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Chorus for change in IMF and World
Bank
Emad Mekay
WASHINGTON - Developing nations have
issued a statement strongly condemning the
"democracy deficit" in two of the most powerful
wardens of the current global economic system -
the World Bank and the International Monetary Fund
(IMF). During the joint meetings of the governors
of the two Washington-based institutions, the
Group of 24 (G24), which operates as an
association of minority shareholders in the IMF
and the World Bank, said that the lack of
representation of poor nations and developing
countries was alienating the two financial
institutions from their clients.
"Ministers note that the BWIs' [Bretton
Woods Institutions] governance structures have not
evolved in line with the increased size and role
of emerging market, developing, and transition
countries in the world economy," said the
statement by finance ministers of the G24.
The World Bank and the IMF were
established in Bretton Woods in the US state of
New Hampshire by the victors of the Second World
War, and have since exercised an enormous
influence on borrowing nations - especially in the
developing world. "The role of small and
low-income countries in the decision-making
process is extremely limited," the statement
alleged. "Ministers [of G24 countries] stress the
need for concrete actions to reduce the democratic
deficit and enhance the voice and participation of
developing countries in decision-making at the IMF
and the World Bank. They express disappointment
that no progress has been made on this issue."
The ministers complained that the current
under-representation of developing countries in
the IMF and the World Bank executive boards
undermines the legitimacy and effectiveness of
these institutions. Decision-making in the two
financial bodies is far removed from the principle
of one country-one vote. The 46 sub-Saharan
African countries, for example, have only two
executive directors representing them at the World
Bank and the IMF, while eight northern nations
have one executive director each. Directors from
countries of the Group of Seven (G7) most
industrialized nations now control more than 60%
of votes at the two institutions, while the US
administration has veto power over any
extraordinary vote that requires a super-majority
vote of 60% or more.
The World Bank and
the IMF each has 184 board members from developed
and developing countries and 24 members who
represent countries or groups of nations. That
system has deprived more populous nations like
India and China - which, combined, represent more
than 2.3 billion people of the world's seven
billion population - of an influential say while
giving countries like Britain, France and the US
greater clout.
Developing countries, civil
society groups and the activist community have
also criticized the selection process of the heads
of the two institutions, arguing that it gives
rich nations a monopoly on nominating and
selecting the leaders of the two institutions.
Traditionally, a European has led the IMF while
the World Bank presidency is given to a US
citizen.
The G24 ministers urged that the
two institutions develop a new quota that would
give greater weight to measures of gross domestic
product in terms of purchasing power parity and
take into account the vulnerability of developing
countries to commodity price movements, the
volatility of capital movements and other external
shocks. "In order to strengthen the voice of small
and low-income countries, basic votes should be
increased to restore their original share of total
voting power," said the statement.
Officials from developing nations
complained that they were not consulted on the
nomination of the US arch-hawk Paul Wolfowitz by
President George W Bush to the post of the World
Bank president. Wolfowitz takes office on June 1.
"I was not consulted on the nomination, so I
cannot say whether I am satisfied or happy about
it," said Paul Toungui, the finance minister of
Gabon. Although the matter is now sealed, the
issue of transparency and fair representation
remains unresolved, he said. "There is no sense in
looking backward in our rearview mirror. Looking
forward, we want to strive to ensure that the
positive claims and urging of the G24 so as to
have greater transparency in the BWIs will take
place, and that one day the situation will be far
clearer for everyone concerned."
The
officials complained that the issue of fair
representation has been on the table for many
years with "very little progress". The developing
nations argue that the current system was created
at a different time in world history, and is no
longer relevant in today's reality. Then, the US,
which holds decisive power in the two
institutions, was the largest creditor nation and
the largest source of capital exports. Today, it
is the world's largest debtor country, and is
absorbing 80% of international capital flows.
In 1944, at the time of the two
institutions' creation, the G7 industrial
countries accounted for most of world output of
goods, while today they account for less than
half. Today, developing and transition economies
account for some 84% of the world's population and
the same proportion of world output as the
developed countries, measured in terms of
purchasing power parity. Even in terms of currency
reserves, developing countries hold considerably
more than the richest industrialized countries.
"So the current system of governance is
completely out of line with economic realities,
and what is happening as a result of this is that
people are moving away from these institutions,"
said Ariel Buira, director of the G24 secretariat.
"It took a lot of effort to create them, so we do
not want to destroy them."
(Inter Press
Service) |
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