At the International Monetary Fund, a Chance for Asia
The Asian Development Bank’s annual meeting in Hanoi last week was the occasion for some politicking over the succession at the International Monetary Fund, where incumbent Dominique Strauss-Kahn is expected to step down and challenge Nicholas Sarkozy for the presidency of France.
Normally the low-key ADB wouldn’t be much of a forum, lacking heavyweights from the West. However, with France now the current chair of the Group of 20, the Hanoi meeting provided an opening for its finance minister, Christine Lagarde, to play a high-profile role and engage with Asian leaders.
It might seem unlikely that Lagarde herself would be a leading candidate. It has long been suggested, including by Strauss-Kahn himself and by British Prime Minister David Cameron, who ruled out his own predecessor, Gordon Brown, that it was time to end the tradition of the head of the IMF being a European. Another French person in the job would seem even less likely given that three of the last five have been French — Strauss-Kahn, Michel Camdessus and Jacques de Larosiere.
It is time, many believe, for an Asian to take the helm. The problem however is: which Asian?
Meanwhile, Lagarde quietly advanced her cause by displaying a mixture of charm, ability to communicate, understanding of the issues — and willingness to tell her audience what it wanted to hear. So it is just possible that the next managing director will be breaking new ground by virtue of her sex, not her nationality.
Take a look at the Asian potential and problems immediately arise despite — or because of — the region’s rise in the world in general and its huge reserves position in particular.
China may seem an obvious choice due to its size and new impact on the world. However, China remains distrusted by its major Asian neighbors as well as by the West. China has people technically well-qualified for the job but others sense, not without reason, that a Chinese leader would follow official lines laid down by Beijing. Some cite the current World Bank chief economist, Justin Lin, as an example. Indians have a better reputation for independent thinking and putting the institution ahead of national interests. But China would resent being passed over in favor of an Indian.
A Japanese would seem the first choice for an Asian given its long status as a developed economy and role in the IMF. However, individuals who are articulate in public and can combine technical expertise with political astuteness are hard to find. The ADB’s president, Haruhiko Kuroda, is a good example of a highly competent individual but one who finds it hard to appear strong and decisive. Ditto the Japanese IMF deputy managing director, Naoyuki Shinohara.
Who else might be in the running? A South Korean might have a claim except that for a South Korean to occupy the top posts at both the United Nations and IMF might seem too much of a good thing and Ban Ki-moon is likely to get another term. Also, South Korea is still a relatively small country while the European heads of the IMF have always been from the major countries of Europe.
Singapore’s even smaller size would likely exclude its nationals from consideration, though Lee Hsien Loong might stand a chance if he were willing to retire as prime minister. His finance minister, Tharman Shanmugaratnam, is smart enough to do a good job but lacks exposure to the non-Asian world. Ditto Hong Kong’s former Monetary Authority head, Joseph Yam.
All that leaves the most likely Asian candidate as Kemal Dervis of Turkey, a nation that neatly bridges Europe and Asia in its relationships as well as geography. But Dervis carries limited political weight. He was his country’s economic affairs minister for just two years and his career has been spent mostly with the World Bank (20 years) and five years as head of the UN Development Program — not an organization that inspires achievement.
Dervis has few enemies but there are plenty of doubts about his weight at a time when the IMF needs to assume a larger role in international financial affairs.
There is also the possibility that the first non-European would not be Asian — a Brazilian or Mexican, maybe. Or perhaps even one of the current deputy managing directors — Nemet Shafik, a woman who has Egyptian and British nationality. Even if the Asians could put their weight behind one candidate, they would still have to convince enough of the big IMF shareholders — still predominantly Western — of their preference. Reform of the IMF voting system to give greater weight to China, India, Brazil etc. is still a work in progress.
Although sweeping changes have been put in motion, they are unlikely to take effect until 2013. Do not be surprised if the next IMF boss is not an Asian.