Though the emerging economies represented on the IMF board don’t appear to have been able to get behind a common candidate of their own to succeed the lately resigned Dominique Strauss-Kahn as the Fund’s managing director, the five that constitute the Brics have put out a common statement reiterating that the selection should be based on merit not nationality and repeating that the institution should better reflect the growing role of developing countries in the world economy. As the executive director from China, Jianxiong He is one of the quintet that signed it.
All pretty pro-forma stuff. Yet even though the Fund has been gradually reforming its governance to be more encompassing of emerging economies, this Bystander’s eye was still caught by a couple of sentences in points five and six of the statement:
…adequate representation of emerging market and developing members in the Fund’s management is critical to its legitimacy and effectiveness.
The next Managing Director…[should be] a person that is committed to continuing the process of change and reform of the institution so as to adapt it to the new realities of the world economy.
That is likely to mean a promotion for among others, Zhu Min, who, as special assistant to the managing director, is currently the most senior Chinese official at the Fund. He is likely to be bumped up to be a deputy managing director. The three the Fund now has are Naoyuki Shinohara, a Japanese, Nemat Shafik, an Egyptian, and John Lipsky, the American who is acting managing director but who has said he will be leaving the Fund later this year. We also expect the ranks of the senior counsellors and departmental directors to look a little more diverse after the inevitable rejigging once a new managing director is in place.
It also means that any Brics’s backing for the candidacy of France’s finance minister Christine Lagarde, now the front runner since Turkish economist Kermal Derviş has declined to throw his hat in the ring, will be dependent on an explicit promise that “the obsolete unwritten convention that requires that the head of the IMF be necessarily from Europe” will be abandoned for next time round.
A how-it-works footnote: The IMF has 187 member countries, but five exert the most influence over how it is run–the U.S. and the other big, developed economies — Japan, Germany, France and the U.K. That quintet has permanent seats on the executive board. The remaining 182 member countries are assigned to 19 groups, each represented by an executive director. The votes they cast are weighted by their group’s member countries’ subscription to the IMF, its quota. (List of executive directors and their voting power here.) It is a model that leaves the Brics (Brazil, Russia, India, China and South Africa) in particular underrepresented now the center of economic and financial power is tilting eastwards and southwards. The big five command 37.5% of the votes against the Brics 11%. During Strauss-Kahn’s tenure, a start was made on reforming the quota system, with China, for example, seeing its voting share being increased over time to 6% from 2.9%; it has reached 3.82% to date. Longer term, the Fund’s staff of 2,400 also needs to reflect the changes taking place in the world economy and not only in senior management positions.