Emerging nations push for say in global economy


Developing countries will this week demand a louder voice at the World Bank and the IMF, now that they are contributing more funds and it’s a euro zone country, Greece that is in need of a rescue plan.

The United States and Europe, which have long dominated the Washington-based international institutions, acknowledge the growing clout of the emerging market economies such as China and Brazil but are loathe to part with their power.

Brazil, Russia, India and China, the so-called BRIC club of big emerging economies, called for swift reforms in the global institutions when their leaders gathered in Brasilia last week ahead of key financial meetings in Washington.

That was like “a pressurizing device to make it obvious to the developed world that our global organizations are no longer representative of the world economy,” said Goldman Sachs economist Jim O’Neill, who coined the term BRIC in 2001.

Brazil and other developing countries have been calling for a 6.0 % shift in voting power at the World Bank. That would bring the representation between developing and developed countries at the institution to parity.
“We can no longer accept a situation in which the majority of the world’s people remain inadequately represented in such bodies,” South African President Jacob Zuma said during a recent visit to Brazil.

A Brazilian government source conceded that Brazil was pessimistic about achieving an equal say for developed and developing economies at the World Bank.

Brazil would keep pushing for parity in the long term but that a smaller shift of a little over 3.0 percent and up to 4.0 percent would be acceptable for now, Rogerio Studart, who represents Brazil and other developing countries on the World Bank’s board, told Reuters.
“We will try to push for as much as we can but we are aware that we are at the end of the negotiations,” Studart said.

The shift would not achieve parity but would help rebalance a breakdown that now stands at roughly 40 % for developing countries and 60 % for developed nations.
“A profound change in the structure of the IMF is needed so that all countries can trust in it and know that it is objective,” said Nestor Stancanelli, deputy secretary for international economic negotiations for Argentina.

Changing times

When the financial crisis in 2008 pushed rich economies to the brink of a depression, the world turned to emerging powers like China to spend more to cushion the global economic slump.

Now that the BRICs are helping to drive global economic growth and to fill International Monetary Fund coffers, there is a growing consensus that the international institutions should reflect their new importance.

Brazil has committed to buy up to $10 billion of IMF bonds and China up to $50 billion.

But Europe and other rich countries are concerned about shifting voting power.

Europe has long dominated the IMF and selects its head. Many in Europe see a dilution of voting power equal to losing sway over global economic issues.

Analysts argue that the longer emerging economic powers are denied a greater say in the institutions, the more likely it is these institutions will become irrelevant and ineffective.
“Increased income and growth in the developing world means increasing influence,” World Bank President Robert Zoellick said last week said in a speech. “Today’s discussion requires a big table to accommodate the key participants, and developing countries must have seats at it.”

While emerging economies bounced back more quickly from the financial crisis, the Greece’s debt problems and the risk that it may have to be bailed out by the IMF highlighted how fragile developed economies remain.

G20 alternative

As well as pushing for change at the IMF and World Bank, analysts say emerging economies should also help foster the G20 group of leading developed and developing economies.
“Perhaps the question is not so much how hard they should push for greater representation in international financial institutions but how they should try to strengthen the G20, increase its clout and make that clout sustainable,” said Matias Spektor, who coordinates the centre for international relations at the Getulio Vargas Foundation in Rio de Janeiro.

Last year, G20 leaders agreed the group should take over from the G7 as the main forum for managing the world economy.
“Everyone’s talking about the death of the G7 but it’s very plausible to think that within the next five years, if the G20 fails to deliver, then to see a return to some more traditional ways of managing the global economy,” Spektor said.

Pic: President Jacob Zuma of South Africa

Source: www.af.reuters.com