World needs to stop drag­ging its feet, econ­o­mist says

China Daily (Canada) - - ANALYSIS - By FU JING

De­vel­oped economies should take ur­gent ac­tion to give emerg­ing economies a greater say in in­ter­na­tional gov­er­nance, a se­nior econ­o­mist at Tur­key’s cen­tral bank has said.

The rich coun­tries have been drag­ging their feet on this is­sue, ac­cord­ing to Yuk­sel Gormez.

“First, the In­ter­na­tional Mon­e­tary Fund should ac­cept the ren­minbi into the cur­rency bas­ket,” he said.

The IMF was sup­posed to de­cide on the ren­minbi be­ing brought into such a bas­ket be­fore the G20 lead­ers’ meet­ing, but the de­ci­sion has been put back un­til the end of the month.

Sources say that if a de­ci­sion is not forth­com­ing or if the IMF board rules against such a move, the mat­ter will not be re­vis­ited for an­other five years.

“The in­ter­na­tion­al­iza­tion of the ren­minbi has been hap­pen­ing a lot more quickly than many ob­servers had ex­pected, so I think the IMF should ap­prove the move,” Gormez said.

How­ever, in­ter­na­tional de­ci­sion-making can be a fraught process, he said.

“And that ap­plies to global fi­nan­cial in­sti­tu­tions, in­clud­ing the IMF.”

Though China is the world’s sec­ond-big­gest econ­omy, it still has just 3.81 per­cent of the vot­ing rights in the IMF. The United States has 16.74 per­cent, which gives it veto power among the 188 par­tic­i­pants of the IMF’s spe­cial draw­ing rights depart­ment.

“I think many emerg­ing coun­tries are in the same boat as far as bring­ing global fi­nan­cial gov­er­nance into line with re­al­ity is con­cerned, in­clud­ing re­form of all in­sti­tu­tions,” Gormez said.

De­spite the slow­ness in bring­ing the way the fi­nan­cial sys­tem is run up to date, there is a lot to be said in the sys­tem’s fa­vor, he said.

“In­stead of mov­ing quickly and head­ing in the wrong di­rec­tion, it is bet­ter for th­ese kinds of de­ci­sions to be made de­lib­er­a­tively and cor­rectly.

“Nev­er­the­less, re­form is needed, and the cur­rent global fi­nan­cial ar­chi­tec­ture is not de­liv­er­ing. Change will come. I don’t know how, and I don’t know when, but it will come. It may not be as fast as next year, but I be­lieve it will definitely be be­fore 2020.”

Gormez said China’s Belt and Road Ini­tia­tive will be a great help in boost­ing global trade and im­prov­ing con­nec­tiv­ity.

The world is go­ing through a golden age in up­grad­ing global in­fra­struc­ture, and China’s pro­pos­als have of­fered a vi­able fi­nanc­ing ve­hi­cle for many coun­tries, he said.

“This is not only be­cause China has been offering in­vest­ment re­sources, but also be­cause this ini­tia­tive will be pool­ing fi­nan­cial means glob­ally.

“Many de­vel­op­ing coun­tries have long com­plained about lack­ing re­sources for long-term in­fra­struc­ture in­vest­ment, and that is not the case any more be­cause of the Belt and Road Ini­tia­tive.

“Long-term in­fra­struc­ture projects are go­ing to be in­vested in on a global scale, and the cost of global in­vest­ment fund­ing is fall­ing. That’s good for ev­ery­body.”

The Belt and Road Ini­tia­tive of­fers fi­nance for the big­gest of projects and can help cre­ate a global fi­nanc­ing ve­hi­cle, he said.

“This is a fan­tas­tic pe­riod for all of us. I hope China will be ex­tremely suc­cess­ful and will find many friends to sup­port what it is do­ing.

“China has the ca­pac­ity to in­vest in ex­tremely costly in­fra­struc­ture projects, and it can draw on its ex­per­tise to de­liver them.”

In de­liv­er­ing suc­cess with the Belt and Road Ini­tia­tive, China’s ma­jor chal­lenge is cred­i­bil­ity, he said.

“If all projects are im­ple­mented smoothly, China will have built a rep­u­ta­tion for it­self. That cred­i­bil­ity is much more im­por­tant than fi­nan­cial re­sources. It is the best as­set for this gen­er­a­tion in China and for the next gen­er­a­tions.”

Once China has built cred­i­bil­ity, money is a sec­ondary con­sid­er­a­tion, he said.

“Pure cash will never be a prob­lem for a cred­i­ble coun­try, or per­son, or com­pany. ... The real magic for China is in not hav­ing a huge amount of re­sources, but in hav­ing the cred­i­bil­ity to de­liver re­sults.”

Gao Shuang con­trib­uted to this story.

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