Lagarde woos SE Asia as region cuts IMF reliance
The Fund is seeking to maintain its influence in region that is helping global economy
Fresh from yet another meeting in Brussels on Europe’s debt crisis, International Monetary Fund Managing Director Christine Lagarde Wednesday kicked off a three- country tour of Southeast Asia, which is thriving after emerging from turmoil more than a decade ago.
Her week- long visit, which starts in Malaysia and includes the Philippines and Cambodia, builds on ties that took years to mend after the 1997 Asian financial crisis forced some countries into unpopular IMF austerity policies. Now the fund is seeking to maintain its influence in a region that is helping power the world economy while reducing its reliance on the IMF’s financial support.
These countries, which didn’t need IMF help during the global crisis of 2008, are building up foreign currency reserves and boosting regional alliances to ensure they can weather future shocks on their own, said Eswar Prasad, a former head of the China division at the Washington-based lender.
“The main risk for the IMF is that it comes to be seen as less relevant to the region, both in terms of the advice it has to offer and in its role as provider of a financial safety net,” said Prasad, now a senior fellow at the Brookings Institution in Washington.
For Lagarde, who spent most of her first 17 months at the IMF consumed by Europe’s debt crisis, the trip also shows appreciation for the contribution Malaysia and the Philippines made to a $461 billion increase in the fund’s resources this year, when the US and Canada abstained.
The visit, which mixes meetings with officials and business leaders, concludes Nov. 20 in Cambodia with the East Asia Summit, where Lagarde will join leaders of the Association of Southeast Asian Nations and other countries, including newly re-elected US President Barack Obama.
Her goal is to engage, listen and exchange views about the global economy, Anoop Singh, who heads the IMF’s Asia-Pacific department, said in an interview.
Recent economic data have shown signs of recovery in Asia. South Korea’s unemployment rate fell to 3 percent in October, the lowest in more than four years, amid a rebound in the nation’s exports and industrial output, a report showed today. Hong Kong may report faster year-on-year growth in the third quarter, according to a survey. The MSCI Asia Pacific Index (MXAP) rose 0.1 percent as in Tokyo, bringing this year’s gain to about 5.5 percent.
Australian consumer confidence surged to a 19-month high in November, a Westpac Banking Corp and Melbourne Institute survey showed Wednesday in Sydney. The country’s wage price index, which measures hourly pay rates excluding bonuses, advanced 0.7 percent in the third quarter from the previous three months, the statistics bureau said separately.
In contrast, euro-area industrial production may have contracted in September, according to a survey before a report due today. Portugal may report a decline in gross domestic product in the third quarter today, a separate survey showed. In the US, a report may show retail sales fell in October, a survey of economists showed. India’s benchmark wholesale-price inflation unexpectedly eased to an eight-month low of 7.45 percent in October, according to a report.
“Asia is now the global growth leader and you see how much many Asian countries have improved the fundamentals over time,” Singh said. “There are clearly many lessons the world can learn from Asia.”
Some of those lessons have been learned by the IMF, which has changed its policy prescriptions since the 1990s. It has mellowed its opposition to capital controls and eased its stance on austerity measures. It now supports giving Greece and Portugal, two countries where it co-finances bailouts, more time to meet budget deficit targets.
“It is a very different institution than it was 15 years ago,” said Joseph Stiglitz, the Nobel laureate and former World Bank chief economist who has said IMF policies in Asia during the crisis deepened the region’s recession. “There is a framework for more openness,” he told reporters in Singapore last week.