Global Policy Forum

Donor Nations to Focus on Growing States


By Celia W. Dugger

New York Times
April 24, 2006

The International Monetary Fund and the World Bank, concluding their spring meetings on Sunday, have authorized plans to help them more fully recognize the expanding roles and challenges faced by developing nations. The fund will work toward giving countries with rapidly growing economies greater influence on its policies, while the bank hopes to help poor countries cope with global warming and the environmental and economic costs of quickly expanding energy needs.

Finance ministers and central bank governors from the fund's 184 member countries on Saturday authorized the drafting of a proposal to increase the voting shares of a handful of countries that are most underrepresented relative to the size of their economies. They will most likely include China, South Korea, Mexico and Turkey. The plan will be presented at the next round of meetings, to be held in Singapore in September.

More fairly reflecting the size of national economies through increased voting shares is important to retaining the institution's legitimacy as it advises governments on their economic policies, officials at the fund and analysts said. "I have spoken several times about the need for increased voting power for some countries, including a number of emerging market economies, to ensure that they have a role in the fund's decision-making process that accords with their increased importance in the world economy," Rodrigo de Rato, the fund's managing director, said at a news conference on Saturday. He said he was satisfied that he now had "a clear mandate to make some proposals."

But the fund left to a later day the broader and far more politically tricky task of fundamentally reapportioning the vote shares among countries to fully recognize their evolution within the global economy. Steven Radelet, an economist at the Center for Global Development, which studies issues affecting developing countries, said such a change would more clearly reflect the rise of Asian economies in recent decades, as well as Europe's reduced economic impact.

The United States endorsed both the interim step of increasing the vote share of some countries as well as the broader effort. The voting share of the United States, now 17 percent, is not expected to drop below the 15 percent share required to veto action by the fund, analysts said. "Comprehensive, fundamental reform is needed if the I.M.F. is to remain legitimate and relevant to its membership," Treasury Secretary John W. Snow said in a statement. "For this effort to succeed, members need to look beyond their immediate narrow interests."

The fund, which traditionally advises individual countries in the midst of economic crises and provides emergency loans to them, also hopes to expand its work. It would like to encourage cooperation between developing countries with rapid economic growth, like China and India, and the world's richest countries on issues that have global or regional ramifications. Gordon Brown, Britain's chancellor of the exchequer, said at a news conference on Saturday that the I.M.F. should "monitor more deeply not just country policies but the linkages and spillover effects of one country's policies on others in the global economy."

At the World Bank, scientists discussed how to help developing countries reduce their emissions of the greenhouse gases that contribute to global warming, as well as how to deal with the consequences of climate change. Such changes will potentially have the most devastating consequences for the poorest people living near sea level, especially in Bangladesh and small island countries like the Maldives.

Developing countries are hungry for more energy, and China and India in particular are rapidly expanding their energy production. Two-thirds of the increase in energy demand over the next 25 years will be in developing countries that are home to 1.6 billion people, mostly in Asia, said a newly released bank report, "Clean Energy and Development: Towards an Investment Framework." The challenge will be to help them meet that need while minimizing environmental damage, bank researchers said.

Rich nations and Russia are responsible for at least 70 percent of greenhouse gases, and developing countries that are expanding energy production to feed economic growth and reduce poverty say it is unfair to expect them to bear the financial burden of producing clean power, said Robert Watson, the bank's chief scientist. "The developing countries say if you want us to be climate friendly, we have to be compensated for the additional costs," he said.

The bank estimates it will cost $10 billion to $200 billion per year to reduce greenhouse gas emissions, depending on the rate of the reductions. To help meet those costs, bank officials authorized a proposal for accelerating investments in clean energy, to be drafted in the next five months.

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