Nation in spotlight at IMF meeting
Published: 08 Oct. 2009, 04:14
ISTANBUL - The Oct. 6-7 annual meeting of the International Monetary Fund has left Korea’s top economic policy makers two major issues to ponder: how to deal with the nation’s elevated role in the international community and the IMF’s new challenge to provide better and quicker loans to countries hit by sudden financial setbacks.
The Korean delegates said they suddenly found themselves catapulted into the limelight with other world economic policy makers after the country played a larger-than-expected role in global efforts to emerge from the recent economic meltdown and showed an exceptionally quick recovery.
Also, a growing number of elite IMF members complained that many developing countries are racking up unnecessarily large foreign reserves to prepare for rainy days after the IMF failed to provide timely and efficient credit support during the crisis.
When Korean Finance Minister Yoon Jeung-hyun and his deputy, Shin Je-yoon, were preparing to attend the Oct. 6-7 annual meeting, the pair had not expected their schedules to be so jam-packed.
The two received a barrage of meeting requests from more than 20 top policy makers and global financial VIPs who previously had found few reasons to consult with their Korean counterparts. And Yoon and Shin expressed optimism that the latest development may be an indication of Korea’s elevated role in the international efforts to tackle the recent recession, saying they are suddenly faced with a greater sense of responsibility.
“This is the first time I attended an international conference after Korea was designated to host the G-20 meeting in 2010, and I really feel Korea’s status has changed dramatically,” Yoon told reporters in Istanbul during a break between meetings with World Bank President Robert Zoellick, European Commissioner for Economic and Monetary Affairs Joaquin Almunia, Citigroup Senior Vice Chairman William Rhodes, Spanish Finance Minister Elena Salgado and many other senior world economic policy makers. It was the first time for the EU commissioner to request a meeting with a Korean policy maker, not the other way around, according to senior Seoul officials.
“The conference participants look at us differently, and I was bombarded with many similar questions asking about how Korea managed to emerge from the recession so fast,” said Yoon.
Shin also stormed through an equally hectic schedule, having met with managing directors from Standard & Poor’s, Fitch Ratings Agency and Moody’s. Additionally, Shin met with Robert Hormats, the U.S. State Department’s under secretary for economic affairs and a former Goldman Sachs Group executive. It was also the first time for a U.S. State Department official at this level to request a meeting with Korea’s deputy finance minister. “We have never received so many meeting requests,” said Shin. “We were stunned.”
The changed perception of Korea comes at a time when the Group of 20, or G-20, has emerged as a new powerhouse to set the agenda on how the world’s economies weather the recent downturn. Korea was one of the countries that played a crucial role in forming that agenda and is scheduled to hold a G-20 summit in November 2010, becoming the first Asian country to do so.
Indeed, much of the agenda proposed in the latest G-20 meting held in Pittsburgh in September was readdressed in Istanbul, including the full-fledged overhaul in the IMF’s governance system and redistributing voting powers within the organization from European countries to emerging market nations. Korea, along with countries like China and India, is also expected to be one of the biggest beneficiaries from the upcoming change. Yoon stressed he feels “a great sense of responsibility” for Seoul’s newfound status. “Thinking about all the challenges and responsibilities to fall on us, I feel truly a great burden on my shoulders,” said Yoon.
The policy maker also said the biggest talking points during the recent meeting were the renewed emphasis on providing more timely credit support for countries hit by a sudden financial crisis.
IMF Managing Director Dominique Strauss-Kahn said in the keynote speech that the absence of a reliable emergency facility has led many emerging markets to rack up “excessively large buffers of foreign reserves.”
That means the countries will risk bigger trade imbalances or subsequent disputes with other countries in order to grow foreign reserves. Strauss-Kahn said such a tendency “hinders a shift from export-led growth to domestic demand - something that is necessary for more balanced growth in the future.”
“The founders of the IMF envisaged a global lender of last resort role for the IMF, but our resources are currently limited because of the precautionary demand for reserves,” said Strauss-Kahn.
But quickly addressing the situation remains a tough battle, given that many Asian countries still vividly remember the nightmare of the 1997-98 Asian currency crisis.
“The foreign reserves are still considered the last resort you can rely on in worst-case situations, unless there is an absolute guarantee that the IMF will come to the rescue,” said Korea’s Deputy Finance Minister Shin.
“It’s not a very desirable situation, but we are faced with a so-called prisoners’ dilemma,” he added.
By Jung Ha-won [[email protected]]
The Korean delegates said they suddenly found themselves catapulted into the limelight with other world economic policy makers after the country played a larger-than-expected role in global efforts to emerge from the recent economic meltdown and showed an exceptionally quick recovery.
Also, a growing number of elite IMF members complained that many developing countries are racking up unnecessarily large foreign reserves to prepare for rainy days after the IMF failed to provide timely and efficient credit support during the crisis.
When Korean Finance Minister Yoon Jeung-hyun and his deputy, Shin Je-yoon, were preparing to attend the Oct. 6-7 annual meeting, the pair had not expected their schedules to be so jam-packed.
The two received a barrage of meeting requests from more than 20 top policy makers and global financial VIPs who previously had found few reasons to consult with their Korean counterparts. And Yoon and Shin expressed optimism that the latest development may be an indication of Korea’s elevated role in the international efforts to tackle the recent recession, saying they are suddenly faced with a greater sense of responsibility.
“This is the first time I attended an international conference after Korea was designated to host the G-20 meeting in 2010, and I really feel Korea’s status has changed dramatically,” Yoon told reporters in Istanbul during a break between meetings with World Bank President Robert Zoellick, European Commissioner for Economic and Monetary Affairs Joaquin Almunia, Citigroup Senior Vice Chairman William Rhodes, Spanish Finance Minister Elena Salgado and many other senior world economic policy makers. It was the first time for the EU commissioner to request a meeting with a Korean policy maker, not the other way around, according to senior Seoul officials.
“The conference participants look at us differently, and I was bombarded with many similar questions asking about how Korea managed to emerge from the recession so fast,” said Yoon.
Shin also stormed through an equally hectic schedule, having met with managing directors from Standard & Poor’s, Fitch Ratings Agency and Moody’s. Additionally, Shin met with Robert Hormats, the U.S. State Department’s under secretary for economic affairs and a former Goldman Sachs Group executive. It was also the first time for a U.S. State Department official at this level to request a meeting with Korea’s deputy finance minister. “We have never received so many meeting requests,” said Shin. “We were stunned.”
The changed perception of Korea comes at a time when the Group of 20, or G-20, has emerged as a new powerhouse to set the agenda on how the world’s economies weather the recent downturn. Korea was one of the countries that played a crucial role in forming that agenda and is scheduled to hold a G-20 summit in November 2010, becoming the first Asian country to do so.
Indeed, much of the agenda proposed in the latest G-20 meting held in Pittsburgh in September was readdressed in Istanbul, including the full-fledged overhaul in the IMF’s governance system and redistributing voting powers within the organization from European countries to emerging market nations. Korea, along with countries like China and India, is also expected to be one of the biggest beneficiaries from the upcoming change. Yoon stressed he feels “a great sense of responsibility” for Seoul’s newfound status. “Thinking about all the challenges and responsibilities to fall on us, I feel truly a great burden on my shoulders,” said Yoon.
The policy maker also said the biggest talking points during the recent meeting were the renewed emphasis on providing more timely credit support for countries hit by a sudden financial crisis.
IMF Managing Director Dominique Strauss-Kahn said in the keynote speech that the absence of a reliable emergency facility has led many emerging markets to rack up “excessively large buffers of foreign reserves.”
That means the countries will risk bigger trade imbalances or subsequent disputes with other countries in order to grow foreign reserves. Strauss-Kahn said such a tendency “hinders a shift from export-led growth to domestic demand - something that is necessary for more balanced growth in the future.”
“The founders of the IMF envisaged a global lender of last resort role for the IMF, but our resources are currently limited because of the precautionary demand for reserves,” said Strauss-Kahn.
But quickly addressing the situation remains a tough battle, given that many Asian countries still vividly remember the nightmare of the 1997-98 Asian currency crisis.
“The foreign reserves are still considered the last resort you can rely on in worst-case situations, unless there is an absolute guarantee that the IMF will come to the rescue,” said Korea’s Deputy Finance Minister Shin.
“It’s not a very desirable situation, but we are faced with a so-called prisoners’ dilemma,” he added.
By Jung Ha-won [[email protected]]
with the Korea JoongAng Daily
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