Receptive IMF chief seeks new approach

June 2, 2000

HORST Koehler, the managing director of the International Monetary Fund, has made immediate favourable impression with his straight talk, considerate hearings, and his attempt to create a kinder but more decisive IMF.

After holding talks Prime Minister Chuan Leekpai at the Government House yesterday, Koehler emerged to say that he was encouraged by the state of the Thai economy, which has returned to a growth path. But for the economy to sustain its growth, he cautioned that further efforts are needed on financial sector reform and on corporate debt restructuring.

Koehler, who is German, is on a whirlwind tour which starts in Bangkok and will take him to Beijing, Seoul, Jakarta and New Delhi. One of the lessons he learnt from the Asian crisis was the IMF should have listened more to the opinions of people and authorities in countries that sought support programmes from it.

His counterpart at the World Bank, James Wolfensohn, has also tried to build 'his' organisation around partnership with local people or projects with which the bank is involved. In the past, like the IMF, it was top-down instructions to client states all the way.

Koehler, who has been in office for only four weeks, is determined to change the old culture. His gesture reflects a radical departure from the old IMF, giving it a better image and providing it with a clearer mandate.

He would like the IMF to focus more on crisis prevention and to stop throwing big money after irresponsible states. He would like the IMF to concentrate on monitoring macroeconomic trends or tackling the balance of payments crisis. He wants to engage the private sector to play a role in tackling the crisis.

More importantly, he would like a clear division of labour between the IMF and the World Bank. In the waning months of his tenure Horst's predecessor Michel Camdessus called for the IMF to focus on poverty reduction, an area of the World Bank. Koehler says he would not want the IMF to handle poverty reduction.

Thailand, which was struck by economic crisis about three years ago, is set to graduate from the IMF support programme on June 19. Overall, it has got a good passing grade from the IMF. It will be left on its own to undertake further structural reform to achieve quality growth in the future, to try to prevent such a crisis from recurring.

Koehler, who also met with Finance Minister Tarrin Nimmanahaeminda and Bank of Thailand governor MR Chatu Mongol Sonakul, was sensible and diplomatic enough to throw his support behind Asia's move to create a regional financing arrangement. This arrangement would deter speculative attacks against Asian currencies, and foreshadows the creation of a regional lender of last resort.

Koehler said he supports the Asian Monetary Fund or any other arrangement designed to intensify economic or financial integration in the region. He viewed the scheme as complementary to the IMF.

"(The Asian Monetary Fund) is a conceptual idea, which cannot be a taboo," he said.

This marked the first time that the IMF's top office-holder has come out officially and strongly in favour of the Asian Monetary Fund. The IMF and the United States shot down this proposal when Japan tried to launch it in November 1997. Koehler, as a senior official in the German Finance Ministry, played a key role in the formulation of Maastricht Treaty, which gave birth to the European monetary union and the euro. He understood the complexity and the difficulties of formulating a monetary union, so he said it would take a while before Asia could really work out the scheme, which needs time and trust among the member states.

BY THANONG KHANTHONG