Posted 6th June 2001

IMF - The View From Outside

The International Monetary Fund has been hijacked by those who need it least. The fallout from this is only slowly becoming apparent, and that slow revelation is eminating almost solely from those countries with little access to the global media, the so-called developing countries, which New Zealand would do well to indentify with. The International Monetary Fund (IMF) has lost sight of its original purpose to facilitate financial recovery, becoming a tool in the political arena, Malaysian Prime Minister Mahathir Mohamad said in a speech to the inaugural session of the Eleventh G15 Summit last week.

Speaking on behalf of Asian nations at the Summit, Mahathir said: "It has become all too clear that the IMF is more a political instrument than one for financial rehabilitation. "The sufferings of people seem to be of little concern as long as certain policies and directives are implemented." Mahathir said little progress has been made on reforming the "international financial architecture", with the focus more on ideological issues rather than practical ones. "The highly questionable value of free and unregulated markets is still being touted as the ideal which must be adhered to at whatever cost.

The ideology of market freedom it seems is more important than the well-being of human society," he said. Malaysia will host a meeting of G15 experts in the next few months that will push ahead with a commitment to take a more proactive role in the financial rehabilitation process, he said. Mahathir said the pressure placed on developing countries to embrace the ideology of a free market ignores the fact that their economies may not be ready to support such a system. "There is no doubt that globalisation has exacerbated the vulnerabilities of developing countries and eroded their national policy-making capacity," he said.

Developing countries have been unable to achieve equitable terms of trade compared to developed countries, and the pressure to accept the latest round of World Trade Organisation negotiations threatens to erode what little policy discretion they have left, he said. "We have to manage the challenges and be wary of the risks (of globalisation) if we do not wish to be marginalised," he said. He called on developed countries to lower the price of providing information and communication technology (ICT) to their poorer neighbours, and to provide financial and infrastructure development support. Mahathir said the major impediment to G15 countries' ability to bridge the digital divide is poor access to the internet, with less than 20 pct of developing economies' populations having access to a fixed telephone line and internet, compared to 50 pct in developed countries. He said governments should help the private sector finance infrastructure development, particularly in the less profitable remote areas.

Leaving the financing solely to the private sector risks worsening the information poverty cycle, as companies will inevitably focus on providing premium services in commercially viable areas. Developing the necessary "human capital" and implementing the legal and regulatory frameworks necessary to create new markets in online transactions are also crucial to making poorer economies more competitive on a global scale, he said. However, he warned: "The rapid advancement in ICT has its downside too... Technological developments in certain areas have also made it difficult for national governments... to control the spread of negative information and cultural products."