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IMF leadership debate shows need to rethink rules

WASHINGTON: Even if Germany's Horst Koehler this week wins the race to head the International Monetary Fund, the months of manoeuvring to get him the job show the urgent need to reform the way such deals are done.

Analysts and candidates for the position said policy makers should change their rules to avoid a repeat of the acrimonious competition to find a successor to France's Michel Camdessus to run the global lending agency.

The race started in November and peaked last week with an ugly transatlantic fight between Europe, which claimed the job, and the United States, which rejected Europe's first nominee.

Washington has declined comment on Koehler, although it can hardly veto a European candidate twice in quick succession unless other countries urge it to act.

"I believe it has become urgently apparent that a thorough rethink about the selection process for international leadership positions is needed," former candidate Caio Koch-Weser wrote in a letter pulling his name from the race.

"The process now is often humiliating for the candidates and damages the institutions."

Koch-Weser, Germany's deputy finance minister, withdrew from the race last week after a failed last-ditch attempt to lobby for support in Washington.

Germany, determined to win a top international job for the first time, promptly proposed Koehler, a former finance ministry official who now heads the European Bank for Reconstruction and Development.

RULES VAGUE

The rules to find a new IMF boss are vague and opaque. The job has always gone to a European, so even the United States agreed that it was up to Europe to find a candidate.

But at the same time, Washington bluntly blocked Koch-Weser, arguing that he was a political lightweight with the wrong credentials for the immensely powerful job.

The IMF, under fire in the U.S. Congress for misguided policies during the world economic crisis of 1997-99, controls tens of billions of dollars which it can lend to member states. It monitors the economic performance of countries around the world and provides advice to governments and central banks.

The other candidates to replace Camdessus are acting IMF Managing Director Stanley Fischer, who is backed by several groups of developing countries, and Japan's Eisuke Sakakibara, who was known as "Mr Yen" for his ability to move financial markets during his time at the Japanese finance ministry.

Sakakibara admitted last week that his chances were slim.

"I don't think I will get the position, but the way that the IMF managing director has been selected in the past needs to be changed," Sakakibara said. "Anybody who is qualified for that job, regardless of their nationality, should get that position...In that sense, my candidacy is quite symbolic."

FLAWED TRADITION

Morris Goldstein of the Institute for International Economics said the tradition of giving the IMF job to a European and the World Bank one to an American was flawed.

"The only people who have covered themselves in glory in this race are the developing countries, especially those in the Middle East, who nominated Fischer even though he is from outside their region and is an American Jew to boot," he said.

"The system just does not make any sense. It is a tortured process, and it does not produce the best guy for the job, unless it is by accident."

Fischer's support in the first straw poll of IMF board members came from country constituencies headed by nationals from Egypt, Angola and Iran. Other developing countries abstained after the United States made clear it wanted a European and would not back Fischer in the ugly race.

Koch-Weser topped the poll, backed by countries representing 43 percent of the IMF's voting power. But he won minimal support outside Europe and the United States and other key countries abstained.

European finance ministers will discuss Koehler's chances at a meeting in Brussels on Monday. If they nominate him for the position, the IMF's board could meet on Tuesday, followed by an informal vote within a few days.

IMF insiders said the race to head the IMF took a different course this time since the one when Camdessus won the job 13 years ago after two Europeans slugged it out behind the scenes for the votes of the IMF's 24-member executive board.

The developing countries' nomination showed their frustration at how rich countries were making decisions over their heads. Developing states called for more than one candidate for the job and insisted that the position should go to the best qualified individual, regardless of nationality.

Thomas Bernes, Canada's representative on the IMF board last week proposed forming a committee to examine if there might be a better way to work.

"It is too late for this time, but hopefully things can be different next time," Bernes said. "I think we need to set up a committee to look at the whole process and make a recommendation about how we proceed."-Reuters