If history – particularly the current financial turmoil – is to be prevented from repeating itself, nations from across the globe must work together to build a new global financial architecture. Michel Camdessus, former
managing director, deemed so.
To achieve such goal, Camdessus cited two significant prerequisites during the recent Asian Development Bank forum on the impacts of the
on South Asian nations, held at the bank's headquarters in Manila.
First, "a brand new IMF" must be put into place, which may be realized by amending the fund's mandate, setting up a high council entrusted with political responsibility and re-establishing IMF's legitimacy.
A new mandate, Camdessus explained, will enable the fund to perform a full surveillance of the financial developments including coordination and regulation in order to contribute to sustainable world growth.
"To hesitate to adopt such a major reform or to reduce [IMF's] scope would be tantamount to accept that the same causes can lead to the same or worse crises," he said.
The former IMF chief also pushed for the replacement of the fund's International Monetary and Financial Committee or IMF-C – which has a consultative function – with a high decision-making body composed of ministers and governors to accomplish major strategy decisions, a role currently assumed by the IMF executive board.
"We must also recognize … that the magnitude of responsibilities so entrusted to the IMF justify simultaneously [that] its governance be radically reformed in a more participatory direction and ensuring the proper political accountability," Camdessus said.
Meanwhile, to reinstate the fund's legitimacy, the representation of poor and emerging nations must be improved, Camdessus argued. Reforms on the realignment of shares, composition of executive board and quota must be achieved no later than 2010, he added.
"The credibility of the fund depends on realigning the power within the institution to the realities of the new global economy," he said.
Second, a new "global financial and monetary governance group" should substitute "key Gs" like G-8 to allow for greater sharing of responsibilities as well as highest credibility, influence and legitimacy. Members of the proposed financial monitoring body – between 24 and 25 – will all be elected.
should be prepared to relinquish its presently self-attributed responsibilities to [the] new body," Camdessus said.
In effect, Camdessus is suggesting that the new global financial architecture be composed of a three-level super agency with the global financial and monetary governance group at the top, followed by the high council, which replaces the current IMF-C, and IMF executive board.
Developing countries, particularly in Asia, must decide to own this architecture, Camdessus stressed.
"If there is a silver lining in the present situation, it is that the sheer severity of this crisis … should open the eyes of all leaders of the world on the need to establish right away a new, reliable (financial) architecture," Camdessus said.