Bangkok’s floating market, Thailand. Asia is a linchpin of international stability and has emerged from the global crisis with standing enhanced, said Lagarde (photo: Karen Su/Corbis)
CHRISTINE LAGARDE IN ASIA
Speaking at a dinner hosted by the Bank of Thailand on the last leg of a three-country Asian trip, IMF Managing Director Christine Lagarde said that this was a moment in history when Asia is of utmost importance to the world.
“Asia is a linchpin for global economic stability and is being heard, both through its growing stature in the global economy, and also in the corridors of the Fund,” she said.
Her remarks came at the end of a week-and-a-half long trip which took the IMF head to Japan, Indonesia and Thailand where she met with top officials, women leaders, and also held a town hall discussion with Japanese students.
Dynamic Asia
Lagarde reflected on her impressions of the region following this, her third trip to Asia since becoming IMF Managing Director a year ago.
“Asia does not stand still—it is constantly reshaping itself and each time I am here, I see a new, improved, upgraded version,” she said.
Lagarde’s trip comes ahead of the IMF-World Bank Annual Meetings which are due to take place in Tokyo on October 9-14.
The meetings will be an important landmark event for Japan, the world’s third largest economy, and a symbol of the country’s continuing recovery following the Great East Japan Earthquake of March 2011.
Taking lessons from Asia
During the Bank of Thailand dinner speech, Lagarde also paid tribute to Thailand and many other parts of Asia for the difficult reforms undertaken after the devastating financial crisis in the region in the late 1990’s which, she said “had helped position Asia as a major engine for global growth.”
Asia’s economies have been extremely resilient in the face of the global financial crisis, and the region has enjoyed some of the highest growth rates in the world. Since 2008, Asia has contributed to more than half of world growth.
The IMF chief said Asia’s stronger bank balance sheets and fiscal positions had allowed the region to avoid the downward spiral of debt and weak banks that is threatening Europe.
But Lagarde warned that the repercussions of the European debt crisis remained a threat. The main near-term challenge for policymakers across Asia was to decide how far to loosen policies in support of growth, she said. At the same time, they needed to continue encouraging domestic investment and consumption to promote growth.
“So the message is clear: Asia has a growing stake in the global economy—and the global economy has a growing stake in Asia,” she said.
The new Asia-IMF partnership
Lagarde added the IMF had also learned and changed in recent years and “in our interconnected world, we know we must continue to change. We must continue to work toward being an even more effective partner for Asia”.
The IMF chief said that the IMF needed to learn from the region. "It is time for the IMF to open our ears to Asian voices and our minds to Asian ideas, and our textbook to Asian solutions," she said.
The IMF’s more effective partnership with Asia includes making Fund economic analysis and policy advice more relevant, adapting its lending instruments to meet the region’s needs, and pushing to ensure that Asia’s greater economic standing in the world is reflected within the Fund.
Central to the IMF’s credibility and legitimacy was the need to be fair and balanced in its policy advice to member countries, said Lagarde.
“I am personally committed to ensure that the Fund is exactly that—even-handed, telling our objective analysis, no matter whether the country concerned is large or small, pleased with the analysis or not.” She also pointed to the package of so-called quota reforms agreed in late 2010, which will significantly boost the voting power of emerging economies, particularly in Asia.
Responding cooperatively to the crisis
Lagarde said the recent global crisis had underlined the importance of global cooperation. She pointed to the Association of Southeast Asian Nations (ASEAN), the revamped multilateral currency swap arrangement known as the “Chang Mai Initiative,” and other cooperative mechanisms, as models of successful regional, political and economic cooperation.
Lagarde’s speech came on the last full day of her trip to Thailand where she met with top Thai officials, including the Prime Minister Yingluck Shinawatra, and also participated in a seminar “Towards a More Stable Global Economic System,” organized jointly by the Asia Development Bank, the IMF, and the Thai government.
The IMF Managing Director also signed a Memorandum of Understanding with the country to put in place a new IMF office in the Thai capital, Bangkok.
The new office is being opened in collaboration with the Bank of Thailand and will support IMF technical assistance for Myanmar and Laos. In a press release to mark the end of her trip, Lagarde said “We are very grateful for the generosity of the Thai authorities in hosting this new office at a critical moment when important technical assistance and capacity building needs are emerging in the region.”
