Annual Meetings seminar program: Development, monetary and financial issues are focus of wide-ranging discussions
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A program of seminars addressing issues on the general theme of making the global economy work for everyone was held in Prague in conjunction with the Annual Meetings. The seminars, organized by the IMF and the World Bank, served as a forum for private sector leaders, government officials, and officials of the international financial institutions to discuss issues related to sustainable development and international monetary and financial relations.

Abstract

A program of seminars addressing issues on the general theme of making the global economy work for everyone was held in Prague in conjunction with the Annual Meetings. The seminars, organized by the IMF and the World Bank, served as a forum for private sector leaders, government officials, and officials of the international financial institutions to discuss issues related to sustainable development and international monetary and financial relations.

A program of seminars addressing issues on the general theme of making the global economy work for everyone was held in Prague in conjunction with the Annual Meetings. The seminars, organized by the IMF and the World Bank, served as a forum for private sector leaders, government officials, and officials of the international financial institutions to discuss issues related to sustainable development and international monetary and financial relations.

Challenges and opportunities

The opening “keystone roundtable” addressed both the opportunities of globalization and the challenges involved in making the global economy work for everyone. Erna Witoelar, Minister for Housing and Regional Infrastructure of Indonesia, cited the impact of the Asian crisis on economic disparities in her country and said these disparities should be eliminated at every level. She called for renewed efforts to develop the productive capacity of poorer countries.

Stanley Fischer, First Deputy Managing Director of the IMF, observed that globalization was not a new phenomenon and that more people had benefited from globalization today than in any previous period of history. This, he said, was because of recent technological advances, especially in communications technology; the popular taste for more goods and more travel; and public policy initiatives. However, he noted that the recent intensification of globalization has also been associated with negative aspects, including income inequalities and environmental degradation, and stressed the necessity of acting to counter these problems.

Globalization has led to an unprecedented community of values in human rights, equality of women, environmental protection, and an unprecedented generation of wealth, according to Olara Otunnu, the UN Secretary General’s Special Representative for Children and Armed Conflict. The remaining challenges center on those who have been left out of the process, he said, citing persistent income gaps within countries and between regions and ethnic groups.

Currency areas

Opening a seminar on currency areas, Alexander Swoboda of the IMF Research Department noted that, together with financial integration extending to an ever larger number of countries, the birth of the euro represented a fundamental change in the organization of the international monetary system.

Robert Mundell, Nobel Prize winner and professor of economics at Columbia University, said that the introduction of the euro created the prospect for a change from a dollar-denominated currency system to one in which power is shared by the dollar, euro, and yen areas. He made the case for a world currency in the longer run. Hans Tietmeyer, former President of the Deutsche Bundesbank, argued that in a world of free capital movements, there was no effective instrument for controlling exchange rate movements. He also felt that creating a world currency was neither feasible nor desirable in anything but the very long run.

Yung Chul Park, professor at Korea University, stated that interest in monetary and financial cooperation in east Asia had increased strongly in recent months, fueled by frustration with being excluded from decisions on reform of the international financial architecture. The east Asian economies, which hold a substantial fraction of the world’s international reserves, are particularly vulnerable to swings in capital flows and in exchange rates among the world’s three major currencies, he said.

Dollarization and euro-ization

In this seminar, moderated by Zanny Minto-Beddoes of The Economist, Jacek Rostowski, Professor of Economics at the Central European University, Hungary, outlined the policy elements that the central European applicants for membership in the European Union should follow. These are to maintain a rapid rate of economic growth, to be committed to free capital movements, to recognize that the prices of nontradable goods will tend to rise as growth proceeded, and to satisfy the Maastricht criteria.

Drawing parallels between the central European and Latin American experiences, Paulo Leme of Goldman Sachs saw a steady movement among groups of countries toward single-currency systems. He emphasized that high quality in the underlying policies, particularly open trade policies, is essential.

Eduardo Borensztein of the IMF’s Research Department said he was not persuaded that every country should either dollarize or set up a currency board. He saw costs as well as benefits from dollarization, saying that countries could lose a degree of policy freedom by tying their hands to gain credibility.

Rudiger Dornbusch of the Massachusetts Institute of Technology essentially recommended that every emerging market economy either adopt a currency board or directly use a strong currency like the U.S. dollar, thus “outsourcing” monetary policy and gaining credibility and stability automatically.

Challenges for EU accession countries

This seminar, moderated by Pedro Solbes, European Community Commissioner for Economic and Financial Affairs, focused on key policy issues faced by accession countries on their road to European Union (EU) membership.

Charles Wyplosz of the Graduate Institute of International Studies in Geneva argued that removing capital controls too rapidly would entail unnecessary risks and potentially lower long-term growth prospects. György Surányi, Governor of the National Bank of Hungary, discussed the likelihood that strong capital inflows would at times push interest rates in the candidate countries to levels lower than desirable for domestic monetary management.

Marek Belka, economic advisor to the President of Poland, stressed the key role that EU accession prospects had played in crystallizing domestic coalitions for economic reform. Josef Kreuter of the Czech Ministry of Foreign Affairs also stressed the need for the accession candidates to establish the right reform priorities—including in labor market reform.

Financial system stability

Speaking at a workshop on improving financial system stability, Andrew Crockett, General Manager of the Bank for International Settlements, noted that weaknesses in domestic financial systems and in financial markets are most effectively addressed by strengthening best practices and ensuring that markets are transparent, open, and efficient. It would be important to avoid undue complexity, he said, by prioritizing the large number of standards for the benefit of those countries that intended to use them. The chair of the workshop, Bimal Jalan, Governor of the Reserve Bank of India, recommended that the connection between standards and codes and financial stability be clarified.

At a complementary workshop on the development and assessment of international standards and codes, Carl Adams of Merrill Lynch observed that standards serve as the bricks and mortar to hold the global community together and that it is essential to provide details of the work done in this area to the private sector. The moderator, Alastair Clark, Executive Director of the Bank of England, called for a more determined effort to raise general awareness of the standards and codes process.

East Timor

The pressing problems facing the people of East Timor were the focus of a special workshop organized by the IMF and the World Bank on the collaboration between the Bretton Woods institutions in postconflict countries. Opening the discussion, IMF Deputy Managing Director Shigemitsu Sugisaki cited the emergence of a strong leadership in East Timor, the establishment of a basic macroeconomic framework and a credible judicial system, and progress in foreign relations. He stressed, however, that the remaining tasks are monumental, particularly in the sound allocation of domestic resources, building up indigenous managerial capacity, and the efficient use of international aid.

José Ramos Horta, Nobel Peace Prize winner and representative of the East Timorese leadership, paid tribute to what he said were “exceptionally positive” relations with the IMF and the World Bank and the institutions’ contribution to peace and stability in East Timor.

Focusing on the lessons learned in East Timor, Luis Valdivieso of the IMF emphasized the need to closely coordinate international relief operations and reconstruction efforts, and develop key institutions with adequate resources and staffs.

Time-series data management

Addressing a seminar on economic and financial time-series data management, Warren Minami, Frank Maranto, and Sam Ouliaris of the IMF presented recommendations for collecting, managing, and reporting on large volumes of economic and financial statistical data. The main attraction of their approach is a dynamic link between the database and spreadsheets, which would shift the work of analysts from time-consuming data entry, management, and reporting to the more valuable manipulation and analysis of data, thus “unlocking the hidden value of data in spreadsheets.”

Capstone roundtable

The seminar program was summed up at a roundtable at which the opening speaker was the musician Bono, who said he represented a constituency of those who had lost confidence in institutions such as the IMF and the World Bank. The only reasonable course, he asserted, was to completely cancel the debts of poor countries. Lauren Lenfest of Oracle Corporation saw the challenge of the coming years as making the global economy and technological advances work for everyone.

Elizabeth Tang of the Hong Kong Confederation of Trade Unions said that while workers and unions view globalization as inevitable, they are concerned about losing their jobs. Trade unions, she said, are being weakened by liberalized trade and privatization policies.

Boney Katumbo of the Ugandan National Chamber of Commerce said that developing countries were poised to benefit from the digital revolution. He recommended that international negotiations focus on debt relief or cancellation, free movement of labor, enhanced economic cooperation, and strengthened private sector institutions.

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IMF Survey: Volume 29, Issue 20
Author:
International Monetary Fund. External Relations Dept.