Decade After Meltdown IMF Less Relevant in Asia

BANGKOK - As the Asian financial crisis struck 10 years ago, beginning in Thailand and then spreading rapidly to eight other economies in the region, the desperate call for help was answered from the West.

In rode the International Monetary Fund (IMF) with the customary swagger of a powerful moneylender. For the next two years, the Fund supplied over 38 billion US dollars in loans to the affected countries, according to available reports.

This financial bailout and other economic prescriptions to the affected countries such as Indonesia, South Korea and Thailand were given on conditions that the Washington D.C.-based international financial institution (IFI) thought was best, including strict austerity measures.

But times have changed. A meeting on Monday in Manila, hosted by the Asian Development Bank (AsDB), conveyed the tone of contempt with which finance and economic officials from the affected countries now view the IMF.

It is a view built around the region's rapid economic recovery over the past decade and its abundant foreign reserves to stave off a repetition of a similar crisis. The officials from Thailand, Malaysia, South Korea and the Philippines who spoke at the meeting are also warming up to the idea of an Asian Monetary Fund created through regional financial cooperation as an alternative to the IMF.

''Looking ahead, we need to take responsibility. Asia now needs to be the one to manage the global financial system,'' said Thai Finance Minister Chalongphob Sussangkarn, according to Reuters news agency. ''We cannot let debtor nations manage the global financial system. The International Monetary Fund is more like a debtor monetary organisation, we need a creditor monetary organisation.''

Long-time critics of the IMF are hardly surprised by the hostility leading financial and economic players in the region still harbour towards this IFI. ''This is to be expected since the IMF positioned itself on the wrong side of the Asian financial crisis. Its solutions made the situation worst,'' Walden Bello, executive director of Focus on the Global South, a Bangkok-based regional think tank, told IPS. ''The IMF lost its legitimacy and relevance in the region as a result.''

Among the IMF's solutions were the financial packages aimed to save foreign banks and speculative creditors who took a beating as economies contracted than to help the local people, who were the worst affected, added Bello. ''The IMF also used the crisis to push through economic liberalisation policies that it and its backers in the U.S. failed to achieve earlier in these Asian economies.''

''The IMF's policies after the crisis caused much damage in Indonesia,'' said Donatus Marut, executive director of the International NGO Forum on Indonesian Development (INFID). ''They were more interested in privatising state enterprises without thinking about the cost to people.''

''People are still very angry with the IMF and its policies,'' he added during a telephone interview from Jakarta, where his non-governmental organisation (NGO) is based. ''The IMF's prescription for economic reform created massive unemployment.''

Such views were mirrored in the commentaries that appeared this week in the region's press. The IMF's multi-billion dollar rescue packages, ''with their excessive policies,'' exacerbated the problem, argued The Jakarta Post in an editorial. ''In Indonesia, the number of poor people jumped from 34 million in 1996 to almost 50 million in 1998.''

Even renowned experts like Joseph Stiglitz have not spared the IMF during this 10th anniversary of the financial crisis. ''The IMF and the US Treasury marched in, took away economic sovereignty and demanded policies intended to enhance repayments to Western creditors, which plunged (the affected Asian) economies into deep recessions and depressions,'' the Nobel laureate in economics wrote in a commentary that appeared Monday in The Nation, an English-language daily in Thailand.

Till the crisis, which began on Jul. 2, 1997, the affected countries had ridden a wave of prosperity and growth that earned them names such as the ''Asian Tiger economies'' or being known as the ''Asian miracle.'' But when Thailand floated its currency, the baht, after having pegged it to the U.S. dollar for years, its value sank dramatically. This financial flu spread to Indonesia, Malaysia, Philippines, South Korea, Singapore and Taiwan, among others. Some currencies lost over 50 percent in values, while some economies contracted by 13 percent soon after the crisis.

Working women in countries like South Korea, Thailand and Indonesia were among the worst hit as companies went bankrupt, according to the International Labour Organisation. These women were among the first to be retrenched, lose social welfare from the state or, if hired later, were only taken back as part-time, contractual labour.

The cold stares that the IMF is receiving this month adds to a growing trend pointing to its irrelevance in the developing world, says Bello, of Focus on the Global South. ''Countries are looking for other sources of finance than the IMF. China has emerged as a major player.''

This shift away from an IFI set up 60 years ago to give loans to countries struggling with financial problems was brought to relief by the end of 2006. Rather than borrowing from it, more developing countries are paying back past loans. From lending over 100 billion U.S. dollars annually up to four year ago, the IMF was reported to have given 20 billion dollars in loans annually in the years since.

Copyright (c) 2007 IPS-Inter Press Service.