Tuesday, November 01, 2011

IMF- World Bank Annual Meetings 2011: Personal Impressions (Part 2)

By John A. Akec

(IMF Managing Director, Christine Lagarde, on BBC's Global Debate on World Economic Crisis)

This is the second part of a previous article in which I shared with readers my personal impressions about this year's IMF-World Bank Annual Meetings (from 19th to 26th September 2011). I attended the annual meetings with nine other IMF academic fellows for 2011. As pointed out in the previous article, IMF fellowships were awarded to ten academics from South Sudan, Armenia, Bangladesh, Bolivia, Cameroon, Egypt, Mongolia, Paraguay, Romania, and Tanzania. Leaders of civil society organizations, journalists, and youth groups were invited, as has been the practice in the last decade, to attend the week-long annual events in Washington, DC, that involved taking part in thematic seminars, workshops, round-table discussions, televised debates, and conferences, all of which are concerned with discussing current global economic challenges. That said, this was the first time the Fund has invited academics through a fellowship. For the benefit of all, I am going to share my impressions about seminars, panel discussions, and conferences that are of particular relevance to the sort of economic challenges that are currently faced by South Sudan. Last but by no means least, the article will briefly comment on how academic community may contribute to enhancing IMF's effectiveness.

Conference on Commodity Price Volatility and Inclusive Growth in Low Income Countries (LIC's)
This conference was probably one of the highlights of the annual meetings in terms of the importance attached to the economic challenges it tried to address and the solutions the participants have put forward in their presentations which could be of great value to policy and decision-makers in South Sudan, and similar economies that are heavily dependent on natural resources for export earnings. In a nutshell, a well studied and lived problem by many resource-rich countries is that government income from export (such as diamond, oil, copper, natural gas, etc) are hard to predict but fluctuates with global commodity prices that in turn depend on demand for a particular commodity at a time. This poses budgeting difficulties to governments of the affected countries. Another well studied economic problem prevalent in resource-rich countries is that these countries that are endowed with natural resources have tended to remind poor, fragile, and less democratic in comparisons with countries that are not endowed with natural resources, and had to innovate to build their economies from scratch. Besides, natural resource dependency is understood to lead to the so-called resource-curse, or Dutch disease.

The conference opened with remarks by Christine Lagarde, the IMF Managing Director, who acknowledged how many low and medium income countries have successfully weathered the recent world financial crisis and that they have a vital role to play in the global economic recovery. The economic Nobel Prize winner for 2001, Joseph Stiglitz, gave a keynote speech on "Globalization and Income Distribution". He called for other accurate measures of equality and prosperity as opposed to GDP which, according to him, was adopted after Great Depression as a measure of economic activity, as opposed to that of wealth distribution among the members of a population. Furthermore, Stiglitz argued by the way of example, that a universal system of education that is accessible to all, is a better measure of equality. This is because, through education, Stiglitz maintained, majority of the citizens of a country have better chance of achieving their full potential. This keynote speech is bound to challenge the newly independent South Sudan to rethink its priorities regarding how prosperity can be equally spread among its citizens through such instruments as universal quality education and health service that is freely accessible to all.

The second keynote speech was by Jeffery Sachs, a renowned Columbia University's economic professor and former economic advisor to Mr. Koffi Annan, by then the UN Secretary General. Professor Sachs, who spoke via a video link from University of Coulmbia, addressed the conference on "Climate Change, Commodity Price Volatility and Consequences for LIC's." Jeffrey Sachs warned of the dangers of the increasing and unregulated scramble by the multi-national conglomerates for agricultural lands in Africa, describing the process of land acquisition as unsustainable. Professor Sachs called for regulation and good governance procedures to be followed when awarding lands to investors in Africa in order to avoid destroying livelihoods and physical environment, a call that should strike a chord with the decision-makers in Juba, especially after it came to light that investors have bought lands in South Sudan that are collectively the size of Rwanda through community leaders, away from any government oversight. Would you believe it?

Amongst other speakers were Jeffrey Frankel of Harvard University who gave a paper on "Resource Curse"; and Paul Collier, the distinguished development economist at Oxford University, former head of research at World Bank and author of the best seller book: The Bottom Billion, presented a paper on "Savings and Investment Decisions in Natural Resource Rich LIC's". Many more papers on the topic were also presented by illustrious economists, and space will not allow discussing them here. However, each paper tackled a different perspective of the problem. To present policy-makers' perspectives, the finance ministers from Ghana and Bolivia gave presentations about economic policies their countries are pursuing to overcome the challenges posed by commodity prices volatility to their countries.

Not only did the speakers agree that oil, gas, diamond, etc need not be a curse, they also proposed various ways of turning them into great blessings for the countries that are endowed with such resources and wisdom in economic management of the revenues they bring. By following a saving formula that increases with the decreasing reserves, Paul Collier believes, LICs with such resources can 'ride the tiger', smoothing out the dips in incomes when commodity prices are low using their reserves, and accumulating reserves in good times, for partial use in bad times. Ministers of finance in Ghana and Bolivia shared how their countries are riding against resource price volatility by budgeting government expenditure well below the revenue forecasts. That way, they argued, their countries were able to save and insulate their planned spending from chock of commodity price bumps. Like cigarettes and alcohol, the dangers of resource curse and possible solutions are well studied and publicized in literature; yet many a government continues to ignore these solutions at their own peril. South Sudan can do well by budgeting below average oil monthly income, saving the rest away for hard times, and diversifying into agriculture as well as improving tax collection, all within its budgeted expenditure.

IMF Engagement with Fragile States

(Pannel Discussion on IMF Engagement with Fragile States)
A panel discussion was devoted to this important topic. Examples of fragile states include Afghanistan, East Timor, Sudan, South Sudan, Iraq, Liberia, and Sierra Leone. Fragility in this context refers to those states that are emerging from conflict. Their common features include low capacity to design and implement projects, low capacity for absorbing large volumes of direct foreign investment or large doses of foreign aid; having weak institutions that are viewed by the public as somewhat lacking in legitimacy, and existence of fragmented political situations that pose threat to peace and increase risk of reigniting conflict. Panelists observed that aid needs to be coordinated between providers in order to be effective. Too much aid money very early on a transition period is seen as not very effective in many low income fragile states. A paper distributed by IMF Strategy, Policy, and Review Department proposed among other things, flexibility and less ambitious performance targets in the Fund's supported or monitored programmes in fragile states, among others.

Global Development Debate: Jobs and Opportunities for All

(Pictured above: Pannel Discussion on Jobs at World Bank's with Participants from Mexico, Uganda, Kenya, and Jordan take part via video link)

This took form of a panel discussion moderated by Chrystia Freeland, Reuters Global Editor-at-Large. Involved in the discussions were Said Aidi, Minister of Vocational Training and Employment, Tunisia; Stella Li, Senior Vice President, BYD Company Limited, China; Allia El Mahdi, Dean of the Faculty of Economics and Political Science, Cairo University, Egypt; and Manish Sabhardwal, CEO, TeamLease, India.

Amongst the questions debated included such things as what development strategies can be pursued to achieve both economic growth (GDP), and employment growth (employment rates)? How best to increase women employment rate as a way of boosting overall employment rate growth across regions? How to create decent jobs, as opposed to jobs that do not lift workers out of poverty? Is relevant vocational training the answer to putting great majority back into gainful employment? What role can knowledge and innovation-based industries play in bolstering economic growth? Participants in Preston Auditorium of World Bank in Washington DC (where the panel discussion took place) were joined through video link by participants from Mexico, Kenya, Uganda, and Jordan. The government of South Sudan, must wrestle with such questions to find jobs for many unemployed youth in its backyard.

IMF Technical Assistance: Tackling the Crisis and Building Institutions for the Future
For most of us, talking about IMF is talking about lender-debter relationship. Thankfully, it does not always have to be so. As I discovered in this year's annual meetings, there is more to the IMF than lending to its member states. The above seminar took place on Monday 26th September 2011, the last day of the annual meetings. Four specialised departments of IMF, namely Fiscal Affairs, Statistics, Monetray and Capital Markets, and Legal Departments, as well as IMF Instiute, do provide technical assistance in areas of fiscal, debt, finanical data gathering, supervision of banking system, liquidity management, that enables members to face economic crisis and build competent institutions capable of robustly managing their own national economies in future. Working through IMF training arm, the IMF Institute, these departments can channel policy-oriented training in macroeconomic and fiscal markets, macroecoomic management, debt management, among others. Succuessful case studies were presented at the seminar on how the Fund had assisted members countries such as Poland (to reduce inaccuracies in data related to balance of payment), Asian countries (strenegthening of bank supervision and regulation), and Peru (developing a national strategy for anti-money laundering and combating of financial terrorism). Presentations were followed by a pannel discussion that was later sealed by a remark by Nemat Shafik, the Deputy Managing Director of the IMF. It is worth pointing out that though Technical Assistance programme, the Fund can place experts to provide advice within finanical institutions of member states as well as organising workshops that facilitate peer-to-peer learning, as well as enabling the sharing and exchange of experiences. Hence, there is no dobut that South Sudan can benefit greatly from many of the services provided by Technical Assistance Programme of the IMF.

How the Academic Community Can Contribute to Enhancing IMF's Effectiveness?
(Pictured Above: Academic Fellows in Official Photo with Marjorie Henriquez (Centre, to the right of the author), The Academic Fellowships Coordinator, International Monetary Fund)

The IMF academic fellows for 2011 were asked to submit a short essay about their thoughts on this question, several weeks before travelling to Washington for the annual meetings. In the light of criticism of the Fund in relation to structural adjustment programmes in Africa, this author proposed that IMF and academic communities of the countries concerned collaborate in understanding the underlying success factors (or necessary prerequisites) in order to put them into account when designing IMF intervention programmes. This, in the author's view, would avoid the one-size-fits-all approach that had characterized numerous structural adjustment programmes in the past.

Another IMF academic fellow from Bangladesh, suggests that academic community can enhance the effectiveness of IMF's policy prescriptions through rigorous analysis and consultation prior to their adoption; and evaluation of the outcomes afterwards. In essence, he argues for contextualization of such policies to country's specific needs and competencies. "There should be no more square pegs in round holes, please," if I have read him correctly.

An academic from Egypt agrees independently with above propositions, and believes that academics can provide more country-specific insights such as identifying government champions to implement IMF policy recommendations. According to her, academics have access to media, and hence are well placed to correct any misconceptions that have often accompanied IMF's policy interventions in many countries.

As to the academic fellow from Cameroon, he calls for more cooperation between IMF resident country's representative and universities or research centers through partnership agreements, funded research, staff exchange programmes, joint organization of workshops, and presentation of IMF country reports to wider audience, among others.

The Armenian academic also argued in favor of academics playing a bridging role between IMF and World Bank on one hand, civil society, media, and general public on the other hand. Such approach, she emphasises strongly, will enhance mutual understanding and consolidate positive dialogue.

By mere coincidence, and not surprising by any measure, the positions of the academics from Armenia and Cameroon in regards the partnerships and tighter collaboration between the Fund and academic community were echoed by the academic fellow from Paraguay. However, the academic from Paraguay added a new twist. Instead of looking backward to the past, emphasis should be placed more on crafting a new and positive vision for the future that will better redefine the role of IMF in the increasingly globalized economy, and that the academics must contribute to the reshaping of such a role.

Last but not least, an academic from Romania unsurprisingly concurs in her independent analysis with most ideas put forward by IMF academic fellows. She, however, went on to propose a body comprised of academics at country level whose main responsibility is to monitor and analyze IMF policy prescriptions, conduct studies that complement IMF policies, and evaluate policy outcomes at a national level, amongst others.

And so, the academic fellows have spoken their minds by coming up with myriad of solutions as to how their professional community can enhance IMF's effectiveness in this increasingly interconnected world. Perhaps, the motto: think global and act local, has its perfect application in the IMF-academic community collaboration jigsaw. And yes, global challenges need global solutions.

Before concluding, however, I have to acknowledge that my brief overview of what the IMF academics fellows have proposed in their essays cannot do justice to them. Hence, all errors of misinterpretation and omission are mine.

Finally, on behalf of IMF Annual Meetings Academics Fellows for 2011, I would like to extend our deepest gratitude and appreciations to Margorie Henriquez, the Academic Fellowships Coordinator at International Monetary Fund, and her team; for her hard work, exceeding kindness, professionalism, and immense help to us, right from sending out invitations, to sorting the visas applications, to booking of flights, to arrival, and through to the time we left Washington DC for our home destinations. Thank you, Marjorie and team, for a job well done.


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