Do IMF appointments hint at a change in direction?

Zhu Min, deputy managing director, International Monetary Fund Mr Zhu may not be that well known internationally, but his background is impressive

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Christine Lagarde, the new managing director of the International Monetary Fund (IMF), has announced her first senior appointments since taking over at the beginning of this month.

In addition to nominating David Lipton, a US national, to replace John Lipsky as first deputy manager director, she has selected Zhu Min, currently special adviser to the managing director, to fill a new deputy managing director position.

For the first time in the IMF's history, a national of China will be on the IMF's senior management and the number of deputy managing director positions will increase from three to four.

Neither appointment comes as a surprise.

There has been speculation for several months that Mr Lipton would take over as first deputy manager, thus keeping the position in American hands.

American support for Ms Lagarde may well have been based on an understanding to this effect.

It would also not be unreasonable to believe China's support for Ms Lagarde as managing director was based on commitments to increase the number of Chinese nationals in senior IMF positions.

International visibility

Both nominees have impressive credentials.

Between the two, Mr Lipton is probably the better known internationally on account of his having worked for many years in senior positions at the IMF and the US Treasury as well in the private financial sector.

His economic policy background on emerging market issues and crisis management - including during the 1997 Asian financial crisis - will probably be portrayed as significant assets.

Mr Zhu is less well known internationally, but has an impressive background as deputy governor of China's central bank and for his work at the Bank of China.

In addition, he worked at the World Bank in the early 1990s.

Most recently, he has assumed a higher level of international visibility as special adviser to the IMF managing director.

Membership reaction

How will the appointments be viewed across the IMF membership?

Christine Lagarde Ms Lagarde's inclusion of China could bring about changes within the IMF

Formally, the proposed appointments need to be discussed by the IMF's executive board. It does not seem likely the appointments will run into difficulties.

At the same time, however, there may be rather different "behind the scenes" reactions across the IMF membership.

To some, the appointments will be seen as marking the beginning of an important change in IMF governance.

With the appointments in effect, there will be two representatives from Asia on the IMF's senior management, as Mr Zhu joins Naoyuki Shinohara from Japan as a deputy managing director.

This will give more opportunities for the region to influence IMF policies and operations.

Others, however, may look at the appointments less positively.

Within the space of a month, the tradition of the head of the IMF being a European and the number two position at the IMF being held by an American has not been seriously challenged.

Regardless of stated intentions to adopt more open and transparent processes for selecting senior IMF management, the selection process is still largely carried out behind the scenes.

Three 'Cs'

Whether the glass is half full or half empty, it is important to recognize that IMF governance reform embraces much more then the selection of senior management.

Comprehensive reforms are needed to further shift IMF quotas toward emerging markets - including in Asia - and to improve internal decision making at the Fund.

It is to be hoped these will become a key area of focus for Ms Lagarde as she turns to the three "C's" of connectiveness, credibility and comprehensiveness, as discussed in her recent address to the IMF.

Charles Adams worked at the IMF for 25 years. His last posting was deputy director at the Office for Asia and the Pacific in Tokyo.

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