COLOMBO: Indian Finance Minister P. Chidambaram on Wednesday made out a strong case for early reform of the quota system of the International Monetary Fund (IMF) and said the World Bank's development-centric approach should not be vitiated by overemphasis on corruption and governance issues.

"It is widely believed that the present `Quota' formula of the IMF is hopelessly flawed and outdated. Obviously, an ad hoc quota redistribution based on this flawed formula cannot provide a durable solution. We need a consensus on a new formula. And we need it quickly. There must be a deep commitment to fundamental reform and there should be no postponement of a comprehensive review,'' Mr. Chidambaram said in his address to the Commonwealth Finance Ministers meeting here.

Talking about issues connected with the developmental aspects of the World Bank, Mr. Chidambaram said there was an unusual focus on governance and anti-corruption issues in the bank's strategy.

Development-centric

He said the bank proposed to integrate it into the operational policies of all its affiliated institutions. "We recognise the importance of this issue in the development dialogue. However, we would be unhappy if the new focus tends to obscure or negate the bank's historical `development-centric' approach,'' he said.

"While we acknowledge the role played by the two institutions, we also note that there are issues concerning their structure and management. On the issues of immediate concern especially on the eve of the annual meeting - we need to focus on three aspect,'' he said.

First, he said, participation in the management of these institutions had to undergo a change to reflect the current global realities more accurately. A flawed structure would increasingly undermine the effectiveness of these institutions.

Second, the challenge before the world today was to meet the increasing aspirations of the vast majority of the people for freedom from hunger and for the bare minimum necessities of health and education.

Third, there was a growing urge among the member countries to negotiate the development curve in a compressed time frame. The relevance of the IMF and the World Bank would eventually be determined by their ability to play a meaningful role in these areas, he said.

Mr. Chidambaram said the UPA Government strongly believed that any exercise intended to enhance the credibility and legitimacy of the IMF had to be based on fundamental reforms in the quota structure.

"India has always held that the developing world deserves to have much greater `Voice' in the management of the International Financial Institutions,'' Mr Chidambaram said.

Infrastructure deficit

Speaking about the infrastructure deficit, Mr. Chidambaram said the World Bank could help in devising suitable interventions which would help bridge the gap.

Some steps had been taken to increase the bank's participation in infrastructure development in developing countries. "Clearly, there is a need to do more.'' he said.

Mr. Chidambaram said the structural reform, reflecting the current global realities, would invigorate the operations of the IMF and the World Bank. "This will also provide a decisive impetus to our efforts to achieve the Millennium Development Goals.''

He said the IMF Managing Director's Report stated that the new formula should clearly reflect the economic strengths of countries.

"This was something all developing economies strongly endorse, and I urge you to join me in Singapore to articulate our united view on this matter. The issue of implementing a new quota formula is also linked to amendments to the Articles of the IMF on Basic Votes. I am hopeful that we shall all be together united, strong and persuasive in proposing a road map which enhances the `Voice' of the developing community, and that a consensus on this will emerge at Singapore,'' he said. UNI

B. Muralidhar Reddy reports:

Mr. Chidambaram, speaking at the inaugural of the Indo-Lanka Chamber of Commerce and Industry (ILCCI), said free trade agreement (FTA) between Sri Lanka and India had benefited both countries immensely and hoped that soon a comprehensive partnership agreement (CEPA) would be concluded.

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