IMF  HEAD  ISSUES  WARNING  ON  PROTECTIONISM  AT  START  OF  IMF-WB  MEET

SINGAPORE, SEPTEMBER 19, 2006
(STAR) (AFP) - The head of the IMF warned Tuesday that the threat of protectionism loomed over a shaky world economy and called again for urgent action to salvage the Doha Round trade liberalization talks.

"The best hope for continued high growth lies in further increases in international trade," International Monetary Fund Managing Director Rodrigo Rato told the opening plenary session here of the IMF and the World Bank.

While momentum is currently healthy, "the global growth cycle may be close to its peak," he said.

"Educated and skilled labor is in tight supply and the scope for continuing productivity (growth) is in short supply."

In addition, the world trading system is threatened by a resurgence in protectionism following the breakdown in July of multilateral negotiations aimed at tearing down barriers to global commerce.

"The world will either go forward to greater growth and broader opportunities, or backward to narrow nationalism," Rato said.

"We should not fool ourselves that there is a comfortable middle ground."

He appealed to the world's major powers "to intervene quickly to conserve the gains made in negotiations so far and to put the Doha Round back on track."

As he spoke here, senior officials from key trading nations were gathering in Cairns, Australia to mount a last-ditch effort to rescue the Doha Round of trade liberalization talks, launched five years ago in the Qatari capital.

The negotiations since then have foundered and have been brought to the brink of total collapse by squabbling over how much each party is prepared to concede on tariffs and market access to free up world trade.

But Rato also had what he said was good news to announce here -- the overwhelming approval on Monday by the IMF membership of a sweeping reform initiative that aims to drag the 61-year-old Fund into the 21st century.

In a first phase, four countries that are now key and growing players in the global economy -- China, South Korea, Mexico and Turkey -- will see their voting rights in the IMF strengthened.

The blueprint, which also envisages broader reforms to be thrashed out over the next two years, was backed by 90.6 percent of the votes of member states.

"These governance reforms are tremendously important for the future of our institution," Rato said following the vote.

"They will enhance our effectiveness and add legitimacy to all of the other reforms that we are implementing. There is much work to do but this vote is a great start."

The 184-member IMF, created to help regenerate the post-war financial system, has until now been dominated by the United States, European countries and Japan.

Despite its growing stature as a global economic powerhouse, China had less voting clout than Belgium and the Netherlands combined.

The four countries to benefit from the changes are said by the IMF to be the only members under-represented on all four of the criteria that determine a country's quota, which in turn determines voting rights and access to funds.

Mindful of criticism that the poorest countries are being left out of the reform process, the IMF plans to at least double the number of basic votes a member is allocated regardless of its economic standing.

"It's a small step but an important step," US Treasury Secretary Henry Paulson said of the overhaul.

Following two days of meetings in Singapore of their policy-making bodies, the IMF and the World Bank are holding two days of plenary sessions attended by representatives of their 184 member economies.

World Bank President Paul Wolfowitz was also to speak to the gathering. His campaign to combat corruption in the developed and developing world has sparked opposition rooted in fears it will endanger the Bank's poverty-fighting mission.


Chief News Editor: Sol Jose Vanzi

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