***Stanley Fisher, the African-born American who is the current acting head of the organisation, was nominated by twenty sub-Sahara African countries; while Japan nominated Eisuke Sakakibara, a former vice-minister at Japan's Ministry of Finance and popularly known as "Mr. Yen" in the international community.***

THE top management at Ihe IMF-World Bank headquarters in Washington are not happy with what they are hearing. The reason for their concern is the findings that are likely to be reported early next month by the International Financial Institution Advisory Commission, a US congressional commission that was established last year for preparing a report on the working of the two international institutions.

Although the commission's report is not due for al least another week, the broad thrust of its possible recommendations are already circulating among the policy makers and interested academicians in different countries. The recommendations of the commission aren't surprising given its composition. Il includes such IMF critics as Jeffrey Sachs of Harvard and Charles Calomiris of the Cato Institute. Allan Meltzer, a conservative monetary economist from the Carnegie-Mellon University heads the commission.

The 11-member commission is likely to suggest that the IMF should concentrate on shorty term financing to resolve crises In the middle-income countries: while the World Bank ■ should shift their emphasis towards the poor countries and provide grants rather than loans. The commission is also expected to call for the abolition of the International Finance Corporation, the World Bank’s private sector arm. and MIGA, its political insurance unit.

However, the most radical proposal concerns the overlap that the commission found between the roles of the World Bank and regional development banks. Il is likely to recommend that the World Bank should pull out of Asia and Latin America, leaving the regions to the Aslan Development Bank and the InterAmerican Development Bank, .espec-tively. The commission warits the World Bank to concentrate on countries in Africa. Eastern Europe and the former Soviet Union.

Regarding the IMF. the commission would recommend that the Fund should focus its energy in resolving liquidity crises in the emerging economies through providing short-term funds. Moreover, funds should only be provided with collateral and at nigh interest rates. Although it is not yet clear how many of these recommendations would find its place in the final report, all indications are that the commission would call for an extensive overhaul of the workings of the two international institutions. Given the current level of hostility shown towards these two institutions by prominent members of the US congress, it is very likely that the commission's findings would open the way for increased pressure on the Clinton administration to push reform in both the IMF and Jie World Bank.

These widely circulated reports on the commission's findings cannot come at a worse time, especially for the IMF. It is in the middle of finding a successor for Its managing director. Michel Camdessus, who has stepped down from his position earlier this month. His announcement last year to resign after serving for 13 years has provoked a bitter squabble that mixes European national rivalries with serious debate about the role of an increasingly important institution, closer than any other to being a global central bank.

The Job of IMF's managing director 'traditionally goes to a European, which in the recent past has meant a Frenchman including Camdessus and his French predecessor. Jacques Rosiere. For the first time in the history of the IMF. Germany has put forward a candidate: Caio Koch-Weser, a former World Bank executive who is currently the second man in the German Finance Ministry. For the last several months, German Chancellor Schroder has been pushing his candidacy particularly hard.

However, Koch-Weser has found it difficult to secure widespread European support. The major reservation about his carldldacy is his relatively low Crofile. little political clout and ackground In development rather than international finance. His expertise lies In long-term development as a senior World Bank official with almost no management expert-' ence. His critics point out that the main task for the new managing director is to take the IMF in precisely the opposite direction. Its role should not lie in fighting poverty, but in promoting macroeconomic and exchange rate stability.

After the Germans forwarded Koch-Weser's name, no other European government publicly showed any enthusiasm for his appointment. France didn't sign on. Britain was hoping that Koch-Weser and his main backer, the German government, wall relent on its own. This will clear the way for former British Finance Minister Kenneth Clarke or Andrew Crockett, current head of the Bank for International Settlements, each of whom has been floated as a possible candidate. British Finance Minister Gordon Brown could probably secure the Job with ease, but isn't, publicly at least, a candidate. The Clinton administration was even less keen about Koch-Weser, but for diplomatic reasons wanted to leave the choice to the Europeans.

German Chancellor Schroder had sharply stepped up his pressure in recent weeks with a warning that the German government would veto any other European candidate. Among emerging economies, only China has so far publicly come out in favour of Koch-Weser. He has won support from Zhu Rongji, the Chinese prime minister, an old contact from his World Bank days.

Earlier this week, the contest for the job was thrown open as two non-Europeans were nominated to head the organisation. This can be viewed as a sign of growing frustration among other IMF members at the delays surrounding European efforts to find a suitable candidate.

Stanley Fisher, the African-born American who is the current acting head of the organisation. was nominated by twenty sub-Sahara African countries; while Japan nominated Eisuke Sakakibara, a

former vice-minister at Japan's Ministry of Finance and popularly known as "Mr. Yen" in the international community.

Despite haring a feu- better credential than Koch-Weser, the nomination of Fischer would probably be opposed by the European governments. who fear US domination of the IMF. Partly for this reason, the US is also not very' keen about Fisher's candidacy. After the formal proposal of these two rival nonEuropean candidates, there was a strong possibility^thal the European Union may decide to back Koch-Weser as a show of unity. This is actually what has happened when earlier this week, after months of hesitation. the European Union selected Koch-Weser as their candidate — only to have President Clinton publicly reject him as unqualified. The US position is that Koch-Weser lacks the requisite financial experience, the political dexterity to juggle the IMF's member governments, and the support of the poor countries that borrow IMF money. The US decision to oppose his nomination immediately threw the already confused IMF succession process into further disarray. It would be interesting to see how the drama plays out in the next few days.

The whole fiasco in selecting a successor to Camdessus raises a number of interesting Issues. First, like the recent appointment of the director general of the World Trade Organisation and the president of the Euro-Cean Central Bank, the process y which the new IMF chief is being selected is in shambles. One reason for this is that, because the IMF chief has traditionally been a western European. the world has waited for Europe to choose the new leader But there is no reason why the head of the IMF should be from the European Union, particularly given the shortage of candidates. As the IMF deals primarily with developing countries, so the competition should be made open to candidates from all IMF member — countries, not lust the European 410110118. Qualified candidates

should be able to apply to the IMFs board, which would then vote on a new head from a short-list of capable candidates.

This would eliminate the show of parochial nationalism as evidenced in German chancellor Schroder s behaviour. He is pushing for Koch-Weser not on his merits, but only because he is German. The same can be said about the recent behavior of Britain and France in selecting the secretary-general of NATO and the head of the European Central Bank, respectively. Second, the recent experience from the global financial crises shows that the success of the IMF in making the world a safe place financially depends on ihe vision and effectiveness of the top management. So it needs a new leader who can refocus Its role on macroeconomic surveillance and managing financial crises. Among the announced candidates. Sakakibara fills this role better than any of the others. His experience in managing'the value of yen and guiding Ihe Japanese economy through the periods of financial and economic turbulence testifies to his capability, experience, and skill. He would be the perfect candidate to lead the IMF in the new century’. Moreover, it would give the non-western countries a strong foothold in international policy making.

It is obvious that the current IMF management and its backers in the Western countries would not be receptive to the idea of a candidate from a non-Western country lo be elected the head of IMF. This would take lime. But eventually they should be able lo see through the rationale of this argument, it would be much better than having a bungled appointment based on diplomatic convenience. The succession question is of critical importance to the IMF and to countries that seek its loans during crises. The candidacy of Sakakibara from Japan would hopefully open this succession debate in the coming months. Even tho..gh his candidacy may be rejected this time around, it would help promote more transparency In the selection process in future.