IMF Conference

Transcript of an Economic Forum
Transparency at the International Monetary Fund:
The Road Ahead
International Monetary Fund
Multipurpose Room, B-702
Thursday, December 13, 2001
Washington, D.C.

Panelists
Thomas C. Dawson II, Director, IMF External Relations Department
Ydahlia A. Metzgen, Division Chief, IMF Policy Development and Review Department
Robert Wescott, Private consultant
Martin Gruenberg, U.S. Senate Banking Committee
Daniel Bradlow, American University

MR. DAWSON: Welcome to another in our series of Economic Forums. I guess this is an example of the Fund's turning to American English—if it were still the old Fund, I would have said "Economic Fora".

Our Executive Board is scheduled to review, this coming March, our transparency policies. This forum should help us collect public input to help the review.

Financial institutions as well as officials have long been notorious for being inscrutable. There is a story here in the Fund about the first head of External Relations—he was then called, I think, the Personal Assistant to the Managing Director. And he asked the then Managing Director, "What shall I tell the press?" And the Managing Director leaned back, thought about it for a while, stroked his chin, and responded, "You will tell them nothing."

It was less than ten years ago, in fact when I was the U.S. Executive Director, that one of the Fund's senior press officers was subject to a mild dressing down by his superior—who, I might add, is sitting here in this room—because the press officer was quoted by name in the newspaper. In those days it was unacceptable if anyone at the Fund, other than the Managing Director, was identified as anything other than "a monetary source".

All this has changed. We are now in the years of living transparently, and nowhere is this change more apparent than at the Fund. While we used to publish virtually nothing, we now publish almost everything, though some of our panelists may not agree with this completely. And I'd note that Stan Fischer, in one of the many exit interviews he's given since resigning from his post, cited transparency as one of the greatest achievements of the Fund during his time here.

Now, you might accuse Fischer, even in an exit interview, of being a tad biased in favor of the Fund. But it's not only Fischer who says so. So does Charlie Calomiris, a member of the Meltzer Commission, who has praised IMF openness, including in an interview in the IMF Survey not long ago.

I also know from my own experience how things have changed. In the mid-1990s, senior officials of the Fund approached the editors of a major newspaper to stop one of their journalists from reporting on the contents of then secret IMF staff reports. That individual is now a senior press officer in our Media Relations Division.

Not that we really need to drum up press interest in our products these days—new technologies have provided a means through which we can reach millions. Our website—we don't have our usual backdrop here, but it's www.imf.org—now gets something like four million hits per month. Use follows the news, with Argentina and Turkey fighting for the top spot of the most visited country pages. Afghanistan is now moving up the list even though we have almost nothing posted on the country at this point.

Another page that gets a lot of hits as well is our job vacancies pages, and I don't find this surprising. It has always amazed me how many of the Fund's critics, including in meetings like this, will approach us afterwards asking about jobs.

The Fund Web page contains enough information to allow serious students of the Fund and Fund activities to understand what the institution is up to. The reporting of the Fund's accounting practices and financial positions has improved to the point where even I can understand it. And Calomiris—quoting Charlie as saying positive things about the Fund for perhaps the last time today—has said that he was, again, also impressed by changes in the reporting of Fund finances.

The country information available on the website is truly phenomenal. Last year we carried out 130 Article IV consultations—or annual health check-ups, as it were—for member countries, and in 80 percent of these cases the summary of Executive Board discussions was posted on the website to give observers a rundown of how the staff and Board assessed the country. And in nearly half the cases, the complete staff report, which generally has more information than most people would ever want to know about a country, was published.

In short, information once guarded closely as state secrets is now routinely published. And fears that the release of this information would shake the pillars of modern civilization seem to have been unfounded. Financial markets are happy getting a steady stream of information from us and from our member governments. And they like it better than the old system when a sudden deluge of information which had been kept bottled up would come out and destabilize markets and countries.

Despite the progress, the Fund, like all bureaucracies, probably still maintains itself as more closed than many would want. So pressure, I am sure, will be kept on us to be even more open, and I think that's fine. But I do think there are limits to how open the Fund can, in fact, be.

There is a doctor-patient or lawyer-client element to the relationship between the Fund and its members, and the effectiveness of our relationship depends to some degree on that confidentiality. You know, for example, disclosing prematurely details of ongoing loan negotiations could be disruptive and detrimental to the country's interest. In some cases, blowing the whistle may be necessary, but the advice of the Fund may still need to be kept confidential.

There are also limits on the extent to which internal discussions within the Fund can be made public. To quote a knowledgeable economist, "Organizations cannot function without a certain degree of loyalty and structure. ... Once a decision has been made, prior disagreements that exist ought not to continue to be aired in public." Those are quotes from the former Chief Economist of the World Bank, Joseph Stiglitz.

So the principle of not airing our dirty laundry in public is, I think, self-evident. But that doesn't mean that our decisions shouldn't be reviewed, reviewed at a later time, reviewed honestly, independently, and openly. Without that, the institution would have no basis for learning from experience. And it's with this in mind that the Fund has set up an Independent Evaluation Office which will have the freedom to decide what it wants to investigate and how.

With these remarks, I'd like to turn now to the business at hand. First, a housekeeping announcement. The next Economic Forum on conditionality will be next Wednesday, December 19th, same time, same place. Secondly, please leave your business cards as you leave here so we can keep in touch. And, finally, after the introductory comments by the panelists, we encourage your participation in the Q & A, and we have microphones on either side in the two aisles.

With that, I would like to now quickly identify each of the four panelists, and then they in turn will make presentations, and we will leave plenty of time for commentary.

To my immediate left is Ydahlia Metzgen, who heads the IMF's Coordination and Standards Division, which has spearheaded many of the initiatives to improve Fund transparency. Her prior work experience includes stints at Merrill Lynch, the Federal Reserve Bank of New York, and the Central Bank of Barbados.

To my far left, Robert Wescott runs an international economic, financial, and consulting firm based in D.C. He served in the White House during the Clinton administration at the National Economic Council and the Council of Economic Advisers. He previously also worked at the IMF, I think working on the World Economic Outlook in the Research Department.

To my immediate right, Marty Gruenberg is senior counsel at the Senate Banking Committee. I think he's one of the most knowledgeable members of the staff of the Hill on IMF issues, although we haven't given him too much business in recent years, and we hope to keep that the case.

And to my far right, but only for this purpose, is Danny Bradlow with the American University here in Washington. He's professor of law and director of the International Legal Studies Program. He is an expert on reform of international financial institutions, has written extensively and knowledgeably on the Fund, and has been a worthy opponent of the Fund over the years.

I think if I now might just start, in the order of the people as I introduced them, with Ydahlia.

MS. METZGEN: Thank you. I'm happy to be here today. I'm going to very briefly try to sketch out for you and put into perspective our transparency initiatives.

First, let me start by saying transparency goes beyond the publication of documents, the increased transparency of our operations, of our policy advice to our members, and of our members' policies, to a philosophy and an approach to doing business, to how we do business in this organization. In my shop we think of this as the understated revolution of the last several years. There has been a sea change in this area, and certainly since I joined the Fund almost 11 years ago from Merrill Lynch in terms of the transparency within the organization, but also the openness with respect to how we do business and also our accountability.

When I joined Fund, little was published, and now we publish, as Tom has indicated, documents on almost all aspects of our work. In addition, we have launched other initiatives which I think go to the heart of transparency in terms of providing a context for evaluating information, for instance, the Initiative on Standards and Codes, where we've identified areas which we think are important for policy-making and markets and to provide a means of assessing the information that both our members provide and that we provide ourselves.

I will speak briefly on the motivation for some of these initiatives, and for transparency in particular, how we have gotten here, our policies in place, and perhaps a little bit about where we might be going down this road.

Transparency, as I indicated, is one of what we term, or I think if you read in the papers, the so-called architecture initiatives. And the idea behind this, particularly in the late '90s, in light of the crises in emerging market countries and, in particular, the Asian crises, is that the provision of information, and in particular the systematic provision of it, can facilitate more smoothly the functioning of markets, and also facilitate accountability and openness.

In considering this with respect to the IMF—and I think Tom pointed to this as well—there was concern for a trade-off between openness and transparency, on the one hand, and our relationship with our member countries and confidentiality, on the other hand. And because of this, if I look back—and I've been working in this area since 1997—it was in the earlier part of this year, January, that our Executive Board took a decision to endorse a voluntary publication policy for the organization for basically all classes of documents. And it took time to get to that place because of how we work as an organization and also because of the issues of confidentiality, and some of them Tom has raised.

So if I take you back just a little bit to give you a benchmark for thinking about where we are today, prior to 1997 very little was published. When I say very little, I can go through all classes of documents. (staff reports for country operations, letters of intent, papers on policy issues, etc.). The health check-ups that Tom referenced, which are consultations with members, which tend to be annual, these documents are now published on a voluntary basis. Back in 1997, these were not published. We were discussing at that time the possibility of publishing these documents.

In 1997, one of our initial initiatives was the launching of Public Information Notices, which I'm sure many of you are now familiar with, and we are now at 86 percent publication of these documents following Board discussions of member countries' policies.

This is why we refer to this as a sea change. Similarly, for our lending side, almost 96 percent of all Letters of Intent and Memoranda of Economic Understanding, which are the documents that lay out the authorities' policy intentions, are now provided to the public. You can view them on the IMF's website.

So, altogether, what this represents is the provision of information on a systematic basis to the public and also to the private markets to facilitate their work, their investment decisions, and their credit decisions; but also from the point of view of authorities to provide information for them in their policymaking decisions.

Where are we now? As I indicated, the very significant step taken in January of this year was agreement on a voluntary publication policy. Now, some have launched proposals that publication should be mandatory. Our Board stopped short of that for many reasons. We have 183 members. The process of transparency goes beyond simple publication of documents but, also, internal processes of our members. The policy that the Board sets out recognizes these processes and that it may take some members time to make progress in this area. And if you look back at the experience with Public Information Notices, the first year there were very few—30, 40 percent—using this illustrates the effectiveness of a voluntary policy; for as I have indicated to you, we're now very close to full participation.

We've already seen since the Board took the decision to authorize the publication of these country papers—or staff reports, as we call them internally—an increasing participation. We're up to 60 percent at this stage. And if you think of this in the context of the decision being taken in January, this is an incredible change.

So also on the part of our members, I think, this speaks to an embracing of the benefits and the values of openness. In some of the work that I do and in interaction with country authorities, it is clear that there has also been a shift in the perception of our members in terms of the benefits of transparency and the provision of information.

My final comment will be on the work on standards and codes, which is intimately related to this initiative in the sense of trying to bring some order and a framework for thinking about what is important in terms of policymaking, what is important in terms of looking at the dynamics of markets. The focus of our work ahead will be to advance the work on standards and codes.

MR. DAWSON: Bob?

MR. WESCOTT: Well, it's very nice to be back at the IMF and to see a lot of former colleagues. What's particularly nice is when you've been gone for three years to have someone see you in the hall and say, "Oh, I didn't realize you had left the Fund."

We're going to talk about transparency today, which is a great topic. There have been a lot of changes, some of which I've seen with my own eyes. I had a very interesting example in 1998 that made transparency very concrete for me at the Fund.

We were in Poland just finishing up the 1998 Article IV consultation, and the Finance Minister, Balcerowicz, who, by the way, has been a leading force for transparency in Central and Eastern Europe, he decided to release the concluding statement to the press for the very first time. And so right after that we went out, and we had a press conference with 20 or 30 reporters. And the question came up about fiscal goals and growth, or something like that, and we kind of just instinctively fell back to IMF-speak. So we were talking about, you know, if the authorities trimmed the deficit, you know, then growth can be maintained, or something like that.

But a reporter sitting there obviously had the concluding statement in his lap, and he had a very much more detailed question in mind. He said, as a follow-up, "No, I mean the 0.8 percent that you're recommending that the government cut the budget deficit, you know, how would this be achieved?" or something like that.

Well, anyway, it made it very concrete that the world had changed and that what we were talking about at the Bristol Hotel at 2 o'clock that morning before, you know, six hours earlier about what should be in the concluding statement, or shouldn't be. And then, of course, we decided to put certain things in. It was very—just striking to realize that six hours later 30 people from the press, you know, had seen every word that you had written at 2 o'clock that morning.

Basically, there are no secrets when this takes place, and everyone in the whole country of Poland knew exactly what the IMF was recommending and why.

Well, I'd like to just spend a few minutes with you talking about why transparency is important, and then also talk about some of the potential benefits of transparency, but also a few of the cautions that I'd like to just leave you with.

Basically, I see three spheres for talking about transparency. The first sphere is the countries themselves. And if you start with data, transparency means that data should be reported accurately and quickly and objectively. And in this case, transparency means credibility. It should give confidence to international investors. So that's all kind of good.

Transparency also means that policy issues can be better defined. It means they can be better understood by the public. So one could easily argue that with more public awareness of problems, it would be easier to win public support for policies. It may boost public interest. It may help to cut corruption. So that would be—those are some sort of the issues for the country itself.

The second sphere is the international financial markets and other countries. Now, we can say that if we had better reporting, very good reporting of data and more transparency of policy issues and so on that international investors can do a better job of evaluating risks and returns in every country. And if we wanted to follow the classic microeconomic theory to the nth degree, we could say, well, that means that the supply of capital to emerging markets will take—you know, will continue to exactly the right degree; when the marginal benefit is equal to the marginal cost, we'll have just exactly the right amount of flows and that will be great.

The third sphere that we can talk about is the IMF itself. Now, the IMF obviously has been under criticism for the last decade, in a more accelerated sense in the last two or three years. And one could say that transparency could help make the institution seem less secretive, less mysterious, and could help maybe calm some of the critics of the IMF, could make, let's say, some of the decision making appear less secretive, make it better understood. And so one argument would be that transparency could help the IMF, let's say, in its issues with the anti-globalization crowd.

Well, so those are sort of the three spheres that I see. Let's just think about the downside for a second. Are there any downsides from increased transparency?

Thinking about data first, I see no downsides. I think that better data, quicker, faster, more objective, is just a plus all the way around. So I do not see a downside of increased transparency on the data release side.

On the policy side, I think that one can think about some possible downsides. Imagine a Finance Minister who is trying to—you know, in the consultation with the IMF realizes that, you know, he's going to have to hold government wages to a 1 percent increase in the following year, and that's going to be a very tough thing to do politically. It's very easy to imagine that if he said, you know, look, give me two to three months, I'll work this out in cabinet, and I'll swing a couple of the key coalition members over to my side so that we can live with this 1 percent wage increase. Maybe that would be a positive outcome.

You can easily imagine if this hit the streets as an IMF recommendation that you might have a union go on strike and you might actually undermine the chance of achieving the outcome that you want. So certainly that's a possible negative.

You can also imagine a situation where IMF staff going into a country, sleuthing around, they uncover some looming problem. But they have confidence in the authorities, and they go to the authorities. They have—one option would be to go to the authorities and say, look, we're not going to tell anyone what the problem is, but you better address this in the next three months or six months, or whatever. And maybe the authorities are very responsible and do the right thing and you solve the problem.

You know, this is a little bit like the problem that Tom Ridge, the Homeland Security officer in the United States, has right now. It's the same issue. If you know that there's a credible terrorist threat, do you tell everyone and get them excited? Or do you quietly work behind the scenes and try to just make everyone better off? A complicated question.

Well, where do I come down on transparency? Let me just give you two or three thoughts. As someone who has spent time in the political arena the last few years, I can tell you transparency is a great little old slogan to have when you're writing speeches for Presidents and for G-7 meetings and so on. It's a very good talking point.

I have to say, speaking very frankly, that I think transparency is a bit overrated, however. I think it's a modest plus for the financial markets. I think it's no panacea, and I have a few more thoughts on that. It will not make instability go away.

Think about the United States with very developed financial markets, with very good reporting, auditing, accounting standards and so on. This still does not prevent a long-term capital management problem from occurring.

Just a few weeks ago, we had the Enron situation, which also came out of a very developed and very rigorous reporting and accounting and transparency sort of system. But these problems still come up.

Why? Well, capitalism is just prone to excesses, and that's just the way it works. Someone always has an incentive to do something a little bit outside the system, a financial incentive, corruption, political advantage. These are always incentives to push the system.

Believe me, as fast as regulators can think of loopholes to close and of ways to strengthen standards and so on, someone out there can think of a way to push the envelope or to basically get around the edge of what the regulators are trying to do.

I believe that the Fund clearly needs other lines of defense besides just transparency. In particular, I'm not all that optimistic about early-warning systems, say, coupled with very good transparent supply of data. About ten years ago, I was in the private sector as a forecaster with Wharton Econometrics, and we had the best track record in the U.S., documented by independent arbiters, in terms of our forecast accuracy. We had a team of ten Ph.D. economists and about 30 people following the U.S. economy. We had these thousands of, let's say, very clean U.S. data series coming into our system. We had a Nobel Prize econometrician sort of looking over our shoulder trying to keep us on track.

And you know something? We missed all kinds of turning points. We missed all kinds of shifts of momentum, because that's just the state of the art. And so I think that the Fund is going to find that early-warning systems really don't get you anywhere near as far as many people would like to think they're going to get you.

Basically you've got to rely on common sense, and the Fund staff should be giving common sense—should be applying common sense when they go in and look at countries.

You know, nothing—you know, if you thought of two or three rules that would make sense to follow, one, nothing that's growing exponentially keeps growing exponentially. Think of the Nasdaq or think of the Nikkei in the 1980s. When the cost of capital is extremely low, bad things happen. Basically when the cost of capital is zero, like it was in Japan at the peak of the boom, people were borrowing—companies could borrow money through warrants at effectively zero cost of capital. Bad things happen.

So, anyway, I think that some basic common-sense rules are going to be needed, and we'll never be able to achieve just with early-warning systems and transparency what we need people to think about.

Now, let's talk just for one second about transparency and policymaking. I tend to see transparency in the policymaking sense as part of an institutional development process. And by this, I'm using the Douglas North concept of institutional development. Institutional development to me means a sense of justice, democracy, power of government institutions, the role of the press, all of these sorts of things.

By promoting transparency, we're really trying to promote the institutional development of countries. We're trying to basically give them a little jump start on what they could do—we're trying to give them a jump start in terms of institutions and help them jump five years ahead, ten years, 40 years ahead, whatever it is, in terms of their ability to monitor their markets.

I think the benefits of transparency depend greatly on the stage of institutional development of the country. I think the countries that are quite advanced in terms of institutional development gain very little by transparency, and I think the countries that are more—you know, have a further ways to go on institutional development, they might benefit a lot.

Let's take the case of the Federal Reserve. Just a few years ago, the Fed did not make policy announcements. It did not signal its intentions. If the Fed made a policy decision to change interest rates, quietly, secretly, the Fed funds rate would just start being bid up, and people out there spotting this thing were trying to figure out what the Fed was doing.

Now, of course, the Fed gives an announcement at 2:15 on days when it acts and says this is what we did and this is why.

Do I think that monetary policy in the United States is better now because we have, quote, more transparency in making monetary policy? To me, the answer is no, not much. I don't think we have very much better monetary policy.

There actually are some risks—if you have a country with relatively weak institutions of increasing transparency. In 1998, Poland launched a monetary policy council, and they wanted to promote transparency. Well, the first meeting of the council ended, and each of the members came out and made the speeches about what they thought and what the other members of the committee had thought and so on. Well, the result was cacophony and kind of chaos rather than a clear message. So transparency—there are some risks with transparency.

What about transparency in the IMF itself? Well, my first reaction is to say it's a good thing. The IMF should lead by example. I think that when I wind the clock back just a few years and think about the operational budget that we had here at the Fund that was a big secret and we couldn't tell anyone what it was, I mean, the truth was this only affected a handful—it was only meaningful for a handful of currencies. Now I believe that information is on the Web.

But is the world better off because the Fund makes that information available? Maybe a little bit. But I don't believe that's a big—I don't believe actions like that make a huge difference in terms of effectiveness.

I'm a big fan of the PIN, the public information notice, that's becoming very widespread. You just heard 86 percent are now issuing PINs. I actually think this is a big plus. I think these PINs make very good fodder for op-ed articles and for a country's opinion leaders to debate the national policies and options. So I think those are actually one of the best things that the Fund has achieved in terms of transparency.

Lastly, what about the anti-globalization crowd? I think some of the moves to transparency can make the Fund seem a little less haughty as an institution. I think that's good. But I believe at the core much of the anti-globalization movement is basically an anti-capitalist movement. I mean, the Fund is a symbol of world power and power structure and so on, and I think many of these people are pretty cynical. I'm not sure that even a thousand pages of information available on the Fund's website would be viewed as a good trade by some of these people if they thought that just one back-door kind of deal was made, you know, to influence a Board vote or something.

I'm all in favor of having the thousand pages or two thousand pages or seven thousand pages of information out there, but I think we have to realize what we're talking about. We're talking about people who basically see the Fund as a representative of the capitalist system.

I think the Fund can do more in terms of transparency. We still have to make some progress, I think, in the difference between the way words are written at the Fund and what's meant. I think we still have to make some—we have progress to make, there's progress to be made on the difference between what's written at the Fund and what's thought, and that's the question of self-censorship.

Bottom line, I think of transparency, a good analogue is the development of the mutual fund industry in this country. If you wind the clock back to 1970, the mutual fund industry barely existed. There was a lot of question about whether you could trust the statements, whether you could trust the management of mutual fund firms, whether the results were audited, whether the results—whether you were protected if, say, the management of a mutual fund company would be corrupt and would try to steal money.

And over the course of the last 10, 20, 30 years, we've had a whole series of developments in this country that have made the mutual fund industry very strong. We've had increased reporting requirements. We've had increased standardization, a requirement that these companies carry malfeasance insurance against the mangers of the firm, along with very stringent auditing requirements.

Think about the consumer protections in investing in mutual funds. You know that little statement that says, you know, past performance is no guarantee of future performance? Basically we've had an awful lot of transparency in the mutual fund industry. Look at a Fidelity prospectus. It explains in very clear terms if you invested $10, these would be exactly the fees that would be charged and so on.

Anyway, I think that no single change made the mutual fund industry swing from a tens of billions of dollar industry in 1980 to a, what, $2 trillion industry today. But I think transparency is just like that. I think it's the set-up and the arrangements and the supporting infrastructure that can make the world financial system be successful just like the mutual fund industry is successful.

Thank you.

MR. DAWSON: Thank you, Bob.

Marty Gruenberg?

MR. GRUENBERG: Thank you, Tom, and I wanted to thank you for inviting me to participate this afternoon.

I asked Tom if he recalled having a [U.S.] Congressional staffer participate in one of these forums, and he said not to his recollection. It may have occurred in the past, but I wouldn't count on it. So this is one of the contributions to transparency and open participation by just having somebody from the Hill here at the IMF talking about the issue.

I've been with the [U.S.] Senate Banking Committee since 1988 and worked for the House Banking Committee before then. I've been responsible for handling national financial issues over this entire period, so I've had the chance to observe and participate in Congressional consideration of IMF legislation. And I thought the contribution I might make this afternoon is perhaps to share with you my perceptions on how the Congress views the IMF and the transparency issue in particular, because I do have the impression that the attention Congress has paid to this issue in legislation and otherwise has had a significant impact on the IMF and has played a significant role in the changes that have taken place in the IMF over the last five to ten years in regard to the transparency of the institution.

It's always been my sense that members of Congress—I'm generalizing here, but they have a certain ambivalence about the IMF as an institution. It's sort of a "can't live with it, can't live without it" sort of feeling. I think most recognize that the Fund is essential to the functioning of the international financial system and it's a necessary instrument. On the other hand, I think there is a range of different feelings among members of Congress or discomfort with the different aspects of the role the IMF plays.

I think for some members of Congress they view it as bailing out countries who perhaps don't need it or bailing out banks or bailing out investors. For others, they see it as an unreasonable intervention into the sovereign judgments of foreign countries. There are critiques about, in particular, the macroeconomic prescriptions that the Fund has imposed on countries and a fundamental concern related to all of this of the openness of the institution.

So I think you find this across the board at both ends of the political spectrum, this sense of we need the IMF, but you don't have too many unabashed rooters for it on Capitol Hill. I think that's fair to say.

But given that, it's my view that the issue of transparency really goes to the heart of the legitimacy of the IMF as an institution and in the long run is fundamental to its viability and effectiveness, and, arguably, in the long term, on its survival, because if the IMF is not perceived, given the critical role it plays, the extraordinary influence it exercises, if the processes of IMF decision making, if the information gathering and evaluation undertaken by the IMF, if it is not seen that the institution as a whole has some measure of accountability and transparency, then it is very hard to justify the extraordinary influence that it exercises and to hold it accountable in some way. And I think that is why, in part, you've had on all the various pieces of legislation that go through the Congress relating to the international development institutions and the IMF in particular, you've had a range of efforts legislatively by Congress to influence lending policies and other aspects of economic policymaking. But without exception, the issue of transparency is always present and fundamental, I think for those reasons.

You can make the case that previous Congressional efforts, or at least some of them, calling for enhanced transparency at this institution, have been somewhat blunt, if you want to put it in that sense, not as refined, textured, or sophisticated—reflecting a depth of expertise in the workings of the institution or, more broadly, the world of international finance—as some might have liked. But, on balance, the Congress through its influence on the U.S. Treasury and the administration has really pressed the issue, and through that I think helped focus the IMF's attention and the attention of the member countries on the issue and, frankly, has brought a measure of clout to the issue that it's not clear to me where else it might have come and has pushed the institution in a direction that I think, on balance, has been very constructive for the institution. In preparing for this program, I called around town and ended up speaking with a variety of people who advocate enhanced IMF transparency to get their assessment of the changes that have been made and how meaningful they've been. And, without exception, they indicated to me that the changes have been real, rather than cosmetic, and meaningful and absorbed not only into the processes of the institution but to a certain extent into the culture of the institution. So that, you know, there has been a change that's taken place.

They all hastened to add that there's significantly more to be done, and they have a list of prescriptions, you know, changes they would like to see made to go further. But I think even what you might call the critics of the advocates acknowledge that there's been meaningful change that has taken place in the institution. And I personally feel this is essential for ongoing congressional support for the IMF and the other international institutions.

Given the ambivalence I described, if the Congress does not have the sense that the workings of the institution are not open so you cannot see what's going on, you cannot see how the decisions are being made, there's not some sense that interested and affected parties have some opportunity to participate in a meaningful manner, I think political support for the IMF is more difficult to generate. I think the IMF as an institution is coming to understand that. I think Tom has helped contribute to that, quite frankly, and I think on balance it's extraordinarily positive.

I would mention, though, that I was—there are limits to the praise I'm prepared to extend. I was reading through one of the issue briefs that I got off the website on IMF transparency, and the section on IMF transparency began, and I quote, "The IMF used to be accused of lacking transparency and accountability, but recent reforms have effectively addressed that issue."

There's a conclusiveness and finality to that statement that, you know, I think goes a bit far, and I'm not sure in fairness that the IMF itself as an institution would make that claim. So I think there's more to be done. I think the issue of transparency never—it's never a challenge that's put behind the IMF. It's an ongoing challenge for the institution to meet as it evolves. I've come to the conclusion that the IMF has grasped that and is trying to engage in that. I'm mostly confident that, as the IMF comes to Congress again for funding and other purposes, members of Congress will continue to remind the IMF in regard to that and press it upon them.

Thank you.

MR. DAWSON: Thank you, Marty.

Next will be Daniel Bradlow. I just noticed that the resident Argentine press corps has arrived. This is not a press briefing, but just everyone be on notice. Media Relations Officers on alert, please.

MR. BRADLOW: Thanks, Tom. I want to begin on a positive note and to applaud the IMF for the really dramatic changes that have taken place in regard to its information disclosure policies. The amount of information that's being released is really a dramatic change and is something that is very positive.

However, as we know, transparency is not just about disclosure of information. It's also about the way in which institutions make decisions and conduct their operations. And the IMF has made some progress in this regard. It recently created the Independent Evaluation Office which brings it in line with a step that the other international financial institutions took many years ago. In addition, it's developed an informal practice of consulting with a broader range of actors in its operations and in seeking public comment on some of its major policy initiatives. But these consultations are informal, and no one can be confident that they will take place in all relevant case. And, also, there are no clear rules on who gets invited to participate in these consultations. And if truth be told, often the participants in them come away feeling somewhat dissatisfied with the consultations.

So I would say if we had to give a grade to the IMF for its efforts in transparency, it's certainly out of the starting blocks, it's involved in a work in progress, but there's much work still to be done. And in the spirit of assisting in these efforts, I want to focus on two problems with the current state of IMF transparency.

The problems I want to focus on is, first, the lack of certainty and equitable access to information in the current publication policy, and the second one is the lack of a clear legal framework or regulatory framework to govern the IMF's operations and policy development. So let me begin with problems of certainty and access in the current program.

There are three aspects to this problem. The first one is that the current publication policy is a conditional policy in all cases except dealing with the publication of the PRSPs. The policy merely presumes that the IMF will publish many important documents, and it relies on voluntary decisions of member states for the publication of other documents. This means that publication is not assured and that, at least in some cases, the presumption in favor of publication can be rebutted. And although the IMF has been very good in many cases about publishing information, there is at least one case that I know of in which the IMF has been reported as refusing to release specific documents despite government authorization to do so, in the case of Slovakia.

But more troubling in some ways than the conditional nature of this policy, because I think, as was said, there are some limits because of the member state nature of the organization, as to how far you can push that — [tape ends].

— that the IMF has no explicit policy—has not explicitly stated what procedures it will follow and what factors it will consider in deciding which documents to withhold from publication.

In addition, it has not explained how it will deal with countries that voluntarily refuse to disclose documents. The lack of certainty undermines confidence in the publication policy, and it also highlights the problems that can arise when an institution doesn't have a proper legal framework that's applicable to all its operating procedures and policies. So that's problem number one.

The second problem relates to access to IMF information. The IMF has done an absolutely stellar job of putting the information it makes public on its website, and this is very helpful to people who have access to the website. But it does not help the many people around the world who have no access to the Internet, and for these people it still remains very difficult to get access to information on the IMF. And, effectively, the IMF remains as opaque an organization as it's always been.

This suggests that the IMF needs to develop some alternative mechanisms for disclosing information and communicating with the various stakeholders in its operations. And while the IMF has made some efforts in this regard—it holds many more press conferences than it used to; as I said, it has informal consultations with NGOs—it hasn't yet established clear, understandable, and reliable procedures or mechanisms that the IMF can utilize to communicate with all interested parties and vice versa, so that people can communicate with it.

The third aspect in a sense is a potential problem, which is the risk that the publication policy is, in fact, disclosing less than it appears to be disclosing, and the reason for this is that, as documents become more disclosable, the IMF and its member states may begin shifting sensitive information and sensitive aspects of the transactions into confidential side agreements, both written side agreements and oral agreements.

Now, it's hard for those of us on the outside to gauge how serious a problem this is or is likely to become. But until we're proven wrong, it seems to me it's prudent for us to assume that this practice is taking place. And it seems to me that the only way the IMF can address this concern is by explicitly stating that all aspects of the transaction will be recorded in writing and that the transaction will be incorporated—that the writing will be incorporated into one of the critical documents that memorializes a specific transaction and that are presumed publishable under the current policies. And then maybe there can be some factors which discuss why certain aspects of a transaction would not be publicly disclosed.

So, again, in a sense, all three of these problems highlight the fact that the IMF doesn't have a clear legal framework governing its operating rules and procedures. So let me move to that as the second point and to state, which I think we all know, that the major problem in transparency in this institution is that it has no publicly available operating rules and procedures governing its activities, which means it's very difficult for any outsider to understand how the IMF conducts its business or makes decisions and policies or know whom to hold accountable for any particular decision or action.

For example, there are no publicly available rules that formally set out the process that the IMF goes through in preparing for and then executing its Article IV missions, or the issues that must be considered in those missions or which parties must be consulted in developing a program for a particular country.

Similarly, there are no clear rules governing which policy proposals should be submitted for public consultation before they're finally adopted or how the IMF would handle the public comments that it does receive when it does open something up for public consultation. So the result is that the IMF's approach to consultation with outsiders, both in terms of policy development and in terms of its operations, appear to be ad hoc and somewhat arbitrary.

Just to give another example, in the absence of clear operating rules and procedures, outsiders cannot easily determine how much discretion IMF officials have in making operational decisions, and this is particularly significant because, despite the recent efforts to streamline conditionality, the conditions, the benchmarks, the prior actions associated with specific IMF programs still are very complex and are subject to differing interpretations. And it's unclear how these aspects are interpreted and how disputes about them can be resolved.

I must confess that the lack of a clear regulatory framework is surprising because the IMF has spoken eloquently about the importance of legal frameworks as an aspect of effective transparency and good governance in its member countries. And its failure to follow its own advice in its own practices is disturbing.

In this regard, it's important to note that other international financial institutions do have such legal frameworks. For example, the World Bank has its Operations Manual, which is available on the Bank's website. And while there are many criticisms that can be made about the Operations Manual, it does have the great virtue of informing everyone, both inside and outside the institution, about the procedures that the World Bank follows in its operations and in making policy decisions. This tends to limit the discretion that's available to staff and management and establishes some standards of accountability.

The absence of a comparable document in the IMF means that its operating rules and procedures are opaque and that its management and staff can potentially exercise unreasonable discretion in the decisions they make relating to specific IMF operations, and that it's very difficult for outsiders to be able to hold them accountable for these decisions or these actions.

In conclusion, let me just conclude by saying that I think the IMF has made great progress in terms of information disclosure, particularly given where it started. However, there are problems of lack of predictability and access in its current approach to information disclosure, and there are still aspects of its operations which are unacceptably opaque. I would submit that the IMF could make a significant step to alleviating these problems if it would develop a clear and publicly available set of operating policies and procedures to govern its operations.

MR. DAWSON: Thank you, Danny.

We're doing pretty well on time, but I don't think any retaliatory responses have been provoked among the panelists. So maybe we can start by trying to bring the audience in, and then we may weave in any commentary that we have on other panelists' comments.

Jerry? This is Jerry Levinson, a professor of international law, American University, former general counsel of Inter-American Development Bank, former counsel to—the Church Committee?

MR. LEVINSON: The Church Subcommittee on Multinational Corporations.

MR. DAWSON: The Church Subcommittee on Multinational Corporations, and a friend.

MR. LEVINSON: And a Democratic appointee to the—

MR. DAWSON: Oh, the Meltzer Commission. I'm sorry. I forgot. A little repression going on.

MR. LEVINSON: That's understandable.

I think that I share the general view expressed about the significant amount of information that's available to the public now made available by the IMF which was not made available, which was not easily accessible as long ago as three or four years ago. However, I think that the emphasis upon transparency can be exaggerated.

I think that some of the more extreme ideas about having the deliberations of the Board of Executive Directors televised is completely impractical for an organization like this. I think that the complaints of some of the critics who served on the Meltzer Commission with me that the IMF Board does not meet with the critics on a systematic basis, of course, those critics believed that they're the ones that ought to be consulted and have their particular views considered.

So I accept that there are limitations by the very nature of the organization and, what's more, that the critics have a vehicle through which they can reach and should reach policy in the IMF, that is to say, through the Executive Directors of their own nationalities, which is how the U.S. system works. The NGOs and the critics work with the Congress when they have views. The Congress is very diverse, and as a consequence, indirectly they put pressure on, and the IMF hears their views, both in terms of the press and the views expressed through the Executive Directors.

But the point I want to leave you with is that the fundamental issue really is the policies and the development approach.  And in this respect, I think Bob Wescott's observation that the critics are really anti-capitalist really takes us backwards, that this is, I think a disservice to the serious critics of the IMF approach and the World Bank approach, what Joe Stiglitz has characterized as the neoclassical economic approach, and that the fundamental issue, if I could state it in perhaps exaggeratedly broad terms, is that the IMF and the World Bank and the U.S. Treasury seem to propose a policy framework for their borrowing member countries which no industrialized country would be willing to accept as the basis of its own policies. That is this neoclassical approach in which all almost deeply hostile to government intervention, manifested labor market flexibility, rather than addressing labor market abuses, and so forth and so on. And that the debate over transparency too often becomes a means of avoiding the debate over the substance of the economic paradigm that the IMF, the World Bank, and the U.S. Treasury have been advancing. And that we should keep that in mind in this debate over transparency because transparency can become a means of avoiding dealing with these fundamental and serious questions which cannot and should not be dismissed as simply anti-capitalist, if you will.

MR. DAWSON: Another question from the audience?

QUESTION: I'd just like to make a comment regarding the professor's statement on the amount of information released. I worked for the Treasury for many years. I must have reviewed dozens of IMF programs. And in there, there are always structural targets, there are always quantitative targets, and there was always a table on how you came up with how much you needed, like the balance of payments gap. And I started looking for these on the website and couldn't find much.

More recently, I did find something in the Argentinean program, to my great surprise, that did give the actual targets, quantitative targets and the structural targets. There was no indication of what the balance of payments gap would be, and quite typically, there was no indication of the exchange rate policies.

So I find it's very selective when you look from country to country. Sometimes they give all this information. Sometimes they don't. And there should be some policy that gives a standard layout of what the targets are the way we used to get at the Treasury and what we used to comment on.

MR. DAWSON: I think now we've actually got a couple of questions that maybe Ydahlia could comment on, and then the other panel members might want to jump in.

MS. METZGEN: I have a few points I'd like to comment on.

First, on complacency, we are by no means complacent. Part of the transparency initiative within the Fund is a constant review of that policy by our Executive Board, and some of the issues we have coming ahead are issues such as publication in languages other than English, having candid and clear language in our reports, which I think has come up in this discussion, how do we do that, how do we communicate more directly. And here I'd like to say that this is a process—I mean, there have been positive, I think, statements about where we have come, and then some discussion of where we should go. And, you know, in any process it takes time to evaluate and to consider those next steps. And certainly this is an area of ongoing policy development. Our Board has asked for annual reviews of this area so that we do not become complacent.

One of the criticisms, actually, a standing criticism of the IMF, has been one size fits all. So—in terms of the comment that you made—I think one of the benefits of having published country documents is that some of our very critics on this particular issue have seen that there is not a cookie-cutter approach to our policy advice and programs. There is certainly some uniformity in terms of certain issues, what our Board has given us in terms of guidance as the hierarchy of issues which we address. But then there are some areas of relevance to a particular country.

Certainly in terms of what you've referenced in the Argentina case, what I can tell you is that all structural and quantitative benchmarks are published in Letters of Intent and Memoranda of Economic and Financial Policies.

As the website grows, we are working on ways of having clear labeling and clear directions. There is a good deal of information out there trying to assure that people know where to go to get what information. But if you look at the Letters of Intent and Memoranda of Economic Policy, you would see that this is standard information provided in the documents.

These are the two points that I would like to cover here.

MR. BRADLOW: I just wanted to respond to Jerry Levinson's points in two ways. One is I think your point about that people can reach the IMF through their Executive Directors is a valid point if you're talking about G-7 countries. If you're talking about countries, firstly, that come from large—where the Executive Director represents a large constituency of countries, it's much more difficult, number one. And number two is that in many cases part of the problem in many of the developing countries is problems of governance, which means that lines of communication don't work easily within the country, which means the chances that some civil society organization can reach from out in the field to their Executive Director in Washington is wildly unrealistic. And so that you need to have some other mechanisms that allow the IMF to bridge that gap in a sense and to have some consultation with people directly. And so that's why I think it's important to draw distinctions between what's reasonable in G-7 type countries and in developing countries.

The second thing, I agree with you that the problem is a problem of the policies of the IMF, but I think that underlying the problems of the policy in the IMF are structural problems of the way in which policy is made in the IMF, and particularly the power relations in the IMF. So that, in effect, you get the G-7 and, often, as we all know, the G-1 country, the United States, making policy in the institution, knowing full well that none of those policies will ever have any impact on their own citizens directly. And that as long as those structures exist, the chances of getting policies that really are responsive to the situations and the needs of people in some of the poorest parts of the world are extremely unlikely.

MR. DAWSON: If I could perhaps weigh in on a couple of points here—Jerry Levinson may be surprised that I actually agree with him that transparency can somehow divert people's attention or be used as an excuse. I think it's on both sides: On the one hand there may be an impulse in the institution to think that transparency is enough; on the other, there may be an impulse on the part of our critics to think that the lack of sufficient transparency may mean that we're hiding something.

I think we should each hopefully get to trust each other to believe we're acting on good faith. I would actually prefer to spend more of my time arguing with Jerry on issues like flexible labor markets than where a lot of our debate is, is over the [transparency issues in the] Slovak program. We can have a bilateral on the side on the Slovak one. This one has been bugging me for 18 months, and it's—but, anyway, we can discuss that.

I think also Danny's comments reflect the difference of approach of a lawyer. Particularly a lawyer who is citing as a good example the World Bank, which, after all, is sort of like a bank and all banks have Operations Manuals. I mean, commercial banks do. Merrill Lynch had them when I was there.

But the Fund is a different sort of institution.

Frankly, this is the first time I've heard that particular request. We don't have an Operations Manual. We have a number of other policy papers that are sort of the equivalent, and I think we should look at how we can publish them. I think like with most other things that we publish, people are going to be somewhat disappointed, perhaps, when they get it. But I think the approach is correct.

Back to my point, though, on the economist culture. This is by culture a different institution, and a lot of the way we approach things are difficult to understand by people who come from a more rules-based sort of background. But I think, you know, that's not an excuse. It's part of our culture, and we need to know how to deal with it.

I had forgotten in my opening remarks on the issue of clear and candid language to use my two favorite examples of Fund-speak—which when we all had lunch before I was told to use again. I apologize to those who heard this before, certainly the members of my staff have. Both these came up when I was a U.S. Executive Director previously. One was in a Fund staff paper, before we published staff papers, where apartheid in South Africa was referred to as "structural rigidities in the labor market." I mean, that is quite correct, but it lacks a certain human content to it. And the other one that was also in a staff paper was—the Vietnamese invasion of Cambodia was referred to as "a misallocation of resources due to involvement in a regional conflict."

We have gotten much better at writing plain English, and, indeed, that's been my goal, to the extent that I can affect what is published—which is publications policy as opposed to publication policy, which Ydahlia has the lead on. But when it comes to publications policy, I would hope that we will come to the point—and we're getting closer—where what we put out to the public is precisely what we described and presented to the Board. We are close to that in the areas where we do publish, and hopefully I think we will continue that.

There is a danger, we have to be frank, of things being watered down in the process. The publication policy, when it reviewed the initial experience on Article IV's, found that, in general, that had not happened. But that is something that should be looked at. I am sure that is something that the new Independent Evaluation Office will have on its plate at some point—the degree to which we are able to give candid advice and the degree to which what we say publicly is consistent with what we say privately.

Bob?

MR. WESCOTT: Jerry, I agree completely that there are serious criticisms of IMF transparency that are even three levels below, you know, questions of whether documents are published or not. I'm thinking about when the IMF makes up a program, you know, what is the assumption of how money demand is estimated. Do you pick an equation that makes the number be high or low? There are all kinds of ways that the critics have looked at the IMF. This would be sort of getting toward the Stiglitz criticism and very valid points, and there is a core group of very serious critics who want to really get into the details and want to really understand how the decisions are made and are faulting the organization for the way it makes certain decisions.

When I talked about anti-globalization, my statement was more an approximation of the Genoa crowd, and I was just speaking with a broad brush at that point.

MR. DAWSON: I forgot to respond to Danny's point that we should spend more time talking with civil society in country without a governmental filter, as it were. I think that is absolutely true. The PRSP process requires that, and we will review that process at an international conference in January.

We are now encouraging/requiring our resident representatives and our mission leaders to consult with civil society when they go to countries. Hopefully we get some feedback from that.

One other thing that we're about to do somewhat to my amazement—in some of these conferences on the PRSP process and in meetings with civil society, they've expressed an interest in learning about one of the more arcane arts at the Fund, which is financial programming, which is basically how the black box is put together. We have the author of much of the financial programming sitting back here. And they would like basically to have the Fund give a seminar to NGOs, South NGOs, you know, regionally, on sort of how the Fund approaches a country, how it looks at balance of payments, fiscal targets, gaps and so on, and, you know, explain how we view what trade-offs are so that they can be better positioned to be able to influence, lobby their own governments. And we will in the course of this coming calendar year be putting on some seminars for South NGOs precisely to explain to them how the Fund black box gets put together.

We've done this to a limited degree for North NGOs. We've done it for the press, I think, at least once, and we'll try to be doing this further. So that is a transparency initiative, too, but I think it's something that can help the civil society. I think after they've taken a two-day course in financial programming they will not want to sign up for the two-week version. But we will make it available to them.

We have a real ringer coming up here to ask a question. I'll let him introduce himself.

MR. MOHAMMED: I'm Azizali Mohammed. I was the first Director of the Department of External Relations.

The one aspect of transparency that no one has talked about is transparency with regard to voting in the Executive Board of the IMF. Now, when we speak of the IMF doing something, deciding something, it's the Executive Board that decides. And I know in the old days the rule was that you couldn't look at the minutes of the Board until 30 years had elapsed. I believe we have now reduced it to five years.

But perhaps it's important to see that there is a real problem here, because on the one hand, you want to reach consensus, and in order to reach consensus, you want to take everybody's views into account. On the other hand, there are issues on which decisions are taken on the basis of a prior or an under-the-table counting of what is likely to be the vote. And so the consensus comes out very close to where the majority is.

Now, wouldn't it be better to identify in the case of all important country decisions, in particular, for the vote to be recorded? It's not a question of saying who said what but who voted for, who voted against, and who abstained.

Thanks.

MR. DAWSON: Danny, would you like to suggest an answer to that question?

MR. BRADLOW: Thank you, Azizali. I agree with you completely. As you suggest, the consensus decisions are never really what they seem to be. There's always a lot of discussion and deal making that goes on in ways in which the participants hide their opposition.

I think they need—I agree with you that there needs to be more transparency. I would suggest—and I had cut this out of my remarks—that part of the problem for the IMF in this regard is the policy of uniformity and the fact that it draws no formal distinctions between developing countries and rich countries the way other international organizations do. Because if it drew those distinctions, it would be possible to start making some public exposure of where the North-South differences are and some discussion about ways in which to address that.

I have written a paper, which is what Tom was referring to, in which I've suggested that there might be ways—like the GEF [Global Environment Facilty] does, for example—of having different voting by different groups so that you have to get a majority of both developing countries and rich countries for decision.

I recognize the IMF is a very different kind of institution from the GEF, but I think those models are certainly worth exploring to see if there are not ways to address that, because I think there are a lot of important issues that get hidden behind consensus.

MR. GRUENBERG: When I chatted with people for suggestions on future actions the IMF should take on the issue of transparency, Board deliberations tended to be the issue mentioned first. And certainly decisions are—I mean, the votes on decisions, I'd be interested to know what the rationale is for not disclosing those.

The analogy—you know, I work for the Senate Banking Committee, so we also have jurisdiction over the Federal Reserve Board, and having worked with the Fed for a number of years, the culture there is familiar to me, and the culture of the IMF is reminiscent to me. The culture of the central bank is, it seems to me, part of the ethos of this institution. And even the Fed now publishes at least its minutes of its meetings—rather, a summary of the meetings six weeks after the meetings of the Federal Open Market Committee take place. And the decisions—the votes taken in those meetings are included in those minutes, and the votes of the members are identified.

I'd be interested to know what the rationale is for the IMF to function differently.

MR. DAWSON: Well, I think the simple answer is tradition. With your reference to the Fund being like a central bank—and then I'll get to some specific observations—

MR. GRUENBERG: I said the culture—

MR. DAWSON: The culture. In my previous incarnations, I used to refer to the Fund as a bunch of Finance Ministry people pretending they were central bankers. I don't say that now, but I think that's perhaps a definition that someone might want to adopt.

There is, as I understand it, nothing to stop individual Directors or governments from reporting their votes. And, indeed, for the United States and a number of other countries—I think in the case of the United Kingdom—negative votes are reported. In some cases, in the case of the U.S. Congress, they are mandated.

So my understanding is there is nothing to stop individual Directors from revealing their votes, you know, in their own national processes. And from whispering with Ydahlia I know the issue of votes and disclosure is under consideration, and that's something we need probably more of a debate on.

Now, I have to say I do disagree quite strongly on one point, Danny. I view one of the great strengths of this institution that it does not break down on North-South lines. And I don't think this would be affected if one got to a point where you did have recorded voting.

Indeed, one of the interesting developments in the Fund in recent years, with the breakdown of the former Soviet Union and the entry of the Eastern European countries into the Fund, is that a number of European constituencies that used to have rather rigid views of the world—the Executive Director representing one of them was just sitting here—now have constituencies in which some of the borrowing members are now part of their constituency. So to pick a constituency totally at random, you have the Dutch Director who also represents Ukraine. I actually think that has been a tremendous step forward in the institution, for borrowing and lending members of the institution to view things in a somewhat coherent fashion.

So, in my own view, I personally would prefer to focus on the transparency of decision making, i.e., how do you find a way to make it clear who voted for what, than to try to re-divide the institution along North-South lines or creditor-borrower lines.

Ydahlia?

MS. METZGEN: I'm just going to add my footnote here. I agree with what you said, not just because we work in the same organization—

MR. DAWSON: Not just because I paid for the microphone.

MS. METZGEN: Just because you paid for the microphone, that's right. But on uniformity of treatment, I mean, I think experience has shown that is one of the strengths of the organization.

On consensus, just to put it in perspective for you, there is usually not a "yes/no" voting system at the Board that registers individual Director preferences. There's discussion on a particular issue, which isn't to say that it's not clear probably at the end where people basically come out or where the Executive Directors come out; but that on some of the issues that I've worked on, if there was a significant minority of the Board,—and it could break down along North-South lines—that there would be a subsequent discussion. Different views are taken into account, you go back, you discuss again. And in this sense, this is why some policy issues may take a longer time to resolve because it is a good approach—in the organization, and particularly in the area of transparency policy. It is better to have the commitment, the genuine commitment for a particular policy initiative than it is to simply ram it through because you have the majority. And I think this is why in this particular area the actual culture, to which I referred in the beginning, has changed; that this really is a more open institution, and that the membership really does see the benefits of transparency, notwithstanding perhaps limits in some areas. And that is a tremendous change, and it's one that the membership has embraced. So that is the upside of consensus.

MR. BRADLOW: I mean, I think the thing—the problem with consensus is not so much an internal problem within the workings of the Board, because I think you're dealing with a relatively small group of people who know each other and who work well together. So that voting for them probably doesn't make a whole lot of difference. It's more a question of the outside world, and the question of having transparency and people on the outside being able to see how they've been represented, how decisions were made, who the votes were, and that's, I think, the primary benefit of it.

I think the thing on—the problem with uniformity is that a lot of the issues break down on North-South lines, so that it's true you have Directors who have mixed constituencies of borrowers and creditor countries. But I think if you had a system that would recognize that in reality this institution lends only to developing countries and politically is only going to lend to developing countries for the foreseeable future, that it's extremely unlikely that Japan or the United States is going to end up requesting financial support from the IMF, that that means there's a fundamental distinction between different groups of countries. That needs to be reflected in some way in the institutional decision making, and that's the problem—that's why I think uniformity is a problem because it hides that fundamental reality.

MR. DAWSON: I actually think the fundamental reality is pretty clear. One reason why I would like a little more transparency about what happens in Board discussions is I am overwhelmed, particularly in the position that I hold, in dealing with governments, developed governments largely, who take positions publicly that are wholly inconsistent with what they're saying inside the Board. So, I mean, that's slightly different—I think you were thinking of it a little bit more from the South side. But I think that is an issue that works in both hemispheres, and I actually think the problem is a similar problem. So I don't—you know, that's, again, why I kind of fall back on not thinking we need a different approach.

The reality is the issue on which I am aware voting most often taking place tend to be the most important issues for any organization, like staff salaries and benefits. And, frankly, if you're talking about country issues, decisions to lend to a country, the reality is in most of the cases when it comes to the Board, those constituencies that are developing country side are likely to be in favor of it. The industrial countries, you know, do in general go along. You know, we occasionally have abstentions on country loans, but it's quite—it's not unheard of, but it doesn't happen very often. I mean, it's every few months, probably, I guess it happens.

There is nothing at this point in time to stop country X who's one of the G-10 from voting no on any program that they wish. And I think if there is a problem, it is the hypocrisy of those countries who vote yes inside the Board and then take positions on the outside that are rather more critical of the institution.

So I wind up agreeing with you completely, but from a different hemispheric perspective.

MR. SUNDERLAND: Hi. My name is Sean Sunderland (ph). I'm with the Canadian Embassy here. I just want to not so much ask a question, I guess—

MR. DAWSON: Canada, just let the record show, has a wonderful collection of potential borrowing members in the Caribbean as part of their constituency.

MR. SUNDERLAND: Yes, thank you. I wasn't going to make that point, but...

I just wanted to follow up on a point made a little bit earlier by Professor Bradlow and something that you yourself said, Mr. Dawson, about the need to reach out more to constituencies and countries in the South. I myself have had two postings in Sub-Saharan Africa and have followed at various stages the development of IMF programs in quite different countries there. And I've always been struck by the tremendous lack of knowledge, I guess, in these countries on the part of many civil society organizations about how the Fund and how the Bank work and how they function.

And I think it's just intuitive that, you know, to generate buy-in in these countries as well as to create a certain level of accountability in places where obviously it often is very much lacking, that the more dialogue and the more interchange you can have with civil society is absolutely critical.

So if and when you do decide to have these seminars, as you say, these outreach seminars, I would hope that you would consider having them someplace other than just Washington and perhaps have them outside.

That's my only point. Thank you very much.

MR. DAWSON: Danny, do you want to go first? I have a couple specific answers to that, but if you—

MR. BRADLOW: Go ahead.

MR. DAWSON: Well, there clearly will be—I mean, we have a series of regional training centers. We have one in Abidjan. So in the first instance, I expect they will be in those centers, one in Vienna that handles Central and Eastern Europe and Central Asia, and another one in Singapore. So we will do it in those regions.

The Fund has a disadvantage as compared with the Bank when it comes to much of this activity in that the Fund is still a highly centralized organization. The Bank has gone through a major cultural change in terms of decentralization. Most, if not all, country directors are located in country with very substantial staffs, heavily local nationals. The Fund is a much smaller organization globally than the Bank. We are still only around 3,000 people, including the Board and other support areas. And our typical resident representative is in the country alone. So that has made it harder to develop as elaborate a structure as the Bank does, but we are trying to do so.

As I said, we have these regional centers, including one we just set up actually in the Canadian constituency. There was one that was just set up I think in Barbados, CARTAC. So we will be using a number of these centers for that purpose, and I would hope as time goes on we find a way to get our resident representatives and our mission leaders more active, more authority, and more involvement in outreach to civil society.

I should mention, because if there were a developing country director here, they would be the first to mention, don't forget the parliaments, and in a number of regards. One is parliaments, while they are not part of civil society, they are part of an outreach effort that we should engage in, and we do that. We've been doing that, frankly, prior to much of our civil society engagement. But we also have another problem in some countries, and I would say Western hemisphere countries, this is probably a bit more common. You actually have the parliaments or the congresses sometimes jealous or resentful of our outreach to civil society. And then you have the governments wondering at times—okay, IMF, we have a democracy, we had a domestic debate on X issue or Y issue, and why, when we've come to a loan at the Bank or a program at the Fund, are the NGOs allowed a second bite at the apple?

Now, our answer is a pretty simple one, that we think more openness, more participation, more consideration is by itself good. But that is a question and it's a serious question in countries that do have well-established local institutions and a vibrant democracy. So we do have a balance to have to keep in mind.

MR. BRADLOW: I can just—I mean, I endorse everything, I agree with you that both parliaments and civil society need a lot—and many government officials at lower levels in many countries need educating as well.

The one group that I would urge you to keep in mind is universities, and not out of self-interest, but I think if you educate the teachers—

MR. DAWSON: Law schools, too?

MR. BRADLOW: Even law schools. Particularly law schools. But I think if you educate the universities, then you can reach a broader audience, because the parliaments don't include these institutions or international issues in their education programs because often the academics don't know what to teach.

MR. DAWSON: I think we've about reached our 4 o'clock period. Maybe a couple questions, and then feel free to mingle afterwards.

MR. McKAY: My name is Imad McKay (ph). I'm a reporter with Inter-Press Service, and for those who do not know what Inter-Press Service is, it's an online news agency that has its biggest market in the developing world.

Actually, my question has to do with accountability. Basically one reason that we all behave ourselves is the possibility that we could be going to court. And my question is: Is the likelihood of the IMF being taken to court on the table? Some of the countries that actually default on their debts go to court, and it's basically the policy advice by the IMF, and to use the word some of our panelists used, imposed by the IMF that mostly sent them to court. So is the IMF likely to go to court as part of the accountability process?

MR. DAWSON: The IMF is an intergovernmental organization established by an international treaty, and like all other international organizations and governments, it has sovereign immunity.

That is international law. It is not just the IMF. It is the United Nations and every United Nations organization, every other international organization, every government.

When it comes to issues of internal governance, we have a very elaborate mechanism for ensuring review, including administrative tribunals and appeals mechanisms that include independent international lawyers who review it.

When it comes to external issues, the governments of the world have decided that they want organizations like the United Nations, like the World Health Organization, like the IMF, and we all are treated exactly the same. So there's nothing particular about the Fund's privileges and immunities. It is international law.

Now, some may wish to change it. That's a different question.

MR. BRADLOW: Actually, Tom has stated the legal position perfectly. The only thing to add to that is the IMF was sued in Korea after the 1997 program or '98 program, and the court dismissed it fairly quickly on grounds of sovereign immunity.

The only thing I would add, which is not particular to the IMF, is that since 1945 sovereign immunity for states has been shrinking steadily. But sovereign immunity for international organizations has probably been expanding. And at some point that's going to start changing. I can't tell you when or how, but it doesn't make sense that that's a sustainable trend.

MS. METZGEN: I just would like to add one comment to that. I was going to bring in the points that you brought in. But I would like to end on the motivation again, which I think points to something Tom said, which goes to good faith. And so I really don't think that what would constrain or motivate our behavior is being taken to court. It has been the tradition of the Fund—and I expect that it will continue to be the tradition here—to deal in good faith and integrity in interacting and engaging with members, with civil society. So I would just like to conclude with that thought.

MR. DAWSON: Thank you very much, and feel free to ask questions, and we'll see you next week.

[Applause.]

[Whereupon, the forum was concluded.]