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Global reform need seen
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September 29, 1999: 11:49 a.m. ET
World Bank expert warns of risk to fragile economies unless changes made
By Staff Writer M. Corey Goldman
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WASHINGTON (CNNfn) - Additional reforms must be implemented on a global scale to ensure the fragile economic recoveries underway in many parts of the world don't unwind, prompting another widespread financial meltdown, a senior economist of the World Bank said Wednesday.
Creating standards for reporting information, establishing trade agreements, and creating monetary and fiscal policy that's transparent will help take the mystery of whether or not an investor should put their money in those countries, said David Dollar, the development agency's chief macro-economist, in comments at the International Monetary Fund-World Bank meeting in Washington.
"We need a two-step process of reform to get sustained growth over 25 or 30 years," he said.
Dollar's remarks come as both organizations grapple with their changing role in the global economy.
The IMF no longer wants to be seen as a bailout artist that gives quick relief to countries in financial trouble. What it wants to be, according to the line being presented at seminars, conferences and in speeches this week, is an economic adviser of sorts to countries in need.
The World Bank, too, has worked diligently this past week to forge a new role as adviser to some of the world's poorer nations, helping them get back on their feet and making their economies places that international investors feel safe placing their money, Dollar said.
"The roles of institutions have to change," he said. "What we need to do is work on participating more with civil society to help them make the changes they need to sustain their growth."
Among the changes mentioned by World Bank officials are reforms to developing nations' monetary systems, judicial systems, trade practices and other aspects of their economies to promote more integration with each other and more sustained growth.
Types of change
Another suggestion, from Javed Hamid, director of the Asia department of the International Finance Corp., a World Bank umbrella organization, was that countries in the process of recovery need to develop a common language that financial markets can understand to lower the perceived risk of investing in those countries.
"We need to help develop some type of language that makes everyone clear about what they're investing in," he said.
That goes for the auditing agencies, too, Hamid said. Firms that audited many countries' books in the Asia-Pacific region in the early and mid-1990s "left people with the impression that things were okay," he said. "People assumed that because it was those people auditing the countries that the reporting was okay."
Hamid and others at the meeting have repeatedly stressed the need for openness among countries that have traditionally kept their goings-on private, as well as the need to have all countries of the world on the same page when it comes disclosing financial information.
"Investors need to be convinced they should invest in a country for the long term, and the only way to do that is to give them proper, consistent information," Hamid said. And the World Bank along with other institutions should change their practices to help countries get there, he added.
On Sunday, the Interim Committee of the IMF's Board of Governors unveiled in their communiqué a uniform commitment to establish a set of guidelines for countries to report vital statistics about their economies and monetary policy actions to the rest of the world.
Winding down
Most of the remaining work of the IMF-World Bank meeting has now moved behind closed doors and will remain that way as ministers and governors from around the world work on their respective deals and arrangements with each other and with both institutions.
President Clinton was scheduled to address the group's board of governors Wednesday afternoon.
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