Sutherland preparing for summit

Changes to the IMF and the World Bank will be proposed at the next G7 economic summit. The issues will also be discussed at the upcoming meeting of EU finance ministers on February 21st and at next summer's summit.

The changes are backed by Mr Peter Sutherland, former director general of GATT and the current chairman of Goldman Sachs. He is chairing a private meeting in Davos, which is ironing out the details of the proposed changes. The meeting will attempt to sort out a range of multilateral responses to both economic and ethical issues, Mr Sutherland told the Irish Times.

The meeting includes representatives from the World Bank, the IMF, GATT, regional banks, the European Round Table, the US Chambers of Commerce and the Confederation of British Industry as well as a number of UN agencies. It is expected to conclude this afternoon..

Mr Eisuke Sakakibara, the Japanese vice-minister for Finance, earlier told a meeting that he is in favour of some sort of change to the powers of the IMF, following the crisis in Asia.

Mr Sakakibara said he is in favour of the ideas proposed by figures such as international financier Mr George Soros and Mr Sutherland to widen the scope and regulatory powers of the IMF.

However, this was attacked by a prominent US economist, Mr Rudi Dornbusch, of the Massachusetts Institute of Technology. He insisted that if countries knew there is more money on the table they would not have the incentive to sort out their problems. "The IMF should be able to say it will not bail out any country which is in trouble if the financial system is not in order and then you would see a rush to clear up their houses."

According to Mr Sutherland, Asia is a "chilling reminder" that even the greatest beneficiaries of free market development are prey to the brutal way markets settle accounts.

The crisis has pointed to the limits of relying on an ad hoc approach in international financial emergencies and undoubtedly should lead to even closer monitoring and co-ordination among monetary authorities in the future.

"We are only at the beginning of experiencing the full impact of globalisation so these challenges will intensify and multiply. The existing set of international fora is clearly inadequate. The Group of Seven is too narrow, the IMF and World Bank annual meeting too narrowly focussed on finance and the yearly gathering of heads of state at the UN is too ritualised."

However, he is insistent that placing any restrictions on global capital flows would be counter-productive and would almost eliminate the potential for foreign direct investment, which has been so important to most developing countries.

Mr Sutherland also criticised the most powerful economies in the EU for large subsidies to industry and anti-competitive practices. He told a meeting here that this level of subsidy has very negative effects on the poorer countries in the EU and worsens an already bad unemployment situation.