prasarn trairatvorakul : global challenges, global solutions – imfc issues statement by dr prasarn trairatvorakul, governor of the bank of thailand, at the international monetary and financial committee ( imfc ) twenty - third meeting, international monetary fund, washington dc, 16 april 2011. * * * on behalf of brunei darussalam, cambodia, fiji, indonesia, lao p. d. r., malaysia, myanmar, nepal, philippines, singapore, thailand, tonga and vietnam. introduction 1. we thank mr. youssef boutros - ghali for his contributions to the imfc, especially his leadership in completing the 2010 quota and governance reform. we congratulate minister tharman shanmugaratnam on his appointment as the new chairman. with his rich experience in understanding the interests of advanced and emerging market countries, we have full confidence that minister tharman will be able to make significant progress in fostering a global consensus on many challenging policy issues. 2. although the global recovery has gained strength since the last imfc meeting, its prospect remains fragile as several downside risks continue to prevail. having been successful in coordinating policies to contain the catastrophic damage from the global financial crisis, policymakers are now facing a more difficult task in forging a consensus on multilateral commitments for countries to take into account the impact of their policies on other members and the international monetary system ( ims ). such an agreement will not be easy to reach against the current backdrop of a multi - speed recovery and asymmetry in domestic policy requirements. nevertheless, it should be stressed that the need for such a consensus is as great as before, since the reliance on accommodative policies of advanced countries has reduced their urgency for structural reforms and complicated the conduct of policies in emerging market economies. if the current stalemate were allowed to continue, there is a risk that the global recovery would not be sustained and the functioning of the ims could become disorderly. in this context, the theme for this year ’ s imfc plenary, “ global challenges, global solutions ” holds special significance. fund surveillance 3. we look forward to the upcoming 2011 triennial surveillance review ( tsr ). to avoid duplication, an independent opinion of the gaps in the fund ’ s surveillance framework can already be found in the ieo report on the fund ’ s performance in the run - up to the crisis. the ieo

has identified several weaknesses in the fund ’ s culture that impedes effective oversight, such as a silo mentality amongst departments, fear of reprisals that inhibit candid views, and a lack of evenhandedness in the treatment of members. instead of searching for a new legal framework for surveillance, the fund should concentrate its efforts on how best to implement the ieo recommendations. while the ieo report focuses on dealing with risks in the financial sector, we wish to highlight that surveillance should also focus on fiscal and / or debt sustainability problems, from which the next crisis could emanate. a more comprehensive consideration of the gaps in the fund ’ s surveillance framework is necessary to strengthen the effectiveness of the fund ’ s bilateral and multilateral surveillance. 4. given its universal membership and deep technical expertise, the fund is uniquely placed to identify global challenges, facilitate dialogue and propose policy adjustments. to leverage on such unique strengths, the fund must earn the trust of its entire membership that its policy advice is formulated in an evenhanded manner. in this respect, the forthcoming bis central bankers ’ speeches spillover reports will be another important test of the fund ’ s commitment to this principle. therefore, we hope that such reports will be written in a balanced manner without concentrating the burden of policy adjustment needs on any particular country or region. lastly, these expanded exercises should not neglect bilateral surveillance exercises, as they remain the cornerstone of fund surveillance, offering the safe haven of confidentiality that encourages candid discussions between fund staff and country authorities. international monetary system reform 5. the arguments relating to the deficiencies of the ims are by now well - rehearsed. yet, a consensus on what the most critical problems – let alone solutions – are, remains elusive. for emerging market countries, resurgent capital inflows have complicated the task of policymakers, especially as policy settings are being normalized to manage inflation risk. while capital inflows are by and large beneficial in promoting growth and investment, large and volatile episodes can pose significant challenges and overwhelm some recipient countries ’ ability to respond. given their sometimes rapid and dynamic nature and the difficulty in differentiating between temporary and structural flows, it is difficult to envisage a determinate response path at the outset. hence, the policy toolkit ought to entail a range of measures, not precluding any one option ex ante, with the flexibility to make adjustments over time. recent experiences of emerging market economies – including