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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

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Exit the Crisis Fighter
The IMF chief's parting lines on Asia
An interview with MICHEL CAMDESSUS

November 18, 1999
Web posted at 7:00 p.m. Hong Kong time, 6:00 a.m. EDT


    BUSINESS
Keeping the Bulls Busy
Chartered Semiconductor is leading Singapore's tech surge
- Wednesday, Nov. 17, 1999

Siam Cement: The Long Climb Back
How Thailand's biggest conglomerate pulled itself out of a sticky situation
- Monday, Nov. 15, 1999

Taiwan Banks: The Urge to Merge
Don't expect Taiwan's giants to become big regional players any time soon
- Friday, Nov. 12, 1999

Lessons from the Crisis
Manila's Globe Telecom shows why picking the right partner is everything
- Tuesday, Nov. 9, 1999

Apocalypse Postponed
South Korea's Daewoo mess isn't going to go away
- Thursday, Nov. 4, 1999

A Bull on Malaysia
Despite some setbacks, this analyst's faith in Kuala Lumpur remains strong
- Tuesday, Nov. 2, 1999

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Michel Camdessus is an opinionated man. In nearly 13 years as managing director of the International Monetary Fund, the tough-minded Frenchman has raised the Washington-based agency's profile. During the Asian Economic Crisis, critics attacked the IMF's harsh, cookie-cutter solutions. Asiaweek named him the region's most powerful person then. On Nov. 9, Camdessus, 66, announced that he would resign early next year for "personal reasons." Soon after, he spoke to Senior Correspondent Alejandro Reyes. Here are exclusive extended excerpts from their conversation:

Do you have any regrets over Asia?
Even if here or there things could have been done better, I feel admiration for the work the many leaders in Asia did to help their countries out of the Crisis. Indeed, I also have a high regard for the work the teams from the IMF, the World Bank and the Asian Development Bank did to help these countries to pull out of the crisis in record time, if you compare the severity of the Asian Crisis with those before. I am mindful of the difficulty and the heartbreak due to the human suffering we have seen. But I have immense appreciation for the work that was done to contain the crisis and avoid letting it become a major systemic failure as we had at the end of the 1920s. There is also the satisfaction of seeing many of the Asian Crisis countries now on track for high and sustainable economic growth.

That being said, things here or there could have been done [differently]. Indeed, if there are things I regret, one is not being heard when we were warning several countries, particularly Thailand, well in advance about the risks they were exposed to due to the unsustainability of their policies, the weaknesses of their banking systems. Eighteen months before the Crisis appeared we warned Thailand about the growing external imbalances that had the potential to destabilize the country severely. I must regret also not being able to convince [countries] to rapidly put in place a system of regional surveillance which could have helped them to reinforce their economies before the Crisis occurred. I also regret not to have been able to catalyze earlier more external support not just the IMF [funding] which has been quite sizeable, but also bilateral assistance to reduce the human costs of the adjustment in countries such as Indonesia. And of course, I regret that we have not been able to get some countries to stick rigorously to their programs and avoid them having to stop and start negotiations when doing so results in instability. But the regrets shouldn't blur the picture of an Asia which has valiantly fought the crisis and been able to overcome it. Not to mention a country such as the Philippines, which by sticking to the agreed program with the IMF has been able to shield itself from the Crisis.

You were quoted this week in the New York Times saying "we created the conditions that obliged President Suharto to leave his job," adding that doing so "was not our intention." Could you elaborate?
This is not an exact quote of what I said. It is a sort of summary, where what I said has been shortened so much and taken so much out of context that it conveys a different meaning. I must remind you of the central fact, mainly that the program we put in place in Indonesia was negotiated with the Suharto government and signed and agreed by President Suharto himself. He told me personally that even if these were harsh measures, they were needed at that time and that he would give them all his backing. After that, for reasons that I have not yet clearly understood, the government adopted a totally different course of action, which resulted in tremendous instability. Interestingly enough, the students started demonstrating in the streets of Jakarta against nepotism, collusion and corruption, which were precisely the major problems of the country our programs were trying to fight against. So instability developed with the consequences we are familiar with. But I cannot say that the IMF is responsible for that. The IMF is responsible for having formulated a therapy against the very severe illness of the country. The therapy had not been applied, but I am now delighted that the new government is now finally adopting and implementing the key principles of our program. I am happy that the new president has put all his authority and the authority of the new government into pursuing these reforms.

Lee Kuan Yew told Asiaweek in an interview that "the Crisis got dangerous when the IMF wanted to reform not just the Indonesian economy, but also Suharto's governance." He also said that the IMF "had to cater to the mood of the U.S. Congress." How do you react to these comments?
I have the highest respect for Senior Minister Lee Kuan Yew, but I wouldn't put it that way. The influence of the U.S. Congress has not at all determined the line we took. We had a dialogue with the Indonesian government and we explained to them that there are things not only in the banking system but also in the domain of the governance of the country, in the economic fabric of the country, which had to be radically changed. In the globalized market, a system where a few monopolies rigidly control a great part of the economy is perverse, be they in the hands of cronies or members of a family or whatever. This had to be addressed, and we did so with the consent of President Suharto, who signed these programs knowing full well all that they meant. These are the facts. The idea that you could solve the problems and correct the economic imbalances without addressing the major fundamental problems created by bad governance -- the nepotism, the collusion, and the corruption -- was just an illusion because we would then have put billions of dollars in for stabilization. But later we would have to come back and address the same problems with even more financing. In Indonesia, as we did in South Korea and Thailand, we have to address simultaneously the problems not only of the economy but also of the governance of the economic system to make it compatible with the globalized market economy.

Reyes: So even in hindsight, the IMF's prescriptions were, in your opinion, correct.
I have no doubt about that. Thanks to these prescriptions which I remind you were endorsed by each country and owned by each country. Now, Korea, Thailand and Indonesia are starting again to grow on a much sounder basis than before. They are now achieving higher quality growth. This is what they need to do to be strong competitors as they must be in the globalized market of the next millennium.

Reyes: What about comments by World Bank economist Joseph Stiglitz critical of the IMF approach?
I prefer not to comment.

Reyes: There are those who say that Korea's reforms are half-baked. That complacency is setting in.
There is always a risk of complacency particularly where you have outstanding success. This is the situation in Korea. Indeed there is the temptation for many and for vested interests to try to avoid continuing with the needed reforms. I see this danger, but I also see the results and determination with which President [Kim Dae Jung] and the government want to continue with the agreed programs. I believe they are right. And the continuation of their efforts will bring the consolidation that Korea's economy, its banking system and its corporate sector deserve.

Reyes: What lessons should we learn from Malaysia? Might its apparent success with capital controls make it more difficult for the IMF to implement its orthodox approach elsewhere?
Not at all. To contrast the Malaysian approach and IMF prescriptions in such a striking way is only rhetoric. Never has the IMF prevented a country from adopting exchange-rate controls. The exchange control system Dr. Mahathir adopted was very light. It has been in conformity with IMF recommendations to strengthen in particular the banking system. And in strengthening the banking system, Dr. Mahathir has followed very closely the recommendations of the IMF. So all this rhetoric putting in opposition the Malaysian experience and the IMF orthodoxy leaves me with a degree of surprise and even amusement. I believe what has been done in Malaysia corresponded reasonably well with the circumstances of the country. We have all the time maintained an extremely good and continuous dialogue with Malaysia. We are delighted to see their success. It is good for Malaysia and for the region. I only hope that too much rhetoric will not obscure the reality.

Reyes: Your critics and supporters alike say that you have turned the IMF into an activist organization. Would you agree with this assessment?
Well, I don't think so. What characterizes the IMF is that it is there to respond to crisis, to respond to challenges. We have done just that. We are frequently criticized for that because when challenges appear we try to be responsive. It is our role. It must be. It is the role of the institution to be quick to step in and provide support when the crisis is as multi-faceted as it was in Russia and Asia. In Asia, we had to go for a very diversified, quick and hopefully effective solution. This calls for activism, imagination and a degree of creativity -- but always in dialogue with the countries involved, letting them take full ownership of the reforms which are necessary. And then as rapidly as possible, the IMF disappears and the glory for the success must be with the countries.

Reyes: But you have made mistakes.
Seven times a day as it is said in the holy books about the wise man. In the New Testament, it is 77 times a day. And then you must ask the forgiveness of God for these mistakes.

Reyes: What are your views on an Asian Monetary Fund?
For some time, even before the Crisis, I have seen the need in Asia for mutual regional surveillance and cooperation in first identifying the problems that countries might have. This is what was lacking in Asia and made it difficult to forecast the risk which was accumulating. Experience has shown that financing is not a problem. The financing was found rapidly and, contrary to what has been said, in record speed, but the surveillance was not there. I am happy that lessons are being drawn from that and groups such as the Manila Framework countries are intensifying communication. All of this increases cooperation and coordination of economic policies. So far I don't see support in the international community for a new special fund. If the support were there for one, then we should discuss how to reconcile its modus operandi and conditions with ours. But at this moment, I don't see an urgent need for it. It would be wiser to concentrate on the right priorities such as putting in place the early warning system and methods of cooperation which are needed to avoid the repetition of what we have seen during these unfortunate last two years.

Reyes: And what about an Asian Monetary Unit?
I know a lot about creating a new monetary unit. I was there in Europe 30 years ago when we started preparing for a new European currency. I don't know if this is needed in Asia. Remember that it takes 30 years to create [a unified currency] even if there are sound grounds for one and good chances of success. At this moment, the issue is not so much the creation of a new monetary unit but how to put in place the proper exchange regimes in each country with good cooperation among the central banks to ensure the needed stability of Asian currencies.

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