At Davos, intimations of interdependence

I was in Davos like many others last week. Over its 38 years the World Economic Forum has grown from a minuscule group to a giant mammoth. It is not easy to manage and engage scores of prime ministers, presidents, ministers, corporate chiefs, policy makers and others in a meaningful way. Veteran Davos hands know that its real value is outside the over 100 panel discussions — in corridors, in receptions, and in the informality which fosters new associations and renews old bonds. Only those adept at the art of networking and reaching out to new people and disciplines can benefit.

While registering for the conference, Martin Wolf of the Financial Times enquired about the Indian delegation and promptly added that the marketing of India was over and the world had generally accepted its new position as a significant economic power. However, India’s problems and challenges were far from over. In an interdependent world, we need to make our presence felt and periodically reiterate that we continue to perform well on growth, poverty reduction, the human development index as well as positively contribute to the more contemporary concerns on climate change and security of energy, food and water. The sentiment expressed by Larry Summers in a private dinner hosted by me that Chidambaram represents our most acceptable reform face is widely shared.

The session on ‘World Economic Brain-storming’, which had many economic heavyweights, clearly recognised that the current economic turmoil was an outcome of regulatory failures, systemic under-pricing of risks, too much off-balance-sheet exposure and inadequate coordination between supervisory entities. Gordon Brown reiterated the need to reform global institutions — IMF, World Bank, the United Nations — to address contemporary challenges of managing new power equations, terrorism, peace-keeping, global pandemics, energy security, food distress and climate change. Failure to do so quickly will make them increasingly irrelevant.

Re-christening the World Bank as an institution for development and environment might be stating the obvious. However, multilateral financial institutions have yet to come to terms with the changing equilibrium of economic power, a significant shift in favour of Asian emerging markets, particularly China and India, when it comes to voting rights, selecting heads of institutions and more transparent decision-making processes.

Recognising that skills and domain knowledge was more relevant than mere country of origin for leadership of global institutions is a continuing concern. Besides, what does increasing ownership of the world’s most coveted private banks by governments and institutions in Asia mean for these organisations, their management structure and decision-making processes? In the past they have habitually sermonised on prudential norms, risk management capital adequacy and oversight expertise.

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