DPM Lee Urges Structural Reforms to Handle New Challenges
- Expresses the hope to join the IDB for reducing poverty in Latin America

Korean Deputy Prime Minister and Minister of Finance and Economy Lee Hun-jai has called for the IMF and the World Bank to undertake major structure reforms in a bid to tackle with today's new challenges.

"The time has come for these institutions to transform themselves, both substantially and quickly, to become better suited to face today's challenges," Lee said. DPM Lee made the remark in his keynote speech to the 59th IMF/World Bank Annual Meeting in Washington on Oct. 3. ?n the new world, capital flows have increased exponentially, such that only 5% of these flows are now related to current account transactions, and at the same time, the digital divide has become perhaps the greatest threat to our efforts to reduce income gaps," he said. "These challenges are compounded by the existence of large economic imbalances that could start unwinding faster than expected and pockets of what may be called "housing bubbles" that could start deflating."

Lee maintained that trusty policymakers must continue to carry out prudent policies to maintain market confidence and stability. He noted that given present circumstances, patience in tightening monetary conditions will probably prove to be a virtue. "At the same time, I do not think it wise to risk maintaining large imbalances and pressure points for too long," he said. "Given time, fundamentals will prevail. And in today's world, events can unfold and spread very quickly, and the IMF and the World Bank must respond vigorously/ to today's new challenges." "The IMF must improve its effectiveness in surveillance and crisis prevention. This is particularly important now, when huge, volatile capital flows can quickly give rise to crises, not only in the country of origin, but across the globe," he said.

DPM Lee emphasized that concurrently, given today's capital flows, it is essential that the IMF enhance its financial resources to deal effectively with crises, once they develop.

To this end, Lee demanded that the IMF must sizably increase its total quota. He also urged the membership to address imbalances in IMF quotas, where in some cases size of quota is clearly out of line with the economic weight/ and strength of particular member countries. "Beyond reform of the IMF, I would venture to suggest that the international community explore/ alternative means through which it can deal with problems that can stem from today's huge and volatile capital flows. As for the World Bank, I believe there is a need to concentrate further the institution's efforts on reducing poverty around the world," he said.

DPM Lee said, "We must make significant progress in both increasing financial support and improving aid effectiveness." He added that achieving the Millennium Development Goals (MDGs) will be an essential element of this effort. "With continued advances in IT, overcoming the digital divide is likely to be a key factor/ in determining the success of our poverty reduction efforts, and so I believe the Bank should focus much more on bridging the digital divide, for example by focusing more on education aid," he said.

Lee said Korea is ready to share its development experience, including its various e-experiences, saying aid effectiveness would be greatly improved, if financing support became more user-oriented. He said Korea hopes to soon become a member of the Inter-American Development Bank (IDB), saying that Korea is eager to expand the reach of its development aid. "When we do so, we intend to actively contribute to the poverty reduction efforts in Latin America," he said. "Korea will shortly take an Executive Director seat at the IMF for the first time, we will make maximum effort to properly represent all the members of our constituency," he said.   nw