Manila: International Monetary Fund Managing (IMF) Director Christine Lagarde said western economies now in crisis can learn from Asia, where countries undertook changes in response to the turmoil of the late 1990s.
"Asia embraced change, not without a laborious, difficult process, not without huge sacrifices, not without misery and suffering," Lagarde told students at the Asian Institute of Management in Manilla, the Philippines' capital. "But it emerged as a result stronger, less vulnerable, more resilient."
Asia's experience with bailouts and austerity is being reflected in Europe, where governments under pressure to reduce debt and boost growth are trying to make similar changes to their economies. Budget cuts that policy makers say are unavoidable and labour leaders call economic suicide have sent thousands of people protesting from Madrid to Athens.
Europe's debt crisis, in which the IMF is involved through bailouts to Greece, Portugal and Ireland, forced Lagarde to cut short her visit to Southeast Asia. She will skip the Cambodia leg of the trip, which started this week in Malaysia, to attend a November 20 meeting of euro-area finance ministers.
In Asia, Lagarde sought to promote how the IMF has changed its policy prescription from the 1990s. The fund's ties with nations such as Thailand and Indonesia took years to mend after the 1997 Asian financial crisis forced some countries into unpopular IMF austerity policies.
"As we face an increasingly complex and interconnected world, we understand that the IMF needs to change and modernise, and we are doing so," Lagarde said. "We are more flexible across a number of dimensions, including the time horizon for fiscal adjustment and policy responses for dealing with surges in capital flows."
The region is now a haven for investors after its governments spent the years since the turmoil restoring finances, bolstering banking systems and diversifying industries to increase resilience. Lagarde said today that Asia contributed two thirds of global growth from 2007 to 2011.
Her comments pleased Aissa Ang, a student in the Master in Business Administration program at the institute, who attended the speech and asked Lagarde if the IMF would impose "sanctions" on the U.S. for initiating the global financial crisis of 2008 in the way the Philippines had to implement economic reforms attached to IMF loans.
"I got very excited when she mentioned that the developed countries can learn from the Asian experience," Ang said in an interview after the event. "The developed countries can learn, for instance, resilience and a certain level of trust between government and business."