The next head of the International Monetary Fund should come from China, India or another developing economy, veteran emerging market investor Mark Mobius said on Wednesday. "Definitely that should happen," Mobius, who overseas Franklin Templeton's Emerging Markets Group, said when asked about the possibility by Reuters Insider television. "They should put in a Chinese person or an Indian or somebody from the emerging market space, that would breathe fresh air into some of these multilateral institutions." Mobius' comments come as Dominique Strauss-Kahn faces growing pressure to quit as head of the IMF after his arrest on attempted rape charges. The battle over the IMF succession heated up when China, Brazil and South Africa challenged Europe's long-standing grip on a job that is pivotal to the world economy. China said on Tuesday the selection of the next IMF boss should be based on "fairness, transparency and merit". It marked the first time that China, the fund's third largest member, weighed in early and so publicly on an IMF selection debate. Brazil and South Africa echoed China's message and insisted the selection of the next head of the IMF be based on a candidate's qualifications and not their nationality. As emerging nations began staking out their positions in the expected leadership battle, two European finance ministers cast doubt on Strauss-Kahn's ability to run the global lender. Mobius, who oversees more than $50 billion in assets, also said emerging markets should make up around 32 per cent of a global equity portfolio, to represent the market capitalisation of emerging markets. "Economic growth in emerging markets is doing very well, there is no reason why stock markets should not reflect this positive movement," he said. Reuters' latest poll of large institutional investors showed at least 13 percent of equity allocations were in emerging market stocks. Emerging market stocks have underperformed global markets this year, dipping 0.75 per cent compared with global gains of 3.5 per cent.
Brazil Wants To End Status Quo
A senior Brazilian government official said Brazil wants the IMF's next chief to come from a large emerging market nation, but acknowledged Europe was likely to keep the job. "We believe India and Brazil would be good options," the official said, speaking on condition of anonymity. "But we also believe that Europe is likely to keep its deep stranglehold on the position, and so we're not planning to push very hard on this issue for now." South African Finance Minister Pravin Gordhan said institutions like the IMF had to reform and fully reflect all of its members and not just industrialized nations. German Chancellor Angela Merkel said on Monday that it was not yet time to discuss succession but there was a good case for a European to occupy the job. The United States, the IMF's largest and most influential shareholder, has yet to comment on the selection process since Strauss-Kahn's arrest. But it has made a strong case in recent years for emerging markets to have a greater say in the IMF. Washington's predicament is that if it forces a change at the helm of the IMF, it may have to give up the World Bank's captaincy. That would be politically thorny among lawmakers who could force the US to cut funding for the bank. In April 2009 at a meeting of the Group of 20 in London, the United States signed onto a communique by the world's major economies that agreed "the heads and senior leadership of the international financial institutions should be appointed through an open, transparent and merit-based" process. Strauss-Kahn has been deeply involved in talks over European Union and IMF bailouts for debt-strapped countries. Another of his signature achievements has been reforming the IMF's voting structure to give emerging economies more power. The IMF has named the fund's deputy, John Lipsky, as acting managing director although he has announced he is stepping down when his term expires in August.
