NETHERLANDS/IMF: DEPUTY PM/FINANCE MINISTER ON IMF

C O N F I D E N T I A L THE HAGUE 001906

SIPDIS

SIPDIS

STATE FOR EUR/WE, EEB/IFD/OMA
TREASURY FOR MARK SOBEL
USEU FOR BMATTHEWS

E.O. 12958: DECL: 10/16/2017
TAGS: EFIN PGOV PINR EUN NL
SUBJECT: NETHERLANDS/IMF: DEPUTY PM/FINANCE MINISTER ON IMF
QUOTA REFORM

REF: A. THE HAGUE 1898


B. THE HAGUE 642

Classified By: AMBASSADOR ROLAND ARNALL,
REASONS 1.4 (B) AND (D).


1. (C) SUMMARY. Dutch Deputy Prime Minister/Finance
Minister Bos recently told Ambassador Arnall that the Dutch
remain concerned about U.S.-led efforts to reform the
governance structure of the IMF and a consequential loss of
some of the Netherlands' voting power. The Dutch can be
expected to raise this issue in discussions on the margins of
the October 20-21 IMF/World Bank meeting. Bos was positive
about new World Bank President Zoellick's emphasis on
"building consensus" and the "added value of middle-income
countries" within the organization but questioned Zoellick's
focus on the Arab world as one of his priorities for the
Bank. END SUMMARY.


2. (C) During an October 15 meeting with Ambassador Arnall,
Deputy Prime Minister/Finance Minister Wouter Bos shared his
goals for his upcoming U.S. visit, including possible
meetings on Dutch efforts in Afghanistan (reported ref A) and
his attendance at the October 20-21 IMF/World Bank annual
meeting. Bos said the Dutch remained concerned about
U.S.-led efforts to reform the governance structure of the
IMF by increasing the quota/voice (voting power) of
fast-growing emerging market countries. He said the GONL
agreed that the IMF needed to reflect changes in the world
economy and acknowledged that some emerging markets were
underrepresented. He voiced support for the EU proposal to
compress the quota shares of the largest countries in the
IMF. Although not optimistic that the issue would be
resolved during the upcoming meetings, Bos said it would be a
priority issue for the Dutch during discussions and
negotiations on the margins of the IMF/World Bank meeting.


3. (SBU) When asked by the Ambassador for his views on new
World Bank President Robert Zoellick, Bos said he appreciated
Zoellick's emphasis on "building consensus" among members and
the "added value of middle-income countries" within the
organization. However, he questioned the feasibility of
Zoellick's decision to focus on one part of the world (i.e.,
Arab countries) as one of his priorities for the Bank.

COMMENT: HOLDING ON TO ITS QUOTA
--------------


4. (SBU) Under the USG proposed formula for IMF quota
reform, the Netherlands will possibly lose some of its voting
power, as their current quota is significantly larger than
their share in the world economy. (The Netherlands' quota
share is 2.4 percent; its share in the world economy is only
about 1.4 percent.) The Netherlands is not represented in
either the G-7 or the G-20, the two multilateral fora that
play a primary role in shaping the direction of reform at
both the IMF and the World Bank. However, the Dutch do hold
a seat on the IMF's 24-member Executive Board where they
exercise considerable power despite the relatively small size
of their economy.


5. (C) In a March meeting with the Ambassador (reported ref
B),Bos had indicated that the GONL was prepared to give up
part of its quota, provided that a new quota formula was
rule-based and reflected the IMF's mission and objectives,
including incentives to pursue sound economic and financial
policies that foster global economic integration. However,
he said sufficient weight would need to be given to a
country's GDP within any new formula as well as the
transparency and openness of a country's economy.


6. (C) The Dutch clearly will not be happy with any IMF
quota formula that means a loss of Dutch voting power. Bos
made a special point of raising the issue with Ambassador
Arnall and can be expected to be true to his word of making
this a Dutch issue during the October IMF/World Bank
discussions.
Arnall