This year's World Bank-International Monetary Fund meeting brought East and West together for a series of clashes that made this one of the more lively of the annual gatherings in recent memory. The IMF succeeded in raising more money from its member countries, the World Bank in releasing a long-awaited study on China's economy, but the event for which this meeting will be remembered is the war of words started by Malaysian Prime Minister Dr Mahathir Mohamad and joined by one of the world's most powerful financiers, George Soros. Dr Mahathir's threat to restrict foreign exchange trade met with disbelief from most, utter scorn from Mr Soros. The meetings concluded yesterday on a quiet note, but the chasm remains between many Asian and Western leaders. In the East, some governments feel that funds, like big international hedge funds, that operate outside any jurisdiction are prone to imprudent behaviour, such as wrecking economies. Asian leaders in general seek to tame what looks to be the completely capricious nature of international capital. The view from the West, including the IMF, remains that bad policies, not bad fund managers, are what sparks problems such as Thailand's and Mexico's. But the East-West divide extended beyond the two larger-than-life personas of Dr Mahathir and Mr Soros and into other issues. The proposal to set up an Asian-only rescue fund was instantly criticised by Europe, the US and the IMF. Japan was stuck in the middle, as it often is, wishing to be seen as a source of support for the regional initiative, but unlikely to go against what the IMF and US deem appropriate. IMF first deputy managing director Stanley Fischer said any bailout that did not involve a stringent reform programme, like those imposed by the IMF, would be a waste of money. By the end of the meeting, Asian leaders had convinced US Treasury Secretary Robert Rubin to open a dialogue on the subject, after agreeing not to do anything outside IMF guidelines. But the fund is no closer to reality than it was before the meetings began. More time was spent discussing money and markets than on the usual subjects of these annual meetings: poverty, education, economic development and global integration. Developed countries have been flooded with capital over the past few years. Portfolio investment can fuel growth and lift asset prices on the way in, but it can rip holes on the way out. Asian leaders in general seek to tame what looks to be the completely capricious nature of international capital. IMF officials are telling them they can cushion the blows by keeping their economic houses in order. That advice was not welcome to many from around the region. Leaders, like Dr Mahathir, found the meeting a perfect forum to blame speculators. Officials from the IMF, the US and Germany were just as quick to put the blame back on bad policies and remind the region that markets do have a tendency to overshoot, but they come back eventually to fundamentals. One very senior official of the Bretton-Woods institutions said: 'One thing that Dr Mahathir does not understand yet is that people like Mr Soros make money off the crazy mistakes of their crazy policies.' Dr Mahathir called speculators 'ferocious beasts' and 'racists'. Mr Rubin said speculation was a natural part of any market. The IMF, after studying the matter in great detail, concluded in a report after the Mexican peso crisis that speculation was not a 'pathological' market behaviour. Ironically, Mr Soros argued against a completely laissez-faire approach to markets, though he spent more time arguing for more democracy in Asia than defending his currency trades when he presented his keynote speech on Sunday. Malaysian Deputy Prime Minister Anwar Ibrahim has proposed that hedge-fund managers such as Mr Soros be compelled to assist that process by disclosing their positions to governments. Hedge-fund managers do not even tell their clients where they are investing. Any attempt to monitor all the portfolio investment flowing across borders would be like counting snowflakes and in many ways would miss the point. Money flows where the reward is worth the risk, as it was in Thailand when interest rates were relatively high and the risk of currency depreciation low. The short sharp nature of what Asian markets have experienced this year is enough to alarm even the most astute politician. But IMF officials have spent the week reminding regional leaders that when there is a disconnection between fundamentals and prices, fundamentals will prevail in the end. The question of confidence is probably the greater issue in Southeast Asian markets at present. IMF officials have been talking up Thailand since they arrived in Hong Kong last week, stressing the rapid progress made on fiscal and monetary measures and dispelling rumours that all is not well between Bangkok and the IMF. Michel Camdessus and his deputy, Stanley Fischer, both commended the country on its quick work in implementing fiscal and monetary measures, but fiscal and monetary problems were not what eroded Thai share prices by 60 per cent since the beginning of last year. Nor did a generous budget or easy monetary policy lead to the 42 per cent collapse of the baht since July. The markets are clearly not yet convinced by the measures put in place. Turning Thailand around will depend on a rehabilitation of the finance sector. The hard work remains to be done. The Thai finance minister has set October 15 to announce details of financial market reform. That could be the real test for confidence. This week, the words 'confidence' and 'Thailand' were spoken together so many times that the words became like a mantra for Thai and IMF officials. The other leitmotifs of this year's meeting were 'disclosure', 'transparency' and 'surveillance' - all of which, we are told, are in short supply in Thailand's case. The task of making those concepts work in Asia is far from over.