G20 summit tests Lees global leadership

By Na Jeong-ju

President Lee Myung-bak once said he feels a sense of “historic” responsibility to help the world find the most effective solutions to overcome the current economic challenges at the G20 Seoul Summit.

Two big issues have been placed high on the agenda at the ongoing forum ― closing the growth gap between advanced and developing economies and finding workable solutions to the global currency dispute.

To make the discussions successful, Lee must make his last-ditch efforts as chair of the summit to address differences of views among members on how to attain these goals.

The G20 meeting will help boost Korea’s global reputation. And it is also a crucial opportunity for the South Korean leader to become one of the prominent world leaders, analysts say.

Even last year, pessimism prevailed on the possibility of an economic slump that would push the world into another Great Depression. Fortunately, the actual outcome has been better than those worst-case scenarios.

Ironically, the better-than-expected recovery of the world economy could present greater challenges in the years ahead.

While the crisis was deepening, the necessity of effective policy coordination was easily impressed on everyone. As the crisis abates, however, countries tend to act for their own interests.

Such differences can make it more challenging for the countries to agree on coordinated responses after the Seoul summit.

“Although the financial crisis brought the world together and forged an effective coordinated crisis response, we need to translate the momentum we have generated toward establishing a forum that can play a genuine global leadership role for longer term issues,” President Lee said in a press conference last week.

The summit will also test his global leadership.

It was unthinkable even a few years ago that a Korean leader would gain as much global attention as he enjoys these days.

Since the country was chosen as the G20 host, it has successfully positioned itself as an arbitrator between the United States representing the old regime and China seeking a new world order.

President Lee has made it clear that he will mediate between the two superpowers to address their conflicting views and, for his part, increase Korea's stake in deciding on the future course of the global economy.

His goal is simple: clearing the fallout of the financial crisis to bring the world economy back on track based on the collective wisdom of the countries that are at odds over how to do so.

Armed with vast currency reserves, China, the largest holder of U.S. debts, has called for reform of the dollar-based global economic structure to reflect the rising economic power of emerging nations and to prevent a crisis in a certain nation from rippling through the whole world.

Recently, attention has been heaped on the currency conflict as the U.S. and other Western nations have accused China of deliberately weakening its currency to boost exports and deepen global trade imbalances.

One of President Lee’s tasks will be to follow through on the initiatives and agreements made in previous summits on reforming financial regulations, reforming international financial institutions and implementing a framework for strong, sustainable and balanced growth.

At the third G20 summit in Pittsburgh in September last year, Korea gained unanimous support from participating nations as the host of the fifth summit. Canada hosted the fourth on June 26 and 27 in Toronto.

Korea is the first Asian country to host the forum of the world’s 20 major economic powers, launched in September in 2008 to coordinate a global plan to fight the worst recession since the Great Depression. The G20 nations account for about 85 percent of global output.

“For Korea, hosting the G20 meeting is expected to serve as a turning point for the once major recipient of international aid to join the ranks of the world’s major economies,” Lee said.

The world economy has stabilized through the concerted efforts of governments, but private sector investment and job creation are still far from robust.

For an enduring recovery, the revitalized growth of private investment must follow. Priority should be given to job creation and investment by the private sector.

In this context, one of the toughest jobs for President Lee after the Seoul summit will be to help the conflicting sides find common ground on how to restructure the financial governance system and boost private investment, analysts say.

In the coming years, Korea must strive to strengthen global partnership programs for achieving balanced growth, while building up a system to protect countries from the volatility of international fund flows.

As chair of the G20 Seoul Summit, Lee has made it clear that he will focus on addressing the challenges that developing countries face in achieving sustainable, long-term growth.

With a global recovery gaining momentum, financial reform will be crucial for the world to address economic imbalances between developed and poorer nations.

Gone are the days when the powerful and wealthy G7 members could dictate their plans on the global economy to the lesser, non-G7 bystanders, and the rest of the global community.

The rise of the G20 should be seen not as a magnanimous offer by the Western economic cabal and Japan to cede power and influence to formerly, less-influential developing economies.

South Korea plans to launch diplomatic outreach programs embracing African and Asian countries this year based on its pledge to become a more responsible member of the global community.

“Korea is seeking to upgrade diplomatic relations with countries all over the world, particularly Asian and African countries, on the occasion of its hosting of the G20 meeting,” said Chun Yung-woo, senior presidential secretary for foreign and security affairs.

The programs reflect confidence that Korea's ties with its traditional allies, such as the United States and Japan, have improved significantly since Lee took office in February 2008.

As part of efforts to raise the country's international status, the government is seeking to expand development assistance to poor countries and increase its participation in the U.N.’s peacekeeping missions in conflict areas.

Policymakers here have called the hosting a diplomatic triumph as the summit will provide a venue to set the future course of action for the global economy.
It also gives a crucial opportunity for Seoul to reflect voices from developing nations in reforming the global financial sector and create a new economic landscape, analysts said.

At the end of their summit in Seoul, the G20 leaders are expected adopt a set of measures to address poverty, food shortages and industrialization in underdeveloped countries around the world.

President Lee suggested that the action plan will include measures to boost technology transfer to poor nations and modernize their industrial infrastructure, saying providing only handouts won’t resolve their structural problems.

He also stressed that the development issue is crucial for the G20 to gain broader worldwide support in strengthening its status as the premier economic forum that provides workable solutions to the whole world.

“It’s one of the G20’s duties to narrow the growth gap with the rest of the world. That’s crucial to sustain global growth as poor nations will continue to create demand for the whole world as their economies grow,” he said.

“There will be a broad consensus in Seoul on ways to boost the long-term growth potential in underdeveloped nations and help them stand on their own feet.”