Can G-20 fix world economy?
World leaders in desperate search for elusive global stability
By Kim Tong-hyung
South Korea, desperately craving global attention, has been engaging in a shopping spree for mega international events over the past two decades, and the next big exposure comes in November.
However, descending on Seoul this time around wouldn't be star Olympians or millionaire footballers, but a less athletic group of men who nonetheless are equal as the planet's most powerful individuals, gathering over a task none other than to save the world.
The Group of 20 leading economies has now replaced the narrower, Western-dominated G-8 as the primary global forum for economic policy. And the meeting in Seoul between the leaders of G-20 member countries will double as a deadline to produce an outcome that goes beyond diplomatic blather and provides a detailed set of measures to inject new life into the world economy, and fix global financing.
The Nov. 11 to 12 meeting in Seoul, which will be the fifth summit following the fourth in Toronto next month, will also be an important platform for fast-developing nations such as China, Brazil, India, and of course South Korea, to wield larger influence on key issues related to global economic stability.
A warm-up event for the leaders' summits in Toronto and Seoul will be a meeting of finance ministers and central bankers in Busan from June 3 to 5, where participants are expected to predominantly discuss further actions to tackle the southern Europe debt crisis.
By the end of the meeting in Seoul, G-20 leaders will be pressed to reach an agreement on the currently conflicting proposals over a global bank tax, aimed at cutting the risk in the financial system and better prepare for future collapses.
Also to be discussed is the renewing of the global financial system, establishing a framework to coordinate fiscal measures to counter the current economic turmoil, and reforming international financial institutions (IFIs).
South Korea expects to have a leading role in the talks over the forming of a global financial safety net, to insure against risky capital flows and prevent large economic and financial imbalances, a proposal made by President Lee Myung-bak during the World Economic Forum in Davos, Switzerland, in March.
``The November leaders' summit will likely produce concrete conclusion over the talks for building a framework for sustainable economic development, reforming IFIs and creating a global financial safety net,'' South Korean Finance Minister Yoon Jeung-hyun told reporters recently.
``As the G-20 chair of 2010 and host of the leaders' summit, South Korea will have a crucial role in producing agreements on key issues and balancing the differing views of industrialized and developing nations.''
Also to be discussed in Seoul is the reform of the International Monetary Fund (IMF), with negotiations underway to give emerging economies more voting shares at the fund, Yoon said.
G-20 reflects rise of Asian economies
G-20 members, comprised of the 19 countries with the world's largest industrial and emerging economies, plus the European Union (EU), collectively represent about 90 percent of the world's gross domestic product (GDP), 80 percent of world trade and two-thirds of the global population, according to the body's Web site.
World leaders gathered at the third G-20 summit in Pittsburg, the United States, in September last year declared that the G-20 will replace G-8 as the permanent council for international economic cooperation.
The decision reflected the increasing importance of rapidly-growing Asian and Latin American economies, a point that garnered particular relevance after the U.S. subprime mortgage crisis tested the mettle of the American and European banking systems.
The G-20 was established in 1999 as a response to both the Asian financial crises of the late 1990s and the growing recognition that key emerging-market countries were not adequately represented in the core of global economic discussions and governance. The first G-20 meeting was held in Berlin, on Dec. 15 and 16, 1999, hosted by the German and Canadian finance ministers.
Before the G-20 was established as a more permanent economic body, a group of 22 countries (G-22) and then 33 (G-33) gathered on an ad hoc basis under the goals of involving a broader range of countries in global economic discussions.
The current G-20 members are South Korea, the U.S., China, Japan, India, Britain, Germany, France, Italy, Russia, Canada, Argentina, Australia, Brazil, Indonesia, Mexico, Saudi Arabia, South Africa and Turkey. The EU is also a member, represented by the rotating council presidency and the European Central Bank.
With the exceptions of Argentina, Saudi Arabia and South Africa, all of the member countries fall within the world's top-20 list in GDP.
The financial and economic crisis that crippled the world in 2008 enabled the G-20 to solidify its status as the main platform for international cooperation.
The concentrated and decisive actions of the G-20, including the coordinated implementation of aggressive macroeconomic policies, helped countries deal effectively with the economic crisis, although the situation in Greece is shaping up to be a true test.
The G-20 is also moving to enhance financial regulations, reflected best by the establishment of the Financial Stability Board (FSB), and considering more ways to expand resources and improve precautionary lending facilities of international financial institutions.
Key G-20 events for this year include the finance ministers and central bank governors' meeting in Busan, the Toronto summit in June, and two more meetings between the finance ministers and central bankers in Washington and South Korea's Gyeongju during October, as link-ups to Seoul summit in November.
Outcome of past summits, link to Seoul
The G-20 held its first leaders' summit in Washington in November, 2008, as a response to the crippling economic crisis. The world leaders gathered in the U.S. capital produced a five-page communiqu? that vowed for a ``broader policy response'' to the crisis and collectively pledging not to raise any trade and investment barriers over the coming year.
G-20 leaders continued their discussions to jolt the world economy and re-regulate global finance in their second summit in London on April, 2009. The core of the talks was aimed at providing the IMF with extra resources to help the organization pump more money into struggling developing economies, such as Eastern European countries.
With stability beginning to return to the global economy, the G-20 leaders in Pittsburg shifted their discussions toward finding effective measures to put economies and their banking sectors on sounder footing.
There was also a wealth of discussions to harmonize macroeconomic policies to avoid large global economic and financial imbalances. The leaders also vowed not to withdraw stimulus measures until a durable recovery takes hold and agreed to coordinate their exit strategies, although acknowledging that the timing of those could only vary between country to country.
The fourth and fifth summits scheduled in Toronto and Seoul this year are aimed at adding detail to the complex picture of achieving durable economic growth and reducing the risks of financial instability.
The debate over implementing a global bank tax is one of the issues garnering rapt attention. Although details differ between the proposals of each country, the general idea is to introduce an additional levy on balance sheets of banks and other financial institutions or tax on their pay and profits, with the gathered sum intended to fund future bank rescues.
The suggestions are politically popular in the U.S. and much of the EU, but opposed by countries such as Canada, Japan and Australia, whose banks didn't suffer as severely from the financial crisis.
G-20 leaders in Pittsburg requested the IMF to consider feasible bank taxes that would be effective in reducing risks in financial systems and paying for future crashes, and the organizations' final report is expected to shape the outline of any tax agreements achieved in Toronto or Seoul.
Also to be discussed in upcoming summits will be the creation of a strengthened international framework aimed at achieving balanced economic development across the globe. However, considering the ongoing conflict between U.S. and China over the reform of the yuan currency, it would be difficult to yield a visible result on this end ahead of the Seoul meeting.
South Korea is also passionate about advancing the talks over a global financial safety net, which policymakers here dub as the ``Korean Initiative.''