Finance ministers need to pull themselves together against a pile of headaches ahead

By Cho Jin-seo
Staff reporter

After a tough ride on an airplane through heavy turbulence, passengers often give warm applause to their pilots and enjoy a certain feeling of caramaderie among themselves. "We have made it through together!" they may think. It is the comradeship that only a life-and-death situation can give.

Over the course of the past two years, the finance ministers and the central bankers who will gather in Busan this week for the G-20 meeting may have developed a similar fraternity.

Except for those who were recently appointed to their positions, they have together engaged in the matter of saving the world from the ugly financial turmoil. Also, they themselves were often the target of anger from citizens for not being able to predict, and prevent the crisis. For the first time in world history, the finance ministers and central bankers of Asia, Europe, America, Australia and the Middle East are finding themselves in the same boat.

For them, G-20 meetings are becoming a regular trip around the world. The Busan meeting is already the second time this year for them to have a formal discussion, after one in Washington D.C. in April.

Two more meetings are planned in October in Washington and Gyeongju, Korea. They will also accompany their presidents to summits in June in Toronto, Canada, and in November in Seoul.

This tight schedule is intended for the participants to meet their December deadline to produce a final, comprehensive reform plan for the global financial system. Going through the face-to-face meetings and numerous phone calls, the ministers and governors are developing a strong bond among themselves that the fate of the global economy is now in their hands. Certainly it is one of the rare benefits of a global crisis.

In this tightly scheduled two-day event, it will be interesting to see how the ministers and governors develop kinship and trust in each other. They are from different races and ages ― U.K. Chancellor George Osborne is 35 years younger than his Indian counterpart, Minister Pranab Mukherjee; and they represent different national interests.

If the G-20 can be compared to an airplane, then it is one big plane with 40 pilots in the cockpit and 6 billion nervous passengers in the cabin. So far, they have managed to fly through a storm, but it is far from reaching its final destination, yet. Only after they pull themselves together and touchdown on a fair, viable and noble solution for fixing the messy global financial system, will the passengers of the world give them warm, hearty applause

Five steps to climb

In Busan, the meeting will be five sessions. First, there will be a working dinner on Friday night, where ministers and governors will dine on top-class Korean food and drinks. But more than one may lose his or her appetite when seeing a thick report from the International Monetary Fund (IMF) on the dinner table beside their plates.

The report will cover various ongoing issues in the global economy, says an official from the G-20 Seoul Summit Committee, which is hosting the event.

"At the dinner, the participants will be briefed about global economic conditions, and there will be discussions on macroeconomic policies such as exit strategies," the official said in an unofficial press briefing last week. "It is expected that the Southern European fiscal crisis and ensuing discussions on budget balancing will be another important issue."

Saturday begins with the second session, which is a discussion on the framework of the G-20 summit itself. It is going to be more open and comprehensive than the first one, with representatives of various international organizations such as the World Bank, Financial Stability Board (FSB), International Labor Organization (ILO) and OECD all taking part.

Unlike the other international bodies in the alphabet soup, the G-20 so far does not have a permanent headquarters or administrative staff, so host countries take the responsibility as moderator in turn. During the second session, there may be debates on this identity issue.

In his interview with The Korea Times, Chang Ha-joon, an economics professor at the University of Cambridge, says that the G-20 cannot claim much legitimacy in its current form.

The main round begins with the third session ― the financial regulatory reform discussion. This is when bankers around the world will be praying, while ministers discuss what measures they will use to whip the greed on Wall Street into shape. (Information for those who want to join the global prayer of anti-bank reform: the third session starts at 10:45 a.m., Korean time).

The FSB will first report on plans to regulate capital and liquidity at banks to prevent moral hazard in the so-called too big to fail institutions. Then the IMF will report on the idea of a bank levy and its alternative policy options.

Problems with credit rating companies, hedge funds and over-the-counter derivatives market will be also dealt with in this two-hour session.

For Korean officials, probably the most crucial agenda to be discussed in Busan is in the fourth session, which will talk about reform of international organizations and establishing a "global safety net."

Korea and other developing nations will demand more quotas in the IMF, and urge reform of its governance structure. They will also seek methods to prevent the spill-over effect of a financial crisis from developed countries to developing ones. Now is the time to raise their voice.

"So far, the G-20 hasn't made much progress on this topic, since it is not a priority for developed nations. In Busan, our goal is to produce an interim report on the global safety net," the Seoul official in the press briefing said.

The final session will be a wrap-up of the previous four, plus talks on energy-saving policies and financial support for the poor. The ministers and governors will then announce an official statement, or "communique."