Two developed countries are out; India and Brazil are in. The BRIC countries, namely Brazil, India and China, move up to the top 10; three OECD (Organisation for Economic Co-operation and Development) countries slide below the line. I am referring to the recent change in the membership and country ranking of the International Monetary Fund’s (IMF) 24-member board. This is what was agreed at the G20 Finance Ministers and Central Bank Governors Meeting in the run-up to the G20 Seoul Summit, to be held on November 11-12. The transformation is emblematic of a tectonic shift in economic power among countries and heralds a new era in global financial governance. At the centre of this remarkable evolution is the G20 as a prime mover.
The Seoul summit will be the fifth since the G20 leaders got together in the immediate aftermath of the global economic crisis in 2008. Thanks to the G20-led concerted efforts, the world has been able to avoid another Great Depression. The successfully-performed feat has earned the G20 an honourable title: ‘a premier forum for international economic cooperation’. To be fair, the G20 that accounts for 85% of the global domestic product and two-thirds of the world population deserves due respect on its own merit. The emergence of the G20, with both developed and emerging markets as members, is definitely a welcome step forward from the standpoint of global governance, when compared with the G7 as an exclusive club of high-income countries.
There is, however, still doubt and scepticism hanging over the future of the G20. Some point out its lack of legitimacy as a group of non-elected countries. Others are worried that the waning of the global financial crisis could undermine collective action as countries become more embroiled in their own economic circumstances. Still others regard the G20 as a crisis committee responding to the recent financial meltdown as opposed to being a more permanent steering committee for the global economy. Under such circumstances, if the world’s pressing concerns are not properly and effectively addressed by the upcoming G20 Summit, recent progress made over the years risks being undone.
The Republic of Korea is taking these challenges by the horns. The Seoul agenda is clear. First, the Seoul summit will ensure that the commitments made by previous summits should be honoured in good faith and within a given timeframe. These commitments relate to a framework for strong, sustainable and balanced growth, reform of international financial institutions, rejection of protectionism and fostering an open and free global trade regime. The IMF and the World Bank should be reformed to better reflect the contemporary global power configuration. Necessary measures must be taken to mitigate global imbalance in order to forestall trade or currency wars. Similarly, an early conclusion of the Doha Development Agenda (DDA) negotiations is imperative to ensure sustainable growth, job creation and balanced development of the world economy.
Second, Korea will position itself as an honest broker to bridge the divide between developed and developing countries. As an OECD country that has achieved industrialisation and democracy in a short span of time, Korea has much to offer. The host country’s principled position is that emerging, developing and low-income countries must be an important part of the solution and considered equal partners in achieving a more resilient and balanced global economy.
It is in this context that President Lee Myung-Bak, as Chair of the G20, proposed the inclusion of two agenda items closely related with the interests of developing countries: the formation of a global safety net, and development issues. The global safety net aims at countering capital flow volatility and providing emergency support for developing economies hit by external financial crises. The latter is to narrow the development gap with differentiated strategy focused on growth and capacity building.
Third, Korea is trying its best to ensure the full participation of all stakeholders in the world economy to firm up the G20 process. Since the Pittsburgh Summit in 2009, Korea has been engaged in extensive outreach activities geared towards non-member countries and various regional and international organisations. In order to mobilise the resources of the private sector, a G20 Business Summit is being planned where top global business leaders will discuss current issues of global economy related to trade and investment, finance, green growth and corporate social responsibility.
India is one of the biggest beneficiaries of the G20 process. The improvement of its rank to the eighth position from the current 11th in the IMF quota shares is just one example. As newcomers and representatives of emerging markets, Korea and India have a common interest in putting the G20 on a more solid foundation by enhancing its legitimacy and sustainability. In particular, promoting the development agenda is important to accelerate global growth and reverse the three-decade trend of worsening equity between the developed and developing world. Failing this, the G20 will be perceived as an expansion of the rich nations club or another avatar of G7 or G8. On this front, Korea is looking forward to a continued and proactive role of India as a leader of thought.
All eyes are now set on the upcoming Seoul Summit. The outcome of the Summit will have profound implications for the future trajectory of the G20 and world economy. Korea is fully committed to make it a great success. Only the success of the Seoul Summit would put paid to the scepticism and doubt in some quarters, and accelerate the transformation of the G-20 from a crisis-management grouping into the global governance architecture in the true sense of the word.