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The G20: A Timely Forum
By Lee Myung-bak, President, Republic of Korea
[English] [français] [Korean] [Italiano] [Japanese] [Espanol] [Deutsch] [Portugues] [Türk] [Bahasa Indonesia] [Arabic]
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Korea believes that in order to achieve sustainable growth, it is important that all countries – rich and poor – are represented. The gap between developing and advanced countries must be closed
This time last year there was still much pessimistic commentary on the possibility of an economic slump that would push the world into another Great Depression. Fortunately, the actual outcome has been better than these worst-case predictions. Much of the credit for that better-than-expected outcome should be given to the unprecedented level of policy cooperation among the advanced and emerging countries of the G20. I believe that the newfound status of the G20 as the premier forum for international economic cooperation owes much to its proven successes to date. This year the G20 will continue its efforts in coordinating policies toward recovery. But there is a more important task. This year will see the G20 take a decisive step toward longer-term policy coordination. The G20 must build the platform for longer-term economic cooperation that will ensure the sustainable and balanced growth of the world economy in the months and years ahead.
Ironically, the better-than-expected recovery of the world economy presents greater challenges for coordinating policy among the countries of the world. While the crisis was raging, the necessity of effective policy coordination was easily impressed on everyone. As the immediate crisis abates, the world needs to be on guard against the complacency that may accompany more tranquil conditions. In addition, there may be legitimate differences of views on the appropriate pace and sequencing of exit strategies and sustainable levels of public debt. Such differences can make reaching agreement more challenging. The goal should be a coordinated transition to a more normal policy stance to the greatest extent possible. The effectiveness of each country’s economic policy will be enhanced when pursued in concert with others. Thus, all the countries have a collective interest in harmonising their policies.
One task for the G20 is to follow through on the initiatives and agreements made at previous summits on reforming financial regulations, reforming the international financial institutions and implementing the Framework for Strong, Sustainable and Balanced Growth. The G20 leaders have allocated tasks to the Financial Stability Board and the International Monetary Fund in coming up with concrete recommendations on the reform of bank capital regulation, the problem of institutions that are too big to fail and burden-sharing within the financial sector. As the chair of the G20 in 2010, Korea is coordinating efforts in these directions so that the overhaul of the global financial regulatory system rests on firm conceptual foundations and can be implemented effectively.
It would be fair to say that the impetus for the reform of financial regulation has in the past come from the experience of the advanced countries. They were the geographical origin of the recent financial crisis. However, assigning blame is of little comfort when the spillover effects are global. In this respect, it is better to recognise the mutual dependence of interests in an integrated world economy and work to solve the problems together.
The same forward-looking attitude is essential when considering the framework for resolving macroeconomic imbalances. We should move beyond finger pointing and apply ourselves to the question of how best to achieve the strong, sustainable and balanced growth the G20 members agreed to at Pittsburgh.
In order to achieve that balanced and sustainable growth, more is necessary than just achieving balance in a narrowly macroeconomic sense. A broader notion of rebalancing is appropriate, including closing the gap between advanced and developing countries. Such rebalancing should be an essential component of truly balanced growth in the world economy. Such a task should be dealt with as part of the mission of the G20.
In this respect, we should not lose sight of the fact that there are many important and pressing policy and reform issues that are of paramount importance to developing countries. At the Seoul Summit on 11-12 November 2010, Korea will place development issues firmly on the agenda.
The experience of aid policy over the last few decades has shown that aid is not sufficient for development. We need to think much harder about what else is needed to achieve the trajectory for economic growth that can pull a country out of poverty.
Korea knows how effective a period of sustained economic growth can be in curing poverty. Korea is now a member of the developed countries in the Organisation for Economic Co-operation and Development, but it is also a country with first-hand experience of economic development within living memory. Korea also has experience of the devastating impact of a financial crisis and the efforts necessary to secure a robust recovery. For these reasons, Korea is well placed to share its experience and expertise with emerging and developing countries. There is a great deal of significance in the fact that Korea is the first country from outside the ranks of the G8 club of advanced countries to chair the G20.
In placing development as a core agenda item, Korea is keenly aware that many developing countries are not represented in the G20. Therefore, it will not limit its consultations to the G20 members, but will reach out to partners outside. Korea will conduct extensive outreach efforts through consultations with the United Nations and other regional bodies. I cannot emphasise enough the importance of ensuring that the fruits of strong and sustainable growth are shared evenly among all countries, including the poorest.
Let me mention briefly other important initiatives that Korea will bring to the G20 summit in November. To address the problem of reversals of international capital flows, Korea will place on the agenda the establishment of a global financial safety net that can mitigate the destructive effects of liquidity crises. Having been through the recent financial crisis, the world does not need to be reminded of the importance of having a systematic response to stem panic when the financial markets become disconnected from economic fundamentals.
The world economy has stabilised through the concerted action of governments, but private sector investment and job creation are still far from robust. For an enduring recovery, the revitalised growth of private investment must follow. Priority should be given to job creation and investment by the private sector. As part of the emphasis on the private sector, Korea will hold a business summit to coincide with the G20 summit in November.
The recent financial crisis has reminded us all how closely our national economies are integrated in the global economy. It is not only the events in our near neighbours that have an impact on our lives. The degree of integration is now such that events on the other side of the world can affect our daily life.
In this respect, the G20 is a very timely forum. By bringing together not only the leading advanced economies but also the major emerging economies, the G20 has the size and scope to tackle global issues. The November G20 summit in Seoul will be the first major test of this new global forum as it attempts to establish itself as a regular forum for international economic cooperation. I can promise you that the leaders of the G20 will put in our best efforts for the successful conclusion of the G20 summit.
Although the financial crisis brought the world together and forged an effective coordinated crisis response, it is now incumbent on us all to translate the momentum we have generated toward establishing a forum that can play a genuine global leadership role for longer term issues. Let’s not disappoint the global community.
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