[G20 SEOUL SUMMIT 2010/Comment] Why Today iS Important

The G20 Seoul Summit this week is important in that the G20, a summit that began as a crisis response meeting, can be transformed into a legitimate institution for international coordination that embraces both developed and emerging countries once it becomes successful in Seoul.

The summit slogan is “Shared Growth beyond Crisis.” The summit seeks to establish a multilateral cooperation system for sustainable and balanced growth, and to this end, the “Seoul Action Plan” will be announced. The plan will include monetary and trade policies, and other specific policy pledges of individual countries. A commitment will be made to avoiding additional protectionist measures and to re-balancing the global economy.

Unlike other G20 summits, the Seoul summit will deal with issues reflecting emerging economies’ interests such as global financial safety nets and development. The “Korea Initiative” is one of them. It intends to protect emerging economies from foreign capital inflows and outflows. Such protection is a basis for open-market countries to pursue stable prosperity without the need to pile up massive foreign-exchange reserves.

Korea, since it took the chair, has raised the need for global financial safety nets. It also helped the IMF to improve the Flexible Credit Line and to introduce the Precautionary Credit Line. The Seoul summit will discuss global cooperation against future crises and disclose future plans for the world economy.

For development not to be limited to poverty eradication, and in order to achieve sustainable economic growth, we need to help emerging countries stand on their own feet. At the summit, the multi-year action plan on development will be discussed so that it will facilitate developing countries’ economic growth. Infrastructure and another eight crucial areas can be broken down into more detailed sectors. This multi-year plan is expected to contribute to the achievement of the New Millennium Development Goals.

The Seoul summit will offer an arena to create a new framework for the global financial system by approving IMF quota and governance reforms and other agreements reached at the Gyeongju meeting, and by reaffirming the reform of restrictions on bank capital and liquidity.

The G20 leaders summit is a premier forum for global economic coordination. As the chair, Korea has had a keen interest in every issue, taking the lead in establishing agenda in which Korea can play a bridging role between developed and emerging economies. Korea has collected opinions from member countries and coordinated different voices.

In particular, finance ministers and central bank governors in Gyeongju shared the G20’s common ground on the currency issue, an uneasy factor in the global economy. They built a multi-laterally coordinated framework for re-balancing global current accounts and finally reached a historic agreement on IMF quotas and governance reform that exceeded the level of the Pittsburgh summit agreement.

The currency issue has reemerged as the U.S. Federal Reserve has embarked upon a second round of quantitative easing. Tensions are rising over a surge in capital inflows to emerging countries. It is time to consider measures to mitigate negative effects of growing capital movement and to propose policy responses.

Korea is devoted to its role as the chair country so that the agreed policies can be reaffirmed by the leaders and the coordinated framework for reducing the current account imbalances can materialized to be more than a rhetorical communique.

The Seoul summit will mark a watershed in determining the fate of the G20 as a global forum for economic cooperation that is sustainable, comprehensive, credible and efficient.

The G20 Seoul Summit cannot solve all the problems facing the world economy, but if it efficiently tackles these problems and produces substantive results, then the summit will continue to serve as the premium global economic cooperation forum with legitimacy and efficiency. To achieve this, we expect unwavering support and cooperation from all member countries.

Yoon, Jeung-hyun
Minister for Strategy and Finance, South Korea