Korea's Agenda as First Asian Host of the G20 Summit

HONOLULU (Nov. 8, 2010) – This week, South Korea will become the first Asian country to host a G20 summit. As world leaders continue to grapple with economic recovery, the chairman of Korea's Presidential Committee for the G20 Summit, Dr. Il SaKong, says the meeting comes at a critical juncture in creating what he calls "a new framework for global economic governance."

"Korea understands that the results of 2010 will be central to establishing the credibility and effectiveness of the G20 process," wrote economist SaKong – a former finance minister and a member of the East-West Center's international Board of Governors – in an East-West Dialogue publication earlier this year.

Building on the G20 summit in Toronto, Korea and its partners are looking ahead with proposals that address mid-and long-term issues in post-crisis economic management, SaKong wrote.

Considered the world's premier forum for international economic cooperation, the G-20 brings together the leaders from 19 countries and the European Union. According to SaKong, "The G-20 Framework will continue to guide discussions in Seoul and beyond, since rebalancing the global economy will take some time. But building on options developed in Toronto, the Seoul Summit should be in a position to propose concrete policy recommendations."

In his Dialogue article, SaKong wrote that Korea and its partners had identified several policy areas to pursue at the Seoul summit. These include:

Financial safety nets. "Global imbalances are attributable in part to incentives to generate surpluses and accumulate foreign reserves as self-insurance against the effects of volatile capital flows," SaKong wrote. "This has been an especially important motive for small, open economies. Global rebalancing thus depends on strong and reliable financial safety nets that mitigate risk on the global, regional, and bilateral levels."

Bringing development-related economic issues under the G-20 umbrella. "Global rebalancing is not confined to macroeconomic imbalances between deficit and surplus countries; imbalances also arise from gaps in income and development," SaKong wrote. "The G20, as the premier forum for international economic cooperation, is the right platform for these issues. and Korea is well placed to bridge the perspectives of the advanced and the emerging and developing worlds and to provide outreach to non-G20 countries in the G20's endeavor to enhance its legitimacy."

Reform of international financial institutions, or IFIs. "The crisis has provided painful evidence that the IFIs were not equipped to conduct proper surveillance and provide early warning of macroeconomic and financial risks," SaKong wrote, adding that International Monetary Fund reforms should be taken up at the Seoul summit. "Open, transparent, and merit-based selection of the heads and senior leaders of IFIs is also essential," he wrote.

Establishment of G20 surveillance mechanisms and early warning systems for the financial sector. To prevent another economic crisis, SaKong wrote, "progress will need to be made on ensuring appropriate regulatory regimes throughout the world."

Burden-sharing in the aftermath of financial rescues. "Fire-fighting measures and direct interventions have provided a lifeline to systemically important financial institutions in many countries," SaKong wrote. "The challenge now is to find ways to share the burden of government bailouts between the public and the resuscitated institutions, and to establish a more responsible framework for financial discipline in the future." Korea's experience during the 1997-98 Asian financial crisis, he said, is directly relevant in developing effective policies for burden sharing.

Resisting protectionism. "As a major trading nation, Korea is keenly interested in sustaining the [G20] leaders' commitment to resisting protectionism," SaKong wrote. Continued resistance to protectionism of all kinds and recommitment to the early completion of the Doha Development Agenda remain a priority."

SaKong adds that as the global economy moves from crisis to recovery and growth, it is critical to have strong participation from the private sector. "The current global recovery has been led mainly by government spending and public expenditures," he says. "However, for strong and sustainable growth, the private sector needs to play a key role."

In recognition of this, Korea has initiated a new form of Business Summit as part of the G20 Summit process. It is not a one-off event but was devised as a process. About 120 top global CEOs will participate in the Seoul G20 Business Summit, SaKong says, and they have been working on the four key themes – trade and investment, green growth, finance, and corporate social responsibility – for several months under the leadership of 14 conveners.

The group's preliminary report has already been submitted to the G20 sherpas' and finance ministers' channels. The finance ministers and central bank governors that met last month in Gyeongju, Korea welcomed the work of the Business Summit in their communiqué.

The final report will be presented to the Seoul Summit, and South Korean President Lee Myung-bak, chair of the Summit, will report about the Seoul G20 Business Summit, a format that is highly likely to continue in future G20 meetings.

According to SaKong, Korea welcomes its role as the G20 summit's first Asian host in what he calls a "transition year" for the multilateral institution, "full of large immediate and intermediate-term challenges."

"The G20 has already accomplished a great deal by bringing governments together and launching concerted policy responses at the depth of the crisis last year," he wrote. "It can fairly take credit for helping to avert a 'depression-size' recession. The G20 represents a more promising and legitimate architecture for cooperation than has existed for many years, and Korea will work vigorously with its partners to help build it into an effective, durable institution."

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