S. Korea needs to host next G20 summit to prop up economic recovery: scholar

By Hwang Doo-hyong
WASHINGTON, Sept. 17 (Yonhap) -- South Korea should be allowed to host next
year's Group of 20 economic summit to lend momentum to the global economy,
recovering more rapidly than expected from the worst recession in decades, a U.S.
scholar said Thursday.
"I think it would be a devastating blow to the credibility of the G-8 and G-20 if
Korea, the 2010 chair, was not allowed to host a summit," Stephen Schrage, who
holds the Scholl chair in international business at the Center for Strategic and
International Studies, told a forum at the CSIS here.
Leaders of major advanced and emerging economies will get together in Pittsburgh
next week for another G20 summit, the third since the recession broke out last
September, to discuss ways to help revive the global economy. They are also to
decide on whether to hold another summit next year.
South Korea, the host of the G20 finance ministers' meeting next year, wants to
hold the summit so the 20 countries, which account for more than 85 percent of
the global output, could continue to play an important role in the shaping of the
post-crisis economy. This comes as criticism mounts about the effectiveness of G8
summit of advanced economies alone.
Britain, which hosted the G20 summit in London in April, is this year's
chaircountry for the G20 finance ministerial meeting.
"I think there has to be a Korea summit, and I believe there will be one, but it
shows these archaic, fossilized, Cold War, 1940s-era structures struggling to
adapt to the new world," Schrage said. "After we said we'd broaden this to the
G-20, if the outcome is that the old boys' club of the G-8 are the only ones that
can host summits -- especially when you look at Korea that has had such a
dramatic story, going from a developing nation that was very impoverished to an
emerging power, responding to open trade after its own financial crisis and
really leading a lot of these efforts on green technology and other things."
The first G20 summit was convened in November amid criticism that the G8 summit
as well as the International Monetary Fund and World Bank failed to head off the
recession and even nurtured the atmosphere for the economic crisis without proper
reform measures within themselves.
"And will the IMF and World Bank reforms they can call for really change?" the
scholar said. "And we're seeing a lot of tensions with world leaders, like
Russian President (Dmitry) Medvedev and others, talking out about how there's
been a lot of talk but no real action. And we may need to look at new dynamic
structures or new ways forward if these can't evolve."
The G20 is said to have played a greater role in helping the global recovery
through coordinated measures against protectionism and implementing expansionary
fiscal and eased monetary policy.
Sakong Il, a special adviser to South Korean President Lee Myung-bak and head of
the presidential preparatory committee for the G20 summit in Pittsburgh, last
week did not preclude the possibility of the G20 eventually replacing the G8.
"The G8 summit is no longer the appropriate forum to produce solutions for the
imbalance in the global economy, the growing trade and budget deficit of the
U.S., and the burgeoning trade surplus in some emerging economies," Sakong said.
Sakong, former South Korean finance minister, also said that China and Japan have
expressed support for South Korea's hosting of the G20 summit, adding, "There is
a consensus that South Korea will host the next G20 summit, and the timing will
probably be in April next year."
South Korea is among the countries recovering fastest, with its economy having
expanded 2.3 percent in the second quarter from the first three months of this
year, the fastest growth in over five years.
The South Korean government and many experts forecast about 1 percent contraction
for all of this year -- a sharp rise from the more than 4 percent contraction
projected earlier this year.
The country's stock value and foreign exchange reserves have also recovered to
pre-recession levels. The reserves hit a 13-month high in August of US$245
billion, helped by burgeoning trade surplus and the Seoul bourse's reaching the
1,600 point level, boosted by foreign investors.
The Paris-based Organization for Economic Cooperation and Development recently
forecast an annualized U.S. quarter-on-quarter growth of 1.6 percent and 2.4
percent each for the third and fourth quarters, up from the zero and 0.5 percent
predictions made earlier this year.
The International Monetary Fund has forecast that the global economy will shrink
by 1.4 percent this year, and predicted next year will witness a growth of 2.5
percent, up from an earlier projection of 1.9 percent growth.
"So we've weathered some of the storm but we've got a long way to go, and
coordination is going to be important," Schrage said. "But we don't even know
what's going to happen next. Like I mentioned, 2010 is a couple months away and
we don't know whether there is going to be a G-20 summit."
The scholar called for the upcoming summit to focus on "new capital requirements
for financial institutions, which I think the White House has prioritized."
The G20 leaders are also expected to discuss the so-called exit strategies for
phasing out of expansionary budgets and excessively low interest rates, financial
oversight measures, including a limit on bonuses to top employees of financial
institutions to reduce the kind of excessive risk-taking investments that
triggered the financial crisis on Wall Street.
Also to be discussed are ways to reform the IMF and the World Bank to increase
the quota of developing countries to reflect the growing presence of China, India
and other emerging economies.
A possible replacement of the U.S. dollar as the key currency in international
trade will not likely be dealt with, though China and some other countries have
attributed the spread of the U.S.-initiated financial crisis abroad to excessive
dependence on the greenback.
hdh@yna.co.kr
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