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G20 expands its role
The leaders of the Group of 20 developed and emerging economies, including Indonesia, defied skeptics who were afraid that now the economic recession is virtually over and the global financial threat seems manageable, the Pittsburgh summit would end with weak compromises
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he leaders of the Group of 20 developed and emerging economies, including Indonesia, defied skeptics who were afraid that now the economic recession is virtually over and the global financial threat seems manageable, the Pittsburgh summit would end with weak compromises.
The G20 Summit, the third since the global financial crisis broke out last September, instead decided to expand the role of the forum, turning it into a global policy dialogue and coordinating body, thereby relegating the role of the Group of Eight industrialized nations, where developing nations are treated only as guests, not full participants.
The 100-point communiqué, issued at the end of the Pittsburgh summit Friday, stipulates concrete
and specific details on the programs of action the 20 developed and emerging economies will implement to achieve strong, sustainable and balanced global economic growth.
The communiqué has two annexes elaborating the core values of sustainable economic activity and the principles of the framework for strong, sustainable and balanced global economic growth.
This agreement is quite important, especially for such developing nations as Indonesia, which had long complained that their influence on global economic policy lagged behind their economic role.
In light of this commitment, the leaders reiterated their pledge to transfer at least 5 percent of the voting shares in the International Monetary Fund and 3 percent in the World Bank from overrepresented countries to emerging economies.
They also renewed strong pledges to enforce much tighter regulations on financial institutions and complex financial products, including higher bank capital requirements, by the end of 2010.
The communiqué sets out broad principles on financial regulatory reform and the need to tackle the “too big to fail” problem by creating special insolvency regimes for financial institutions.
Certainly the G20 leaders also re-emphasized their commitments to reviving talks to reach a new global trade agreement by the end of 2010 and address climate change issues.
In today’s highly fragile global economy, the G20 must prove itself a forum for decisive action to maintain the momentum, because any disparity between the hype and the reality is bound to upset financial markets and shake investor and consumer confidence.
But the biggest question for such a grouping with such diverse member countries, with widely differing stages of development, is whether the commitments will remain weak pledges, because there is no a clear, strongly binding enforcement mechanism to penalize members who stick to their old bad habits.
The G20 leaders seem to be aware of such a risk, as can be seen in their commitment to allowing more outside scrutiny over the economic strategies of member countries. This means each country agrees to submit its policies to a peer review from other governments as well as to monitoring by the IMF.
All in all, expecting much more than the 100-point communiqué of commitments from the summit is to misunderstand the nature of politics and the scale of the challenges.
The summiteers have their own historical and cultural reference points, since many of the differences defy the obvious boundaries between East and West, between old and rising powers.
The summit cannot wipe out such differences. The objective then is to align, as far as possible, national and mutual interests.
