T

he global economic growth of today faces tough challenges, which mostly come from the widening disparities among countries, as well as the weakening of international organizations, according to a visiting senior economist.

Danny Leipziger, managing director of the Growth Dialogue, which is a global network of economists and policymakers promoting economic growth, said the current challenges are closely associated with economic power shifts and ageing demographics, aside from business disparities and problems in international organizations.

'€œThe 20th century institutions are poorly equipped for the 21st century challenges and suffer legitimacy, authority and effectiveness deficits,'€ said Leipziger, former vice president of the World Bank'€™s Poverty Reduction and Economic Management (PREM) network.

He cited the World Trade Organization (WTO) as an example of how a global organization fails to deal with today'€™s more complicated trade issues.

Leipziger made the statement during the '€œNew Challenges to Economic Growth'€ public lecture at the Foreign Ministry on Tuesday.

Today, emerging market economies worldwide have suffered downturns, which have resulted in the need to readjust projections of the real gross domestic product (GDP).

Meanwhile, ambassador Ibrahim Yusuf, chairman of the executive board of the Indonesian Council on World Affairs (ICWA), who chaired the public lecture, warned of the significant global shift of power.

'€œIndonesia should act with caution,'€ said Ibrahim, a former Indonesian ambassador to the United Arab Emirates and Thailand and permanent representative to the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP).

According to China'€™s National Bureau of Statistics, China'€™s GDP grew by 7.7 percent in 2013, faster than the government'€™s official target.

However, Leipziger reiterated China had severe challenges of its own including under-consumption, corruption and lower returns on investments.

Similarly, Russia has wasted huge resources on poor investments, South Africa is mired in unemployment, Japan and Korea face demographic challenges and India has large gaps in public service.

Leipziger discussed in depth the importance of investment in the global environment, which will ease national challenges.

'€œIt'€™s about being inclusive and sharing in the growth,'€ said Jim Brumby, the World Bank'€™s sector manager and lead economist for the Indonesian economics program.

The lecture brought embassy delegates from many countries, including China, to engage and discuss the shifts necessary for economic growth. '€œA concerted institutional investment in the global economic system is a key to regaining momentum,'€ he said.

Leipziger reminded the audience that US growth is of importance even for China. '€œThe US still has some strengths in terms of creativity ['€¦] but it also has some weaknesses; [the question] is whether or not the positives will dominate. Will we be able to shift resources from the military to things like infrastructure, which is too low? So the US has a lot it could do to improve its situation. It has a number of advances that it needs to capitalize on.

'€œI think it'€™s in the Chinese interest for the US economy to do well. I don'€™t see it in this '€˜winner takes all'€™ environment. I think it'€™s quite the contrary.

'€œIf the US isn'€™t the dominant economy, it must still lead,'€ Leipziger said.

The Growth Dialogue is a network that works to extend economic growth as far as possible by connecting high-level policymakers and thought leaders with those who the decisions can benefit.

The writer is an intern at The Jakarta Post.