Sunday, 23 March 2014


G 20 or a club of 20 leading economy of the world consisted of 19 countries of great economy of the world plus Uni Europe. Officially G-20 was called The Group of Twenty Finance Ministers and Central Bank Governors of Group of Twenty Finance Ministers and Central Bank Governors.
This group was formed in 1999 as a forum which systematically mobilized economic powers of advanced and developed countries to dissect important issues of world’s economy. The premiere meeting of G-20 was held in Berlin on December 15-16 1999 with the Foreign Ministries of Germany and Canada acting as host.

The background of this forum was Financial Crisis of 1998 and opinion emerging in G-7 Forum  on ineffective meetings unless other economic powers were involved where decisions made had greater impact and where other voices were probably not heard. This group constituted nearly 90% of the world’s total GDP, 80% of the total world’s population.

As economic forum, G-20 hade been a forum for consultation and collaboration in matters related to international monetary system. There had been regular meetings to analyze, review, and enhance communications between developed and developing countries on policies not solcable by one single country.

G-20 had no permanent staff. The chairman’s position was rotated among members and led by a Troika consisting of 3 members Chairman of current year, Chairman of previous year and Chairman of the next year. This system was adopted to ensure continuity of activities and management. Chairman of current year ran a temporary secretariat which worked only during his office.

Most of the members were countries with big Balanced Spending Capability [PPP] with slight modification. Holland, Poland and Spain were Big 20 represented by Uni Europe. Iran and Taiwan was not included although the position was above South Africa, who was included.

In the development so far, group of leading countries of the world united in G 20 had failed to keep their promise to foster collaboration amidst differences and contradictions among members today. The assumption was based on the fact that some Financial Ministers did not attend C 20 Meeting in Sydney last week. This indicated that the G-20 glory was fading out.

As analyzed by the Guardian on February 21, 2014 the idea to set up G-20 came up in 2008. The first meeting of G-20 members countries, developed or developing countries alike in Washington DC on November 2008 only took place just a few minutes before news bursted out that Lehman Brothers had collapsed.

The idea was to prevent phase II of Great Depression to happen. The second meeting in London, 5 months later was held after Ministries and Governors of Central Banks of G-20 member countries agreed to jack up global demand.

Message of the forum was clear. i.e. how G-20 nations could unite to prevent economic disaster; but is seemed that the collaboration could no longer rely on support of the Western states. China, India, Russia, Brazil and other strong nations who were the emerging nations, must be involved.

The Guardian reported that the G-20 Forum only emerged to serve instant need. The G-20 forum looked bigger than the G-7 but not big enough to make the forum uncontrollable.

Moreover, the Forum could help to find solution for global issues, under demand in the world market, unemployment, imbalance of creditors as indicated by deficit that befell on the USA. The forum was also expected to control ineffective multinational financing and state’s loss caused by tax avoidance.

Unfortunately, still according to the Guardian, the G-20 Forum seemed to have failed to keep promises. The meeting seemed to be mere forum of coffee break chatting and taking pictures together. The collective will power to overcome unfriendly economic climate of 2008-2009 was now lost. G-20’s fading glory was indicated by some Finance Ministers who decided not to come.

Some of those who were present probably expected to see a compromistic way in regard to remark by Governor of India’s Central Bank Raghuram Rajan who criticized America’s the Fed. Rajan repeatedly said that Quantitative Easing run by the Fed had negative impact on economy of developing countries including India.

Looking back at the G-20 forum held in London in April 2009, today the forum seemed to be irrelevant. Less support from political leaders in that forum made to forum flavorless with no effort to overcome unemployment, global warming and Financial Crisis Part Two. The challenge for G-20 Forum was how to realize its initial objectives;

Recently there was pressures on the leaders of G-20. Finance Ministers of economically strong nations of the world demanded support by Central Banks and infra-structure of the private sector to strengthen growth.

G-20 leaders had ended their Summit Meting last week in Sydney. In a joints statement they planned to strengthen world’s economic growth by more than USD 2 trillion for over many years ahead based on strategy set up by IMF.

G-20 leaders met to find ways to navigate the nation’s economy when crisis rocked the earth and easy money policy ran by the Fed made things worse. At the same time, developing countries would strive to control volatile foreign capital inflow while the Euro zone were trying to prevent deflation.

Under G-20’s latest plan, developed nations would continue easy money policy. On the other hand developing countries would restructure their economy and tame inflation. Besides, Government of many countries were expected to channel out financing for the private sector into new infra-structure projects.

IMF estimated global economic growth would come to 3.7% this year and 3.9% in 2015. According to IMF, the latest plan would increase 0.5 point percent for the world’s economic growth for the next 4 years. Details of this Plan would be agreed upon before G-20 summit next November. However, to learn a lesson from G-20 past experience, investors must keep their high expectations. Previous G-20 steps to enhance growth had flopped. The failure was clearly reflected political reality at home in Indonesia and the world.

The G-20 group were playing key role to make IMF double their emergency lending. G-20 encouraged countries of the world to stimulate growth amidst world’s economic slowdown. However the emergency condition of financial crisis had subsided and the spirit of collaboration was diminishing as well. In 2009, G-20 agreed on “the process of joint evaluation” which was expected to recue countries of the world from global recession by controlling implementation of target and scheduling economic growth in each country.

Somehow, the plan could not meet IMF growth target as some Government resigned due to internal conflict. The Fed’s Governor Janet Yellen met financial executives of G-20 members. Yellen was expected to listen to the grievances of some countries that the Fed’s action to axe stimulus could hold back economic growth.

Developing countries like Brazil and India would persuade the Fed to reconsider acceleration of Tappering off plan. Ever since the Fed announced their plan to axe stimulus per January last, investors were starting to leave the market of developing countries amidst grief over resistance of developing countries to withstand imbalanced growth.

However countries of the emerging market still feared possible next crisis that might come in consequence of US policy. In this is case Indonesia. In this case Indonesia and South Africa were stepping up pressures on US monetary policy and demanded for clear and sound explanation on the emerging markets need to be trapped in the Fed’s actions. Indonesia, South Africa, Turkey and India were having capital outflow and monetary disadvantages caused by the Fed playing on-and-off game Tappering Off.

From Indonesia’s viewpoint such was important to be discussed at the G-20 Meeting where finance ministers and central bank governors demanded certainty of US policy. Indonesia felt certain that global economic development was moving toward new equilibrium. As Europe and US economy turned better China’s economy slowed down. And yet in the past many circles were expecting China would grow to be the world’s economic locomotive, but such expectation was still far from reality.

So Indonesia had to play greater role in G-20 Forum by introducing economic management strategy as reference for member countries. Problems of developing nations could be set forth by Indonesia spokesperson G-20 meetings of the future.

Developed countries who would be investors in the emerging markets stated that today there were adopting low interest regime. Indonesia must respond this global policy appropriately so the process of global balancing would not disadvantage Indonesia.

South Africa’s view which stated that meetings must be aimed at fostering global collaboration through G-20 could serve as reference. Economic turbulence at the moneymarket recently demonstrated how the financial market as one of global economic linkages could affect stability among developing countries.

This spirit of collaboration was in accordance with the philosophy of IMF in their latest release which underscored the need for implementation of the Spirit of Cooperation for all countries in the world. (SS)

Business New - March 7, 2014      

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