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
