With these achievements, the leaders in Pittsburgh designated the G20, which produces more than 85 per cent of global GDP and is home to two-thirds of global population, as the premier forum for international economic cooperation. Indeed, this was an historic event in terms of reshaping global governance to reflect the changed economic reality.

At the previous four summits, the G20 leaders put emphasis primarily on combating the crisis. At the same time, their concern was mostly on the priorities of the advanced countries where the crisis originated. The G20 so far has been effective as a crisis-management  committee. As the sense of crisis recedes, however, the unity among the G20 countries may also dissipate. In this regard, the outcome of the Seoul Summit will be highly critical for the G20’s future.

The agenda of the Seoul Summit can be dissected into two parts: follow-ups and additional items.

The follow-up agenda includes four issue areas. First, it is the macroeconomic  coordination which involves the Framework for Strong, Sustainable and Balanced Growth. After the first stage of the Mutual Assessment Process (MAP) in Toronto, the second stage is under way in Seoul to produce specific policy options for individual countries.

The second follow-up area is about International Monetary Fund (IMF) reform. The G20 leaders in Pittsburgh agreed on a 5 per cent shift in the IMF quota from over-represented countries to under-represented dynamic emerging economies as an effort to make the IMF more legitimate and credible. For the credibility of the G20 and the IMF, it is critically important for the G20 to complete the quota reform as promised by the Seoul Summit.

Recently the Basel Committee on Banking Supervision agreed on a new capital framework for banks which will be submitted to the leaders in Seoul for endorsement. I am quite sure that the G20 leaders in Seoul will endorse the new framework. The new framework distinguishes itself from both Basel I and II by including a macro-prudential regulatory aspect. So we might consider naming it as the ‘Seoul capital framework’ or ‘Seoul capital accord’.

Regarding trade issues, the G20 leaders in Seoul should be more forthcoming in resuscitating the Doha Development Agenda (DDA). This is absolutely essential for the G20’s credibility as the premier forum for international economic cooperation. Korea, the first non-G7 country to host and chair the G20 Summit, proposed to include new agenda items specifically to address the needs and priorities of non-G20 countries, most of which are developing and emerging economies. It fits well within the framework for Strong, Sustainable and Balanced Growth. The leaders approved the inclusion of economic development for low-income countries and the strengthening of the global financial safety net on the Seoul agenda.

Alleviating poverty and narrowing the development gap are essential to achieving sustainable global growth. The aggregate demand gap left by the advanced world can also be filled with additional global demand from the emerging and developing world.

Against this backdrop, Korea envisions a growth-oriented development strategy. The G20’s newly established Development Working Group is expected to submit multi-year action plans to the leaders in Seoul. A strengthened global financial safety net will help to reduce the incentives for emerging and developing countries, particularly small open economies, to generate current account surpluses to accumulate foreign reserves as self-insurance against volatile global capital flows. So it will help global rebalancing as well.

The IMF, in cooperation with Korea, recently announced the first stage of strengthening  the global financial safety net through enhancing the Flexible Credit Line (FCL) and introducing the Precautionary Credit Line (PCL). The second stage involves the establishment of the Global Stabilisation Mechanism (GSM), which is a framework for proactive provision of financing to stem contagion during a systemic crisis. The second stage also involves linking it up to regional cooperative arrangements, such as the Chiang Mai Initiative (CMI), to supplement and complement the IMF’s global financial safety net.

The discussion is likely to continue into the next year’s summit in France.

The current global recovery, although fragile, has been primarily driven by government spending and public expenditures. For strong and sustainable global growth, however, it is crucial to provide enabling conditions for full participation by the private sector. In light of this, Korea is organising a Business Summit for top global business leaders to discuss the global recovery and beyond. Four to five top CEOs from each of the G20 countries and some non-G20 countries have been invited, totalling around 100 or so business leaders.

Their discussions will centre on four main topics: trade and investment, finance, green growth and corporate social responsibility. The Business Summit being organised is an ongoing process, not a one-off event. The process is already under way to prepare their report, to be presented to the Sherpas’ and Finance Ministers’ processes to be reflected in the leaders’ communiqué. We would like to see it become an additional pillar of the entire G20 Summit process in the future. In this regard, we are in close consultations with France, next year’s chair of the G20.

The Seoul G20 Summit is a litmus test for the G20’s future as the premier forum for international economic cooperation. Once the G20 in Seoul proves itself by keeping up to its earlier commitments, the G20 can then formally consider its further institutionalisation.

Il Sakong is Chairman of the Presidential Committee for the G20 Summit for the Republic of Korea and has previously served as Minister for Finance, as Special Economic Adviser to the President, and Ambassador for International Economy and Trade.

This is an article from the most recent edition of the East Asia Forum Quarterly, ‘Asia and the G20.’