What Asia should expect from G20
The Economic Times, April 1, 2009, Page 13
Jaspal Bindra
ASIA has come of age. In a few days, the region’s rising powers — China, India, Korea and Indonesia — will sit at the global high table to decide on ways to reshape the world’s financial and economic order.
As leaders from the Group of 20 nations converge in London this week, expectations are that the outcome will include concrete steps to revive growth, a boost in funding for the International Monetary Fund (IMF), and an understanding on the new financial architecture to restore trust in the financial system.
Asian policy makers will seek two other critical assurances — one, that developed countries will keep their markets open; and two that global capital flows will remain unchecked. Consensus is difficult. But the stakes have never been higher.
Amid frenetic attempts to tackle the biggest economic crisis since the Great Depression, one can forget that progressive dismantling of international trade and investment barriers had fuelled the biggest economic boom the world has seen. More than 200 million jobs were created worldwide between 2000 and 2007, according to the Institute of International Finance, and millions in the developing world were lifted out of poverty. Yet, as the crisis continues, leading economies could encourage manufacturers to keep production onshore, and banks and insurance companies to keep money within their borders.
Any such protectionism comes at a dark time. While Asia remains fundamentally robust, the turmoil has caused consumers and lenders in developed countries to tighten their purse strings. In addition, the International Institute of Finance estimates that net private capital flows to emerging markets could drop to $165 billion this year from over $925 billion in 2007. Ensuring trade and capital keep flowing must top the agenda of the G20, whose member countries account for two-thirds of the world’s population and over 80% of its output.
The London meeting, the second G20 summit meeting, could see the emerging Asian powerhouses assert more leverage due to the relative strength of their position. Though weakened, China, India and Indonesia are still expected to grow 6.8%, 5% and 4%, respectively.
The emerging powers have already notched up some gains. The G20 finance ministers, meeting in London in March, agreed to expand the Financial Stability Forum — a body which will set new standards for global financial institutions — to include developing country members. These countries will also join global forums that will set new international accounting and risk-regulatory frameworks.
Greater participation of the rising powers in such key decision-making bodies should help resolve potential conflicts and go a long way in helping to rebalance the world economic order.
Ironically, it is the financial upheaval which has brought the systemic importance of the emerging markets to the forefront. It is now clear that the imbalances between the high-saving nations in the East and overspending economies of the West led to the asset bubbles in the US and Europe.
Big savers, particularly in Asia, must spend more to boost domestic economies. China has made a decisive move on this front with its $600-billion stimulus plan. Others in the region have also taken unprecedented steps.
Emerging economies must step up trade among themselves. That is already happening. For some countries in the region, China has replaced the US and Europe as the biggest export market, a trend that will accelerate as western consumers curb spending.
Asian members of G20 are also looking to international lenders such as the IMF and the World Bank to revive investments into the region’s developing economies.
The author is chief executive, Asia, for Standard Chartered Bank
The Economic Times, April 1, 2009, Page 13
Jaspal Bindra
ASIA has come of age. In a few days, the region’s rising powers — China, India, Korea and Indonesia — will sit at the global high table to decide on ways to reshape the world’s financial and economic order.
As leaders from the Group of 20 nations converge in London this week, expectations are that the outcome will include concrete steps to revive growth, a boost in funding for the International Monetary Fund (IMF), and an understanding on the new financial architecture to restore trust in the financial system.
Asian policy makers will seek two other critical assurances — one, that developed countries will keep their markets open; and two that global capital flows will remain unchecked. Consensus is difficult. But the stakes have never been higher.
Amid frenetic attempts to tackle the biggest economic crisis since the Great Depression, one can forget that progressive dismantling of international trade and investment barriers had fuelled the biggest economic boom the world has seen. More than 200 million jobs were created worldwide between 2000 and 2007, according to the Institute of International Finance, and millions in the developing world were lifted out of poverty. Yet, as the crisis continues, leading economies could encourage manufacturers to keep production onshore, and banks and insurance companies to keep money within their borders.
Any such protectionism comes at a dark time. While Asia remains fundamentally robust, the turmoil has caused consumers and lenders in developed countries to tighten their purse strings. In addition, the International Institute of Finance estimates that net private capital flows to emerging markets could drop to $165 billion this year from over $925 billion in 2007. Ensuring trade and capital keep flowing must top the agenda of the G20, whose member countries account for two-thirds of the world’s population and over 80% of its output.
The London meeting, the second G20 summit meeting, could see the emerging Asian powerhouses assert more leverage due to the relative strength of their position. Though weakened, China, India and Indonesia are still expected to grow 6.8%, 5% and 4%, respectively.
The emerging powers have already notched up some gains. The G20 finance ministers, meeting in London in March, agreed to expand the Financial Stability Forum — a body which will set new standards for global financial institutions — to include developing country members. These countries will also join global forums that will set new international accounting and risk-regulatory frameworks.
Greater participation of the rising powers in such key decision-making bodies should help resolve potential conflicts and go a long way in helping to rebalance the world economic order.
Ironically, it is the financial upheaval which has brought the systemic importance of the emerging markets to the forefront. It is now clear that the imbalances between the high-saving nations in the East and overspending economies of the West led to the asset bubbles in the US and Europe.
Big savers, particularly in Asia, must spend more to boost domestic economies. China has made a decisive move on this front with its $600-billion stimulus plan. Others in the region have also taken unprecedented steps.
Emerging economies must step up trade among themselves. That is already happening. For some countries in the region, China has replaced the US and Europe as the biggest export market, a trend that will accelerate as western consumers curb spending.
Asian members of G20 are also looking to international lenders such as the IMF and the World Bank to revive investments into the region’s developing economies.
The author is chief executive, Asia, for Standard Chartered Bank
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