The G20 economies faced demands yesterday to do more for the developing world as their finance chiefs gathered to work on an agenda aimed at fending off future crises.
The talks in Busan, attended by US Treasury Secretary Timothy Geithner and other top finance ministers, are focusing on setting an agenda for a summit in Toronto later this month — and years beyond.
The leaders face myriad demands as they search for consensus on how to reshape the global financial system and avert a “double dip” back into recession due to the European sovereign debt crisis.
“The G20 needs the rest of the developing world for reasons of self-interest,” World Bank Managing Director Ngozi Okonjo-Iweala said at a conference yesterday on the sidelines of the G20 meeting.
She noted that growth in developing countries is forecast to average 6 percent this year — twice the rate for rich countries.
“G20 countries need new sources of demand. The developing world has the potential, and it has the people,” she said. “The G20 must recognize this and give development the central place it deserves in its agenda.”
Managing the European debt fiasco and resulting market turmoil has recently overshadowed longer term efforts to reform banking regulation and set up financial safety nets for countries emerging from crisis.
“This crisis presents a new threat to the global economy. Just when we thought we have turned the corner, there are new clouds on the horizon,” Okonjo-Iweala said.
US Treasury Secretary Timothy Geithner on Thursday praised the steps Europe is taking to deal with the crisis, but said the challenge was in the execution.
“They have laid out a very strong program and they are starting to put that in place and it is starting to get a little more traction,” Geithner said in an interview with CNBC while en route to Busan.
The G20, founded in 1999, evolved into a global crisis management forum with the 2008 collapse of US investment bank Lehman Brothers and the resulting turmoil in financial markets. It now needs to set an agenda that will promote sustainable long-term global growth, Asian Development Bank chief economist Lee Jong-wha said.
He and other speakers said the big economies can generate jobs by channeling investment into filling the gaping need for better infrastructure in developing countries, while also ensuring they rebalance growth at home to help make capital more affordable for crucial productive uses.
Justin Lin Yifu (林毅夫), a World Bank chief economist and vice president, said private companies, wary of risks, need support to pursue opportunities in Africa and elsewhere in the developing world.
Recovering funds stolen through corruption, providing aid for trade and greater market access for poor countries to sell their goods and services in richer countries are other key priorities, the experts said.
South Korea, which emerged from poverty to become a technology and industrial powerhouse, assumed the rotating G20 chair this year and will convene a summit in November in its capital, Seoul. It favors including development in the G20 agenda.
The finance ministers, who last met in Washington in April, are looking to shore up confidence in financial markets and in a nearly US$1 trillion bailout plan for ailing European economies, hoping to stave off any wider damage to the world economic recovery.