Lee MB dubs G20 summit as major power shift from advanced economies

By Hwang Doo-hyong

WASHINGTON, Nov. 15 (Yonhap) -- South Korean President Lee Myung-bak Saturday categorized the just-concluded G20 economic summit as a major power shift from a handful advanced countries to a number of countries representing a variety of economic developments.

"This summit should be seen as a historic one that can happen only once in a
century as emerging economies were taking part in the process to discuss major
global issues, that were monopolized by G7 advanced economies," Lee told South
Korean reporters accompanying him.
Lee expected that the summit of the world's 20 biggest economies will develop
into a major forum to discuss energy, global warming and other major global
issues as well as the global financial crisis.
"From now on, such global issues should be discussed both by developed and
emerging economies, and that's my presumption," he said.
The president noted South Korea will be the chaircountry of the summit in 2010,
after Britain next year.
Lee forecast that the summit will be able to have "epochal reforms" of the
International Monetary Fund and other international financial institutions for
oversight of financial institutions and hedge funds by the end of April when the
leaders are set to get together again, although the summit meeting failed to
agree to establish a new global financial institution.
Lee, French President Nicolas Sarkozy and several other heads of state have
called for sweeping reform of the IMF and the establishment of a new global
financial system to keep pace with recent changes in the global economy.
"The ongoing financial crisis shows the current financial system has not kept up
with changes being made in the finance industry," Lee said in a recent interview.
"Under the new financial transaction environment, it is time for us either to
greatly reform the existing regime or to make a completely new one."
Sarkozy and several other leaders also called for less dependence on the U.S.
dollar in international trade, blaming the global financial crisis on what they
called excessive reliance on the greenback.
In a keynote speech to the summit forum, Lee, however, said, "I think this short
session should prioritize stabilization of the global financial market and
minimizing its adverse impact on economic fundamentals, although today's session
was supposed to deal with reform of the international financial systems to
prevent recurrence of the financial crisis."
Lee told reporters that the IMF has not been properly trusted by many developing
countries, stressing the need for a major change for the lending agency.
He was talking about the bitter memory of a decade ago when South Korea underwent
austerity measures mandated by the IMF in return for a bailout package.
"The IMF has not been seen positively by emerging and developing economies," he
said, referring to the lending agency's higher interest rates, tight budget
spending and other tight regulatory measures for beneficiary countries.
He, however, noted the recent change in the IMF's recently introduced rescue
funds without any conditions attached.
"However, it was very desirable for the IMF to make short-liquidity facility to
provide foreign currency liquidity," he said. "It is inevitable for the IMF to
increase its funding resources to distribute benefits to the countries which were
not represented at this summit."
Lee said the IMF managing director asked him to apply for the facility as no
country has applied for it since it was introduced last month.
South Korea has said it will not go to the IMF citing its ample foreign exchange
reserves.
In the speech, Lee cautioned against protectionism and suggested currency swap
lines between advanced and emerging economies and more funds to developing
countries to help alleviate a credit crunch in the global financial markets.
"What we are concerned about is spread of protectionism due to the current
difficult economic situation," he said, fearing any spread of protectionism will
make the global economy more susceptible to recession and harm weak emerging
economies.
In this context, Lee called for global leaders to agree on a "Stand-Still"
declaration in which they would no longer create new barriers to trade and
investment.
The president also proposed concerted efforts to conclude the Doha Round
multilateral trade negotiations and economic stimulus measures with increased
spending in a counter-cyclical measure.
"South Korea has already come up with fiscal spending worth 3.7 percent of gross
domestic product and tax cuts," he said, dismissing concerns of a budget deficit.
Lee also urged the world's leading economies to establish currency swap lines to
help provide foreign currency liquidity to emerging economies.
South Korea currently has a US$30 billion currency swap arrangement with the
U.S., a currency line of $13 billion with Japan and a $4 billion currency deal
with China.
Finance ministers of South Korea, China and Japan met here Friday to agree on the
need to explore a possible increase in the size of bilateral currency swap
arrangements between their respective countries.
They also agreed that working with other ASEAN+3 members on expediting the Chiang
Mai Initiative Multilateralisation (CMIM) was a top priority.
South Korea, China and Japan have agreed with 10 members of the Association of
Southeast Asian Nations to set up an $80 billion fund to help stabilize regional
financial markets, although the three Northeast Asian economic powers have yet to
agree on how to divide the equities.