CAIRO: To date, the G20 has helped the world avoid a “30s’ style” great depression, South Korean Ambassador to Egypt, Jong-kon Yoon, said, however adding that “recovery has been modest.”
Yoon affirmed that recovery has been “different from country to country,” mentioning that emerging and developing countries faired well overall.
Yoon sat down with Daily News Egypt for an exclusive interview to discuss the Group of 20 summit held in Seoul on Nov. 11-12, and its relevance to Egypt as a promising emerging economy.
The G20, Yoon explained, has until now focused on global current account imbalances, reform of international financial institutions, achieving development goals through economic growth and creating an international financial safety net to eschew future international financial crises.
To help sustain recovery going forward, Yoon highlighted that South Korea, in the run up to the summit, had proposed new ideas to be included in the global financial safety net: an IMF flexible credit line, and a precautionary credit line, which, he says, would be the two pillars “to capture” capital flights, preventing further global imbalances.
A second proposal was to establish better inter-regional cooperation by linking the ASEAN-led Chiang-Mai multilateralization (CMIM) initiative – whose goal, the ambassador explained, is to protect the Asian region from external shocks through financial and macroeconomic cooperation, with the Arab Monetary Fund as well as a regional Latin American financial safety net through the pooling of each institution’s resources.
This measure is imperative to emerging economies’ hearts, Yoon said, because they are highly concerned about capital flights from the US to their markets, which could create a price bubble and potentially spur another major international financial crisis.
However, he lamented that due to time constraints, detailed quantification targets for addressing global current account imbalances would unlikely be possible during this particular summit.
Yoon believes that establishing detailed targets will have to wait for the next summit, held in France in six months’ time.
For the moment, ambassador Yoon said, “If we are able to get an agreement on basic principles for guidelines – excluding quantifications, then the summit will be a success.”
Despite his hopes for the summit, recent reports have consistently mentioned that the G20 talks were overshadowed by the currency disagreement between China and the United States over the value each countries’ currency, which was further exacerbated recently when the US Federal Reserve announced $600 billion in cash to be introduced into the American economy, a plan termed ‘quantitative easing,’ thus casting aside the main topics on the G20 agenda.
Emerging markets fear that this measure will flood their markets with excess liquidity, as investors will seek higher interest rates outside of the US, where they are projected to fall further due to the $600 billion injection.
Asked whether these concerns were justified, the ambassador dismissed them, stating that media reports are often exaggerated, and that when the G20 leaders gather, the agenda issues are addressed, rather than being steered off course by secondary disputes between countries.
Asked about his opinion about the significance of South Korea having been chosen to hold the G20 Summit, ambassador Yoon underscored that his country was the “first emerging market and Asian country to hold the summit,” which demonstrated the “gradual change in the status of emerging and developing economies” on the global scene.
Yoon explained how South Korea had been an “exemplary” aid recipient 60 years ago, and now it ranks number 13 for GDP and 9 in trade worldwide.
He also noted his country’s ability to turn around its economy following both the 1997 and 2008 financial crises.
After the 1997 Asian financial crisis, South Korea underwent serious restructuring and reform, poising it for “great success;” In 2011, after the dust begins to settle from the 2008 financial crisis, his country will post a 6 percent growth rate and foreign exchange totaling $300 billion, putting it within the top five category worldwide, the ambassador explained.
In his view, South Korea’s economic success story is edifying for Egypt, because, as South Korea is a country that imports 100 percent of its gas and oil, much of its agricultural commodities and mineral resources, it is obliged to focus strictly on developing its human capital, something Egypt is steeped in, he pointed out.
Indeed, Egypt has 80 million inhabitants with oil and gas reserves to boot, making it even better positioned to replicate South Korea’s economic prowess.
He indicated that the Egyptian government is well aware of the human and natural resource potential to bolster the economy, and is striving to tap both.
To this end, both Egypt and South Korea are active in a bilateral cooperation program, inviting skilled workers to each country for technical training programs.
Asked whether he was optimistic about the success of the summit, he stated that the financial safety net, development of multi-year action plans, are trade issues are becoming more detailed, all of which demonstrate signs of progress.
Yet, the main issue remains the global imbalances in current accounts, which will take time to address.
Yoon also underscored that this summit represents a “test of legitimacy” for the G20, and that it “must produce concrete results.”
Nevertheless, he was quick to point out the importance of the G20, as the participating countries constitute 85 percent of world GDP, around 66 percent of the world population, and 80 percent of global foreign exchange.
While those numbers are indeed impressive, another 170 countries would like to participate in the global economic discussions that take place under the umbrella of the G20, the ambassador said.
Yet it should be noted that through the G20 discussions, the World Bank instituted reforms this past April, shifting an added 3.13 percent of voting power to developing and emerging countries, bringing the total to 47.19 percent.
The International Monetary Fund is also considering transferring two board member seats, or 6 percent voting power, from two over-represented regions, likely European countries, to under-represented members.
While these changes reflect a major shift in the global financial balance of power, the ambassador acknowledged that the percentages do not accurately reflect the economic weight such countries represent within the international economy.
He nonetheless indicated that such changes are a “gradual process,” and that clearly countries with positions of power are recalcitrant to give up their influence.
Ambassador Yoon concluded: “At least it has opened the door to change, and is a tangible result.”
