Getting to the Seoul of the Matter: Moving beyond currency disputes

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(Also available in Spanish)

Many observers predict that this week’s G-20 Summit in Seoul will be remembered mainly as a dance of high diplomacy aimed at persuading members to refrain from competitive devaluation of currencies and to reign in excessive current account imbalances.

If most headlines from Seoul are about spats over currencies and whose deficit or surplus is most harmful, then leaders  will have missed the Seoul of the Matter.

Indeed, such an outcome would be a setback for developing countries and could potentially erode the legitimacy of the G-20 as an inclusive broker of financial and economic cooperation in the global economy.

What G-20 leaders should keep at the heart of their discussions is the reality that developing countries are leading the world economy out of the crisis, but that they face huge development gaps, including in such critical areas as food security, access to finance and aid for trade, and adequate roads, ports and rail systems and access to reliable and affordable electricity services.

Developing countries contributed between 35 to 40 percent to global growth in the past decade, and in 2010 are projected to contribute around 50 percent. Yet despite their economic ascendancy, many developing countries are fighting an uphill battle to achieve the Millennium Development Goals, or MDGs, by 2015, especially in the aftermath of the financial crisis. 

Click here to see a larger version of the graph.

At the G-20 Ministerial Meeting in Gyeongju held late last month, many of these development issues were indeed mentioned. Of particular note in the resulting communiqué is the following passage:

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“We look forward to the multi-year action plan of the G-20 Working Group on Development to promote inclusive and sustainable economic growth and resilience in developing countries. We are committed to meeting the Millennium Development Goals by 2015 and will reinforce our efforts to this end, including through the use of the Official Development Assistance.”

Longer term development  issues, which are being pushed as part of the  drive for a more balanced growth, should be the hallmark of the G-20 and the baton of sustainable and inclusive development should be passed by the Koreans to the French, when they take over the G-20 Presidency  in 2011.

In the recently published book Postcrisis Growth and Development: A Development Agenda for the G-20, we propose that, as the global recovery matures, the G-20 should broaden its agenda to focus on the following areas:

• Infrastructure. Provision of infrastructure is critical to growth and sustainable development over the long term in both middle- and low-income countries. To facilitate such efforts, the G-20 could develop action plans for increasing public and private financing of infrastructure, improving its efficiency and environmental sustainability, and providing increased technical and financial assistance to developing countries. In addition to integrating economic and environmental concerns, it will be essential to promote collaborative efforts to collect and share data on infrastructure coverage and quality—and on investments and impacts.
• Trade. Recognizing the importance of trade capacity and market access for economic growth, the G-20 summit in Seoul should consider measures such as a commitment to maintain aid for trade levels and provide full “duty free, quota free” access for the least developed countries. Trade is one of the most powerful mechanisms for ensuring global and sustained growth. Therefore, it is essential to resist protectionism and recommit to the Doha trade agenda.
• Agriculture and food security. Given the critical importance of agricultural productivity to economic growth, and food security to the fight against malnutrition and social unrest in developing countries, action is needed. Multilateral coordination is essential to achieve the timeliness, flexibility, capacity, and adequate scale of resources to reach these objectives.  The G-20 can and should provide additional resources to scale-up agricultural and food security assistance to eligible developing countries in line with the promises made by 14 heads of state at L’Aquila in July 2009. Priority interventions in agriculture include research and extension relevant to smallholder farmers, better management of land and water resources, investment in rural infrastructure to reduce transaction costs, and institutional improvements that allow the public and the private sectors to mobilize resources and share costs in support of country-led plans that are inclusive and evidence-based.
• Financial Inclusion. Greater access to finance will have a strong positive impact on economic growth and employment generation. An estimated 2.7 billion working age adults still lack access to basic formal financial services, such as savings or checking accounts.  The finance gap is equally critical for small and medium sized enterprises (SMEs), which are important drivers of job creation and GDP growth in developing countries. The G-20 could improve financial access and build the foundations for sustainable economic growth by convening a global partnership to advance progress toward universal access and focus on a range of financial products, beyond credit, such as payments, savings, remittances, and insurance.

 

Failure to include development issues at the forefront of the G-20 will relegate the developing countries to be an afterthought and not true partners in the globalization process.