Attracting Investment after the Financial Crisis and G20 Summit in Korea
Dongsun Park, Ambassador for International Economic Cooperation, Republic of Korea
I thank Mr Emmott for his kind introduction and the IISS for inviting me to this prestigious meeting in Bahrain. I wish to thank the Bahraini government for their warm hospitality.
Excellencies, ladies and gentlemen, the recent global economic crisis, the worst since the Great Depression, has ignited a spirit of cooperation the international community has rarely seen before. The G20 Summit has played a pivotal role in helping the global community overcome the crisis.
Accordingly, leaders at the Pittsburgh Summit endorse the G20 as the premium forum for international economic cooperation. On the occasion of the 40th World Economic Forum in Davos, Switzerland, President Lee Myung-Bak of Korea delivered a special speech and presented his blueprint for the Seoul Summit, which Korea will be hosting in this coming November. It is very important that the Seoul Summit should be a success. The reason I believe that the Seoul Summit should be a success is not only because I believe Korea, a non‑G8 country, will be hosting the event, nor is it merely because it will be the first G20 Summit to be held in either; rather, it is because the Seoul Summit will be held during the post‑crisis period.
The G20 has certainly succeeded in responding effectively to the global financial crisis. However, will we be successful in the post‑crisis period? Specifically, will the G20 be successful in attracting investment after the financial crisis? I think this is a very important question, because countries may be less willing and less motivated to cooperate during the post‑crisis period. This is why I believe that the success of the Seoul Summit will be critical to the future of the world economy in general and to attracting investment in particular.
The Seoul Summit is also important because it will be held in the era of multiple leadership of the world economy. The decline of the US leadership in the 1970s prompted the global community to rely on a number of countries to facilitate international cooperation. The G7 and G8 are the products of this multiple leadership. Unfortunately however, the G8, which does not include emerging economies, did not have sufficient legitimacy or leadership to address the crisis. The G20 in contrast has legitimacy, because it represents two thirds of the global population and 85% of global GDP. Moreover, the G20 members are major contributors to international investment flows; they accounted for 78% of global inflows and 85% global outflows during the 2007‑09 period.
Now, let us now examine what is happening to foreign investment in the post‑crisis and multiple‑leadership period, and how the G20 is responding. In the second combined report on G20 trade and investment measures, the OECD, WTO and UNTAD find that most G20 members are holding to their commitments to open trade and investment in the wake of the global economic crisis. However, they say, protectionist pressures may continue to gather force in the face of the losses of jobs and high unemployment. This G20‑mandated report was issued on 8 March this year. The OECD Secretary‑General, Angel Gurria, said, ‘Openness to international investment is a precondition for a strong global economy, job creation and innovation.’
Against this background, the joint report makes the following four‑point recommendation: first, continued close attention needs to be paid to the design, application and winding‑up of measures taken in response to the crisis to assure that they are effective in responding to the crisis, while minimising anti‑competitive impacts; second, in particular, government withdrawals from emergency programmes and individual rescue operations should be well‑timed, credible and transparent, in line with commitments made by G20 leaders at the Pittsburgh Summit; third, since enhanced transparency and accountability can facilitate non‑discriminatory implementation of emergency measures, governments should continue providing public reporting and auditing of emergency response accounts, publish guidance for government and private participation in these programmes, and undertake public consultations; fourth, continuity in international monitoring by WTO, OECD and UNTAD can help in this regard, and ensure that current endeavours against investment protectionism do not remain one‑off initiatives.
I would now like to explore what we need to do in order to preserve the G20 as a relevant and effective forum for global cooperation in various areas including investment. First of all, the G20 requires a clear vision. As stated in the Pittsburgh Summit communiqué, the G20’s vision is to become the premier forum for international economic cooperation including investment.
Second, the G20 needs increased interaction among all the countries. To ensure frequent interaction, it is desirable to develop institutional arrangements for truly global cooperation. In order to achieve this, it is essential to secure the support of non-G20 countries and international organisations in particular. Bearing this in mind, the Korean government will first hold outreach meetings with African, Middle Eastern, and Central and South American countries and then seek further cooperation with the UN, APEC, OECD and other international organisations. The G20 also needs widespread support from business communities. The Korean government therefore, acknowledging the need to build such support, is planning to hold a G20 Business Summit during the Seoul meeting.
Third, the G20 needs continued US leadership. The US displayed decisive leadership during the recent global financial crisis, leading the launching of the G20 summit in Washington, DC, in November 2008. This achievement clearly demonstrates the importance of continued US leadership in this era.
Before I conclude my remarks, I would like to briefly touch upon the Seoul Summit’s agendas. As you may know, the agendas are divided into the already established agendas and the new agendas. The already established agendas include: trade and investment, the G20 framework, reforming international financial institutions, strengthening financial regulations, energy security, among others. These agendas will be developed further at the Seoul Summit. The new agendas may include the establishment of financial safety nets and development issues, among others.
For international trade and investment, the Seoul Summit will reaffirm the G20’s earlier commitment against protectionism of all kinds. Also, as President Lee stated in his special speech at the Davos Forum, the task to conclude the negotiations on the Doha Development Agenda before the end of this year remains a priority. As for the G20 framework, the Seoul Summit will provide an opportunity for policy recommendations for its further development. For the reform of international financial institutions, the Summit will provide a detailed plan for reforming the IMF to meet the agreed deadline of January 2011. The leaders will also discuss the ways and means to stabilise global energy markets. Also, for the creation of financial safety nets, the leaders will discuss, among others, currency swap agreements and the IMF’s Flexible Credit Line. The aim of course will be to mitigate risk on global, regional and bilateral levels.
For development issues, Korea, as the first recipient-turned-donor country in the OECD Development Assistance Committee, as well as a veteran of the 1997-98 Asian financial crisis, will endeavour to share its experiences and expertise with other developing countries. Korea is well placed, I think, to bridge the perspectives of the advanced, emerging and developing worlds.
In short, ladies and gentlemen, I believe that our fruitful discussions on these agenda items will help the G20 Seoul Summit and the Business Summit to mark an important milestone in the development of the G20 in the aftermath of the global economic crisis. The Seoul Summit will enhance the G20’s vision to become the premier forum for international economic cooperation and attract investment among all the countries in the world. Thank you very much for your kind attention.
Bill Emmott
Thank you very much, Ambassador Park, for your very clear and crisp remarks. I should disclose to you that, when I was Editor of The Economist, we decided to stop sending a journalist to cover the G8 Summits, because nothing ever happened there. I am torn in my mind as to whether a good sign for the G20 would be if we change that and send people, or if that would be a bad sign. In other words, a good question for our discussion is: is this an event or is it a process? Is Montek Singh Ahluwalia’s ambition that the press release should be very short and say, ‘We had an interesting discussion but we did not solve all the world’s problems,’ the right outcome? Alternatively, is this something more focused on an event that can be a decision‑making forum? I am going to hand over immediately to Kairat Kelimbetov, Chief Executive Officer of the Kazakhstan sovereign wealth fund.
