By Hwang Doo-hyong
WASHINGTON, Sept. 26 (Yonhap) -- The Pittsburgh G-20 set a milestone in the shift of power from the world's richest countries to China and other emerging economies, as reflected by its eclipse of the Group of Eight as the primary forum for global economic cooperation.
South Korea is being given a major role in this new order as the world's 13th largest economy and the host of the fifth summit for the Group of 20 industrialized nations in November next year, as leaders discuss how to move into the post-financial crisis era.
By many measures, South Korea is recovering faster from the global recession than any other nation, while the U.S. and other traditional economic powers struggle to emerge from last year's Wall Street meltdown.
Lee Myung-bak, South Korean president, on Friday forecast a 4-percent growth for his country's economy next year. The economy expanded 2.6 percent in the second quarter from the first three months of this year, the fastest growth in more than five years, and most experts are forecasting an upwardly revised 1 percent contraction for all of this year.
Korea's stock value and foreign exchange reserves have also recovered to pre-recession levels, with the reserves hitting a 13-month high in August of US$245 billion, helped by a burgeoning trade surplus. Last week, the Seoul bourse passed the 1,700 mark, boosted by foreign investors.
South Korea has been a vocal advocate of institutionalizing the G-20, created last fall as economies around the world tumbled. The forum's members agreed on Friday to make the summit an annual event from 2011.
President Lee even established a task force to bid to host the gathering last November when he was invited to the inaugural summit in Washington by then U.S. President George W. Bush.
Sakong Il, a senior adviser to Lee who is in charge of the G-20 task force, said recently that he met with Lawrence Summers, U.S. President Barack Obama's chief economic adviser, three times to explain the reasons both for the institutionalization and South Korea's bid for hosting the next summit.
"I might be able to write several books on the stories behind the G-20," he said, talking about the numerous trips he and other South Korean officials had made to promote the G-20.
President Lee also pushed aggressively for the G-20 project while meeting with Obama, Australian Prime Minister Kevin Rudd and other global leaders.
Obama and Rudd were among the strongest supporters of South Korea's hosting of the G-20 and its annualization, although Japan, which unsuccessfully lobbied to host the second or third summit this year, and a few advanced economies disliked the idea of the G-20 replacing the G-8.
Marcus Noland, a senior researcher at the Peterson Institute for International Economics, lauded South Korean officials.
"Diplomatically, Korea's hosting of the G-20 next year is a big deal," he said. "Korean policymakers are considered highly capable and the rest of the world is looking for good things to come out of the summit that Korea will host."
Greg Scarlatoiu, director of public affairs and business issues at the Washington-based Korea Economic Institute (KEI), said, "It is also very significant that Japan, China and Australia all supported the hosting of the next G-20 summit in Korea, and that this is the first time an Asian country will host the meeting."
The G-20 summit is an extension of the G20 finance ministers' meeting established in 1999 to tackle the Asian financial crisis. Bush convened the meeting amid calls for reform of the Bretton Woods institutions launched after the end of World War II and buttressed by the International Monetary Fund and the World Bank, saying, "They were based on an economic order of 1944."
The IMF has often come under criticism as being a tool of U.S. economic dominance.
The U.S., which holds nearly 16 percent of IMF equities, has a virtual veto power in the global lending agency, along with Japan, Germany and several other advanced economies supporting the U.S. as dominant players.
The 20 leaders Friday also agreed to transfer at least five percent of the IMF equities and three percent of the World Bank quota to developing nations by early 2011 to better represent the economic strength of China and other developing nations.
China's foreign exchange reserves have surpassed $2 trillion and the reserves of South Korea and India exceed $200 billion and $300 billion, respectively. A large portion of those reserves are U.S. treasury bonds -- a factor that could ultimately destabilize the dollar and the credibility of the U.S., which holds huge trade and budget deficits.
China's output is expected to surpass Japan's by the end of this year to become the world's second biggest economy after the U.S -- and is forecast to outperform the U.S. within decades.
Many experts believe South Korea's hosting of the fifth G-20 summit in November next year will officially terminate decades of dominance by the rich G-8 nations. The fourth Group of 20 summit will be held in Canada in June on the sidelines of the G-8 forum.
Canadian Prime Minister Stephen Harper said Friday that the Canada G-8 will focus on security issues.
"The growth of India and China is a wonderful achievement of the recent quarter century, but it is not a zero sum game in which their gains are offset by others' losses," said Barry Bosworth, a senior research fellow at the Brookings Institute. "I think Asia has emerged as a greater influence on the global economy and I expect to see the development of a strong regional economy that will provide a more diversified global economy, balancing the United States and Asia."
The November 2010 summit will provide South Korea with ample opportunities.
"Korea's hosting the G-20 meeting in 2010 will further enhance Korea's status as a rising middle power, and will contribute to improving confidence in Korea's ability to undergo swift economic recovery and also enhancing Korea's rating as an investment destination," KEI's Scarlatoiu said, noting South Korea's success story "from rags to riches over only a few decades, a unique position to understand the concerns of developing and developed countries alike," and its swift recovery from the 1997 Asian financial crisis.
"In Canada next year, the world will bid farewell to G-8 and salute the advent of G-20 as the new world economic forum in the post-crisis, second decade of the 21st century," he said. "This provides Korea an opportunity to seek a regional and global leadership role in the 21st century."
Depending on the political situation on the peninsula, Korea could hold even more economic potential in the future.
A Goldman Sachs report recently said that a unified Korea, with a population of over 70 million, would surpass most other G-8 advanced economies by 2050 in terms of gross domestic product -- helped by South Korea's capital and technology and North Korea's natural resources and competitive labor force.
"We project that a united Korea could overtake France, Germany and possibly Japan in 30-40 years in terms of GDP in USD terms, should the growth potential of North Korea be realized," the report said.
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