Korea advocates financial safety nets

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Korea advocates financial safety nets

The 100-day countdown to the Group of 20 Summit - the largest diplomatic event in Korea’s history - started yesterday. The meeting will bring together leaders of the world’s largest economies and global organizations to discuss key issues related to efforts to facilitate the global economic recovery.

The government recently announced the slogan for the summit, which is scheduled to take place on Nov. 11 and 12. The slogan, “Shared Growth Beyond Crisis,” reflects the G-20 framework for strong, sustainable and balanced growth, the summit preparation committee said.

The summit in Seoul is the fifth of its kind. The first summit took place in Washington, D.C., in 2008 in the aftermath of the global financial meltdown.

At the most recent summit in Toronto in June, participants failed to resolve several issues before the meeting ended, leaving a long list of tasks for participants of the Seoul summit to address when they meet in November.

As the first non-G-8 country to host the summit, Korea is hoping to serve as a bridge between developed and developing countries. In that role, the country will advance a series of agenda items under the umbrella “Korea Initiative.”

The first task for the Korea Initiative is the creation of global financial safety nets. Seoul is currently exploring the creation of a global stability mechanism that would focus national, regional and international efforts on mitigating capital flow volatility and financial fragility and preventing crisis contagion.

“Without reliable financial safety nets, many emerging and developing countries have had to rely on self-insurance, prompting them to accumulate large foreign reserves,” the committee pointed out.

Given that countries with large reserves fared better than those with smaller reserves in the recent financial crisis, Korea is concerned that the trend is likely to continue. Therefore, it believes the establishment of credible global financial safety nets will free governments from the pressure of continuing to add to their reserves.

During his visit to Korea last month, the chief of the International Monetary Fund said the fund is working closely with Asia to also develop a global financial safety net.

IMF Managing Director Dominique Strauss-Kahn said the organization’s proposals will be presented at the Seoul summit.

With the assistance of the IMF, Seoul is also seeking to integrate regional initiatives to prevent the sudden evaporation of capital and to ensure bank liquidity.

Another key task of the Korea Initiative deals with development issues.

Just 60 years ago, in the aftermath of the Korean War, Korea was a developing country and international aid recipient. It has since transformed itself into a developed country, and the government has pledged to share its development experiences with those assembled at the summit.

“Korea and South Africa will co-chair high-level G-20 development working group meetings to facilitate the formulation of multi-year action plans,” the committee said. “The outcome of these meetings will first be reported to the Sherpas, then to the G-20 leaders for their consideration and endorsement.”

The first working-group meeting to develop the agenda took place in Seoul on July 19 and 20, and progress was made, according to Sakong Il, the chairman of the preparation committee.

“One proposal involves creation of a public-private partnership,” he said in an interview yesterday with Yonhap News Agency to mark the 100-day countdown to the Seoul summit.

By Ser Myo-ja [myoja@joongang.co.kr]
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