How to make best of G20 summit legacy
It was a small, stuffy, windowless space called Cherry Room D in the basement of the Hilton in the Millennium City of Gyeongju, North Gyeongsang Province.
There, the finance ministers of the United States, Europe and the BRIC countries secretly met during last month’s G20 meeting in Gyeongju, to compromise on reforming the International Monetary Fund (IMF).
As the host of G20 meetings this year, Korean officials were there as well.
“The Cherry Room meetings were a very historic moment for the IMF as well as for the world economy. It was a privilege for Korea to be there and see how things work out among the big countries,” one of them recalled. “But then, it suddenly hit me that this could be the last time Korea would be included in such a major global decision-making event.”
“What will happen when we hand over our chairmanship to France at the end of the Seoul Summit? Things may go back to before where Korea was just a bystander of global politics,” another official worries.
The officials are perhaps being too pessimistic on the future of the country, given the support and praise it is now receiving from international communities for its selection as host of the G20 summit.
In its latest issue, the Economist magazine praised the “energetic chairmanship of Korea” that it “has proved a skilled chair of this unwieldy group.” The G20 is also reportedly categorizing Korea as a “developed nation with surplus,” with the likes of Germany and Japan. What an honor.
As Korea is doing a service to the G20, the G20 too is doing a favor for Korea in return. This year’s chairmanship has given Korea a chance to taste what it is like to be in the center of the universe. Yoon Jeung-hyun, minister of strategy and finance, said last month in Washington that he and other officials were overwhelmed by the critical information on each of the G20 nation’s economic policies and situations. Korea’s G20 committee officials can request as much information as they like, and most countries have willingly obliged, they say.
In the past, when the world’s economy was ruled by the G8, the only way for Korean officials to get a hint of what was going on at the global level was to beg the Japanese to share their knowledge after G8 meetings, Yoon said. Now the relationship is reversed, he adds.
But such euphoria does not change the future reality the Korean economy is likely to face after the Seoul Summit. First of all, chances are slim that Korea will be allowed in closed meetings like the one took place in the Cherry Room, when Europe takes back the chairmanship next week.
Economic size also matters. Though it is regarded as an emerging economy, Korea is expected to have a modest growth rate of around 4.5 percent next year and beyond, according to the IMF. Combine this with the aging and to-be-shrinking population, the country’s economic output is not likely to impress anyone, anymore.
For this reason, Jim O’Neil, chairman of Goldman Sachs Asset Management, predicted last week that Korea will be lagging behind the Philippines, Nigeria and Indonesia beyond 2020 in terms of the national GDP even though it is currently one of the top 10 contributors in the world’s GDP growth.
Some Korean officials see that the day Korea will start to go down in the global economic rankings could arrive faster than we imagine. For example, Korea earned a 0.4 percentage point increase in its voting share at the IMF last weekend as a result of global rebalancing. But 1.8 percent, or 16th place, is likely to be the largest piece of the pie the country can claim from the IMF.
"For Korea’s share to get even bigger, it would need explosive growth like China’s, as well as a major demographic expansion. Neither will happen realistically," says Robert Kelly, professor at Pusan National University. "Globally speaking, Korea is just too small to have a much bigger quota, although a 0.4 point jump is 30 percent quota expansion, which is actually pretty good."
Of course, all of these gloomy projections are based on the size of the national economy, so this does not necessarily mean the life of individuals will worsen. In addition, the real benefit of the G20 would be quality, not quantity.
“This is about the confidence we now have, that Koreans can host international forums of this size and this importance and this intellectual intensity,” the official from Seoul’s G20 committee said.
Korea’s economic clout may be shadowed by larger, faster-developing nations and its GDP rankings may fall accordingly. But experience and respect will live on. In that sense, the Seoul Summit is not the beginning of the end, but the end of the beginning as Korea is on its way to become a more prosperous, respected nation.