Emerging economies gain unprecedented clout on global stage

November 16th, 2008 - 1:05 pm ICT by IANS  

Washington, Nov 16 (DPA) The world’s emerging economic powers came out of an historic financial summit Saturday emboldened by their new role in fixing the global economy.The Washington summit marked the first-ever meeting of leaders from the Group of 20 (G20) nations, a bloc that brings together the world’s leading industrial nations and some of the top developing economies including China, India and Brazil.

The gathering’s final declaration made clear that the wider bloc will be central to reforming the global financial system over the coming years and made no mention of a role for the smaller G7 or G8 - a sign that emerging economies will keep their seat at the policy table for the foreseeable future.

Many leaders spoke of the arrival of new world order, all the more momentous because it happened at a gathering in the United States. Outgoing US President George W. Bush, criticised for failing to reach out to the international community for much of his administration, played host to the emergency summit.

“This is a historic day. I leave with the certainty that the political geography of the world has been given a new dimension,” Brazilian President Luiz Inacio Lula da Silva said after the meeting.

World leaders Saturday agreed on the principles for major reforms of how financial institutions are regulated. The G20’s finance ministers are instructed to hammer out the specifics in the coming months, followed by another summit in April.

Many developing countries have some reason to gloat. The financial crisis that has threatened the global economy was not of their making. Instead, it was the result of financial firms in wealthy nations taking unnecessary risks in the US mortgage market.

The International Monetary Fund has forecast a recession in most advanced economies in 2009. The 15 countries in the eurozone this week officially slipped into recession, and the US is likely to follow suit.

That means powerhouse emerging economies in Asia, the Middle East and Latin America are likely to be the key pillars of economic growth next year. China’s economy, though slowing, is still forecast to grow at an 8.5 percent clip next year. India will grow between 7-7.5 percent.

“Today’s summit was significant because of the people present. A new world economic order is developing that is more dynamic and more inclusive than any we have yet seen,” said Dominique Strauss-Kahn, managing director of the International Monetary Fund.

But while the G20 represents a broader array of interests than in past crises, aid groups lamented that it still failed to capture the views of the world’s poorest nations.

The economic summit produced an action plan, but the agreement only includes 20 countries. Many of the poorest and most vulnerable countries were not included in this summit, yet they may suffer the most from the economic downturn,” said Gawain Kripke of Oxfam International.

The World Bank has warned that hundreds of millions could be plunged back into poverty as developing nations, especially in Africa, face a triple threat to their economies from the credit crisis as well as higher food and energy costs.

“The poorest developing countries must not be left out in the cold,” said World Bank President Robert Zoellick. “We will not solve this crisis, or put in place sustainable long-term solutions by accepting a two-tier world.”

The G20 leaders pledged to keep their aid commitments to world’s poor and resolved not to open up new barriers to trade in response to the economic downturn.

But one of the keys for the developing world - representation in global financial institutions - will take much longer to solve. The G20 resolved to give emerging countries a greater voice in the IMF, World Bank and Financial Stability Forum, which are largely controlled by the US and Europe.

The pace of those reforms will answer whether this new world order is here to stay.

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