How to manage geopolitics at G20 Summit

Maria Monica Wihardja, Jakarta | Mon, 04/04/2011 8:00 AM A | A | A |-Klipping the Jakarta Post

Four out of five countries that abstained on a UN vote authorizing military strikes to enforce a no-fly zone in Libya were the emerging powers of BRIC (Brazil, Russia, India and China), which are also members of the G20.

Other G20 member countries, including Germany and Indonesia, have also expressed their disagreement with the attacks. Meanwhile, France, who holds the presidency of the group, is the main supporter of the military strike in Libya, along with the US and the UK.

This year’s BRIC Summit that will be held in mid-April on Hainan Island, China, will mark the new membership of South Africa into the grouping. The BRIC economies will also prepare for the G20 Summit to be held later this year. BRIC, whose combined economy is expected to take over that of the US by 2018, is not only an emerging economic power but also an increasingly influential political one.

China, which seems to be determined to act as a global regime maker instead of a regime taker, is dominant among these BRIC countries. The political division between BRIC (along with Indonesia and Germany) and France, the US and the UK over Libya may overshadow this year’s G20 Summit in Cannes, France, on Nov. 3-4.

So, how can the G20 contain these political dimensions? First, the G20 Finance Ministers and Central Governors’ Meeting (FMCGM) must reach a strong consensus and commitment on economic fronts, given the constraints on political circumstances, so that the focus and agenda during the Leaders’ Summit will not go astray.

This year’s FMCGM will place a new agenda on the table: Controlling excessive commodity and energy (including oil, gas, and coal) price volatility, food security, and long-term investment in the agricultural sector in developing countries. This agenda is critical, partly due to increasingly climatic shocks which has made certain commodity prices more volatile

This meeting will also be timely, given the increasing political tensions in the Middle East, and the unprecedented 8.9-magnitude earthquake, seismic tsunami and nuclear crisis in Japan.

This new agenda also aligns with the Seoul Development Consensus on Shared Growth and Multi-action Plan, since food crises will affect the poorest first and most. Due to the urgency of this agenda, there is no space for political tension.

Second, in the midst of unstable and uneven global economic recovery, the momentum for reform should be maintained, including the reform of international financial institutions, rebalancing global imbalances and structural reforms, for strong, sustainable and balanced growth. During the FMCGM 2011, indicative guidelines to persistently assess large imbalances have been agreed on, while the IMF-facilitated Mutual Assessment Process will monitor the consistency of national policies.

On March 11, the IMF boosted its funding resources by 10-fold via the New Arrangement to Borrow, which is a set of credit arrangement between the IMF and 26 old plus 13 new members (among the new 13 participants were the BRICS with China’s credit arrangement taking the third-largest position after the US and Japan).

The IMF quota reforms increased the voting shares of dynamic emerging markets and developing countries by more than 6 percentage points (the reforms put China as the third-largest shareholder while the BRIC were among the 10 largest).

The IMF has also overhauled its lending and conditionality framework, including the new Flexible Credit Line and high access precautionary arrangement, which will help with global liquidity issues. Meanwhile, the new financial reforms have been formulated by the Financial Stability Board and the Basel Committee (Basel III), but are yet to be fully implemented.

The next financial reform agenda includes the completion of the global-systematically important financial institutions reforms. While these reforms were just put in place and are yet to be put in place, the G20 leaders must show their full commitments.

Third, the G20 must avoid political agendas or those that are close to political agendas, such as governance reforms of the UN Security Council and the inclusion of democracy and human rights issues on the agenda. It could diverge its focus to reform global economic governance and restore global economic recovery, and even pose a risk to stability of the grouping.

It must be remembered that the G20 was formed in the midst of economic crises (in 1997 for the FMCGM and in 2008 for the Leaders’ Summit), and hence it should remain committed to avoid any possible risk of another crisis. Moreover, what triggered the political crises in the Middle East amidst citizens’ dissatisfaction with the governments are persistent poverty, increasing food prices and high unemployment, i.e. social issues.

So, if the leaders’ political commitment is to restore peace and stability, tidying up the economy is a pre-condition. If the G20 fails to restore or bring momentum to the global economic recovery, it will exacerbate political instability throughout the world.

The rise of the BRIC states will serve to rebalance emerging countries and the hegemony of the G7. At the same time, it should not form a structural “caucus” among G20 economies, although “caucusing” among developing countries is encouraged to find a common thinking, but must remain flexible and open. In fact, this year Indonesia is to chair the pre-G20 Summit meeting among the G20 developing countries.

There is neither a meaningful reason nor prestige for Indonesia to become a BRICS state. It should instead strive to excel among the BRICS economies. French President Sarkozy is expected to visit Indonesia as this year's ASEAN chair.

This opportunity should be taken by Indonesia to represent ASEAN at the G20.

The writer is a researcher at the Centre for Strategic and International Studies and lecturer at the University of Indonesia.