It is unfortunate that the recent ASEAN meeting of leaders due to be held on April 11-12 was cancelled in Pattaya, Thailand due to anti-government protesters threatening the safety of attendees. It is now a good opportunity for the Rudd Government to call for a meeting to be rescheduled in an Australian city such as Darwin or Cairns embracing not only ASEAN membership but all of our neighbours, including the Pacific Islands in order to orchestrate a regional response to the present world economic crisis and to implement the outcome of the recent London G20 meeting.
The recent G20 Summit was deemed to be a great success given such a divergence of viewpoints of the G20 leaders surrounding the event. What has unexpectedly emerged out of this great fanfare of international co-operation is what I would like to coin a “London Consensus”. Major beneficiaries of the outcome will be numerous countries in the Asia-Pacific region as G20 Countries have pledged the International Monetary Fund IMF and Multilateral Development Banks MDBs with an increase in resources to the tune of US$850 billion to be used to smooth the world’s economy through the crisis and assist in alleviating poverty.
These additional resources will finance an expanded and more flexible New Arrangements to Borrow; a doubling of the concessional lending capacity for low income countries within the Debt Sustainability Framework (DSF) and an expansion of Special Drawing Rights SDRs to improve global liquidity, among other measures.
This unequivocal commitment to strengthen and improve the efficacy of international financial institutions like the IMF will undoubtedly help the Asia-Pacific region and thus the World economy along its path of recovery towards sustained economic growth and prosperity.
While these extra resources are likely to be welcomed by emerging market and developing countries in our region they will be futile if the IMF continues its cavalier attitude of dictating policy reforms in return for assistance, mainly in the form of bailout loans. This has been the predominant approach by the IMF in the past two decades through what was termed “Washington Consensus”: which was a set of financial and economic liberalisation policies that were convergent in nature, and did not take into account the fact that different countries suffered from divergent ailments, which resulted in catastrophic economic and financial consequences for countries adopting them. In particular, the Asian financial crisis in 1997 was due to overzealous financial liberalisation policies implemented by countries in our region which had their roots embedded in “Washington Consensus”.
A regional response to the outcome of the London G20 Summit should be adopted to balance and harness the immense power of multilateral institutions like the IMF so that resources can be allocated in an efficient and effective manner. It is crucial that the resources and mandate from the G20 in relation to the IMF are implemented with regards to the specific ailments of recipient countries.
Within the Asia-Pacific, this can be better achieved if a regional decentralised structure of disbursement is achieved in a transparent and accountable fashion. Besides, this is the spirit of the G20 communiqué which promotes a greater level of decentralisation and thus democratisation through representation of emerging economies in IMF and Multilateral Development Banks (MDBs) packages, than has been in the case in the past.
In the wake of the G20 summit, Kevin Rudd can reinforce Australia’s important role within our region by hosting a regional forum on the economic and financial crisis as we are mutually interdependent with neighbouring countries, with the view of working more closely together.
Kevin Rudd, as an ambassador for the Australian people and in particular of our Australian values, was instrumental behind the scenes long before the summit took place developing directions through his role on a working committee that considered proposals that came from the November G20 meeting and can help formulate a “Asia-Pacific Regional Consensus” on how to deal with the present crisis.
At the summit he pushed the robustness of the Australian economy, particularly the banking sector as well as ideals as strong as he could.
A core consideration of the G20 outcome is the “needs and jobs of hard-working families, not just in developed countries but in emerging markets”, not far removed from the spirit of Australia’s recent economic stimulus package. Not only are our intra-regional trade linkages within the Asia-Pacific of paramount importance but in terms of financial interdependence, the New Zealand banking sector is highly dependent upon the viability and capitalisation of Australian banks. One could argue that the sharp downturn in the New Zealand economy, particularly the housing sector, could easily be transmitted to increasing the riskiness of Australian banks because of the predominant ownership of New Zealand banks by Australian banks. In addition, Australia’s trade deficit is being financed by capital flows from Japan and East Asia. We all live in the same regional backyard.
We thus need to work together with countries in our region in a mutually reinforcing way to ensure the G20 reforms are implemented effectively, and we can help countries implement their own stimulus packages so that we are all moving in the same direction.
Without further ado it is now time for Kevin Rudd to call a regional summit.
First published in ABC's Unleashed on April 22, 2009.
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