Global economic and financial crisis in 2007 was a ramification of imbalanced international economic and financial architectural system especially in terms of unaccountable financial regulation. Began with subprime mortgage crisis in US, poor financial regulation and high financial interdependency among countries, especially in financial derivative products, caused the crisis to spread in developing countries. This domino effect also dragged real sector and finally led to worldwide economic downturn.
Albeit similar economic crisis once hit Asian region in 1997, this time's crisis had larger repercussion that required a more pervasive handling and cooperation from countries over the world. The global economic and financial crisis has hindered development process in the Least Developed Countries and also set drawback in achieving the MDGs.
However, after government's implementation of various policies to save the economy, the global economy started to show signs of recovery in the beginning of 2010. Even though, this recovery was predicted to be slow, considering poor financial system still persisted, and recovery process would run uneven in each region. In addition, the tendency in developed countries is that financial recovery often did not run parallel with recovery of real sector, indicated by increase in the unemployment number.
To deal with this crisis, the US Government had an initiative to hold the G-20 Summit for leader/ head of G-20 member states in Washington DC on 15 November 2008. The global economic crisis raised awareness among financial authorities and central banks in various countries that closer integration of financial system required an intensive permanent discussion forum in order to achieve global financial stability through international financial crisis prevention and resolution. Members of the G-20 consist of Canada, France, Germany, Italy, Japan, UK, US, Argentina, Australia, Brazil, China, India, Indonesia, Mexico, South Korea, Russia, Saudi Arabia, South Africa, and Turkey.
Indonesia's role in each G-20 Summit has always been to promote the interests of developing countries and to maintain an inclusive and sustainable global economic system (such as: proposing to establish the global expenditure support fund, preventing any discussion on exit strategy of fiscal stimulus package which could harm the developing countries, and encouraging the achievement of a consensus while acting as a bridge builder). Further details on these roles are as follow:
- Indonesia prioritizes constructive approach in addressing issues under the G-20.
- Spirit of the G-20 to foster equality, trust building and orientation to solution has shaped the G-20 forum to be a democratic forum in which all of its members have the opportunity of speaking on equal footing with any country. Indonesia needs to safeguard this basic characteristic from any dominating pressure or stringent attitude/ position from the G-20 member states.
- Shifts in Indonesia's position from being a low income country to a middle income country and from a beneficiary country to a beneficiary and concurrently a donor country require an update on Indonesia's profile in the outside world. Therefore, Indonesia's active role in the G-20 becomes salient since the G-20 serves as foreign political instrument for Indonesia towards becoming a developed country in 2025.
- Considering that Indonesia has experienced quite many success stories of development program, participating in the G-20 could serve as an instrument to propose these experiences as Indonesia's global contribution to the G-20 discussion forum. In the Pittsburg Summit, for instance, Indonesia set a success example of transforming direct fuel subsidy into direct subsidy (BLT program). Indonesia could also work together with the World Bank and the OECD to circulate such success stories.
Asian region in general showed better endurance throughout the global economic crisis. Some of the developing countries in the region were even able to maintain a moderate level of economic growth which in the end stimulated the global economic growth. Therefore, Indonesia and other countries in the Asia Pacific region should continue to promote this vital regional role in the recovery process and global economic growth.
The most recent G-20 Summit was held in Seoul, South Korea on 11-12 November 2010. The Leaders successfully agreed upon the G-20 Seoul Summit Leaders' Declaration and Seoul Summit Document which contained the Seoul Action Plan as well as the 3 (three) annexes (Seoul Development Consensus for Shared Growth; Multi-Year Action Plan on Development; Anti-Corruption Action Plan). As a supporting document, also attached were the Policy Commitments by G-20 Members as a part of accomplishment of the G-20 Framework for Strong, Sustainable and Balanced Growth.
The next G-20 Summit will be held on 3-4 November 2011 in Cannes, France to address the following main issues:
- International monetary reform;
- Reducing excessive volatility;
- Improving global governance (institutions and standards).
Meanwhile, priorities based on South Korean chairmanship in 2010 are as follow:
- Framework for Strong, Sustainable and Balanced Growth;
- Financial regulatory reform;
- Development. Special attention was given to the issues of food security, infrastructure, private sector development, financial inclusion and inclusive growth.