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The G20 and Asean

By David Swartzentruber
AseanAffairs  28 June 2010

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In Toronto, the world’s largest economies cam together this past weekend and will meet again in November in Seoul.

Indonesia, Asean’s largest economy, is the only Asean country included in the 20-member group. The other countries are: Argentina, Australia, Brazil, Canada, China, European Union, France, Germany, India, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom and the United States.

The group was started in 1999 to bring together systemically important industrialized and developing economies to discuss key issues in the global economy. This G-20 summit singled out debt reduction after many of the wealthiest countries, after enacting spending programs to counter the worldwide financial crisis. This concern was most pronounced in European

Nations that believe deficits are the biggest threat to economic stability.

Here is a list of countries with the largest external debt: United States … US$13.5 trillion (94.3% of 2009 GDP), United Kingdom … $9.1 trillion (422.9%), Germany … $5.2 trillion (185.3%), France … $5 trillion (238%), Italy … $2.3 trillion (132.3%), Japan … $2.1 trillion (51.5%), Australia … $920 billion (111.6%), Canada … $833.8 billion (64.9%),Russia … $369.2 billion (17.4%) and China … $347.1 billion (3.9%).

Halving the debt by 2013 was placed as a goal, rather than a requirement, to give some countries, notably Japan, some “wiggle” room.

How will this impact Asean and its economies?

The most notable conclusion to this G20 summit was that one size does not fit all and while Europe and the United States economies appear to be still in the doldrums, other countries, especially in Asia, are pushing vigorously ahead.

It is reasonable to conclude that as wealthy nations retrench after massive debt aimed at economic stimulus, faster-growing economies in Asia and elsewhere are being looked at to provide growth.

But the economies of Asean countries are highly dependent on exports to wealthier countries. If the economies in wealthy countries lag, this will have a negative effect on smaller, export-oriented countries, some of them in Asean.

India and China are exceptions as they can fall back on the unmet consumer demands of their large domestic markets.

This is why the exchange rate of the Chinese yuan has become such a contentious issue with the United States, as employment continues to lag there.

The concerns of many economists coming at the end of the G20 summit is that the emphasis placed on budget deficits will diminish the economic rebound. U.S. President Obama voiced these concerns during the G20 summit.

If this is the case, that budget deficits stifle economic recovery, then the effect on Asean economies will most likely be negative.

It will be quite interesting to see developments at the next G20 summit, when it moves to Asia in Seoul in November.


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