The third round of the Group of 20 (G20) Summit, which was widely expected to seek a new direction for the global economy, ended here on Friday with encouraging outcomes, but key challenges remain.

MULTIPLE ASPECTS OF THE RESULT

Before the summit, some commentators observed it had a big agenda but it would get small results, due to the different goals of its participants.

The summit will be "language without teeth," Edward Luce, Washington Bureau Chief of the Financial Times told Xinhua. "The longer the communique is, the less action it will be."

True, G20 Pittsburgh Leaders' Statement addressing comprehensive global economic and financial issues totals 23 pages.

Still, it contains a number of results that seem not that small.

The No. 1 result worth mentioning is the confirmation of the legitimacy of the G20's status as the top coordinating mechanism of the world's economic issues.

"We designated the G20 to be the premier forum for our international economic cooperation," the statement said.

The move means that the G20 supplants the G7 and G8, institutions dominated by rich Western economies that will now be forums for discussing geopolitical issues, experts say.

"The old system of international economic cooperation is over. The new system, as of today, has begun," declared British Prime Minister Gordon Brown. He said the G20, which included not only developed nations but fast-growing emerging economies such as China, Brazil and India, would become the "premier economic organization for dealing with economic management around the world."

"The G20 has consolidated itself as the institutional forum to take care of economic issues. I think it's an extremely important decision that was made today," Brazilian President Luiz Inacio Lula da Silva told a press briefing.

Some consensus was also reached on economic and financial issues, which were the main topics of the summit.

On the world economic recovery, G20 countries, which account for 90 percent of the world's output, vowed to keep emergency economic support in place until a recovery was secured. Leaders agreed to avoid premature exit strategies that might kill the fragile recovery.

On financial regulatory issues, the G20 agreed to strengthen the regulation of areas where financial industry excesses triggered the credit crisis two years ago. Tighter rules on how much capital banks must have to absorb losses should be ready by the end of 2010 and will be phased in during the following two years.

Notably, a breakthrough has been made for international financial institutions' governance reform, with developing countries' rising strength being recognized. The G20 committed to a shift of at least five percent in the International Monetary Fund (IMF) quota share to dynamic emerging market and developing countries.

Dominique Strauss-Kahn, IMF managing director, welcomed the G20's decision.

"I am very encouraged by the outcome of the G20 summit, including the new role given to the IMF," Strauss-Kahn said at a briefing. "The commitment by the leaders of the G20 to a shift in representation is a groundbreaking step to improve the IMF's legitimacy and effectiveness."

The quota-based governance of the IMF had been criticized for mismatching the world economy's reality, in which emerging economies, such as the BRICs (China, India, Brazil and Russia) have grown at a much more rapid pace than the advanced economies.

On rebalancing the world economy, G20 leaders agreed "to reform the global architecture to meet the needs of the 21st century."

"After this crisis, critical players need to be at the table and fully vested in our institutions to allow us to cooperate to lay the foundation for strong, sustainable and balanced growth," the statement said.

That rebalancing act involves the debt-laden United States saving more and export powerhouse China consuming more.

"It is a positive progress for the summit since it is a new issue for the G20 statement," Hong Pingfan, chief of global economic monitoring for the Department of Economic and Social Affairs at the United Nations, told Xinhua.

On world trade issues, the G20 set a timetable to secure a deal next year in long-running world trade talks. "We will fight protectionism. We are committed to bringing the Doha Round to a successful conclusion in 2010," the statement said.

The leaders also vowed to support the poorer, especially African countries.

CHALLENGES REMAIN

Like at most multilateral meetings, not everyone came away entirely happy.

Firstly, no one is certain whether the world economy will recover on a firm footing.

According to Barclays outlook, markets still underestimate the strength of recovery. The Dow Jones Average Index fell on Friday.

In the short term, the demand-driven recovery, to some extent, has appeared. But in the long run, the structural shift of the world economy is still uncertain.

Second, there are still differences over financial regulation reform.

The summit's statement tackled the contentious issue of bankers' pay schemes. U.S. Treasury Secretary Geithner said G20 countries had reached a consensus on the "basic outline" of a proposal to limit bankers' compensation by the end of this year.

However, the statement did not mention direct caps on pay, as proposed by some European leaders. French officials said the summit had not reached a final accord on executive pay.

Still, the financial regulatory standards are various among different jurisdictions. Geithner said the G20 would involve setting separate standards in each of the countries and would be overseen by the Financial Stability Board, an international group of central bankers, finance ministers and regulators that has representation from all the G20 nations.

But, Morris Goldstein, a former IMF official who's affiliated with the Washington think tank Peterson Institute of International Economics, suggested that a bulked-up G20 organization could make it even more difficult to impose mandatory requirements that all member nations must follow.

And the G20 little addressed the widely watched protectionism issue, which had been widely considered as a more threatening factor to the global economic recovery.

"Obviously, it is lack of a detailed action plan," said Hong Pingfan. He worried that more cases of protectionism would probably arise anyway.

Despite the pros and cons, the meeting speaks for itself.

"The economy is global. We find ourselves in the same boat. So the system we create now will certainly be universal," Russian President Dmitry Medvedev said during the meeting.

Of course, it is not easy to get 20 people with different experiences, ideas and visions around one table to reach consensus on extremely complex issues, Tim Adams, former under secretary of the Treasury Department told Xinhua in an interview.

"What really matters is that they do sit at one table," Adams said.

Actions speak louder than words. It is little doubt that the G20 Pittsburgh summit represented the beginning of a new era, yet there is a long way to go.

The world is expectant.

(Xinhua News Agency September 26, 2009)