Dr Susan Harris-Rimmer examines the challenges of the G20 when it comes to spurring on sustainable and strong development in emergent nations
The G20 is currently the “premier forum for international economic cooperation”, with political leaders from the nations that provide over 80 per cent of the world’s output meeting to face the complexity of globalised markets. It should also be recognised that more than one half of the world’s poorest people live in G20 nations. Since 2010,the G20 has had a significant development agenda.
Origins: The Seoul Development Consensus
As a development catalyst, the G20 shows promise. Debates about development have fundamentally changed from a focus on low-income countries to a focus on rising income inequality and “pockets of poverty” in middle-income countries and entrenched poverty cycles in fragile states. G20 leaders at the Seoul Summit in 2010 made development a more fundamental part of the G20’s mission: “Narrowing the development gap and reducing poverty are integral to our broader objective of achieving strong, sustainable and balanced growth and ensuring a more robust and resilient global economy for all.”
The Seoul Development Consensus for Shared Growth is conceptually rich, clearly focused on the “beyond aid” agenda, with potential for both developed and emerging economies. It is focused on six principles: growth, partnership, systemic issues,the private sector, complementarity, and outcome orientation. It also outlined nine pillars: infrastructure, private investment and job creation, human resource development, trade, financial inclusion, growth withresilience (social protection and remittances), food security, domestic resource mobilization, and knowledge sharing.
The world is facing a global reckoning point in 2015 on many crucial international development issues including climate change finance, aid effectiveness, transparency reforms and the end of the United Nations Millennium Development Goals (MDGs), which provide the current global framework and targets for development. Key parts of the G20 agenda are likely to be reflected in the post-2015 development and sustainability goals.
Narrowing Focus at St Petersburg
In 2013, there was a concerted effort to review and narrow the focus of the development work of the G20, resulting in the St Petersburg Development Outlook and the Accountability Report on G20 Commitments. The Outlook was developed by the Development Working Group (DWG) with input from low-income countries (LICs), and with some consultation with NGOs and the private sector. As a result, there is now more transparency and coherence around the development agenda of the G20, and better guidelines about what the comparative advantage such a singular summit might bring to development debates in the future. LICs will still be seeking clear action.
The Brisbane Challenge
Australia has been explicit as the host nation for the 2014 G20 meeting that focusing on development is fundamental to its growth mandate. Australia has soughtto consider the impact on developing countries of the G20 agenda as a whole by linking development actions to growth. As the Overview document notes, “[e]merging market and developing economies contribute around three quarters of global growth”. For example, Australian Prime Minister Tony Abbott has focused on the development aspects of trade, specifically: “working together on practical actions to remove obstacles to trade and enhance countries’ ability to participate in global value chains through domestic reform”.
The challenge for the Brisbane Summit is how to identify and achieve practical actions to help developing countries – particularly low-income countries – and to elevate certain issues that relate to development to the leaders’ level. Australia has prioritised three issues: infrastructure investment, strengthening tax systems and financial services.
- Creating conditions for developing countries to attract infrastructure investment
The DWG will examine potential implications for LICs from work of the former G20 Study Group on Financing for Investment (SG) and strengthen their coordination with the new Infrastructure and Investment Working Group (IIWG). The design/risk issues for investment in infrastructure for development outcomes is clearly an area of the development agenda that has the potential to be placed on the leadership track negotiations by Australia’s “infrastructure prime minster”, Mr Abbott. However, the issues of how to increase private investment are difficult to navigate, asshown by the recent G20 report, Practical Solutions and Models for Addressing Obstacles to Institutional Investment in Infrastructure in Developing Countries (2014).
The issue of public-private partnerships in this area raises significant concerns for many development commentators. A key debate for Brisbane will be how to finance and handle the risk issues for “leapfrog” green and clean infrastructure (including technology and social infrastructure) in a way that meets the development needs of states and also safeguards vulnerable communities.
2. Strengthening Tax Systems
Civil society organisations have urged the G20 to take action to address tax havens and improve tax transparency so that developing countries do not lose the revenue they need to invest in ending poverty and inequality. This is in recognition of the fact that these practices increase costs for businesses and deprive developing countries of up to $40 billion each year. Australian Finance Minister Joe Hockey has lauded the OECD Base Erosion and Profit Shifting (BEPS) agenda for its potential to increase domestic budgets in developing and developed countries.
The DWG states that, in 2014, it will work with the Global Forum on Transparency and Exchange of Information for Tax Purposes to identify and address the obstacles to automatic exchange of information for developing countries. They will continueto promote the Multilateral Convention on Mutual Administrative Assistance among developing countries. And in relation to the BEPS agenda, theDWG will assess the impacts of BEPS on low-income countries to identify how the G20 can best support LICsin addressing these challenges.
3. Improving Access to Financial Services and Reduced Remittance Transfer Costs
In 2014, the DWG will work with the Global Partnership for Financial Inclusion to explore options to strengthen financial inclusion work in developing countries and targeted actions to harness emerging mechanisms– such as electronic payments and mobile technology that can significantly improve access. And by extension, increase theiruptake by multiplying incentives, financial literacy, education and consumer protection for the poor – in particular, vulnerable groups such as women, youth and migrants.
The G20 will also support the potential of remittances as these provide income security for poor communities, lending a buffer from external shocks by identifying actions on reducing transfer costs, regulatory reform and improved competition dynamics.
Dr Susan Harris-Rimmer is the Director of Studies in the Asia Pacific College of Diplomacy at the Australian National University.
This is an extract from G20: Words into Action Brisbane 2014, to be published by Faircount Media in association with the Australian Institute of International Affairs in October 2014.