Transcript Slide 1

Reflections on the G20
02 August 2012
Reflections on the G20
Challenges and Opportunities
Alan Hirsch, August 2012
1
Reflections on the G20
02 August 2012
What is the G20?
Decomposing a complex institution
“the premier forum for international economic cooperation”
19 countries plus the EU
The IMF, the World Bank and the United Nations
Its core agenda is:
Stabilisation and Growth in the World Economy
Financial architecture reform
Financial regulation reform
Other issues include:
Development,
Trade,
Food security and commodity prices
Corruption, Energy, Employment Disaster Management
2
Reflections on the G20
02 August 2012
Where did it come from?
1999 Finance Ministers of 19 systemically important economies and the EU met in
Berlin
It met annually
South Africa hosted the G20 Finance Ministers meeting in Kleinmond in
September 2007
In 2008 President GW Bush was persuaded to call the first G20 summit due to failing
banks and markets
It was held in Washington DC in mid-November
South Africa was represented by President Motlanthe
It was held biannually in 2009 and 2010 and since then it been an annual meeting
3
Reflections on the G20
02 August 2012
Why this composition?
Countries judged to be systemically important countries for global and regional
financial systems in particular
They are not all in the top 20 countries by GDP, but are in the top 26 or so
Some bigger economies left out include Spain, the Netherlands, Poland and Taiwan
The members are all relatively large economies, but some are very rich (e.g. USA,
Japan, Germany) and some are quite poor in GDP per capita terms (India and
Indonesia)
4
Reflections on the G20
02 August 2012
Participation
At the summit table, each country is represented by 4: the leader, finance minister,
Sherpa and DG of Finance
The Presidency is rotated from geographic sets of countries
By agreement, five guests are invited:
Spain (permanent guest); president of AU, Chair of NEPAD, President of ASEAN,
and one at the discretion of the host (Mexico invited more)
Beyond the core IOs, the WTO, the ILO, UNDP, the regional MDBs, FAO, UNCTAD and
others participate in various meetings
5
Reflections on the G20
02 August 2012
Structure
There is no secretariat: The presidency of the G20 hosts a temporary secretariat (a
“leader driven process”)
The presidency is supposed to be supported by a troika system, but this has not yet
fully matured
There are two main streams of work:
The financial stream
The Sherpa stream
In fact other streams emerge from time to time including:
employment, trade, and agriculture ministers
Also side-streams such as the B20, the L20, the Y20 and the T20
6
Reflections on the G20
02 August 2012
The core agenda is financial but
Sherpas officially lead preparations
The core agenda is:
Stabilisation and Growth in the World Economy with the Mutual Accountability
Process
Financial architecture reform—reform of the IMF and the World Bank
Financial regulation reform through the Basle reforms and the Financial Stability
Board
Other issues include:
Development
Trade
Food security and commodity prices
7
Reflections on the G20
02 August 2012
Achievements of the G20: core agenda
Reduced the depth of the global crisis through emergency measures taken in in
Washington and London
Contributed to quota and governance reform for the IFIs
Drove significant financial regulation including the creation of the Financial Stability
Board and supporting the Basle 3 reforms (plus G-SIFIs, shadow banking, derivatives
trading etc)
More recently:
Establishment of the Mutual Accountability Process (the “Action Plans” and
Policy Commitments
Building IMF resources to reduce the threat of Euro collapse
8
Reflections on the G20
02 August 2012
The IMF reserves issue
Myth #1 “It’s a gift to the IMF”
The money is lent to the IMF, not a gift. For all of this time the money will be earning interest for South Africa. The capital of the
loan will ultimately be repaid to South Africa. It’s like lending money to a very strong bank. This is not a risky loan.
Myth #2 “The money could be used more urgent purposes”
The funds used for this purpose are part of our foreign reserves. They do not require an additional budgetary allocation.
Myth #3 “The money does not help jobs in South Africa”
If the global economy falls sharply, there is a serious risk that we will lose more jobs. In the last global recession we lost 1 million
jobs. Our contribution to the IMF is intended to help stave off this kind of crisis happening again.
Myth #4 “The money is for Europe”
The money is available for any member of the IMF that is in trouble, in Europe, in Africa or anywhere else. If South Africa needs
help from the IMF, it could borrow much more than the $2 billion that we have set aside for the IMF resourcing.
Myth #5 “Only developed countries should contribute to the IMF funds”
It’s not only developed countries that have contributed to the current funding exercise—countries like China and India a have
contributed too. China has a lower per capita income than South Africa and yet they have set aside $43 billion for this resourcing
exercise. India is considerably poorer than South Africa and China, and yet they are allocating $10 billion. South Africa is allocating
$2 billion.
9
Reflections on the G20
02 August 2012
The Development Agenda
“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. In this
regard, we agree to establish a Working Group on Development and
mandate it to elaborate, consistent with the G20’s focus on measures to
promote economic growth and resilience, a development agenda and
multi-year action plans to be adopted at the Seoul Summit.”
G20 Leaders Declaration, Toronto, June 2010
10
Reflections on the G20
02 August 2012
The reasons
Prosperity must be shared to be sustained
The interconnected nature of the world economy means that crises impact
on all economies and can severely hurt the poor in LICS
As “the premier forum on international economic cooperation”, the G20
needs to compliment the work of donors in driving for MDG goals, by
focussing on the contribution of stronger growth
The world economy needs to encourage the development of new growth
poles in developing countries and LICS to support long-term global growth
Credibility and legitimacy
11
Reflections on the G20
02 August 2012
The development principles
12
The core approach is that G20 development interventions focus on economic growth,
as a compliment to the social objectives at the centre of the MDG and related
processes
1. Consistent with the G20 Framework for Strong, Sustainable and Balanced
Growth, inclusive sustainable and resilient growth is crucial to reduce poverty
(while ODA commitments are still essential for LICs)
2. There is not single formula for success, therefore we engage with developing
countries as partners
3. We must prioritise global and regional systemic issues that call for collective
action, including South-South and triangular cooperation
4. We recognise the role of the private sector in economic development and job
creation, and will support actions to improve the investment environment
5. We aim to add value and not duplicate existing efforts
6. We will focus on tangible outcomes that remove blockages to growth,
especially in LICs
Reflections on the G20
02 August 2012
The Pillars (and action plans)
Investment in infrastructure, especially in LICs and for regions
Human resource development
Enhance Trade Capacity and Access to markets
Private Investment and Job Creation
Food Security
Growth with resilience
Financial Inclusion
Domestic Resource Mobilisation
Knowledge Sharing
Inclusive green growth (non-pillar)
13
Reflections on the G20
02 August 2012
Achievements of the DWG
Infrastructure development:
The MDB Action Plan
The HLP focus on reducing risk for private investors
Incremental gains on food security e.g. AMIS
Commitments to support Domestic Resource Mobilisation
Social protection floor in broad principle
Commitment to reduce the cost of remittances
Financial inclusion instruments and indicators agreed upon (GPFI)
14
Reflections on the G20
02 August 2012
Achievements for the Non-G7
G20 replaced the even narrower G8 as a key coordination point for global
economic cooperation
Launched a development agenda with some notable achievements
Commitment to an accountability process for the development agenda
Other Developmental Achievements:
Introduction of inclusive green growth into the development agenda
Replenishment of the regional MDBs and IDA
Strong “support” for regional integration in Africa
15
Reflections on the G20
02 August 2012
Failures of the G20
IMF quota and governance reform is very slow (hence some countries’ reluctance to
bolster IMF reserves)
Anaemic leadership on Euro Crisis—Europe effectively resisted attempt by the other
members of the G20 urge more decisive actions
The Development Agenda while effective in parts is uneven and unwieldy (it is
poorly communicated and has little public impact)
Level of participation of the US, China and India in the DWG is suboptimal
Level of engagement with the G>190— “Outreach”. it is unsystematic and lacks
credibility
16
Reflections on the G20
02 August 2012
Overall view of the G20
It was very successful in 2008-09 in preventing the greater deepening of the
global financial crisis
The MAP is an important innovation though it is yet to prove itself
The G20 has helped to drive a new generation of financial regulation
Its impact on financial architecture reform started fairly well with the World
Bank but has slowed on the IMF
It has made some progress in institutional reform to support development,
but has a way to go
17
Reflections on the G20
02 August 2012
This is not a defence of the G20
It’s not ideal
Some countries have veto powers
Failures are evident
There is a risk of weak presidencies
The agenda is still not clearly delineated
But, what else have we got
A UN elected committee in its place (idealistic)
The UN itself?
The IFIs?
It is better than an G2 or a G4
Developing countries are well represented
If we try to tamper with it (now, anyway) we will open a Pandora’s box
18