Speech
of the Union Finance Minister at the Internationalconference on
‘Governance and Development: Views From G20 Countries’ Organised by
Icrier
Following
is the text of the speech of the Union Finance Minister at ICRIER event
entitled ‘Governance and Development: Views from G20 Countries’ here
today.
Chairperson Dr Isher Judge Ahluwalia,
Dear Colleagues,
Ladies and Gentlemen,
It gives me great pleasure to join you at this international conference
on ‘Governance and Development: Views from G20 Countries.’ I understand
that the conference has been organized around 6 broad thematic issues -
global governance, food security, energy sustainability, long-term
investment finance, trade and protectionism, and growth and employment.
In each of these areas, the world is facing several challenges and these
are the subject of ongoing discussions in the G20. I congratulate
ICRIER and its partners for organizing this conference and bringing
together eminent academicians and policymakers from G20 countries, to
discuss and deliberate on these critical issues.
As you are aware, it was the 2008 global financial crisis that brought
the G20 into the centre of global economic governance. G20 owes
pre-eminence to its quick, effective and coordinated response to the
financial crisis resulting in the designation of the G20 as the premier
forum for international economic cooperation among its members. In fact
the G20 Leaders’ process is one of the most significant developments in
the history of global economic cooperation as it has led to a
significant geopolitical shift regarding global economic governance. It
has a different balance of power where both advanced and emerging
countries come together as equal partners allowing for a more inclusive
deliberation and more effective response to today’s complex global
challenges and opportunities.
Given its track record, G20 is now moving from a temporary crisis
bailout mechanism towards a permanent organisation of global economic
governance. Considering the range of complex issues confronting the
world economy, and the persistent weak recovery, it is important for all
countries that G20 continues to be successful. However, there are
inherent challenges facing the G20 going forward. I would like to
highlight a few of them today and I would expect policymakers attending
this conference to deliberate further during this conference on some of
these issues.
Firstly, the agenda setting of G20 has had an advanced country
perspective so far. This is highlighted by the emphasis given on
financial regulation and on transparency whether it be in taxation or in
the Extractive Industry Transparency Initiative (EITI). As the crisis
originated in the advanced countries, it is natural that higher capital
requirements and asset quality have been stressed in the Basel norms for
banking sector. Emerging markets have accepted these norms in a spirit
of multilateralism. However in the context of a weak global recovery, we
should be careful that the procyclical bias should not be a stumbling
block in developing countries. Since growth in emerging markets is
crucial to the strength of the global economy, it is critical that G20
find ways to develop strong links of coordination and cooperation and
take up issues of importance to emerging economies as otherwise, G20 may
evolve as a loose forum instead of a powerful steering wheel of global
governance.
Secondly, there is a big challenge relating to mission creep. Many
experts have expressed concern that the G20 agenda has been expanding
too widely, covering far too many unrelated issues. The outreach process
of subsequent Chairs of the G20 is partly to blame as this widening of
agenda is encouraged mostly by outside players including civil
societies, academics and international agencies who hope that high level
discussion and endorsement by leaders will advance their various
causes. I am not saying that the outreach programme is a bad idea; I am
simply saying that interaction with various players should not result in
the G20 losing its focus. I do believe that to be able to play a
meaningful role in the global governance, the G20 agenda should be
sharper, and focused only on those issues on which it can make a
distinctive contribution particularly on economic and financial issues,
as premier forum for international economic cooperation.
Thirdly, reforms of international financial institutions of global
governance have been among the top priorities of G20. Indeed the G20 has
initiated a considerable governance reforms in the pillars of global
governance namely IMF, World Bank, and Financial Stability Board (FSB),
as well as in many of the Standard Setting bodies (SSBs). However,
progress thus far has been extremely limited and far from satisfactory,
and some members have not been able to adhere to the commitment on
certain reforms by Leaders. Most advanced countries have now clearly
indicated their unwillingness to move ahead on IFI governance and
capital reforms. This has hampered credibility of the G20, and makes it
difficult to, progress on other issues as well.
India and other emerging economies have repeatedly underscored the
critical role that investment, particularly in infrastructure could play
in sustaining the global recovery and rebalancing. The G20 Leaders had
mandated the G20 Finance Ministers and Central Bank Governors at their
Los Cabos Summit in 2012 “to consider ways in which the G20 can foster
investment in infrastructure and ensure the availability of sufficient
funding for infrastructure projects, including Multilateral Development
Banks’ (MDBs) financing and technical support”. The mandate had been
taken up during this year, but by broadening the subject to cover
financing for all kinds of investment, it resulted in the situation that
one year later, in the 2013 Summit, they could only just endorse
the work plan of the Study Group. This is surely an opportunity loss,
and we hope that the matter would be taken up more meaningfully during
the next Presidency of the G20.
In this regard, one issue that deserves priority is recycling global
savings for infrastructure investment. Enhancing infrastructure
investment in emerging economies and developing countries, would have
positive implications for rebalancing global demand. At the same time,
high savings would find productive use into areas where there is a need
for real investment that results in tangible growth and development. The
G20 is well placed to coordinate various stakeholders including
governments, especially the ones that have large surpluses, the private
sector, and multilateral development banks, for investment in developing
economies. I hope the conference can suggest innovative ways to recycle
global savings and develop viable strategies that overcome the presumed
hurdle of ‘lack of enabling environment’ for infrastructure investment
in emerging and developing countries.
Finally it is important to ensure that the decisions taken in G20
meetings are carried forward expeditiously. Leaders at St Petersburg
committed to remain mindful of the risks and unintended negative side
effects of extended periods of monetary easing while carefully
calibrating and communicating clearly, future changes to monetary policy
settings and to cooperate to manage their spillovers on other
countries. Similarly in the backdrop of the upcoming WTO Ministerial in
Bali in December 2013, G20 Leaders have called on all the WTO members to
show the necessary flexibility so as to achieve a successful outcome in
Bali. I believe that such language of consensus and cooperation is very
important for the interests of both the developed as well as the
developing countries.
I see an important signal emerging from the St. Petersburg Leaders
Declaration with regard to the manner in which development issues are
being addressed in G20 forum and that is the clear recognition that the
dimensions of development challenges vary from country to country and
therefore any policy that is being recommended in an international forum
has to be tailored to national circumstances. It is also welcoming to
note that the G20 Leaders have taken a comprehensive approach to
addressing the challenges of unemployment and underemployment faced by
advanced as well as developing countries. While emphasis has been placed
on creation of more jobs, the G20 also focuses on generating quality
jobs by addressing issues of skills portability, youth employment,
labour flexibility and improvement of the labour market infrastructure.
Under the upcoming Presidency of G20 under Australia, we must make use
of the opportunity provided by the St. Petersburg Leaders Declaration to
ensure that we study the complex issue of labour mobility as the free
movement of capital with restraints on movement of the necessary skills
does hamper productivity.
I am hopeful that the deliberations during this conference will provide
an opportunity to discuss the possible approaches to dealing with global
challenges at the current conjuncture in a spirit of cooperation. I
would like to thank you for your kind attention and wish you all a very
productive discussion. I look forward to the outcome of your
deliberations which I hope can be a useful input to the incoming G20
Chair in 2014.
By: Sumeet .L. Barla pgdm 3rd sem
