As economy slows, China urges G20 to focus on domestic reforms

G20 leaders had met at Antalya last month and resolved to persist with collective action

China, the host for the 2016 G20 meet and holder of the rotating presidency, urged member countries to pursue structural reforms to spur global economic growth even as the Asian giant’s economy slows. Macro-economic expansionary policies such as monetary easing remain a ‘temporary response’ to the global financial crisis of 2008, it said.

India’s Finance Ministry has initiated consultations on the priorities identified by China for the G20 summit in September 2016, which include constructing a new structural reform index to assess progress by member nations on their target to add two per cent growth to the global economy by 2018 through domestic reforms.

“The Department of Economic Affairs is examining the summit agenda set by China and has sought urgent inputs from different ministries on the priorities that have been proposed for the summit in Hangzhou,” a senior government official told The Hindu.

G20 leaders had met at Antalya last month and resolved to persist with collective action to lift actual and potential growth of their economies and boost job creation. The G20 summit mechanism for economic co-operation had evolved in the aftermath of the 2008 financial crisis.

“Many countries are suffering from a series of unfavourable factors, including anaemic global growth, decline in potential output, increasing volatility in financial markets, weakening global trade and investment, high levels of unemployment and inequalities,” the Chinese government noted, laying out the theme for the next summit.

“Due to growing divergence in economic performance and policy priorities among major economies, we are seeing increasing difficulties in macro-economic policy co-ordination. The world economy calls for a new impetus,” it said, adding that the G20 has managed ‘mainly short term risks’ through co-operation so far.

Protectionist measures

Raising concerns about persistent decline in global trade growth ‘to levels below the global growth rate in the past three years,’ China has questioned the significant rise in protectionist measures adopted by countries in trade and investment and the lack of movement on the World Trade Organisation’s (WTO) Doha Development round of talks. G20 nations account for 80 per cent of global trade volumes.

“Worldwide, regional trade agreements and bilateral investment agreements have flourished…it also results in ‘fragmentation in global trade and investment governance regimes, to which G20 needs to respond,” it noted, urging the G20 to instead to focus on the multilateral trading system based on the outcomes at the WTO ministerial summit in Nairobi that kicks off on Tuesday.

In a separate document drafted by China’s finance ministry proposing a new G20 Structural Reform Index reviewed by The Hindu, it has noted that efforts to maintain financial stability and support economic recovery, since 2008, have helped achieve certain results but structural deficiencies persist that can hold back growth in the long run.

“The expansionary macroeconomic policies mainly focus on managing aggregate demand as the temporary response to the financial crisis. Without solving the deep structural problems, these policies could not reverse the prevailing trends of slow growth in potential output and productivity, and therefore could barely deliver sustainable economic growth,” according to the document.

China has proposed a new assessment system that focuses on aggregate impacts of the structural reform measures undertaken by G20 countries instead of focusing on the progress of implementation. This, it has argued, would provide a more objective and effective evaluation of reforms. In a message after taking over the G20 presidency on December 1, Chinese president Xi Jinping asked: “Can we strengthen the foundation for global recovery and growth and leave the crisis behind us?”

“We should strive to build an innovative, invigorated, interconnected and inclusive global economy and explore new ways to drive development and structural reform, injecting impetus into the growth of individual countries and energising the global economy,” Mr. Jinping said.

China has also said that the prolonged delay in the implementation of reforms in the quota and governance structure at the International Monetary Fund and review of World Bank voting shares ‘jeopardises the credibility of the G20’ and must be pushed.

Officials stressed the need to firm up India's strategy soon ahead of meetings between G20 sherpas (the term used to describe the chosen national interlocutors), finance ministers, central bank governors and top officials to arrive at a consensus communiqué for the G20 leaders when they gather in Hangzhou next September.

Delink terror and religion, Modi tells G20 Leaders

The world must speak in one voice and act in unison against terrorism, without any political considerations, he said. 

India late on Sunday called for a comprehensive global strategy to delink terror and religion, and to promote cooperation among countries to counter radicalisation.

Addressing the G20 leaders here at a session on terrorism, Prime Minister Narendra Modi said, “We need to involve religious leaders, thinkers and opinion-makers for a social movement against extremism, particularly addressed to the youth.”

This was needed the most in countries where extremism was most prevalent, he said and highlighted the urgency for promoting broader peace and stability in West Asia and Africa.

Hitting out at terrorism, especially that perpetrated by countries as an instrument of state policy, Mr. Modi said there was a new level of threat to pluralist and open societies. “We must isolate those who support and sponsor terrorism and stand with those who share our values of humanism.”

The changing character of terrorism, he said, was visible with the use of cyberspace for recruitment and propaganda. “We don’t have a comprehensive global strategy to combat terrorism. And, we tend to be selective in using the instruments that we have.”

Global consensus

Furthermore, there should be no distinction between terrorist groups or discrimination between states and the world must speak in one voice and act in unison against terrorism, without any political considerations, he said.

He highlighted the need to restructure the international legal framework for dealing with the unique challenges of terrorism and increasing international cooperation in intelligence and counter-terrorism and appealed for early adoption of a comprehensive convention on international terrorism. “We should strengthen efforts to prevent supply of arms to terrorists, disrupt terrorist movements and curb and criminalise terror financing.”

The West Asian crisis, Mr. Modi said, focused global attention on an acute humanitarian challenge. He called for a long-term approach to, and a stronger role for the United Nations in, dealing with it.

Modi seeks more global help to get back illicit money

Prime Minister Narendra Modi on Monday sought greater international cooperation for the return of illicit money to the country of origin.

Addressing G20 leaders, at the session on ‘Enhancing Resilience,’ he wanted them to address the issues of excessive banking secrecy and complex legal and regulatory frameworks.

“In India, my government has zero tolerance of corruption and black money...We have enacted a law to deal with undisclosed assets and income kept abroad. We have also entered into a number of bilateral tax treaties.”

Mr. Modi said the G20 must continue according priority to combating corruption and sought the implementation of the Common Reporting Standard based on Automatic Exchange of Tax Information by all countries.

On trade and energy, Mr. Modi said the Doha Development Round should achieve its goals. He wanted all elements of the Bali package to be implemented fully.

Without naming the U.S.-backed Trans Pacific Partnership, he said regional trade agreements should not lead to fragmentation of the global trading system and sought support for a more liberalised multilateral trade regime.

He hoped the ratification of the 2010 reforms of the IMF would be completed in the U.S. at the earliest. “The IMF should remain a quota-based institution and not depend on borrowed resources.”

Mr. Modi underscored the need for greater labour mobility and skill portability across countries for global economic growth to be balanced and sustained.

He also sought greater voice for major emerging economies in the global governance structure for energy and said India targeted an additional 175 GW of renewable energy by 2022; a cutback on subsidies for fossil fuel and carbon cess on coal. “By 2030, we have targeted 40 per cent of our energy through non-fossil fuel.”

Higher capital requirements should not hamper financial inclusion or the functioning of the banking sector in developing countries, he said. Effective supervision and better use of technology could help cut capital requirements. “Cyber security is important for the protection of the banking infrastructure.”

He was happy that the Base Erosion and Profit Shifting Package was put up for the G20’s endorsement within the agreed timeframe.

Mittal calls upon G20 leaders to commit to Internet access for all

Bharti Enterprises Chairman and Vice-Chairman of the International Chamber of Commerce (ICC) Sunil Bharti Mittal on Sunday urged world leaders to commit and invest in developing digital infrastructure to deliver a brighter and more prosperous future to their citizens.

Speaking at the B20 – G20 session at the ongoing G20 Summit in Turkey, immediately following the inaugural address by Recep Tayyip Erdogan, President of the Republic of Turkey, Mr. Mittal said the Internet can become the cornerstone of a more inclusive global economic growth.

Mr. Mittal underlined the urgent need to bridge the global digital divide and provide easy and affordable access to Information Communication Technologies to millions across the world. “If we want to help people feed, heal, educate and employ themselves, we need to ensure they can connect to the Internet...The challenge of connecting the world will require us to take many different and complementary actions in the coming years,” he said.

Prime Minister Narendra Modi, who is attending the G20 Summit, has outlined ‘Digital India’ as one of the key priorities for his Government.

Stressing the need for supporting the growth of small and medium enterprises (SMEs), which generate 60 per cent of the world’s private sector employment, Mr. Mittal said in his address: “Globally, 95 per cent of the enterprises are SMEs and these should be at the core of the global growth strategy outlined by the G20 nations...they can become a major source of employment opportunities for youth and support a more inclusive economic growth.” He made a case for easier finance options for SMEs. To take just one example: SMEs often rely on bank credit to allow them to export, but ICC new data shows that over 50 per cent of SME applications for trade finance are now turned down by banks, he said.

He spoke of the need of bringing more women and youth into the mainstream economic growth to ensure balanced growth within economies. “The global economy is facing considerable headwinds and the unemployment rate amongst youth across the world is at a high of 13 per cent...We must create meaningful opportunities for the young people to avoid social unrest.”

Mr. Mittal also highlighted the agenda outlined by the ICC B20 for the revival of the global business environment which calls for the ratification and implementation of the World Trade Organisation’s (WTO) Trade Facilitation Agreement (TFA), which India is yet to do.

“New WTO research suggests that the TFA could boost global trade flows by an unprecedented $3.6 trillion, creating more than 20 million jobs in the process,” Mr. Mittal argued and said that the impact of implementing the TFA would be greater than eliminating all remaining tariff barriers the world over-and could lead to an increase in SME exports by up to 80 per cent in some economies as the Internet opens up new market opportunities. Although 51 countries have ratified the TFA to date, 108 are required to do so for the agreement to come into force. IBAC members are calling on the G20 economies to do all they can to speed effective implementation of this landmark agreement in the months ahead.

On behalf of the global business community, he called on the G20 to commit to a comprehensive strategy to boost youth and female participation in the workforce.

A key aim should be to reduce mismatches in skills, not least through better public-private collaboration on national skills strategies and education plans, he said. Mr. Mittal also said that though the launch of the Global Infrastructure Hub under last year’s Australian G20 presidency was a major step in the right direction, more needs to be done to build on this important platform given that a the worldwide spending gap on infrastructure is forecast to reach $15 trillion to $20 trillion by 2030.

In their outreach to governments over the past few months, ICC CEOs have emphasized that if the G20 is serious about creating jobs it must urgently help deserving businesses get financing for their viable investments. A prudent starting point for the G20 would be to commit to exploring whether the implementation of tougher financial regulation has inadvertently stymied the flow of finance to small businesses. A cogent strategy to deepen SME access to alternative forms of financing must also be established.

ICC’s delegation in Antalya-comprising business leaders from across the G20-will is led by Mr. Mittal. The ICC group also includes: Marcus Wallenberg, Chairman, SEB; Gerard Mestrallet, CEO, Engie; Peder Holk Nielsen, CEO, Novozymes; Khalid Alireza, Chairman, National Petrochemical Industrial Company; Antonio Brufau, Chairman, Repsol; Alexander Shokhin, President, Russian Union of Industrialists and Entrepreneurs; John Denton, CEO, Corrs Chambers Westgarth; Alejandro Ramirez Magana, Director General, Cinepolis; Sam Walsh, CEO, Rio Tinto; and Paul Bulcke, CEO, Nestle.

In addition to meetings with the G20 leaders, ICC will also be participating in a range of side events on issues ranging from SME growth through to the UN Sustainable Development Goals.

G20 for joint steps to fight terrorism

The crisis in Syria, the base to the Islamic State, which was already high on the G20 Summit’s agenda, in the wake of the attacks by it in Paris, took centre stage at the talks between world leaders in the Turkish seaside resort city of Antalya, not far from the Syrian border. G20 leaders on arriving here for the summit, including U.S. President Barack Obama, Russian President Vladimir Putin, Chinese President Xi Jinping and Prime Minister Narendra Modi, called for joint efforts to combat terrorism.

Turkish President Recep Tayyip Erdogan told a joint news conference on Sunday with Mr. Obama, ahead of the G20 Summit, that he expected the meeting to produce a “strong statement” on the fight against terrorism. “We will, of course, carry on with our discussions at the G20 Summit within the predetermined agenda; however, we will put a strong emphasis on having a firm stance on international terrorism,” he said.

United Nations Secretary-General Ban Ki-moon said he would soon present to the member-states a comprehensive plan to prevent violent extremism.

The leaders will deliberate on terrorism and migration over a working dinner. Traditionally, the forum has primarily discussed global economic issues but the skies had been darkened by the horrific attack in Paris just a day and half ago, Mr. Obama said. “As was true with the terrible attacks that took place in Ankara, the killing of innocent people based on a twisted ideology is an attack not just on France, not just on Turkey, but it’s an attack on the civilised world,” he said.

United against terror: Modi

Mr. Modi, in his lead intervention at the opening session of the G20 Summit, said the leaders were united in condemning the barbaric attacks in Paris, the recent bombings in Ankara and Lebanon.

Earlier, at a meeting of the BRICS — Brazil, Russia, India, China and South Africa — nations hosted by Mr. Putin, Mr. Modi demanded that the G20 push for stronger, coordinated global action for putting an end to finance, supplies and communication channels of terrorists and an early adoption of the Comprehensive Convention on International Terrorism. He also sought a special international legal regime to take on terrorist activities and cooperation for the prevention of the use of cyber networks by terrorist groups.

The killing of at least 129 people in Paris on Friday by suicide bombers and gunmen linked to the Islamic State cast a shadow on the two-day summit in Antalya, further raising pressure on the G20 leaders to increase cooperation on fighting terror. Mr. Ban told presspersons that he wished to stress to world leaders that the response needed to be robust but always within the rule of law and with respect for human rights “otherwise we will only fan the fire we are trying to put out.” He said there was a need to address the underline drivers of violent extremism. “No grievance or cause can justify such violence … Those who claim to be acting in the name of religion are only harming their religion … It is tragic to see so many young men so radicalised that they are willing to lose their lives.”

President Putin said: “We have all seen the horror that took place recently in Paris and we sympathise with the affected people ... But we are always in favour of joining efforts to deal effectively with the terrorist threat ... Of course it is necessary to act in strict accordance with the United Nations.”

Coordinating action against Daesh should be the G20’s aim, said Union President Donald Tusk. “Cooperation between us and Russia is a crucial one.”

Mr. Xi expressed shock as also solidarity over both the Paris attacks and the Russian plane disaster. “We will work more closely with the international community to reject and fight terrorism in all its manifestations,” he said.

Earlier, at a meeting ahead of the joint news conference, President Obama and President Erdogan discussed the conflict in Syria and the efforts to secure Turkey’s borders. They also talked about the refugee crisis affecting Turkey and Europe as well as the progress made in Vienna, where, ahead of Mr. Obama’s arrival in Antalya, U.S. Secretary of State John Kerry agreed with his counterparts from other countries, including Russia, on a road map for political transition in Syria aimed at ending the over 4-year-long civil war.

“The discussion we had was very helpful in continuing to coordinate work that we are doing together,” Mr. Obama told the conference.