Finance Minister P. Chidambaram on Wednesday said that, given its track record, the G-20 is now moving from a temporary crisis bailout mechanism towards permanent global economic governance.
Addressing a international conference on 'Governance and Development: Views From G-20 Countries' organised by the Indian Council for Research on International Economic Relations (ICRIER) here, Chidambaram said: "Considering the range of complex issues confronting the world economy, and the persistent weak recovery, it is important for all countries that G-20 continues to be successful."
However, he said, there were inherent challenges facing the G-20 going forward, including the fact that the agenda setting of the grouping had 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," he said.
Chidambaram further said that, since growth in emerging markets is crucial to the strength of the global economy, it is critical that G-20 find ways to develop strong links of coordination and cooperation and take up issues of importance to emerging economies.
"Otherwise, G-20 may evolve as a loose forum instead of a powerful steering wheel of global governance," he added.
Secondly, he said, there was a big challenge relating to mission creep. "Many experts have expressed concern that the G-20 agenda has been expanding too widely, covering far too many unrelated issues. The outreach process of subsequent Chairs of the G-20 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," he said.
"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 G-20 losing its focus. I do believe that to be able to play a meaningful role in the global governance, the G-20 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," he said.
Chidambaram said that, thirdly, reforms of international financial institutions of global governance had been among the top priorities of G-20.
"Indeed the G-20 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 G-20, and makes it difficult to, progress on other issues as well," he said.
He said India and other emerging economies had repeatedly underscored the critical role that investment, particularly in infrastructure could play in sustaining the global recovery and rebalancing.
Chidambaram said the G-20 Leaders had mandated the G-20 Finance Ministers and Central Bank Governors at their Los Cabos Summit in 2012 "to consider ways in which the G-20 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 G-20," he said.
He said that, 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," he said.
The G-20 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," he added.
Finally, he said, it was 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," he said.
"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," he added.
