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  • Roundtable discussion "Following the G20 Summit: Expert Opinions"

Experts give evaluation of the Russian G20 Presidency outcomes

On September 9, a roundtable discussion titled "Following the G20 Summit: Expert Opinions" was held in the RIA Novosti Press Center.

Head of the G20 Expert Council Sergei Drobyshevsky spoke on what had been done during the Russian G20 Presidency to help the global economy move from the post-crisis stage on to sustainable economic growth.

He reminded that the issue of investment financing had been selected a priority for the Russian Presidency. "Russia brought about a broad discussion of this issue and pushed for adoption of some concrete decisions," Mr. Drobyshevsky said. "Previously, international discussions usually were focused on investments of the developed countries into the developing ones, and the largest sources of capital are in the commodity exporting countries, while the traditional centers of economic power such as the United States, Europe and Japan have a more and more declining resources for investment and a shortage of investment ideas."

The G20 countries have endorsed two key decisions in this sphere.

First of all, they have confirmed the need to rely on private capital as the basic driving force of investments, including long-term investments. "The government sets the rules of the game in this instance. It is not the leading force, only creating conditions for long-term investments," Mr. Drobyshevsky stressed.

Secondly, they have proposed establishing new instruments and creating additional investment opportunities, such as through development institutions, to support investment in infrastructure. The goal is to widen the bottlenecks, supporting the investment projects, which otherwise the government would have to finance in full.

Overall, the G20 countries have pledged to pursue an economic policy to prevent additional business risks and create conditions for economic development with regular investment process. In particular, this will involve reducing their budget deficits, settling debt issues and stimulating the development of local currency capital markets. In addition, they have pledged to develop new instruments for attracting long-term investments and to offer them for the market.

 Martin Gilman, Director of the Center for Advanced Studies at the Higher School of Economics, spoke on the reform of international financial institutions, primarily redistribution of the IMF quotas between the developed and the developing countries. Since its establishment in 1944, the IMF has been dominated by the United States and the European countries, Mr. Gilman said. The global economic situation has changed dramatically since then, and we now see a shift in economic influence. But the developed countries tend to recognize this new economic reality, that is the shifting of the centers of power toward the emerging markets, slowly, Martin Gilman said.

In 2010 an agreement on a limited realignment of IMF quota shares towards emerging markets was reached. Unfortunately, only minor progress has been made towards this goal during the Russian Presidency, Martin Gilman noted. The main reason for this was the refusal of the United States, which holds a blocking stake, to ratify the realignment agreement. At this stage, it is unclear when progress can be made in this sphere, he said.

Mr. Gilman also touched upon the discussions of the sovereign debt management and debt stability during the Russian Presidency. Much has been done here, he said, but the work is not finished. The finance ministers will continue to work on this, including at their next meeting in October, Martin Gilman concluded.

Yevsei Gurvich, Head of the G20 Expert Council Economic Expert Group, elaborated on the G20 countries' decisions on taxation and structural reforms. "The participants have coordinated extremely detailed and constructive agreements on taxation," he said.

This is certainly an important issue, because public finance resources are needed to ensure sufficient funding for government investment in infrastructure and capital for development institutions, Mr. Gurvich explained. On the other hand, if companies do not pay taxes in the country where they operate, the government is not eager to support and encourage business.

He also highlighted some of the most important decisions of the G20 countries in this area, which include the new rules on the automatic exchange of information on tax payment by multinational enterprises; the decision to standardize the member countries' tax legislations to close tax avoidance loopholes; and the commitment to improve the rules for signing double taxation agreements and transfer pricing rules.

"The deadlines for these goals have been set: the G20 members will begin exchanging information on tax matters automatically in 2015, and should adjust their legislation within 18 to 24 months," Yevsei Gurvich said. "Of course, this will not resolve all problems, but it is a good example of coordinated efforts by the G20 countries in a sphere where problems can only be settled by concerted action."

Speaking about the importance of structural reforms, Mr. Gurvich noted that the approved measures were designed to strengthen economic efficiency and would also improve the investment climate and promote the growth of investment and, consequently, global growth.

Structural reforms are one of the most difficult issues we deal with, he added: "Tax issues are usually settled at the level of federal governments, whereas the investment climate depends not only on the federal government, but also on the regional and municipal authorities, as well as numerous regulating and controlling organizations. Taking this into account, the G20 has approved an individual approach. Bottlenecks have been identified in each country; recommendations on what needs to be done in order to launch structural reforms tailored to countries' circumstances have been issues. They have also approved common measures to improve the business climate."

Russia has pledged to lower administrative barriers and to ease government regulation, in particular by simplifying licensing and increasing the number of non-licensed activities from 26 to 50 by 2018. "These measures are expected to increase investments in Russia to 25% of GDP by 2015 and to 27% by 2018," Mr. Gurvich concluded. 

Vladimir Zuyev, Head of the Department of International Economic Organizations and European Integration, Faculty of World Economy and International Affairs at the Higher School of Economics, spoke on the issues of financial regulation. He said that one of the biggest achievements of the G20 Summit was the adoption of a roadmap towards strengthened oversight and regulation of shadow banking. It is a key document setting out clear deadlines, the procedure for working with securities, securities-based loans, as well as new supervision standards and elements, the Basel standard and the derivatives market and addressing the issue of  "too-big-to-fail" banks.

Mr. Zuyev also commented on the agreements on trade reached at the Summit, in particular the agreement aimed at advancing transparency in regional trade agreements (RTAs). "While the Doha round of the WTO negotiations has been floundering and the achievement of global agreements is a complicated matter, we have seen a large number of regional trade agreements signed, leading to the creation of free trade zones and customs unions, which promotes trade liberalization processes at the regional level," Vladimir Zuyev said. "This is why it is very important to enhance the transparency in RTAs and to ensure their compliance with WTO rules."

Mark Rakhmangulov, Deputy Director of the Global Governance Research Center of the International Organizations Research Institute at the Higher School of Economics, spoke on employment and jobs. "The G20 countries have for the first time admitted that a responsible labour market policy is not an expenditure but an investment in economic growth," he said. "In other words, economic growth does not create jobs, but the creation of jobs leads to economic growth."

Mr. Rakhmangulov supported the G20's approach to link macroeconomic policy with job creation policies. He pointed out an innovative element of the Russian Presidency - the joint meeting of labour and employment and finance ministers. The third key priority was the focus on creating inclusive labour markets with equal (to the extent possible) conditions for different groups of people.

He also touched upon the endorsed measures on anti-corruption, in particular the adoption of the St.Petersburg Strategic Framework. One of the key anti-corruption issues for the G20 countries is to ensure the ratification and implementation of the UN Convention against Corruption. Saudi Arabia ratified the convention this year, leaving only two G20 countries which have yet to join it.

Mark Rakhmangulov said the G20 countries had supported Russia's anti-corruption initiatives in the organization and holding of sports, cultural and other major international events, on assessing and minimizing corruption risks in the privatization of state-owned assets, as well as on identifying and promoting the best anti-corruption practices among officials.

Marina Larionova, Director of the Institute of International Organizations and International Cooperation and Co-Chair of the Russian NGO Working Group on Interaction with the G8 and the G20, said the St.Petersburg Development Outlook endorsed at the G20 Summit was aimed to promote growth in the developing countries and eliminate obstacles to growth, as well as to contribute to increased financing and investment in infrastructure and better sovereign debt management.

Ms. Larionova also noted increased social dimension on the G20 agenda, highlighting the commitments to reduce inequality and to ensure effective social protection.

She also gave high appreciation of cooperation of the Russian Presidency with the outreach groups - Civil 20, Business 20, Youth 20, Labour 20 and Think 20. "Our cooperation has been highly intensive and successful. In particular, an initiative to ensure strong, sustainable, balanced and inclusive growth was prepared by the Civil 20 and some of its recommendations were included in the final documents of the G20 Summit," Marina Larionova concluded.

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