Seoul G20 Summit UK NGO Briefing Paper

Seoul G20 Summit UK NGO Briefing Paper

Bond continues to call for fundamental and farreaching transformation of the international financial and economic system, reform that will deliver real economic justice for people living in poverty, for those most affected by the climate, food, economic and financial crises. The fifth Leaders G20 Summit this November in Seoul, South Korea, is the first of its kind outside a G8 country, and the first to signal its intent to put development at the centre of the G20 s vision for global economic reform. To date, G20 Leaders have not delivered the fundamental reforms that the world needs. This upcoming Summit is a critical test; the G20 must demonstrate its ability to make substantial progress and deliver innovative global responses to an ongoing economic crisis; a crisis that continues to have a devastating impact on people living in poverty around the world, particularly women and vulnerable groups. The UK has the opportunity to take a leadership role in driving a permanent and progressive development agenda for the G20 and it can play a significant part in catalysing leaders to agree the solutions needed to create a balanced and sustainable global economy that delivers for all. Recommendations for the G20: Economic growth and jobs G20 governments should employ stimulus measures and implement reforms to get millions of people back to work through ambitious job creation programmes. A development agenda for the G20 the UK should take leadership in encouraging the G20 to agree an ongoing pro-poor, gendersensitive development agenda, where growth is focused on reducing inequality. The UK should also do all it can to ensure that the G8 meet their existing aid commitments to make a progressive development agenda a reality. Global governance and accountability the G20 should open its doors to full representation from low-income countries and implement accountability mechanisms to ensure progress can be tracked. Leaders should also pursue a deeper reform package for IMF governance to shift more power to developing countries, remove single country vetos and implement a double majority voting system. Curbing illicit financial flows, improving transparency of natural resource revenues and taxing the financial sector the G20 should honour its commitments on reforming tax havens (by implementing country by country reporting, public registration of beneficial ownership and effective tax and judicial cooperation) and put a tax on the financial sector to make a significant contribution towards funding development and climate change back on the agenda at Seoul. Sustainable growth each G20 country needs to agree to develop a long term, low-carbon and climate-resilient roadmap, as well as agree green growth measures and the G20 must prioritise policy coherence for development and ensure that trade policies do not prevent developing countries from shaping their own economies to achieve development goals.

1. Global economic growth and jobs The economic crisis that has wreaked havoc on the lives and livelihoods of working people is far from over. Not only is the global recovery fragile and uncertain, but the financial crisis has evolved into a wave of speculation against major currencies and sovereign states. In early 2010 the coordinated and inclusive approach to stimulus that prevailed in 2009 was replaced with a competitive and premature exit by the majority of G20 countries, as governments under pressure from bond markets moved to fiscal consolidation. These consolidation programmes have and will continue to hit public services, reduce living standards and risk a return to recession. Women and men around the world are experiencing the devastating impacts of rising unemployment and the threat of a decade of stagnant labour markets in industrialised countries, the entrenchment of poverty in developing countries and a lost generation of youth shut out from productive activity. 1. The G20 should retain or restore stimulus measures that focus on jobs and growth, rather than exiting prematurely. It is essential that governments implement measures that support sustainable growth and increase demand so as to increase output and jobs. 2. G20 governments must get millions of people back to work through ambitious job creation programmes, by implementing a global social protection floor, and through retraining and job search schemes, particularly for women and the most vulnerable. These measures are about more than fairness; they are about harnessing the world of work to boost aggregate demand in the economy, to create equitable, balanced and sustainable growth. This crisis has resulted in a massive transfer of public finance to the private financial sector. Cutting public expenditures, wages, pensions and social programmes to pay for this transfer would be morally unjust, as well as economically unsound. It would serve to increase inequality a key factor in precipitating the crisis in the first place.

2. Development agenda The addition of the development issues to the G20 mandate is both welcome and necessary; the G20, as the premier global economic forum has set out its intention to achieve sustainable and balanced growth. Ensuring that the benefits of growth reach the majority of people in developing countries is a crucial component of delivering a long-term, sustainable and inclusive growth agenda. As such, the G20 can make a significant contribution to global efforts to tackle poverty and inequality. The G20 has also signalled its commitment to support the achievement of the Millennium Development Goals and close the development gap. Growth and development are two sides of the same coin and it is vital that the G20 agrees a pro-poor, gender-sensitive development agenda with sustainable growth focused on reducing inequality, making development a standing fixture of G20 Summit discussions and communiqués. This will only be achieved by: Recognising the needs of poor producers and small businesses and investing in smallholder agriculture and land reform. Investing in social protection and health and education for social and human development to support long-term sustainable growth for the majority, not the few. The development experience of the current G20 chair, South Korea, along with several other emerging economies that have progressed from Low-Income Country status through sustained investment in social infrastructure and active state stewardship of national economic policies, is an important case in point. Moreover, decades of poverty in the developing world, and failed policies of the Washington Consensus targeted at growth with insufficient attention paid to poverty reduction, have demonstrated that growth policies alone will not deliver to the poor, and under-investing in social and human capital runs the risk of bypassing the social inputs necessary to achieve robust, long-term and sustainable growth. 1. It is vital that the G20 agrees a pro-poor, gender-sensitive development agenda with growth focused on reducing inequality, and makes development a standing fixture of future G20 summit discussions and communiqués. 2. The G20, and its G8 members in particular, must keep all existing individual country commitments to reach their development obligations. The G8 has so far fallen short of its aid commitments, and if the G20 is to deliver an effective development agenda, the G8 must honour its targets on aid. The UK is leading by example so it is well placed to call on other countries to keep their promises. 3. The G20 should agree to implement mechanisms that will generate additional and innovative forms of financing for development, climate change and domestic poverty reduction, crucially, through agreeing to support a tax on the financial sector. 4. Meeting the Millennium Development Goals and ensuring sustainable and balanced growth for all are two sides of the same coin. The G20 should support and complement existing development processes including the Millennium Development Goals by ensuring that its own multi-year action development plans deliver real, tangible and measurable progress for people living in poverty.

3. IFI reform Ensuring that developing countries have a greater say in the running of international financial institutions (IFIs) is critical given that these countries continue to represent the IFIs main clients. Reform is necessary to create more effective and democratic institutions. The current discussions on IMF governance are inadequate and agreements so far on reform have fallen far short of what is needed. Reform must go beyond changes to voting shares and a few fractional board seats, and instead, should be implemented as part of a full and comprehensive package of reform. The G20 should continue and make more ambitious its reform of the IFIs, building on progress made to date by ensuring the following: 1. The current commitment to a six per cent shift is not sufficient to rectify the IMF s democratic and legitimacy deficits, particularly because the net shift from developed countries is much too small. Further, a 2008 commitment made by the IMF s board of governors not to undertake further quota reallocation without a full reform of the quota formula is in danger of being reneged upon. There should be a full reform of the quota formula during this round of IMF reform with a more ambitious increase in total developing country shares. 2. In the medium term, we believe that the best way to increase the voice of developing countries would be to implement a double majority voting system that matches the current one dollar one vote system with a one country one vote system. 3. While we welcome the commitment to move to an all elected Executive Board, increasing developing country representation on the Board and a plan for reducing the number of chairs held by European countries is of utmost importance. The current proposal to give up a chair partially held by Spain and the chair held by Belgium are a positive step but not sufficient. 4. The IMF also needs much more transparency in its decision-making and policy processes. Commitments to a fair, transparent and merit-based selection process for all senior management positions also need to be implemented. Changes to voting majorities that prevent single countries from holding an effective veto over important decisions should also be removed.

4. Tackling corruption, illicit financial flows and taxing the financial sector Since the 2008 Washington Summit, the G20 has made a number of commitments relating to domestic resource mobilisation, most notably in April 2009, when it undertook to develop proposals by end 2009 to make it easier for developing countries to secure the benefits of a new cooperative tax environment. Little progress has been made by the G20 since then to address the challenges faced by developing country governments. The French Presidency offers an opportunity for the G20 to formally recognise the crucial role of domestic resource mobalisation in achieving the Millennium Development Goals in building accountable and democratic states, alleviating poverty, curbing corruption and ultimately, contributing to the end of aid dependency. In so doing it has to highlight the dramatic obstacle presented by illicit outflows of capital from developing countries, as well as the need to improve natural resource revenue transparency. G20 governments should commit to increase the funding and technical assistance available to developing countries to strengthen their tax systems, surveillance and collection, to participate in information exchange conventions and to tackle illicit financial outflows. On tackling illicit financial flows and tax inequality: 1. Country by country reporting: The G20 should continue to insist on a single set of high quality, global accounting standards (Busan Declaration of the G20 Finance, June 2010), and to challenge the current ability of the International Accounting Standards Board (IASB), to meet the needs of all its stakeholders. Specifically, it should endorse the implementation of a country-by-country financial reporting standard, obliging multinational companies to report financial data for every country in which they operate. 2. Registers of beneficial ownership: The G20 should also ensure that the beneficial ownership of all companies, trusts, foundations, and charities in all jurisdictions are made a matter of public record. Similarly, registers of bank accounts must be readily accessible to tax, financial and judicial authorities in every jurisdiction. This is a central piece of transparency on which there has yet to be sufficient progress. 3. Effective tax and judicial cooperation: the incentives for corruption, tax evasion and other financial crimes would become much less attractive if impunity ceases. G20 countries should commit to work together to achieve this. On taxing the financial sector: 1. Prioritise action on financial sector taxation. Evidence shows that a financial transaction tax could raise up to $400 billion per annum from the financial sector to pay for recovery from the crisis, tackling poverty at home and abroad, and fighting climate change in poor countries. 2. Agree a tax on the financial sector that would demonstrate the G20 s serious commitment to carry out financial sector reform aimed at rebalancing an economic system biased strongly in favour of the financial sector. 3. The G20 should commit to exploring and implementing a broad range of proposals such as a Financial Stability Contribution, a Financial Activities Tax and a Financial Transaction Tax as outlined in the G20-commissioned IMF report, in order to raise up to an additional $400 billion annually, and commit to ensuring that 25% of any tax on the financial sector will go to helping poor countries cope with the financial crisis and 25% to assist poor countries tackle climate change.

5. Climate change and sustainable, green growth Climate finance Leaders of the G20 bear a significant responsibility for ensuring a binding deal through the UNFCCC becomes a reality. Developed G20 nations should commit to delivering the promised $30 billion in new and additional Fast-Start financing for 2010-12. The G20 should also support a fair global mechanism to govern the agreed $100 billion per year in climate financing by 2020. Donors within the G8 should pledge that climate finance will not be taken from aid budgets. The UK should lead the way in this respect by promising to ensure that British climate finance will be additional to the 0.7% GNI target. Sustainable and green growth Green growth must be at the centre of the G20 s agenda as a means to stimulate the global economy and to create new sustainable jobs. Global economic security is dependent on the healthy functioning of natural systems and the goods and services they provide. The rapid transition to a green economy will be essential if the worst impacts of climate change (including loss of sovereign countries) are to be avoided. For this reason, the G20 needs to link strong ambition on green growth to the ambition that global average temperatures should not rise above 2ºC, or, better, 1.5ºC, above pre-industrial levels. Although the UN Framework Convention on Climate Change (UNFCCC) process is the legitimate forum for agreeing a global deal to address the challenges of climate change, fora such as the G20 can play an important role in sending out signals of strong political commitment to the UN process. Moreover, the economic policies and financial reforms implemented by G20 countries must be consistent with commitments to tackling climate change and reducing the loss of global biodiversity. Achieving both climate and biodiversity goals will require developed countries to provide financial, technical and capacity building support for developing countries, and to this end, the G20 should both affirm its resolve to provide adequate fast start and long term funding for developing countries to achieve agreed global goals. G20 countries, the world s economic powerhouses, must honour their commitment to a sustainable future with concrete actions. They must work cooperatively to find and implement measures to the green their economies, and learn from each others experiences. 1. G20 Leaders need to express their commitment to reaching a global agreement under the UNFCCC that is adequate to keep global average temperatures well below 2ºC,and endorse a scientific review in the UNFCCC by 2015 to explore the implications of moving to a below 1.5ºC goal. 2. G20 countries should both confirm the 30 billion of USD going into fast-track financing by 2012, and also recognize the report of the Advisory Group on Climate Finance. G20 countries should also agree to discuss some of the innovative sources of financing that the AGF analyzed, as part of the G20 s work for 2011. 3. G20 countries should cooperate on concrete actions and programs to stimulate a just transformation towards a green, climate-resilient and socially-fair economy including RD&D on renewable energy sources and energy efficiency, setting strong standards to give a visible hand to the market, and investing in green jobs and industries 4. G20 Leaders should state their support for phasing out inefficient fossil fuel subsidies and redirecting these financial flows to renewable energy sources.

5. Climate change and sustainable, green growth continued 5. Each G20 country needs to agree to develop a long term low-carbon and climate-resilient roadmap, with the developed countries laying out a realistic pathway for decarbonising their economies by 2050, with indicative decadal targets, with an economy-wide emissions reduction target for the period 2013-2017. Developing country members of the G20 should agree to lay out a package of nationally appropriate mitigation actions that will detail their strategic plans for low carbon development, including plans for increasing resilience to climate impacts. 6. Guidelines for the G20 Framework for strong, sustainable and balanced growth must promote genuinely sustainable economic activity, as defined and committed to by G20 leaders in Pittsburgh, 2009. Economic policies must be compatible with meeting commitments to tackle climate change and address biodiversity loss.

6. Trade World leaders have attempted to use the global recession as a spur for greater trade liberalisation. However, the conclusion of the WTO Doha Round should not be pushed through in its current form. World leaders must step back and develop a fresh approach to the global trading system that prioritises justice and equity, including labour and environmental standards. It is not enough simply to seek the expansion of trade as a panacea to the world s problems, no matter how much money or growth it adds to the world economy; the G20 must be able to demonstrate that this will benefit the poorest first. The case for growing trade flows must be based on building a global economy to deal with the financial, climate and food crises, focusing on the interests of people and environment rather than capital flows. It must strengthen local and regional supply chains and ensure dialogue and cooperation at the international level. We call on the G20 to stop pushing developing countries to pursue liberalisation that is too deep and too soon, in particular in financial and other services as well as their industrial and agricultural sectors, via multilateral or bilateral trade negotiations. There should be no attempt to rush a conclusion to the WTO Doha Round, which developing countries have rejected several times due to concerns at the potentially negative impacts on their economies. 1. Trade policies are coherent with and support development objectives. 2. Regional and South-South trade is prioritised. 3. Developing countries have the policy space, through access to the full range of policy tools including tariffs and export taxes, to strategically protect and promote their domestic economies, livelihoods and food security. 4. The WTO Doha deal is not pushed through in its current form. 5. No bilateral trade deals with developing countries are concluded that undermine development, particularly by inclusion of Singapore issues or liberalisation of services. 6. The G20 should agree new and binding financial commitments on aid for trade, building on their commitment at Toronto to support the future development of LIC capacity to better benefit from trade.

7. G20 governance Opening the G20 door to Low-Income Country representation The G20 is not a replacement for genuinely representative global decision-making, and it must ensure that its meetings supplement rather than undermine the work of the UN. However, the G20 is a marked improvement on previous global fora, and we welcome the Korean Government s decision to invite additional representatives to the summit in Seoul. For the G20 to maintain credibility, it is crucial that this process is now extended and formalised. 1. The G20 should formalise the permanent representation of developing countries in all G20 processes and structures, including all working groups. This should include an offer of full and permanent seats to African, Latin American and Asian regional bodies, with full participation in all G20 processes. 2. The G20 should also agree to ensure that LICs are better represented on the Working Groups, and that they are not represented by international organizations alone. Accountability The G20 is yet to prove its ability to tackle today s pressing issues in a transparent and accountable way, yet it has signalled that it intends to take accountability for its decisions seriously. If it is to be seen as a legitimate forum for discussion and decisions on global issues, it must become more open, inclusive and accountable, and leaders must take responsibility for building and improving upon the accountability practices of the G8. 1. All reform processes and working groups must be transparent and accountable, with consultation of all governments, parliaments, trade unions and civil society, with the UN playing a key role. 2. Crucially, the G20 must implement accountability mechanisms to ensure that its action plans can be monitored and progress tracked. This process should be open, transparent and publicly available. Openness and transparency for civil society Open dialogue with civil society is crucial to ensuring a more credible and effective G20. Civil society has so far been excluded from the majority of G20 processes, and decisionmaking has not been sufficiently transparent. The G20 must adhere to the highest standards of openness, transparency and accountability. 1. The G20, including its working groups, formalise its engagement and consultation processes with global civil society. Meeting schedules, participants and expert lists, agendas and background documents should be publicly available. The terms of reference, representatives and contributors to G20 working groups (and technical support groups) should also be public. 2. Any expert groups should be encouraged to solicit and receive formal civil society submissions for G20 consideration. 3. Civil society should be afforded access to Summits.

Bond is the UK membership body for non-governmental organisations (NGOs) working in international development and has over 370 members. Bond promotes, supports, represents and, on occasion, leads the work and interests of UK international development organisations. It does this through the exchange of experience, ideas and information and, as the UK network of international development organisations, supports members to strengthen the quality and effectiveness of the sector. For more information: bond.org.uk Contact: Joanna Rea, Bond International Advocacy Officer jrea@bond.org.uk +44 (0)20 7520 0255 Bond, Regent's Wharf, 8 All Saints Street, London, N1 9RL Bond Published November 2010