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How can the G-20 Development Working Group continue to support growth? Looking ahead to 2012

Written by Dirk Willem te Velde


The G-20 advanced its thinking on development with the adoption of its Seoul Consensus on shared growth in Cannes last year. This contained nine pillars of growth consistent with the wider G-20 framework of Strong, Sustainable and Balanced Growth. At the time it was refreshing to see a new growth and development agenda, with action points, that recognises the importance of factors to facilitate developing country growth, rather than a set of short-term development outcomes. There was also more recognition of the role of the G-20 emerging powers and their spillovers on low-income countries, and of the importance of beyond-aid, innovative finance.

Current G-20 Development Working Group (DWG) discussions (they are also meeting next week in Cape Town) focus on delivering against the action points from the Cannes summit in November, however for 2012 there will be a need to follow up and prioritise the nine pillars. Given the increasing scarcity of water, energy and land, the quality and quantity of ecosystem services will become just as important as high labour and capital productivity in the future, therefore we need to create a tenth pillar of growth – natural resource management – crucial for new, long-term growth opportunities. Could this be the next big opportunity for the G-20 DWG to help poor and vulnerable countries?

Progress has been uneven on the nine Seoul consensus pillars to date:

1.      Financing infrastructure: the newly established High Level Panel on Infrastructure aims to unlock finance for infrastructure. A project preparation fund and an outreach investment conference gathering G-20 stakeholders – especially business and emerging powers – would be good initiatives to launch in 2012.

2.      Human resource development: skills indicators are being developed, but it is not clear what new approaches are emerging for 2012.

3.      Trade: the Doha Round is moribund and G-20 offers of Duty-free, Quota-free (DFQF) for Least Developed Countries (LDCs) are political. Work on Aid for Trade and support for regional integration is progressing. We are awaiting the results of the third Aid for Trade global review in July 2011 for next steps.

4.      Private investment and job creation: – promoting the investment climate is important, but where are the binding constraints?

5.      Food security: The G-20 agricultural ministers agreed to promote agricultural productivity and increase transparency on food stocks to tackle short-term food price volatility. A recent report by 10 international agencies further includes useful principles such as discouraging the use of beggar-thy-neighbour export bans and has much to say on shock absorber schemes (which have been one of the successes of the G-20 as a response to the global financial crisis). But the work in this pillar emphasises reducing short-term volatility rather than building long-term resilience against shocks.

6.      Growth with resilience: including lessons sharing on social protection. Here, the ‘growth and resilience’ agenda may not have been well articulated, as resilience building includes economic and governance aspects, in addition to social components.

7.      Financial inclusion: the Global Partnership for Financial Inclusion (GPFI) has been launched and the Principles for Innovative Financial Inclusion need to be disseminated. The real progress in this pillar is about the promotion of bank accounts, using mobile financial services in appropriate regulatory contexts and financing promising enterprises (rather than being biased towards micro finance). The working group could focus more on between- as well as within-country inclusion, especially regarding small, vulnerable and poor countries.

8.      Domestic resource mobilisation: important for development and accountability, yet the role for the G-20 is not well defined.

9.      Knowledge sharing: should be a priority for the G-20 given its nature as a network of networks, but seems to be limited to established international organisations. Why don’t we have more Wikipedia style and fewer I-phone knowledge creation networks?

The DWG should continue to set action plans and begin to publish score cards for each pillar. But where should it place its emphasis next year? And who decides?

One key piece of recent information is the role played by natural resources, which makes it worthy to become the tenth pillar. Commentary is full of large land deals in Africa, high commodity prices, export bans for rare earth metals, new deals to avoid deforestation, virtual water trade and water scarcities, and new ways to become more energy efficient and promote renewable energy for the poor. The temptation is to deal with these issues in the short term, but we need a well-considered long-term response involving a wide variety of stakeholders, which the G-20 could convene.

The global population is growing and getting richer, emerging powers and new middle classes are increasingly visible, and consumption of natural resources is continuing to grow, despite more efficient resource use. Scientists suggest that we are reaching our planet’s limits, having already crossed the boundaries on  climate change, biodiversity and nitrogen levels in the biosphere. Respected international organisations suggest that by 2030 demand for energy will have risen by 40%, for water by 40% and for food by 50%. This will put more pressure on land acquisitions and on the environment. Physical or economic scarcities in water, energy and land (the WEL nexus) provide a new context for growth.

Business as usual won’t work. We need to do things differently. According to the outline for the 2011-2012 European Report on Development, poor people in developing countries will not be able to maximise their living standards through inclusive and sustainable growth unless a wide variety of public and private actors work together to tackle the new constraints and grasp the new opportunities through effective natural resource management. Growth and competitiveness have been based traditionally on capital and labour productivity and accumulation, deregulation and effective administrations. In future, they are more likely to be based on the quality of ecosystem services and the regulation and management of international access to natural resources.

The G-20 has a great opportunity to use its convening powers and highlight the challenges and opportunities in natural resource management. Countries that can offer quality management of their natural resources will increasingly be at the forefront of sustainable trade, investment and growth opportunities.

In 2012, a tenth G-20 pillar on natural resource management could:

•  chart expected physical and economic scarcities in water, energy and land
•  document challenges and opportunities created by changed global environment
•  convene relevant players from public and private sectors, and
•  gather best-practice and best-fit approaches on natural resource management.

The G-20 could link to existing initiatives by the World Bank, UNEP, UNFCCC and of course the Rio+20 conference next year and has already asked for further reporting on climate finance. It is inconceivable that the G-20’s work on development will continue to overlook natural resource management. Failure to act would shift the weight of the other pillars and undermine growth.