Can the G20 Become a Catalyst of Inclusive Economic Recovery?

In his speech delivered at the World Economic Forum on 20 January 2022, President Joko Widodo sent his very strong and clear message that under the Indonesian presidency, the G20 must play its leading role as catalyst of inclusive economic recovery. As catalyst, the G20 shall speed up significant change in coping with the current multidimensional crisis due to the COVID-19 pandemic outbreak.

The chosen G20 presidency theme of ‘Recover Together, Recover Stronger’ clearly demonstrates Indonesia’s high call for promoting inclusiveness at the center of the G20 process throughout 2022 and beyond. Inclusiveness values shared benefits for the broader community among both G20 members and non-G20 members. Inclusiveness also highlights the value of partnerships between diverse multi-stakeholders as the key to building a breakthrough platform to enable transformation in various fields.

Priority agenda for inclusive recovery

As the first priority in the health sector, Indonesia wants to ensure equal distribution of vaccines in both developed and developing countries so that the targets of 70% global vaccination by mid-2022 can be achieved. The production of vaccines constitutes the key step to ensuring the availability and affordability of the vaccines for the entire world population. The next agenda for recovery in the health sector is to enhance the prevention and preparedness capacity of developing countries to anticipate similar pandemics in the future by strengthening their national health systems. The development of quality health infrastructure will also be promoted to support stronger recovery in the post COVID-19 pandemic era.

The Joint Finance and Health Task Force holds monthly meetings to meet the necessary conditions for inclusive recovery. The work program was already agreed on during the first meeting held in December 2021, while the strategic assessment of feasible options of the health and finance collaboration was made at the second meeting in January 2022.

To strengthen inclusive recovery, the Indonesian presidency of the G20 is also committed to paying greater attention to the micro, small and medium enterprises (MSMEs) as one of the priority agendas in both Finance and Sherpa Tracks. In the Finance Track, particular attention will be paid to the most impacted target group of the COVID-19 pandemic. Policy options on the digital financial inclusion and financing of MSMEs are being explored to facilitate the expansion and diversification of financial services to MSMEs.

In the Sherpa Track, strategies to enhance the role of MSMEs in the global value chain (GVC) will be explored to provide increased job opportunities. People with disabilities (PWD) in the workplace, the empowerment of women-owned MSMEs, and the inclusive labor market towards the changing of work have also been included in the G20 agenda to ensure that these target groups benefit from economic recovery.

Assistance is also given to developing countries to cope with the pandemic and find sound exit strategies to support recovery. The Development Working Group is formulating strategies to strengthen the recovery and resilience required to withstand future crises in developing countries, including the Less Developed Countries (LDCs) and Small Island Developing States (SIDS). Efforts to scale up private and blended finance in those countries are on the G20 Development Working agenda to strengthen inclusive recovery.

In the financial sectors, the developing countries shall have sufficient capacity to allocate their national budgets to cope with pandemics, despite their budget constraints. Debt sustainability remains in the G20 priority agenda to support Low-Income Countries (LICs) in addressing debt vulnerability. The Finance Track has put forward the importance of coordination between advanced countries and emerging economies in formulating exit strategies so that the strategies will not expose the developing countries to higher risks. For instance, any policy options to tackle the high inflation rates in advanced countries shall be taken prudently to avoid negative impacts on the developing countries’ economy. Coordination of policies between advanced and emerging economies to adapt to urgent economic conditions is thus necessary to support inclusive recovery in developing countries.

Tackling huge challenges with great determination

The unequal distribution of vaccines obviously poses serious challenges to ensure inclusive recovery. The target of 70% of the total population in the world vaccinated by mid-2022 is very hard to reach. As early as February 2022, the members of the world population who have received full vaccination (two doses of a COVID-19 vaccine) has reached 4.83 billion people, which equals 63% of all the people worldwide.

However, the vaccination distribution shows a markedly contrasting figure that does not represent inclusiveness at all. In the United States, Canada, Latin America, Europe, and Asia Pacific, more than 60% of the total population have been fully vaccinated. Moreover, 30% of the population in the US, Canada and Europe have received their third doses of the vaccine as a booster. In the Middle East, only 40% have received the second dose, while in African countries, those fully vaccinated have reached only 10%.

The uneven distribution shows that every country has advanced their national interest first before directing their attention to other countries. Production of vaccines to meet the needs of the global population and the financing issue to support the production and equal distribution worldwide obviously pose difficult challenges, but the political commitment to agree on concrete actions is apparently a more serious concern to tackle.

Once the pandemic is under control, other challenging issues include how to ensure that all nations with different levels of development will be adequately prepared to respond to similar pandemics in the future. This state of preparedness is not only related to health infrastructure, but also the financing capacity required to ensure equal access to proper health service. To support a stronger recovery, reforming the global health architecture shall thus become a top priority agenda beyond the Indonesian presidency.

It is unfortunate that the G20 has had to rely to such a great extent upon the goodwill of the advanced countries when the members have had to negotiate on the financing issues that are surely indispensable for supporting the inclusive recovery mentioned.

Other challenges reflect difficulties in addressing the economic impact of the COVID-19 pandemic outbreak. High uncertainty continues to haunt the global economy throughout 2022 when Indonesia will have to demonstrate its leadership skill at the G20. The IMF’s World Economic Outlook (January 2022) corrected its previous projection of the condition of the global economy in 2022. Higher and more broad-based inflation in the US, European countries and many emerging markets indicates a weaker condition of the global economy caused by the rise of energy prices and supply disruptions. The uncontrollable spread of the omicron variant of COVID-19 will apparently lengthen the volatility of energy prices and supply chain disruptions that will subsequently affect inflation rates. WHO’s Coronavirus Dashboard tracks the global situation of COVID-19 cases and on 7 February 2022, more than 2.8 million new confirmed cases had been found within the last 24 hours.

Moving beyond words to actions

Facing this tough situation, the G20 members will tend to focus on their national interest before prioritizing the interests of other nations. In the G20 forum, members prefer to agree on normative principles and policy framework, while avoiding the negotiations about more concrete actions to realize the principles and framework.

The G20 has been criticized for its incompetence to generate more concrete and detailed policies beyond the generic principles (Roubini, 2011). The G20 is regarded as an informal bureaucratic forum where many issues are being discussed intensely, but very little agreement on concrete measures has in fact been reached. The agreements are non-legally binding, but the negotiation process always consumes a great amount of time and energy because delegates focus more on the selection of agreeable words to be used in the formulation of every single outcome document (for example, in the leaders’ declaration, ministerial communiqués and working groups’ documents).

Tran (2021) sounded a critical warning that the G20 could become “a miniature of the United Nations, a venue for endless discussion instead of swift action.” In times of emergency, the world needs action, not words (Kickbusch, 2021) and the G20 may fail to meet the needs of the global community unless the G20 leaders share the same sense of urgency and agree to act collectively to meet the world’s pressing needs.

To be fair, these criticisms are not entirely well-founded. Negotiations in some G20 working groups have reached some agreements on policy options, the roadmap and plans of action. However, G20 Leaders should focus on implementing their commitments once the Summit is concluded. Related agencies responsible for the agreements should follow-up and not get distracted by other priorities.  

The annual summit becomes the sign of the end of a certain presidency, and at the same time it heralds the beginning of a new one. In the conclusion of the Summit, the host country of the G20 presidency hands over the gavel to the next G20 host country as a symbol of succession. All G20 members will generally then be very busy with dozens of meetings to negotiate priority issues hosted by the G20’s new presidency.

The success of the G20 presidency is often simply measured by the number of documents to be adopted at the Summit. This is another concern to be addressed if a presidency wants to ensure the effectiveness of the G20 as a catalyst of inclusive recovery.

It is interesting to learn from the last two presidencies. Despite many constraints due to the pandemic outbreak, the G20 produced 80 outcome documents over the last two presidencies. In 2020, the Saudi Arabian presidency generated one leaders’ declaration and 33 annexes (25 ministerial declaration, communiqués and statements, and 8 relevant documents). The number of documents increased under the Italian presidency in 2021. In addition to the leaders’ declaration, the G20 adopted 45 annexes (16 ministerial declarations and communiqués and 29 G20 working groups’ documents). The working groups’ outcome documents take in different formats such as action plans, reports, recommendations, frameworks, roadmaps, policy principles, policy options, policy agendas, high level principles, guidelines, and compendiums of good practices.

The question is how many leaders can remember well every single commitment written officially in each document? To what extent does the Indonesian presidency refer to the legacies left by the previous two? Of course, it is now up to Indonesia to decide on which direction the high-profile G20 will go throughout 2022.

What concrete deliverables can the world expect from the Indonesian presidency of G20?

The world clearly needs actions, not dozens of documents consisting of diplomatically formulated nice words. For Africans, they urgently need vaccines to be distributed fairly throughout the entire continent. As for people who became infected with the COVID-19 virus, they need quality treatment to recover. In regard to those who lost their jobs because of the pandemic, they need re-employment so their families can gain access to nutritious foods and to quality education. For MSMEs that have had to close their business, they need to build their livelihoods back better. Finally, as for the broader community whose members cannot afford to buy their daily basic needs due to supply chain disruptions or unresponsible speculative actions by market players, they need prices to stabilize immediately.

The Indonesian presidency of G20 is well aware of highly urgent current needs across the world. Indonesia has expressed its serious intention to involve the G20 as a catalyst of inclusive recovery by addressing the most urgent priority of today’s global community as its short-term priority agenda. Of course, Indonesia cannot deliver the concrete initiatives for actions unless the other G20 members share a similar faith in their plausibility and effectiveness.

__

Dr. Yulius Purwadi Hermawan is a lecturer in International Relations at Parahyangan Catholic University, Bandung, Indonesia and consultant for international development cooperation and foreign policy inputs. He has been researching on G20 issues since 2010.

The views expressed in this article are not necessarily those of Heinrich Böll Stiftung