The G20: "Maestro" of the Development Finance World?

This paper describes the G20's Development Action Plan (DAP) to promote economic growth in some 80 low-income countries. The DAP would deploy existing bilateral and multilateral aid to - among other things - offset risks to private investment in infrastructure and agriculture projects that promote regional integration. The paper asks whether the DAP is likely to democratize the governance of development and promote equitable and sustainable development. 

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Overview

Part I, the “Introduction,” provides background on the G20’s adoption of its Development Action Plan (DAP) at the Seoul, South Korea Summit in November 2010. It describes the goal of the DAP which is to promote economic growth in approximately 80 low-income countries (LICs).

Part II, “The Development Action Plan,” describes:
(1) the nine pillars of the DAP. A primary goal of the first four pillars – which relate to infrastructure, food security, private investment and job creation, and trade – is to leverage public-private partnerships (PPPs), particularly in infrastructure and agriculture, in order to promote economic growth and trade integration. The other five pillars are “supportive;” they relate to: human resources (skill development); resilient growth (social protection); financial inclusion; domestic resource mobilization; and knowledge-sharing.
(2) The governance of the DAP. The G20 appointed a 35-member Development Working Group (DWG) to help design and implement the DAP. (See Attachment B, “Members of the DWG.”) To date, very few representatives of LICs have been directly involved in this process. To accomplish the DAP’s goals, the G20 gave 23 mandates to a range of international institutions. (See Attachment A.) This Part asks whether, in carrying out the mandates, these institutions (e.g., the World Bank, the World Trade Organization, UN agencies) become accountable to the G20 rather than their own governance boards.
(3) The financing of the DAP through mobilizing existing multilateral and bilateral sources of finance for its investment priorities. If the G20 succeeds in orchestrating investment from many sources, it will be the governance “maestro” of the entire system of development finance. The DAP will also help mobilize domestic resources for development. This pillar includes many positive initiatives (e.g., curbing illicit capital flows and ensuring that citizens, including corporate citizens, pay taxes.)

Part III, “Taking Risks: Private Investment in Infrastructure,” asks whether, in mobilizing public-private partnerships (PPPs) in infrastructure in LICs, the G20 is protecting the public sector (e.g., taxpayers) from excessive risks or serving the over-arching goals of development such as: supporting internationally agreed development goals, sustainable development, decent work, and human rights standards.

Part IV, “Environment and Climate Considerations,” asserts that, particularly since the two top priorities of the DAP relate to infrastructure (e.g., energy and transport) and agriculture/food security, the DAP should not be implemented without a strong and thorough climate-related dimension. To date, it appears that the G20 Agriculture Ministers will launch initiatives related to climate adaptation and biofuels, but much more is needed.

Part V, “Food Security” describes how the G20 faces the specter of high and volatile prices for oil, raw materials, and food products with implications for inflation, economic growth, access to raw materials, food security, and political stability. This Part describes the new initiatives that the G20 Agriculture Ministers are launching, including a new mechanism for gathering information on food stocks and prices; support for smallholder farmers, particularly women; and a “small regional pilot on emergency humanitarian food reserves, consistent with WTO rules.” There is disagreement among the ministers over the call by ten international institutions to eliminate mandates, targets, and subsidies for biofuels. This Part reviews some highlights of the civil society food security agenda, including achieving food sovereignty; shifting from industrial to organic agriculture; and using buffer stocks for price-management. Against major odds, the French are working with their allies to ensure that commodity derivatives markets are subject to regulations which ensure that excessive speculation does not destabilize food and financial markets.

Part VI, “The Future of Environmental, Social, Gender, and Anti-corruption Safeguards,” reviews G20 initiatives to address social, environmental, and other standards as they relate to the private sector; health and food, infrastructure; and land acquisitions. In most regards, these initiatives are not taking into account the views of the vulnerable groups that are being affected by investments in these areas.

Part VII, “Trade Integration,” reviews the momentum behind this agenda, especially in Africa where 26 countries in three trade blocs are negotiating a Tripartite Free Trade Area (TFRA) with mechanisms for liberalizing trade and harmonizing customs and infrastructure development policies. This Part asks whether this initiatives or others will strengthen or cripple the role of the state in development or emphasize sustainable development.

Part VIII, “Jobs and Equity,” urges the G20 to emphasize “decent work” deficits, not just budget deficits. It stresses that social protection “floors” not be considered “ceilings;” that they be affordable for LICs; and that they aim for universal rather than piecemeal coverage of needs.

Part IX, “Questions about the DAP,” asks:
1. Does the DAP democratize the governance of development? For instance, are the intended beneficiaries of the DAP, low-income countries, involved in designing it?
2. Does the DAP promote a new model for development or rely on discredited economic policies?
3. Will the DAP improve employment and social conditions in developing countries?
4. Given the fact that LICs emit low levels of greenhouse gases yet suffer the gravest consequences of global warming, what does the DAP do to help them? Since the goal of the DAP is to promote growth, not foster sustainable development or a green economy, its weak record in these policy areas is not surprising.

Part X, “Conclusion,” describes the high stakes in democratizing the G20 and its work on development. As it is, the narrow focus on economic growth will distort all other development efforts and undercut efforts to fight climate change. Public money should not be used to guarantee the profits of private investors in low-income countries to the extent envisioned by the G20. LICS, themselves, should re-design the DAP to focus on four dimensions of sustainable development as they relate to the economy, equity, the natural environment, and democratic process.