Reconfiguring the Role of Business in G20

Akshay Mathur

Gateway House

13/04/2015

A powerful new fora for global business is emerging and it is called the B20. Business leaders were first invited to this forum at the G20 Finance Ministers’ meeting in Canada in 2010. Since then, the B20 has become an important bridge between business and foreign economic policy the B20 has become an important bridge between business and foreign economic policy. The forum has met regularly since then on the sidelines of the G20 Summits – South Korea (2010), France (2011), Mexico (2012), Russia (2013) and Australia (2014) – to advise world leaders on global economic governance. This year, Turkey is the President of the G20; its leadership of the accompanying B20 will be closely watched.

So far, the B20 has made over 400 recommendations to the world leaders. Many have been incorporated into the final G20 vision. At the last G20 Summit in Australia, the B20 task forces comprising of 300 global business leaders made recommendations on a range of business issues from infrastructure to energy.

However, the impact of the B20 on the G20, and ultimately on global economic governance, has been uneven. A self-assessment done by the B20 forum during the Russian Presidency in 2013 concludes that only 35% of the recommendations were adopted by the G20 leadership. Even in cases where acceptance was higher, like employment (97%), the effectiveness was marred by subsequent reports that called the G20 employment policies “ineffective” for working people, stating a bias towards big business.

What imperils B20 most is its job description. It sees itself as an advisor to G20 leaders – not as a practical implementer of G20 policies. This has resulted in repeated recommendations by business for the same things – invest in infrastructure, focus on green energy, remove trade barriers – without much headway in execution, the very expertise that business has.

Another challenge is that of aligning the B20 mission with the G20 vision. For instance, for Turkey to sync the G20 vision for 2015 (Inclusivity, Implementation, Investment) with the B20 vision (Inclusivity, Continuity, Connectivity) through the six B20 task forces (Trade, Infrastructure and Investment, Financing Growth, Employment, Anti-Corruption, SMEs and Entrepreneurship) is a 54-dimensional challenge. The relevance of the final recommendations will then be limited. Better instead to follow the 2013 self-assessment report which found that in cases where a B20 task force focused directly on a G20 goal, the chances of its recommendations being accepted were higher. This makes common sense.

In its defence, the B20 is only in its fifth year, an infant in the forum world (the World Economic Forum has been around since 1971). Assessing its impact may even be unfair. The forum has become more organised and representative since the 2013 self-assessment report. Turkey launched the first B20 meeting in Istanbul in December 2014 with a larger contingent of over 500 Turkish and international business leaders in attendance. The chambers of commerce are now included in B20 meetings, and they claim that G20’s responsiveness to their suggestions has improved.

Yet, as the forum grows, there is a risk that competing interests will dilute its mandate to lobbying. The forum needs reconfiguration, without which its role may become ineffective.

First, it must shift from advisory to facilitation. The only Presidency that seems to have adopted this spirit publicly is Mexico in 2012. It specifically asked what business itself can do first, before it advised governments on what they should do.

For instance, at the Mexico Summit, the B20 leaders themselves created a club of international financial institutions – the Green Growth Action Alliance – for introducing a “programmatic” approach to private financing of green infrastructure instead of the ad hoc project-by-project financing that lending institutions such as the World Bank were used to. This group was formally launched with more than 40 multilateral and multinational financial institutions with its secretariat at the World Economic Forum. It went on to incubate new financing models; two of them were related to renewable energy initiatives in India.

Second, the B20 must refrain from replicating the mission of the World Economic Forum (B20 collaborates with WEF as a partner). Rifat Hisarcıklıoğlu’s, the dynamic Chair of B20 Turkey, compared the G20 to the “world’s economic steering committee” and Davos as the “compass” at WEF 2015. This is contrary to the very raison d’etre of the B20 and Hisarciklioglu’s own mission of including small and medium enterprises as equal stakeholders. WEF’s purpose is to seek the support of the world’s political leaders for meeting business goals whereas the B20’s purpose should be the exact opposite — to galvanise the world’s business leaders for helping the political leaders meet nation-building goals.

Third, the B20 is underplaying the role of technology in the critical issue of job creation – a problem that affects developing and developed nations. This is not only a limitation of imagination but also a denial of reality. Technology firms can contribute as much to GDP and jobs as infrastructure. Google and Apple in the US or Flipkart and TCS in India are common examples. But technology barely makes it as a sub-category of the task forces and technology entrepreneurs remain underrepresented at B20.

The implications of this are evident. This year the B20 Infrastructure task force is brainstorming on how the $57 trillion needed for global infrastructure spending by 2030 can be galvanised. No one has questioned (yet) why spending, say, $10 billion or (less than 2% of the estimate) on scientists at new infrastructure technology research centres in each of the 20 countries to discover affordable materials, would not be a better investment instead.

Lastly, the most game-changing proposals for global economic governance under the G20 have been made by institutions such as the International Securities Organization (IOSCO) on the credibility of global financial and energy benchmarks, by the Financial Action Task Force (FATF) on the loopholes for money-laundering, or by the OECD on mechanisms for catching tax evasion. The B20 can play a similar role for the G20, using its own competencies, of providing business solutions to global problems. For instance, both in 2011 and 2012, the B20 recommended that a multi-currency architecture be introduced, one that enables trade and investment in non-dollar currencies. But even when governments and central banks have tried, businesses have backtracked, reluctant to experiment for fear of costly hedging and transition costs. This could have been a model problem for the B20 to help central bankers to solve.

As the world’s economic health remains in intensive care, expectations from Turkey’s Presidency of the G20 are high. Turkey’s agenda for 2015 has been welcomed in India, which relates to Turkey as another emerging market. Prime Minister Narendra Modi’s focus on business as the driver for foreign policy fits nicely with the objectives of the B20. India has played an important role in shaping the recommendations in previous years. If the B20 can reconfigure its approach, Indian business too can help the G20 in realising its priorities. As we know with the outsourcing wave, business solutions to global problems can emerge from India.

Akshay Mathur is Head of Research at Gateway House: Indian Council on Global Relations.