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The G-20 Development Working Group Agenda – Clare Walsh and Scott Morris
00:26:42
Clare Walsh, a senior official in the Australian Department of Foreign Affairs and Trade and the chair of the Development Working Group of the G-20, recently visited CGD for a round-table discussion with CGD senior staff. Afterwards I hosted her and...
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- [00:09]
A
Welcome to the Global Prosperity wonkast. I'm Lawrence MacDonald. I'm pleased to have with me in the studio today Claire Walsh. She is a First Assistant Secretary in the Australian Department of Foreign affairs and Trade. But more importantly, she is the chair of the G20 Development Working Group. Claire, welcome to the show.
- [00:26]
B
Thank you very much for having me.
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A
I also have Scott Morris. He's a senior visiting associate with us and when he was working in the U.S. treasury, among other things, looked after U.S. ties with the G20's development agenda. Scott, welcome back.
- [00:40]
C
Thank you. It's a pleasure to be here.
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A
We've just had a small roundtable discussion here with some CGD senior staff. We heard a bit about the agenda that Australia has as the presidency of the G20. I should say that the summit is going to be in the middle of November and in Brisbane, in Queensland. I imagine that that's something that some Australians are pretty excited about.
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B
Very excited about, particularly people living in Brisbane.
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A
And within the larger G20, of course, which has primary responsibility for looking after global economic and financial flows. There's this thing called the G20 Development Working Group. Claire, for those listeners who maybe are hearing from about it for the first time, what is it? Where did it come from and what does it do?
- [01:27]
B
So the G20 Development Working Group was really established under the Republic of Korea's presidency in 2010. It was in recognition that the developing countries, the non G20 members, are really important contributors to economic growth, which is the G20's mandate. And so it was established a separate working group to look at the specific issues for developing countries that are both important to them and important to the G20 economies as it thinks about delivering its mandate.
- [01:57]
A
We followed that pretty closely. We provided a number of forums for the Koreans when they were doing it. And I actually lived in Korea myself for a number of years. And so I know the Koreans felt very proud of themselves, both as a country that had graduated, become a wealthy country and a member of the oecd. They also saw themselves as a bridge to the developing countries and saw that as an important legacy. I think as a result of that, they kind of loaded up the agenda. If I recall, there were nine pillars. It was a little bit potentially unmanageable. How is that spun out going forward?
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B
So I think the response to the establishment of the Development Working Group and the design of its work program was the response was quite overwhelming. Obviously there was a lot of support for it and lots of countries put in ideas that were reflected in the sole action plan it did end up in nine villas, as you said. And I think it was a strong learning curve for the Development Working Group. It hadn't looked at these issues before. The G20 hadn't looked at these issues specifically. And so there was a lot of learning. And what happened last year under the Russian presidency is we did a bit of a stock take. We had a look at those nine pillars, we had a look at three years worth of activity and did an accountability report, which is available for anyone who wants to read it, and was able to see whether actually we were doing too much or we were doing too much. We were doing things that maybe weren't the biggest priority for the G20. And so what we did was recognise that we could tick off some items, we could say that we had done things that we said that we were going to do, and then have a look at what we wanted to do next. And so, under Russia's presidency, we narrowed down the agenda into five areas.
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A
I want to hear about those five. But before we do that, I was so interested in the roundtable. You've been involved in the United nations before in climate talks and the unfccc, and you describe the difference between your experience in those larger, more formal negotiating settings and what the G20 working group is. And I think when we think about these five priority areas, it'll be interesting to understand what the dynamic is around the table. What kinds of people are there and how do they behave, what do they do?
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B
Right, so you're right. I have had the experience of negotiating in the United nations and also just engaging in discussions in the United Nations. They're not always negotiations, but they're unwieldy at points. There's a lot of countries that have a lot of interests, and so sometimes the conversations are, I wouldn't say more difficult, just more complex. Maybe when you have 192 countries all engaging in the same discussion. The G20 is an interesting grouping. You have experts around the table, you have an interesting mix of countries with an interesting mix of experience. But it's not just the G20 economies sitting around the table. You've also got the international organisations, so the key ones that are a big part of any development outcomes that might be achieved globally. So your multilateral development banks, you, your key UN agencies, UNDP is there, the FAO is there, the IMF is there. There's a range of organisations. The ILO is there to bring that perspective into a discussion. Discussions are quite targeted. They tend to look at reports or evidence that we've asked the international organisations to bring to the table. It requires the international organisations also to think quite comprehensively across rather than just within the mandate of individual organisations. But also around the table are representatives of developing countries. So there's always a representative from nepad, a representative from the African Union, the Chair or the President of ASEAN every year. And then each presidency has the ability to invite two other countries in addition to that.
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A
So there are 50 people in the room.
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B
They're big meetings. They're not as big as the un, but they're big meetings.
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A
And Scott, I want to bring you in here. Were you involved in meetings like that when you were in Treasury? Was that part of your job or your boss's job? Who was doing that?
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C
Sure. I mean, one of the challenges for I think all of the G20 countries is who's going to represent at any point in time and just with schedules being aligned correctly. So yes, I participated directly in a number of the development working group meetings after the Koreans started it up, primarily in the French and Mexican presidencies actually.
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A
So then maybe you'll have different answers to this question, but you'll both have experience in that regard. So you have people who are maybe for secretary level, they can speak authoritatively on behalf of their government, they can certainly listen, they're well intentioned and smart. But then, and it's small and informal enough that you can have a true conversation, maybe unlike in a large UN forum, but then you've got all this in your head and you go back to your ministry or you go back to treasury, what sort of feedback mechanisms can there be? I mean, you might have come out of a meeting like that, Scott, and said, you know, really makes sense that the G20 should do X, then you've got to go back and make a case for it. Right. How does that work?
- [07:12]
C
I think we have a strong sense of our marching orders going into any meeting. It is, you're right, there's a balancing act of having sufficient flexibility that you can have a real conversation. And even if you want to call it a negotiation, you know, you want this to be a meaningful exercise. On the other hand, you are representing your whole government and there are various equities in all of our governments around these issues. So, you know, there is a process that goes on, I think, within each of our governments ahead of these meetings to collect the input from the various agencies and make sure you know what the red lines are, what your basic parameters are, what the objectives are. And you know, so it does, you know, I think certainly the US has taken the DWG very seriously and has devoted a lot of effort to making sure we show up as full participants and really try to move the ball forward.
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A
But is there any point at which a consensus could emerge from a discussion like that that would cause the participants to do something different than they would have done? If it's just a matter of representing your government, then the fact that, Claire, you said the discussions are much more, you know, interesting or congenial or useful than in the larger setting. But if you kind of go in with your marching orders and you leave with your marching orders, then does anything change? Claire, I'm trying to understand the process because this is not the leaders we're talking about. These are, you know, hardworking, well intentioned civil servants at a senior level. What is the dynamic that creates change out of something called the development of working group at the G20 level? Can you give me an example of something that might, where a discussion might have led to something that would be different or does it all percolate up to the leaders?
- [08:51]
B
So I think that it's important not to sort of think about the G20 as so radically different to any other intergovernmental forum in the way that you're in the sorts of things that you're talking about. So whenever countries get around a table, whenever governments get around a table, whether there's two or 192 countries around that table, they come with a government perspective, of course. And so you go through those whole of government consultations to make sure that what your government position is coming into any meeting is clear. And with the G20, just to provide an example, I wouldn't go into a G20 meeting without having talked to my treasury colleagues because so many of the issues are interrelated. And so I think that's not unique about the G20 or the development working group. But, but let me give you an example of something that might happen, might change. So under the French presidency, food security was a big priority for the French presidency. And so the discussion was what is it that the G20 can do on this agenda? The French brought to the table some proposals, so governments around the table would have thought about those proposals, consulted widely within their governments and consulted with other non government actors as appropriate, and brought that position to the table through that debate. Because you're getting different perspectives, which is important when you're thinking about a global effort. You can then go back and say, okay, do we need to redesign this initiative? Do we have to think about this differently? What is it that we have to do to adjust it, to recognise issues that we didn't think about when we first put it forward or as a result is going to be significantly improved if we do two or three things that were suggested from the floor or. Or has a better chance of getting up if we avoid some of the big sensitivities that are obviously emerging. And then you shape the initiative or whatever it is you're trying to do over a number of meetings so that you can actually deliver something at the end. And that's really how it works. It's just important when you're trying to do a global effort. You know, lots of countries coming together to do a few things that there is no one size fits all. The first thing that's put on the table will be one country's perspective or one international organisation's perspective or however a thing gets on the table and. And then it gets moulded when you bring really important perspectives to bear on the issue.
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A
That's terrifically helpful. For me as somebody, it's always seemed very kind of opaque. We're going to take a quick break. When we come back, I want to ask you, Claire, to go very quickly through the list of the five things that came out of this nine pillared process and then maybe to shift to having given the example of the food security work, some of the things that might come up in the Development Working Group during Australia's presidency. This is the Global Prosperity Wonkast from the center for Global Development. My guests today are Scott Morris and Claire Walsh of the Development Working group in the G20. We will be back in a moment. Welcome back to the Global Prosperity Wonkcast. I'm speaking with Claire Walsh. She is the chair of the Development Working group in the G20 during Australia's presidency. The summit is coming up in November and Claire's just given us a wonderful rundown of. Claire and my other guest, Scott Morris have talked about this dynamic of where change can come from out of the G20 working group process. Claire, I said I was going to ask you to tell us the five priorities. There was this big effort with the Koreans, I think very, very ambitious. Nine pillars, subcomponents. In all the pillars under the Russian presidency, you've said it was boiled down into five areas. Can you tell me the five?
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B
I can. So the first area is infrastructure and specifically investment in infrastructure. The second is domestic resource mobilisation and I'll come back to giving you some more detail around these later. The third area is financial inclusion. The fourth area is food security. And the fifth area is human resource development.
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A
It's so easy to list them. I imagine that coming up with the list of five was really an easy process too, huh?
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B
Very strong.
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A
The domestic resource mobilization. There's some resonance with that in some of the work that my colleague Alex Cobham is doing here on tax and transparency. But it struck me also as being a little bit of a deliberate shift from the traditional G7, G8 agenda, where so much was focused on foreign assistance and aid. When you talk about domestic resource mobilization, you're immediately saying most resources are raised by countries themselves and we want to put in place changes that are going to help them to do a better job of that. Is that sort of. What's the subtext in the selection of this one? It's not about aid, it's about domestic resources.
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B
So, no, it's not so much. I wouldn't characterise it that way. That is certainly part of the discussion in a broader development finance discussion that's happening in any number of international forum at the moment. In the G20, it's really about economic growth. That's what the G20 is focused on. The finance ministers have looked at two elements of what we're calling domestic resource mobilisation as it pertains to global efforts. And one of those is around base erosion and profit shifting. And so that's where you're seeing what is base erosion. So this is your tax base, basically the base that you collect through your own domestic taxation. And that's eroding because it's been taken offshore. And so that's looking at how your bases are eroding that way. And then the other one is automatic exchange of information, which is just a standard about how countries exchange information. In a globalised world, individuals are paying tax in multiple jurisdictions. So how do you get a sense of where those taxation arrangements are working? Because it allows you to manage some of the illegal issues in the leakage that's happening.
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A
And I understand from my familiarity from Alex's work that in the past it's been, I need to request it, I kind of need to know what I'm requesting before I ask for it. I might not get the information back. If it's exchanged automatically, then if I'm trying to figure out if somebody owes me tax or not, it's going to be a lot easier.
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B
That's right, exactly. It's not easy to do. No one seemed under any illusion that it's a straightforward thing to do. But yes, that's the principle that you have have an automatic Exchange of information. But going back to your question, though, about ODA and what the drm, the Domestic Resource Mobilisation Agenda is about, there is a recognition, though, that if a country is going to develop with some strength, then a domestic tax base is important. It's not the only thing. There is a lot of other things that come into play, but being able to raise your own revenue is a really critical part of development. We all know that. What we're doing in the Development Working Group, though, is picking up the issues that finance ministers are talking about around base erosion and profit shifting and this automatic exchange of information and saying, what does this mean for smaller economies, less developed countries, where some of this is quite challenging? You know, meeting these gold standards will be not without challenges for developed countries, let alone for developing countries. So what we're looking at is what. What are the steps, what are the roadmaps to achieving that gold standard of automatic exchange of information? Or what is the issue around base erosion and profit shifting for a variety of countries? So depending on their development levels or other considerations, so that we can put them in context of a broader discussion around taxation. And so that's really where the Development Working Group is taking that agenda. And from that we can then say, well, what are the tangible, practical, pragmatic things that the Development Working group and the G20 can work on with developing countries on the broader issues of taxation? And the issue around capacity building comes up a lot. So, you know, for many countries, their treasury or their Finance department isn't skilled up or doesn't have sufficient people to do the kind of complex tax arrangements or the even less, not so much complex, but at the necessary tax arrangements that really are required to have a strong base.
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A
Financial inclusion refers to the ability primarily of poor people to participate in the financial system. There are all sorts of benefits that flow from that. There are also. My colleague Liliana Rojos Suarez has noted sometimes there are risks too, both to the individuals and systemic risks that arise. What's the particular piece of the financial inclusion agenda that you think will be advanced during Australia's presidency within the Development Working Group?
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B
So you're right about the financial inclusion. I was at a meeting yesterday with the Group of Countries in the Commonwealth and La Francophoni and there was a presentation done by a professor and I was quite shocked, I guess, to see that the informal sector in Africa, in a lot of African countries, is something up towards 90% of employment and income generation. But amongst those groups, and particularly for women, there's no access to basic services. You can't get a bank account, you can't access a line of credit, you can't get insurance, you can't do a number of things that many of us take absolutely for granted. And so if you're going to grow your economy, if you thought about being in America or in Australia and you wanted to grow your economy, but you didn't have access to credit, I mean, can any of us even imagine a world where that wasn't possible and you're trying to better yourself as an individual or your overall economy?
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A
Is this something that a G20 development working group can tackle? Is that by giving instructions to the World bank or setting standards or what would be the mechanisms for addressing the problem you described so well?
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B
So there's a whole bunch of things that you could do. And what we're doing at the moment is going through a. A bit of evidence raising, I guess, to say what are the starting points? Because it can be quite overwhelming when you think of all the challenges that are involved. So there's opportunities around technology. For many people, just identifying themselves is challenging. Where there's no birth certificates or records of birth and no other kind of ways of identifying. Can we use technology to allow an individual to identify herself and therefore be able to have a bank account? There's issues around service provision. You know, if you're in very remote and rural areas, how do you think about providing services to people in those locations that isn't broadly expensive? You know, we need innovative approaches around that. How do you get around some of the concerns about security in transferring funds? And how do you target interventions that really target women, basically, because a lot of the people that aren't accessing these services are actually women.
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A
Talk to me about infrastructure. I'm very conscious. Although Scott said he was going to be shy and not speak, it's something that he's done a lot of work on. But Claire, maybe tell us first, within the Development Working Group, the focus on infrastructure in the coming year.
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B
Infrastructure is a top priority for the G20 full stop, not just for the Development Working Group. No one would argue that a big part of economic development, regardless of your current country's circumstances, will be an infrastructure. It's a challenge for Australia, I'm sure it's a challenge for the us. It's certainly a challenge for developing countries. So we're linking very closely into the work again of finance ministers. There's a big part of this story around private sector. You know, the investment is going to have to come from the private sector into infrastructure. It can't just come from public sources. And we know that the numbers of needs, the dollar amounts, is just so overwhelming. So what is it? So taking it back to the Development Working Group, what are the sorts of things that are barriers at the moment to infrastructure investment in developing countries? There is obviously an issue around foreign direct investment and why private sector is investing to the level that many of these countries would like. But there's also some big issues around project preparation. So what's the pipeline of projects? How is the support at the national level and even at regional levels being provided so that you do have good quality projects being developed in a timely way that can attract investment, that you're able to look at very complex projects from the various risk perspectives and other considerations, and there's a big gaps in that. So the work that we started doing some work a couple of years ago looking at project preparation facilities in Africa and the Australian presidency, we're taking that work and building on it by looking at the Asia Pacific region. Now we'll see, I'm sure, some common threads. It doesn't matter whether you're in Asia or Africa. Some of those challenges will be similar and I've got no doubt there'll be differences as well. So the African one showed us there's a great deal of fragmentation around the various project preparation facilities out there. The Asia story, I think, is going to tell us that there's not so much an issue around fragmentation. There's actually not that many project preparation facilities, except those may be run by the multilateral development banks. So when we get a sense of what is out there and where those challenges are, we can then think about the interventions. But very much focused on the. In the Development Working Group, on the project preparation for. In the finance ministers, they're looking at a whole range of issues around infrastructure, including private public partnerships, looking at issues of concessional lending and the approaches that the MDBs take, looking at issues around risk and how you manage those sorts of things? So it's an extremely comprehensive agenda at the moment on the G20.
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A
Scott, it's something that you've been looking at pretty closely. Do you have anything to add to what Claire said about the infrastructure agenda?
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C
Just the reaction that I think it's. I mean, number one, the fact that it has been a consistent priority, I think speaks well of the G20's approach to development, frankly, because it is the right priority, but it's also a good example of where the G20 can bring value. This is a highly complex issue. And the response, in contrast to say the G7 approach, historically where it is about a small group of donor countries coming together and say, what are we going to kick a bunch of money in for? That is not the approach. And it can be the approach of addressing the infrastructure issue. So, you know, it's a much more complex issue in trying to figure out not only what are all the elements of fixing this problem, but then what does the G20 do about it? It's impressive where the group is right now, particularly using the DWG in one way that's complementary to what this other work in finance ministers is doing on the same basic problem. But how does all this add up to a robust agenda? And I think they're really on the right track.
- [24:14]
A
I remember when the Koreans were putting forth the idea of having a development working group, that infrastructure was at the top of their list. I think based in part on their historical experience, their investments in infrastructure proved to be very important. So I don't imagine they were delighted to see their nine pillars trimmed, but they were probably pretty happy that infrastructure wound up at the top of the list.
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B
Again, I think Korea was absolutely on board with the streamlining of the agenda. They had no problem with that happening. They were fully supportive. They didn't see their agenda, their legacy, being undervalued by any stretch. It was a logical next step for.
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A
Us and they must be pleased the development working group continues to function as well.
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B
Absolutely. And they continue to be a very strong partner in it. Just going back to the issue around infrastructure, I had an interesting conversation with the chief economist of the Bangladesh Reserve bank yesterday who was saying one infrastructure project that they have planned, which is a very large infrastructure project, but one alone he estimates, would increase their GDP by 1 percentage point. I mean, that's an amazing statistic.
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A
What is it?
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B
It's a big bridge, road type, bridges and roads. But it just tells you just how critical it is to economic growth that you get good and well designed infrastructure.
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A
Well, Claire, thank you very much for joining me. It's delightful to have you as a guest. And Scott, thanks for coming back on the show. This has been the Global Prosperity Wonkast from the center for Global Development. My guests today are Claire Walsh, she's the chair of the G20 Development Working Group, and Scott Morris, a senior policy associate here at the center for Global Development. You can find the Wonkast online on itunes and on stitcher. Just search for wonkcast or CGD and sign up to hear a new interview every week until next week. I'm Lawrence MacDonald. Thank you for listening.