It's all about growth and jobs

The OECD’s contribution to the Saint Petersburg G20 summit

©OECD

The Russian presidency of the G20– the “premier forum for international economic cooperation”–is fast approaching its climax with the leaders’ summit taking place in Saint Petersburg on 5 and 6 September. By presiding over a group that represents 80% of the world’s GDP and that is sometimes dubbed the “steering committee” of the world economy, Russia has used this influential position to make a significant contribution to strengthening the recovery of the world economy.

Indeed, the Russian government, under the able supervision and leadership of its Sherpa and finance teams, took on this responsibility in an ambitious and innovative manner, showing strong leadership in crafting a coherent agenda. Its emphasis on fostering growth was more than welcome in light of the very precarious prospects still faced by many G20 countries, the harsh social consequences of the crisis, and the hesitant recovery in trade and investment. In our most recent analysis, the OECD has concluded that by historical standards, the global recovery has been particularly slow, and five years into the crisis G20 countries still show a significant output gap.

As a well-established partner of the G20, our organisation has been honoured to make an active contribution to the Russian presidency. The growth theme developed by the presidency with our support helped identify the key challenges facing the world economy and develop appropriate and concrete measures to address them.

Structural reforms, jobs and investment
In a very effective process, the Russian presidency identified a number of key levers required to overcome the challenges stemming from the crisis and to foster growth. The first item on the agenda is the need for all G20 economies to engage in advancing structural measures. For some time now, the OECD has documented the fact that, given the limited room to rely on monetary or fiscal tools, structural reforms are key to stronger, more sustainable and inclusive growth. Building on our annual Going for Growth publication, we assisted the G20 in monitoring the implementation of countries’ policy commitments on structural reforms endorsed at the Los Cabos summit. We have also played an active role in designing and enhancing the structural policy component of the new Saint Petersburg Action Plan that will be endorsed by G20 leaders at the summit.

Next on the agenda is the flagship initiative of the Russian presidency– financing for investment–aimed at reigniting investment, notably long-term investment, by harnessing and unlocking traditional and innovative sources of financing. The OECD has made a decisive contribution to this initiative and will deliver high-level principles to G20 leaders at the summit aimed at guiding policymakers in establishing an environment to encourage increased long-term investment by institutional investors.

Job creation and the enhancement of labour and employment policies have also been at centre stage under the Russian presidency. This is not surprising given that there are now 93 million jobless people in G20 countries. Together with our colleagues from the International Labour Organization (ILO), we have continued to support G20 efforts in this area, in particular by providing specific policy advice for countries on job creation activities, activation policies and support for the most vulnerable. In this context, we participated in the fourth meeting of G20 labour and employment ministers and the first joint meeting of labour and finance ministers, which were held back-to- back in Moscow in July 2013.

Ongoing G20 work on financial inclusion, financial consumer protection and financial education is an important complement to financial reform because this enables individuals to be better prepared to understand complex financial instruments and the risks they are confronting when engaging with them. The OECD has provided policy guidance on the effective implementation of the G20 high-level principles on financial consumer protection and on financial education endorsed at the Cannes and Los Cabos summits respectively. In addition, we took on an active role in the (broadly positive) assessment of the three-year implementation of the Seoul Multi-Year Action Plan on Development (Accountability Report on G20 Development Commitments) and in the design of a road map for future G20 work on development (the Saint Petersburg Development Outlook). We continue to believe that the G20 has much to offer to low income countries for them to benefit from a stronger world economy, and from the agreements that can be reached in the context of the G20.

Establishing a growth-enhancing regulatory environment
While creating quality jobs and unlocking investment are key to boosting growth, it is also essential to address the regulatory failures that contributed to the crisis and to create a regulatory environment conducive to higher but sustainable growth. It is also important to ensure that the financial system plays the role it is called to do, to finance productive activities and to act as the conveyor belt of the economy. In this respect, the OECD made very concrete proposals under the Russian presidency to achieve its objective of growth through effective regulation.

In the field of financial regulation, we insisted on the need to complete the repair of the financial system and to restore the banks’ role. We called for ambitious structural banking reforms, in particular for the separation and ring-fencing of risky (derivatives) and more traditional (retail) activities of banks. We also made the case for an appropriate recapitalisation of banks in advanced economies, notably in the euro area, by assessing banks’ need for fresh capital in light of a simple leverage ratio. We welcome the fact that these bold longstanding proposals are now gradually making their way up the agenda of G20 policymakers and regulators.

An additional priority, and one where G20 countries can show strong leadership, is to foster higher rates of growth by keeping markets open for trade and investment. In this context, we have continued to provide our support, along with the WTO and UNCTAD, to monitor protectionist measures in the G20, as well as provide analytical evidence of the gains, in terms of jobs and growth, of open regimes for trade and investment. During the Russian presidency, our work on global value chains and trade in value-added has made an even stronger economic case for further multilateral liberalisation and advancing negotiations on issues such as trade facilitation by exposing the self-defeating nature of protectionism in an increasingly interconnected world.

Re-instilling trust and confidence
Last but not least, we welcomed the Russian presidency’s focus on reigniting growth through trust and transparency. Indeed, one of the factors behind the weakness of the ongoing recovery is the loss of confidence and trust among citizens and economic actors in institutions, both government and markets, because of the crisis.

 Upon the request of G20 leaders, the OECD is making a significant contribution to this agenda through its work on international tax transparency and tackling tax base erosion and profit shifting (BEPS). Aggressive tax planning, as well as tax evasion and avoidance, constitute serious risks, not only to tax revenues but also to tax sovereignty and tax fairness in all G20 countries. For the Saint Petersburg Summit, the OECD, together with G20 members, has developed a comprehensive and ambitious G20/OECD Action Plan on Base Erosion and Profit Shifting aimed at revisiting the rules, standards and transparency of international taxation, including double (non-)taxation and transfer pricing. Moreover, the G20, with OECD support, has committed to move to automatic exchange of information on tax matters, which G20 leaders are likely to designate as the new global standard at the Saint Petersburg summit. The tax agreements in the G20 to move to higher rules of the game are one of the most important achievements of the group, and we are proud to have played a central role in these negotiations.

More than ever, the OECD is a natural partner of the G20
The appreciation and reliance of the Russian presidency on our contributions is not only testimony to the depth, breadth and quality of OECD work, but also to its interest in making real progress on the international economic agenda. Working closely with it, the OECD has been able to make a significant contribution to the goals of the G20, through a mutually beneficial relationship. Beyond the substantive achievements outlined above, we have had the pleasure of working with a very able Russian team, and I wish to take this opportunity to recognise Ksenia Yudaeva and Svetlana Lukash in the Sherpa track, and Sergei Strorchak and Andrei Bokarev in the finance track as the brains behind pulling together this very meaningful agenda, and who have relied on the good work of OECD experts. On our side, I would like to highlight the substantive work and meaningful contributions of the relevant OECD directorates in the fields of taxes, employment, trade, investment, development, environment, anticorruption and financial education, the leading role of our Finance Deputy, OECD Chief Economist and Deputy Secretary- General Pier Carlo Padoan, and the coordination and support of our Sherpa Office, namely Nicolas Pinaud and Andreas Schaal, who stepped in as head of the Sherpa Office when Fabrizio Pagani was appointed as the Italian G20 Sherpa and the diplomatic counsellor to Prime Minister Enrico Letta.

The very solid and strategic preparations augur well for meaningful outcomes during the G20 summit and we are glad to be part of this very relevant effort.

Visit www.oecd.org/g20

© OECD Observer No 295 Q2 2013




Economic data

GDP : +0.50%, Q4 2014
Employment rate: 65.7%, Q3 2014
Annual inflation : 0.51% Jan 2015
Trade : -3.0% exp, -3.7 imp, Q4 2014
Unemployment : 7.045% Q4 2014
Recovery ahead? Composite leading indicators
Updated: 24 Mar 2015

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