Inter Press Service » G20 Turning the World Downside Up Thu, 26 Mar 2015 14:29:25 +0000 en-US hourly 1 OPINION: A New Era of Hemispheric Cooperation Is Possible Sun, 18 Jan 2015 18:34:54 +0000 Luis Almagro Luis Almagro, Minister for Foreign Affairs of Uruguay, addresses the opening of the 16th session of the Human Rights Council, in Geneva, Switzerland. Credit: UN Photo/Jean-Marc Ferré

Luis Almagro, Minister for Foreign Affairs of Uruguay, addresses the opening of the 16th session of the Human Rights Council, in Geneva, Switzerland. Credit: UN Photo/Jean-Marc Ferré

By Luis Almagro
MONTEVIDEO, Jan 18 2015 (IPS)

Two decades after the first Summit of the Americas, a lot has changed in the continent and it has been for the good. Today, a renewed hemispheric dialogue without exclusions is possible.

Back in the mid-1990s, at the time of the Miami summit, it was the time of imported consensus, models of economic and social development exclusively based on the market and its supposed perfect allocation of resources through the invisible hand.Today, all voices count, and if they do not, they will have to. The powerful club of the G8 turned into the G20; still, this is not enough to embrace the new reality of our hemisphere.

Hidden under a development rationale, the greatest wave of privatisation and deregulation took over the continent. The role of the state was reduced to be a facilitator of a process based on the principle of survival of the fittest. Solidarity, equity and justice were all values from the past and poverty a necessary collateral damage.

However, these values were in the top of the minds of the people of the hemisphere, who turned their backs to these policies and instead during the past 15 years, have forcefully supported the alternatives that combine economic growth with social inclusion, broadening opportunities for all citizens.

Economic growth went hand in hand with social inclusion, adding millions to the middle class – which today accounts for 34 percent of Latin Americans – surpassing the number of poor for the first time in the history.

If this was possible it was because governments added to the invisible hand of the market, the very visible hand of the state.

And this took place within the context of the worst post war global financial crisis that led to an unprecedented recession in the United States and Europe, which the latter still strives to leave behind.

Growth with social equity turned out to be the new regional consensus.

Today, this binds the region together.

Today, conditions are present to set up a more realistic cooperation in the Americas, where all members could partner in equal conditions, from the most powerful to the smallest islands in the Caribbean.

Today, nobody holds the monopoly over what works or does not; neither can anybody impose models because the established truths have crashed against reality. While in the 1990s social exclusion in domestic policies and voice exclusion at the international level were two sides of the same token, this in not any longer acceptable.

Today, all voices count, and if they do not, they will have to. The powerful club of the G8 turned into the G20; still, this is not enough to embrace the new reality of our hemisphere.

To the existing bodies, the region has added in this past decade the dynamic UNASUR in South America and CELAC in the Americas, thus leaving the OAS as the only place for dialogue among all countries of the Americas, whether large, medium, small, powerful or vulnerable.

But, governmental or inter-governmental actors by themselves are not the only answer to the problems of today´s world. Non-state actors of the non-governmental world, the private sector, trade unions and social organisations must be part of the process.

Leaders need to interpret the time in order to generate an agenda for progress, but progress that is tangible for people, for citizens, to whom we are accountable to.

Therefore, in a more uncertain international economic environment, we should focus on maintaining and expanding our social achievements and a new spirit of cooperation in the Americas can be instrumental for that.

The Summit of the Americas in Panama, in April 2015, may be the beginning of this new process of confidence building, where all countries can feel they can benefit from a cooperative agenda. This will be a historical moment because this time there will be no exclusions.

The recent good news on the diplomatic front related to the normalisation of diplomatic ties between the U.S. and Cuba and the participation of Cuba in the Summit represent an additional positive signal. Panama deserves the support of the entire region before and during the Summit.

This will be a great opportunity to strengthen democratic values, the defence of human rights, institutional transparency and individual freedoms together with a practical agenda for cooperation for shared prosperity in the Americas.

Edited by Kitty Stapp

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The Future of the Planet and the Irresponsibility of Governments Fri, 21 Nov 2014 08:23:09 +0000 Roberto Savio

In this column, Roberto Savio – founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News – argues that governments are unwilling to take steps to do something concrete to halt climate change because of their incestuous relations with energy corporations and because they are unable – or unwilling – to see beyond their immediate existence.

By Roberto Savio
ROME, Nov 21 2014 (IPS)

Less than a week after everybody celebrated the historical agreement on Nov. 17 between the United States and China on reduction of CO2 emissions, a very cold shower has come from India.

Indian Power Minister Piyush Goyal has declared: “India’s development imperatives cannot be sacrificed at the altar of potential climate change many years in the future. The West will have to recognise we have the needs of the poor”.

This is also a blow to the Asia policy of U.S. President Barack Obama, who came back home from signing the CO2 emissions agreement in Beijing, touting his success on establishing U.S. policy in the region.

Roberto Savio

Roberto Savio

But, more importantly, will give plenty of ammunition to the Republican Congress, which has been fighting climate control on the grounds that the United States cannot engage on climate control unless other major polluters make similar commitments. This was always directed to China, which had refuse to make any such commitment until President Xi, to the surprise of everybody, did so by signing an agreement with Obama.

India is a major polluter, not at the level of China, which has now reached 9,900 metric tons of CO2, against the 6,826 of the United States. But India is coming up fast. “The incestuous relations between energy corporations and governments are out of the public's eye. It is yet further proof that, even when nothing less than survival is at stake for islands and coastlines, agriculture and the poor, governments are unable – or unwilling – to see beyond their immediate existence”

Goyal has promised that India’s use of domestic coal will rise from 565 million tons last year to more than a billion tons by 2019, and he is selling licences for coal mining at a great speed. The country has increased its coal-fired plants by 73 percent in just the last five years. In addition, Indian coal is of poor quality, polluting twice as much as coal in the West.

Nevertheless, newly-elected Indian Prime Minister Narendra Modi has announced that he will embark on a major programme of renewable sources of energy, and there is an apparent paradox in the fact that many of the climate scientists who form the Intergovernmental Panel on Climate Control (IPCC) are from India. Its Director-General is an Indian, Dr. Rajendra K. Pachauri, who is also chief executive of the Energy Resources Institute in New Delhi.

The IPCC’s last report was much more dramatic than previous ones, stating conclusively that climate change is due to the action of man, and providing an extensive review of the damage that the agricultural sector is bound to face, especially in poor countries like India. At least 37 million people would be displaced by rising seas.

Indian towns are by far the most polluted in the world, surpassing several times each year the worst polluted day in China.

But what is more worrying is that governments are reacting too slowly. It would take a very major effort, which is not now on the cards, to keep temperature from rising by more than 2 degrees Centigrade, and therefore to start to reduce emissions by 2020. Emissions in 2014 are expected to be the highest ever, at 40 billion tonnes, compared with 32 billion in 2010.

The consensus is that to limit warming of the planet to no more 2 degrees Centigrade above pre-industrial levels, governments would have to restrict emissions from additional fossil fuel burning to about 1 trillion tons of carbon dioxide.

But, according to the IPCC report, energy companies have booked coal and petroleum reserves equal to several times that amount, and they are spending some 600 billion dollars a year to find more. In other words, governments are directly subsidising the consumption of fossil fuel.

By contrast, less than 400 billion dollars a year are spent to reduce emissions, a figure that is smaller than the revenue of one just one U.S. oil company, ExxonMobil.

The last meeting of the G20 in Brisbane earlier this month gave unexpected attention to climate, but the G20 alone is spending 88 billion dollars a year in subsidies for fossil fuel exploration, which is double that which the top 20 private companies are spending to look for new oil, gas and coal.

The G20 spends 101 billion dollars to support clean energy in a clear attempt to make everybody happy but, according to the International Energy Agency, if G20 governments directed half of their subsidies, or 49 billion dollars a year, to investment for redistributing energy from new sources, we could achieve universal energy access as soon as 2030.

Another good example of the total lack of coherence from Western governments is that they have pledged an amount of 10 billion dollars for a Green Climate Fund, whose task is to support developing countries in mitigating and adapting to climate change. That amount is two-thirds of what those countries have been asking for and, since its creation in 1999, the fund has still to become operational.

And it was only after the last G20 meeting that the United States pledged three billion dollars and Japan 1.5 billion, bringing the total so far to 7 billion dollars – one-third is still missing.

And now we have the upcoming Climate Conference in Lima, in December, where opinion is that governments will once again fail to reach a comprehensive agreement on climate change – and the amount of time left for the planet will reduce even further.

Besides the fight to be expected from the Republican Congress in the United States, there will be also be opposition from countries that depend on fossil fuels, such as Russia, Australia, India, Venezuela, Iran, Saudi Arabia and the Gulf countries.

So, governments show a total lack of consensus and responsibility. If a referendum could be held asking citizens if they would prefer to pay 800 billion dollars less in taxes to avoid subsidising pollution, there are few doubts what the result would be. And there would be same result if they were asked if they would prefer to invest those 800 billion dollars in clean energy or continue to pollute.

But the incestuous relations between energy corporations and governments are out of the public’s eye. It is yet further proof that, even when nothing less than survival is at stake for islands and coastlines, agriculture and the poor, governments are unable – or unwilling – to see beyond their immediate existence. We are direly in need of global governance for this kind of globalisation. (END/IPS COLUMNIST SERVICE)

(Edited by Phil Harris)


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G20 Seeks to Streamline Private Investment in Infrastructure Tue, 18 Nov 2014 02:00:43 +0000 Carey L. Biron Water pouring through the sluice gates at Gariep Dam in Port Elizabeth, South Africa. Credit: Bigstock

Water pouring through the sluice gates at Gariep Dam in Port Elizabeth, South Africa. Credit: Bigstock

By Carey L. Biron
WASHINGTON, Nov 18 2014 (IPS)

Industrialised countries have agreed to collaborate on a new programme aimed at funnelling significant private-sector investment into global infrastructure projects, particularly in developing countries.

The Global Infrastructure Initiative, agreed to Sunday by governments of the Group of 20 (G20) countries, will not actually be funding new projects. But it will seek to create investment environments that are more conducive to major foreign investors, and to assist in connecting governments with financiers.In developing countries alone these needs could require up to a trillion dollars a year of additional investment, though currently governments are spending just half that amount.

The initiative’s work will be overseen at a secretariat in Australia, the host of this weekend’s G20 summit and a government that has made infrastructure investment a key priority. This office, known as the Global Infrastructure Hub, will foster collaboration between the public and private sectors as well as multilateral banks.

“With a four-year mandate, the Hub will work internationally to help countries improve their general investment climates, reduce barriers to investment, grow their project pipelines and help match investors with projects,” Australian Prime Minister Tony Abbott and Treasurer Joe Hockey said Sunday in a joint statement. “This will help improve how infrastructure markets work.”

Some estimate the undertaking could mobilise some two trillion dollars in new infrastructure investment over the next decade and a half. This would be available to be put into electrical grids, roads and bridges, ports and other major projects.

The G20 has emerged as the leading multilateral grouping tasked with promoting economic collaboration. Together, its membership accounts for some 85 percent of global gross domestic product.

With the broad aim of prompting global economic growth, the Global Infrastructure Initiative will work to motivate major institutional investors – banks, pension funds and others – to provide long-term capital to the world’s mounting infrastructure deficits. In developing countries alone these needs could require up to a trillion dollars a year of additional investment, though currently governments are spending just half that amount.

In recent years, the private sector has turned away from infrastructure in developing countries and emerging economies. Between 2012 and last year alone, such investments declined by nearly 20 percent, to 150 billion dollars, according to the World Bank.

“This new initiative very positively reflects a clear-eyed reading of the evidence that there are infrastructure logjams and obstacles in both the developing and developed world,” Scott Morris, a senior associate at the Center for Global Development, a Washington think tank, told IPS. “From a donor perspective, this indicates better listening to what these countries are actually asking for.”

Still, Morris notes, it remains unclear what exactly the Global Infrastructure Initiative’s outcomes will be.

“The G20 clearly intends to prioritise infrastructure investment,” he says, “but it’s hard to get a sense of where the priorities are.”

Lucrative opportunity

The Global Infrastructure Initiative is the latest in a string of major new infrastructure-related programmes announced at the multilateral level in recent weeks.

In early October, the World Bank announced a project called the Global Infrastructure Facility, which appears to have a mandate very similar to the new G20 initiative. At the end of the month, the Chinese government announced the creation of a new Asian Infrastructure Investment Bank (AIIB).

Many have suggested that the World Bank and G20 announcements were motivated by China’s forceful entry onto this stage. As yet, however, there is little clarity on the G20 project’s strategy.

“With so many discreet initiatives suddenly underway, I wonder if the new G20 project doesn’t cause confusion,” Morris says.

“Right now it’s very difficult to see any division in responsibilities between the G20 and World Bank infrastructure projects. The striking difference between them both and the AIIB is that the Chinese are offering actual capital for investment.”

The idea for the new initiative reportedly came from a business advisory body to the G20, known as the Business 20 (B20). The B20 says it “fully supports” the new Global Infrastructure Initiative.

“The Global Infrastructure Initiative is a critical step in addressing the global growth and employment challenge, and the business community strongly endorses the commitments of the G20 to increase quality investment in infrastructure,” Richard Goyder, the B20 chair, said Monday.

“The B20 estimates that improving project preparation, structuring and delivery could increase infrastructure capacity by [roughly] 20 trillion dollars by 2030.”

Goyder pledged that the business sector would “look to be heavily involved in supporting” the new projects.

Poison pill?

Yet if global business is excited at the prospect of trillions of dollars’ worth of new investment opportunities, civil society is expressing concern that it remains unclear how, or whether, the Global Infrastructure Initiative will impose rules on the new projects to minimise their potential social or environmental impacts.

“Private investment in infrastructure is crucial for closing the infrastructure funding gap and meeting human needs, and the G20 initiative is an important move by governments to catalyse that private investment,” Lise Johnson, the head of investment law and policy at the Columbia Center on Sustainable Investment at Columbia University, told IPS.

“It is key, however, that the initiative and the infrastructure hub develop procedures and practices not only to promote development of infrastructure, but to ensure that projects are environmentally, socially and economically sustainable for host countries and communities.”

Prominent multilateral safeguards policies such as those used by the World Bank are typically not applied to public-private partnerships, which will likely make up a significant focus of the G20’s new infrastructure push. Further, regulatory constraints could be too politically thorny for the G20 to forge new agreement.

“In the 2013 assessment of the G20’s infrastructure initiative by the G20 Development Working Group, only one item of the whole infrastructure agenda ‘stalled’ – and that was the work on environmental safeguards,” Nancy Alexander, director of the Economic Governance Program at the Heinrich Boell Foundation, a think tank, told IPS.

“I’ve always gotten the feedback from the G20 that such policies are matters of national sovereignty.”

The G20 is now hoping that trillions of dollars in infrastructure spending will create up to 10 million jobs over the next 15 years, spurring global economic growth. Yet Alexander questions whether this spending will be a “magic bullet” or a “poison pill”.

“Some of us are old enough to remember how recklessly the petrodollars of the 1970s and 1980s were spent – especially on infrastructure … Then, reckless lenders tried to turn a quick profit without regard to the social, environmental and financial consequences, including unpayable debts,” she says.

“Seeing the devastation wrought by poorly conceived infrastructure, many of us worked to create systems of transparency, safeguards and recourse at the multilateral development banks – systems that are now considered too time-consuming, expensive and imperialistic.”

Edited by Kitty Stapp

The writer can be reached at

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U.N. Chief Eyes Upcoming Summits to Resolve Development Crisis Tue, 11 Nov 2014 18:31:42 +0000 Thalif Deen IPS U.N. Bureau Chief Thalif Deen interviews Secretary-General Ban Ki-moon. Credit: Lyndal Rowlands/IPS

IPS U.N. Bureau Chief Thalif Deen interviews Secretary-General Ban Ki-moon. Credit: Lyndal Rowlands/IPS

By Thalif Deen

The continued widespread economic recession – aggravated by the recent Ebola outbreak in West Africa – is threatening to undermine the U.N.’s highly-touted post-2015 development agenda.

Still, Secretary-General Ban Ki-moon is placing his trust and confidence on two key upcoming summit meetings: a G20 gathering of world leaders in Brisbane, Australia later this week, and the International Conference on Financing for Development (ICFD) in Addis Ababa, Ethiopia, next July.

In an interview with IPS, just before his departure to Brisbane, he described the G20 as “the world’s primary global economic forum”, while the ICFD, he predicted, will be “one of the most important conferences in shaping sustainable development goals (SDGs).”

Ban has already cautioned world leaders of the urgent need for “a robust financial mechanism” to implement the proposed SDGs – and such a mechanism, he said, should be put in place long before the adoption of these goals in September 2015.

In a letter to G20 leaders, he says the successful implementation of the growth and sustainable development agendas will depend largely on mobilising “all sources of financing”.

“It is difficult to depend on public funding alone,” he told IPS, stressing the need for financing from multiple sources – including public, private, domestic and international.

The G20, a rare mix of both developed and developing countries, includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom and the United States, plus the European Union.

Overall, the G20 represents about two-thirds of the world’s population, 85 per cent of global gross domestic product and over 75 per cent of global trade.

The G20 president, this time around Australian Prime Minister Tony Abbott, usually invites several guest countries to participate in the summit. The presidency rotates on a geographical basis.

The countries which previously hosted the G20 summit include the United States (in 2008 and 2009), the United Kingdom (2009), Canada (2010), the Republic of Korea (2010), France (2011), Mexico (2012) and Russia (2013).

At the meeting in Brisbane Nov. 15-16, Abbott will welcome Spain as a permanent invitee; Mauritania as the 2014 chair of the African Union; Myanmar as the 2014 chair of the Association of South-East Asian Nations (ASEAN); Senegal, representing the New Partnership for Africa’s Development; New Zealand; and Singapore.

The ICFD, scheduled for July 2015, is billed as a U.N. conference and will be attended by all 193 member states.

Speaking of financing for development, Ban said official development assistance (ODA), from rich nations to poorer ones, “is necessary but not sufficient.”

According to the latest available statistics, only five countries – Norway (1.07 percent), Sweden (1.02), Luxembourg (1.00), Denmark (0.85) and the United Kingdom (0.72) – have reached the longstanding target of 0.7 of gross national income as ODA to the world’s poorer nations.

Meanwhile, the economic recession is taking place amidst the millions still living in hunger (over 800 million), jobless (more than 200 million), water-starved (over 750 million) and in extreme poverty (more than one billion), according to the United Nations.

Asked about a proposal for innovative sources of financing for development – including a tax on foreign exchange transactions – Ban said he has appointed a former French cabinet minister, Philippe Douster-Blazy, as his special adviser to explore these funding sources.

The proposal for innovative financing was approved at the 2002 ICFD in Mexico and it has raised about 2.0 billion dollars so far.

Ban’s most formidable task will be to ensure that rich countries deliver on their pledges, made in 2009, to provide a staggering 100 billion dollars by 2020 for a Green Climate Fund to prevent the most disastrous consequences of climate change.

“I need at least 10 billion dollars to operationalise the fund,” he said. So far, about 2.5 billion dollars have been made available.

Meanwhile, in his letter to the G20 leaders, Ban says new threats, including geopolitical tensions and the Ebola crisis, “have emerged to create further uncertainty” for the U.N.’s development agenda.

“The G20 Brisbane summit is well timed to provide the leadership that will translate into strong global growth and positive change in people’s lives,” he wrote. “Therefore, I urge you and your fellow leaders to seize the moment in Brisbane and set the stage for success in our shared work to build a more sustainable and prosperous world for all.”

The United Nations, he said, “stands ready to partner with you in your endeavour in Brisbane – and beyond.”

But a lingering question remains: how many of the world leaders will respond to the call?

Edited by Kitty Stapp

The writer can be contacted at

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International Reform Activists Dissatisfied by BRICS Bank Thu, 17 Jul 2014 21:39:24 +0000 Mario Osava Chandrasekhar Chalapurath, an economist at Jawaharlal Nehru University in New Delhi, talks about development banks in India, at the International Seminar on the BRICS Bank. Credit: Mario Osava/IPS

Chandrasekhar Chalapurath, an economist at Jawaharlal Nehru University in New Delhi, talks about development banks in India, at the International Seminar on the BRICS Bank. Credit: Mario Osava/IPS

By Mario Osava
FORTALEZA, Brazil, Jul 17 2014 (IPS)

The creation of BRICS’ (Brazil, Russia, India, China and South Africa) own financial institutions was “a disappointment” for activists from the five countries, meeting in this northeastern Brazilian city after the group’s leaders concluded their sixth annual summit here.

The New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA), launched Tuesday Jul. 15 at the summit in the northeastern Brazilian city of Fortaleza, represent progress “from United States unilateralism to multilateralism,” said Graciela Rodriguez, of the Brazilian Network for the Integration of Peoples (REBRIP).

But “the opportunity for real reform was lost,” she complained to IPS at the International Seminar on the BRICS Bank, held in this city Wednesday and Thursday Jul. 16-17 as a forum for civil society organisations in parallel to the sixth summit.

The format announced for the NDB “does not meet our needs,” she said.

The NDB will promote “a new kind of development" only if its loans are made conditional on the adoption of low-polluting technologies and are guided by the Millennium Development Goals and their successors, the Sustainable Development Goals. -- Carlos Cosendey, international relations secretary at the Brazilian foreign ministry
The bank’s goal is to finance infrastructure and sustainable development in the BRICS and other countries of the developing South, with an initial capital investment of 50 billion dollars, to be expanded through the acquisition of additional resources.

“We want an international system that serves the majority, not just the seven most powerful countries (the Group of Seven),” that does not depend on the dollar and that has an international arbitration tribunal for financial controversies, said Oscar Ugarteche, an economics researcher at the National Autonomous University of Mexico.

“It is unacceptable that a district court judge in New York should put a country at risk,” he told IPS, referring to the June ruling of the U.S. justice system in favour of holdouts (“vulture funds”) in their dispute with Argentina, which could force another suspension of payments.

“We need international financial law,” similar to existing trade law, and an end to the dominance of the dollar in exchange transactions, which enables serious injustice against nations and persons, like embargoes on payments and income in the United States, he said.

“Existing international institutions do not work,” and the proof of this is that they have still not overcome the effects of the 2008 financial crisis, said the Mexican researcher.

Major powers like the United States and Japan have unsustainable debt and fiscal deficits, yet are not harassed by the International Monetary Fund (IMF), in contrast to the treatment meted out to less powerful nations, particularly in the developing South.

During the seminar, organised by REBRIP and Germany’s Heinrich Böll Foundation, oft-repeated demands were for civil society participation, transparency, environmental standards and consultation with the populations affected by projects financed by the NDB.

These demands have not yet been included in the NDB but may be discussed during its operational design over the next few years, while the group’s parliaments ratify its approval, said Carlos Cosendey, international relations secretary at the Brazilian foreign ministry, in a dialogue with activists.

Participants at one of several panels at the International Seminar on the BRICS Bank, held Jul. 16-17 in Fortaleza, Brazil. Credit: Mario Osava/IPS

Participants at one of several panels at the International Seminar on the BRICS Bank, held Jul. 16-17 in Fortaleza, Brazil. Credit: Mario Osava/IPS

Cosendey said that a disadvantage of the multilateral bank was the need for its regulations not to be confused with infringement of national sovereignty of member states. The political, cultural, legal and ethnic differences between the five countries could pose a major obstacle to the adoption of common criteria, he said.

The NDB can be constructive “if it integrates human rights” into its principles and presents solutions for the social impacts of the projects it finances, said Nondumiso Nsibande, of ActionAid South Africa, an NGO.

“We need roads, other infrastructure and jobs, as well as education, health and housing,” but big projects tend to harm poor communities in the places where they are carried out, she told IPS. It is still not known what levels of transparency and social concern the bank will have, she said.

In the view of Chankrasekhar Chalapurath, an economist at Jawaharlal Nehru University in New Delhi, the NDB will alleviate India’s great needs for infrastructure, energy, long distance transport and ports. However, he does not expect it to make large investments in one key service for Indians: sanitation.

Having an Indian as the bank’s first president, as the five leaders have decided, will help attract more investments, but he said people’s access to water must remain a priority.

Cosenday said the NDB will promote “a new kind of development.”

But Chalapurath told IPS that this will only happen if its loans are made conditional on the adoption of low-polluting technologies and are guided by the Millennium Development Goals and their successors, the Sustainable Development Goals, as well as human rights and other best practices.

Adopting democratic processes within the bank will facilitate dialogue with social movements, parliaments and society in general, he said.

Incorporating environmental issues and gender parity is also essential, said Ugarteche and Rodriguez, who regards this as necessary in order to make progress towards “environmental justice.”

Not only roads and ports need to be built; even more important is the “social infrastructure” that includes sanitation, water, health and education, said Rodriguez, the coordinator of the REBRIP working group on International Economic Architecture.

Mobilising resistance to large projects that affect local populations in the places they are constructed will be part of the response to the probable priority placed by the NDB on financing physical infrastructure projects, she announced.

The social organisations gathered in Fortaleza, with representatives from Brazil, India, China, South Africa and other countries that are not members of the group, are preparing to coordinate actions to influence the way the bank and its policies are designed, and to monitor its operations and the actions of the BRICS group itself.

Brazilian economist Ademar Mineiro, also of REBRIP, said there was potential for national societies to influence the format and policies of the NDB, and time for them to organise and mobilise. “It is an unprecedented opportunity,” he told IPS.

Russia did not originally support the BRICS bank, preferring private funding. But Mineiro said its position changed after the United States and the European Union involved multilateral financial institutions like the World Bank in sanctions against Moscow for its annexation of Crimea, a part of Ukraine.

BRICS evolved “from the economic to the political,” with its members demanding more power in the international system. The alliance is one of the pillars of the Chinese strategy to conquer greater influence, including in the West, said Cui Shoujun, a professor at the School of International Studies of Renmin University in China.

“The BRICS need China more than the other way round,” he told IPS, adding that the Chinese economy is 20 times larger than South Africa’s and four times larger than those of India and Russia.

As well as seeking natural resources from other countries, among the reasons why China has joined and supports BRICS is strengthening the legitimacy in power of the Communist Party through internal stability and prosperity, the academic said.


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IMF Issues “Revolutionary” Warning on Corporate Tax Avoidance Thu, 26 Jun 2014 21:31:47 +0000 Carey L. Biron By Carey L. Biron
WASHINGTON, Jun 26 2014 (IPS)

The staff at the International Monetary Fund (IMF) has issued an unusually stark warning over the lack of harmonised global tax policies, pointing out that these gaps are allowing for widespread tax gaming by corporations with particularly negative impacts for developing countries.

Anti-poverty advocates are lauding a new staff paper from the fund released Wednesday. Its findings not only coincide with civil society calls for major taxation reforms at the national and international levels, but also repeatedly push back against longstanding tax-related dogma, including that offered by the Washington-based IMF itself.“As tax dodging knows no border, it makes sense to move to the international level to create such a worldwide entity.” -- Catherine Olier of Oxfam

“This is, frankly, a revolutionary paper,” Jo Marie Griesgraber, the executive director of the New Rules for Global Finance Coalition, a Washington-based international network, told IPS.

“It looks very carefully at many aspects of tax planning, and each time says that this has very negative impact on developing countries … Ultimately, it says that traditional tax theory is essentially uninformed by empirical knowledge.”

The paper is the result of a new focus on tax-dodging among the Group of 20 (G20) industrialised countries, which directed the fund to undertake related research. The findings are particularly notable in their sustained focus on the impacts on developing countries.

“Our technical assistance work in developing countries frequently encounters large revenue losses through gaps and weaknesses in the international tax regime,” Michael Keen, deputy director of the IMF’s Fiscal Affairs Department, said in a statement.

“The sums involved for them can be large, not just relative to corporate tax but relative to all tax revenue: 10-15 percent in some cases. The paper reports new evidence that these effects are in fact systematically more important for developing countries.”

Corporate tax rates in all countries have plummeted in recent decades, the paper notes.

Low-income countries have seen these rates degrade from near 50 percent in 1980 to under 30 percent last year. Others have seen similar plunges, with high-income countries seeing corporate taxation fall from around 40 percent three decades ago to little more than 20 percent today.

Such trends have been tracked for years. Yet in the aftermath of the global financial crisis, rich and middle-income countries have begun actively discussing how to maximise their tax revenues, with a focus on ending corporate accounting gimmickry.

Rich companies and individuals could be stashing away as much as 20 trillion dollars overseas in order to escape national taxation, according to some estimates.

“Developed countries today need more income and are mad because not everyone is paying their taxes,” Griesgraber says.

“And that anger is also translating into public pressure. People who pay their taxes even during a difficult recession are even madder than the governments.”

“Meaningless” designations

According to the IMF data, developing countries should perhaps be the most incensed by the impacts of today’s global taxation hodgepodge. The paper offers new findings on the ramifications of what the fund terms “spillover effects” – the ways in which one country’s tax rules impact on another country, which can also be thought of in terms of tax competition between countries.

This phenomenon has been significantly exacerbated as multinational companies have increasingly learned how to legally “move” their operations – largely on paper – for tax benefit. Such companies appear to be based in countries with low taxes, despite doing most of their work in another country that, in turn, is unable to place levies on the company’s full earnings.

“Current international tax arrangements rest on concepts of companies’ ‘residence’ and the ‘source’ of their income, both of which globalization has made increasingly fragile (some would say meaningless),” the paper states.

“At its core, a key issue in assessing any international tax arrangement is how it divides the rights to tax between source and residence countries … The allocation of rights is especially important for low-income countries, however, as flows are for them commonly very asymmetric – they are essentially ‘source’ countries.”

The fund staff found that the impact of these spillover effects on corporate tax bases are “significant and sizable” but are “especially pronounced for low-income countries”. Compared to rich countries, the paper notes, “the base spillovers from others’ tax rates are two to three times larger” in developing countries, and “statistically more significant”.

Particularly problematic has been the extractives industry, though the fund also calls out telecommunications companies. The paper recounts IMF experiences in multiple countries where corporate tax trickery has eaten up much of a project’s revenue, such as a “gold mining sector in which USD 100 billion has been invested over the last decade, but which is almost entirely debt financed”.

The fund ultimately goes so far as to suggest that countries should be extremely careful about signing any bilateral tax treaty, urging developing country governments instead to signal openness to investment by other means. Through such agreements, countries can sign away their right to levy full tax rates and give an upper hand to foreign corporations.

“The IMF analysis raises some very worrying concerns about the impact of tax rules and practices in rich countries on the ability of poor countries to raise their own revenues,” Diarmid O’Sullivan, a tax justice policy advisor with ActionAid, a watchdog group, said Wednesday.

“We see a clear message to … major capital-exporting countries to review their tax rules and make sure they are not harming the ability of poor countries to raise the revenues they need for their development.”

Comprehensive approach

One key step being pushed by governments and civil society today to cut down on corporate tax avoidance entails the automatic exchange of tax information between governments. Doing so, proponents say, would quickly clear up the discrepancies that can be exploited by tax-dodgers.

In February, the Organisation for Economic Co-operation and Development (OECD), comprised of 34 rich countries, unveiled just such a proposal. Still, anti-poverty campaigners have warned that developing economies were not included in discussions around the OECD plan – though a roadmap is due by September on facilitating poor countries’ participation in such exchanges, an OECD official told IPS.

Some are now hoping that this new flurry of work could be leading towards the formalisation of a stricter international framework on tax policy, in line with the globalised environment of today’s multinational corporations. Indeed, the IMF’s new paper notes that “the case for an inclusive and less piecemeal approach to international tax cooperation grows.”

Indeed, a decade and a half ago an IMF official proposed the establishment of a World Tax Authority, an idea that campaigners are now hoping to revive.

“As tax dodging knows no border, it makes sense to move to the international level to create such a worldwide entity,” Catherine Olier, a policy advisor with Oxfam International, an advocacy and humanitarian group, told IPS.

“Modalities about its functionalities and mandate would remain to be determined, but it could have a role in setting minimum standards to avoid harmful tax competition between countries – and, if ambitious, an international dispute mechanisms to fight countries that deliberately put in place tax policies with too much negative spillover effect on others.”

The IMF and OECD reports will both go before the G20 at a summit in November.

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U.S. Blasted on Failure to Ratify IMF Reforms Sat, 12 Apr 2014 00:31:45 +0000 Jim Lobe By Jim Lobe
WASHINGTON, Apr 12 2014 (IPS)

While Republicans complain relentlessly about U.S. President Barack Obama’s alleged failure to exert global leadership on geo-political issues like Syria and Ukraine, they are clearly undermining Washington’s leadership of the world economy.

That conclusion became inescapable here during this week’s in-gathering of the world’s finance ministers and central bankers at the annual spring meeting here of the International Monetary Fund (IMF) and the World Bank.The delays are clearly damaging Washington’s global economic and geo-political agenda: persuading other G20 countries to adopt expansionary policies and punish Moscow for its moves against Ukraine.

In the various caucuses which they attended before the formal meeting began Friday, they made clear that they were quickly running out of patience with Congress’s – specifically, the Republican-led House of Representatives – refusal to ratify a 2010 agreement by the Group of 20 (G20) to modestly democratise the IMF and expand its lending resources.

“The implementation of the 2010 reforms remains our highest priority, and we urge the U.S. to ratify these reforms at the earliest opportunity,” exhorted the G20, which represent the world’s biggest economies, in an eight-point communiqué issued here Friday.

“If the 2010 reforms are not ratified by year-end, we will call on the IMF to build on its existing work and develop options for next steps…” the statement asserted in what observers here called an unprecedented warning against the Bretton Woods agencies’ most powerful shareholder.

The message was echoed by the Group of 24 (G24) caucus, which represents developing countries, although, unlike the G20, its communique didn’t mention the U.S. by name.

“We are deeply disappointed that the IMF quota and governance reforms agreed to in 2010 have not yet come into effect due to non-ratification by its major shareholder,” the G24 said.

“This represents a significant impediment to the credibility, legitimacy and effectiveness of the Fund and inhibits the ability to undertake further, necessary reforms and meet forward-looking commitments.”

The reform package, the culmination of a process that began under Obama’s notoriously unilateralist Republican predecessor, George W. Bush, would double contributions to the IMF’s general fund to 733 billion dollars and re-allocate quotas – which determine member-states’ voting power and how much they can borrow – in a way that better reflects the relative size of emerging markets in the global economy.

In addition to enhancing the IMF’s lending resources, the main result of the pending changes would increase the quotas of China, Brazil, Russia, India, and Turkey, for example, at the expense of European members whose collective representation on the Fund’s board is far greater than the relative size of their economies.

Spain, for instance, currently has voting shares similar in size to Brazil’s, despite the fact that the Spanish economy is less than two-thirds the size of Brazil’s. And of the 24 seats on the IMF’s executive board, eight to ten of them are occupied by European governments at any one time.

The reforms would only change the status quo only modestly. While the European Union (EU) members currently hold a 30.2 percent quota collectively, that would be reduced only to 28.5 percent. The biggest gains would be made by the so-called BRICS (Brazil, Russia, India, China, and South Africa) – from 11 percent to 14.1 percent — although almost all of the increase would go to Beijing.

Washington’s quota would be marginally reduced – from 16.7 percent to 16.5 percent, preserving its veto power over major institutional changes (which require 85 percent of all quotas). Low-income countries’ share would remain the same at a mere 7.5 percent collectively, although their hope – shared by civil-society groups, such as Jubilee USA and the New Rules for Global Finance Coalition — is that this reform will make future changes in their favour easier.

Thus far, 144 of the IMF’s 188 member-states, including Britain, France, and Germany and other European countries that stand to lose voting share, have ratified the package. But, without the 16.7 percent U.S. quota, the reforms can’t take effect.

The Obama administration has been criticised for not pressing Congress for ratification with sufficient urgency. But, realising that its allies’ patience was running thin, it pushed hard last month to attach the reform package to legislation providing a one-billion-dollar bilateral aid package for Ukraine during the crisis with Russia over Crimea.

While the Democratic-led Senate approved the attachment, the House Republican leadership rejected it, despite the fact that Kiev would have been able to increase its borrowing from the IMF by about 50 percent under the pending reforms.

House Republicans – who, under the Tea Party’s influence, have moved ever-rightwards and become more unilateralist on foreign policy since the Bush administration – have shown great distrust for multilateral institutions of any kind.

Both the far-right Heritage Foundation and the neo-conservative Wall Street Journal have railed against the reforms, arguing variously that they could cost the U.S. taxpayer anywhere from one billion dollars to far more if IMF clients default on loans, and that the changes would reduce Washington’s ability to veto specific loans.

They say the IMF’s standard advice to its borrowers to raise taxes and devalue their currency is counter-productive and could become worse given the Fund’s new emphasis on reducing income inequalities; and that, according to the Journal, the reforms “will increase the clout of countries with different economic and geo-political interests than America’s.”

Encouraged by, among others, the U.S. Chamber of Commerce and their Wall Street contributors, some House Republicans have indicated they could support the reforms. But thus far they have insisted that they would only do so in exchange for Obama’s easing new regulations restricting political activities by tax-exempt right-wing groups.

Meanwhile, however, the delays are clearly damaging Washington’s global economic and geo-political agenda – persuading other G20 countries to adopt expansionary policies and punish Moscow for its moves against Ukraine – during the meetings here.

“The proposed IMF reforms are a no-brainer,” according to Molly Elgin-Cossart, a senior fellow for national security and international policy at the Center for American Progress. “They modernise the IMF and restore American leadership on the global stage at a time when the world desperately needs it, without additional cost for American taxpayers.”

Further delay, especially now that the G20 appear to have set a deadline, could in fact reduce Washington’s influence.

While she stressed she was not prepared to give up on Congress, IMF managing director Christine Lagarde told reporters Thursday the Fund may soon have to resort to a “Plan B” to implement the reforms without Washington’s consent.

While she did not provide details of what are now backroom discussions, two highly respected former senior U.S. Treasury secretaries suggested in a letter published Thursday by the Financial Times that “the Fund should move ahead without the U.S. …by raising funds from others while depriving the U.S. of some or all of its longstanding power to block major Fund actions.”

C. Fred Bergsten and Edwin Truman, who served under Jimmy Carter and Bill Clinton, respectively, suggested that the IMF could make permanent an initiative to arrange temporary bilateral credit lines of nearly 500 billion dollars from 38 countries who could decide on their disposition without the U.S.

More radically, they wrote, the Fund could increase total country quota subscriptions that would remove Washington’s veto power over institutional changes.

“The U.S. deserves to lose influence if it continues to fail to lead,” the two former officials wrote.

Jim Lobe’s blog on U.S. foreign policy can be read at

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Russia Expelled From G8, but G20? Not So Fast Tue, 01 Apr 2014 21:42:55 +0000 Thalif Deen Russian President Vladimir Putin awaits leaders arriving for the G20 Summit in St. Petersburg on Sep. 5, 2013. Credit: UN Photo/Eskinder Debebe

Russian President Vladimir Putin awaits leaders arriving for the G20 Summit in St. Petersburg on Sep. 5, 2013. Credit: UN Photo/Eskinder Debebe

By Thalif Deen

When Western powers, led by the United States, decided to throw Russia out of the Group of 8 (G8) industrial nations, it was aimed at punishing and “isolating” President Vladimir Putin for his intervention in Ukraine and “annexation” of Crimea.

“What’s next? Expel Russia from the United Nations and the G20?” an Asian diplomat jokingly asked one of his colleagues at the U.N. delegate’s lounge last week, hinting at what could only be construed as a Western political fantasy.The procedure the G7 followed to transform itself to G8 in 1998 (with the inclusion of Russia) was as opaque as the process that led to Moscow’s virtual expulsion.

The G8 move was pretty tame because it was a decision taken by seven Western industrial nations: the United States, Britain, France, Germany, Canada, Italy and Japan, along with the European Union.

But Russia is also a member of the G20, a coalition of both developed and developing countries, as well as the economic powerhouse called BRICS (comprising Brazil, Russia, India, China and South Africa).

Australia has reportedly warned that Russia may be excluded from the next G20 summit meeting in Brisbane in November. But that is more easily said than done.

On the sidelines of last week’s Nuclear Security Summit in The Hague, the foreign ministers of BRICS warned Australia against any such action.

In a statement released during the summit, the foreign ministers of BRICS said “the custodianship of the G20 belongs to all member states equally and no one member state can unilaterally determine its nature and character.”

The G20 members include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom, United States and the European Union (EU).

At a General Assembly vote last Friday, on a resolution implicitly critical of Russia on the upheaval in Ukraine, Russia’s four BRICS partners abstained, joining 54 others.

The final vote was 100 for the resolution, 11 against, but with 58 abstentions in an Assembly with 193 votes.

Chakravarthi Raghavan, editor-emeritus of the Geneva-based South-North Development Monitor, told IPS, “The G7/G8 and the G20 are at best self-appointed informal gatherings, without any legitimacy, mere costly annual exercises, where occasionally side-event meetings are of some help.”

He pointed out that the G7/G8 originally came into being in the wake of the oil crisis to tackle economic issues and promote a dialogue of the G5/G7 with the Organisation of Petroleum Exporting Countries (OPEC) to promote agreements and avoid confrontations.

Soon, it became clear the G7 process was not effective, and the initial aim of informal but frank and spontaneous exchange of views among the leaders failed.

“Their own bureaucracies and ministries in governments did not want this process to move forward,” said Raghavan, a veteran journalist and a former editor-in-chief of Press Trust of India (PTI) who has covered the United Nations, both in Geneva and New York, for several decades.

But instead of abandoning the annual meetings, he said, the G7 continued to meet, with the original economic focus lost, and with costly preparations and meetings of “sherpas”, where the gatherings themselves became too formalised, and where the outcome had been already decided or agreed to at the lowest common measure of accord.

He also pointed out that the G7/G8 increasingly began pronouncing themselves on all kinds of subjects – with none of the leaders able to ensure the decisions were carried out in their own countries.

Vijay Prashad, author of “The Poorer Nations: A Possible History of the Global South”, told IPS the procedure the G7 followed to transform itself to G8 in 1998 (with the inclusion of Russia) was as opaque as the process that led to Moscow’s virtual expulsion.

The Group of Seven (Canada, France, Germany, Italy, Japan, UK and USA) came together in 1974 to consolidate their response to the major thrust from the Third World Project: an assault of the oil weapon of 1973 that consolidated in the U.N. General Assembly resolution 3201 in May 1974 for a New International Economic Order (NIEO).

The G7 was formed, as former U.S. President Gerald Ford put it, “to ensure that the current world economic situation is not seen as a crisis in the democratic or capitalist system,” Prashad said.

“It had to be seen as a momentary shock, not a systematic challenge,” he added.

The collapse of the Third World Project, the rise of a new International Monetary Fund (IMF)-driven neo-liberal dispensation and the demise of the Union of Soviet Socialist Republics (USSR) moved the G7 to welcome battered Russia into its arms, said Prashad, who is the Edward Said Chair at the American University of Beirut in Lebanon.

Membership in the G7 came with the promise that the North Atlantic Treaty Organisation (NATO) would not move one step closer to Russia than the German border, he added.

Raghavan told IPS the annual G20 meeting pronounces itself on a range of political, economic and other arenas — but with less and less effect — whether (as they have done several times) for concluding Doha trade negotiations or other areas.

Some of their views on global financial stability – addressed to the Bank of International Settlements – have factually been very diluted in actual decisions and norms because of the lobbying of the big financial groups, both in New York and London, said Raghavan, author of the just released “Third World in the Third Millennium”.

Prashad said when the credit crisis startled the West in 2007, the G8 hastened to China and India, asking for funds.

If the money came – as it did – the G8 would wind up its operations and the G20 (with Brazil, China, India and South Africa as members) would take over as the effective executive managers of planetary affairs – which it did not, he added.

The G20 had been formed during the Asian financial crisis of 1997-98 to ward off any nationalistic reactions to that crash.

“As the Western stock markets rallied by 2011, the promise was forgotten,” he said.

The G8 continued – much to the chagrin of the BRICS bloc, which had assumed it would now share power.

They agree the West’s move east is dangerous, and it is unlikely they will allow for the expulsion of Russia from the G20 – itself of limited consequence, he noted.

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G20 Urges U.S. Action on IMF Reforms by April Tue, 25 Feb 2014 00:58:50 +0000 Carey L. Biron By Carey L. Biron
WASHINGTON, Feb 25 2014 (IPS)

The Group of 20 (G20) industrialised and emerging economies on Sunday formally expressed frustration with the ongoing inability of the United States to approve a major reform package that would see governance at the International Monetary Fund (IMF) shift more towards developing countries.

The reforms were approved by the IMF in 2010 and have since been ratified by more than three-quarters of the fund’s member governments. Yet while the administration of President Barack Obama has been a key proponent of the reforms, the U.S. Congress has thus far been unwilling to approve the changes."The BRICS are wondering why they put up their money when nothing is happening." -- Jo Marie Griesgraber

Because the United States, with around 17 percent of voting rights (or “quota” shares) has an effective veto within the IMF, the reforms cannot go forward without the U.S. vote. The process has now missed a January deadline, while a second deadline for a subsequent round of changes is looming.

“Given that the U.S. is a big part of the G20, it is no small victory that emerging market and developing countries were able to get IMF reform so formally prioritised,” Kevin P. Gallagher, co-director of the Global Economic Governance Initiative at Boston University, told IPS. “Such pressure is basically the US administration and the rest of the world against the U.S. Congress.”

On Sunday, the G20, which has been a key organiser of the international financial response in recent years, strongly criticised the deadlocked reforms process. It also offered a new deadline for U.S. action.

“We deeply regret that the IMF quota and governance reforms agreed to in 2010 have not yet become effective,” the G20 stated in a communiqué on Sunday, following a ministerial meeting in Australia, which is hosting the grouping this year.

IMF chief Christine Lagarde. The quota changes would significantly increase the currently underweighted influence of fast-rising economies such as Brazil, China, India and Turkey. Credit: World Economic Forum/cc by 2.0

IMF chief Christine Lagarde. The quota changes would significantly increase the currently underweighted influence of fast-rising economies such as Brazil, China, India and Turkey. Credit: World Economic Forum/cc by 2.0

“Our highest priority remains ratifying the 2010 reforms, and we urge the US to do so before our next meeting in April. In April, we will take stock of progress towards meeting this priority.”

IMF Managing Director Christine Lagarde echoed this concern, saying Sunday that the fund “share[s] this view and urge[s] rapid progress on implementation.” The Washington-based institution is considered the world’s “lender of last resort”.

The quota changes would significantly increase the currently underweighted influence of fast-rising economies such as Brazil, China, India and Turkey. It would do so largely by decreasing the cumulative share of European members, considered outsized in terms of gross domestic product.

The Netherlands and Spain, for instance, both have voting shares similar in size to Brazil’s, despite the fact that the Spanish economy is less than two-thirds the size of the Brazilian. Given the problems in the eurozone, the European countries have also been prime beneficiaries of IMF support in recent years.

Under the quota reforms, the so-called BRICS countries – middle-income countries including Brazil, India and China – would see their vote shares expand the most significantly. The 2010 reforms would shift around nine percent of these shares towards developing countries, while also doubling the size of the fund’s overall lending capacity.

“The Europeans love it – they’re gloating. They have excessive power, are significantly overrepresented, and they love that [the United States] is not moving the reforms process forward,” Jo Marie Griesgraber, the executive director of the New Rules for Global Finance Coalition, a Washington-based international network, told IPS.

“On the other hand, the BRICS are wondering why they put up their money when nothing is happening. They’re most unhappy. In the long term, the BRICS countries could say this doesn’t work for them and move more seriously away from the IMF.”

On Sunday, a top Indian finance official warned that the failure to move forward on quota reform was threatening to undermine both IMF and G20 legitimacy.

“This is perhaps the first visible failure of G20. This has reduced the credibility of G20,” India’s economic affairs secretary, Arvind Mayaram, said in Sydney, calling implementation of the 2010 reforms “vital for the credibility, legitimacy and effectiveness of the IMF”.

Alternative institutions

Although an esoteric topic, the IMF governance reforms have received widespread approval from important constituencies in the United States, including major business and financial lobby groups as well as a long list of Republican luminaries.

In fact, President Obama bears some blame for the current situation, having decided in 2012 for political reasons not to request approval from the U.S. Congress. Yet since then, his administration has tried to do so repeatedly.

Each time, however, the Republican-controlled House of Representatives has rebuffed these requests, though apparently less for ideological than for political reasons. The last such attempt took place last month, when Republicans agreed to include the IMF reforms proposal in a major appropriations bill – but only if the Democrats would agree to stop the U.S. Treasury from imposing proposed restrictions on political “dark money”.

President Obama reportedly refused the trade, and there are few legislative options left for moving related legislation through Congress in coming months, particularly as national elections loom at the end of the year. (On Sunday, U.S. Treasury Secretary Jacob Lew told the G20 his office “will continue to work with Congress to pass legislation as soon as possible to secure the 2010 reforms, which are vital to our economic and national security interests.”)

Some observers say that such a situation should only strengthen an ongoing process under which developing countries are building multilateral structures outside the IMF.

“Upcoming Congressional elections may lead to further entrenchment by the U.S. on this issue. Thus it is imperative that the developing world continue to build alternative institutions such as the BRICS bank and the BRICS exchange reserve pool,” BostonUniversity’s Gallagher says.

“Just as important is for these bodies to have more equitable and transparent processes, so they can be held up as models against the arcane structures in the international financial institutions.”

The BRICS countries announced their intention to create a new multilateral development bank last year. Yet since then, progress has reportedly been slow, particularly as ongoing economic roiling is being felt particularly strongly in emerging economies.

“There is good talk about these projects, but most countries remain very reluctant to walk away from the [IMF]. Nonetheless, we are already seeing a gradual erosion in the use of the institution,” New Rules’s Griesgraber says.

“From our perspective, we need to get through this current reform process so we can move on to the larger governance issues that need to be addressed at the fund. Let’s equalise the power, introduce greater transparency around the board, and ensure that likely consequences for poor people are assessed before the IMF acts.”

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Illicit Capital Leaving Developing Countries Up by 14 Percent Thu, 12 Dec 2013 23:48:49 +0000 Carey L. Biron By Carey L. Biron
WASHINGTON, Dec 12 2013 (IPS)

Developing countries are likely losing more than a trillion dollars a year in “illicit financial flows” stemming from crime and corruption, according to new estimates. This fast-rising figure is already 10 times the total amount of foreign aid these countries are receiving.

Between 2002 and 2011, governments in the developing world are thought to have lost a total of almost six trillion dollars, largely due to poor governance and lax regulation, according to Global Financial Integrity (GFI), a Washington-based watchdog. Included in its estimates are ill-gotten wealth from purposefully incorrect trade invoices, the use of shell companies and tax havens, and other accounting gimmicks.

“This gives further evidence to the notion that illicit financial flows are the most devastating economic issue impacting the global South,” Raymond W. Baker, GFI’s president, stated in the introduction to a report released Wednesday, calling the numbers a “wake-up call to world leaders on the urgency with which illicit financial flows must be addressed.”

Particularly worrying is the fact that the rate at which these outward flows have been growing appears to be increasing substantially."Illicit financial flows are the most devastating economic issue impacting the global South."
-- Raymond W. Baker

In 2002, for instance, the earliest year that GFI’s researchers have examined, illicit financial flows are thought to have been around 270.3 billion dollars. By 2011, the latest year for which estimates are available, that figure had grown to 946.7 billion dollars, and has likely increased since then.

When adjusted for inflation, this translates into an average growth of more than 10 percent a year, while the 2011 number constituted a 13.7 percent increase over 2010.

“Outflows have certainly been increasing,” Dev Kar, GFI’s chief economist and a co-author of the new report, told IPS. “During the economic crisis both imports and exports declined, but as economic activity has recovered so too have these outflows.”

Kar also cautions that the GFI estimates are likely conservative. They include neither unofficial (“hawala”) financial flows nor large-scale cash transactions, and as such are unable to offer a glimpse of broader underworld economies, including drug or human trafficking.

Asia is seen as having the most significant problems, accounting for around 40 percent of all illicit outflows from developing countries. While Africa’s share was only around seven percent in 2011, the continent did have the highest ratio of average illicit flows to gross domestic product, at around 5.7 percent.

With Africa also the world’s most aid-dependent region, an increasing concern for many is how to staunch the flow of some of this illicit capital so it can be ploughed back into public sector spending such as on health, education and public infrastructure.

Shadow systems

Major development institutions have started paying attention to such discrepancies. The humanitarian group Oxfam estimates that some 32 trillion dollars are currently sitting in tax havens around the world, for instance, and suggests that taxes on this sum could raise nearly 190 billion dollars a year.

“Governments should agree to end global hunger by 2025 and an end to tax havens, which could help pay for this and much more,” Stephen Hale, advocacy head for Oxfam, said in a statement. “Tax-dodging effectively takes food from hungry mouths.”

The past year has actually seen notable moves by the international community to close down certain avenues used to hide or shield unreported wealth from prying states. Major multilateral groupings including the Group of Eight (G8) rich countries and the Group of 20 (G20) industrialised countries, for instance, have put tax abuse at the top of their list of priorities.

This summer, a high-level United Nations panel negotiating the next phase of the Millennium Development Goals (MDGs), for which the deadline is 2015, stated that one of its highest priorities would be tackling the abuse of offshore tax havens and illicit financial flows.

The following month, nearly a dozen EU members agreed to the world’s first multilateral system of tax information exchange, based on similar bilateral U.S. requirements passed three years ago.

“The fact that illicit financial flows are being mentioned in the G20 and other international organisations – that didn’t exist before,” Brian LeBlanc, a junior economist with GFI and a co-author of the new report, told IPS. “Earlier, these issues were seen solely as a developing country problem but now we’re seeing developed countries taking action. So we’re making some progress.”

Yet transparency advocates urge that far more needs to be done, and GFI’s Kar says that he expects the moves that have been taken so far will have little impact on illicit financial flows in the near term.

“The G20 has basically not tackled the shadow financial system, which remains largely intact – there have been no moves to improve transparency, not much has been done on tax havens or blind trusts,” he says.

“Importantly, much of the conversation currently focuses on developed rather than developing countries. We believe that governance factors are the main engines of illicit flows, and in the major countries governance is simply not improving – in fact, it’s deteriorating in many countries.”

GFI has now put out research on illicit financial flows for several years in a row. Yet Kar says the startling estimates presented appear to have made little impact on government officials in many developing countries, even as state coffers in those countries continue to struggle in the aftermath of the global financial crisis.

“In most countries it’s had almost zero impact, with government officials refusing even to acknowledge that this is a problem. Malaysia, for example, will only say that our estimates are overstated,” Kar says, noting that Malaysia ranked fourth on GFI’s list of the largest exporters of illicit capital.

“There remains a powerful, corrupt nexus between politicians and business, covering the financing of elections, non-transparency of business conduct, kickbacks in government contracting,” Kar added.

“These are huge issues, and we expect a long process before countries come to accept the fact that illicit flows are a problem – and then to move to implement policies to deal with the situation.”

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The Emerging Economies and the G20 Summit at St. Petersburg Tue, 17 Sep 2013 14:54:11 +0000 Shyam Saran

* Shyam Saran, a former Indian foreign secretary and the current chairman of the National Security Advisory Board, writes in this column that the Syrian crisis overshadowed economic coordination issues at the recent G-20 summit. Saran, current chairman of the Research and Information Systems for Developing Countries and a senior fellow at the Centre for Policy Research in New Delhi, also discusses the deliberations by BRICS leaders on the sidelines of the meeting.

By Shyam Saran
NEW DELHI, Sep 17 2013 (Columnist Service)

The eighth G20 Summit convened in St. Petersburg on Sept. 5-6, 2013 was dominated by the Syrian crisis, deflecting attention from the mandate of the gathering to serve as the premier forum for international economic coordination.

When leaders of the most influential countries meet it is inevitable that the pressing political issues of the day take centre stage.

Shyam Saran

Shyam Saran

The G7 too began as a forum for economic consultation and coordination among the world’s advanced market economies in 1975, to cope with the fallout of the 1973 oil crisis.

Just three years later, in 1978, the G7 issued its first Political Declaration and became, thereafter, the political, security and economic steering committee of the most powerful nations.

The G20 has taken its first steps in the same direction and it is likely that its role as a political and security forum will evolve steadily though informally at first. This trend will be reinforced if the United Nations Security Council remains a relic of a bygone international order.

That the G20 provided a platform on which the U.S. and Russia initiated steps leading to an eventual understanding on Syria’s chemical weapons is an indication of the potential political utility of the forum. These steps were taken against a strong prevailing sentiment at the summit against a military strike against Syria, favoured by the U.S. and some, but not all, of its allies.

The emerging economies were able to reflect some of their key concerns in the Summit declaration. The unconventional monetary policies pursued by reserve currency countries such as the U.S. and lately Japan, involving significant injections of liquidity into the system and keeping interest rates at zero or near zero, have confronted emerging economies like Brazil and India with volatile capital flows and exchange rate instability.

The declaration acknowledged for the first time that monetary policies pursued by advanced economies should be “calibrated and clearly communicated”. This falls short of a coordinated approach of the G20 but will help calm markets by promising greater predictability.

Developing countries would also take satisfaction over the G20 consensus, reflected in the declaration that the profits of transnational corporations should be taxed in the country where they are generated. African countries, in particular, have been victims of the tax avoidance practices of such companies.

An Indian proposal to create an infrastructure financing facility at the World Bank to extend funding for infrastructure projects in developing countries will be the subject of a study. However, in a situation of financial stringency in most developed economies, it is doubtful whether any significant financing window for this purpose will see the light of day soon.

The leaders of BRICS (Brazil, Russia, India, China and South Africa) met on the sidelines of the G8 summit. Their deliberations focused on two landmark initiatives which were announced at their fifth regular summit in Durban on Mar. 27.

On the New Development Bank (NDB) it has been agreed that its initial capital will be 50 billion dollars, a somewhat modest amount given the expectations aroused when the proposal was first made. India had wanted a figure closer to 100 billion dollars.

It is still not clear how the equity will be distributed among the five partners. China has been willing to contribute a larger share but it is reported that Russia wanted each to have an equal share. South Africa is unable to contribute a significant amount given the smaller size of its economy.

On the Contingency Reserve Arrangement (CRA), the leaders announced a figure of 100 billion dollars, with China contributing 41 billion, Brazil, India and Russia 18 billion each, and South Africa five billion.

The CRA will serve as a multi-country currency swap mechanism which will help the BRICS deal with balance of payments problems. It is similar to the Chiang Mai initiative among ASEAN, China, Japan and South Korea, but which is currently 240 billion dollars and partially linked to a parallel though partial International Monetary Fund aid programme.

Whether the CRA will follow a similar pattern is not yet clear. Nevertheless China’s role as a leading partner among the BRICS is now amply apparent. It is possible that the equity distribution in the NDB may follow a similar pattern.

It may be noted that none of the BRICS members forms part of the U.S.-sponsored Trans Pacific Partnership (TPP) or the Trans-Atlantic Trade and Investment Partnership (TTIP) – regional trade arrangements which will fragment the global trading system and marginalise the emerging economies. It is surprising, therefore, that this challenge did not figure in the deliberations of the BRICS nor at the G-20 either.

China’s pre-eminence in the BRICS is a trend likely to be reinforced with the current economic slowdown and economic difficulties being faced by most emerging economies, in particular Brazil, India and South Africa.

Russia is a special case, not an emerging economy in the same category as the other BRICS members. It has escaped economic distress thanks to rising energy prices in the wake of spreading turmoil in the Middle East.

China’s economy is likely to decelerate in the coming months. Its growing debt, now over 200 percent of GDP, is causing concern. If the Chinese economy undergoes a major crisis as some analysts predict, its role as the prime mover in BRICS would certainly diminish.

For the present, however, China, with its seven percent growth and its three trillion dollars of foreign exchange reserves, is likely to be acknowledged as the most emerged of the emerging countries.


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Russia Throws Obama a Life Preserver on Syria Tue, 10 Sep 2013 00:28:58 +0000 Jim Lobe By Jim Lobe
WASHINGTON, Sep 10 2013 (IPS)

With President Barack Obama facing increasingly certain defeat in his quest for Congressional authorisation to carry out military strikes against Syria, the Russian government Monday appeared to offer the White House a way out of the crisis.

Seizing on what seemed to be an offhand remark by Secretary of State John Kerry during a London press conference, Russian Foreign Minister Sergey Lavrov pledged that Moscow would support any effort to put Syria’s chemical weapons under international control and eventually destroy them.

Lavrov was meeting in the Russian capital with Syrian Foreign Minister Walid Al-Muallem, who immediately “welcome(d)” the idea.

The proposal, which in the course of the day was also embraced by U.N. Secretary-General Ban Ki-moon and French Foreign Minister Laurent Fabius, appeared initially to provoke as much scepticism among administration officials here as it did when Kerry first raised the idea in response to a question of what Damascus could do to avoid military action.

“Sure, he could turn over every single bit of his chemical weapons to the international community in the next week – turn it over, all of it, without delay and allow the full and total accounting,” Kerry replied. “But he isn’t about to do it, and it can’t be done.”

After Lavrov’s endorsement, State Department spokesperson Marie Harf asserted that Kerry “was not making a proposal” but was instead offering a “rhetorical statement about a scenario that we think is highly unlikely.” She said Washington was prepared to take a “hard look” at the idea which, said, should be met with “serious, deep scepticism”.

But, by mid-afternoon, that scepticism appeared to turn more to hope as former secretary of state Hillary Clinton, emerging from a White House meeting with Obama himself, called the plan an “important step” in defusing the crisis.

In an interview aired on the Public Broadcasting System’s Newshour Monday evening, Obama also suggested Washington would take it seriously.

“(M)y intention throughout this process has been to ensure that the blatant use of chemical weapons that we saw doesn’t happen again,” he said. “If in fact there’s a way to accomplish that diplomatically, that is overwhelmingly my preference. And you know, I have instructed John Kerry to talk directly to the Russians and run this to ground.

“And if we can exhaust these diplomatic efforts and come up with a formula that gives the international community a verifiable, enforceable mechanism to deal with these chemical weapons in Syria, then I’m all for it.”

The day’s surprising turn of events came amidst growing indications that, absent some unanticipated move, Obama faced a major political defeat in Congress over his requested authorisation despite the support of the most of the Congressional leadership of both parties and an all-out lobbying effort by his administration, the powerful American Israel Public Affairs Committee (AIPAC), and prominent neo-conservatives and former senior officials of the George W. Bush administration.

As of Monday, Obama took personal leadership of the effort, taping interviews on virtually all of the major television network and cable news programmes, in addition to PBS, and preparing a major policy address to the nation Tuesday evening.

According to a number of published reports earlier Monday, a vote in the Democratic-led Senate, which could come as early as Thursday, was expected to be extremely close despite the apparent support of a majority of the Democratic caucus there.

But in the Republican-led House, the authorisation faced almost certain defeat with even a majority of Democrats considered likely to vote “no”, while opposition to the measure among Republicans, despite their leadership’s support, was believed to be much greater.

“If I were the president, I would withdraw my request for the authorisation at this particular point,” said Democratic Rep. Jim McGovern, a liberal Democrat who has generally – if somewhat reluctantly – supported Obama on foreign-policy issues, said on CNN’s “State of the Union” public affairs programme Sunday.

Congressional opposition is strongly bolstered by the latest polling that shows that, if anything, Obama’s case for attacking Syria has lost ground significantly among voters across the country over the past week.

According to a Pew Research Center/USA Today survey conducted Sep. 4-8 and released Monday, 63 percent of respondents said they oppose a strike – 15 percent more than a week ago. Of that 63 percent, 45 percent said they are “strongly oppose(d)” to military action.

Despite the enlistment last week of former senior Bush officials in the administration’s lobbying effort, the erosion of support among grassroots Republicans has been especially severe. Four in 10 self-identified Republicans said they opposed strikes in the earlier poll; as of Sunday, seven in 10 Republicans voiced opposition.

Opposition has also grown among the independents, according to survey, with two-thirds now opposed, up from half the weekend before.

A less detailed CNN/ORC poll conducted over the past weekend gained a somewhat more-favourable result for the administration, with 59 percent of respondents voicing opposition and 39 percent in favour. Only 28 percent of Pew respondents said they favoured airstrikes against Syria.

Moreover, 71 percent of the CNN respondents said Obama should not attack Syria if Congress fails to pass the authorisation. In the Pew poll, 61 percent of respondents said Congress – not Obama -should have the final say on whether to take military action.

If domestic support for strikes appeared to plunge, Obama was not doing much better on the international front.

He was embarrassed last week when only half of the leaders of the Group of 20 (G20) – five of which (the U.S., Britain, France, Saudi Arabia, and Turkey) have been aiding Syrian rebels for some time – meeting in St. Petersburg, Russia signed on to a statement expressing support for “efforts undertaken by the United States and other countries to reinforce the prohibition on the use of chemical weapons” although it not explicitly endorse military action.

On Monday, the White House announced that 14 other countries had signed on – far less than the “several dozen” that, according to unnamed administration officials and Congressional supporters, allegedly support U.S. military action. Of the 14, the only G20 member was Germany; the others included mainly Central European nations, the three Baltic states, Denmark, Qatar, the United Arab Emirates, Morocco, and Honduras.

In this context, the possibility that the U.S. and Russia, Assad’s most important international supporter, could agree on a plan that would satisfy U.S. demands to eliminate any possibility that the regime could use chemical weapons would appear to be particularly attractive to Obama.

Early indications suggest that the administration will, as Clinton argued, use the proposal’s timing to persuade reluctant lawmakers to pass the authorisation in order to maintain pressure on Moscow and Damascus to follow through.

“It could be used either way; it could take the steam out of the administration’s lobbying effort or give it a new argument for making military action appear more credible if they don’t co-operate,” one lobbyist opposed to military strikes told IPS.

The idea that Syria would give up its chemical weapons arsenal to avoid an attack was circulated quietly on Capitol Hill by Democratic Sen. Joe Manchin last week in the form of an alternative resolution which demanded that Damascus sign and comply with the Chemical Weapons Convention (CWC) within 45 days or face an attack.

Some lawmakers reportedly objected to the idea because it would implicitly put pressure on Israel, which signed the treaty in 1993 but never ratified it, making it, along with Syria, the two Koreas, Egypt, Angola, and Myanmar, one of seven non-member states worldwide.

Jim Lobe’s blog on U.S. foreign policy can be read at

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Obama Increasingly Isolated on Syria Military Action Fri, 06 Sep 2013 23:53:20 +0000 Jim Lobe Some analysts suggest that Obama’s failure to line up support from more G20 leaders suggests that the U.S.-created global order is no longer sustainable. Credit: Official White House Photo by Pete Souza

Some analysts suggest that Obama’s failure to line up support from more G20 leaders suggests that the U.S.-created global order is no longer sustainable. Credit: Official White House Photo by Pete Souza

By Jim Lobe
WASHINGTON, Sep 6 2013 (IPS)

With a week of intense lobbying behind him, U.S. President Barack Obama looks increasingly beleaguered – both at home and abroad – in his effort to rally support for a military strike against Syria to punish its government for its alleged Aug. 21 chemical-weapons attack outside Damascus.

At home, most political observers say Obama faces a particularly difficult task in bringing a majority of the Republican-led House of Representatives, which begins debating his proposed Authorisation for the Use of Military Force (AUMF) next week on return from its August recess, over to his side.“The lack of consensus within G20 is confirmation of what we already knew, which is that there is limited support for military action in Syria within the international community." -- Charles Kupchan of the Council on Foreign Relations

Congressional offices, even those whose bosses favour Obama’s position, are reporting overwhelming opposition in telephone calls and emails from their constituents, while public meetings held by lawmakers in their home districts have been dominated by anti-intervention forces from both the right and the left.

And polls released over the past week suggest that the administration has made little headway in moving public opinion its way.

A new Gallup poll taken at mid-week and released Friday found that support for U.S. military action “to reduce Syria’s ability to use chemical weapons” – 36 percent – was the lowest on the eve of any military intervention Washington has undertaken in the last 20 years. Fifty-one percent of respondents opposed a strike.

In a reflection of White House concern over opposition to military action, Obama himself announced Friday that he will address the nation about his intentions Tuesday. At a press conference at the Group of 20 (G20) meeting in St. Petersburg, Russia, he acknowledged that getting both house of Congress to approve an authorisation was “going to be a heavy lift”.

He spoke just after his deputy national security adviser, Tony Blinken, told National Public Radio (NPR) that, even though Obama retained the constitutional authority to strike Syria without Congressional authorisation, “it’s neither his desire nor intention to use that authority absent Congress backing him.”

Meanwhile, on the international front, Obama also appeared to be faring poorly in his bid to gain support for military action.

In St. Petersburg, The White House released a “joint statement” signed by the leaders of only 10 members, including the U.S., of the G20 plus Spain voicing “support efforts undertaken by the United States and other countries to reinforce the prohibition on the use of chemical weapons” and calling for “those who perpetrated these crimes (to be) held accountable.” The statement stopped short, however, of endorsing military action.

The signatories included the leaders of Australia, Britain, Canada, France, Italy, Japan, South Korea, Saudi Arabia, Turkey, as well as the U.S. Absent from the list, however, were all members of the BRICS bloc – Brazil, Russia, India, China, and South Africa – as well as Argentina, Indonesia, Mexico, and Germany.

The European Union (EU), a G20 member in its own right, also did not sign due to a lack of consensus among its membership.

Independent observers described the statement as a serious setback not only to Washington’s efforts to rally international support.

“It seems to have been a remarkable investment of American diplomatic energy not to have achieved the support of even a majority of the G20, and they tried to give the appearance of half plus one through sleight of hand,” noted Daniel Levy, the director of the Middle East and North Africa Programme at the London-based European Council on Foreign Relations (ECFR), who pointed to larger problems caused by the way the administration has acted over the Syria issue.

“Look at the institutions they’ve weakened in this process: the U.N. Security Council itself; the European Union by implicitly underlining its failure to gain consensus; the Arab League where the three most populous Arab states – Egypt, Iraq and Algeria – have all come out against military action; and even the G20 – all in order to achieve a statement that is far from an unequivocal endorsement of American military action,” he told IPS.

Charles Kupchan, a senior fellow at the Council on Foreign Relations (CFR), also suggested that the administration’s latest diplomatic move underscored its weakness on the issue.

“The lack of consensus within G20 is confirmation of what we already knew, which is that there is limited support for military action in Syria within the international community,” he said.

Back at home, advocates of military action, the most vocal of whom are pro-Israel activists and organisations worried that Congress’ failure to back up Obama’s threats against Syria will embolden Iran and its regional allies, are increasingly making the argument that both the president’s and Washington’s international credibility is at stake.

“This is not longer just about the conflict in Syria or even the Middle East,” wrote former Sens. Joe Lieberman and Jon Kyl, co-chairmen of the American Internationalism Project of the American Enterprise Institute (AEI), a neo-conservative think tank that played a leading role in championing the 2003 invasion of Iraq.

“It is about American credibility. Are we a country that our friends can trust and our enemies fear? Or are we perceived as a divided and dysfunctional superpower in retreat, whose words and warnings are no longer meaningful?” they asked in an op-ed entitled “Inaction on Syria Threatens U.S. Security” published by the Wall Street Journal Friday.

Failure to authorise a strike will be a “green light” for Iran to “speed toward nuclear weapons” and “confirm the worst fears of our ally, Israel, and moderate Arab states like Jordan that the U.S. cannot be relied upon to stand by its commitments. This will dramatically raise the risks of a regional war that could upend the global economy,” they stressed.

But others have argued that the credibility argument is overdrawn in this case.

“We heard this argument many, many times before, and always when the objective case for war was weak,” according to Stephen Walt, a prominent international relations expert at Harvard University. “To refrain from using force when vital interests are not at stake and when bombing could make things worse is not weakness; it is good sense.

“The United States has fought five wars since the Cold War ended and is using drones and special forces in several countries already,” he told IPS. “Nobody is going to question U.S. credibility when its interests are genuinely engaged and it has a clear objective in mind.”

Some liberal interventionists, notably Secretary of State John Kerry in his various public remarks, have also stressed the credibility argument, arguing that Washington’s failure to act could have profound implications for world order.

“For better or worse…” William Galston of the Brookings Institution argued in the Journal earlier this week, “the United States is the guarantor of the global order, which we took the lead in creating.

“Mr. Obama will need to convey this idea to the American people …from the Oval office,” he wrote.  “He must be prepared to go all-in to win what is shaping up as a tough fight on Capitol Hill. One thing is clear: A loss would shatter his presidency, and a lot more.”

But Kupchan said Obama’s failure to line up support from more G20 leaders suggested that the U.S.-created global order was no longer sustainable in any case.

“It’s clear confirmation of the degree to which there is a fundamental difference in geopolitical perspective between developed and emerging powers,” he told IPS.

“That the BRICS countries voted as a bloc is a sign of how difficult it’s going to be to fashion international consensus as global power continues to diffuse.”

Jim Lobe’s blog on U.S. foreign policy can be read at

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OECD Proposes Plan to Curb International Tax Avoidance Fri, 19 Jul 2013 22:52:50 +0000 Carey L. Biron By Carey L. Biron
WASHINGTON, Jul 19 2013 (IPS)

Finance ministers from the Group of 20 (G20) countries on Friday received a previously requested strategy under which the world’s largest economies could crack down on international tax avoidance, particularly on the part of multinational corporations.

The 15-point action plan was created by the Organisation for Economic Cooperation and Development (OECD), a Paris-based think tank funded by the world’s richest countries. The G20 requested the study in February, as tax avoidance has moved to the top of the global agenda, particularly in the context of governments struggling to fill state coffers in the aftermath of the global economic downturn."When multinational corporations game the system – and the evidence shows that they are – everyone else loses." -- Nicole Tichon of the Tax Justice Network USA

Yet some analysts have also suggested that, against the backdrop of countries such as Brazil, China, India and Russia quickly becoming some of the world’s most powerful economies, the current exercise could be developed countries’ last attempt to steer the conversation on international tax policy.

“The joint challenges of tax evasion and tax base erosion lie at the heart of the social contract,” Angel Gurria, secretary-general of the OECD, said Friday in Moscow, where he handed over the new blueprint to government officials gathered ahead of the G20 summit in September, which Russia is hosting.

“Our citizens are demanding that we tackle offshore tax evasion by wealthy individuals and re-vamp the international tax system to prevent multinational enterprises from artificially shifting profits, resulting in very low taxes or even double non-taxation and thereby eroding our tax base.”

The OECD strategy would now seek to strengthen coherence among its members’ tax systems, aimed at filling the gaps between those systems – through which multinational corporations, in particular, have become adept at slipping.

A major thrust of the new strategy deals with ways to corral the new powerhouses of the digital economy, which in recent years have become adept at extremely complex – some say only marginally legal – tax strategies. Such companies, making use of extensive offshore subsidiaries, have recently been the focus of a strengthened tax-avoidance discussion here in the United States and in Europe.

The action plan, which the OECD says it will roll out over a two-year rulemaking process, also tries to increase transparency. It would require companies to engage in country-by-country reporting of profits, for instance, in order to make it more difficult for phony “shell” offices to quietly shift profits made in one country to another that offers lower or nonexistent tax rates.

On Friday, Gurria noted that these 15 actions would “result in the most fundamental change to the international tax rules since the 1920s!”

Built on an earlier general report, the plan received widespread initial plaudits from government officials. Russian Finance Minister Anton Siluanov “commended” the report for hewing to “the basic tenets of fairness – that it allows multinational corporations to prosper without loading a higher tax burden on domestic companies and individual taxpayers.”

U.S. Treasury Secretary Jacob J. Lew also “welcomed” the action plan, which he said was created in part with U.S. participation.

“This is a major step toward addressing tax avoidance by multinational firms in the global economy and represents a concerted effort to raise standards around the world,” Lew noted in a statement sent to IPS. “We must address the persistent issue of ‘stateless income’, which undermines confidence in our tax system at all levels.”

Entrenching global inequality?

Yet the plan received a more cautious appraisal from certain civil society organisations, with some warning that the OECD’s membership has led it to overlook the importance of developing countries in combating tax avoidance in today’s context. Indeed, it is in these countries where illicit outflows of capital are having major, damaging impacts on already strapped governments’ abilities to fund their public sectors.

“We are encouraged to see this unequivocal acknowledgement that when multinational corporations game the system – and the evidence shows that they are – everyone else loses: governments, citizens and other businesses,” Nicole Tichon, executive director of the Tax Justice Network USA, an advocacy group here, told IPS.

“We agree that this is a global problem and will require a global solution, but this plan needs to more carefully consider the additional plight of developing countries.”

One of Tichon’s colleagues in Africa expanded on this point.

“In poor nations we are largely failing to capture tax revenue from major international corporations which should be harnessed to ensure better social and economic opportunities for citizens,” Alvin Mosioma, the director of Tax Justice Network Africa, says.

“This is why the current OECD reform process needs to include at its heart serious representation from developing nations rather than keeping them to the margins. That developing countries are kept out of this key process runs the real risk of further entrenching global inequality.”

Others are taking issue with the new plan’s failure to recommend that country-by-country reporting of corporate profits – seen as a critical tool in halting the currently rampant shifting of earnings among multinational companies – be made public.

According to the OECD’s top tax official, the action plan does recommend such reporting, but he admits that those reports would not be publicised.

“This country-by-country reporting will be for tax administrations and not [the] public,” Pascal Saint-Amans, director of the OECD’s Centre for Tax Policy and Administration, told IPS.

“What matters is that tax inspectors have the information. Confidentiality issues [could stop] countries from agreeing to public country-by-country reporting.”

Indeed, a similar fight is currently taking place here in the United States, which last year instituted a landmark regulation requiring multinational companies to publicly report all payments made to foreign governments. Yet earlier this month a court overturned that rule in part because of the requirement that these reports be made public.

Some anti-poverty groups are going so far as to suggest that the OECD’s tax fixes are already obsolete, having been far outstripped by the decentralised model that the most aggressive modern corporations have been able to follow.

“This plan is papering over the cracks in a broken system, rooted in an outdated and irrelevant model of corporate taxation,” Murray Worthy, a tax campaigner at War on Want, an advocacy group, said in a statement. “It might be able to tackle the worst of corporate tax dodging, but it won’t fix the system.”

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Q&A: Moving Away from “Elite Multilateralism” Wed, 10 Apr 2013 18:07:44 +0000 Marzieh Goudarzi

Marzieh Goudarzi interviews Dr. Jose Antonio Ocampo

By Marzieh Goudarzi

As the global South claims a greater share of the world’s GDP, is it also progressing in terms of overall human development? How has this southward tipping of the scale affected the dynamics of international trade? What is the role of global governance in mediating this period of change?

José Antonio Ocampo. Credit: UN Photo/Mark Garten

José Antonio Ocampo. Credit: UN Photo/Mark Garten

The 2013 U.N. Human Development Report entitled, “The Rise of the South: Human Progress in a Diverse World” and its lead author, Khalid Malik, suggest that as the South grows economically, its citizens experience an “expansion of human capabilities and choices” that is leading to further social and political development.

Others are more sceptical of the purported “rise of the South”, pointing to the world’s widening income inequality, the lack of correlation between economic growth and equitable and sustainable socio-economic policies, and relatively unchanging global power dynamics.

On Monday, Columbia University’s Committee on Global Thought hosted a conference to discuss these issues with panelists including Malik, U.N. Ambassador Luis Alfonso de Alba of Mexico, and Dr. Jose Antonio Ocampo, a professor at Columbia’s School of International and Public Affairs and a former U.N. Under-Secretary-General of Economic and Social Affairs.

Ocampo called Malik’s characterisation of the rise of the South as a “tectonic change” a bit strong.

While he recognises the important changes that are occurring now, with regard to overall human development Ocampo says, “It’s a process that will have long-term implications.”

Excerpts from IPS’s interview with Ocampo on the impact of newly rising economies in international trade and global governance follow.

Q: Both you and Ambassador de Alba agree on the importance of multilateral global governance in terms of human development. Ambassador de Alba addressed the shortcomings of current institutions and, in particular, the U.N.’s inefficient decision-making processes. Discuss what productive, multilateral global governance would look like.

A: I have written extensively on the G20 and my perspective is that these informal institutions, which I call “elite multilateralism”, are not the best form of global governance. I like “the G’s” when they are part of multilateral institutions.

Global governance derives its legitimacy at the global level just as governance does at a national level, from universality. You have to have universal membership. For that purpose, the best way for these “G’s” to work is within a formal multilateral setting.

At the same time, I agree that you have to have effective decision-making mechanisms. Smaller decision-making bodies, in which everyone is directly represented, are fundamental. In all democracies, decisions are taken by a limited number of actors at the end, but those actors have to be representing all of the membership.

Q: What is the state of South-South trade relationships today? What constitutes an ideal South-South partnership that allows for progress toward a more advanced, dynamic economy?

A: There is one sort of South-South trade that is really part of North-South trade. For example, Southeast Asia is producing parts and capital goods that are assembled in China and then exported to the U.S.

In the case of China-India, it’s a huge deficit for India and surplus for China. There is a second China-centered relationship, in which China essentially imports raw commodities and exports manufactured goods. I would say, for commodity producers – i.e. sub-Saharan African, South America, and some of the Middle East – that’s an opportunity. But it’s still a very imbalanced trade relationship. In the long-term, you have to diversify away from that.

There is a third type which are legitimately South-South flows in which you have, more or less, a balanced relationship. For example, the inter-regional trade in Latin America is one relationship of that type – it starts and ends in developing countries. I think that’s the most positive of all, but it’s less common.

Q: As these newly rising economies close the income gap that separates them from developed countries, what do you think characterises fair and mutually-beneficial North-South partnerships?

A: In the past, the North-South relationship was considered to be an asymmetric relationship in which the North had to support the development of the South so it could cash out. I think that concept has become obsolete because of the heterogeneity of developing countries.

Ambassador de Alba mentioned this almost sacred principle of “common but differentiated responsibilities”. In the past, developing countries wanted to be treated according to the second part of that principle – “differentiated” – and I think, as de Alba pointed out, the “differentiated” still has to be considered today.

Even major emerging economies are developing countries – they are technologically dependent, they still have a large share of the labour force in low productivity activities, and the GDP per capita is still a fraction of that of developed countries. So they have a right to be treated with some differences internationally. But they are, at the same time, responsible and the responsibility those countries have is very important.

Q: How have Southern governments been an obstacle to human development and, on the other hand, what should they be prioritising in order to create positive conditions for growth?

A: The basic problem is that power ends up in the hands of the elite that uses power to further its own interests. This has been associated with developing countries, but it can also happen in developed countries, particularly in the financial sector. There has been a change in that regard during the recent crisis; now there is a bit more hope that financial policy will be detached from financial interests.

Successful human development strategy has to include very active social policy, including education, health, and social protections, and at the same time very active economic development policy, particularly the generation of employment.

We have seen so many cases of countries that have improvements in education and when an educated labour force comes to the market, there is no employment to absorb that population. You have to have an active social policy but also an active economic policy and the basic connection between the two is called employment.

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Digging Deep for New Conflict Sat, 16 Mar 2013 18:55:04 +0000 Pierre Klochendler The Palestinian village Zaatara at the foot of Herodion. Credit: Pierre Klochendler/IPS.

The Palestinian village Zaatara at the foot of Herodion. Credit: Pierre Klochendler/IPS.

By Pierre Klochendler
JERUSALEM, Mar 16 2013 (IPS)

If Herod the Great was a controversial figure of his time, 2,000 years on the controversy isn’t about his legacy; it’s about who holds the rights to excavate and preserve his artefacts.

A new exhibition at the Israel Museum which, for the first time, displays the king’s relics, might serve as a great tribute to him, but is also a powerful reminder of how the history of the Holy Land and today’s conflict between Israel and the Palestinians have become intertwined.

On top of a hill “raised to a greater height by the hand of man; rounded off in the shape of a breast,” as Flavius Josephus, Jewish historian of Rome described it, the old monarch had a fortress-palace erected as memorial for himself; and named it after himself – Herodion for Herod.

Herodion, from where the bulk of the exhibition originates, is visible from Jerusalem and dominates the Judaean desert, since 1967 part of the Israeli-occupied West Bank which the Palestinians seek as part of their future state.

Herodion is in Area C, namely 62 percent of the West Bank maintained under full Israeli control since the 1993 Oslo interim peace accords. An Israeli military base protects the site.

The Holy Land changed hands time and again since Herod’s time, but at 758 metres high, the lay of the land looks unchanged – at first glance.

Dotting the surroundings, Israeli settlements and Palestinian villages vie for rights to the land.

Appointed by the Romans, Herod ruled the vassal kingdom of Judaea, part of the Palaestina province of the Roman Empire, for 33 years between 37 and 4 BCE.

“He was a cultural bridge, working on both sides, caught between the exigencies of the Roman Empire and that of Judaism,” says David Mevorah, the exhibition’s curator. “By his people he was regarded as a convert Jew; by Rome as a client king. But Judaea prospered in his time.”

Exquisite tableware from glass and fine and glossy red roman pottery; a statue of Cleopatra, the last pharaoh of Ancient Egypt; a decorated basin, a gift from his patron Emperor Augustus, whose bust is on display; his royal highness’s bath – all were found in situ.

Adorned with stucco and rare frescoes of sacred landscapes and navy battles painted with pigments on plaster, also imported from Herodion is the royal chamber.

The jewel of Herod’s crown, so to speak, is the reconstruction of his mausoleum which sheltered what archaeologists believe is the sarcophagus in which his body was placed. The man surely possessed a taste for the arts – even on his deathbed.  “He was very aware of historic memory,” comments the curator.

Here nowadays, historic memory refers mostly to competitive national quests.

Excavations at Herodion began in 1972 under Israeli archaeologist Ehud Netzer. “No one asked us or consulted us, then or now,” protests Jamal Amro, a Palestinian scholar from Bir Zeit University familiar with the site.

“The Israelis plundered Herodion,” he adds. “Israel uses archaeology to shape history and validate the country’s occupation of the West Bank and East Jerusalem.”

After prolonged exploration, Netzer uncovered Herod’s tomb in 2007. Two years later, he died in tragic circumstances at the site.

It took three more years to move some 30 tonnes of carved masonry from Herodion to the museum. “We actually moved thousands of fragments to our laboratories, working intensively from here on restoration and reconstruction,” says Mevorah.

“We’ve performed quite an important role for world cultural heritage,” says Israel Museum director James Snyder. But the self-complimentary effusion has been short-lived.

Palestinians complain that Israeli archaeological activities in Palestinian territories are illegal. “According to international law, this is a crime,” declares Amro. “Israel must recognise the rights of the Palestinian nation to their historical sites.”

The Israeli government lists Herodion as a national heritage site. Granted full membership of the United Nations Educational, Scientific and Cultural Organisation (UNESCO), the Palestinian Authority now wants to nominate Herodion for recognition as a world heritage site.

“The Oslo Accord makes Israel responsible for custodianship over archaeology in the West Bank until a final settlement is reached,” retorts Snyder.

A ruthless ruler who had the last lineage of the Hasmonean dynasty that ruled before him executed, including high priests, opponents, his beloved second wife and three of his children, Herod was feared by his subjects. In Christianity, he’s ‘Horrid Herod’, thought of as a serial baby killer.

At the museum, he is mostly remembered as a master builder for his colossal projects, including expansion of the Second Temple in Jerusalem revered in Judaism. Centuries later, the Haram al-Sharif or Noble Sanctuary would be edified on its ruins.

For Amro, “Herod and Herodion are important not only to Jews but to Christians and Muslims. We should be in charge.”

“We borrowed the artefacts as authorised loans; we’ll retrocede them once the exhibition wraps by year’s end,” assures Snyder.

The question is where the relics will be returned to, and to whom. “To the authority in charge of archaeology in the West Bank,” clarifies Mevorah. That is, to the ‘Civil Administration’, a well-known euphemism for Israeli military authorities in the West Bank.

“They’ll never give back the artefacts to us, forget it,” protests Amro, not sure himself whether “it” refers to the site and its treasures or to the West Bank.

“When Israel signed the Camp David peace accord with Egypt in 1979 and withdrew from Sinai,” recalls Snyder, “there was a very intelligent division of material: what related to Egyptian heritage was returned to Egypt; what related to Jewish heritage stayed with Israel.”

Would such a model be applicable to Israel and Palestine were peace to be signed between them? “I’m just a museum director, but it was well done,” says Snyder.

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Better Governance to Achieve Food Security Fri, 02 Nov 2012 11:12:16 +0000 Jose Graziano da Silva By José Graziano da Silva
ROME, Nov 2 2012 (IPS)

Despite a sudden increase in July this year, prices of cereals on world markets remained fairly stable. But there are no grounds for complacency, as cereals markets remain vulnerable to supply shocks and disruptive policy measures. In this context, the good harvests that are expected in the Southern Hemisphere are important.

José Graziano da Silva, director-general of the Food and Agriculture Organisation of the United Nations (FAO). Credit: FAO News

In the last ten years we have seen major changes in the behaviour of food prices. Up until around 2002 real food prices were falling but they have now been above trend for longer than at any other time in the previous forty years.

Food prices have also been volatile and the combination of high and volatile food prices will continue to challenge the ability of consumers, producers and governments to cope with the consequences.

All this makes it timely to reflect on recent price events and the reactions of the international community, especially since price volatility is likely to continue for the foreseeable future.

Set against this backdrop, the Ministerial Meeting on Food Price Volatility held on World Food Day on Oct. 16 was particularly relevant.

Twenty-five ministers and 13 deputy ministers met to discuss the issues and exchange views on how to strengthen measures to contain food price volatility and to reduce its impact on the most vulnerable populations.

The meeting recognised that a lot was learned from the 2007-8 and 2010-11 price hikes about appropriate responses at international, regional and national levels. They also agreed that much more could be done based on the Action Plan on Food Price Volatility and Agriculture that was adopted by the G20 leaders in November 2011.

This action plan launched major international initiatives, in particular the Agricultural Market Information System (AMIS), hosted at the headquarters of the Food and Agriculture Organisation (FAO). AMIS monitors developments based on the latest available information, analysing the global supply/demand situation and providing objective assessments.

Born just one year ago, AMIS is already a fully functioning mechanism and played a key role this summer in calming markets and preventing the deterioration of a vulnerable food market situation into the potential crisis that countless commentators were so quick to predict.

AMIS is providing an objective assessment of the market situation and risks, while calling on G20 member states to refrain from adopting policy measures that might further destablise markets.

This experience shows that coordinated international action and enhanced transparency and information on agricultural markets can make a difference in limiting food price spikes and excessive volatility.

Even when they are affected by adverse weather conditions that reduce production and export capacity, it is important that governments of exporting countries act transparently and dialogue with commercial actors to assure local availability of cereals without creating uncertainty in international markets.

This coordination is crucial because it can stop a drought or a flood from becoming a crisis.

Other actions to limit price spikes and excessive volatility ­ adjustments to trade rules, the creation of emergency food reserves, reform of biofuel policies and control of speculation ­ are all still works in progress. ‘Excessive’ is the keyword, because some degree of volatility is a characteristic of agricultural markets.

Action also needs to be taken to build resilience to that volatility in the medium-term.

This requires substantially increased investment in agricultural production with a particular emphasis on support to smallholder farmers.

Financing will need to come primarily from the private sector including smallholders themselves and major companies. This is a controversial area and concerns, especially over large-scale land investments, are well founded.

It is vital that any investment is made responsibly and for the benefit of all stakeholders. This is where the Principles for Responsible Investment in Agriculture, which will be discussed by the Committee on World Food Security (CFS), and the Voluntary Guidelines on Land Tenure previously endorsed by the CFS, have an important role to play.

FAO is prepared to assist governments in implementation of these safety measures. AMIS, Voluntary Guidelines and the Principles for Responsible Investments are all elements of the new global governance on food security that we are building, and that has the CFS as its cornerstone. We are making up for lost time, as food security governance was neglected until a few years ago. Fortunately we are learning that, in a globalised world, it is impossible to ensure food security in a single country or region. (END/COPYRIGHT IPS)

*Jose Graziano da Silva is the director-general of the United Nations Food and Agriculture Organization (FAO).

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Brazil Frustrated with European “Backtracking” on IMF Reforms Fri, 19 Oct 2012 17:22:52 +0000 Carey L. Biron By Carey L. Biron
WASHINGTON, Oct 19 2012 (IPS)

In the aftermath of last week’s elections to the International Monetary Fund (IMF)’s executive board, Brazil and others are expressing frustration that a reforms process aimed at increasing the representation of developing countries is being stymied by European countries.

IMF chief Christine Lagarde has urged members to act on a suite of reform measures that would significantly increase the voices of developing countries, with mixed results. Credit: MEDEF/cc by 2.0

“There was some movement, but in my opinion this so-called reduction in the number of European chairs has petered out into a reshuffling that is largely cosmetic in nature,” Paulo Nogueira Batista, the IMF executive director for Brazil and several other Latin American and Caribbean countries, told IPS. “The Europeans have cleverly upgraded the representation of the emerging markets of the E.U., such as Turkey and Poland.”

The IMF’s executive board, based at the institution’s Washington headquarters, consists of 24 members, most of which represent shifting constituencies of the Fund’s 188 members. In 2010, a package of reforms was agreed to, aimed at rectifying longstanding concerns over the IMF’s governance imbalance.

While these reforms were meant to be finalised during the annual meetings of the IMF and World Bank, held Oct. 9-13 in Tokyo, and implemented this coming January, both deadlines now look set to be missed as the United States focuses on its presidential election and IMF members are deadlocked on key issues.

Part of this reforms package includes changes in who sits on the executive board, with the Europeans agreeing to give up two seats in order to increase the representation of developing countries. That process has now led to an unusually large amount of movement on which countries will align with which constituencies – the most significant changes in this regard since the early 1990s.

The second part of the reforms process has to do with voting rights, based on “quotas” arrived at through a contentious and complex formula that has favoured developed economies. Calls have mounted for the system to change, particularly to take into account a changed global economic situation in which so-called middle income countries (particularly the BRICS, referring to Brazil, Russia, India, China and South Africa) are increasingly crucial players.

Batista says that reforms of the quotas formula constituted the single most controversial topic discussed in Tokyo. Countries including the United States, Brazil and most of the BRICS want the formula to be based on gross domestic product, while the Europeans stress the issue of economic “openness”, which would specifically favour EU economies.

“The Europeans use a highly unusual definition for ‘openness’ – a definition so strange that I have proposed we rename this ‘Europeanness’,” Batista said, speaking not in his official capacity. “The main role seems to be to artificially inflate the quotas of European countries.”

In recent days, Batista, already one of the more outspoken of the IMF executive directors, has been openly critical of the European bloc at the Fund.

“What we’ve seen in Tokyo is that, unfortunately, some Europeans are backtracking on their pledges to quota review,” he told IPS shortly after arriving back to Washington from Tokyo. “This is a major concern, as the credibility of the Fund, of the G20 and of the individual countries is predicated on the faithful implementation of what they sign up to in the communiqués – and we’re not going to take this lightly.”

Post-crisis model

Over the past year, Brazil has played an increasingly central role in enunciating the demands of developing countries, a push that has been particularly embodied by the IMF reforms process.

“Brazil has been wonderful in that they have outright threatened not to turn over certain financial commitments to the IMF until the quota reforms move forward – not only regarding the 2010 agreements, but surrounding the 2013 deadline as well,” Jo Marie Griesgraber, the executive director of the New Rules for Global Finance Coalition, a Washington-based international network, told IPS.

“The Brazilians have been very forthright in this process – putting out notes on ridiculous anomalies, presenting these to the board and then, very unusually, making them public afterwards.”

Now the world’s sixth largest economy – larger than that of the U.K. – Brazil has in recent years been making a concerted effort to step up its bilateral relations throughout much of the Global South, particularly in Africa. Under former president Luiz Inacio Lula da Silva, the country opened more than a dozen new embassies across Africa, with the 37th reportedly opening soon, in Malawi.

Brazilian officials have increasingly focused on foreign aid funding, which a 2010 tabulation suggested was already reaching four billion dollars a year across all parts of the government, and growing rapidly. That’s a significant turnaround for a country that for decades was a net aid recipient.

More importantly, Brazilian aid has become characterised by a uniquely forceful emphasis on South-South technical assistance, particularly focused on agriculture and social issues. This is an approach that could increase substantially given new projects now in the works.

Today, Brazil is at the centre of a global push to define a new development paradigm, which has only received greater momentum – and focus – in the aftermath of the global economic crisis.

“What’s at stake here is not just about IMF voting share. Since the crisis, the previously preferred models, the so-called Washington Consensus, have been called into question,” Gregory Chin, a senior fellow with the Centre for International Governance Innovation, in Waterloo, Canada, told IPS.

“The BRICS countries are advocating a different understanding of best practices on national development, and the Brazilians have been the leading diplomatic force in pushing these changes.”

Such models, including what is known as countercyclical financing, directly contradict the approaches long pushed by institutions such as the IMF and the U.S. Treasury. Yet with several of the emerging economies having weathered the financial crisis better than anticipated, Chin says that such models are now gaining greater attention in the Washington headquarters of the IMF, the World Bank and beyond.

Beyond the BRICS

Even as Brazil and others work to strengthen the reforms process within the IMF, Chin points to the broader parallel effort to set up a BRICS-funded development bank.

“That is, they have one foot outside of the system versus one foot inside,” Chin says. “They’ve made sure to create for themselves this alternative track, because they’ve seen how slow things are happening in the IMF.”

Analysts are now looking to the next BRICS summit, to be held in Durban, South Africa, in March, with the South African hosts reportedly pushing hard for agreement on a major announcement on a BRICS development bank. Many are also weighing whether such an institution would be able to move beyond a BRICS-only institution to work throughout the developing world – potentially falling in line with Brazil’s focus on South-South cooperation.

“Brazil is trying to increase its role in the IMF and other international organisations and G20, and I think this is happening – all of the BRICS countries are raising their involvement in these institutions in the hope that these institutions will change fundamentally,” IMF executive director Batista says.

“Hopefully, the IMF will eventually no longer be a ‘North Atlantic monetary fund’, dominated by the North Atlantic. Although we are running up against a lot of institutional inertia, the IMF and other international fora must become truly international if they want to be relevant in today’s world economy.”

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Rich Nations Fall Short of Development Potential Tue, 16 Oct 2012 23:29:13 +0000 Sarah McHaney Large rich nations are falling short in their commitments to global aid and its effectiveness. Credit: Miriam Gathigah/IPS

Large rich nations are falling short in their commitments to global aid and its effectiveness. Credit: Miriam Gathigah/IPS

By Sarah McHaney
WASHINGTON, Oct 16 2012 (IPS)

The United States is lagging far behind other developed countries in its policies aimed at improving global prosperity, according to new research.

The tenth annual Commitment to Development Index (CDI) was released this week by the Washington-based think tank Centre for Global Development (CGD). The report ranked the efforts of 27 developed countries to support developing countries.

As in previous years, Denmark, Sweden, Norway and the Netherlands vied for the top spots. This year the United Kingdom, in ninth place, was the sole country from the wealthy Group of Seven (G7) bloc to make the top 10, while the United States ranked nineteenth.

Unlike most rankings of its kind, the CDI does not focus primarily on the quantity of foreign aid each country gives per year. Rather, it takes into account seven different components of development and averages a country’s score in each area. It also focuses on the scope of the integration of a country’s policies.

“All nations are linked in many ways, not just through aid – many policies in wealthy nations affect people all around the world,” David Roodman, a senior fellow at CGD and the chief architect of the CDI, explained in an interview last week.

Comprising each of the index’s seven components, such as quantity and quality of foreign aid, or migration and environmental policies, are multiple factors that contribute to a country’s overall score. In the category of foreign aid, for example, the index looks at what percentage of a country’s gross domestic product is given away, and whether the money is “tied” to certain conditions, goes to corrupt governments, or is given in the form of loans.

After scaling the scores to an average of 5.0, researchers found Denmark to have the highest score in 2012 (7.0), while South Korea had the lowest (2.7).

The United States scores above average on only two of the seven components, and with a score of 4.8 it ranks behind all major industrialised nations except Italy and Japan. Meanwhile, Nordic countries repeatedly stand at the top of the list, for several reasons.

“Superficially it’s about foreign aid; each of these countries gives a large amount of foreign aid for the size of their economy, about 1 percent of GDP,” Roodman said of the Nordic countries. “They are also pretty good with environmental policy, doing more than most countries to reduce the use of fossil fuels.”

Citizens of these countries, Roodman explained, tend to trust more in their government and in how taxes are spent, a sentiment that could potentially allow government officials to feel more comfortable making significant commitments to developing countries.

Owen Barder, a senior fellow at CGD and director for Europe, offered a broader explanation for Nordic countries’ top rankings. In an interview last week, Barder said, “These smaller nations are forced to have an international outlook because of their size. I think this results in a sense of national pride in the role these countries play in international peace and environment negotiations.”

Barder regarded the CDI as an opportunity to evaluate how Europe as a whole scored in individual components and to begin a continent-wide conversation on how improvements can be made.

Not all countries look favourably on the CDI’s metrics. Japan, which is consistently ranked at or near the index’s bottom, responded to the 2006 CDI by criticising its method.

“By using its own method to measure aid effectiveness of each donor and publishing its results…the [CDI] has various problems and has not evaluated fairly developed countries’ policies for international development,” Japan’s ministry of foreign affairs wrote.

Japan received a low score in trade partly because of its high import barriers, especially on rice. Yet the Japanese government has argued that only the negative impact of its trade tariffs were considered, not the positive agricultural subsidies it also provides.

“The CDI does not reflect the fact that major developed countries…take development challenges by making maximum use of their comparative advantages and by complementing one another through aid coordination,” the ministry stated. (Roodman’s response can be found here).

Indeed, the CDI does have some structural flaws. The countries currently listed on the index are all democracies, for instance. These countries “preach concern for human life and dignity within their own borders”, the index’s overseers have written, noting that the CDI “looks at whether rich countries’ actions match their words”.

Yet in the past decade a host of “middle income” countries – China, India, Brazil – have emerged as global economic leaders.

“I don’t think changes in the world mean that Japan or the U.S. are any less obliged to contribute to the prosperity of developing countries,” Roodman said. He added that he is considering broadening the index to a group of countries similar to the Group of 20 (G20) to include rich developing countries that still have a large amount of poverty within their borders.

Incorporating such countries would require the index to be built on a paradigm different from its current “rich world, poor world” model.

The CDI has seen slight improvements in industrialised countries over the past ten years. Nevertheless, as Roodman pointed out, “The richest largest nations are still falling short of their potential.”

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G20 Produces Little for Developing World – or Anyone Else Thu, 21 Jun 2012 00:09:11 +0000 Carey L. Biron By Carey L. Biron
WASHINGTON, Jun 21 2012 (IPS)

The release of the final communiqué of the Group of 20 (G20) summit in Los Cabos, Mexico, on Tuesday evening has been met with widespread derision from observers across the ideological spectrum.

Critics have been particularly scathing of the summit’s lack of discussion on development issues.

According to Oxfam International, an aid agency, the G20 countries “sidelined development” in Los Cabos.

“This is a hugely disappointing outcome for developing countries,” Oxfam spokesperson Carlos Zarco said on Tuesday. “Leaders failed to keep the world’s poorest in their sights, despite the fact that more than half these people live in G20 countries.”

Even while many had begun to forecast that world leaders attending the summit, held June 18-19, would be hobbled in making long-term commitments by roiling economic downturns at home, many had continued to hope that progress would be made on individual programmes.

Yet during the event, the financial problems in Europe seemed to eclipse much of the rest of the agenda.

U.S. President Barack Obama admitted as much in post-summit comments. “The (threat) that’s received the most focus…is the situation in Europe,” he said, despite the fact that “most leaders of the eurozone…are not part of the G20″.

Nonetheless, the entirety of Obama’s comments was devoted to European issues, a trend reflected in the Los Cabos declaration as well as the text of the signature Los Cabos Growth and Jobs Action Plan.

No new action

Some new initiatives did receive cautious praise from development experts. These included a new 100-million-dollar pot to fund agricultural innovations, as well as a renewed focus on nutrition and food security.

Even in Washington, however, critics noted that much of the momentum on these issues had already begun well prior to the Los Cabos summit, meaning that little new progress or detail emerged in Mexico.

“With food prices swinging wildly and the planet burning, this was the moment for bold proposals from the G20,” Neil Watkins, with ActionAid USA, a watchdog group, said. “Instead, on food security and climate change, the G20 turned in last year’s homework, content to reaffirm old plans and commission more studies.”

World Vision’s Adam Taylor voiced similar complaints. “The summit focused more on recycling previous commitments and sharing best practices and not enough on making measurable political commitments in the fight against poverty and hunger,” he said.

John Ruthrauff, director of international advocacy with InterAction, a Washington-based network of nearly 200 international NGOs, offered support for several of the initiatives, but expressed exasperation that “these words … are not accompanied by concrete steps, action plans, or benchmarks for completion”.

More IMF funding

Perhaps the biggest news to come out of the summit was the International Monetary Fund’s (IMF) successful raising of an additional 456 billion dollars, a push that had encountered friction leading up to the talks.

While IMF head Christine Lagarde praised this doubling of the Fund’s lending capacity as a demonstration of “the broad commitment of the membership to ensure the IMF has access to adequate resources to carry out its mandate in the interests of global financial stability”, the new money is, in fact, aimed largely at shoring up faltering European economies.

A critical percentage of those commitments came from the “middle income” countries that define the G20.

Although last week these governments, led by Brazil, China, India and Russia, had threatened to withhold some or all of this additional funding pending assurance of the passage of a suite of reforms within the IMF’s voting structure, the money was ultimately given with little forward movement on the reforms, which would increase the voting power of developing countries.

The G20 “lost sight of developing countries reeling from aid cuts, climate change and volatile food prices”, Oxfam said in a statement. “Poor countries depleted their reserves defending themselves against the economic crisis caused by the rich world, and are also having to cope with massive aid cuts.”

“When confronted with a severe crisis on your own doorstep, it can be easy to sideline development issues,” said Samuel A. Worthington, the president of InterAction. “But these problems are real and they are not going away unless we take measurable steps to address them.”


Many commentators have interpreted the lack of results at the Mexico summit as indicative of a broader lack of global leadership at the moment, amidst economic crisis and with several heads of state facing election this year.

“Political courage seems to be in short supply in Los Cabos,” said Michael Elliott, the head of ONE, an international campaign against extreme poverty. “Too much of the work that was started (in previous summits) has not been advanced by leaders in Los Cabos.”

Oxfam’s Zarco agreed, saying, “This collective failure of political will is shocking, and must be dealt with in the last months of Mexico’s G20 presidency.”

While Mexico’s G20 secretariat will be expected to answer for any lack of focus during the proceedings, much handwringing is being reserved for European and U.S. leaders, particularly Obama.

“He may well be appropriately focused on economic issues at home, but there is no denying that at the G-20, in the UN, at the world’s international financial institutions, and confronting key challenges, no one is touting the transformational presence of Obama the multilateralist as they did a couple of years ago,” wrote David Rothkopf, the influential editor at large for Foreign Policy magazine, this week.

Citing the G20’s recent agenda as “almost laughably remote from the big issues of the day”, Rothkopf suggested that the world is currently seeing more of a “G-Zero moment”, using a term recently coined by an American political scientist named Ian Bremmer.

Another commentator, the noted Indian economist Jayati Ghosh, suggested that the events at Los Cabos underscored the G20’s overall lack of relevance.

The Mexico summit was “arguably the most important meeting of this group since it was formed”, Ghosh wrote in a recent blog post. “The reason for this significance is that for some time now, the G20 appears to have lost its way…(having) increasingly shied away from addressing the more important questions.”

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