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 cbiron@ips.org

Multilateralism is at a crossroads. This is a crucial matter for environmental and sustainability issues, as we have seen in the Rio+20 Summit, and for trade and other economic matters. The G20 Summit in Los Cabos, Mexico, focused precisely on improving our collective response to the current economic turbulence, which is at the heart of developments in the European Union (EU) as well.

More than three years have passed since the beginning of the 2008-09 crisis and the world economy remains very fragile. World Trade Organisation (WTO) projections indicate that trade growth will further decelerate this year to 3.7 per cent, down from 5 percent in 2011. Moreover, WTO economists believe that downside risks of an even sharper slowdown in trade growth remain high. Many of the achievements in poverty reduction over the past decade could be threatened with unravelling.

The impact of the crisis is being felt not just in developed countries but also in the developing world. China’s dynamic economy is expected to grow more slowly in 2012. India’s growth is decelerating. Many poor countries are seeing their exports to major markets such as the EU and the U.S. slow down.

Pascal Lamy. Credit: Courtesy of WTO.

While the crisis continues to loom, the world has not remained static. New economic players and new patterns of trade have emerged, dramatically changing the nature of trade and resulting in greater economic interdependence.

In the past decade, developing and emerging economies’ share of global gross domestic product (GDP) has risen from one-third to half. Developing countries’ share of global exports has jumped from 33 to 43 percent over the last decade.

Global trade patterns are also changing rapidly. Not too long ago, goods were referred to as “made in China” or “made in Germany”. Today, the expansion of global value chains means that most products are assembled with inputs from many countries. In other words, today’s goods are “made in the world”. At a growth rate of six percent a year, trade in intermediate goods now comprises close to 60 percent of total trade in goods and has become the most dynamic sector in international trade.

The map of global greenhouse gas emissions has also changed. Emissions of the developing world are rising fast, and China’s emissions are said to be either equal to, or to have actually overtaken, those of the U.S.

The same can be said of macroeconomic cooperation. As subsequent G20 summits have demonstrated, whether monetary policies, fiscal policies, currencies, the fight against tax havens or regulation of financial activities, a virtuous path requires global cooperation.

However, the rules governing multilateral cooperation have not kept pace with these changes. We are to a large extent living by the global rules created in the 90s.

The last couple of years have seen the emergence of a worrying attitude towards multilateralism. In stark contrast to the calls for greater and improved international regulatory coherence that dominated the headlines during the outbreak of the global financial crisis in 2008, international cooperation has slumped into an ever more precarious state.

Cynical observers would say that over the past decade international efforts to forge legally binding agreements have continued to set the threshold of expectations so low that even an agreement to continue to talk is considered a successful outcome.

Such cynicism ignores the fundamental lessons about international cooperation that we have learned over the past century. Most of all, it disregards the fact that for most countries more multilateralism and more international cooperation remain the only sustainable way forward.

Certainly, the changes of the past few years demand a re-configuration, rethinking and adjustment of traditional multilateral cooperation, including in the WTO. The proliferation of different informal coalitions and groups of countries and civil society ­the G8+, G8+5, G20, B20 and L20, to name but a few­ are symptomatic of the constantly evolving nature of international relations.

However, their effectiveness will depend on whether they are representative enough to address the increasingly complex challenges on our agenda. A stable global economy cannot be built without including all key stakeholders in the decision-making process.

More fundamentally, I believe that while the crisis continues to hit national systems hard, it will be very difficult to achieve high-standard multilateralism.

Contrary to conventional wisdom, international agreements necessitate a high quantum of political energy at home. They require strong political leadership because they are about bringing domestic constituencies on board.

This situation is a dangerous one and risks turning into a vicious circle: exiting the crisis sooner rather than later implies strong leadership to craft the necessary international cooperation agreements. But governments’ legitimacy is weakened by popular discontent generated by economic and social hardships. This erodes the ability to act together, which in turn further prolongs the crisis, leading to the syndrome of “too little, too late”.

For these reasons, I believe that multilateralism is at a crossroads. Either it advances in the spirit of shared values and enhanced cooperation, or is allowed to falter, at our own peril. Without global cooperation on finance, security, trade, the environment, and poverty reduction, the risks of division, strife and war will remain dangerously real. Waiting for better times will simply not suffice. A consensus on inaction would simply mean a consensus on more pain for all. We must, together, be bolder if we are to cope with the growing risks of today’s world. (END/COPYRIGHT IPS)

* Pascal Lamy is the director-general of the World Trade Organisation (WTO).

This column is available for visitors to the IPS website only for reading. Reproduction in print or electronic media is prohibited. Media interested in republishing may contact romacol@ips.org

Business will push for the freeing up of trade in green goods and services, at the upcoming summit of heads of state of the Group of 20 (G20) industrialised and emerging countries in Mexico.

“It’s an agenda for investors,” Diana Aguiar, representative of the Brazilian Network for the Integration of Peoples (REBRIP), told IPS. “The idea is that natural resources won’t be preserved if no monetary value is put on them. This is a very mistaken premise. They see it as a business.”

The activist is attending the alternative People’s Summit, which runs Tuesday Jun. 12 to Friday Jun. 15 in Mexico City before continuing in the northwestern city of La Paz until Tuesday Jun. 19.

The civil society forum has drawn hundreds of delegates of NGOs from Mexico and other G20 nations, whose presidents are meeting Jun. 18-19 in Los Cabos, a Pacific resort town at the southern tip of Mexico’s Baja California Peninsula, south of La Paz.

Fomenting free movement of green or sustainable products is one of the recommendations that Business 20 (B20) – which represents companies in the G20 bloc – set forth to the governments. The issue is to be discussed at the summit.

In a 102-page report on recommendations of the B20 task force, to which IPS had access, the business executives laid out suggestions on food security, green growth, employment, trade, investment, technology and innovation, and financing for growth and development.

The B20 argues that free movement of green-friendly goods and services will accelerate the adoption of green technology and foment competitiveness, innovation and job creation.

The document also recommends raising the price of carbon dioxide (CO2) in order to change investment patterns and decisions and help reduce greenhouse gases.

To that end, G20 leaders should guarantee that national goals and policies are ambitious enough to create international demand consistent with the units of CO2 and thus bolster green technologies, climate-smart agriculture, and energy efficiency, the report says.

Transnational corporations like Monsanto, Coca-Cola and Wal-Mart from the U.S.; the Anglo-Dutch Unilever; and Nestle from Switzerland are among the companies represented in the B20.

In addition to the G8 industrialised nations – Canada, France, Germany, Italy, Japan, Russia, the UK and the U.S. – the G20 is made up of Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Saudi Arabia, South Africa, South Korea and Turkey, as well as the European Union.

In Los Cabos, the presidents will discuss issues like policies against financial crises, food security, the green economy, the fight against climate change, transparency and corruption.

The non-member countries that have also been invited include Colombia, Chile, Peru and Spain.

The NGOs participating in the People’s Summit question the legitimacy of the G20, whose rotating presidency is currently held by Mexico, saying it represents the “one percent” of the world’s seven billion people.

They reject the summit’s agenda, which they say is more responsive to corporate and financial interests than to the needs and concerns of the world population.

“The G20 and B20 are very close, but that doesn’t happen with NGOs. That is worrisome,” Nancy Alexander, of the Heinrich Böll Foundation, told IPS.

Alexander, the director of the Economic Governance Programme in the Berlin-based Foundation’s North America office, also said the G20 has not focused on the priorities of infrastructure, green growth and food security.

Alexander and Aldo Caliari, director of the Rethinking Bretton Woods Project at the Center of Concern, a U.S. not-for-profit agency, stated in an article this month, “Selected Highlights of B20 Draft Recommendations to the G20”, that “If accepted by the G20, many of these recommendations would have far-reaching implications.”

Referring to the recommendation to place trade and investment on the G20’s permanent agenda, and to hold “periodic meetings of trade ministers” who would be in “ongoing dialogue” with the B20, they said this would exclude the 173 countries that are not members of the G20. “Therefore, if leaders accept this recommendation, it would institutionalise exclusionary trade negotiation practices,” they wrote.

The People’s Summit has scheduled seminars and workshops on questions like gender, energy, and alternatives to the G20, as well as street protests.

The NGOs are opposed to the austerity policies being implemented in the industrialised North, which have imposed drastic spending cuts in education, health and other essential social areas, and have driven up unemployment and stood in the way of developing a green economy.

“The G20 is in crisis,” Susana Sanz of Spain’s May 15 Movement (15M), which sprang up as nationwide protests against the government’s response to the economic crisis on that date last year, told IPS. “It doesn’t represent us. Public policies are adopted with a view to protecting private interests. We need participative democracy.”

The government of conservative Mexican President Felipe Calderón has outlined a five-point agenda for Los Cabos. The priorities include economic stability and structural reforms for growth and employment; consolidation of the international financial architecture; financial inclusion for economic growth; reduction of volatility in the commodities market; and promotion of sustainable development.

But what is expected to continue to monopolise the debate is the financial crisis that broke out in the U.S. in 2007, intensified in the EU last year, and has now thrown the future of the euro into doubt.

“They are seeking to use new spaces of accumulation of the financial system, to create commodities for speculation,” Aguiar said.

The G20 summit will announce the creation of a bloc that will include the multilateral financial institutions, private and development banks, companies, and private investors, to advance the B20 agenda over the next 36 months.

The B20 proposes an expansion of the public-private partnership model, especially in infrastructure construction, which is currently being tried in a number of the G20 countries.

“G20 promotes policies in low-income countries, but they are not represented nor have they been consulted properly,” Alexander said.

In their article, Alexander and Caliari argue that “formal engagement by the B20 in the assessment of trade and investment policies, as proposed, would also give the transnational business sector an unprecedented degree of access to decision-making, while excluding countervailing views from non-governmental actors”.

(END/IPS/WD LA G20 IF FM/TRASP-SW/EG/EGF/12)