Beyond-Aid Development Agenda on the Anvil?
DIRK WILLEM te VELDE
(IDN) - Most developed G-20 countries are walking a tightrope, trying to
balance actions to promote growth whilst ensuring fiscal sustainability.
So most headlines about the G-20 Summit in Toronto were about the
agreement on growth-friendly plans to reduce deficits, albeit at
different speeds in different countries.
There was also coverage of the slower than expected progress on
financial regulation, and on the agreement to implement bank levies only
if and when countries want them. Beyond these headlines, however, the
Summit Declaration contains what could become a new development agenda
for the G-20, focusing on support for growth in low income countries (LICs).
This means that there is much work to do before the G-20 summit in Seoul
One of the clearest benefits of this Summit was to see the G-20
framework for strong, sustainable and balanced growth working in
The Declaration welcomes ‘"the actions taken and commitments made
by a number of G-20 countries to boost demand and rebalance growth,
strengthen our public finances, and make our financial systems stronger
and more transparent."
At the Summit press conference, Canadian Prime Minister Stephen Harper
identified a number of "down payments" such as the UK decision
to halve its deficit by 2013, the Chinese decision to float the Renminbi,
and the US financial sector reform package. This provides some evidence,
at least, that such summits work. The G-20 committed itself to halving
deficits by 2013 and all members, with the exception of Japan, pledged
to stabilise or reduce government debt-to-GDP ratios by 2016.
There were commitments to greater exchange rate flexibility in some
emerging markets; structural reforms across the entire G-20 membership;
action to boost national savings in advanced deficit countries while
maintaining open markets and enhancing export competitiveness; and
agreement that economies with surpluses will undertake reforms to reduce
their reliance on external demand and focus more on domestic sources of
Taken together, the entire span of commitments within the G-20 growth
framework represents an ambitious set of reforms that could, according
to background papers from the IMF and the World Bank, lead to the
following in the medium-term:
- an increase in global output by almost $4 trillion, with a 2.4% gain
in developing country incomes the creation of tens of millions more jobs
- a fall of around 33 million in the number of people living in poverty
(on less than $2 a day), and a significant reduction in global
WHAT THE TORONTO G-20 MEANS FOR DEVELOPMENT
One key sentence in the Declaration reads: "We are committed to
narrowing the development gap and must consider the impact of our policy
actions on low-income countries."
The Declaration also says: "Narrowing the development gap and
reducing poverty are integral to our broader objective of achieving
strong, sustainable and balanced growth and ensuring a more robust and
resilient global economy for all."
The poorest countries are, therefore, seen as central to the G-20
deliberations on growth.
One encouraging step is the Summit's creation of a Working Group on
Development, with a mandate to create a development agenda and
multi-year action plans to be adopted at the Seoul Summit. This Working
Group could be the starting point for a G-20/ LIC 20 point charter for
strong sustainable and balanced growth which could commit both the LICs
and the G-20 to engage in mutually reinforcing growth and development
The Working Group could examine in more detail how G-20 policy actions
affect specific developing countries, an element that may not have
received enough attention in the IMF and World Bank background papers.
It could also examine which complementary policies are needed to
mitigate any negative development consequences of G-20 policy actions.
One example of policies that have already deserved G-20 attention is the
possible negative impact of stronger financial regulation, which may
reduce bank lending to poorest countries, as outlined in ODI's recent
publication on the G-20 and growth.
The Declaration states: "We will continue to support development
financing, including through new approaches that encourage development
financing from both public and private sources." In Toronto, the
Canadian Prime Minister announced to the B-20 (the business equivalent
of the G-20) the SME Finance Challenge (small- and medium-sized
enterprises), which aims expand business opportunities and create jobs
by inviting the private sector to develop proposals that will attract
private investment for small businesses in LICs.
The successful proposals will be announced at the Seoul G-20 summit.
This private sector initiative could be a useful complement to the
capital increases for multilateral development banks and increased
resources for the IMF, previously announced and referred to in the
The G-20 renewed its commitment to refrain from protectionism until 2013
-- a commitment mentioned in ODI's Development Charter for the G-20, and
which has been highly successful over the past two years -- and
reiterated its support for bringing the WTO Doha Development Round to an
end as soon as possible. While this is not the first time the G-20 has
made this pledge, dropping the pledge would be worse. The Declaration
also maintains a reference to Aid for Trade, which can be a very
effective form of aid.
The Declaration also reinforces the commitment to a green recovery and
to sustainable global growth, and welcomes the commitment to the
country-specific phase out of inefficient fossil fuel subsidies,
"taking into account vulnerable groups and their development
needs." The latter is important as some poor groups might otherwise
lose out, even though the environment might gain (see ODI's recent
publication on the G-20 and growth).
The Declaration mentions the upcoming high level plenary meeting on the
Millennium Development Goals in September 2010, and the 4th United
Nations Conference on the Least Developed Countries in June 2011 in
Turkey -- events that could also benefit from new thinking on strong,
sustainable and balanced growth.
A new development agenda for the G-8 and G-20 with new targets is
urgently needed, now that the G-8 has dropped references to the
Gleneagles commitments on aid, despite the UK's excellent aid efforts
The Toronto G-20 may have ushered in a new beyond-aid agenda on
development and worked rather well, according to some interpretations.
There is more on development in this Declaration than might have been
expected from the previous G-20 communique.
The onus is now on the Seoul summit in November to deliver, and
effective coordination between the newly established G-20 working group
on development and developing country policy makers could play a crucial
role in this.
| Analysis That Matters]
Dirk Willem te Velde is
the programme leader of the Investment and Growth Programme at Overseas
Development Institute (ODI) in London. He has extensive research
experience and has led teams providing policy advice in-country in
sub-Saharan Africa (e.g. Malawi, Botswana) and the Caribbean, and has
worked with and for business and NGOs. He has advised a wide variety of
developing countries and UN agencies, the Wold Bank and the EC. He has
written and edited four books, 15 journal articles and 20 book chapters
related to growth, trade and investment issues. He has a PhD from
Birkbeck College, University of London. This article features the
author's personal view and does not represent the view of ODI. It first
appeared as blog post at