Wise investments
The summit is also expected to address the digital economy and issues that arise from an aging society. Nicholas Stern, chairman of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics, said the most important issue for G20 leaders in Osaka is how to generate sustainable and inclusive economic development and growth across the world over the coming decades. Stern, who is also co-chair of the Global Commission on the Economy and Climate, said G20 nations can safeguard against one potentially important element in future financial crises by prioritizing wise investments in the transition to zero-carbon and climate-resilient growth and development, adding that an inadequate, slow or badly managed transition could destabilize economies, slow or reverse growth, and severely damage the environment. A report published by the World Bank early this year highlighted the huge need for infrastructure to eliminate poverty and raise living standards, with 940 million people living without electricity, 663 million lacking adequate sources of drinking water, 2.4 billion lacking decent sanitation facilities, 1 billion living more than 2 kilometers from an all-season road, and 4 billion people lacking internet access. It found that the spending of developing countries on infrastructure was mostly in the range of 3.5 percent to 5 percent of GDP, and they should be able to build the infrastructure necessary to realize the SDGs through investment equivalent to about 4.5 percent of GDP. "Such investments will be of profound importance in our cities, where more than half the world's population now lives and 70 percent of GDP is created, to ensure they are places where we can live, breathe, move safely and be productive," Stern said. The G20 nations must lead by example on this imperative, Stern said, and especially the world's two biggest economies, the US and China. "China is demonstrating leadership through its significant investments in zero-carbon energy, particularly renewable power," he said. "China's support for solar power has directly contributed to the astonishingly rapid fall in the production costs of panel units, making it now the cheapest source of electricity in many parts of the world." Stern also noted that China can provide even greater leadership through the Belt and Road Initiative if it encourages the application of robust sustainability tests to investments in new infrastructure in partner countries. He added that G20 nations should be wise with their investments within their own countries and abroad. They should promote the role of international financial institutions, and multilateral development banks in particular, in lowering the cost of capital for sustainable infrastructure. "The necessary pace and scale of transition requires a substantial expansion of that role," he said. Stern, a member of the international advisory panel for the Asian Infrastructure Investment Bank, said that on the back of good management, a strong portfolio and a clear strategy, the AIIB successfully issued its first global bond last month, raising $2.5 billion to support sustainable infrastructure, cross-border connectivity, and environmental, social and governance-related investment practices in emerging economies in Asia. The AIIB's inaugural report on Asian infrastructure finance, published early this year, concluded there has been no significant breakthrough in Asia in mobilizing private capital for infrastructure. It urged more efforts to attract private capital to sustainable infrastructure, and called on multilateral development banks to contribute more toward improving project preparation and country policy frameworks and maintaining supportive conditions by, for instance, providing better information for market players. Stern said the G20 nations can promote sustainable economic growth and development, reduce poverty and improve living standards across the world. "But they must move quickly and on scale," he said. "The climate crisis is real and now; delay will be profoundly dangerous." Kevin Gallagher, director of the Global Development Policy Center at Boston University, and Richard Kozul-Wright, director of the Division on Globalization and Development Strategies at the United Nations Conference on Trade and Development, have appealed to G20 leaders to call for a new multilateralism that combines mission-oriented rules with a commitment to shared prosperity and environmental recovery and that leads by example, with or without the US. "A new multilateralism must prioritize the role of global public goods needed to deliver shared prosperity and a healthy planet, promote cooperation and collective action to bring fairness and balance to market outcomes, coordinate policy initiatives to mitigate common risks, and ensure that no nation's pursuit of these broader goals infringes on the ability of other nations to pursue them," they said in a report published at a forum in Osaka on Tuesday organized by China Daily. "In short, we need a global green 'new deal' to reclaim multilateralism." With the US having signaled its intention to withdraw from the Paris Agreement, other countries such as China, Germany and the UK are leading the way by phasing out fossil fuels, investing in clean technologies and advancing green industrial policies, they said. "But actions at home must be globalized." Stephen Roach, a faculty member at Yale University and a former chairman of Morgan Stanley Asia, warned that if the US and China, which have accounted for fully 44 percent of world GDP growth since 2008, opt for a superficial resolution or fail to come to terms on their trade conflict, the global economy could well falter. Bipartisan political support for China bashing in the savings-short US threatens to turn a trade war into a protracted and destructive economic cold war, Roach said. "Now, more than ever, a fragile world is in desperate need of political will and wisdom," he said. Xiong Aizong, assistant researcher at the Chinese Academy of Social Sciences' Institute of World Economics and Politics, agreed that multilateral mechanisms are the best solution to tackle global issues. Most of the current multilateral mechanisms were established after World War II and have long played a positive role in addressing global issues and ensuring the world's economic stability and development, he said. But as time has passed, some of the mechanisms have run into challenges. Take the World Trade Organization. Xiong said it is in unprecedented crisis as its dispute-solving mechanism is challenged, its clauses on security exceptions and unilateral measures are abused, and negotiations on some agendas progress slowly. "To solve such problems, we need to improve and consolidate multilateral mechanisms as soon as possible," he said. "As countries become more domestic-focused, and unilateralism as well as protectionism are rising, China's support for, and promotion of, multilateralism is more important than ever." China has been working with G20 countries on macroeconomic policy coordination, global financial governance and sustainable development, and held a successful G20 summit in Hangzhou, Zhejiang province, in 2016 where it contributed Chinese wisdom and Chinese solutions to global economic governance, Xiong said. |
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