The meeting brought together prestigious think tanks from all over the world, including, as co-organizers, the three Chinese organizations that are leading T20 activities under this year’s Chinese presidency of the G20. Namely, Institute of World Economics and Politics, Chinese Academy of Social Sciences (CASS-IWEP); Shanghai Institutes for International Studies (SIIS); and Chongyang Institute for Financial Studies, Renmin University of China (RDCY). From Germany, country that will have the presidency of G20 in 2017, participated also as co-organizer, the Economic Policy Forum (EPF). Among renowned institutions that were also represented in the workshop are: Brookings Institution (United States); Korea Institute for International Economic Policy, KIEP (Korea); Gateway House (India); Asian Development Bank Institute (Japan); Real Instituto Elcano (Spain); Institute of Applied Economic Research, IPEA (Brazil); among others. A total of 33 experts between foreigners and nationals were gathered in this occasion. The complete list of participants is presented at the bottom.
As underlined by Dr. Rosario Santa Gadea, Director of the Center for Peru-China Studies of Universidad del Pacífico, the university was invited by IWEP-CASS, the leading institution of the T20 under Chinese presidency, to be co-organizer and host of this important event. For the first time, a Latin American country not member of the G20 hosted a T20 activity during the Chinese presidency, which is undoubtedly a sign of China's interest in Latin America and in Peru in particular.
The inaugural session of the T20 Workshop was attended by Dr. Julio Velarde, President of the Central Reserve Bank of Peru, who gave the opening keynote speech on trends and prospects of the Peruvian economy in the global context. According to Velarde, exogenous factors have been affecting the economic cycle, but the Peruvian economy has strong foundations. However, it is necessary to deepen structural reforms in order to strengthen the recovery of potential growth.
The working sessions had the participation of all think tanks, allowing an enriching debate based on the comparison of national and international experiences and perspectives. The multilateral institutions and development agencies that participated in the workshop also offered their perspective, including the Inter-American Development Bank (IDB) and the German Agency for International Cooperation (GIZ), institutions that, in turn, made the workshop possible thanks to their valuable sponsorship.
As noted Dr. Zhang Yuyan, Director of IWEP-CASS, the T20 is a distinguished academic platform of the G20 that serves as a bank of ideas generated by academics and other experts, which can be provided to government leaders. In this sense, the Chinese institution will prepare a Minute of the meeting that will be reached to the G20 presidency and will also be published on the T20 China website as a result of the workshop in Lima.
Dr. Rosario Santa Gadea, Director of the Center for Peru-China Studies, Universidad del Pacífico and Dr. Yuyan Zhang,
Director of the Institute of World Economics and Politics, Chinese Academy of Social Sciences (IWEP-CASS)
Some key ideas that reflect the significance of the topics covered in this workshop are:
The G20 has a leadership role in global collective actions due to its characteristic of being a forum for cooperation formed by the largest advanced and emerging economies. This leadership mission can also be reflected in the transition observed in the G20: from being a mechanism of response to international crisis, mainly focused on cyclical policies, to becoming a mechanism for global governance in the long term, which also implies promoting structural reforms. But, how does all this relates to developing countries, either G20 members or not? The workshop has raised this fundamental question and addressed its analysis taking into account the Global Sustainable Development Goals, adopted by the United Nations in 2015, which is known as the 2030 Global Agenda for Sustainable Development.
It has been emphasized the need to differentiate middle-income and high-income developing countries (categories where most Latin American countries are) from low-income or least developed countries, since their needs for financing and international cooperation are very different. For the first group, the financing for development is no longer about receiving official development assistance, but rather attracting more foreign direct investment, so FDI must have a prominent place in a new agenda for cooperation with these countries.
Moreover, it is necessary to differentiate and give especial attention to the objectives of the 2030 Agenda that most directly concern middle-income and high-income developing countries. Among them, the workshop focused on three: economic growth, investment in infrastructure and partnerships (including South-South cooperation and regional economic integration). See the agenda of the workshop including topics and driving questions.
Regarding economic growth, the developing countries face the "middle income trap" where wages are too high to remain competitive in labor-intensive productions, while productivity is not high enough to allow them to compete in more technology intensive productions. In consequence, the rate of economic growth slows down and becomes insufficient to make the leap to economic development. The challenges are to increase productivity, incorporate technology, develop innovation and reduce social inequality. Countries like Korea have managed to overcome these challenges.
However, there is a variety of situations. For example, India still does not have to face the "middle income trap" and its main challenge is unemployment rather than reaching the degree of sophistication needed by the economy. Despite having grown an average of 6% over the past 30 years and being the largest recipient of foreign direct investment in 2015, there are still strong pockets of poverty and inequality.
As for the Latin American countries, even after all the economic growth experienced, productivity still represents on average only half of the one of the USA; meaning that Latin America must strengthen the pillars of growth and avoid its volatility. Some pending tasks are: increasing quality of education, reducing informality and inequality, promoting financial inclusion, providing infrastructure and other public goods, among others.
Concerning investments in infrastructure, it was discussed how the G20 and the new international financial institutions can foster the development of more sustainable infrastructure worldwide. It is estimated that 70% of the infrastructure investments required in the next 15 years will be located in emerging markets and developing economies due to the projected growth of their urban population that will require cities with energy, water and transport systems. The investment needed is greater than the currently existing stock. Therefore, how do these significant investments are made will undoubtedly have a lasting impact on growth, development and the planet.
If infrastructure is well designed and implemented, it can be favorable to inclusive growth without damaging the environment. The most important role that G20 could play in this context would be to promote reforms in the multilateral development financing system in order to raise more funds and achieve more sustainable investments on infrastructure. In this sense, the new international financial institutions have a crucial role in adopting sustainability as a key element of their mission. At the national level, the design and implementation of comprehensive plans for infrastructure and territorial development is essential.
As for financial cooperation and regional integration, it was discussed how middle-income countries can attract and channel more financial resources generating regional public goods. The per capita income cannot be the sole criterion for determining the degree of development of countries, as there are significant disparities within them. Therefore, it is necessary to renew the agenda for international cooperation with middle-income developing countries and review the criteria for funding.
From the 26 member countries of IDB, 7 will surpass US$ 20,000 GDP per capita and 11 will be above US$ 10,000 GDP per capita by 2020. This graduation process makes countries lose their eligibility for traditional sources of funding for development.
Then, these criteria should be reviewed and new emerging forms of cooperation should be analyzed, such as triangular and South-South cooperation. In this context, there are new initiatives of regional integration and financial cooperation in Latin America that could become platforms to mobilize more international resources for development.
In sum, the workshop highlighted the importance of forums such as the G20 to contribute to global governance, addressing global issues that necessarily require negotiations to achieve a balance between common and conflicting interests, within the framework of existing international organizations such as the United Nations, the International Monetary Fund, the World Trade Organization, among others, aimed at the provision of global public goods.