The current motto of Indonesia’s G20 presidency is “recover together, recover stronger”. The focus is on three priority issues; global health architecture, digital transformation and sustainable energy transition. Through these priority issues, Indonesia has continued to take the lead on ensuring equitable access to COVID-19 vaccines, promoting sustainable and inclusive economic development through participation in Micro, Small & Medium Enterprises’ (MSMEs) and in the digital economy, while also maintaining the aspiration to continue to improve our collective capacity in securing the shared prosperity among nations, through reform proposals in global taxation, stronger cooperation in fighting corruption, deepening of infrastructure financing, and pushing for a more democratic and representative international cooperation.
The contribution of T20 Indonesia
T20 Indonesia is the official engagement group of G20 that brings together leading think tanks and research centers worldwide. It serves as the ‘ideas bank’ of the G20 and aims to provide research-based policy recommendations to the G20 leaders. In the current juncture where we witnessed uneven economic recovery, the rise in inequality, and global frictions that call for global coordinated actions, the tole of the T20 has become more important than ever. During the T20 Summit, we successfully produced a communiqué and submitted recommendations to G20 for their considerations and policy affirmations.
In the Communiqué, T20 Indonesia pushes for five main policy recommendations: 1) fostering recovery and resilience, 2) accelerating the progress towards Net Zero Emissions (NZE), 3) governing transformation to the digital society, 4) making the economy more inclusive and people-centered, and 5) reviving global governance. T20 Indonesia has gathered more than 700 policy brief abstracts and produced 130 policy briefs, written by more than 200 authors from a think tank network encompassing the whole world. To ensure a rigorous output, T20 Indonesia has also co-organized three main side events, namely Global Solutions Summit, Global Policy Forum, and Global Dialogue. In addition, more than 200 side events from nine task forces were held. We will highlight some recommendations that are highly relevant to the priority issues within the G20 presidency of Indonesia.
Supporting a resilient recovery
In the issue of fostering recovery and resilience we have focused on resolving the issues of public debt, improving welfare and managing the risk of stagflation, strengthening global and regional supply chains, developing vaccine production hubs and creating a sustainable and resilient agriculture food system. The impact of the COVID-19 pandemic has left many developing countries with tighter fiscal space. A strengthening of the available global sovereign debt-restructuring facilities is therefore urgently needed to safeguard those economies from the outbreak of a crippling public debt crisis. With the rising prices in energy and agricultural products, which have been largely responsible for increased inflation, it is an imperative to ensure that vulnerable groups still have adequate purchasing power to satisfy their basic needs. Increasing subsidies and social protection programmes requires additional fiscal space that needs international assistance for countries with limited fiscal space and on the brink of debt distress. Expanding credit line facilities and assistance from multilateral development banks (MDBs) could help address this issue. Furthermore, rising global inflation caused by skyrocketing agricultural and energy prices is putting the recovery process from COVID-19 under serious pressure. To curb the supply-shock driven inflation, countries around the world have resorted to tighter monetary policies. A more suitable policy option and one less costly in the fragile economic conditions would be global coordination to address constraints on the supply side.
COVID-19 has disrupted Global value chains (GVCs) like never before. Hence, we emphasized the need to reinforce global and regional supply chains through a strengthened focus on the deep trade agreement. Several countries responded with trade protectionism in in the form of export bans to the shortage of various commodities in the domestic market due to rapid price increases. Unnecessary trade barriers also materialize in the form of dumping and illegal subsidies to improve domestic industry competitiveness, disincentivising businesses to enhance their own productivity. This might damage the benefits coming from trade agreements and globalization. It is something that needs to be addressed by enhancing the degree of transparency through healthier global trade coordination and cooperation. The G20 should call for more transparency in global trade practices, especially on coordination and cooperation.
Coordination and cooperation are also needed in providing access to vaccines through the development of multiple vaccine production hubs as well as in enlarging common funding pools to strengthen global health. Vaccine production hubs are necessary to ensure more equitable vaccine access and more resilient global health preparedness. This requires G20-level coordination to set up regional vaccine production hubs and alignment on patents rights for common goods. Moreover, massive financing is required to set up such a system. This could be enhanced through blended financing instruments, including a more active participation from philanthropic institutions. The G20 could take a leading role in coordinating the setup and funding for the global health system. In detail, MDBs could serve as financing organizers while the World Health Organization (WHO) could play a major role in the programming and implementation aspects.
Financing the green transition
Regarding the issue of transitioning to a sustainable society, we are highlighting the importance of addressing the financial and non financial barriers to scale up efforts towards Net Zero Emissions (NZE), ensuring sustainable, affordable and reliable energy transition. The examples of the efforts to scale up NZE are designing international standard qualifications for environmental, social, and corporate governance (ESG) investments. The G20 could lead multilateral institutions to coordinate and cooperate better in setting up a common taxonomy that includes standard qualification of ESG investments to scale up the channeling of funds to finance the green transition. Besides, the G20 members could initiate the tax incentives beyond national levels, attracting cross-border investment and lending by global financial institutions at a more affordable borrowing rate, in order to eliminate (or minimize) tax-related barriers to ESG projects to spur investment, especially for low- and middle-income countries.
In order to have a smooth and just energy transition, we have to also take into account other three issues. First, we need to mainstream debt-swap as a solution for a green and inclusive recovery. Pursuing this agenda might worsen the fiscal position of low and middle income countries, especially those at high risk of debt distress. Setting up a debt-swap framework with the main goal of enhancing a green and inclusive recovery in the short-run and a development agenda in the long-run could be facilitated by common coordination at the G20 level.
Second, redirecting subsidies from fossil-based energy to clean and renewable energy. G20 members could contribute to ensuring universal coverage of all types of employment as well as ensuring adequate benefits and services which respond to people’s needs. This could be achieved by shifting away from fossil-based energy subsidies to clean and renewable energy to ensure the affordability of the green-transition economy.
Third, addressing climate finance contributions (e.g. by fulfilling the $100 billion goal) to strengthen the credibility of national development banks (NDBs) and national climate funds (NCFs). Multinational dedicated funds for climate purposes are often out-of-sync with national funds due to institutional and technical aspects. This requires effort beyond the national level. One proposal for G20 donor countries is to redirect their climate finance contributions to build the credibility of NDBs and NCFs by providing them with robust technical assistance packages and capacity-building programmes.
Towards a truly digital society
One aspect that we have to remember is how to manage the transformation to a digital society. As governments are adjusting their strategies in response to the pandemic, it is important to note that an increased reliance on digital technologies could trigger the opening of new divides and/or widen those that have proved persistent over the years.
Countries should also work towards a less restrictive and less abusive exercise of international property rights. Their use to justify and perpetuate market power for new technologies has indeed the tendency to worsen inequality. In addition, there is also a lack of cooperation between developed and developing countries in terms of science and technology.
G20 leaders can overcome such market failures and find ways of engaging scientists and researchers from both developed and developing countries and promote inclusion in technological development.
On the issue of digital access, accessible, fast, and affordable connectivity creates more opportunities and benefits at an increasing rate from the digital universe. G20 members should ensure that more resources flow to digital infrastructure development and project collaboration in partnership with the private sector. Priorities should include acceleration of broadband internet user penetration, especially in low-income countries, and improvements in cyber security. Therefore, governing the transformation to a digital society needs to take into account the need to close the digital divide, especially for vulnerable groups and small and medium sized enterprises. Harmonizing global common principles and data and artificial intelligence (AI) governance and ensuring these are in line with broader sustainable development goals will also be essential.
In addition, this is also an opportunity to further 1) strengthen the social protection system against future shocks by leveraging the digital system to deliver social assistance and financial inclusion and 2) achieve resilient education systems by enabling accelerated and inclusive learning and investing in digital skills.
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