Since the trans-Atlantic financial crisis, there has been a consistent focus on giving more voice and vote to emerging powers such as China and India, as well as to developing countries.
The concerted effort of the G20 has therefore resulted in a reform of the International Monetary Fund which has led to a distinct shift in voting powers, especially to China.
What has received less attention, however, is how can the priorities and concerns of the emerging and developing markets be better reflected on the global governance agenda.
For instance, addressing the lack of transparency, data, monitoring, efficiency and stability of the financial system has not received due attention.
Here are some examples:
- India has been raising the issue of high cost of remittances at the G20 for many years. The low and middle-income economies received ($466 bn) in 2017. India received $69 billion which played a big role in mitigating the current account deficit we have as an importing country. The global average cost of sending $200 was 7.1 % and the cost of remitting to India was 5.6% in 2018, higher than the SDG goal of 3% (RBI). While cost depends on many components, the margins charged by intermediaries on exchange rates is one of the key cost additives (India Centre for Migration).
- Cross-border trade in services is increasingly the pre-eminent driver of growth for developed and developing countries alike. Service-related commitments are included in most of the new trade agreements. Effective policy-design, however, is dependent on collection and presentation of accurate data. Inter-agency task forces of multilateral organizations such as UN, WTO, IMF and OECD have designed a framework to capture cross-border trade in services but data classification by partner trading company, partner trading country and by modes-of supply, remain a challenge.
- Emphasis on addressing terrorism financing, money laundering, and transparency in financial flows worldwide is weak. Indian prime minister Narendra Modi raised the issue of economic offenders again at the G20 Summit in Osaka.
a) The cross-border flow of payments, remittances, aid and investments is integral for globalisation. Ensuring transparency in such cross-border financial transactions is critical for the stability of the global financial system. A key goal for policy-makers has been the necessity to identify beneficial ownership in multi-country financial transactions to protect against money laundering, terrorist financing and tax evasion, which have besieged developed and developing countries alike. Existing global efforts on tracing Beneficial Ownership are insufficient since verification is limited to self-disclosures and by national regulations. What is needed is a global framework to enable data exchange, cross-referencing, tracing and analysis of data on cross border financial transactions.
b) A connected parameter is the adoption of the Legal Entity Identifier. As of September 2018, 1,267,387 LEIs have been issued in 223 countries and 83,652 direct and ultimate parents have been identified. The largest number of registrations were reported in the US, UK, Germany, Netherlands and Italy. So far, 11,521 LEIs have been issued in India and as of 11 September 2018, 2,210 are pending acceptance. The slow pace of adoption – not just in India – is not surprising. LEI issuers and registrants have both reported that the process is complex and tiresome. Since the information is self-declared, the registrant is responsible for its accuracy.
- The US and its European allies have steadily increased economic sanctions on Russia since first imposing them in March 2014. The stated purpose of sanctions is to punish Russia for its involvement in Ukraine, as well as its alleged cyber-meddling in the 2016 US elections and its transfer of arms to Syria and alleged human-rights abuses, also in Syria. As the economic battle mounts, India is caught in the crossfire. Russia is its long-standing strategic partner and, for the foreseeable future, its irreplaceable supplier of defence equipment and weaponry. The sanctions pose significant risks to this vital relationship. Under the sanctions, Indian companies doing business with critical Russian defense suppliers like Rosoboronexport, United Shipbuilding, and Almaz-Antey could find themselves locked out of the dollar-based global financial system controlled by the US. Indeed, even the activities of Indian companies in areas not directly covered by sanctions could be affected.