Reconfiguring the role of business in the G-20

AKSHAY MATHUR

A powerful new forum for shaping business and foreign economic policy is emerging called the B-20.
Since their first meeting in 2010, they have met regularly on the sidelines of the G-20 Summits – in South Korea (2010), France (2011), Mexico (2012), Russia (2013) and Australia (2014). This year, Turkey is the president of the G-20 and therefore its leadership of the B-20 will be closely watched.

So far, the B-20 has made over 400 recommendations to the world’s leaders on a range of business issues from infrastructure to energy. Many have been incorporated into the final G-20 vision.

However, the impact of the B-20 on the G-20, and ultimately on global economic governance, has been uneven. A self-assessment done by the B-20 forum during the Russian presidency in 2013 concludes that only 35% of the recommendations were adopted by the G-20 leadership.

What imperils the B-20 is that it sees itself as an advisor to the G-20 leaders – not as a practical implementer of G-20 policies. This has resulted in repeated recommendations on business for the same things – invest in infrastructure, focus on green energy, remove trade barriers – without much headway in execution, the very expertise that business has.

In its defense, the B-20 is only in its fifth year, an infant in the forum world - the World Economic Forum (WEF) has been around since 1971. Assessing its impact may even be unfair. The forum has become more organized and representative. Turkey launched the first B-20 meeting in Istanbul in December 2014 with a contingent of over 500 Turkish and international business leaders and the chambers of commerce are now included.

Yet, as the forum grows, there is a risk that competing interests will dilute its mandate to lobbying. The forum needs reconfiguration, without which its role may become ineffective.

First, it must shift from advisory to facilitation. The presidency that had adopted this spirit publicly is Mexico in 2012. B-20 leaders asked what business itself can do first, before it advised governments on what they should do. To that end, they created a club of lending institutions to design new models for enabling private financing of green infrastructure projects.

Second, the B-20 must refrain from replicating the mission of the WEF (the B-20 collaborates with the WEF as a partner). Rifat Hisarcıklıoğlu, the dynamic Chair of B-20 Turkey, compared the G-20 to the “world’s economic steering committee” and Davos as the “compass” at the WEF 2015. This is contrary to the raison d’etre of the B-20 and Hisarciklioglu’s own mission of including small and medium enterprises as equal stakeholders. The WEF’s purpose is to seek the support of the world’s political leaders for meeting business goals, whereas the B-20’s purpose should be the exact opposite - to galvanize the world’s business leaders to help political leaders meet nation-building goals.

Third, the B-20 is underplaying the role of technology in the critical issue of job creation – a problem that affects developing and developed nations. This is a denial of reality. Technology firms can contribute as much to GDP and jobs as infrastructure. Google and Apple in the U.S. or Flipkart and TCS in India are common examples. Yet technology entrepreneurs remain underrepresented by the B-20.

Lastly, the most game-changing proposals for global economic governance under the G-20 have been made by institutions such as the International Securities Organization (IOSCO) on the credibility of global financial and energy benchmarks, by the Financial Action Task Force (FATF) on the loopholes for money-laundering, or by the OECD on mechanisms for catching tax evasion. The B-20 can play a similar role for the G-20, using its own competencies of providing business solutions to global problems. For instance, both in 2011 and 2012, the B-20 recommended the introduction of a multi-currency architecture, one that enables trade and investment in non-dollar currencies. But even when governments and central banks have tried, businesses have backtracked, reluctant to experiment for fear of costly hedging and transition costs. This could have been a model problem for the B-20 to help central bankers to solve.

As the world’s economic health remains in intensive care, expectations from Turkey’s presidency of the G-20 are high. Turkey’s agenda for 2015 has been welcomed in India, which relates to Turkey as another emerging market. If the B-20 can reconfigure its approach, Turkish and Indian business can help the G-20 realize its priorities.


Akshay Mathur is Head of Research and Geo-economics Fellow at Gateway House, a foreign policy think-tank based in Mumbai, India.