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G20 to improve trade governance

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World’s top economies known as G20 nations or Group of Twenty, accounting for 85 percent of the world trade, met in Chinese Shanghai on July 9-10 to discuss and find solutions for the global slowdown of economies, causing serious concerns globally. G20 economies decided to remain committed to an open global economy, and will further work towards trade liberalization and facilitation, said a statement released following the two-day G20 Trade Ministers Meeting in Shanghai.

At the opening session of the G20 trade ministers meeting, the first of its kind in G20 history, in Shanghai on July 9, 2016. China’s commerce minister said the outlook for the global economy remains grim despite its gradual recovery from the impact of the financial crisis.

The G20’s agenda have been gradually shifting from dealing with the aftermath of financial crisis to long term governance in recent years, with trade and investment emerging as another critical aspect along with financial and fiscal coordination,” said China’s Commerce Minister Gao Hucheng.

The G20 is an international forum for the governments and central bank governors from 20 major economies. The G20 is made up of EU and the finance ministers and central bank governors of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States of America. The European Union is represented by the rotating Council presidency and the European Central Bank. Finance Ministers and Central Bank Governors meet regularly to discuss ways to strengthen the global economy, reform international financial institutions, improve financial regulation, and discuss the key economic reforms that are needed in each of the member countries.

The G20, the premier forum for its members’ international economic cooperation and decision-making, was founded in 1999 with the aim of studying, reviewing, and promoting high-level discussion of policy issues pertaining to the promotion of international financial stability It seeks to address issues that go beyond the responsibilities of any one organization. The G20 heads of government or heads of state have periodically conferred at summits since their initial meeting in 2008, and the group also hosts separate meetings of finance ministers and central bank governors.

The G20 started in 1999 as a meeting of Finance Ministers and Central Bank Governors in the aftermath of the Asian financial crisis. In 2008, the first G20 Leaders’ Summit was held, and its decisive and coordinated actions boosted consumer and business confidence and supported the first stages of economic recovery. G20 leaders have met eight times since 2008.

The G20 works closely with international organizations including the Financial Stability Board, the International Labour Organization, the International Monetary Fund, the Organization for Economic Co- operation and Development, the United Nations, the World Bank and the World Trade Organization. These and a number of other organizations are invited to attend key G20 meetings. Engagement groups such as B20, L20, T20 and W20 also convene to prepare policy recommendations for the G20 Summit during the year.

The G20 Summit continues to focus on measures to support global economic growth, with a strong emphasis on promoting job creation and open trade. The G7 was established in 1976 as an informal forum of seven major industrial economies: Canada, France, Germany, Italy, Japan, the United Kingdom and the United States of America. It was re-named the G8 after the entry of Russia in 1998. This March, the G7 voted to suspend Russia in response to escalating tensions with Ukraine that led to Russia’s annexation of Crimea. Where the G7 seeks agreement on current economic issues based on the interests of those countries, the G20 reflects the wider interests of both industrial and emerging-market economies.

The World Trade Organization (WTO) statistics showed that global trade growth has slowed significantly since 2008, from an average of over seven per cent per year between 1990 and 2008, to less than three per cent between 2009 and 2015. The WTO unveiled a new trade-related index called the World Trade Outlook Indicator (WTOI) on Friday ahead of the meeting, which is designed to provide real time information on trends in global trade. The current reading suggested that trade growth will remain weak into the third quarter of 2016.

In June the World Bank cut its forecast for the global economy in 2016 from 2.9% to 2.4%. And in April the International Monetary Fund had cut its forecast to 3.2% from 3.4%. The current reading suggested that trade growth will remain weak into the third quarter of 2016. Also, G20 economies vowed to support low-income countries (LICs) to participate more in global value chains (GVCs) to drive global trade growth

Last year marked the fourth consecutive year with global trade growth below 3 percent. The meeting endorsed the G20 Strategy for Global Trade Growth, in which the economies will lead by example to lower trade costs, harness trade and investment policy coherence, boost trade in services, enhance trade finance, promote e-commerce development and address trade and development, state-run Xinhua news agency reported.

The world’s top 20 economies agreed to improve international trade governance in view of the global slowdown of global trade growth due to increasing anti-trade measures that have become more universal since 2009, said a statement released on Sunday after the two-day G20 Trade Ministers’ Meeting in Shanghai.

The Brexit vote by the UK to leave the EU has added to the global financial uncertainty.

Outcomes

The meeting endorsed the G20 Strategy for Global Trade Growth, in which the economies will lead by example to lower trade costs, harness trade and investment policy coherence, boost trade in services, enhance trade finance, promote e-commerce development and address trade and development.

The G20 economies recognised that GVCs, encompassing regional value chains (RVCs), are important feature of the global economy, and are important drivers of world trade. The economies would support policies to allow firms of all sizes, including small-and-medium-sized enterprises (SMEs), in countries with different developing levels to participate in and fully utilize GVCs.

The G20 ministers agreed the world’s major economies to cut trade costs, boost trade and increase policy co-ordination and enhance financing. They also approved a trade growth plan. “We agree that we need to do more to achieve our common objectives for global growth, stability and prosperity,” the G20 ministers said in a statement.

G20 economies vowed to support low-income countries (LICs) to participate more in global value chains (GVCs) to drive global trade growth, it said. The G20 economies recognised that GVCs, encompassing regional value chains (RVCs), are important feature of the global economy, and are important drivers of world trade.

Some countries still practice protectionism policies though the idea of protectionism in a globalizing world is wrong. G20 members would facilitate developing countries and SMEs access to information on trade and investment opportunities, and provide further information to help them participate in GVCs and move up the value chain.

G20 members with capacity to do so would continue to help developing countries ‘and SMEs’ ability to adopt and comply with relevant national and international standards, technical regulations, and conformity assessment procedures.

The economies would support policies to allow firms of all sizes, including small-and-medium-sized enterprises (SMEs), in countries with different developing levels to participate in and fully utilize GVCs. G20 members would continue to enhance capacity building to promote inclusive and coordinated GVCs and seek to develop and implement initiatives to assist developing countries, particularly LICs and SMEs in the areas that matter most to GVCs.

G20 members would continue to enhance capacity building to promote inclusive and coordinated GVCs and seek to develop and implement initiatives to assist developing countries, particularly LICs and SMEs in the areas that matter most to GVCs.

Such initiatives might include appropriate infrastructure, technology support, access to credit, supply chain connectivity, agriculture, innovation and e-commerce, skills training and responsible business conduct. G20 members with capacity to do so would continue to help developing countries ‘and SMEs’ ability to adopt and comply with relevant national and international standards, technical regulations, and conformity assessment procedures.

China warns on global economy and says G20 (and not G7) must lead global economy. China’s commerce minister says the outlook for the global economy remains grim despite it having overcome the impact of the 2008 financial crisis. Gao Hucheng said at a G20 meeting in Shanghai that major economies must lead the way in tackling problems, including slowing trade and sluggish growth.

The international community now expected the G20 to show initiative and leadership in solving economic growth problems.

China’s will host the main G20 summit later this year. “The global economy emerged from its previous low and is developing in a good direction, and the deep effects of the global financial crisis can still be felt. The revival and growth of the global economy is still lacking in strength,” Gao said, “Low levels of global trade and investment has not recovered to their pre-financial crisis levels.”

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Belarus: Strengthening Foundations for Sustainable Recovery

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The speed of economic recovery has accelerated in early 2018, but the foundations for solid growth need to be strengthened, says the latest World Bank Economic Update on Belarus.

The economic outlook remains challenging due to external financing needs and unaddressed domestic structural bottlenecks. Improved household consumption and investment activity, along with a gradual increase in exports, will help the economy to grow, but unlikely above three percent per annum over the medium term.

“The only way for ordinary Belarusians to have better incomes in the long run is to increase productivity, which requires structural change. While macroeconomic adjustment has brought stability, only structural change will bring solid growth to the country,” said Alex Kremer, World Bank Country Manager for Belarus. “Inflation has hit a record low in Belarus, driving the costs of domestic borrowing down. However, real wages are now again outpacing productivity, with the risks of worsening cost competitiveness and generating cost-push inflation.”

A Special Topic Note of the World Bank Economic Update follows the findings of the latest World Bank report, The Changing Wealth of Nations 2018, which measures national wealth, composed of produced, natural, and human capital, and net foreign assets. Economic development comes from a country’s wealth, especially from human capital – skills and knowledge.

“Belarus has a good composition of wealth for an upper middle-income country. The per capita level of human capital exceeds both Moldova and Ukraine. However, the accumulation of physical capital has coincided with a deterioration in the country’s net foreign asset position,” noted Kiryl Haiduk, World Bank Economist. “Belarus needs to rely less on foreign borrowing and strengthen the domestic financial system, export more, and strengthen economic institutions that improve the efficiency of available physical and human capital.”

Since the Republic of Belarus joined the World Bank in 1992, lending commitments to the country have totaled US$1.7 billion. In addition, grant financing totaling US$31 million has been provided, including to programs involving civil society partners. The active investment lending portfolio financed by the World Bank in Belarus includes eight operations totaling US$790 million.

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Economic Growth in Africa Rebounds, But Not Fast Enough

MD Staff

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Sub-Saharan Africa’s growth is projected to reach 3.1 percent in 2018, and to average 3.6 percent in 2019–20, says Africa’s Pulse, a bi-annual analysis of the state of African economies conducted by the World Bank, released today.

The growth forecasts are premised on expectations that oil and metals prices will remain stable, and that governments in the region will implement reforms to address macroeconomic imbalances and boost investment.

“Growth has rebounded in Sub-Saharan Africa, but not fast enough. We are still far from pre-crisis growth levels,” said Albert G. Zeufack, World Bank Chief Economist for the Africa Region. “African Governments must speed up and deepen macroeconomic and structural reforms to achieve high and sustained levels of growth.”

The moderate pace of economic expansion reflects the gradual pick-up in growth in the region’s three largest economies, Nigeria, Angola and South Africa. Elsewhere, economic activity will pick up in some metals exporters, as mining production and investment rise. Among non-resource intensive countries, solid growth, supported by infrastructure investment, will continue in the West African Economic and Monetary Union (WAEMU), led by Côte d’Ivoire and Senegal. Growth prospects have strengthened in most of East Africa, owing to improving agriculture sector growth following droughts and a rebound in private sector credit growth; in Ethiopia, growth will remain high, as government-led infrastructure investment continues.

For many African countries, the economic recovery is vulnerable to fluctuations in commodity prices and production,” said Punam Chuhan-Pole, World Bank Lead Economist and the author of the report.  “This underscores the need for countries to build resilience by pushing diversification strategies to the top of the policy agenda.”

Public debt relative to GDP is rising in the region, and the composition of debt has changed, as countries have shifted away from traditional concessional sources of financing toward more market-based ones. Higher debt burdens and the increasing exposure to market risks raise concerns about debt sustainability: 18 countries were classified at high-risk of debt distress in March 2018, compared with eight in 2013.

“By fully embracing technology and leveraging innovation, Africa can boost productivity across and within sectors, and accelerate growth,” said Zeufack.

This issue of Africa’s Pulse has a special focus on the role of innovation in accelerating electrification in Sub-Saharan Africa, and its implications of achieving inclusive economic growth and poverty reduction. The report finds that achieving universal electrification in Sub-Saharan Africa will require a combination of solutions involving the national grid, as well as “mini-grids” and “micro-grids” serving small concentrations of electricity users, and off-grid home-scale systems. Improving regulation of the electricity sector and better management of utilities remain key to success.

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Multilateral Development Banks Present Study on Technology’s Impact on Jobs

MD Staff

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Rapid technological progress provides a golden opportunity for emerging and developing economies to grow faster and attain higher levels of prosperity. However, some disruptive technologies could displace human labor, widen income inequality, and contribute to greater informality in the workforce. Tapping new technologies in a way that maximizes benefits, mitigates adverse effects, and shares benefits among all citizens will require public-private cooperation and smart public policy.

That is one of the main conclusions of a new study, The Future of Work: Regional Perspectives, released today by four regional multilateral development institutions: the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), and the Inter-American Development Bank (IDB).

The study, which was presented at a seminar hosted 19 April at the IDB in Washington, D.C., explores the potential impact of technology in global labor markets and identifies concrete actions countries can take to prepare for the changing nature of jobs and leverage the benefits of emerging technologies.

The Future of Work: Regional Perspectives analyzes the challenges and opportunities presented by artificial intelligence, machine learning, and robotics in what is known as the Fourth Industrial Revolution. Potential challenges include increased inequality and the elimination of jobs, as well as the high degree of uncertainty brought about by technological change and automation. The greatest opportunities come from gains in economic growth that can result from increased productivity, efficiency, and lower operating costs.

The study includes chapters focusing on how new technological developments already are affecting labor markets in each region.

In the case of Asia and the Pacific, ADB research shows that even in the face of advances in areas such as robotics and artificial intelligence, there are compelling reasons to be optimistic about the region’s job prospects. New technologies often automate only some tasks of a job, not the whole. Moreover, job automation goes ahead only where it is both technically and economically feasible. Perhaps most importantly, rising demand—itself the result of the productivity benefits that new technologies bring—offsets job displacement driven by automation and contributes to the creation of new professions.

“ADB’s research shows that countries in Asia will fare well as new technology is introduced into the workplace, improving productivity, lowering production costs, and raising demand,” said Yasuyuki Sawada, ADB’s Chief Economist. “To ensure that everyone can benefit from new technologies, policymakers will need to pursue education reforms that promote lifelong learning, maintain labor market flexibility, strengthen social protection systems, and reduce income inequality.”

The publication was launched with a panel discussion featuring senior officials of the four regional development banks leading the study: Luis Alberto Moreno (IDB President), Charles O. Boamah (AfDB Senior Vice-President), Takehiko Nakao (ADB President), and Suma Chakrabarti (EBRD President). They were joined by Susan Lund (Lead of the McKinsey Global Institute) and Pagés, one of the co-authors.

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