2015 – A Year of Implementation
January 2, 2015
By JC Collins
“The G20 has so far taken significant strides in designing and launching policy frameworks in many areas. In November 2014, as the members of the G20 we have agreed on the Brisbane Action Plan and pledged to undertake about 1000 commitments that, if fully implemented, will add more than USD 2 trillion to the global GDP and generate millions of additional jobs for our citizens by 2018. Likewise, for a number of work streams within the G20 including financial regulation, international tax, and international financial architecture, words have played their part. 2015 will be the time for the deeds and the year of implementation.”
From the official Turkish G20 Presidency Priorities for 2015
Only 2 days into the new year and we have the official outline of G20 priorities. They are, as expected, a continuation of alternate framework policies and financial architecture. One thing that is different right out of the gate is the terminology utilized by the Prime Minister of the Republic of Turkey. The quote above makes clear the intention of transitioning from “words” to “deeds” and to “implementation”.
It also references the 2018 time frame which we have discussed as the end of this stage, and the beginning of the next stage of multilateral transition. We will review the three stages of transition further down the road but for now it is important to understand that we are moving from Stage One into Stage Two, and the third and final stage will commence in 2018.
I’m working on a series of e-publications titled The Economic Transition Papers, which will be segmented into the three stages and will offer more detailed information on the processes and structure of the multilateral architecture. Each will be around 50 pages in length and my goal is to produce one a month. The first installment is titled “Reengineering the Dollar”, and should be available sometime next week.
Also from the G20 publication:
“On the demand side, enhancing project preparation, effective project prioritization and developing more efficient Public-Private-Partnership (PPP) models will be our targets. With regard to financial intermediation, Turkish Presidency will attribute great importance to non-traditional sources of lending. Among those we will especially emphasize equity-based financing, with a particular focus on the New Modalities of Asset Based Financing, which is important for infrastructure investment and a good way of diversifying the risks.”
This quote gives us some new terminology to consider. First, we are given the phrase “non-traditional sources of lending” which leads into “emphasize equity-based financing”. These can be taken as subjective references to the SDR bonds and liquidity and required restructuring of the IMF quota amounts, as detailed in the IMF Reforms.
The more important terminology here is found in “New Modalities of Asset Based Financing”. This phrase is loaded with potential speculation and unknowns, but is likely a reference to Basel 3 Banking Regulations and transition to the SDR as the international unit of account.
“Completing the IMF reform will not only ensure a more even-handed realignment in the ranking of quota shares, but also help the Fund maintain its legitimacy and effectiveness. There will be a continued emphasis on the ratification of the 2010 IMF Quota and Governance Reform in 2015. In case of a failure, we will start discussions on the alternative ways to enhance the governance of the Fund, with a view to preserve the spirit of the 2010 Reform Package.”
This statement gives a very clear indication that the G20 is considering giving the United States Congress a short window to ratify the 2010 reforms or they will move forward on “implementing” the Plan B reforms, which will bypass the US and potentially remove the American veto, with an even larger decrease in quota amounts.
It also makes overtly clear that the G20, which includes China and Russia, intend on moving forward with the International Monetary Fund as opposed to further fragmenting the international monetary system by creating a parallel and competing system. Reform is the preferred path forward in regards to monetary framework policies.
I would recommend all readers to review the G20 publication as it contains all of the components of the transition which we have been discussing, from an international tax, anti-corruption, energy sustainability, large infrastructure investments, and changes to the international financial architecture. The points in the document mirror what we reviewed in the post The Engineering of Global Public Goods.
As stated by the G20, 2015 will be the time for deeds and implementation. Needless to say, there is much more to come. – JC