Emerging Economies and G20’s Infrastructure Agenda

Zhu Jiejin

Associate Professor， School of International Relations and Public Affairs，

Fudan University

As the worlds leading forum for international economic cooperation， the agenda of the G20 summit reflects the development trend of global economic governance and the agenda preferences of major powers. Infrastructure as a topic preferred by India， China and other emerging economies， has finally entered the agenda of the G20 summit after a period of gaming. However， the stability of infrastructure in the G20 development agenda is not high. The cooperation achievements on infrastructure issues of the 2014 Brisbane Summit and the 2016 Hangzhou Summit have not been effectively continued in subsequent summits. The purpose of this paper is to examine the historical evolution of the G20 infrastructure topic and analyze the capability of emerging economies to promote the agenda of G20 summit， so as to provide policy implications for emerging economies to participate in the reform of global economic governance system.

Infrastructure Enters G20

Development Agenda

There was a discussion on infrastructure as early as 2008 at G20s Washington Summit. However， it was not until the Seoul Summit in November 2010 that infrastructure was officially put on the agenda due to the lack of support from the developed countries. On November 14， 2008， the first G20 summit was held in Washington. At that time， infrastructure was not the official agenda of the meeting. However， in his speech， then Prime Minister Manmohan Singh of India mentioned the need to enhance infrastructure investment in developing countries. Singh pointed out that as the financial crisis is global， it needs a global solution. It needs to control the crisis in the short term and reform the international financial architecture to avoid similar crises in the medium term. In addition， in the medium term， G20 can also tap new impetus for world economic growth by strengthening its investment in infrastructure in developing countries. In the context of the weak recovery of the world economy， the investment momentum of the private sector in the global economy is weakening， which makes it particularly important to increase public sector investment in infrastructure and drive private sector investment. Singh believes that infrastructure investment can play a counter- cyclical role in stimulating demand and creating conditions for the world economy to resume growth. However， the biggest problem of infrastructure investment is the lack of funds， so new ways are needed to solve the financing problems. Based on that， Singh suggested that the World Bank and regional development banks consider providing additional loans of US$ 50 billion to stimulate investment in infrastructure projects and explore new infrastructure financing tools. However， at the Washington Summit， as the leaders of G7 member states focused on how to deal with the global financial crisis， restore liquidity， and re-stabilize the financial systems of the United States and the United Kingdom， the Singh Initiative did not receive much attention. It was written in the G20 Leaders Declaration at the Washington Summit that， “We will encourage the World Bank and other multilateral development banks （MDBs） to use their full capacity in support of their development agenda， and we welcome the recent introduction of new facilities by the World Bank in the areas of infrastructure and trade finance.” As a matter of fact， G20 only expressed “encouragement and welcome” to strengthen infrastructure construction in principle， and did not issue any relevant substantive measures.

At the London Summit in April 2009， then British Prime Minister Gordon Brown made every effort to promote the G20 states to work out economic stimulus plans， sending a signal to the market that “the situation of the current financial crisis has been under control”. The goal of the London Summit was to introduce a huge economic stimulus plan to show that G20 states were united to inject strong momentum into the stability of the global financial system. The sensational effect of the London Summit was indeed a landmark achievement of the G20， which also helped to curb the spread of the financial crisis. However， the topic of infrastructure was not covered in the outcome paper.

The global financial market has gradually stabilized since the London Summit. The US issued a huge economic stimulus plan and bank rescue plan. The Federal Reserve begun to implement quantitative easing monetary policy. At the same time， it signed bilateral currency swap agreements with the European Central Bank， the Bank of Japan， the Bank of Switzerland and other major central banks. As a result， the liquidity of the US dollar has gradually recovered. The Pittsburgh Summit was held in the US in September 2009， focusing on the reform of international financial regulation. Meanwhile， it was proposed that G20 should strive to achieve a “framework for strong， sustainable and balanced growth” after the crisis. At the Pittsburgh Summit， the finance ministers of the US， the UK， Canada and other G7 countries stressed that the G20 should strive to solve the problem of the exchange rate misalignment of the global economy， believing that the imbalance of the exchange rate was the main cause of the global financial crisis in 2008. The US began to use its position as the largest economy and as the rotating chair of the Pittsburgh Summit to put the exchange rate issue on the top agenda of the G20.

The fourth G20 summit was held in Toronto of Canada in June 2010. Canada did not put infrastructure on the agenda. Instead， the exchange rate and the exit of the economic stimulus plan were put on the agenda of the G20. At that time， China， India and Brazil were quite interested in discussing counter-cyclical economic policies， including expanding infrastructure investment. However， Canada and the UK still followed the pace of the US， taking the exchange rate， global economic rebalancing and mutual assessment process （MAP） as the theme of the summit， deliberately ignoring the infrastructure topic.

In November 2010， as the first non-G7 state， the Republic of Korea hosted the G20 Seoul Summit， and officially put infrastructure on the agenda of the G20 summit. As one of the latecomer countries， ROK has a deep understanding of the importance of infrastructure investment in the process of its economic take-off. At the Seoul Summit， ROK tried to act as a bridge between G7 countries and emerging economies. On the hand， ROK continued to promote the topic of global economic rebalancing and mutual evaluation， and took the lead in formulating “indicative guidelines” as the basis of evaluation. On the other hand， ROK promoted the formation of the Seoul Development Consensus， which identified nine key areas， namely infrastructure， human resources， trade， private sector investment， food security， anti-risk growth， inclusive finance， domestic resource mobilization and knowledge sharing. ROK placed infrastructure at the top of the G20 development agenda and set up a G20 high-level expert group on infrastructure to deliberate the status of infrastructure investment promoted by multilateral development banks. Since then， the Singh Initiative has been officially implemented in the G20.

The Evolution of

G20 Infrastructure Agenda

Although infrastructure officially entered the G20 development agenda at the 2010 Seoul Summit， most G20 summits failed to achieve substantial results on it except for the 2014 Brisbane Summit and the 2016 Hangzhou Summit. At the same time， the rotating presidency adopted by G20 has also caused the lack of continuity and stability of its infrastructure agenda. In November 2014， Australia took the rotating presidency. It believed that the effectiveness of G20 was declining significantly， failing to meet the expectations of emerging economies. It also believed that G20s development agenda had been replaced by the traditional international development agenda， and the disappointment of emerging economies was transforming into enthusiasm for founding new international organisations specializing in infrastructure investment.

The Singer initiative were already transformed into the BRICS New Development Bank initiative in 2012 at the BRICS Summit in New Delhi. Chinese President Xi Jinping also proposed to found the Asian Infrastructure Investment Bank （AIIB） in 2013 at the informal meeting of APEC leaders （the two banks had basically completed the negotiations by 2014 and started full operation in 2015）. It was against this backdrop that Australia pushed G20 to set up the Global Infrastructure Hub （GIH） at the Brisbane Summit， driven by which， the World Bank also announced the founding of the Global Infrastructure Facility （GIF）. Also at the Brisbane Summit， the Asian Development Bank announced it would expand investment in infrastructure projects.

As the most substantial achievement of G20 in infrastructure agenda， the major function of GIH is to serve as a bridge between the investors and the projects， solve the problem of data missing and improve project information channels. Its resources include data allocation， evaluation tools， knowledge platform， project channels and advanced practices. It needs to be emphasized that although the establishment of GIH alleviates the information asymmetry in the field of infrastructure investment to a certain extent， the achievements of the G20 Brisbane Summit in the field of infrastructure should not be overestimated.

As Michael Callaghan， an Australian scholar who has followed the infrastructure development for a long time， said， we should take a comprehensive view of the role played by GIH. There is a view that GIH can release trillions of dollars of private sector funds into the field of infrastructure， which is not true. GIH can play a role， yet expanding infrastructure investment is not simply improving data quality. In fact， in addition to the data problem， it is more important to improve the investment environment， find the sources of infrastructure funds and formulate strict standards for infrastructure projects.

When China took the rotating presidency in 2016， infrastructure became one of the top agendas for the Hangzhou Summit. In July 2016， at the G20 finance ministers and central bank governors' meeting held in Chengdu， China， giving full play to its influence and voice as a major shareholder of the existing multilateral development banks and an advocate of new-type multilateral development banks， successfully promoted the release of the MDBs Joint Declaration of Aspirations on Actions to Support Infrastructure Investment by 11 major multilateral development banks in the world， including the World Bank， the Asian Development Bank， the AIIB， and the BRICS New Development Bank， which was a highlight of the G20 China year. Moreover， China has successfully launched the Global Infrastructure Connectivity Alliance Initiative to strengthen the overall coordination and cooperation of infrastructure connectivity projects. G20 requests that the World Bank as the Secretariat of the Alliance to work with GIH， OECD， AIIB， the BRICS New Development Bank and interested G20 member states to forcefully push forward the cooperation between newly founded and old multilateral development banks in the field of infrastructure investment.

Although fruitful achievements were scored on the infrastructure agenda at the Hangzhou Summit， the momentum of cooperation has failed to continue at the subsequent G20 summits. At the Hamburg Summit hosted by Germany in 2017， Trumps adherence to the principle of “America first” made the debates focused on issues such as opposing trade protectionism and tackling climate change， rather than on infrastructure investment. The Summit only mentioned in the G20 Africa Partnership Initiative that “we welcome the African Unions Agenda 2063 and the Program for Infrastructure Development in Africa”. In fact， infrastructure was not dealt with in real term at the Hamburg Summit.

At the Buenos Aires Summit in 2018， although the rotating presidency Argentina put infrastructure on the agenda， what was mainly discussed was how to leverage private sector funds for infrastructure development， emphasizing the need to make infrastructure an independent asset category. As a matter of fact， it is precisely because of the long investment cycle and low profits of infrastructure that market investors are hesitant to enter this field， which requires the government and the multilateral development banks and other public sectors promoted by the government to play a leading role. Therefore， in a sense， the Buenos Aires Summit has fallen into a platform for the governments of G20 member states to shirk responsibility and take infrastructure investment as a behavior of market investors.

At the Osaka Summit in 2019， the core agenda set by the rotating presidency Japan is digital economy， free trade and climate change， while “high quality” and “high standards” were unilaterally emphasized for infrastructure agenda. Unlike most emerging economies， which mainly focus on the capital and quantity of infrastructure， the G20 Principles for Quality Infrastructure Investment adopted at the Osaka Summit stresses that it is necessary to focus on the full life cycle cost of infrastructure， the degree of damage to the environment and society， resilience to natural disasters， job creation opportunities， knowledge and professional skills transfer， etc. In fact， although the quality of infrastructure shall not be ignored， there is no uniform standard at present. The reality and needs of different countries should be given full consideration while developing infrastructure. The current G20 agenda should also focus on meeting the huge and urgent needs of developing countries for infrastructure financing， instead of overemphasizing “high quality” that will lead to insufficient investment.

Due to the outbreak of COVID-19 in 2020， the Riyadh Summit could only take the form of video conference. Although the Summit also involved infrastructure agenda， it only vaguely re-mentioned the “Road Map for Infrastructure as an Asset Class” reached in 2018 and the “G20 Principles for Quality Infrastructure Investment” reached in 2019， without any substantive policy initiatives.

Prospects of

G20 Infrastructure Agenda

It was difficult for infrastructure， a preferred topic for emerging economies， to enter the G20 agenda at the beginning and to maintain its continuity after entering. This actually reflects a major dilemma of the current G20 global economic governance system. The still low ability of emerging economies to advance the G20 agenda could not meet the goal of “the founding spirit of G20 of bringing together the developed and emerging economies in global economic governance on an equal footing” proposed at the Cannes Summit.

Furthermore， infrastructure as a part of G20s development agenda has inherent deficiencies. For developed countries， development issues mainly refer to helping low-income developing countries to achieve development， which is generally undertaken by the Department of International Development or the International Development Agency with foreign aid as the core. On contrast， for emerging economies， development issues cover almost all government departments， infrastructure as one of the prominent issues and economic growth as the core. Therefore， the different understanding of development issues by developed and emerging economies as well as the different sectors dealing with development issues make the infrastructure agenda more difficult in G20.

Against this background， China launched the Belt and Road Initiative and pushed forward the founding of AIIB and New Development Bank to provide new sources of funding for infrastructure development in developing countries， which constitutes a strong complement to G20s infrastructure agenda.

In addition， these new initiatives and international organisations will also have an adverse effect on the World Bank and other regional multilateral development banks led by developed countries， forcing these traditional multilateral development banks to pay more attention to the investment in infrastructure in developing countries in a healthy competitive manner， and push forward the reform of the global economic governance system in a more just and efficient direction.