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G20 Policy Paper March 2016 2016 G20 Summit Recommendations G7/G20 Advocacy Alliance (US) Hangzhou, China For more information, please contact: John Ruthrauff Director, International Advocacy Coordinator, G7/G20 Alliance (US) InterAction [email protected] 1-202-552-6523 For information on specific recommendations please contact the Policy Team Leader listed under each issue. Issues covered in this brief: Anti-Corruption Food and Nutrition Security International Tax and Financial Transparency Jobs and Employment Pro-poor and Clean Infrastructure and Investment When the G20 leaders meet in September to discuss pressing global issues, it is imperative that they take action to address the needs of the world’s poorest and most vulnerable people. This paper contains the recommendations of the G7/G20 Advocacy Alliance (US), a group of 45 non-governmental organizations. They call for the United States to play a leading role in encouraging the G20 to take the following actions: Anti-Corruption Lead: Shruti Shah, Transparency International-USA ([email protected]) 1. Implement and effectively enforce the OECD Anti-Bribery Convention (OECD Convention). a. All G20 countries should become parties to the OECD Convention, participate in the peer review process, and take concrete steps to strengthen implementation and enforcement of their foreign bribery laws. 2. Implement effective anti-money laundering actions through enhanced transparency of legal persons and arrangements and continue to support asset recovery initiatives. a. G20 countries should take concrete actions to implement the G20 High-Level Principles on Beneficial Ownership Transparency in 2016. b. Enhance implementation of the Financial Action Task Force recommendations within a two-year time frame. 3. Deny entry to corrupt officials. To implement the G20 Common Principles For Action: Denial of Safe Haven in 2016, the G20 Anti-Corruption Working Group should: a. Establish a common set of criteria to be used for denial of entry across the G20 jurisdictions. This will help to reduce risks and concerns that enforcement is uneven or arbitrary. b. Make public the national contact points and working methods for the Denial of Entry Experts’ Network. c. Provide opportunities for the public to provide relevant information. Food and Nutrition Security www.InterAction.org 1400 16th Street, NW Suite 210 Washington, DC 20036 202.667.8227 *Updated 3/9/2016* Lead: Manuel Claros, 1,000 Days ([email protected]) 1. Implement a strong accountability framework monitoring ODA increases, including: a. Food and nutrition security investments, with annual public reporting; b. Enhanced transparency with disaggregated data on vulnerable groups; c. Reporting codes weighting; and d. Schedules fulfilling outstanding pledges. zz 2. Accelerate implementing SDG 2 by mobilizing resources and attending the Rio Nutrition for Growth Summit in August. a. Commit in the Communique that each member will mobilize resources and attend the Summit at the highest level possible. 3. Reaffirm investments to benefit vulnerable populations, including small-scale producers, women, and children, by improving nutrition outcomes and integrating gender. a. Increase technical and financial support to existing efforts, including the Scaling Up Nutrition Movement, the Comprehensive Africa Agriculture Development Program, and the Global Agriculture and Food Security Program. International Tax and Financial Transparency Lead: Tom Cardamone, Global Financial Integrity ([email protected]) 1. The BEPS Action Plan should require multi-national corporations’ country-by-country reports to be fully available on each company’s website. 2. The automatic exchange of tax information should include non-reciprocal exchange of information, on a temporary basis, with developing countries. a. Assistance should be provided to developing nations, as needed, to upgrade their capacity to participate in the global standard. 3. G20 countries should focus a portion of their ODA funding to provide technical support and capacity building for developing countries’ customs departments to detect and curtail trade mis-invoicing. Jobs and Employment Lead: Molly McCoy, Solidarity Center ([email protected]) 1. Coordinate demand stimulus for job creation and inclusive economic growth: a. Set targets of 1% of GDP for public, social, and physical infrastructure investment. b. Ensure that liquidity created by central banks is channeled directly into increased public investment in infrastructure, innovation, job creation, skills development, and a just transition to a low-carbon economy. 2. Promote decent work, especially for the most vulnerable people: a. Strengthen labor market institutions to promote wage growth and quality employment: social dialogue, collective bargaining, wage setting mechanisms, labor legislation. b. Reinforce social protection, occupational health and safety protection, and parental benefits. c. Extend protection to the most vulnerable groups: migrants, women, and informal economy workers. d. Adopt a whole-of-government approach and scale up quality apprenticeships through strong partnerships with civil society, including trade unions, to implement the G20 Skills Strategy. e. Invest in child care and the care economy to meet the “25 by 25” target on women’s employment before 2025. f. Target commitments to resettle refugees and migrants, and provide them the right to work in the formal economy with full labor rights. Pro-poor and Clean Infrastructure and Investment Lead: Sasanka Thilakasiri ([email protected]) 1. Apply mandatory investment principles through: a. Defined development outcomes, increasing access and affordability of infrastructure services. b. Robust evaluation, negotiation and monitoring of the investment contracts. c. Green Procurement standards. d. Improved CSO engagement throughout the project cycle. e. Improved transparency provisions, including on- and off-budget public liabilities. 2 zz 2. Prioritize financing for clean, pro-poor infrastructure development being fully consistent with INDC/NDCs1 and the Paris Agreement on the mobilization of climate finance by 2020 by: a. Setting a clear timeline for the full and equitable phase-out of all harmful fossil fuel subsidies by 2020, while ensuring protection for the poor. b. Prioritizing clean energy, low carbon development, adaptation, and resilience. c. Continued prioritization of clean energy-access in sub-Saharan Africa. 3. Support the alignment of financial markets with sustainable development and human rights by: a. Enhancing the Green Finance Study Group’s financing options with a commitment to a direct articulation of human rights. b. Third party verification and monitoring of standards with mandatory climate risk and performance disclosures for both the corporate and finance sector. BACKGROUND Anti-Corruption The G7/G20 Advocacy Alliance welcomes the G20’s continued focus on global corruption. The G20 AntiCorruption Action Plan for 2015-2016 contains significant anti-corruption commitments. In order to assure corruption is meaningfully tackled all G20 countries must fully implement the plan with urgency. The G20 Working Group on Corruption should lead by example, operating with the highest degree of transparency and providing opportunities for meaningful civil society participation. OECD Anti-bribery Convention Cross-border corruption has negative consequences for economic growth, development, and international business. According to Transparency International’s 2015 Progress Report on the status of enforcement of the OECD’s Anti-Bribery Convention, only four countries actively enforce the Convention and there is little or no enforcement in twenty countries. Additionally, many large economies such as China, India, and Indonesia are not yet parties to the Convention. Beneficial Ownership Major corruption scandals often involve the use of anonymous shell companies situated across multiple jurisdictions to transfer and hide illicitly-sourced funds and mask the identities of corrupt actors. In recent years, several commitments have been made to tackle the misuse of these corporate vehicles. In 2014, the G20 leaders adopted High-Level Principles on Beneficial Ownership Transparency, describing financial transparency as a “high priority” issue. Transparency International produced a report in 2015, Just for Show? Reviewing G20 Promises on Beneficial Ownership, assessing the extent to which G20 members are fulfilling their legal and regulatory commitments implicit in the G20 principles. The report highlights poor implementation of the beneficial ownership principles. Deny entry to corrupt officials Corrupt officials should not be able to travel with impunity or enjoy their illicit gains abroad. At the 2012 Los Cabos Summit, the G20 Leaders’ Declaration endorsed the G20 Common Principles For Action: Denial of Safe Haven and initiated a denial of entry experts’ network. Food and Nutrition Security The G20 has served as an important international forum at which countries have committed significant financial resources to tackle hunger and malnutrition. Despite the progress toward transparency, however, a robust accountability framework to coherently measure investments is still needed.2 3 zz The Rio Nutrition for Growth Summit in August 2016 is a critical moment for the G20 to pledge resources to improve nutrition and to report on progress toward reducing undernutrition. For several members, it is an opportunity to announce the substantial contributions to these goals and the fulfillment of outstanding commitments. SDG 2 and other health-related SDGs,3 as well as the Global Nutrition Targets,4 can only be realized with increased financial commitments to nutrition. Greater investments in nutrition are lifesaving and boost GDP by as much as 12%.5 As the 2016 G20 president, the Chinese Government has committed to lead and transform the world through sustainable development. This includes encouraging members’ participation at the highest level in the Nutrition for Growth Summit to fulfill the G20 commitments. International Tax and Financial Transparency The G20’s Call to Action for Strengthening Tax Capacity in Developing Countries document contains significant commitments to help countries increase domestic resource mobilization. In order to assure these steps are successful, all G20 countries should fully implement the plan with urgency. Under the rules of the Base Erosion and Profit-Shifting (BEPS) Project, multi-national corporations that have revenue of more than €750 million (or its equivalent) must report basic financial information such as income earned and taxes paid in each jurisdiction where the firm operates. However, that information, which is vitally important to stockholders, analysts, academics, journalists, and the public, is currently only available to government authorities. This reporting requirement falls short of what is needed for full transparency of company data to ensure proper taxes are paid for business activity in the jurisdiction where the activity occurs. Requiring country-by-country reports on firm websites will enable all stakeholders to obtain key tax data of multi-national firms, which will facilitate increased oversight. The global standard of exchanging tax information of non-residents with their home government reduces the possibility of tax evasion. Further, as the OECD has noted, this exchange of information will also enable governments to discover “formerly undetected tax evasion” and to “recover tax revenue lost to noncompliant taxpayers.”6 Global efforts to achieve policy coherence with the Addis Ababa Action Agenda, the Addis Tax Initiative, and the Sustainable Development Goals all stress the importance of boosting domestic resource mobilization to aid development. This suggests that developing country governments should not be denied the ability to receive vitally-important tax revenue because they are, as yet, unable to reciprocate data transfer. The G20’s Call to Action for Strengthening Tax Capacity in Developing Countries provides a thorough overview of various programs available to help developing nations bolster their tax administrations. However little is said about tackling the problem of illicit flows - and the related tax loss - through customs departments due to trade fraud. Of the estimated $1 trillion in measurable illicit financial flows in 2013, over $875 billion were related to the mis-invoicing of trade.7 Creating robust tax authorities is important, but ignoring the crisis in customs departments risks failing to meet the SDGs. Given that illicit flows due to mis-invoicing are severe and clearly illegal, measures to address the issue are required. Jobs and Employment Almost a decade after the global financial crisis, working people continue to suffer its consequences. Nearly 2.2 billion people worldwide still live on less than $2 per day, 8 and global unemployment9 and inequality are rising. This year, 1% of the population will control 50% of the world’s wealth. 10 This trend threatens economic recovery, undermines political stability, and stifles equitable development. Therefore, G20 countries must focus on promoting a model of inclusive growth that places sustainable, quality employment at the fore. Strengthening worker rights and social protection systems, and introduc4 zz ing social protection floors to support a transition away from the informal economy in developing and middle- income countries are necessary steps toward ensuring that all workers have access to safe, decent employment. The G20 countries must take concerted action to boost aggregate demand and reduce inequality through coordinated stimulus policies that prevent relapse into a new crisis. Securing higher wage growth through strengthened labor market institutions will avoid zero inflation from becoming entrenched through weak wage agreements. This will re-anchor inflation expectations and, as agreed by the G20 under the Turkish presidency, help correct rising inequality and the falling labor income share. Strengthening worker rights and social protection systems, as well as introducing social protection floors to support a transition away from the informal economy in developing and middle-income countries, are necessary steps toward providing all workers with access to safe, decent employment. Countries must ensure that G20 companies respect international labor standards and human rights, including the UN Guiding Principles, ILO conventions, and OECD Guidelines for Multinational Enterprises, in their global supply chains. They should also strengthen rule of law with cross-border legislation that mandates due diligence. G20 countries must deliver on their prior G20 commitments and implement the structural policy reforms outlined in their comprehensive growth strategies and employment plans to reduce unemployment and income and gender inequality. Pro-poor and Clean Infrastructure and Investment 2015 saw two major historic moments for environmental stewardship and development cooperation with nations agreeing on the Sustainable Development Goals and the Paris Climate Conference (COP21). Both outcomes set the pathway for all nations to achieve inclusive growth that is environmentally sustainable, low carbon, and climate resilient. G20 nations have a unique opportunity following these agreements to set the financing agenda in accordance with these commitments by ensuring that infrastructure investment serves the needs of the poor while ensuring long-term environmental sustainability. Building off specific initiatives from last year’s summit will be important, such as setting a target date for the phasing out of harmful fossil fuel subsidies and advancing the Energy Access Plan in prioritizing clean energy. Countries can decarbonize their economies and still achieve significant inclusive growth. Concerns remain that significant work streams in the G20 – the adoption of G20/OECD Principles on Long-Term Investment Financing by Institutional Investors and effective approaches to them, the updated G20/OECD Principles of Corporate Governance, and World Bank-designed Model PPP Contractual Clauses – are parallel to such commitments. These may undermine their implementation and the restructuring of the financial sector to promote pro-poor, clean energy infrastructure. Environmental, social, and governance principles need to be strengthened, with an emphasis on human rights, and implemented toward these goals. It is particularly important to do so within new financing institutions and platforms such as the Asia Infrastructure Investment Bank, as well as reviews being undertaken within the World Bank safeguards. Such due diligence will increase profitability of ventures and protect the global economy from future economic and environmental shocks. Additionally, the financial and corporate sector is ill-equipped in reporting on climate risk and climate performance disclosure, based on findings from UNEP FI and the Bloomberg Climate risk initiative reports. Of the world largest funds (worth over $40 trillion), only 7% could calculate the GHG emissions within their portfolio, with few of them knowing their exposure to climate risk. Such reporting needs to be increased to minimize both climate and investment risk. 5 zz While the statement is not designed to be a consensus position of the contributors, it has been endorsed by InterAction’s leadership. Each set of recommendations was developed and/or endorsed by a Policy Team of the G7/G20 Advocacy Alliance, listed below. Anti-Corruption Transparency International-USA, Shruti Shah (Lead) Global Witness, Stefanie Ostfeld InterAction, John Ruthrauff New Rules for Global Finance, Nathan Coplin ONE, Joseph Kraus Endorsers: Global Poverty Project Jobs and Employment Solidarity Center, Molly McCoy (Lead) ActionAid USA, Marie Clarke InterAction, John Ruthrauff Sabin Vaccine Institute/Global Network for Neglected Tropical Diseases, Amber Cashwell Trade Union Sustainable Development Unit, Robert Lovelace Endorsers: Global Poverty Project Food Security and Nutrition 1,000 Days, Manuel Claros (Lead) and Kate Goertzen ActionAid USA, Katie Campbell and Doug Hertzler Bread for the World, Faustine Wabwire Global Poverty Project, Judith Rowland InterAction, John Ruthrauff Oxfam America, Gawain Kripke Save the Children, Shawnee Hoover Pro-poor and Clean Infrastructure and Investment Oxfam America, Sasanka Thilakasiri (Lead) Center of Concern, Aldo Caliari Heinrich Boell Foundation, Nancy Alexander InterAction, John Ruthrauff Sabin Vaccine Institute/Global Network for Neglected Tropical Diseases, Amber Cashwell Union of Concerned Scientists, Alden Meyer Endorsers: Global Poverty Project International Tax and Financial Transparency Global Financial Integrity, Tom Cardamone (Lead) ActionAid USA, Katie Campbell and Marie Clarke InterAction, John Ruthrauff Jubilee USA Network, Andrew Hanauer New Rules for Global Finance, JoMarie Griesgraber ONE, Joseph Kraus Oxfam America, Gawain Kripke Endorsers: Global Poverty Project End Notes INDCs – Intended Nationally Determined Contributions; NDCs – Nationally Determined Contributions. Executive Summary, “If Not Now, Then When?,” ACF France, ActionAid, CCFD-Terre Solidaire, Welthungerhilfe (2016), http://goo.gl/jrhjg0. 3 SDG 2: “end hunger and achieve food security and improved nutrition by 2030.” Other SDGs related to health include SDGs 5, 6, 8, 12, 13, 14, and 15. 4 The World Health Assembly global nutrition targets aim, by 2025, to reduce: (1) stunting in children under 5 by 40%; (2) the rate of anemia in women of reproductive age by 50%; (3) the rate of infants born with low birth weight by 30%; 1 2 6 zz (4) to ensure that there is no increase in the rate of children who are overweight; (5) increase the rate of exclusive breastfeeding in the first six months to at least 50%; and (6) reduce and maintain childhood wasting to less than 5%. 5 Horton S.; R. Steckel, “Global Economic Losses Attributable to Malnutrition 1900–2000 and Projections to 2050,” in The Economics of Human Challenges, ed. B. Lomborg ( Cambridge, UK: Cambridge University Press, 2013). 6 OECD, “Automatic Exchange of Information,” Global Forum on Transparency and Exchange of Information for Tax Purposes, http://www.oecd.org/tax/transparency/automaticexchangeofinformation.htm. 7 Dev Kar; Joseph Spanjers, “Illicit Financial Flows from Developing Countries: 2004-2013,” Global Financial Integrity (December 2015). 8 Sustainable Development Goals Platform, “Goal 8: Promote inclusive and sustainable economic growth, employment and decent work for all,” http://www.un.org/sustainabledevelopment/economic-growth/. 9 International Labor Office, “World Employment Social Outlook: Trends 2016,” (2016), pp. 9, http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_443480.pdf. 10 Oxfam International, “Richest 1% will own more than all the rest by 2016,” 19 January 2015, https://www.oxfam.org/en/pressroom/pressreleases/2015-01-19/richest-1-will-own-more-all-rest-2016. 7