Context: Under the aegis of India’s G20 Presidency, a 11-member expert group has been set up to explore measures to strengthen multilateral development banks (MDBs).
Professor Lawrence Summers, President Emeritus, Harvard University and N K Singh, former Chairperson of the 15th Finance Commission of India, are co-convenors of the G20 Expert Group.
Objectives for the panel
- Making a road map for an updated MDB ecosystem for the 21st century,
- Touching upon all aspects of MDB evolution, and mechanisms for coordination among these banks to address and finance global development.
- Looking into how can the World Bank contribute towards climate finance, critical for developing and LDCs to make a smooth transition to lower carbon emissions without compromising on growth.
What is a Multilateral Development Bank?
- It is an international financial institution chartered by two or more countries for the purpose of encouraging economic development in poorer nations.
- MDBs provide loans and grants to member nations to fund projects that support social and economic development, such as the building of new roads or providing clean water to communities.
- They originated in the aftermath of World War II to rebuild war-ravaged nations and stabilize the global financial system.
- Today, MDBs fund infrastructure, energy, education, and environmental sustainability in developing countries.
- Examples: World Bank, Asian Development Bank, Asian Infrastructure Investment Bank.
Group of Twenty is the premier forum of international economic cooperation. It plays an important role in shaping and strengthening global architecture on all major international economic issues.
- Members of G20: 19 Countries and EU. Countries include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, Turkey, UK and USA. G20 members represent around 85% of global GDP and 75% of global trade and 2/3rd of global population.
- G20 does not have a permanent secretariat or staff.
- G20 presidency rotates among the members and is selected from a different regional grouping of countries. G20 member countries are divided into 5 groups comprising a maximum of four countries each.
- Most groups are formed on a regional basis. However, Group 1 includes Australia, Canada, Saudi Arabia and USA) and Group 2 includes India, Russia, South Africa and Turkey do not follow the regional pattern. Group 3 includes Argentina, Brazil and Mexico; Group 4 includes France, Germany, Italy and UK and Group 5 includes China, Indonesia, Japan & South Korea. EU is a not a member of any of these regional groups.
- Each year another country from a different group assumes G20 Presidency. The countries in a group are each equally entitled to take Presidency when it is their group’s turn.
- G20 Summit is held annually, under the leadership of rotating presidency. G20 initially focused largely on economic and macroeconomic issues, but it has since expanded its agenda to include trade, sustainable development, health, agriculture, energy, environment, climate change and anti-corruption.
- G20 Presidency is responsible for bringing together the G20 agenda in consultation with other members. The Presidency is supported by the Troika – previous, current and incoming Presidency of G20. During India’s Presidency, the troika will consist of Indonesia, India and Brazil respectively.
- The theme of India’s G20 presidency is Vasudhaiv Kutumbakam or ‘One Earth, One Family, One Future’. The Sanskrit phrase in drawn from Maha Upanishad.
- India holds the presidency of G20 from 1st December 2022 to 30th November 2022.
- Inception of G20: G20 was founded in 1999 after the Asian Financial Crisis as a forum for Finance Ministers and Central Bank Governors to discuss global economic and financial issues.
- Elevation to Leader’s Level: In 2008, G20 was upgraded to Heads of State/Government level in the wake of Global Financial crisis of 2007. In 2009, G20 was designated as the premier forum for international economic cooperation. First G20 Summit took place in 2008 in Washington.
Structure of G20
- G20 consists of two parallel tracks: Finance Track & Sherpa Track.
- SHERPA TRACK: Headed by Sherpa who is representative of the Leader. Focuses on socioeconomic issues such as agriculture, anti-corruption, climate, digital economy, education, employment, energy, environment, health, tourism, trade & investment.
- FINANCE TRACK: Headed by Finance Ministers and Central Bank Governors, who generally meet four times a year, with two meetings being held on the sidelines of World Bank/IMF meetings. Focuses on Fiscal & Monetary Policy, International Financial Architecture, Infrastructure, financial regulation, international taxation etc.
- The Sherpas oversee negotiations over the course of the year, discussing agenda items for the Summit and coordinating the substantive work of the G20.
- ENGAGEMENT GROUPS: As part of G20 members’ commitment to consult relevant stakeholders communities, dialogue is facilitated through engagement groups, comprising non-government participants from each G20 member. These groups often draft recommendations to G20 Leaders that contribute to the policy making process. Some engagement groups are: Business20, Civil20, Labour20, Parliament20, Science20, SAI20, Startup20, Think20, Urban20, Women20, Youth20.
Other G20 Initiatives
- Research & Innovation Initiative Gathering (RIIG): Aims to enhance, intensify and strengthen research & innovation collaboration among G20 member countries. RIIG is further the work of Academic Forum held during the Italian Presidency in 2021, by bringing together science, technology and innovation experts of G20 member countries.
- G20 EMPOWER: G20 Alliance for Empowerment & Progression of Women’s Economic Representation (G20 EMPOWER) was launched during G20 Osaka Summit in 2019. It aims to accelerate women’s leadership and empowerment in private sector by leveraging its unique alliance among business leaders and governments across G20 countries.
- Space Economy Leaders Meeting: Under India’s G20 Presidency, ISRO is organising fourth edition of Space Economy Leaders Meeting (SELM) to continue deliberations on significance of space in shaping the global economy.
About WORLD BANK GROUP
Set up along with the IMF in 1945 following the Bretton Woods agreements. Institutions under World Bank:
- International Bank for Reconstruction and Development (IBRD): Loans to middle-income & creditworthy low-income countries.
- International Development Association (IDA): Interest-free loans & grants to governments of poorest countries.
- International Finance Corporation (IFC): Lends money to private sector companies of its member countries thereby promoting economic development
- Note: IFC has enabled investments into India through launch of Masala Bonds.
- Multilateral Investment Guarantee Agency (MIGA): Promotes FDI into developing countries by offering political risk insurance (guarantees) to investors & lenders.
- International Centre for Settlement of Investment Disputes (ICSID): Provides international facilities for conciliation and arbitration of investment disputes.
Note: India is a member of all these institutions except ICSID.
World Bank: IBRD + IDA.
World Bank Group: IBRD+ IDA+ IFC+ ICSID+ MIGA.
Structure of World Bank
Board of Governors: Comprises of 189 member countries represented by their Minister for Finance; Highest decision-making body.
Board of Executive Directors: 25 Executive Directors responsible for day-to-day management. Five largest shareholders of World Bank appoint an executive director, while other member countries are represented by elected executive directors.
World Bank President: Selected by Board of Executive Directors for a five-year. As per the convention followed so far, World Bank President has been an American Citizen, while IMF President has been a European.
Reports published by World Bank: Human Capital Index (HCI); World Development Report; Global Economic Prospects; Logistics Performance Index; Women, Business and Law; Global Financial Development Report