2015 – A YEAR OF IMPLEMENTATION
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.
And finally:
“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
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