G20’s push for growth in Seoul fails to protect the poor

November 17th, 2010*

G20 leaders meeting in Seoul last week issued a lengthy communiqué accompanied by an annex fleshing out the “Seoul development consensus for shared growth.” The recognition that “there is no ‘one-size-fits-all’ formula for development success and that developing countries must take the lead in designing and implementing development strategies” is a welcome one.

However, the G20 call for “inclusive and sustainable growth” fails to provide concrete measures to ensure that poor people in poor countries reap the benefits of economic growth. The text fails to provide a specific plan to combat tax evasion by multinational companies and to ensure that the International Financial Institutions, donors and the private sector comply with the highest standards of responsible financing and investment in poor countries.

Translating words into action requires binding commitments which G20 leaders in Seoul were not ready to make. Will France, the incoming G20 chair, deliver?

“Inclusive growth” takes more than words

While the G20 leaders’ recognition that the global crisis “disproportionately affected the most vulnerable in the poorest countries” and while their call for “sustainable economic growth and resilience in developing countries” is welcome, the communiqué largely ignores the fact that economic growth in past decades has not trickled down to benefit the most vulnerable sectors of society. Their almost unqualified call to “keeping markets open and liberalising trade and investment as a means to promote economic progress for all and narrow the development gap” turns a blind eye on the fact that unfettered liberalisation in poor countries has all too often increased vulnerability and inequality, while not always contributing positively to the creation of decent jobs and poverty eradication.

Promoting “responsible private investment” won’t do, unless concrete measures are put in place that ensure that companies pay their tax dues in developing countries, ensure responsible lending and investments, and put the interests of the poor and the most vulnerable first.

Combating tax evasion: the ball in developing countries’ courts

The Seoul Consensus commits “to continue working to strengthen tax regimes and fiscal policies in developing countries” and to enhance “domestic resource mobilisation.” The G20 puts the onus on the need for developing countries to enhance their tax regimes, but ignores much needed global regulations to clamp down on tax havens and tax dodging by multinational companies. Using G20 terminology, this is a “critical bottleneck” which prevents developing countries from enhancing their tax revenues. The Summit failed to address Northern countries’ responsibility for curtailing tax evasion and avoidance from poor countries.

Key discussion was sorely missing on global financial transparency, country by country reporting by multinational corporations, automatic tax information exchange, and the full disclosure of corporate ownership or beneficiaries of offshore trusts and accounts, which are all crucial measures to be taken if the G20 is serious about enhancing domestic resource mobilisation in poor countries.

If the G20 leaders are serious about promoting “inclusive growth,” they have a tall task ahead in 2011: to make binding and concrete commitments to curb tax evasion by multinational companies and ensure that the International Financial Institutions, donors and the private sector comply with the highest standards of responsible financing and investment in poor countries.

Núria Molina is director of the European Network on Debt and Development (Eurodad) in Brussels.

María José Romero is a policy and advocacy advisor at the European Network on Debt and Development (Eurodad).

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Written by Núria Molina

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