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  • Director of the Department of International Financial Relations of the Ministry of Finance of the Russian Federation, Andrei Bokarev

Accountability issues of G20 activity in the year of the Russian Presidency

Interview with the Director of the Department of International Financial Relations of the Ministry of Finance of the Russian Federation, Andrei Bokarev, about accountability issues of G20 activity in the year of the Russian Presidency.

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Question: Why are accountability and transparency important to the G20 process?

Andrei Bokarev: The work of G20 on achieving transparency and accountability of the Forum has been going on in step with the times and meets the demands placed on it by the civil and business community and general public. It is an issue of priority in the work of any working groups, both within the Financial Track and the Sherpas' Track. G20 is being criticized today. It is being argued that the Group is an exclusive club that has taken on responsibility for making decisions and producing recommendations for the world economy on the whole, while the G20 representation is relatively small. That's why we consider it essential to ensure reliability and transparency when accounting for the work of G20 to the international community. At the same time it is important not to make it a goal in itself. No work of G20 in any format should boil down to preparing reports, self-reports and trying to justify its existence on an annual basis, each time emphasizing that we haven't simply wasted time.

It would be wrong to say that there is a single universal approach to ensuring transparency and accountability of the working bodies of G20. Frameworks for ensuring accountability in any given area are designed depending on the subject matter, on priorities. For instance, in the case of the Framework on Strong, Sustainable and Balanced Growth, regular assessment and publishing of results were originally planned for. Reports of this kind become annexes to the Leaders' Declarations in conclusion of summits. On the other hand, there is a number of areas and topics where accountability process is less well defined. Undoubtedly, the information about the progress made, topics discussed gets published; however one can't claim that there is a clear-cut procedure or a certain order for collecting and analyzing information from all countries, for submitting it to international organizations or for accumulating it by a current G20 Presidency. In a number of situations this procedure is not in place.

At the same time we see a distinct trend towards increasing transparency and accountability of the Forum in all of its working areas.

Question: Since 2008 the G20 has declared that it will hold itself accountable for its commitments, but it is in the last two years that the G20 has begun to define the basic elements of an accountability framework, what new progress will be made during the Russian G20 Presidency?

Andrei Bokarev: Here we should look at concrete areas of work of G20. Implementation of the Framework on Strong, Sustainable and Balanced Growth would be best to start with. The main methods of carrying out the process - of preparing annual reports, of analyzing the extent to which countries are fulfilling their commitments, the extent to which measures taken at national levels are in line with decisions made by the whole of G20 - all these methods were set out back in 2009 during the UK Presidency. Since then it has been more about perfecting, modifying the accountability process, rather than changing its nature. Within this area and activity of the Framework Working Group there is a so-called peer review process, which calls on all countries to submit required information on a regular annual basis and in accordance with established framework. The framework includes a list of key factors that reflect the extent to which a given country influences the global economy, the dynamics of relations among and the pace of economic growth within the G20 countries themselves. The IMF plays here a leading role in terms of compiling this information, summarizing it and giving an assessment. To be frank, the way a situation is assessed and seen by national governments and the IMF doesn't always coincide. Moreover I would like to illustrate my point with a rather interesting example of a situation that took place a couple of years ago when the IMF Managing Director was Dominique Strauss-Khan. In one of the meetings of the Financial G20 he said that either the national governments were looking at the situation in the economy and financial markets and assessing the growth prospects too optimistically or it was that the IMF and the countries had been using different data, as, even though they had been utilizing one and the same data, the IMF experts had been reaching rather different conclusions, their opinion often times being much less optimistic. My point of view is that with this situation being as paradoxical as it is, it still provides a rather good illustration to the point that the G20 context makes it possible to compare different assessments, different points of view, different expert opinions and in the end reach a unanimous vision. It is well known that the truth always lies somewhere in the happy medium.

In addition to the peer review process, another area in ensuring transparency is passing by countries a list of commitments to implement certain policies and structural reforms. Here we are talking about monetary, currency exchange and fiscal policy. Countries make a list of their priorities. Clearly this framework doesn't include absolutely all areas of reforms, but it is not the task we are setting ourselves. Here what is taken into account are the key points which are in line with the G20 priorities and which facilitate stable and balanced growth of the world economy and national economies, with a later assessment of the progress made against these criteria on a regular basis. At the moment this format suggests making forecast for five years ahead. During these five years the fulfillment of these commitments is monitored - to which extent the countries are carrying out their commitments, to which extent the trend towards achieving their goals is in place. There is also a built-in opportunity to make recommendations and suggestions to countries in the event that, in the view of international organizations and other G20 countries, the volume of measures taken is not enough or the pace of implementing reforms is not conspicuous and doesn't provide for achieving the goals established earlier.

The new approach to assessing the implementation of structural reforms was introduced into practice of G20 starting this year. Although the main premises of this practice have been voiced for a while now, it is only this year that it has been piloted for the first time. The idea is that the way countries carry out structural reforms and policies in various sectors is assessed not only by international organizations - the IMF, the World Bank and OECD - but the countries themselves as well. For example, country A assesses the extent of fulfillment of certain commitments by country B, and country C performs the same kind of analysis towards country A. As far as the Russian Federation is concerned, the implementation of reforms in Russia was assessed by our colleagues from Australia, and we in turn, gave assessment to the information provided by and fulfillment of commitments in the Republic of Korea.

It's worth noting that with the Russian Presidency a special emphasis is going to be put on monitoring the fulfillment of commitments in the area of medium-term fiscal consolidation - which is also going to be reflected in the documents to be prepared for the Leaders' Summit. Today fiscal consolidation is a topic widely discussed in various formats. As we know, during previous summits, including last year's Mexico's Presidency, the circumstances were already put in place, against which the G20 countries are to set out new parameters for their prior commitments, set out a strategy for medium-term budget consolidation and present updated commitments to achieving sustainable debt level, budget deficit level, etc. First of all we are talking about developed economies. It is sort of an update of the commitments taken on in 2010 in the wake of the Toronto Summit. I wouldn't say that the process is going easily. There are different points of view, different approaches. However, assessment in this area is going to be carried out as well.

Besides, it is actively debated now whether this commitment - probably on a voluntary basis - should be extended to emerging markets as well. This proposition doesn't enjoy undivided support from everyone, but I think that by and large it would be right for all G20 countries to articulate their position regarding these issues. There is no doubt that it is so far difficult to evaluate and predict the way these strategies will be formulated, or what kind of indicators the countries will submit. But we expect the publishing of this data to become one of the visible achievements of our presidency and one of the tangible results that can be presented at the Summit of the Leaders.

Speaking about other areas of work, it is worth mentioning the reform of the financial sector, financial regulation. The accountability framework here is somewhat different from that established for the Framework Agreement Group. The main job of preparing assessment data, conclusions and recommendations on further implementation of reforms is carried out here by the Financial Stability Board. This approach has been agreed on by all countries, the Board possesses the required expertise and understanding of the issues. Naturally, all G20 countries are members of the Board. On a regular basis and by the time of each Summit the Board prepares a detailed report on the progress made in implementing further reforms in the area of financial regulation - including country-specific analysis. Traditionally, such kind of report is an Annex to a Leaders' Declaration. This year is going to be no exception to the rule and there will be no attempt to move away from the traditional practice. From my point of view, this process is effective and quite fairly reflects the problems that still exist in the sector as well as the tasks to be tackled by G20 in the near future. The Report by the Financial Stability Boards keeps a precise enough record of the progress made, that is why, we believe that in the area of financial regulation there is no need to change format of the assessment and results analysis. I think that in the nearest future not just the Russian but other Presidencies to follow are going to stay loyal to this framework. We will continue working in this context.

At the same time it is no secret that there is a number of areas in the realm of financial regulation where the procedure for assessing situation in certain countries is formed on a voluntary basis. Under the auspices of the Financial Stability Board special groups, teams of experts are formed from different countries that are interested in participating in the assessment of a given economy, in preparing recommendations. Here we are certainly talking about participation of competent professionals and experts in the field. There may be no random people on such teams, that is why the level of reliability of the information received as a result of their assessment is rather high. Reports of this kind may also be seen as a rather serious source of information that can be reckoned on when preparing conclusions and analyzing work of G20 on the whole.

As far as issues related to the subject of international financial architecture are concerned, today there is no accountability procedure in place, and thus far we haven't been setting ourselves this kind of task.

A rather wide scope of issues are debated as part of this area of work - here we are talking about the reform of international financial institutions, of the IMF in the first place; and about issues related to the work of regional financial arrangements (RFAs); here we are talking about the proposed by the Russian Presidency development and improvement of recommendations on managing sovereign debt; and a number of other areas of work, proposed by previous presidencies, including expansion of the SDR basket of currencies, increasing the number of reserve currencies; - there is a whole range of topics, some of them discussed on a regular basis, others are proposed by a given presidency and as soon as certain progress is made, they take a back seat again. As a rule, key assessments of the implementation of work and reforms in this area are produced by the IMF. It would be wrong to say that there is a certain defined format or layout of reports and reviews in this area that would keep record of results. However, the IMF together with the International Financial Architecture Working Group regularly monitor the process of negotiations, reaching agreements and fulfillment of prior commitments. It is a different matter that the process of assessment in this area is less formal. However, in my view, it does not impede work. And in case G20 would make certain progress or, on the contrary, if some problems arise in resolving certain issues, they will be taken into account when producing assessment, and it has nothing to do with how formal the assessment framework is and how precisely the process of receiving recommendations is designed, including those from the civil society and countries outside G20. It can hardly be seen as an obstacle, creating significant problems.

Question: What steps are being taken this year to improve on the accountability report that was issued last year?

Andrei Bokarev: Going back to the Framework Agreement, it can be said that this year the framework for submitting data for assessment is changing, new sections are appearing. It is becoming more comprehensive, containing better defined ways of reasoning and conclusions regarding priorities in the medium term.

Secondly, as I have already mentioned, this year we have had a first-time - and a rather successful - experience of producing peer reviews and recommendations by countries to each other, rather than only preparing opinions by international financial organizations. In my opinion, it is interesting experience and it could be continued in the future, although nobody doubts the level of aptitude and expertise of international organizations, nobody suggests turning down services provided by the IMF in this respect. Here there are undoubtedly certain aspects present, related to the fact that it is not always the case that a country giving assessment, its national government participating in the process - mainly finance ministries, central banks - have their hands on enough information about the course of reforms in another country. That is why there is a certain subjective element present here. And it would be wrong to say that the conclusions and recommendations made to countries based on the assessment by peers, are completely reliable and in tune with reality. At the same time assessments of this kind allow for an opportunity to look at policies of one country with the eyes of experts from other economies. This provides for a rather interesting comparison picture.

Thirdly, as I have already mentioned, in 2013 - taking into account certain concrete tasks from the Leaders and priorities of the Russian government - a special emphasis will be put on discussing medium-term strategies of budget consolidation, on indicators of debt sustainability, budget deficit, on formulating strategy toward reaching in the medium term new attainable indicators and formulating a specified list of reforms, that will help ensure stabilization of the debt and deficit situation in the foreseeable future.

Question: The Los Cabos Leader's Declaration invited the Development Working Group (DWG) "to explore putting in place a process for ensuring assessment and accountability for G20 development actions by the next Summit." Can you tell us how the DWG is responding to this invitation? How will the DWG's plans differ from the accountability framework described in the Annex B of the Los Cabos Growth and Jobs Action Plan?

Andrei Bokarev: Talking about activities of the Development Working Group, where Russia holds presidency this year, I would like to mention that last year in Los Cabos the G20 Leaders set the task to prepare for the first time in the lifetime of the Group a Development Accountability Report, that would contain analysis of the outcomes and results of the work of the Group over the last 3 years, that is from the time it was established. This work is in full swing at the moment. A number of meetings of the Working Group have taken place. We expect the final text of the Report to be ready by July, i.e. by the last Sherpas' Meeting leading to the Summit, in order to be able to officially present the Report before the Leaders' Summit and showcase exact results of the G20 development actions.

It is no secret that certain critical remarks have been voiced by both G20 itself and a number of other countries and organizations, including civil society organizations, aiming at the Development Working Group's activities. It is this format of G20's activities that raises certain questions. It is not always clear what G20 is doing on the development front, what concrete steps and decisions have been taken, what particular results it has helped to achieve. At the current moment all G20 countries have reached agreement on the approach to this Report, they have agreed on the format of the Report. There is precise understanding of the form it is going to take. In effect, what now is going on is some technical work on the content of the Report, on preparing specific examples of the Group's activities, of the ways the Group's decisions have been implemented on the ground, in certain developing countries. Consequently, this kind of examples will also be part of the Report. Undoubtedly, a critically important aspect, both for our G20 partners and the Russian presidency in general in working in this area and preparing the Report, has been participation in the process by the very partner countries, i.e. those countries that are the main beneficiaries of the decisions and initiatives passed by G20. As it has been important to us to have the Report reflect not just the success stories, but also to identify those problems and difficulties that we are coming across in this area at this time. It is important to show it to countries beneficiaries and to have them confirm which decision proved to be successful and which one less so, what sort of mechanisms and approaches turned out to be most effective ones; what works and which ideas face most difficulties and lack of understanding. In the wake of the consultations held with the partner countries it became clear that in this area there is a lack of certain sort of visibility - that is a visible display of specific results, of understanding of the Group's activities, of what gets done in this area.

This year the Development Accountability Report will have been published for the first time. In the future it will be published regularly. It's not unlikely that every next presidency will prepare a report like that. Here, to some extent, the G8 practice has been adopted, as they have been publishing this kind of reports within G8 on a regular basis since 2010. For G20 it will have been a first-time exercise of this sort, and it fell to our lot. There are certain difficulties, including because not all G20 countries have this sort of experience, some issues and difficulties arise. But by and large I believe that we have come a long way in preparing this document and it should come out fairly decent. During March-April Russia and a number of other countries, who actively participate in the Development Working Group - for example, Australia, France, Great Britain and others, through concerted effort, dividing areas of responsibility, held a series of various events, both on the territory of our countries, and on the territory of the partner countries as well. The goal of these events was not just publicizing activity of G20 and the Development Working Group, but also to receive suggestions and recommendations from the partner countries - such as how they see further activity of G20 in this area, what in their opinion is worthy of attention, and what could be the ways of increasing effectiveness of work. We received very many responses, even more than we had originally expected. A large data base has been compiled, that can be tapped into not just in the preparation of the Report, but also in the work in the future.

This data base contains quite a large number of recommendations, suggestions, proposals. It's worth noting that these proposals have been made both by representatives of the national governments of the partner countries and by representatives of various international organizations, first of all those of regional variety, that unite developing countries and work with them. As the most telltale example I would like to point out a very effective cooperation with the countries and secretariats of the Commonwealth and La Francophonie. We will do our best to take heed of these proposals to the fullest extent and show that G20 operates not like a self-contained thing, that we don't prepare our ideas and suggestions in disconnect from reality, from the situation in the world, from the suggestions and aspirations expressed by our partners. We also certainly take into consideration the work in this area performed outside of G20 by various international institutes. An important role in preparing the Report and assessing the situation on the whole is played by international organizations, first of all by the World Bank, the OECD, a number of regional banks of development, such as the Asian and Inter-American Development Banks.

The Report is going to be rather comprehensive, informative and worth studying. In order to make the document easier to comprehend, we suggest that it should be published in two formats. An abridged version will be submitted to the attention of the Leaders and will be available to the general public. This version will contain the key approaches, premises and recommendations. In addition, an extended, full version will be published that will contain around 80 pages, that will include all-inclusive  assessment of the work of G20, a broader range of recommendations and a longer list of specific results, success stories, examples of how and in what way the work of G20 helped solve certain problems. I suppose this document will be favourably received by a most diverse audience, and not just by a narrow specialist circle.

It goes without saying that the Development Working Group itself gets a lot of food for thought from the information gathering and report preparation processes: such as how the work within the Group should be organized; what our shortfalls and weakness are; what are the areas where we could improve, take extra measures to boost efficiency. Already now at the stage of preparing the Report, a whole range of obvious conclusions is emerging, that the Development Working Group should take into account in its future work and make according changes to its working process and process of cooperation with partners. For instance, it is fairly obvious that we don't just need to arrange for the development of initiatives and recommendations and then pass them on to have them implemented, but we also need to provide financial and technical support within G20 for promoting these initiatives, trying to achieve sustainable results over a long period of time, and not just during the time of preparing a concurrent report. We have also become aware of the need to increase concentration of work by the Development Working Group on certain key, high-priority topics for G20. It's important to focus on those issues that G20 can contribute most to. By the start of the Russian Presidency, we believe, the scope of tasks, tackled by the Group, has grown too much, and providing for the implementation of programs and initiatives, for the development of coordinated approaches to different areas, oftentimes unrelated to each other, is certainly very difficult. We are already working on these issues, and by the time of the Summit we will be able to submit for consideration by the Leaders concrete proposals to focus the working agenda of the Group on several areas, realistic and achievable.

Question: Will civil society organizations have the opportunity to offer their expertise, particularly on issues such as food security to help inform both the preparation of the report as well as recommendations for future G20 action?

Andrei Bokarev: That's true, there are discussions about the need to have more active involvement of the civil society in the debating initiatives and preparing proposals. On the one hand, we have a positive view of such suggestions, and we have never tried to avoid discussing difficult and uncomfortable issues. We undoubtedly try to take into account to the fullest extent the recommendations prepared by the civil society and other social partners. I can say that over 50% of Civil 20 and Business 20 recommendations, ready to be submitted to the Leaders during the St.Petersburg Summit, are shared by the official G20 and are consistent with the view, the understanding of the situation by our partners, who represent the G20 at the government level. There is no doubt that this cooperation should go forward, though its form remains subject of discussion. The framework for this kind of work that we have this year, that includes Civil 20 and Business 20 processes, is, in my view, rather justified and effective. It is certainly not always possible to ensure accountability on and attainment of all recommendations and goals, that are proposed by the partners. And the reason it happens is not because their recommendations are out of synch with today's reality or they don't account for specificity of the situation in the global economy or in financial markets. The reason why it happens is because G20 is a multilateral forum, representing countries with different level of economic and social development, with different approaches, different history of development and mentality. And this makes it obvious that the decisions taken are always characterized by compromise, and in a number of cases it is apparent that certain decisions based on compromise can't be premised on unequivocally following all recommendations. That is why we are talking about the need to produce more workable and realistic proposals that can really receive support and further development.

It should also be taken into account that governments bear direct responsibility for further implementation of these decisions and recommendations, both at the international arena and inside the countries. Representatives of the G20 governments should consider possible consequences of recommendations which are not always apparent from an expert's position. They bear the burden of responsibility for possible consequences of carrying out a certain policy, related to implementation of certain decisions. This puts in place certain limitations.

Although not all recommendations can be implemented, G20 has been trying to work in a fairly open manner, cooperate with and take into consideration proposals voiced in various formats. The development agenda this year is an example of the flexibility the G20 is prepared to show in its work, to reckon with suggestions from the partner countries and the civil society and to consider recommendations. In my opinion, it is rather positive experience. In a short time this experience will be documented through preparation and publishing of a 180-pages-long report, describing the way, in the year of the Russian Presidency, G20 worked, cooperated on development issues and showed regard to the suggestions from those parties, in whose interest those decisions are to be taken. I believe it is a fairly positive result.

Question: Could you please provide us with a rough calendar of the preparation of the accountability report?

Andrei Bokarev: Development Accountability Report will be submitted to Sherpas at the end of July. After approval by Sherpas, by late August it should be ready for publishing. We are planning to circulate it shortly before the Leaders' Meeting in order to assure visibility and demonstrate specific results of performing the task, set by the Leaders during the Los Cabos Summit. We expect the Report to be officially published and be available on the official website of the Presidency for examination by the civil society and all interested parties. Plans for an open presentation of the Report are in the works, but exact dates still require clarification. The presentation will certainly have a most open nature. We expect the invitees to the presentation to include representatives of the most diverse circles, and not just representatives of governments and ministries who took part in the preparation of the document.