Russian Finance Minister Anton Siluanov finalized at the press conference the results of the G20 Finance Ministers and Central Bank Governors' Meeting held in July in Moscow.
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Anton Siluanov: Today we finished our joint meeting with the G20 Finance Ministers and Central Bank Governors. As usual, we had a rich agenda. We have discussed a number of issues concerning the global economy, attracting investments for economic growth, financial regulations and the international financial architecture reforms, and enhancing tax legislation.
I will speak on the key issues. First among them is the global economy development. The greatest focus was on the quantitative easing. How long will countries issuing reserve currencies to carry out this policy going forward? How will this policy affect Emerging markets and developing economies or developed economies?
Indeed, we have seen how the very only mentioning of winding down quantitative easing had a significant impact on emerging markets. We have seen capital outflows and the influence of this policy on foreign currency rates. This news stirred up all the financial markets. During the meeting monetary regulators proposed rather clear courses of action. It was said that low interest rates will remain in place. This is a key solution on keeping money cheap.
Whether quantitative easing should continue or not should depends on the situation in each certain country. The actions of monetary authorities will be based on changes in growth and inflation rates, these effects on decision-making process.
In any case, we agreed to regularly exchange information about the actions of monetary authorities and to take measures in order to make policy in this area clear and predictable. On the one hand, we will be working to prevent any sudden changes or major upheavals. On the other hand, we are concerned with how long the quantitative easing policy will last. There contains a risk of more market bubbles emerging where the extra money and resources created by quantitative easing flow to the financial sector rather than the real economy. As a result, more derivative instruments and bubbles are emerging in the market. We need to walk this fine line very carefully to avoid falling to either side. There have been many discussions of this matter.
The meeting also covered the continuation of budget consolidation policies. We agreed that soft monetary policy and policy consolidation may contribute to each other without being contradictory, because budget consolidation is firstly aimed at reducing debt in countries that have accumulated large debts. Of course, this is also our common concern. What will these countries undertake? What budget policy will these countries adopt? Whether they accumulate debt or take action to reduce their debt and, therefore, reduce their budget deficits? The most common solution is to do all we can to foster economic growth. With a growing economy, there will be possible to consider greater consolidation. This is one point of view.
The other opinion is that consolidation should take place regardless of the current situation. And I also agree with that. These two views are not mutually exclusive. Everything depends on the progress and structure of the consolidation. We have already mentioned that restraining and optimizing spending may affect the economic growth and situation in each country in a different way. Therefore, decisions must be made very carefully, in well thought-out steps.
I will speak briefly about financing for investment since it is a major topic of Russia's G20 Presidency. This issue stirred genuine interest among our colleagues. We began discussions and will continue to work on this complicated issue during Australia's presidency, which was confirmed by our colleague from Australia.
In fact, we all are looking for sources of investment. Bank lending is decreasing. The question is where will the investments come from? First of all, it will come from institutional investors, but they will require guarantees on the return and effectiveness of investments. Multilateral and national development banks could be of assistance here if they develop specific investment and infrastructure projects jointly implemented with institutional investors. That would be effective. At any rate, it was stressed that the investment climate largely depends on the actions of the government - particularly, how the government carries out structural reforms and whether the budget and financial policy in a particular country is well structured. These aspects largely define a country's investment appeal.
We paid very close attention to small and medium-sized businesses as a source of rapid growth and new jobs. We spoke a lot about public-private partnerships. The speech by our colleague from Turkey was particularly interesting. He described how large infrastructure projects are being developed under public-private partnerships in Turkey, with minimal participation of the government, making these projects much more attractive for businesses. We heard many proposals regarding joint projects between business and government.
We briefly discussed reforming the international financial architecture. There is some disappointment with the lack of progress in this area, although our American colleagues assured us that this autumn the U.S. Congress will return to the issue of considering and ratifying the 14th general review of quotas. These proposals have been made, the U.S. administration, Secretary of the Treasury and the Congress are working on this. We hope for a positive resolution and progress because we cannot begin changing our countries' participation without ratification of the previous decision on reviewing quotas. It is obvious that the quota of emerging market economies and developing countries should be increased as their influence on the global economy has increased. Therefore, we hope that this issue will be resolved this autumn and further discussed at the next meeting of finance minister in Washington, D.C. headed by the Russian Federation.
And I'd like to note the progress made on the taxation issue. We discussed the Action Plan on Base Erosion and Profit Shifting by transnational companies, which was presented by OECD and Finance Ministers from France, Germany, the UK and Russia. It is a rather good plan that was generally approved by everyone. In a communique, we confirmed the effectiveness of the proposed measures. We will recommend our heads of the governments to approve the plan in September and give instructions to its implementation at the national level in each jurisdiction.
This is an important plan because it makes it possible to increase transparency for large transnational companies' activities that, as Mr. Gurria said (OECD Secretary-General Angel Gurria) have "double non-taxation." This curious term means that transnational companies somehow get exempted from taxes in the country where their headquarters and production facilities are located and in the country where its revenue centers are registered. Therefore, we agreed that the Action Plan would be carried out after the approval by the G20 Leaders' at the Summit in St.Petersburg.
I think everyone is concerned about competition between transnational companies that can afford to optimize taxes and other national companies that do not have access to these incentives. Competitiveness is one aspect of the issue, while providing revenues to the budgets through our countries is another. Since we are engaged in budget consolidation, which is not easy, we need to think about expanding the revenue base of our budgets, and this is one of the goals of the tax plan. I think these tax initiatives are one of the important measures that we will offer to our Leaders and that they will be a step forward for the G20. The G20 is expected to work together to resolve major issues affecting all countries. Tax avoidance is a critical part of the agenda.
Full video of the press conference you can find here (only Russian version)