Indonesia's G20 Presidency: International Expectations

Presentation to Golkar Institute Public Dialogue on The Significance of Indonesia’s G20 Presidency in 2022, Online, 25 October 2021

Importance of the G20. While the G20 has sometimes promised more than it has delivered, it is almost impossible to overstate both its present significance, and potential future significance, in the global governance system – and the significance, accordingly, of the position that Indonesia will be occupying with the 2022 presidency. In particular, the G20 provides a vehicle for effective global policymaking in relation to global-scale problems which require coordinated, cooperative, collective action for their solution.

It is big enough for its policy decisions, if it acts collectively, to have a decisive global impact – representing as its members do more than 60 per cent of the world’s population, 75 per cent of its trade, and 80 per cent of world GDP. The G7, by contrast, accounts for just 11 per cent of global population and – although two decades ago the figure was 65 per cent -- now less than 50 per cent of the global economy.

At the same time, while larger than the G7, the G20 is still small enough with just 20 core participants – even with all the others who regularly attend G20 meetings, institutions like the IMF and World Bank and a rotating cast of additional state invitees – for its deliberative processes to be manageable, and if necessary speedy.

The G20 is far more representative, and far more obviously bridges the gap between developed and developing countries, than any multilateral body of similarly small size – its membership embracing not only established but emerging powers, nearly all the world’s regional heavyweights, and countries from very different political, economic, cultural and religious traditions. From a regional perspective, it is worth noting that the G20 has five Asian members plus Australia, whereas the G7 has just one, Japan.

The G20’s agenda was designed from the outset to focus on economic issues, and its core business of the G20 remains global financial system stability and financial market regulation, global economic growth, and removing impediments to international trade and investment. But it has periodically addressed topics with a broader focus (albeit all having at least some economic dimension), in recent years becoming increasingly concerned with climate and the environment, and – since Covid-19 – the impact of pandemics.

Whatever the topics on the formal agenda, the annual G20 leaders’ summit meetings which have taken place since 2008 are also important for the opportunities they provide for both formal and informal exchanges, in the margins of the main meeting, on whatever other current issues are preoccupying them, including geopolitical strategic and security issues. Similar opportunities of course exist with other high-level international meetings, but the G2O summits are almost unique for the concentration of global heavy-hitters they bring together.

Until now the greatest success of the G20 has been the central role it played in saving the global economy from another 1930s-scale great depression after the financial crisis of 2007–2008. The G20 leaders responded to the crisis by launching the largest and most coordinated fiscal and monetary stimulus ever undertaken, stabilizing global financial markets by coordinating the fundamental overhaul of international financial regulatory standards, and holding back a tide of trade protectionism with their standstill agreement.

It is worth noting that Australia’s then Prime Minister, Kevin Rudd, is widely credited, including by then US President Obama, as having played a quite leading role both in both in crafting this strategy, and in advocating the institutional innovation which made it possible – the creation of the G20 leaders summit itself, after a decade of the group, since its inception in 1999, meeting only at official and ministerial level. I make this point not in any spirit of national chauvinism, but to emphasise that it is not only the world’s major powers that are capable of influencing the G20’s direction, but its active and effective middle powers, like Australia – and Indonesia.

If the G20’s greatest success was its response to the Global Financial Crisis thirteen years ago, its most obvious failing has been its totally inadequate response until now to Covid-19 pandemic, not only a catastrophic health crisis but an economic one on a much greater scale than 2008-09. My ANU colleague Shiro Armstrong (East Asia Forum, 13 June 2021) has described the impact of the G20 going missing in these terms:

With global cooperation and coordination the health crisis and economic downturn would have been much less severe. There was technical cooperation among health experts, starting with the rapid genomic sequencing of what became known as COVID-19, but countries restricted exports of personal protective equipment, food and medicines. The World Health Organization was hamstrung by geopolitics instead of backed in with the support it needed. The COVID-19 Vaccine Global Access (COVAX) program has done little to improve equitable distribution of vaccines.

Economic cooperation has been piecemeal and economic support largely provided bilaterally or regionally based on narrow self-interest or for geopolitical reasons. Countries that could afford fiscal stimulus failed to realise that without global macroeconomic coordination, the rest of the world couldn’t afford to put a floor on the economic downturn and support lockdowns.

Getting the G20 back into the play during what remains of the Covid-19 crisis and what is bound to be a painful period of recovery from it, is clearly going to be Indonesia’s major challenge coming into the presidency in December.

Indonesia’s Role. International hopes are high that Indonesia can and will make a difference. Above all you are seen as admirably able to play a bridging role between developed and developing countries, as will be India and Brazil following you, And in bringing a strong Indo-Pacific perspective to the G20’s deliberations, you can expect very strong support from your regional neighbours, and certainly will receive it from Australia, for your presidency. Your chairmanship of ASEAN in 2023 will give you the opportunity to maintain real momentum in translating the global agenda into regional action

You bring some real credibility to the role at a number of levels. In economic size and population – half the ASEAN total - you are the unequivocal regional leader in South East Asia. You played a central and constructive role in the creation of the ASEAN we know today, not least in leading the process to bring peace to Cambodia and resolve all the geopolitical tensions associated with that we celebrated on 23 October with the 30th anniversary of the Paris Peace accords. And you led the charge in both conceiving and bringing to fruition the Regional Comprehensive Economic Partnership (RCEP) agreement concluded last year.

On the global stage, your GDP already makes you 15th in the world in nominal terms, and you are projected to have the world’s fourth biggest economy by 2050. You chair the Group of 33 Developing Countries in the WTO. Overall, as a democratic, dynamic developing country that is majority Muslim, you bring some distinctive moral authority to global governance issues.

All that said, there are some issues on the other side of the ledger which you will need to be aware of and address. Indonesia is seen by the wider international community as sometimes dragging its feet on key economic governance issues, in particular WTO negotiations on e-commerce and the digital economy generally, fisheries subsidies regulation and your generally defensive stance on tariff reduction.

Every country has its own particular interests to advance and protect, but assuming the leadership of major multilateral institutions carries with it a responsibility to bring a broad international, rather than narrowly national, perspective to the role. I have to acknowledge that it is widely perceived that Australia, under then Prime Minister Tony Abbott, did not do as well as we should have in that respect when we hosted the G20 Summit in Brisbane 2914 – and I am sure that Indonesia will want to do better.

Although a great many different issues will be addressed, and hopefully moved forward, by ministers and officials in the different G2O tracks during the course of the year, it is important – particularly in the context of the leaders’ summit – that if a country wants to be remembered as having been not just a chairman but a leader during its presidency, it concentrate its major efforts on achieving visible returns in no more than two or three centrally important areas, focusing on those which are being inadequately addressed elsewhere.

The most obvious preoccupation – as Indonesia has already acknowledged by identifying ‘Recover Stronger, Recover Together’, as the core theme of its presidency – will need to be global recovery from the COVID-19 pandemic crisis, defining and implementing a detailed strategy to address the interrelated mixture of health and economic issues, on which, as mentioned above, the G20 has so far basically gone missing.

The other major area on which I – and many others – would really like to see Indonesia placing its leadership on the line, where its developing country status gives it real value-added and where it has previously shown an interest, at the Osaka summit in 2019, in taking the initiative, is reform of the global trading system, where the WTO is close to complete meltdown. Existing global trade rules cover a smaller proportion of global commerce each year, and are not enforceable anyway with the US’s continuing hostility to the dispute settlement system. New rules are needed for trade in services, investment and the digital economy, and new disciplines in subsidies to fisheries, agriculture and industry. China has been gaming the system by continuing to claim developing country status but is by no means the only spoiler. Indonesia is better placed than almost anyone else to bring it and other into line by leading by example.

Indonesia’s ambitious reform plan for the WTO at the Osaka summit two years ago was noticed by the international community. Unfortunately, it was smothered by the Japanese hosts who were trying to manage President Trump and China but it is that kind of initiative, backed up by action that will make a difference.

Building a Stronger G20. Looking to the future of the G20, I have long nurtured the hope that it might evolve from being an essentially economic policymaking and coordination body into something that the global governance system still manifestly lacks. And that is a workable global policy formulation mechanism that recognises the reality that in the contemporary world security, economic and other major policy problems overlap – with saving the global environment and protecting the word from devastating pandemics being the most obvious current examples. A mechanism that will consolidate ideas, debate options, and generate policy conclusions that have an inherent credibility and momentum, and universal take-up potential.

The G20 has so far done no more than dip a toe into this wider water, acknowledging periodically the need to broaden its agenda to respond to certain pressing current issues, but resisting any suggestion that it establish the kind of permanent secretariat which might give it the capacity for more systematic policy formulation.

It is probably asking too much for Indonesia to initiate a broad-ranging debate on the G20’s future role and how it might be strengthened, given so many other more specific issues clamouring for attention. But this would certainly be one way of leaving a distinctive mark during its presidency, and I for one would urge that such an initiative be at least considered. The G20 has been somewhat drifting in recent years, punching well below its potential weight, and it is in nobody’s interest that that continue.