Bring on the Belt and Road?

As promised, I returned to the Annual Meetings today, making the comparatively longer commute from Seminyak. Today brought me back to my Year 12 Global Politics class. Back then, we did an extensive study on China’s international relations, and looked at the still nascent Belt and Road Initiative (BRI) a China-led regional infrastructure project spanning 71 economies, to the tune of trillions of dollars. We largely viewed the BRI in a negative light, looking at how the project encroached upon national sovereignty and was being used as a form of coercive power to bind countries closer to China, offering regional and economic security.

Fast forward to today, and the Belt and Road Initiative is a key agenda item at the Meetings. Except this time, instead of a classroom, I’m learning about the BRI from Zou Jiayi, Vice-Minister of Finance in China, the aptly-named Dr. David Dollar, senior fellow at the Brookings Institute, Hoe ee Khor, Chief Economist at the ASEAN+3 Macroeconomic Research Office and Caroline Freud, a director at the World Bank.

Here’s an indication of the significance of the BRI. The 71 economies represent 30% of global GDP, 60% of the world population, 40% of world trade and 75% of known energy reserves. The opportunities and benefits of such a project are obvious: the improvement of cross-border infrastructure, the reduction of trade costs and restrictions, and participation in global-value chains. For low-income countries involved in the BRI, the boosting of infrastructure is key – it is undoubtedly an enabler.

But there are equally sizeable challenges. The lack of data transparency surrounding the projects, their economic, social and political risks, problems with coordination in the project selection and implementation stages and debt sustainability issues. The latter is critical for low-income countries, who lack the capacity to service debt. This could lead to repayment issues for these countries burdened by debt, which would also affect the stakeholders, who are the Chinese corporations involved in the BRI. Dr. Dollar suggests using concessional loans, through lower interest rates or longer grace periods, or consider pulling back on certain projects to avoid debt distress. Lee ee Khor offered the example of hydroelectric dams in Laos, where these projects take some time to return revenue to Chinese companies, given their nature.

Naturally, the entire event consisted of Zou Jiayi skirting her way around questions surrounding the integrity of the BRI. To be fair, she offered some quite compelling answers. She opened by assuring that the BRI projects involve the localisation of international standards, in line with multinational development banks such as the Asian Infrastructure Investment Bank and the World Bank. However, she then divulged China’s belief that market forces should align with these high standards, which could be open to some interpretation. Regarding debt sustainability, she proclaimed that China has a debt sustainability analytical framework to ensure the macro supervision of individual projects.

Dr. Dollar consistently underscored the importance of domestic policy reforms in ensuring only the positive effects of the BRI are felt in the participating economies. This relates to the host of questions from the audience, which were all targeted at Zou. The recent Malaysian pushback against the BRI invoked the concern of country ownership of the projects, and was the result of analysis of debt sustainability; to this, Zou diplomatically responded that “it is a good thing to respect their own judgement”. The question of whether participating economies could choose between high-speed or conventional rail to link themselves to China was asked, and this question was answered poorly. She began by saying that this is entirely up to the individual country, but then said “it takes two to tango”, explaining that Chinese companies have their choices too on whether a particular project fits into their comparative advantage, scale and resources, which sounds contradictory to me.

Finally, a very direct question regarding the labour issue of the BRI arose; the projects mostly involve the employment of Chinese workers, rather than local labour of the participating country. Zou asseverated that this is merely a cost consideration for China’s commercial lenders and construction companies, and the audience was disappointed not to hear a more concrete commitment to ensuring the engagement of local labour force, which would only boost the positive impacts of the BRI. This is where domestic policy can be important, with appropriate procurement and labour laws meaning that China will have to play by the rules.

We are the Civil Society

Today marked my official final day at the meetings as part of the Global Voices Program. I have been running off around 6 hours of sleep per night this week, but my enthusiasm and desire to learn has only grown. A quick overview on how the meetings all work: with an estimated 20,000 participants over the course of the week, the meetings bring together the big wigs such as finance ministers, central bankers and IMF/World Bank leaders, who would engage in innumerable meetings with each other. However there also thousands of representatives from Civil Society Organisations (CSOs), from NGOs and charities to think tanks, who attend the meetings to push their own agendas through forums, building networks and lobbying. Global Voices, the organisation who has coordinated this Australian youth delegation, comes under the Civil Society category.

The landmark event for this week was the launch of the World Bank’s Human Capital Index, which measures how well governments equip their people to achieve their full potential. Education and healthcare are the key concerns here. Singapore topped the rankings, and we came in at 7th place. Many of the events and forums have naturally been centred upon the importance of investing in people, particularly children.

This morning, I attended a CSO forum with Save the Children Indonesia and village heads from more remote areas in East Java, such as Bangun. The discussion was centred around ensuring better futures for the children of Indonesia. Youth ambassador Putri Gayatri (18 years old!) spoke on anti-child marriage, and the perils of pregnancy at a young age. Unfortunately, this is the reality for many girls as young as 15 years old, and the importance of sexual education, still seen as taboo, was emphasised. Erna Warata runs her village’s committee for children, and her energy and motherly qualities shone through. She warned against the dangers of scolding and exposing children to violence, something she has been pushing within her own community. For me, a standout one-liner came from Putri when she declared “children develop the nation, not the household”, referring to the importance of connecting children with education and building an environment in which they can grow and prosper.

I asked a question to the panel about what Save the Children Indonesia is doing to support children with disabilities in remote communities. The answer I received was disappointing. I was told there is an ongoing program in West Java, but the response seemed tokenistic, as if a box was just being ticked. After the forum, I was approached by Fred Smith, Head of Policy at Sightsavers who campaign for disability-inclusive development. He handed over his business card, as is the standard procedure here, and said it was the first time this week that he had heard somebody ask a question about disabilities. This reflects the broader concern that many of the civil society organisations here are lone voices, fighting to be heard in a sea of causes and agendas. Of course, they all face the collective problem of having their voices heard by those at the very top, and it was disappointing to hear that many World Bank and IMF representatives were invited to these Civil Society Forums but did not attend. However, this does not discount the crucial role the civil society plays in affecting change. Managing Director of the IMF, Chirstine Lagarde reaffirmed her commitment to ensure CSOs’ voices are heard at the annual and spring meetings, and we mustn’t forget that so many of these CSOs are doing incredible things and changing the world at a grassroots level.

While this is supposed to be the final day of the program, there are still events on tomorrow, so rather than indulging in the tourist delights of Seminyak, surrounded by a hoard of holidaying Australians, I will be returning to the meetings to learn about China’s Belt and Road Initiative, the role disruptive education can play in education, and will endeavour to get a photo with UN Secretary General Antonio Guterres, who will be at the meetings!

Talking about Tax

A diverse day. An engaging session on the ways that development which engages the private sector discriminates against women, a panel featuring Melinda Gates looking at harnessing technology for inclusive economic growth, the pressing issue of tax justice and a forum of young social entrepreneurs in India, as young as 15 years old!

Tax justice is in area I became interested in way back in 2014 when I volunteered with the Oaktree foundation. We were campaigning for tax justice to be put on the agenda for the upcoming G20 Summit in Australia, and fast-forward four years, it is a prominent theme at the IMF/World Bank Annuals. With huge multinational corporations finding nefarious ways to evade paying tax, this can significantly deprive developing countries of crucial funds which they could be using for essential public services and infrastructure. Back then, we looked at profit shifting. A company should pay tax in the countries in which their business was conducted, however many multinationals have been able to shift their profits to countries with low corporate tax rates, known as “tax havens”. The other piece of tax jargon was transfer pricing. Put simply, subsidiaries of a parent company can set values for transactions that are too high or too low, such that as much of its profit is recorded in low tax-rate countries, and as little of its profit in high tax-rate countries. There are many examples of destructive tax evasion by corporations operating in developing countries, and Oxfam estimated in 2016 that it costs these countries $100 billion a year.

I walked into this forum on tax justice and was surprised to see Wayne Swan, former Australian treasurer, sitting on the panel. He is here as part of the civil society, working with ICRICT, the Independent Commission for the Reform of International Corporate Taxation. As a delegation, we met with Wayne this week and he told us hates the superfluous name. The forum incited robust debate on the ‘radical’ nature of reforming the international tax system. Wayne’s angle was direct and unambiguous. He declared tax evasion “a cancer in our system” and offered a seemingly simple proposal that all subsidiaries of a parent company should be treated as a single entity for all tax reporting purposes. Apparently, this isn’t so simple, and Vitor Gasper, director of the IMF’s Fiscal Affairs department, called Wayne “a radical”!

In Australia, the introduction of transparent public reporting of tax operations led to landmark reforms in our public policy, a process Wayne was heavily involved in. Consensus was found on the need for international standards and reform, and the role regional cooperation, through the likes of the ASEAN bloc, can play in accelerating these reforms. The OECD has launched the Base Erosion and Profit Shifting (BEPS) process, which lists specific actions that governments can take to address tax avoidance, including the emerging issue of taxing digital businesses. Whether these actions are adopted by the world remains to be seen.

Briefly, my day ended at a forum featuring young Indian social entrepreneurs. For example, 15- year old Nikita is behind Project Freshstart, which helps women prisoners in India find work and rehabilitation. Schoolgirl Esha runs an organisation who teach medical health consultants English. Given I am writing my policy paper on social enterprises, these stories were particularly interesting, and reflects a key theme for this week from a personal standpoint. While combatting the bureaucratisation of the IMF and the World Bank may be difficult, young people have the capacity to affect change through many avenues. For me, it just makes sense to find an area you are passionate in, one which aligns with your core values, belief and experiences, and look for ways in which you can have a positive impact.

Pertinent Perceptions of Public-Private Partnerships

Day two at the IMF/World Bank annuals was just as charged as the first. Forums and panel discussions on a range of issues, a meeting with World Bank executive director Jason Alford, seeing IMF director Christine Lagarde and World Bank president Jim Kim in the flesh and rocking up to the Australian Treasury reception. My ability to get through the 12-hour day without caffeine has certainly surprised me, but honestly, it’s the ideas you hear and the people you meet that keeps you going.

Across today’s sessions on the future of work, the relationship between disruptive technology in inclusive development, the resurgent growth of East Asia and failed public-private partnerships (PPPs), the pertinent theme was the precarious but potentially world-changing role that the private sector can play in economic growth and development. A prevalent manifestation of this notion is PPPs – partnerships between governments and the private sector in the provision of public services and infrastructure.

At the meetings, many have preached the dangers and pitfalls of putting too much power in the hands of corporations. PPPs can be financially risky, as is the case of the Nya Karolinska Solna hospital in Sweden, a private hospital whose cost rocketed from €1.4 billion to £2.4 billion, and it is known as “the most expensive hospital in the world”. PPPs can have adverse social impacts; the privatisation of water provision in Jakarta made monthly bills unaffordable, forcing them to rely on wells or expensive jerry cans. Caution must be taken by governments in engaging with PPPs. A joint Civil Society Organisation report on failed PPPs recommends that governments cease aggressive promotion and incentivising of PPPs, rather, publicly acknowledging their associated risks. It stresses the importance of responsible, transparent and environmentally and fiscally sustainable financing for public services, which certain PPPs may not offer, particularly where commercial interests trump public interests.

However, there are prominent voices who laud the efficiency and capital that the private sector can bring, with PPPs promoted at many of today’s forums and events. In a panel discussion on economic growth in the East-Asian region, Lim Guan Eng, finance minister of Malaysia, argued that the private sector must take the lead in ensuring Malaysia can escape the ‘middle income trap’, by which economic growth slows after a certain level of income is reached. He cited the efficiency gains and technical knowledge and expertise of the private sector as important justifications for the use of PPPs, particularly where technology is involved. A major example of where the lack of a PPP has cost Malaysia financially was during the genesis of Grab Rideshare, which was initially a Malaysian company but quickly changed hands to Singapore after the Malaysian government refused to offer financial support.

Moving towards an Australian context, the overlapping of the public and private sector presents these universal challenges but also unlimited potential. As part of my overall experience attending the IMF/World Bank Annuals, I am writing a research policy paper on how the Australian government can better support work-integration social enterprises, that is social enterprises whose missions involve helping disadvantaged groups obtain employment. I am particularly concerned about employment rates for people with disabilities. In 2012, the ABS reported that 52.7% of all working-age Australians were not participating in the labour force, and shockingly   Australia is ranked 27th out of 27 OECD countries for the relative poverty risk of people with disabilities. I believe social enterprises offer an innovative solution to combatting this issue, and one of my policy recommendations looks at how the public sector can partner with the social enterprise space through ‘Social procurement’. For example, if the Victorian government wants to build a new bridge, social procurement clauses will ensure that the government obtains its physical and human resources from social enterprises or businesses who will have an additional social impact beyond the scope of the public project. A simple example of this is in Sydney, where the City of Sydney government only purchases its catering from a social enterprise which offers hospitality training to unemployed members of society, with a focus on Sydney’s Indigenous population.

This week, I have been able to bounce my ideas off a range of individuals such as Anele Mkuzo of the African Entrepreneurship Initative, and the content of the events here has reassured me that my area of research is relevant, topical and universal. We have the freedom to approach anybody we like here, and as somebody fascinated by Myanmar’s history and politics, I was compelled to approach Thet Zaw Htwe from Spectrum Sustainable Development Knowledge Network. I have organised a meeting with him today and am excited to hear about the challenges and opportunities that his organisation faces within such a complex political environment. Bring on Day three.

Day One: Perspectives on Youth Unemployment

A brief snapshot of the atmosphere at this year’s World Bank/IMF Annuals: with the sun and humidity relentless, the meetings take place in Bali’s lavish beach resorts and conference centres. At every turn, a smiling volunteer will greet you and smother you with their warm hospitality. It’s not all suits and ties; the bright, vibrant ‘Batik’ shirts are a popular choice of clothing.

Despite the more relaxed feel, the seriousness and sense of importance at the meetings have not been compromised. A morning of presentations on real-time output gaps, how the IMF deals with external imbalances and how it uses big data to tackle corruption was a somewhat overwhelming but equally fascinating introduction to the meetings. I am acutely aware of my youth as I rub shoulders with central bankers and economists, however, this is not a bad thing. Our youth puts us in a privileged position to contribute at these meetings, with the people we meet genuinely interested to hear from a group often unrepresented at major international conferences. The most engaging panel event today was the ‘Youth at Work’ forum. While the panellists drew from experiences within their own countries, the issues raised were unequivocally universal concerns.

A key theme was the importance of connecting supply and demand in the youth labour market. In a live Twitter poll, 39% of respondents said that the biggest challenge for youth employment was outdated educational systems, and 36% cited the incompatibility of skills with the market. In Thailand, one-third of all unemployed people are skilled graduates, reflecting the scale of this issue and the importance of quality education. Anele Mkuzo of the African Entrepreneurship Initative mentioned that in South Africa, they inexplicably “teach coding without laptops”, and the panel agreed that education must have a creative, “soft skills” component, rather than mere textbook learning. With the World Bank to release its Human Capital Index tomorrow, the panellists identified education as being the key pillar of this index, emphasising the importance of investing in education at a young age. Furthermore, in reflecting upon her work as a parliamentarian in Kosovo, Vjosa Sadriu stressed the importance of ‘youth budgeting’, in which the government analyses the extent to which any new law will support youth in the labour market.

Aya Chebbi from Afrika Youth Movement was a passionate voice, who somewhat rejected the panel’s concern on matching youth with the market. She focused on purpose, imploring young people to properly consider where they want to work, and for what reasons. She labelled the trend of young Tunisians joining ISIS or dangerously fleeing across the Mediterranean as a “tragedy” and invoked the key questions of why Tunisia’s youth are leaving, and why they are risking their lives for it. There are no easy answers to the issue of youth employment around the world, particularly in countries like Tunisia, and it looms as a pressing challenge for the world’s policy-makers.

For me, the discussion ended on a relatable and hopeful note. In addressing the ‘brain drain’ seen in many countries, Vjosa underscored the crucial role that inspirational individuals and stories can play in shaping young people into active, engaged citizens within their own communities and then abroad. This is certainly something I can relate to in the context of this opportunity to attend the IMF/World Bank Annuals. From the pre-departure briefings in Canberra to today, I have met a range of inspiring people who have taken unique and admirable pathways to get to where they are today. Whether they are leaders in their respective fields or involved in policy-making processes, they are in positions to improve the world they live in. I look forward to meeting as many interesting and inspiring people as I can this week.