2017. vol. 12. No. 3

International trade and investments declined sharply in the aftermath of the 2008 financial crisis. To coordinate policy responses in the wake of this crisis, the Group of Twenty (G20) was elevated to the leaders’ level and the BRICS grouping of Brazil, Russia, India, China and South Africa was founded as a summit to gather leaders from the most important emerging economies. This contribution reviews the work of both fora to restore trade and investment. We show that, despite efforts to stimulate cross-border trade and investments, neither has returned to pre-crisis levels. This is especially the case regarding international investment for the G20 members, although the data show a revival of trade. In general, BRICS members have been able to recover more quickly. Although their decisions have not always been implemented by members, the G20 and BRICS have proven to be effective fora for coordinating efforts and compliance has been rather high. However, this contribution argues that more can be done, especially regarding investments. The future will tell whether these two bodies will continue to be complimentary and whether they will be able to withstand protectionist and nationalist reflexes. 

The main objective of this article is to analyse the new global governance mechanism developed at the G20 forum by nineteen individual countries, along with the European Union (represented by the European Commission and the European Council), cooperating with international organizations (IOs) and government officials (GOs). In the subsequent sections, I argue that the new mechanistic and praxis-oriented mechanism of global governance is built on the nexus between (1) the G20 acting as a hub of multi-level cooperation and as an apex systemic risk manager; (2) IOs offering expertise on specific issue areas; and (3) GOs as sherpas, or ministers responsible for specific subjects, who are able to meet before and after commitments, and are endorsed by and influence the iteration leaders use at subsequent summits to soften difficult issues. The mechanism represents a departure from the Schumpeterian “creative destruction” process, understood in broader terms as not restricted solely to the role of entrepreneurs and innovations, but extended also towards global politics and institutions (norms, systems, and organizations). As shown in G20 communiqués and declarations, the elite global governance institutions are providing valuable input to the G20 process. A good example of the G20 and IOs' effective synergy is the relationship between the G20 and the OECD, which can be described as a “partnership of convenience”. The activity of sherpas, finance ministers, central bank governors, expert groups and similar sub-summit entities are also an essential component of the global governance mechanism. They are all responsible for major preparatory work before G20 summits. In conclusion, I argue that the successful spreading of this mechanism makes it possible to achieve ambitious objectives, such as (1) crisis response and closing global governance gaps, (2) enhancing international cooperation, and (3) building a capacity for international innovation. 

China took over the G20 2016 presidency from Turkey during a period of subdued economic activity and diminished global growth. Growth in China was expected to slow to 6.3 percent in 2016 and 6.0 percent in 2017, primarily reflecting weaker investment growth as the economy continued to rebalance. Acknowledging that lower growth rates have become the “new normal”, the Chinese leadership set the annual target growth rate for China at no less than 6.5 percent in its 13^th Five-Year Plan (2016-2020). The Plan redefined China’s development paradigm, de-emphasizing speed in favor of quality based on innovation, coordination, green development, openness and sharing. This vision constituted the foundation of China’s concept and priorities for the G20 presidency. The article reviews themain outcomes of the Chinese G20 presidency, focusing on major results which reflect China’s priorities for domestic development and international cooperation. Using qualitative and quantitative analysis of the G20 2016 documents and the documents of international organizations, the author highlights the key decisions made at the Hangzhou summit and trends in G20 engagement with international institutions.

The findings indicate that the Chinese presidency’s priorities of development, innovation and trade received unprecedented attention, with development reaching an almost 43% share in the discourse (compared to the average of 15% for the eleven summits), innovation rising tenfold to about 7% (compared to 0.75% for the eleven summits) and trade peaking to 7.3% (compared to the average rate of 2.8%). At 2.2%, the share of the G20 discourse dedicated to the environment was higher than the overall average (1.42%) and higher than at any other summit except Cannes and Los Cabos. While energy issue-related discourse (about 4%) ranked lower than for Brisbane and Antalya, the metric was comparable to the average for the period (3.4%). Discussion dedicated to economic issues (25%) was close to the average for the period (27%). In line with the historical trend, the share of finance issues in the G20 discourse continued to decline, reflecting the G20’s role in the division of labor with regards to the regulation of financial markets.

The intensity of G20 engagement with international organizations was higher than the average since the Washington summit. The choice of organizations was defined by the presidency’s priorities and established trends. Given the UN’s role in setting Sustainable Development Goals, and China’s commitment to the UN as the central element of a fair and peaceful multilateral system, it came as no surprise that the intensity of references to the UN was twice as high as the average for G20 summits and significantly higher than in any other summit. A similar trend was observed with respect to the WTO and UNCTAD. The G20’s reliance on OECD expertise continued to rise. The intensity of G20 engagement with the IMF and the World Bank was slightly lower than during the previous presidencies. Last but not least, China consolidated the G20’s dialogue with engagement groups, most notably with B20 and L20.

Drawing on the results of qualitative and quantitative analysis, the author concludes that China’s G20 presidency contributed to the country’s development priorities, reflected China’s role in the evolving world order, and consolidated the G20’s status as the premier forum for economic cooperation and making globalization work for everyone. The author asserts that China managed to ensure its imprint on future G20 cooperation. First, it did so by integrating innovation, the new industrial revolution and the digital economy into its core agenda, generating 137 commitments to innovative growth and setting up the relevant international mechanisms. Second, with respect to trade and investment, it facilitated development and the adoption of two documents defining guiding principles for global investment policymaking, and promoting inclusive trade and global value chains. Third, under China’s stewardship, the G20 agreed to three action plans on energy cooperation, including Enhancing Energy Access in Asia and the Pacific: Key Challenges and G20 Voluntary Collaboration Action Plan, the G20 Voluntary Action Plan on Renewable Energy, and the G20 Energy Efficiency Leading Program (EELP), making further progress to address energy access, a cleaner energy future, energy efficiency, global energy architecture, energy security, as well as market transparency. Fourth, China advanced further G20 cooperation on development based on the Action Plan of the 2030 Agenda for Sustainable Development. Fifth, the presidency committed to establish three China-based G20 centers, thus creating opportunities to enhance its influence in the G20 process through an evidence base, research and the exchange of knowledge in key policy areas. China struck a good balance between continuity and innovation regarding the G20 agenda, contributed to its legitimacy and effectiveness through productive engagement with key international organizations and dialogues with the engagement groups, and consolidated the G20’s capacity for direction setting, decision making and delivery. 

The BRICS have made considerable strides in economic and development cooperation, yet the coalition has not been as successful in formulating and implementing an agenda of its own to address international security despite clear signs that the coalition wishes to promote cooperation in this area. Why, then, have the BRICS been slower to cooperate on security issues, and what are the prospects for intensifying cooperation in this area? This article analyses BRICS cooperation agenda-setting in international security against the backdrop of the coalition’s efforts to institutionalize itself as a flexible yet coherent entity and an influential collective actor in international affairs. Drawing on key BRICS documents and reports related to security meetings, I examine three types of security-related efforts that have been made since the first summit, in 2009.

These include attempts to coordinate positions on specific security issues, namely armed conflicts, and related normative stances; efforts to coordinate policies; and institution-building initiatives. I find that the bulk of BRICS security discussions have focused on the first category, with some effort to  coordinate policy and minimal progress in institution-building in the security arena. This finding shows that international security has not, thus far, been among the “paths of least resistance” that the grouping’s diverse members have found in their efforts to deepen intra-group collaboration—a fact that can be explained by citing internal differences as well as contextual factors. However, the hurdles to a more cohesive BRICS security agenda are not insurmountable, although they may restrict the gamut of topics addressed by the coalition’s cooperation efforts. In particular, there is an unexplored area in which the five states could enhance their security cooperation while drawing on their development and peace-building experiences and preferences: that of conflict prevention. 

This article deals with the nature and degree of influence of service liberalization on the participation of BRICS countries in global value chains (GVCs). The authors used econometric analysis to determine the inverse relationship between barriers in infrastructure services and the degree of countries’ participation in global value chains. Using data on the structure of trade in goods and services in terms of value added, they analyzed the situation of developing countries through the example of the BRICS countries of Brazil, Russia, India, China and South Africa in production and service GVCs. They found China and India to be the most deeply integrated in the international production and service chains. Russia, Brazil and South Africa are included in production value chains more as suppliers of raw materials and intermediate goods with low added value, but nonetheless have significant potential to expand their participation in international production systems, in particular by improving the infrastructure necessary for GVCs.

Based on the study of liberalization of certain service sectors in BRICS countries, the authors noted the positive impacts of reducing barriers in maritime, rail and air transportation and of finance for improving the quality and reducing the cost of services. In many respects, these effects were the result not only of reducing barriers in services, but also of implementing measures to increase a country’s investment attractiveness. The article concludes that the liberalization of infrastructure services industries can become one of the tools for integrating the BRICS countries into GVCs. However, this liberalization should be part of a broader development strategy that includes trade and investment policy measures to increase participation in global production and the overall economic development of the country.

Tax base erosion and profit shifting (BEPS) is a global problem. Finding solutions is a challenge for most countries. The global economic crisis led to a new environment and requirements for doing business. These requirements have been developed by two key international institutions: the Organisation for Economic Co-operation and Development (OECD) and the Group of 20 (G20). This approach has engaged the developed and developing countries that are members of these institutions, as well as a significant number of partner countries. As a result, the number of countries that have confirmed their commitment to the BEPS Action Plan exceeds 100.

This article assesses the level of implementation of the BEPS Plan in Indonesia and in the BRICS countries of Brazil, Russia, India, China and South Africa. The author monitored their activities for 13 of the 15 actions (excluding Actions 11 and 15). He has also identified several best practices that can be used by Russia.

Monitoring considered implemented and planned actions, primarily amendments to and new norms in relevant national legislation, as well as the expected implementation time for all BEPS actions. In addition, the author assessed institutional environments created to implement the provisions of the Action Plan, consultation processes and mechanisms for informing stakeholders.

Analysis shows that approaches to implementing the BEPS Action Plan differ among the six countries. Although several lag behind in terms of their implementation schedule, each country has demonstrated some efforts that can be considered as best practices. Russia has succeeded the most in implementing the Action Plan.

This article analyzes the implementation of the G20/OECD Principles of Corporate Governance by Russia compared to other BRICS countries and Indonesia. Originally, these principles were adopted by the Organisation for Economic Co-operation and Development (OECD) in 1999. The last (third) version was developed in 2014–2015, with the active involvement of the Group of 20 (G20), and was adopted at the G20 Antalya Summit in Turkey in November 2015. There are no dramatic changes in the new document, although it contains several new recommendations that became necessary after the 2008 global financial crisis.

The article focuses on the actions of six countries and on real changes in these countries. The author assesses the OECD recommendations on implementing the G20/OECD principles. According to these recommendations, researchers should not pay much attention to quantitative analysis, because many important issues are unobservable for them. The author thus accentuates qualitative research methods and comparative analysis. The results of the study show that Brazil, Indonesia and Russia were most active in implementation, and South Africa and China did not act, and India achieved only partial implementation.

Despite the vast documentation on the formal implementation of corporate governance principles in Russia in recent years, there has been little real improvement in terms of information disclosure (including data on management remuneration), gender diversity on corporate boards and the share of independent directors. Moreover, Russian companies are characterized by a high concentration of capital, and the role of boards is often reduced to formalities. Still, the author assesses Russia’s efforts as “substantial implementation,” mainly for its initiative (and not results). The study also concluded that similar limitations are found in the other countries it researched. 

OECD Policy Framework for Investment (PFI), containing recommendations and best practices in 12 investment-related policy areas, is widely perceived as the world’s most comprehensive and authoritative instruments on international investment regulation. Topicality of PFI recommendations for OECD members and other countries, including Russia, is dictated by the competition in international investment markets. The instrument’s implementation can significantly boost national jurisdiction’s attractiveness to investors and increase its economic competitiveness.

The experience of BRICS countries as large developing economies, involved in collaboration with the OECD, could be of great value from the standpoint of the PFI implementation in Russia.

This article analyses investment policies of Brazil, India, China and South Africa from the perspective of PFI recommendations, organized in four major categories: general characteristics of investment regime and investment stimuli, national investment regulation regime, trade policy, overcoming structural limitations. The analysis forms the basis for recommendations on improving investment policy regime in Russia.

The international system is characterized by increasingly interdependent and asymmetrical relations between the constellations of actors that compose it. While the state remains a central reference in international relations, multilevel and multidimensional relationships make the system very complex. The state, international organizations, non-state actors, club diplomacy and groups of states (e.g., the Group of 20 [G20] and the BRICS grouping of Brazil, Russia, India, China and South Africa) all contribute to this complexity and make the global governance system increasingly multifaceted. In this context, this article examines the relationship between the European Union and the BRICS — two very different actors, pursuing formal and informal integration processes, respectively — and assesses the possibilities and limits of cooperation. This article seeks to understand whether the EU–BRICS relationship reflects a strategic partnership or a structural disjuncture. It starts by discussing multilateralism as a cooperation-oriented but sometimes interest-driven tool in a diverse and multilevel governance system. It then analyses EU–BRICS relations, identifying the main drivers and highlighting how complex context both facilitates and hinders the constitution of this relationship. The article concludes that the EU–BRICS relationship is informed by asymmetries and ambivalence that reflect their different sizes, capacities and approaches. Moreover, although there is a shared understanding that cooperation might be beneficial, contradictory rules and perspectives on international order mean this potentially positive relationship is nevertheless embedded in fundamental structural constraints.

China has recently become a key provider of development cooperation in the world. Its development cooperation budget has increased on average 12% annually since 2003. The Chinese government has increased its contribution to United Nations agencies and made several major development cooperation commitments including the pledge of multibillion U.S. dollar support for African countries. China has also led in establishing new regional and global initiatives such as the Asian Infrastructure Investment Bank and the BRICS New Development Bank.

China pays close attention to trilateral development cooperation and has increased the number and the scale of its trilateral partnerships. Trilateral cooperation helps China expand its scope and has the potential to increase the effectiveness of its development cooperation. China is carrying out several trilateral cooperation projects with UN agencies and traditional bilateral development partners. These projects cover different sectors such as agriculture, food security, health, education, disaster management, trade and investment. China contributes knowledge, expertise and technology and provides full or partial financial resources.

UN agencies are considered to be neutral partners to China that have global networks of country offices with direct links to governments. Special attention is paid to trilateral cooperation with the United Nations Development Programme (UNDP) and China. The parties jointly developed the first project in 2011 and currently have projects in five countries in Asia and Africa. There are two main models in China-UNDP partnership. The first model provides for joint funding from China and UNDP with Chinese experts playing a key role throughout the projects. The second stipulates funding from a third donor with China providing technical expertise and experience.

Given the experience to date, China’s trilateral partners cite several common benefits and challenges. Trilateral cooperation with China is considered beneficial for development partners to strengthen relationships and promote mutual learning with their Chinese counterparts. However, it is more complicated than bilateral cooperation in which higher transaction costs could incur. It is therefore important for all parties involved to identify common interests from the very beginning and be patient in day-to-day communication and coordination. Strong knowledge of local contexts and implementation capacities also help reduce transaction costs.

The author made some recommendations for developing trilateral cooperation with China. Current projects should be scaled up to larger and more complex projects, which requires further and continued resources from all sides. Given the complicated nature of trilateral cooperation, the roles, responsibilities and procedures need to be clearly defined. The specific monitoring and evaluation system for trilateral cooperation should be set out so that each partner’s added value, mutual learning and policy impact could be assessed.

The G20 is committed to promoting infrastructure investment and has called on multilateral development banks (MDBs) to increase their infrastructure lending to help boost global growth. Alongside long-standing MDBs such as the World Bank and Asian Development Bank (ADB), new MDBs such as the Asian Infrastructure and Investment Bank (AIIB) and the New Development Bank have been established, and G20 members would like both old and new multilateral banks to scale up their infrastructure investment by developing a pipeline of bankable projects.

Even with all the MDBs investing more, they will not be able to satisfy the global need for infrastructure. What they can do, however, is start to fill the infrastructure gap by catalyzing private investment and cooperating on standards and regional infrastructure. Concerns have been raised about the geo-political implications of the new MDBs which underscore the need for MDB cooperation. There are challenges to and opportunities for this cooperation. The G20 needs to be clear about the role it can play in encouraging MDB cooperation and infrastructure investment, and must also be aware of the limitations on its role given that each MDB has its own mandate.

Specifically, the G20 can downplay the perceived trade-off between efficiency and standards in the MDBs, encourage cooperation on new standards for sustainable or green infrastructure, invest in the Global Connectivity Alliance as a coordinating body for the MDBs and help align the G20 work on infrastructure with the United Nations Sustainable Development Agenda.

Since the United States withdrew most of its troops from Afghanistan, the situation has not changed in a positive way, but, to the contrary, has deteriorated further. The ruling elite, despite having firm support from Washington and the West in general, has been unable tomaintain the necessary consolidation. The National Unity Government (NUG) formed after the 2014 presidential election, has remain politically shaky and vulnerable. The economy operates predominantly on foreign financial and economic injections. The country’s 10-year economic programme to achieve self-sufficiency has not had a meaningful effect.

The NUG has not been successful in launchingnegotiations with its armed opponents, who have endorsed the complete withdrawal of the forces of the United States and the North Atlantic Treaty Organization. The Taliban continues to control a significant part of the country. Along with intensive military operations, it conducts large-scale terrorist attacks in a number of big citiesincluding Kabul. Simultaneously, the number of ISIS fighters who have infliltrated the country’s eastern and northern areas has increased significantly.

The neighbouring countries, including Russia, continue to express serious concern over instability in Afghanistan, the overall increase in ISIS activities, and the spread of drugs and terrorism emanating from Afghanistan. Considering it a potential challenge to regional security, they try to provide necessary assistance to Kabul and support its course for national reconciliation. Moscow recently explored the possibility of broadening the scope of regional component while resolving the Afghan issue.

With the new administration in the United States, U.S. policy toward Afghanistan has not changed. Moreover, the possibility of expanding the military presence in Afghanistan is being explored, which could lead to further complications in the Afghan conflict.