Let’s get together: Global Government Finance Summit 2018, part 1

By on 20/09/2018
The GGFS exists to help leaders in finance ministries to learn from and build links with your peers overseas, identifying the tools and innovations that can help you overcome the challenges you face.

International cooperation is the key to building a ‘better future’, said German minister Bettina Hagedorn at the start of Global Government Forum’s annual gathering of global public finance leaders. Then, calling for collaboration to boost African growth, Germany’s chief economist urged delegates to turn that key. Matt Ross reports

“Global challenges require global solutions,” said Bettina Hagedorn, the Parliamentary State Secretary of Germany’s Federal Ministry of Finance. “This is something that, when we look around at the world, some countries maybe forget at the moment; but there is no other way to face our global problems other than with global cooperation.” In Germany, she added, “this is one lesson from the past that we’ve learned.”

Speaking as she welcomed senior officials from the finance departments of 11 countries to the 2018 Global Government Finance Summit (GGFS) in Berlin, Hagedorn emphasised the importance of engagement and collaboration between the world’s government finance leaders. Following the 2008 financial crisis, she recalled, “one of the great achievements of the G20 was that its members withstood the temptation to resort to large-scale protectionist measures.” Instead G20 nations “reiterated their commitment to open markets”; Hagedorn, who joined the government this year under Angela Merkel’s coalition with her own left-leaning SPD party, did not need to spell out how this consensus is today coming under pressure.

“This conference helps with the free exchange of ideas. It’s a good platform to enrich the dialogue and share best practice,” she added. “And I’m convinced that economic and social progress has its roots in international cooperation. That’s how we collectively can build a better future.”

Let’s get together

The GGFS brings together senior public officials from treasuries and finance ministries around the world: meeting this year in Berlin during April, delegates from five continents discussed shared challenges around financial management, fiscal sustainability, digital technology and public sector reform – seeking solutions and developing relationships to help them deal with common problems.

Although the event is held under Chatham House Rules and some of the discussions are too sensitive to put into the public domain, many of the ideas and solutions that emerge are relevant to the work of civil servants around the world. So Global Government Forum has sought delegates’ permission to use specific quotes, and will report on the discussions in a series of features; you can also download the full report on the GGFS events page.

This first feature introduces the event, and covers one of the headline projects of Germany’s 2016-17 presidency of the G20: the Compact for Africa. Future articles will report the delegates’ discussions on the use of blockchain in public finances; Finland’s health and care sector reforms; the use of data and digital technologies in policymaking and service delivery; and the threat to tax bases posed by profit shifting and digital economies.

The GGFS exists to “help leaders in finance ministries to learn from and build links with your peers overseas, identifying the tools and innovations that can help you overcome the challenges you face,” explained Global Government Forum director Kevin Sorkin in his opening remarks. Thanking Hagedorn and Torsten Arnswald – Head of the Fiscal Policy Division in the Federal Ministry of Finance – for hosting the event in Berlin, and knowledge partners EY and Microsoft for their support, he urged the delegates to speak freely during the Summit. “Please don’t wait for permission to speak,” he said. “It’s by contributing to an event that’s informal and frank and open that we can leave the room knowing that when we arrive back at our desks, we’ll do things differently.”

“Global challenges require global solutions”, Bettina Hagedorn, the parliamentary state secretary of Germany’s Federal Ministry of Finance.

The Compact with Africa

That evening Ludger Schuknecht, the Chief Economist of Germany’s Federal Ministry of Finance, led a discussion of the Compact with Africa: the German-led G20 initiative designed to, as Schuknecht put it, “tie the African continent into the G20, and to extend there the benefits of international policy cooperation.”

“This is about building a better environment for investments that will provide jobs and create prosperity and progress for everyone,” said Schuknecht, describing the compact as a “commitment device” designed to agree, catalyse and monitor actions by participating African countries, international bodies, G20 members and other nations. The goal is to clear away the unnecessary and bureaucratic barriers to investment in Africa – strengthening the support given to investors, creating links between major firms and African nations and, crucially, assisting African governments to smooth the path of business investors.

In the developed world, Schuknecht explained, countries “commit to better coordinate their cooperation with Africa and to better adapt their programmes to the needs of African partners. In the past, we’ve been too public sector-focused in our cooperation; this is about getting private sector investment going.”

For their part, African participants identify the challenges and the unnecessary obstacles facing potential investors, and work up programmes to address them. “These agendas are self-developed and self-chosen,” Schuknecht stressed. “There’s no western push for African countries to participate; this is about what they wish to commit to.”

Leading a discussion of the Compact with Africa G20 initiative, Ludger Schuknecht, the chief economist of Germany’s Federal Ministry of Finance

Lifting the barriers

Siaka Fanny, Conseiller of Côte d’Ivoire’s Minstère de l’Economie et des Finances, emphasised the value both of highlighting the opportunities in Africa, and of catalysing government action to help investors to take advantage of them. “There are so many business opportunities, but international visitors don’t know what can be achieved,” he said. “So we show them the opportunities and say: ‘This is our commitments, this is how we’re improving what we’ve been doing.’ We’re conscious that we need to do more.”

Asked what kind of problems the African nations’ reforms are designed to tackle, Schuknecht highlighted the need to create a more stable, predictable environment. “You might find your machinery gets stuck in customs for six months, and you need to pay bribes to get it out,” he said. “Where governments can simply breach rules or disregard contracts, that creates political and regulatory risk and reduces the return on investment.”

So there’s plenty of work here for the members – which include 11 countries across North, East and West Africa. As Schuknecht suggested, the other participants also need to raise their games. The international organisations involved – the G20, IMF, World Bank Group, and African Development Bank Group – “have not been famous for coordinating with each other,” he said. “But here they are doing so.”

Meanwhile, the participants among developed nations – which extend beyond the G20 to states such as Finland, Norway and the Netherlands – have pledged to reform parts of their own governments’ operations. This involves improving communications with their own private sectors to highlight investment opportunities in Africa, said Schuknecht, as well as strengthening collaboration between the relevant ministries: “In Germany, for instance, the international development, finance, foreign and economic ministries now cooperate much more effectively, creating a framework to coordinate their work.”

Held to account

On the African side, says Schuknecht, “we have over 100 reforms which are on track for implementation and there’s significant progress, particularly in terms of the macro-economic framework and the stabilisation of public finances.” And developed nations are working – via the joint country teams established in each participating African state – to help address problems and create financial instruments to channel and support investment.

Key to the model is a system of regular monitoring and reporting in the G20 ‘finance track’, designed to hold all sides to account against their promises. “The monitoring system ensures that if we say we’re going to help an African country develop a bond market or create an equity co-financing instrument for institutional investors, then we have to deliver,” Schuknecht commented. Fanny was equally aware of the drive to show progress: “We need to show investors that the country is ready to give them the necessary security,” he said. “There are many reforms that have been indicated, and we have to make those reforms a reality.”

Siaka Fanny, conseiller of Côte d’Ivoire’s Minstère de l’Economie et des Financ

Big challenges, big ambitions

Ultimately, in many parts of Africa the creation of better environments for business investment is linked to the development of effective democracies, argued one African delegate. “The policy maker must be very close to the people who benefit from their policies,” he argued. “If I don’t have electricity or roads, I can have a good business plan but it’s very difficult to produce goods and compete with people bringing goods in from Europe. So we need very good public goods: security, infrastructure, water. And to produce these goods under better conditions, we need democracy.”

Nonetheless, as Schuknecht pointed out, many African countries are already growing rapidly: “Côte d’Ivoire has been growing at 6% for ten years,” he said. “These are successful countries that want to become emerging markets.”

In places like this, he argued, inward investment built on a strengthened business environment can help countries “reach the next stage – where local and foreign entrepreneurs have confidence, and self-sustained private sector development takes place. The battle is going to be won when local investors bring their own money, and we have investments in projects run by local people – not just foreigners.” 

The Compact’s future

Such development takes time and consistent effort; and Germany has worked hard to ensure that momentum is not lost as the G20 presidency passes from its hands. That role currently sits with Argentina, and in December it will pass to Japan: “We have convinced them both to make this one of their focuses, and so the continuity of the initiative is ensured,” said Schuknecht. “We need patience, but we also need steadfast progress on the commitments.”

Schuknecht also hopes to recruit more African members: “More countries want to participate,” he said, “and right now we don’t have any from Southern Africa; so we hope more will come in, and that the success of some members will encourage other countries to join.”

Ultimately, he explained, “we hope to create a better environment for the local population in these countries, and that there’s better coordination, collaboration and advertising at the global level – and I think we’re on the way to achieving that.” But progress, he knows, will depend on a sustained, continuing commitment from all parties – developed nations, international organisations, and African states.

“We all know how long it takes to turn a big tanker around: we know it, our African friends know it, international organisations know it,” Schuknecht concluded. “We’re in this for the long haul.”

This is the first instalment of our report on the 2018 Global Government Finance Summit. Part two explored the use of blockchain in public finance management. The third instalment covers Finland’s radical reforms of health and social care. Part four explores how digital technology can give governments the power to provide convenient user-focused services; and part five detailed Singapore’s innovation in digital public services and efficiency.

About Matt Ross

Matt is a journalist and editor specialising in public services, policymaking, government and management. He was the editor of trade title Civil Service World from 2008 to 2014, serving an audience of senior UK officials; and the features editor of weekly news magazine Regeneration & Renewal between 2002 and 2008, covering urban regeneration, economic growth and community development. He has also been a motoring and travel journalist, and now combines his role as editorial director of Global Government Forum with writing for other publications including The Guardian and Planning magazine.

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