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Analysis

Promising Prospects and Proposals for the G20 Bali Summit

John Kirton,
Director, G20 Research Group, June 16, 2022

Keynote Speech to the "UI International Conference on G20: Boosting Indonesia's Role in the G20 Presidency 2022," Universitas Indonesia, Jakarta, Indonesia, June 16, 2022.

Abstract

The G20 Bali Summit is a highly significant global governance event. It builds on recent United Nations, G7 and BRICS summits. It is the first G20 summit hosted by Indonesia, with its many distinctive assets. It confronts an unprecedented array of interconnected crises, led by the COVID-19 pandemic, Russia's invasion of Ukraine and the existential threat of climate change. It responds with Indonesia's summit theme of "Recover Together, Recover Stronger" and its priorities of the global health architecture, digital transformation and sustainable energy transition.

Some suggest that G7 leaders will either skip or cripple the Bali Summit due to Russia's invasion of Ukraine, and others suggest synergistically cooperate with their G20 colleagues on their common priorities. In fact, the Bali Summit will probably produce a significant performance, relative to G20 summits before. It will be propelled by its host's focus on three well-chosen priorities, momentum from the G20's past performance and this year's many ministerial meetings, and by the severe, broad and interrelated shocks the world confronts. It will produce valuable achievements on health, digitalization and sustainable energy. But progress here, and on the global economy, will be constrained by deep divisions among G20 members over their response to Russia's aggression against Ukraine. It will thus be insufficient to meet the growing global governance need.

Yet further progress is possible, especially if Indonesia and G20 members, first, close their current compliance gap; second, focus more comprehensively on climate change; third, add a special summit on the margins of the UN General Assembly in September to advance the struggling Sustainable Development Goals; and, fourth, invite to Bali for the first time the heads of the world's leading multilateral environmental organizations. These are the critical foundations for the stronger, better, fairer, sustainable post-pandemic economic recovery that all want and need.

Introduction

Significance

The G20's Bali Summit will be a highly significant event.

It will build on other summits, notably the G20's Rome Summit hosted by Italy in October 2021, the United Nations climate summit in Glasgow in November 2021, the United Nations conference on biodiversity in Kunming, China, this year and the G7 summit in Germany and the BRICS Summit in China in late June 2022.

Bali will be the first G20 summit hosted by Indonesia, the anchor of the Association of Southeast Asian Nations and a major democratic power with a Muslim majority. Its large and young population, vast geographic expanse, multiple coastlines and many natural assets make it critical to the global community in the economic, social, ecological and security domains.

The Bali Summit confronts an unprecedented array of interconnected crises, led by COVID-19, climate change, Russia's invasion of Ukraine and the inflationary, recessionary, debt, energy and food distress they have brought. Bali will also address the compounding chronic challenges of biodiversity loss, development, gender equality, fair taxation, trade and the fate of the open multilateral order as a whole, as well as the opportunities that digitalization brings.

The Debate

Bali's prospective performance and its propellors have aroused a growing debate.

Some see the possibility of G7 leaders skipping the summit, due to Russia's invasion of Ukraine, the G7's refusal to conduct business-as-usual, and no G20 provision for removing a member (Shalal and Strzelecki 2022).

Others see a crippled G20 and resulting G7 rise, due to Russia's invasion of Ukraine and G20 divisions and deadlocks in response (Sobel 2022).

Still others see G20-G7 synergies, due to desire of the Indonesian G20 and German G7 hosts to co-operate amid Russia's invasion of Ukraine and their two summits' common priorities of health, digitalization and energy (Hermawan 2022; Kloke-Lesch 2021).

The Argument

I argue that the Bali summit will produce a significant performance, relative to G20 summits before. It will be propelled by its hosts' focus on its three well-chosen priorities, by momentum from the G20's past performance and this year's many ministerial meetings, and by the unprecedentedly severe, broad and interrelated shocks the world confronts. It will produce valuable achievements on health, digitalization and sustainable energy. But progress here, and on the global economy, will be constrained by deep divisions among G20 members over their response to Russia's aggression against Ukraine. It will thus be insufficient to meet the growing global governance need.

Yet further progress is possible, if Indonesia and G20 members, first, close their compliance gap; second, focus comprehensively on climate change as the only genuinely existential global threat; third, add a special summist on the margins of the United Nations General Assembly (UNGA) in September to advance the endangered Sustainable Development Goals (SDGs); and, fourth, invite to Bali for the first time the heads of the world's leading multilateral environmental organizations.

These are the critical foundations for the stronger, better, fairer, sustainable post-pandemic economic recovery that all want and need.

Priorities, Preparations and Problems

Priorities

Indonesia intensively prepared the Bali Summit throughout 2021. It finally chose the overall theme of "Recover Together, Recover Stronger." It selected three priorities: the global health architecture, digital transformation and sustainable energy transition.

Preparations

Indonesia scheduled many ministerial meetings, and activated 18 working groups, starting right away.

The finance deputies got off to a fast start, meeting on December 9–10, 2021, to discuss exit strategies from COVID-19 and its scarring effects and how to recover together stronger, as well as financial regulation, financial inclusion, sustainable finance, infrastructure investment and taxation.

Problems

Indonesia and its G20 colleagues confronted an unusually large, broad list of pressing problems. Ten stood out.

• Vaccine equity, as the omicron variant spread, and new variants could and did arrive at any time. Here they wisely put health first.
• Economic growth, which was increasingly uneven, with different rates across different countries, depending on vaccination rates, the ability to recover, and the sustainability of fiscal and monetary support. Here the Indonesia presidency correctly saw that wealth depends on health.
• Green recovery, where everyone wanted an inclusive, smarter, greener recovery and gradually rising carbon prices, but disagreed about what "gradually" meant. The presidency correctly saw that economic recovery requires climate change control.
• Fiscal and monetary stimulus, while reducing the unprecedented government fiscal deficits, public and private debt, major central bank balance sheets, and inflation, which was stronger for longer than initially thought.
• Tax, by implementing the G20's newly agreed reformed corporate tax regime.
• Allocations of the special drawing rights (SDRs) of the International Monetary Fund (IMF), of which, by late February this year, G20 members had given only $60 billion of the $100 billion they had promised at Rome to voluntarily channel to poor countries, including through the IMF's new Resilience and Sustainability Trust and its old Poverty Reduction and Growth Trust. The United States led with $21 billion, and China with $14 billion.
• Debt relief for vulnerable countries, although China resisted disclosing and reducing its clients' debts.
• Trade, where the deadlock on reforming the World Trade Organization remained.
• Resources for international financial institutions, which must be raised to deliver the SDGs and the promised climate finance.
• Russia, whose invasion of Ukraine raised energy process and financial stress, and reduced G7 members' willingness to cooperate with Russia on the key challenges they shared.

Momentum from Past Performance

In addressing these many problems, Bali's leaders benefit from the momentum from G20 summit's generally rising performance in the past (Kirton 2022a, b).

Rising Conclusions, Commitments and Compliance, 2008–2021

Momentum comes first from the summit's rising overall performance since its start in 2008. It has high and rising communique conclusions and collective commitments, and solid and recently strong compliance with them.

Since 2008, leaders have produced over 193,000 words of collective conclusions in their public summit communiques. Their performance grew tenfold, from over 3,000 words at Washington in 2008 to a peak of over 34,000 words at Hamburg in 2017. The Rome Summit in 2021 produced a high of 10,060 words.

Since 2008, the leaders' made 2,382 precise, future-oriented, politically obligatory, collective commitments. The number rose fivefold, from 95 at Washington to a peak of 529 at Hamburg. There were a high 225 commitments at Rome last year.

Members' compliance with their priority commitments, as assessed by the G20 Research Group, before the subsequent summit averaged 71%. It rose to 78% for Buenos Aires in 2018 and Osaka in 2019, and 86% for Riyadh in 2020.

Rising Performance on Bali's Priorities

Performance also rose on Bali's three priorities.

Health

On health, the G20 devoted 12,151 words or an average of 9% of its communiqués. This rose to a COVID-19-caused peak of 68% at Riyadh in 2020, and 16% at Rome last year.

They contained 143 health commitments, starting with 33 at Brisbane in 2014 and rising to 34 at Rome in 2021 (Byrd 2021).

Members' compliance with those commitments averaged only 72%. It rose to over 82% for Riyadh. But a deadly gap remains.

Digitalization

To digitalization, G20 summits dedicated 6% of their communiqués. It rose to a new high of 24% at Rome last year.

They made 122 commitments. They peaked at 29 in 2016, and reached 26 last year.

Compliance averaged only 68%. It rose to 85% for Osaka in 2019 and again to 90% for Riyadh in 2020.

Sustainable Energy

To the sustainable energy transition, as defined by the G20, leaders dedicated only 5% of their communiqués. This rose to 6% at Osaka in 2019 and 11% at Riyadh in 2020, and a peak of 15% at Rome last year.

They made 115 commitments, compared to only 55 on non-sustainable energy. The G20 is thus largely a clean energy club.

The number of sustainable energy commitments rose at Hamburg in 2017 to a high of 36. But Rome produced only eight.

Compliance averaged only 70%. It spiked to 89% for Buenos Aires in 2018 but returned to the 70% average for Riyadh the next year.

Economy

In sharp contrast, performance on the G20's core subject of macroeconomic policy has been consistently high. It took 32% of the conclusions, including 20% at Rome and had 491 commitments, if only 7 last year (Wang 2021). Compliance averaged 80%, including 95% for Riyadh.

Expanding Ministerial Meetings

Even more momentum for Bali comes from the unprecedented number, breadth and synergistic combination of the G20 ministerial meetings that Indonesia has mounted and scheduled this year.

The 19 scheduled meetings started on February 17, when finance ministers first met. They continue to the eve of the summit, when health and finance ministers will hold a joint meeting on the eve of their leaders' meeting.

They involve ministers from more than 15 portfolios. They are led by the G20's traditional core of finance ministers with five meetings, who are responsible for mobilizing the money to advance all the summits' priority and other initiatives. Health ministers have three, to address Bali's first priority. The second priority of digitalization is set up by a meeting for ministers of the digital economy itself more broadly, supported by the ministers responsible for education, meeting at the same time. The third priority of the sustainable energy transition is set up by one meeting each for ministers of the energy transition and for the environment and climate change. Specific economic subjects are covered by one meeting each for ministers of tourism; culture, agriculture; trade, investment and industry; labour; development; and women's empowerment.

Smart synergies arise from the joint ministerial meetings for finance and health, and, more narrowly, for those of the environment and climate change and for trade, investment and industry.

These ministerial meetings should boost Bali's performance in two key ways. First, amid the divisions over Russia, they will help develop a formula that maximizes the participation of all members on many important issues and facilitates consensus, in a bottom-up process for the Bali leaders to convert into commitments of their own. Second, holding pre-summit ministerial meetings fosters higher members' compliance with the leaders' commitments on their subjects.

Propellors of Prospective Performance

The Bali Summit's significant performance is further propelled by the unprecedentedly severe, broad and interrelated shocks the world confronts, the failure of the established multilateral organizations to adequately respond on their own, and the globally predominant and internally equalizing capabilities of G20 members. While a severe constraint comes from their deep divisions over Russia's invasion of Ukraine, the leaders are backed by strong domestic political cohesion and their attachment to their valued G20 club as the hub of a growing network of global summit governance.

Shock-Activated Vulnerability

The shock-activated vulnerabilities that powerfully spur summit performance are exceptionally high, broad and synergistic. COVID-19 continues to mutate in more infectious ways and new pandemics will arrive, as the recent spread of monkeypox suggests. The severe economic and human costs of Russia's invasion of Ukraine will climb. Above all, the high costs of climate change and its intensified extreme weather events are certain to rise.

Multilateral Organizational Failure

The failure of the ministerially governed, established multilateral organizations to adequately respond to these shocks will grow. Even with the recent financial reforms and progress towards securing a pandemic preparedness treaty, the World Health Organization (WHO) and its affiliated bodies will still struggle to control COVID-19 and the many other infectious and non-communicable diseases that spread. The UN Security Council, dominated by the Permanent Five veto powers is unable to resist or reverse Russia's invasion of Ukraine. UN Climate and its ministerial meeting in Egypt in November will not close the many gaps that the UN's Glasgow Summit left last year left and that have escalated since. The world's plurilateral summit institutions of the G7 at Elmau and the BRICS in China in late June will do better, but not enough to mobilize a majority of the world's countries to stop these shocks.

Predominant Equalizing Capability

Only G20 members collectively possess the globally predominant and internally equalizing capabilities to stop these shocks. Together they contain a strong majority of the world's economy, population, medical, military and ecological resources, and, in some cases, a slowly increasing share, as conflict, COVID-19, climate change and the ensuing economic and debt crises, shrink the many poor small countries outside.

Among G20 members, internal equalization remains strong. The rising US exchange rate is offset by its declining growth in gross domestic product (GDP) into a contraction in the first quarter this year, while China's sliding exchange rate is offset by still strong, if less vibrant, GDP growth.

Diverging Political Characteristics and Policies

By far the biggest constraint comes from the diverging political characteristics and policies among G20 members, above all, from Russia with its invasion of Ukraine and increasing authoritarianism at home. This has led G7 members to unleash extraordinarily severe and broad sanctions on Russia and direct support for Ukraine. The sanctions include the threat that G7 leaders will not attend the Bali Summit should Vladimir Putin come, as he has said he will. As of late May, G7 leaders were still considering a full boycott. Meanwhile, Indonesia as host was consulting extensively with its G20 partners in search of a solution. Several possibilities exist (Hermawan 2022).

More broadly, the degree of democracy is declining, even in NATO member Turkey, as Joe Biden frames U.S. foreign policy as defending democracies against autocracies, and organizes summits of the new Quadrilateral and Summit for Democracies in support.

But there is also a slow, if uneven, upward convergence on members' policies on COVID-19, digitalization and climate change. On COVID-19, all G20 members see the value of vaccination, are inoculating their own citizens and sharing more of the relevant resources with those outside. On climate change, led by Australia's new government, several are increasing their nationally determined contributions (NDCs) and none are reducing theirs, even if the promises and implementation remain far too low and slow.

Domestic Political Cohesion

The domestic political cohesion behind G20 leaders is strong, especially in G20 host Indonesia, G7 host Germany, BRICS host China, and also in Japan, India and Russia. Constraints come primarily from the prospective loss of Joe Biden's precarious legislative control in the mid-term congressional elections in early November. But continuity is strong, with many veteran leaders participating at Bali. Above all, Bali benefits from a highly experienced, domestically strong, personally committed host.

Club at the Network Hub

Finally, the G20 remains its leaders' most valued club at the hub of a growing network of global summit governance. Most leaders always come to G20 summits, despite the demanding and growing list of other plurilateral summits they create, host and attend. To govern all the world's central challenges, with all the systemically significant states contributing, the G20 is the only summit club that counts.

Prospective Significant Achievements

Propelled by these forces, the Bali Summit will produce several significant achievements, both overall and across its priorities of health, digitalization and energy, and even on the war in Ukraine.

Overall

Overall, Bali will produce many commitments, focused in a timely, well-tailored, ambitious fashion on the summit's key priorities, but also covering a comprehensive range of traditional G20 subjects and new ones requiring action this year. Moreover, many of these commitments will be crafted in ways likely to increase members' compliance with them, even beyond the new peaks of recent summits, and despite the constraints caused by Russia's invasion of Ukraine.

On the key priorities, in a bottom-up process, the leaders will endorse and improve many of the agreements incubated by their ministers during the year.

Health

On the global health architecture, the signature achievement will be the full funding of the newly created G20 Pandemic Preparedness Fund, housed at the World Bank and co-managed with the WHO. President Widodo will thus succeed in securing this major initiative, which he publicly promoted at a critical stage. The Bali leaders will also endorse – and thus help ensure the effective implementation of – the recent decision of health ministers at the World Health Assembly to have at least half of the WHO budget come as core contributions, as distinct from the unpredictable, voluntary contributions that some members might donate to the specific projects they like. Progress is also possible on the difficult tasks of producing a pandemic preparedness treaty and the compulsory licensing of the intellectual property to enable all countries to produce the vaccines required to combat COVID-19.

Digital

On the digital transformation, leaders will advance the process of fostering digital free flow with trust, which they began at Osaka in 2019. However, they will not agree to create a global data body, as the divisions here remain far too deep.

Energy

On the sustainable energy transition, they will agree to increase their NDCs, or at least not weaken those they have. They will strengthen resilience and disaster risk reduction, including through support for the Bali Agenda for Resilience. They will continue to phase out coal in critical countries, with a new Just Energy Transition Partnership with Indonesia, adding the world's largest exporter of coal by weight to South Africa's move last year.

More broadly, progress on the critical issue of more globally comprehensive, coordinated and connected carbon pricing will be slight.

Ukraine

On Ukraine, Bali will show that G20 summit governance can transcend traditional geopolitical divisions and conflicts, even of the most serious sort, to provide the global goods on health, the digital economy and our endangered ecology that the world so badly needs.

But it is unlikely that Bali can help induce Russia to stop its invasion of Ukraine and return all the territories Russia has seized. This is the single best short-term step to spur a stronger, better, fairer, sustainable post-pandemic economic recovery. Possible progress at Bali depends on the path and prospective outcome of a war that will likely last for many months to come.

Other Issues

On the many other Bali issues, progress will be mixed.

On core economic subjects, starting with macroeconomic policy coordination, advances will be slight.

On reforming international corporate taxation, the landmark achievement of the G20 and the Organisation for Economic Co-operation and Development last year, little will be done to overcome the delay in the implementation of the newly agreed two-pillar regime.

On debt relief for poor countries, not enough will be done.

However, on any contagious financial crises erupting within the systemically significant G20 members, G20 leaders will credibly commit to act swiftly to contain them, as they did against the American-turned-global financial crisis in 2008–2009 and again against the regional euro-crisis from 2010 to 2012.

Proposals for Progress

To produce further performance at Bali, including to spur stronger, better, fairer, sustainable post-pandemic economic recovery, G20 leaders can and should act on the fundamental drivers, by doing the following four things under their direct control.

1. Close the Compliance Gap

First, close the compliance gap, to increase the G20's credibility and effectiveness and the solutions the world badly needs.

G20 compliance is low, both overall at 71% and on the Bali Summit priorities of health at 72%, digitalization at 68% and sustainable energy at 70%. But it can be much higher, as the performance of most recent summits shows. Moreover, the best evidence suggests that leaders can craft their summit process and their individual commitments to increase members' compliance with them (Rapson 2020).

Overall, they should make more commitments using highly binding language that strongly commit the G20 members to act. This should increase compliance by 6%. They should also hold even more pre-summit ministerial meetings, to increase summit compliance by 3% on the subjects they address.

On health, they should, first, make more commitments and second, focus on the underlying structural determinants of health, notably health systems strengthening, universal health coverage and pandemic preparedness (Byrd 2021). Health is wealth everywhere, in many ways.

On digitalization, they should devote a larger portion of their public conclusions, private deliberations and commitments to digitalization and use lower binding language in their commitments (Williams 2020).

On sustainable energy, they should focus on a few targeted areas in their conclusions, make more energy commitments and hold pre-summit energy ministerial meetings, including those that link synergistically with other critical subjects, led by climate change and health (Kokotsis 2021).

2. Concentrate Comprehensively on Climate Change as the Central Challenge

Second, Bali's leaders should concentrate comprehensively on climate change, as the only genuinely existential global threat.

Climate change control will be critical to the G20 summit's future success, at Bali and beyond. Today's science and extreme weather events show that the climate crisis is already here. It will certainly get worse in the next few years, unlike COVID-19.

Climate change is the major economic and financial threat. It dominates the top threats in World Economic Forum's Global Risks Report this year.

Several nature-based solutions already exist, from forests, peatlands, and plants.

At a minimum, G20 leaders must give, starting now, poor countries the $100 billion annually in climate finance they had promised to provide starting last year.

They should also finally end their fossil fuel subsidies, as they promised at almost every G20 summit since 2009, to do by 2014.

They should further promise to preserve all the world's peatlands, starting now. Peatlands are seven times as powerful as forests in removing carbon emissions from the atmosphere. As the world's peatland's superpowers, Indonesia, Canada and the United States, with Russia, can lead all G20 members to do so at home and create a global regime covering all.

3. Add a Special Summit on the SDGs in September

Third, G20 leaders now should add a special G20 summit, ideally at the UN in September to advance the endangered SDGs, notably those on climate change, sustainable energy, the ecology and food. There was one G20 special summit under Saudi Arabia in 2020 and two, on health and Afghanistan, under Italy in 2021. Russia and the other G20 leaders might find it easier to cooperate in this UN nest than elsewhere, on this common global cause.

4. Bring to Bali Multilateral Environmental Organization Heads

Fourth, bring to Bali as guests the heads of the world's major multilateral environmental organizations. This would be the first time a G20 summit has done so, as only the heads of many multilateral economic organizations have come thus far. The best candidates for Bali are from UN Climate, UN Biodiversity, UN Environment and the World Organization for Animal Health.

But the G20 should consider the World Meteorological Organization, the International Renewable Energy Agency, and the United Nations Development Programme too.

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References

Byrd, Meagan (2021). "G20 Performance on Health," in John Kirton and Madeline Koch, eds., G20 Italy: The 2021 Rome Summit (London: GT Media). https://bit.ly/g20it.

Hermawan, Yulius, P. (2022). "The G7 and G20: Building Synergy for a Better Future," in John Kirton and Madeline Koch, eds., G7 Germany: The 2022 Elmau Summit (London: GT Media). https://bit.ly/g20it.

Kirton, John (2022a). "The G20's Growing Governance, 2008–2022." Lecture to the G20 Studies Centre, University of Pelita Harapan, Jakarta, February 24. https://www.g20.utoronto.ca/biblio/Kirton_G20_Governance_UPH_220224.pdf.

Kirton, John (2022b). "G20 Performance and Prospects, 2008–2022." Lecture to the National Defence College of Oman, Muscat, January 22. https://www.g20.utoronto.ca/biblio/Kirton_G20_Performance_and_Prospects_220123.pdf.

Kloke-Lesch, Adolf (2021). "How Germany's 2022 G7 Presidency Could Shape Change," The Current Challenge (Blog), November 15. (Bonn: German Development Institute). https://www.die-gdi.de/en/the-current-column/article/how-germanys-2022-g7-presidency-could-shape-change.

Kokotsis, Ella (2021). "G20 Performance on Energy," in John Kirton and Madeline Koch, eds., G20 Italy: The 2021 Rome Summit (London: GT Media). https://bit.ly/g20it.

Rapson, Jessica (2020). "Using Data to Improve Compliance," in John Kirton and Madeline Koch, eds., G20 Saudi Arabia: The 2020 Riyadh Summit (London: GT Media). https://bit.ly/g20saudi.

Shalal, Andrea and Marek Strzelecki (2022). "Russia's G20 Membership Under Fire from U.S., Western Allies," Reuters, March 22. https://www.reuters.com/world/europe/poland-pushes-call-russia-be-excluded-g20-2022-03-22g.

Sobel, Mark (2022). "The G7's Growing Weight," in John Kirton and Madeline Koch, eds., G7 Germany: The 2022 Elmau Summit (London: GT Media). https://bit.ly/g20it

Wang, Alissa (2021). "G20 Performance on Macroeconomic Policy," in John Kirton and Madeline Koch, eds., G20 Italy: The 2021 Rome Summit (London: GT Media). https://bit.ly/g20it.

Williams, Meredith (2020). "G20 Performance on the Digital Economy," in John Kirton and Madeline Koch, eds., G20 Saudi Arabia: The 2020 Riyadh Summit (London: GT Media). https://bit.ly/g20saudi.

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