G20 china_web

Structural reform and SMEs
KEY TAKEAWAYS
G20 growth targets will only be met
by encouraging entrepreneurship
Promoting trade and investment
will help boost productivity
Million
US dollars
1.2
G20 foreign direct
investment flows
1.1
Strengthening
momentum
for growth
1
0.9
0.8
2008
2009
2010
2011
2012
2013
2014
2015
Source: OECD
The G20 has pledged to support policies that help recovery
and increase social inclusion. Now it must implement them,
writes Bernhard Welschke
10%
Possible growth best practice
reforms could add to per capita GDP
The world economy is now
growing at the lowest rate since
the onset of the global financial
crisis in 2008. While essential
in many countries, continued
monetary and fiscal responses have their
limits. Achieving the G20’s additional
two per cent growth scenario by 2018 –
a 2014 commitment from the Australian
presidency – will only be possible through
bold actions to unleash entrepreneurship.
Revival policies
Companies encounter significant policy
uncertainties, regulatory burdens,
protectionist measures and economic
risks that constrain their business
activities in markets. Policies can revive
business confidence and enhance both
competitiveness and predictability. There
are three things to do now: identify the
needed structural reforms, bridge the
implementation gap and leverage the
role of the G20 in this endeavour.
Evidence from the Organisation for
Economic Co-operation and Development
(OECD) shows that well-designed structural
reforms have added on average five per cent
of potential gross domestic product per
capita since the early 2000s. Further
reforms based on best practice could add
an additional 10 per cent, on average.
Earlier this year the OECD submitted a
paper to the G20 to persuade it of the value
of structural reforms. It also proposed
priorities including promoting trade and
investment to boost total factor productivity,
removing barriers to competition and
encouraging innovation, reforming labour
markets and improving infrastructure to
encourage long-term investment.
These policies vary depending on the
national context, but the 2016 economic
survey issued by the OECD's Business
and Industry Advisory Committee (BIAC)
suggests such reforms are essential because
they address the deceleration in productivity
experienced in many economies.
114 G20 China: The Hangzhou Summit • September 2016 G7G20.com