Civil Society Forum on Foreign Policy – ICFP
A number of representatives of Indonesian civil society organizations have attended Civil20 (C20) summit in Hamburg, Germany, on 18-19 June 2017. Such summit constitutes a forum which was specifically prepared to formulate inputs from civil society organizations throughout the world to the G20 member countries. Indonesian representatives have also participated—together with representatives of more than 300 civil society organizations from the entire world—in formulating C20 Communiqué.
In such communiqué, the points of main thought of civil society which have been conveyed to the G20 President, Angela Merkel, German Chancellor, are evident. In general, the civil society views that the neoliberal economic system which currently influences the world is a threat to sustainability. If mankind is serious about achieving Sustainable Development Goals and implementing the Paris Agreement to protect future generations from the disaster of climate change, fundamental change in the economic system must be made. Therefore, it requires extra hard work of all of the G20 countries, including and especially Indonesia.
THE URGENT NEED FOR
BETTER INTERNATIONAL COOPERATION
Conclusion of the Civil20 Summit, Hamburg, 19 June 2017
Over 300 civil society organizations from all regions of the world came together on 18-19 June 2017 at HafenCity University in Hamburg, Germany to advise the governments of the Group of 20 (G20) nations on how to achieve “the world we want”. It is clear to all of us that the challenges are enormous, and our global economic system is on the wrong track. The world has never seen such massive inequality: eight super-rich individuals now own as much wealth as the bottom half of the world’s population. The gap between rich and poor is widening in most countries around the globe. This is also reflected in the persistent gender inequalities.
Without important policy changes, the 2030 Agenda and its Sustainable Development Goals (SDGs), that the world’s heads of state and government adopted only two years ago at the United Nations, will not be achieved. The world also remains vulnerable to new economic crises and environmental degradation. Moreover, unless governments commit themselves to social security systems and widespread job creation efforts, digitalization and automation will increase unemployment, potentially leading to lower wages, eroding labor rights and political instability. Bold actions are needed by all governments, especially by those meeting at the G20 Summit next month. The principle of “Leave No One Behind” means affirmative action for the poor, disadvantaged, discriminated, excluded persons and countries. It also means adjusting trade, fiscal, energy, climate, agricultural and other policies accordingly.
The recent announcement by the US Government to step out of the Paris Climate Agreement was not only rejected by the global civil society but by many states, cities and companies—in the US and worldwide. The global climate crisis represents one of the largest risks to sustainable development, gender equality, inclusiveness, equitable economic growth, and financial stability, and even survival itself for the most vulnerable. A just transition and cooperation for a sustainable future can boost economic development, create jobs, improve productivity, and reduce inequalities. We expect the remaining 19 members of the G20 to reaffirm their unfaltering commitment to comprehensive and concrete implementation measures of the Paris Agreement.
Just a few weeks ago, the G20 and other governments met at the UN Financing for Development Forum and agreed that the “current global trajectory will not deliver the goal of eradicating poverty by 2030.” We need to take immediate steps toward more effective and progressive tax policies and better tax administration, including deeper international cooperation to boost tax collection and curtail illicit financial flows. These steps, coupled with honoring commitments on official development assistance, are needed to mobilize the necessary funds to attain the Sustainable Development Goals.
The world remains excessively vulnerable to financial crisis as the financial sector and its institutions have grown. Today, instead of improving financial regulation (which was one original reason to upgrade the G20 to Summit level), there is the prospect of unraveling regulation standards. Moreover, the absence of an internationally agreed mechanism for fair, transparent and effective restructuring of external sovereign debts is worrying, as the IMF judges more and more developing countries as being at increased risk of debt distress.
While the 2030 Agenda to achieve SDGs requires large-scale and long-term investment, including in infrastructure, we are concerned that the G20 governments are primarily looking to for-profit investors to provide the bulk of the financing. We fear that the proposed terms of the investments, especially public private partnership (PPPs), may significantly handicap governments’ capacity to protect the public interest. We call for responsible and transparent deliberation on appropriate risk sharing before unwarranted standardized PPP contractual provisions are adopted.
Many of the recent global health advancements will be at risk if the world’s largest economies do not strengthen and better fund the multilateral health organizations and health systems. The consequences of inadequate preparedness to tackle outbreaks and antimicrobial resistance will not respect borders and will put global health at risk.
In sum, we need a radical transformation of the present neoliberal economic system by:
- No longer treating the environment, oceans and the atmosphere as though they were limitless sinks for pollution and greenhouse gases (GHGs),
- Regulating financial markets so that they are no longer a casino of speculation, but serve the needs of the real economy,
- Strengthen public investment and social welfare by no longer tolerating a system of tax evasion and avoidance by multinational corporations and super-rich individuals, while encouraging progressive tax policies,
- Implementing rapidly the Paris Agreement by ambitious long term climate strategies, phasing out fossil fuel subsidies, setting effective and fair carbon price signals, shifting the finance flows to promote transformation and resilience as well as sticking to the promises to ramp up climate financing,
- Reforming trade agreements so that they facilitate fair trade in goods and services, benefitting the many rather than the few, and cancel provisions deregulating economies, securing intellectual property rights, liberalizing procurement, and shifting rights and wealth from states to investors,
- Ending the imposition of austerity policies and encouraging public budgets that promote development, poverty eradication and social justice, and
- Regulating labor markets in ways that secure working people’s rights to decent work and a living wage.
- We therefore urge the G20 leaders to take bold steps to fundamentally re-design the present global financial and economic system so that it respects human rights and serves the people and the planet.
For our detailed C20 Recommendations, please refer to the seven policy briefs which can be accessed through the following page: https://civil-20.org/media/positions/
Following up such Communiqué, various civil society groups in Indonesia subsequently had a follow-up discussion to formulize a specific position for the Government of the Republic of Indonesia and other G20 countries. Such specific position is related to the work focus of each organization, in relation to G20 agendas.
Transparency, Investment and Trade, as well as Migration
TuK Indonesia specifically highlighted three issues, which are completely related to how companies must be managed. It is obvious that companies in the world still tend to obscure various negative impacts of their operations on economy, society and the environment. Therefore, in agreement with C20 recommendations, TuK Indonesia demanded that the Government of Indonesia can immediately obligate sustainability reporting. Large companies and those listed at the Indonesian Stock Exchange should have been obligated to report their sustainability policies, programs and performance comprehensively.
The reporting obligation, with strict supervision of the accuracy of its contents, as well as clarity of economic, social and environmental obligations of companies will be able to change the practices of companies operating in Indonesia and the entire world. The government can do so by making stringent regulations, as well as creating a comprehensive (dis)incentive system. Differentiation between companies which have social responsibilities and those which do not have them is badly needed, thus other stakeholders can also take an appropriate position to those companies.
One of the stakeholders whose change of position is worst needed is financial service institutions. “If we truly want companies to operate sustainably, it must be ensured that only those which are serious about the achievement of sustainable goals can obtain access to funding,” stated Jalal, sustainable financial policy counselor of TuK Indonesia. Subsequently, he stated “It is high time public and private funding is measured against express measures. Those assisting the achievement the objectives of SDGs and Paris Agreement are financed. Those contradicting both need to be immediately included into a blacklist and not to be financed. Indonesia and the world can only truly see a better future by such method.”
The issues of trade and investment will also constitute one of the important discussions in G20 agendas. Indonesia for Global Justice (IGJ) considered that G20 agendas in combating protectionism through international trade and investment policy reform must be carefully addressed by the Government of Indonesia, because it can become blowback for Indonesia.
The Executive Director of IGJ, Rachmi Hertanti, was of the opinion that G20 impetus for disciplining domestic regulations on international trade and investment policies including the enforcement of an effective dispute resolution mechanism, will further restrict the space of policies of the government of Indonesia. “Do not let this trade and investment policy reform later hamper the achievement of President Joko Widodo’s economic policy packages to enhance the national competitiveness. Keep in mind that the Government of Indonesia has been protested and rebuked by many countries because of adopting a concentrate export restriction policy to strengthen the downstream industry, local content requirements, and import limitation in certain sectors,” explained Rachmi.
Wahyu Susilo, the executive director of Migrant Care, highlighted the world’s conditions which change in an extremely short period of time. “Anti-migration political tendency which arises in the United States following the election of Donald Trump and enforcement of right-wing populism in G20 member countries constitute threats to worker mobility freedom of developing countries and also restrict safe space for refugees who are displaced in their country of origin.” Therefore, Migrant Care expected that the last point of C20 Communiqué can be added with the statement “…indiscriminative, and ensuring that international worker mobility is protected in a human rights scheme.”
Natural Resources, Climate Change and Energy
In agreement with C20 conclusion, WALHI considered that insofar as G20 member countries do not correct the neoliberal economic system which serves as their economic paradigm, G20 will never manage to achieve fair and sustainable economic development. The global economic growth regime, which is also embraced by the government of Indonesia, in fact increasingly perpetuates the inequality in domination of natural resources, including agrarian sources. Domination by a handful of corporations over such resources most of the time leads to conflicts.
“Economic inequality becomes more evident and global crisis continues to persist—such as climate crisis and food crisis—due to corporate monopoly or domination in the global food system and global agricultural production system. Since it refers to international trade agreements which side with corporate interests and limit state’s role, inequality and crisis are inevitable,” expressed Khalisah Khalid, the spokesperson of WALHI.
In relation to climate change, the G20 countries play an important role in leading the world towards low carbon development. The G20 which produce 85% of the global GDP, are responsible for 75% of the global emission. Based on Brown to Green Report 2017 which was launched by Climate Transparency at the beginning of this week, the G20 countries have started a transition to low carbon economy, but it is still considered very slow to prevent the occurrence of increase below 2 degree C in accordance with the target of the Paris Agreement.
Indonesia itself has set a greenhouse gas emission reduction target by 2030 which is stated in NDC, but unfortunately, it has not been in line with the target of the Paris Agreement. Indonesia’s climate policy at the sector level is considered not good enough, and lacks long term emission reduction strategy. Although it is considered relatively successful in fossil fuel subsidy reduction efforts, on the other hand, the support of public funding instruments to renewable energy does not improve. Investment attractiveness for Indonesian renewable energy is also extremely inferior compared to the other G20 countries.
In relation to such condition, Fabby Tumiwa, the executive director of IESR, stated “We ask President Joko Widodo in the G20 Summit in Hamburg to enhance Indonesia’s commitment to the Paris Agreement and to encourage GHG emission reduction in the forestry, peat land and more ambitious energy sector prior to 2020.”
Tax and Extractive Industry
The National Coordinator of PWYP Indonesia, Maryati Abdullah, considered that it is important to critically address the G20 Summit in Germany, because it will directly impact Indonesia’s domestic policies. There are a number of important points especially in the tax and extractive industry sectors which must be promoted by President Joko Widodo and all of the G20 leaders.
PWYP Indonesia especially noticed five matters, namely: First, Indonesia and the G20 countries are to seriously crack down and prevent the practice of illegal money flow originating from tax avoidance and evasion practices, money laundering and other criminal acts by creating an appropriate supervisory mechanism. Second, Indonesia needs to encourage transfer of knowledge from the G20 countries in the implementation of Automatic Exchange of Information (AEoI) so that so that it can be properly and effectively applied. Third, the Government of Indonesia and the G20 countries are called for to seriously ratify regulations on the beneficial ownership of companies and other legal entities which make profits in Indonesia. Fourth, Indonesia and the G20 countries must urge multinational companies to implement country-by-country reporting information separately but can be accessed internationally. Last, it is important for Indonesia and the other G20 countries to ensure compliance of companies in the extractive sector with international standards in sustainable development, by taking into account the aspects of human rights, environment, governance (transparency and accountability), as well as worker rights along their value chain.
Meanwhile, Prakarsa stated his support to President Joko Widodo’s measure which will urge a war agenda against global tax evasion at the G20 Summit. Indonesia as one of the countries which become the victim of tax avoidance and evasion practices must compel all leaders of the G20 member countries to jointly combat tax evasion. The government of Indonesia must also encourage global progressive and redistributive tax policies through the G20 and other multilateral forums. Tax must become an instrument for the improvement in public investment and improvement in social welfare and inequality reduction. Moreover, President Joko Widodo must also be bold in leading global cooperation among tax jurisdictions and law enforcers for the prevention and handling of economic and taxation crimes.
“The government of Indonesia needs to campaign for global tax compliance, especially the compliance of global corporations and the superrich. In addition, Indonesia needs to encourage cooperation on the collection of tax from digital business. It is critical because tax potential from the digital business sector is enormous and their compliance remains extremely low,” stated Ah Maftuchan, the executive director of Prakarsa. He continued, “Indonesia also needs to invite all of the G20 countries to urge the establishment of Intergovernmental UN Tax Body. Moreover, it also needs to encourage the realization of global agreement on Automatic Exchange of Information (AEoI) and Base Erosion Profit Shifting (BEPS) so that they are globally implemented in 2017. If they are postponed, measures to mobilize state revenues from tax in an accelerated and massive manner will be more difficult.”
Options for Indonesia
All Indonesian civil society organizations joined in ICFP greatly stressed the importance of such agendas to be immediately implemented, so that state revenues from tax continue to increase significantly and state capability to finance sustainable development, including to materialize social welfare, will also continue to improve. Taxation reform indeed may become an entry for Indonesia to jointly encourage an economic-political system which is more equitable, improves most of the community’s welfare, and is sustainable, not only for the people of Indonesia but also for the people in other parts of the globe.
However, it is very important to remember that all such duties are very heavy, thus requiring an extremely high discipline in planning and executing them. Indonesia is now still considered as an underdog among the G20 countries, especially because of its economic measure which remains below number 16. Nevertheless, if Indonesia truly intends to stand firm among the other G20 countries—and materialize the forecast that we will become the 7th economic power (according to McKinsey) or the 6th economic power (according to PwC) in 2030, and become the 5th economic power in 2050—there is no other choice but to work hard to materialize it together with all progressive components of Indonesian nation, among other things by implementing the various inputs above. The implementation of those inputs is critical because becoming a larger economic power compared to the present does not necessarily mean advantages for Indonesian people if economic, social, and environmental fairness and sustainability are not realized.
The other option is to continue business as usual, wasting various opportunities which Indonesia actually has now, and continue to become a country which ranks almost the last among the G20 countries, and continue to be at risk in terms of sustainability. “If we are not willing to work hard to increase our rank in the G20, maybe it is better to just give up now. Stepping out of the G20 may be more honorable, rather than humiliating 250 millions of Indonesian citizens before more than 7 billion Earth’s population,” said Edi Sutrisno, the advocate director of TuK Indonesia, closing the discussion.
Jakarta, 6 July 2017
Indonesia Civil Society Forum on Foreign Policy – ICFP consists of IESR – IGJ – INFID – Migrant Care – Prakarsa – PWYP Indonesia – Transparency International Indonesia – TuK Indonesia – WALHI. For further information on ICFP, please contact Asri Nuraeni (+62-813-54723226) and Agung Budiono (+62-812-91697629).