Following on from a year in which supply chains and international travel were severely disrupted, 2021 saw an increase in global cooperation, as institutions, businesses and governments alike sought to work together to find solutions to some of the world’s major challenges.
The onset of the Covid-19 pandemic in early 2020 had a dramatic effect on global connectivity. The implementation of border restrictions greatly disrupted the provision of goods and made cross-border travel extremely difficult.
In order to adapt to these challenges, many governments, businesses and institutions moved towards a strategy of regionalisation.
For example, in April last year the foreign ministers of ASEAN’s 10 member states endorsed several collective initiatives to fight the pandemic, including the establishment of a common Covid-19 fund to enable a rapid response to medical emergencies.
In the same month, the GCC agreed to establish a food supply network to safeguard the region from food insecurity.
However, while 2020 was marked by a trend towards regional solutions, 2021 has witnessed expanded global cooperation, as governments and international institutions collaborated on initiatives designed to help countries recover from the impacts of Covid-19.
Foremost among these was the Covax initiative. A collaboration between Gavi, the Vaccine Alliance, the Coalition for Epidemic Preparedness Innovations and the World Health Organisation, Covax is designed to coordinate international resources to ensure that developing countries have affordable access to Covid-19 tests, therapies and, above all, vaccines.
Since beginning to distribute vaccines in February, the programme has helped ship more than 610m vaccine doses to 144 predominantly low and middle-income countries.
Despite such efforts, however, Covax has not been enough to bridge the vaccination gap between developed and emerging markets.
To take an example, while more than 90m doses have been delivered to Africa through Covax and the African Vaccine Acquisition Trust, only four of the continent’s 54 countries are on track to meet a WHO target of fully vaccinating 40% of the population by the end of the year, according to a recent report from the Mo Ibrahim Foundation.
This has led to calls for greater global coordination with regard to vaccine distribution, particularly in light of the discovery of the Omicron variant in southern Africa. Indeed, leading officials from the WHO, UN High Commission for Refugees and the International Organisation for Migration recently called on G20 governments to provide greater assistance to lower-income countries.
Providing financial assistance
While Covax has aimed to address the medical impact of the pandemic, other collaborative measures have sought to provide financial assistance to offset the worst of the economic fallout.
One such was the Debt Service Suspension Initiative (DSSI), a G20-run scheme that offers a moratorium on bilateral loan repayments owed to G20 members and their policy banks. Initially rolled out in June 2020, the DSSI, which is available to 73 low-income nations, was extended until the end of this year.
Complementing that initiative is the G20 Common Framework for Debt Treatments Beyond the DSSI. Established in November last year by the G20 and the Paris Club – a 22-strong informal group of mainly Western creditors – the Common Framework applies to the same 73 countries that are eligible for support under the DSSI.
It differs from the former in that it provides relief on a case-by-case basis, with assistance ranging from complete debt restructuring or reduction to the longer-term deferral of debt payments.
Another move designed to ease fiscal concerns was the increased allocation of special drawing rights (SDRs). Managed by the IMF, SDRs are international reserve assets defined by a basket of five currencies – the US dollar, Japanese yen, euro, UK pound and Chinese yuan – which are used by member countries to supplement their own reserves.
On August 2 the IMF’s Board of Governors approved the allocation of $650bn worth of SDRs to bolster global economic recovery. This was the first new allocation since 2009 and by far the largest of its kind, doubling the $318bn in SDRs previously released by the IMF.
While not considered blanket solutions to Covid-19-related economic problems, these measures are expected to help emerging markets address any liquidity squeezes they may be facing, which in many cases have become more critical on the back of reduced bilateral aid last year.
Global infrastructure expansion
International institutions were not the only ones who took a global approach in 2021, with a number of the world’s largest economies reaffirming their commitment to globalisation over the course of the past year.
Following a fall in spending in 2020 across many of the projects tied to its Belt and Road Initiative (BRI), China sketched a reformed vision for the programme’s future, focusing on three aspects: the Green Silk Road, the Health Silk Road and the Digital Silk Road.
As the names suggest, the strategy will focus on developing environmentally sustainable projects, with a particular focus on those in the health and ICT sectors, across various emerging markets.
While specific details of the programme have not yet been released, G7 officials said the programme aims to close the $40trn infrastructure gap in the developing world, thus strengthening some of the connections between high-income and emerging markets.
Elsewhere, on December 1 the EU launched Global Gateway, its own international infrastructure strategy, which aims to mobilise €300bn in investments through to 2027 to help with the global recovery from the pandemic.
The launch or continuation of these initiatives comes as a number of emerging markets are turning towards infrastructure projects to help stimulate their economic recoveries from the coronavirus, with many placing a focus on green or sustainable developments.
Aside from coronavirus recovery-related issues, there was also a higher degree of global cooperation with regard to some longer-term themes throughout 2021.
After a decade of talks and months of negotiation, 136 countries signed up to an agreement to implement a global corporate tax rate of 15%.
The landmark deal aims to limit aggressive tax competition, and could bring in an estimated $150bn in extra tax revenue each year, according to the Organisation for Economic Cooperation and Development.
The agreement was seen as a triumph for global diplomacy, particularly given that a number of emerging markets use low tax rates as an incentive to attract foreign investment. However, some emerging markets – namely Kenya, Nigeria, Pakistan and Sri Lanka – have not yet signed up to the plan.
Meanwhile, perhaps the largest diplomatic event of the year was the UN Climate Change Convention (COP26). Representatives from more than 200 countries gathered at the event, held in Glasgow between October 31 and November 12, to discuss ways in which they could reduce global emissions.
The outcomes included pledges to “phase down” the use of coal-fired power and reduce deforestation, while more than 100 countries signed up to the US- and EU-led Global Methane Pledge, which aims to reduce methane emissions by 30% by 2030.
However, COP26 was weakened by the absence of China’s President Xi Jinping and Russia’s President Vladimir Putin, the leaders of two of the world’s leading polluters. In addition, a number of emerging markets criticised some of the proposals put forward by developed nations.
By Oxford Business Group
More Top Reads From Oilprice.com:
- Guyana To Become The 11th Country To Produce Over 1 Million Bpd
- The Electric Vehicle Charging Market Could Be Worth As Much As $1.6 Trillion
- OPEC+ To Add 400,000 Bpd In January Despite Oil Price Plunge