G20 Executive Talk Series

Strategic Partner

Oliver Bäte

Allianz SE–CEO and B20 Taskforce Chair

Certainty and Cooperation: Improving the Environment for Investment

The world economy has come a long way since 2008, when international financial markets were on the brink of collapse. The world economy has become a lot more resilient.

Yet, global economic growth has been depressed for several years. Financial conditions have tightened, risk appetite has decreased, credit risks have risen, and the repair of balance sheets has stymied. In advanced economies, heightened uncertainty and setbacks that hurt confidence have dampened growth prospects, while the economic powerhouses of emerging economies have lost steam not least because of declining oil and commodity prices.

In 2014, the G20 had agreed to increase global growth by at least two percentage points over the next five years – but we are far from reaching this goal. A lot of work remains to be done. Monetary policy has reached its limits. We need a new policy mix. Governments should redouble their efforts to improve the business environment. This includes facilitating private infrastructure investment and implementing more coherent and growth-oriented financial regulation.

Many countries face considerable investment gaps in infrastructure, research and development, and education. For example: No less than $3.3 trillion per annum, or altogether 3.8 percent of the global gross domestic product, would have to be invested in infrastructure projects worldwide by 2030 to keep pace with population and economic growth. The need for good infrastructure is particularly high in emerging and developing countries. Emerging economies account for 60 percent of the global investment needed for infrastructure.

Investment in infrastructure can provide economic stimulus, while infrastructure itself can drive productivity and competitiveness as well as improve the quality of life. It is the foundation for economic and social development and an important stepping stone to fulfilling the Sustainable Development Goals. Infrastructure also has a vital role to play in achieving the goal set in the COP21 Paris Agreement to limit the increase in global temperature to below 2°C, compared to pre-industrial levels. Infrastructure usually has a long lifespan, often across several decades. About 75 percent of the infrastructure that will be in place in 2050 does not exist today. So, there is not just a great need to bridge the infrastructure gap but also to channel investment to future-oriented, sustainable and resilient infrastructure projects.

The global financial crisis exposed many shortcomings in the financial system and in its regulation. The G20 played an important role in managing the crisis, largely overcoming its direct consequences. Recent regulatory reforms, both domestic and international, have made the markets more resilient. Banks have made significant progress in meeting increased capital requirements, building recovery and resolution planning, enhancing corporate governance standards and increasing liquidity buffers.

At the same time, the benefits of such policies need to be balanced against their negative impact on economic growth. This is not a call for deregulation. Well-designed financial regulations are vital to ensure stable financial markets. But it is a call for more regulatory coherence across countries as inconsistent implementation and interpretation of international standards on the national level lead to market fragmentation, barriers to access and unfair competition, further depressing growth.

There is a lot of unfinished business we need to tackle if we want to make the global economy truly future oriented and sustainable. National ‘go-it-alone’ strategies are destined to fail. We hope that G20 members will act together, providing the necessary leadership for other countries to follow.


Oliver Bäte, chairs the B20-Taskforce on Financing Growth & Infrastructure and he is Chairman of the Board of Management of Allianz SE.