BIAC General Assembly Business Roundtable
Remarks by Angel Gurría, OECD Secretary-General
Budapest, Thursday 7th April 2011
Prime Minister Orban,
Distinguished hosts from the Hungarian Business Associations,
Dear Mr Heeter and Mr Asami,
Ladies and Gentlemen,
I am delighted to be with you to celebrate 50 years of work together.
The OECD has always been a firm believer in the capacity of the private sector, for creating jobs, innovation and growth, as well as for getting people closer together through global trade and investment. These are powerful tools to foster change and essential components in the search for prosperity.
Whether we are talking of essential goods such as food or medicine, telecommunications or financial services, the private sector produces almost everything we use every day.
This is why BIAC is such an important partner for the OECD. By connecting the Organisation with the corporate sector, BIAC provides an essential reality check on our public policy discussions, and their potential impact on the private sector.
Thank you for the very warm testimonials presented in the celebratory publication issued by BIAC today. They are a stimulus to carry on with our effort in building better policies for better lives. They strengthen the bonds that unite us.
Together we strive to find the best policy solutions and develop high standards and guidance for both governments and business. The least I can say is that our partnership has become even more important during these challenging times, as we work to revitalise the global economy. When we say millions of jobs were lost because of the crisis, we mean they were lost mostly in the private sector.
The critical role of the private sector to create jobs and wealth and the need for a policy environment that supports sustainable, private sector-led investment and growth was explicitly recognised by G20 leaders in the Seoul Summit Declaration.
Let me briefly overview some of the pillars of OECD’s work and how the partnership with BIAC supports them.
OECD as a champion of high standards
BIAC’s celebratory publication is an excellent reminder that the OECD is the international champion of higher standards of quality and performance in government policy to enhance business. This is key, given that in large part, the imbalances that built up over the recent years were driven by failures in the regulation and supervision of, banking and financial institutions.
Reforms are now being put in place that should make financial markets more robust, more transparent, and strongly anchored with incentives to ensure compliance. This includes through both sounder regulation and better supervision.
The momentum toward such reforms needs to be maintained and we welcome the fact that this is a priority for the G20 French Presidency with which we are very strongly engaged. We value very highly BIAC’s support for our contributions to G20 policy discussions, especially with regard to our work on financial markets.
The crisis also disrupted ordinary consumers’ confidence in the financial system. Part of restoring this confidence involves giving consumers the tools they need to understand their own financial dealings, such as savings, investments, insurance or pensions. That is why we are working closely with the Financial Stability Board and other international organizations to advance financial consumer education and protection. This is the very important issue of enhancing disclosure, transparency and education, as well as fostering protection against fraud, abuse and errors.
Decades of close work with BIAC have also involved providing sound, reliable, and multilaterally agreed principles and standards for business ethics.
Bribery is one prominent example. The unfair advantage it gives to the unscrupulous not only distorts competition, it distorts prices and can even endanger lives. The OECD Good Practice Guidance on Internal Controls, Ethics and Compliance, developed with invaluable input from BIAC, helps companies protect themselves against bribery and corruption. This is the most comprehensive guidance ever provided to companies and businesses by an international organisation. The Anti-Bribery Convention, also developed and monitored with BIAC’s guidance, helps to level the playing field by denouncing and punishing cross-border bribing of third countries’ officials by a company of another Country in the pursuit of business.
Several other OECD instruments address ethical business. The OECD Principles of Corporate Governance primarily address the structure and quality of the regulatory system, but they also highlight the importance of high ethical standards when conducting business and in interactions with stakeholders.
The OECD Guidelines for Multinational Enterprises are the sole instrument covering all areas of business ethics. They have been developed multilaterally and agreed by governments. They include general principles but also recommendations such as promoting compliance with laws; protecting consumer interests; respecting human rights; caring about employment, industrial relations; and protecting the environment. The update of the Guidelines is expected to be completed and ready for adoption at our next Ministerial Meeting. This is another milestone where BIAC’s contribution has been invaluable.
OECD works at the sources of growth
Besides addressing the issues mentioned above, we also need to strengthen growth.
This is easier said than done. We know all too well the dreadful combination of the fiscal and the jobs crises. “Going structural” is the only option, as I will reaffirm this afternoon during the launch of Going for Growth, our main flagship publication on structural reforms. The solution lies in enhancing the productive capacity of our economies. Structural reforms will foster new sources of growth, through green growth, innovation, new skills or gender economic empowerment.
On top of these country-specific priorities are several global policy priorities.
First, markets must be kept open for trade and investment by resisting protectionist measures. This is a foundational principle of the OECD. Protectionist measures may promise some short-term relief to national economies, but they are short sighted and will only serve to exacerbate the current sluggish growth and undermine well functioning markets.
A recent OECD study shows that if G20 countries were to reduce tariffs and non tariff trade barriers by 50%, they would generate more jobs and higher real wages. Jobs could rise by 3.3% for low-skilled workers and up to 3.9% for the high-skilled, depending on the country. Low-skilled and high-skilled workers alike could see their wages rise by up to 8%.
And if all countries, not just the G20, cut tariffs by 50%, the least-developed countries of Asia and Africa could see an important increase in exports and in employment for high-skilled and lower-skilled workers alike.
However, openness alone will not deliver the growth we need.
We need the complement of policies that stimulate innovation and encourage green growth. Both are essential if countries and firms are to recover from the economic downturn and thrive in today’s highly competitive and connected global economy. Both are most effective and rapid when government and business work hand in hand.
Large firms possess the scale, scope and experience to commercialise and diffuse new products and technologies at a global scale. New firms often exploit opportunities neglected by more established companies, but many have weak capabilities for innovation due to their small scale.
Government policy can help them access to finance and information, foster their participation in knowledge networks, and support the development of skills. But this support system needs to be built on good knowledge of business needs and conditions, both local and global. The work with BIAC has been decisive in enhancing the focus and accuracy of the OECD’s advocacy work, leading to more effective policy choices.
The OECD Innovation Strategy and the OECD Green Growth Strategy are prominent examples. They show that as governments cope with shrinking revenues and growing public debt, there is still much they can do to support growth. They can create the frameworks, regulations and markets that enable firms and other actors to undertake change.
The inputs and views of the corporate sector also help us to better assess the complementary reforms – such as in education and training, in entrepreneurship and in product and labour markets – needed to support a shift towards environmentally-friendly growth paths.
Having a conducive tax system is also important for growth. Our 2010 study on Tax and Growth calls for a shift away from taxes on profits and wages and towards taxes on consumption, real estate and environmental taxes. Governments must provide a business friendly tax environment, one which provides certainty and predictability. The counterpart to these policies must be that business pays its fair share of the tax burden. Corporate boards need to recognise that good tax compliance has to be a part of their good corporate governance agenda.
Last but not least, the issue of the relationship between state-owned and private sector enterprises. “Competitive neutrality” is of particular importance in recently liberalised sectors. It plays a crucial role in levelling the playing field between former state monopoly incumbents and private entrants. But they need the backing of effective monitoring and enforcement.
Ladies and gentlemen,
In this very delicate moment of sluggish and fragile recovery, more than ever before we need business organisations to work together with governments at both the domestic and the global levels. The wisdom of the corporate sector is essential to find new and better policy approaches to the great challenges of today and tomorrow.
The OECD will continue to support BIAC’s dialogue with governments and to drive, together, better policies for better lives.