Open letter from Global Competitiveness Forum to leaders of G20 Member Countries

We represent business, academia, the public sector and civil society, and share an interest in economic competitiveness as a driver of sustainable prosperity worldwide.

The GCF proceedings produced sharp and compelling insights about the needs of the global economy at this crucial juncture. On this basis we submit collectively to the G20 leadership a set of recommendations to help guide discussion at its April meeting in London. We believe that policies based on the principles of responsible competitiveness will restore confidence in our respective economies and pave the way to renewed growth.

Since the November meeting of the G20, the financial crisis that occupied its agenda has become a global economic crisis. Advanced economies have contracted and growth in emerging markets has slowed precipitously. Foreign direct investment flows tumbled 21% in 2008, with worse expected in 2009. Capital markets lost over US $30 trillion in value, and unemployment rates are rising around the globe. The challenges facing the world economy are now both broader and deeper than any witnessed in decades.

The severity of the global reaction to events originating in the United States proves irrevocably that we operate in a highly interdependent world. It is therefore our view that cooperation is needed to create the framework for healthy international competition. Innovation and economic development can only be built on a stable global system of balanced trade and finance. As such, governments must act in a collaborative fashion to create a sustainable framework for economic recovery, including confidence-restoring measures, credit easing, fiscal coordination, open markets, and standards for sound financial regulation.

The G20 leaders must begin by restoring public confidence in the integrity of our markets and institutions. U.S. President Barack Obama's inauguration provides an exciting opportunity to do so. Decisive, collective action will demonstrate the unity of world governments in their commitment to overcoming the crisis.

G20 governments must act swiftly and convincingly to free up credit markets. Recent announcements of further bank losses once again threaten the availability of credit to even the most stable and profitable firms. Unless monetary easing and other measures translate into lower borrowing costs for companies and households, the broader economy will be unable to recover. As governments provide unprecedented assistance to their financial sectors, that helping hand should be accompanied by vehicles that direct credit to the private sector, with emphasis on the small- and medium-sized businesses that generate the majority of the world's jobs.

Furthermore, governments should agree to a coordinated fiscal stimulus policy, set at a target percentage of GDP. Stimulus measures should focus on initiatives that will enhance the long-term competitiveness of each country. In addition to physical infrastructure, priority should be given to investments that foster vital human capital development, including education and healthcare. Furthermore, there must be a renewed commitment to research and development budgets to fund future economic vitality. Particular emphasis should be placed on areas that hold promise for addressing climate change by boosting energy efficiency and promoting alternative energy. These initiatives will create new industries to power the economy's future.

While speed is of the essence in this time of crisis, governments should give careful thought to ways in which spending can provide more than just short-term, domestic stimulus, and focus on investment and not consumption. Due to the interdependent nature of this crisis, concerns about fiscal burden-sharing and the 'leakage' of stimulus across borders are misplaced. Open markets and recognition of common interests are critical to restoring shared growth.

Accompanying monetary easing in G20 economies should be a commitment to provide the IMF with adequate resources and policy leverage to help the governments of emerging economies to do the same. This direct assistance could be complemented by enhanced opportunities for emerging economies to help themselves. For example, governments could offer African companies tariff-free market access similar to that allowed by the United States' African Growth & Opportunity Act. It is imperative that the Doha round of trade talks be speedily concluded.

Finally, as these short-term measures are being enacted, the G20 should also begin the process of reforming oversight of global financial markets. While it is natural that the G20 countries have taken the lead in this discussion, in order for a new regime to be effective, fair, and welcomed, the decision-making process that produces it must be inclusive and reflect the interests of all countries. Greater involvement could be achieved through the expansion of existing institutions, such as the Financial Stability Forum, or through the creation of new ones that have already been proposed. This is a time to develop new platforms for cooperation that create engines of economic growth and foster innovation internationally.

As G20 leaders consider their goals for the April meeting in London, we urge them to bear in mind these priorities. While we have confidence that this crisis will pass, the manner in which it is handled provides unique opportunities to reposition the global economy for sustainable growth fueled by collaborative leadership and responsible competitiveness.