The meeting offered the opportunity to discuss how to make the global economy more resilient by financing intangible assets.
February 5th, 2021
On February 4th, officials from the G20 Membership gathered virtually for the second meeting of the Framework Working Group (FWG).
In line with the work plan of the Framework Working Group under Italian Presidency, the Membership agreed that a return to the pre-crisis status quo would be expensive and not cost-effective. G20 Members were united in affirming that it is time to seek new opportunities for a recovery, founded on new, innovative, ambitious and transformative paradigms.
For the international community, this means guiding the ongoing digital transformation towards a path leading to increased productivity and new job opportunities, thereby fostering inclusive economic growth.
The G20 is called upon to steer the international policy debate towards a consensus on the transformative steps needed to tackle climate change, support innovation and reduce poverty and inequality.
Discussions focused on the implementation of the G20 Action Plan and on setting a new concrete timeline for actions in support of economic recovery in the short to medium term. In this context, G20 members took stock of the implementation of local measures supporting the sectors most affected by the Covid-19 crisis. The discussion also addressed the ongoing developments of the global economic outlook, in a context of high and enduring macro-economic uncertainty. Members agreed on the need for stronger international cooperation to overcome these challenges.
The Framework Working Group also renewed its commitment to monitoring potential risks for the global economy by considering potential future challenges the world may be called to face.
The meeting also offered the opportunity to discuss a key component of the global digital transformation: investments in intangible assets. These assets are classified as investment in innovation, enabling the commercialization of knowledge and thereby becoming a relevant source of economic growth in both advanced economies and emerging markets.
While intangible assets such as research and development (R&D), patents or algorithms have been key drivers of innovation in recent years, the list of key assets now includes databases, graphic design, managerial and worker skills, just to name a few.
Intangibles are particularly relevant in the digital sector and have become a prerequisite for the development of innovative activities, new services, applications and products.
All this has become even clearer with the outbreak of the Covid-19 crisis, as digital technologies have enabled the reorganisation of activities in several economic areas. As employees started working from home, good managerial skills paired with innovative digital solutions made intangible-intensive economies more resilient to the crisis.
Discussion on this matter focused on one of the major challenges related to intangible assets: financing. The G20 intends to define an efficient policy framework to support investments in intangible assets, which by their very nature have more difficulty in finding financing as compared to traditional tangible goods such as machinery and equipment. More specifically, the objective is to fill financing gaps and remove obstacles, particularly with regard to small enterprises.
In a dedicated study, the OECD proposed that the G20 identify best practices and agree on how to simplify the funding of intangible investments. As intangible investments are key complementary factors of the digital transformation, reducing their financing gap will be essential to foster the digitalization and speed up economic recovery.
The research developed by the OECD identifies the main policy areas in which to intervene in order to make the financial systems of G20 countries better suited to the needs of a knowledge-based economy.
The work of the FWG will continue in the coming months with in-depth analyses of the challenges brought about by the crisis, with a particular focus on understanding how investments in digital and green technologies can become the backbone of the global economic recovery.