Emerging Economy

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Indian economy has been witnessing a phenomenal growth since the last decade. The country is stillholding its ground in the midst of the current global financial crisis.

Quarterly gross domestic product (GDP) at factor cost at constant (1999-2000) prices for Q3 of 2008-09 isestimated at US$ 171.24 billion, as against US$ 162.57 billion in Q3 of 2007-08, showing a growth rate of 5.3 per cent over the corresponding quarter of previous year.

Despite the global slowdown, the Indian economy is estimated to have grown at close to 6.7 per cent in2008-09. The Confederation of Indian Industry (CII) pegs the GDP growth at 6.1 per cent in 2009-10. Thisscenario factors in sectoral growth rates of 2.8-3 per cent, 5-5.5 per cent and 7.5-8 per cent, respectively, for agriculture, industry and services.

A number of leading indicators, such as increase in hiring, freight movement at major ports and encouragingdata from a number of key manufacturing segments, such as steel and cement, indicate that the downturnhas bottomed out and highlight the Indian economy's resilience. Recent indicators from leading indices,such as Nomura's Composite Leading Index (CLI), UBS' Lead Economic Indicator (LEI) and ABN Amro'Purchasing Managers' Index (PMI), too bear out this optimism in the Indian economy.

Meanwhile, foreign institutional investors (FIIs) turned net buyers in the Indian market in 2009. Directinvestment inflows also remain strong, prompting official expectations that foreign direct investment (FDI)inflows in 2009 would better the realised inflows of US$ 33 billion in 2008 and touch US$ 40 billion.

According to the Asian Development Bank's (ADB) 'Asia Capital Markets Monitor' report, the Indian equitymarket has emerged as the third biggest after China and Hong Kong in the emerging Asian region, with amarket capitalisation of nearly US$ 600 billion.

The Economic scenario

Investor sentiment in India has improved significantly in the first quarter of 2009, according to a surveyconducted by Dutch financial services firm ING. With foreign assets growing by more than 100 per centannually in recent years, Indian multinational enterprises (MNEs) have become significant investors in globalbusiness markets and India is rapidly staking a claim to being a true global business power, according to asurvey by the Indian School of Business and the Vale Columbia Center on Sustainable InternationalInvestment.

Despite the global financial crisis, inflow of foreign capital to the country has increased sharply in 2008-09.

India's foreign exchange reserves increased by US$ 4.2 billion to US$ 255.9 billion for the weekended May 8, 2009, according to figures released in the Reserve Bank of India's (RBI) weeklystatistical supplement.

Net inflows through various non-resident Indians (NRIs) deposits surged from US$ 179 million in2007-08 to US$ 3,999 million in 2008-09, according to the RBI.

FDI inflows during April 2008-January 2009 stood at US$ 23.9 billion compared with US$ 14.4billion in the corresponding period of the previous fiscal, witnessing a growth of 65 per cent,according to the Department of Industrial Policy & Promotion.

FIIs have made investments of around US$ 2 billion as of May 14, 2009, including a record singleday net purchase of US$ 824.72 million on May 13, 2009, according to the Securities andExchange Board of India (SEBI).

Inflation for the week ended March 7, 2009, fell to an all time low of 0.44 per cent. The sharp fall ininflation was due to several factors including easing prices of food articles and fuel items along witha high base effect. Currently, the inflation rate stood at 0.7 per cent for the week ended April 25,2009.

The year-on-year (y-o-y) aggregate bank deposits stood at 21.2 per cent as on January 2, 2009.Bank credit touched 24 per cent (y-o-y) on January 2, 2009, as against 21.4 per cent on January 4,2008.

Since October 2008, the RBI has cut the cash reserve ratio (CRR) and the repo rate by 400 basispoints each. Also, the reverse repo rate has been lowered by 200 basis points. Till April 7, 2009,


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the CRR had further been lowered by 50 basis points, while the repo and reverse repo rates havebeen lowered by 150 basis points each.

Exports from special economic zones (SEZs) rose 33 per cent during the year to end-March 2009.Exports from such tax-free manufacturing hubs totalled US$ 18.16 billion last year up from US$13.60 billion a year before.

The rural India growth story

The Indian growth story is spreading to the rural and semi-urban areas as well. The next phase of growth isexpected to come from rural markets with rural India accounting for almost half of the domestic retail market,valued over US$ 300 billion. Rural India is set to witness an economic boom, with per capita income havinggrown by 50 per cent over the last 10 years, mainly on account of rising commodity prices and improvedproductivity. Development of basic infrastructure, generation of employment guarantee schemes, better information services and access to funding are also bringing prosperity to rural households.

Per Capita Income

The per capita income in real terms (at 1999-2000 prices) during 2008-09 is likely to attain a level of US$528 as compared to the Quick Estimate for the year 2007-08 of US$ 500. The growth rate in per capitaincome is estimated at 5.6 per cent during 2008-09, as against the previous year's estimate of 7.6 per cent.

Advantage India

According to the World Fact Book, India is among the world's youngest nations with a median ageof 25 years as compared to 43 in Japan and 36 in USA. Of the BRICBrazil, Russia, India andChinacountries, India is projected to stay the youngest with its working-age population estimatedto rise to 70 per cent of the total demographic by 2030, the largest in the world. India will see 70million new entrants to its workforce over the next 5 years.

India has the second largest area of arable land in the world, making it one of the world's largestfood producersover 200 million tonnes of foodgrains are produced annually. India is the world'slargest producer of milk (100 million tonnes per annum), sugarcane (315 million tonnes per annum)and tea (930 million kg per annum) and the second largest producer of rice, fruit and vegetables.

With the largest number of listed companies - 10,000 across 23 stock exchanges, India has thethird largest investor base in the world.

India's healthy banking system with a network of 70,000 branches is among the largest in theworld.

According to a study by the McKinsey Global Institute (MGI), India's consumer market will be theworld's fifth largest (from twelfth) in the world by 2025 and India's middle class will swell by over tentimes from its current size of 50 million to 583 million people by 2025.

Growth potential

Special Economic Zones (SEZs) are set to see major investments after the straightening out of certain regulatory tangles. The commerce department expects about 120 SEZs to be operationalby 2009-end, up from existing 87.

According to the CII Ernst & Young report titled 'India 2012: Telecom growth continues,' India'stelecom services industry revenues are projected to reach US$ 54 billion in 2012, up from US$ 31

billion in 2008. The Indian telecom industry registered the highest number of subscriber additions at15.84 million in March 2009, setting a global record. A McKinsey report, 'The rise of Indian Consumer Market', estimates that the Indian consumer

market is likely to grow four times by 2025, which is currently valued at US$ 511 billion. The volume of mergers and acquisitions (M&As) and group restructuring deals in India witnessed a

sharp nine times jump at US$ 2.27 billion during March 2009 against the volume of deals inFebruary 2009, according to a Grant Thornton report.

India ranks among the top 12 producers of manufacturing value added (MVA)witnessing anincrease of 12.3 per cent in its MVA output in 2005-07 as against 6.9 per cent in 2000-05according to the United Nations Industrial Development Organisation (UNIDO).


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In textiles, the country is ranked fourth, while in electrical machinery and apparatus it is ranked fifth.It holds sixth position in the basic metals category; seventh in chemicals and chemical products;10th in leather, leather products, refined petroleum products and nuclear fuel; twelfth in machineryand equipment and motor vehicles.

In a development slated to enhance India's macroeconomic health as well as energy security,Reliance Industries (RIL) has commenced natural gas production from its D-6 block in the Krishna-Godavari (KG) basin.

India has a market value of US$ 270.98 billion in low-carbon and environmental goods & services(LCEGS). With a 6 per cent share of the US$ 4.32 trillion global market, the country is tied withJapan at the third position.

Exchange rate used:1 USD = 49.58 INR (as on February 2009)1 USD = 49.82 INR (as on April 2009


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plined macroeconomic and financial management.Page 3

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4. Outside of our group, a number of countries in emerging Asia have taken first stepson the road towards a more flexible exchange rate regime and a strengthening of the

financial sector, a move which would support this adjustment. Oil producing countrieshave increased investment in oil production capacity and many have made prudent useof their additional export revenues to promote the diversification of their economies andemployment. Their import growth has accelerated substantially.5. Global imbalances have been showing some signs of stabilisation more recently anddeficits have been relatively easily financed. An orderly adjustment, which is in the in-terest of the world economy, will take time. We are committed to implementing domesticpolicies to promote this. They are first and foremost in each of our own best interests:

The United States is targeting the elimination of its federal budget deficit by 2012.Policies also have been proposed to strengthen long-term fiscal sustainabilitythrough entitlement and health care reform, tax incentives to promote privatesaving, and proposals have been made to boost the use of alternative fuels andenhance energy efficiency. The United States will continue to follow pro-growtheconomic policies.

Europe will continue its structural reform efforts guided by the Lisbon strategy topromote growth and employment.

Japan will continue its effort to enhance growth potential by implementing thecomprehensive program for boosting productivity growth announced in this April.

Fiscal reform will be steadily implemented to meet the targets committed by thegovernment, namely achieving surplus in the primary balance of the combinedcentral and local governments by 2011 as a first step for reducing the debt-to-GDP ratio in a stable manner by the mid-2010s.

Russia is committed to pursue a sound macroeconomic policy framework andprudent financial policies along with a range of structural reforms facilitating itstransition to self-sustaining, investment- and innovation-led growth.

Canada is committed to continuing to reduce government debt and has set anobjective of eliminating total government net debt in a generation. Canada isalso committed to continuing to lower taxes on persons and business and to re-ducing regulatory burdens, as well as promoting knowledge creation and invest-ing in infrastructure.6. We encourage a contribution from the emerging market countries towards reducingimbalances. Continued reforms to rebalance growth towards domestic demand, thusenhancing its sustainability, are key to reducing imbalances while sustaining the robustglobal expansion. In emerging economies with large and growing current account sur-


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pluses, it is crucial that their effective exchange rates move so that necessary adjust-ments will occur. Oil-producing countries should continue accelerating investment incapacity and economic diversification.

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SYSTEMIC STABILITY AND TRANSPARENCYOF FINANCIAL MARKETS / HEDGE FUNDS7. We discussed recent developments in global financial markets, including hedgefunds, which, along with the emergence of advanced financial techniques and products,such as credit derivatives, have contributed significantly to the efficiency of the financialsystem. Nevertheless, the assessment of potential systemic and operational risks asso-ciated with these activities has become more complex and challenging. Given thestrong growth of the hedge fund industry and the increasing complexity of the instru-ments they trade, we reaffirm the need to be vigilant.8. In this context, we welcome the Financial Stability Forums (FSF) update of its 2000Report on Highly Leveraged Institutions and support its recommendations. The globalhedge fund industry should review and enhance existing sound practices benchmarksfor hedge fund managers; in particular in the areas of risk management, valuations anddisclosure to investors and counterparties in the light of expectations for improved prac-tices set out by the official and private sectors. Counterparties and investors should actto strengthen the effectiveness of market discipline, including, by obtaining accurate andtimely portfolio valuation and risk information. Supervisors should act so that core inter-mediaries continue to strengthen their counterparty risk management practices. In theexercise of their supervision of hedge funds counterparties, relevant authorities shouldmonitor developments and cooperate among themselves. We welcome that the Finan-cial Stability Forum (FSF) will report to finance ministers as from October of this year on

the progress and actions taken in respect of these recommendations.Page 5

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FREEDOM OF INVESTMENT, INVESTMENT ENVIRONMENTANDSOCIAL RESPONSIBILITY9. We recognize that the increase of cross-border direct investment is a major factorshaping the worlds economy. Provided appropriate framework conditions are in place,such inflows make a major positive contribution to economic growth, social and envi-ronmental development. We note four areas for action in order to maximize the benefitsfrom cross-border investment:reinforcing our G8 commitment to the freedom of investment,promoting an open investment environment in industrialised countries andemerging economies,enabling greater benefits from and sustainability of foreign direct investments(FDI) for developing countries,promoting and strengthening corporate and other forms of social responsibility.


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Freedom of investment10. We will work together to strengthen open and transparent investment regimes andto fight against tendencies to restrict them. Erecting barriers and supporting protection-ism would result in a loss of prosperity. We therefore agree on the central role of freeand open markets for the world economy, respecting sustainability concerns, and the

need to maintain open markets to facilitate global capital movements. We reaffirm thatfreedom of investment is a crucial pillar of economic growth, prosperity and employ-ment. We call on all developed countries, major emerging economies and others tocritically assess their investment policies, the potential costs incurred from unnecessar-ily restrictive or arbitrary policies and the economic benefits of open investment re-gimes.

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11. Against this background we remain committed to minimize any national restrictionson foreign investment. Such restrictions should apply to very limited cases which pri-marily concern national security. The general principles to be followed in such cases arenon-discrimination, transparency and predictability. In any case, restrictive measuresshould not exceed the necessary scope, intensity and duration. Applicable treaties relat-ing to investment remain unaffected. We encourage the OECD to continue its work onthese issues, especially by identifying best practices and by further developing generalprinciples. We will work with the OECD and other fora to develop further our commonunderstanding of transparency principles for market-driven cross border investment of both private and state-owned enterprises.The global investment environment12. Emerging economies benefit considerably from inward FDI while acting increasinglyas countries of origin of FDI. We see the need and the opportunity to work towards a

level playing field for all investors. Companies from G8 countries investing in emergingeconomies expect to find the same open investment environment as companies fromsuch countries investing in G8 countries. Openness to investment is beneficial for allparties involved.13. We underscore that market-driven technology transfer is an important globalisationcatalyst. Governments have a role in establishing and maintaining the appropriate insti-tutions and legal regulatory policy frameworks necessary to enable technology flows ona commercial basis and assuring the respect of intellectual property rights.14. Open and transparent procurement markets are an important precondition for cross-border investments. We invite all our partners, in particular the major emerging econo-mies, to create a level playing field for national and foreign tenderers. This may includeconsiderations to join the WTO's Government Procurement Agreement (GPA).15. We call on the emerging economies to adopt the OECD Declaration on InternationalInvestment and Multinational Enterprises. We invite the major emerging economies toparticipate in a structured High Level Dialogue on investment conditions in industrialisedcountries and emerging economies as part of the Heiligendamm Process. A stocktakingexercise, an examination of best practices and the implementation of peer reviewmechanisms to promote an open, efficient investment environment that aims to remove


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remaining barriers to investment should be a good start. We ask the OECD to provide aplatform for such a dialogue.

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Investment in developing countries

16. Unlike industrialized and emerging economies, many less advanced developingcountries often reap only inadequate benefits from FDI. In shared responsibility with ourdeveloping country partners we want to enable quality FDI inflows to grow, inflows thathelp local infrastructure facilitate the operations of national and foreign investors thatimprove the skills of the local labour force and the advantages of transfers of manage-ment skills and technology that accrue from FDI increase, and that support the ability of domestic firms to supply inputs to foreign-invested companies or strengthen interna-tional value chains. Economic, social and environmental aspects of sustainability arecrucial in order to maximize the FDI benefits for all developing countries, including leastdeveloped countries.17. We support the regional and multilateral development banks (MDBs), including theInternational Finance Corporation (IFC) and the Multilateral Investment GuaranteeAgency (MIGA), in addressing the problem of poor business environments in their bor-rowing members and urge them to integrate efforts to address these impediments toinvestment in their country strategies and budgets.18. We support the initiative of G8 Finance Ministers to foster the development of deeper, more liquid local bond markets in emerging economies. This can make an im-portant contribution to reducing the vulnerability of individual countries to crises and toenhancing the financial stability of emerging countries as a whole.19. We support the OECD Policy Framework for Investment and UNCTAD InvestmentPolicy Reviews as valuable mechanisms in defining a shared understanding of healthy

investment climates in emerging economies and developing countries. The OECD Pol-icy Framework for Investment could be translated into national practices and develop-ment strategies, especially for countries under the New Partnership for African Devel-opment (NEPAD) and Asia Pacific Economic Cooperation (APEC) framework. Weinvitethe OECD, UNCTAD and other organisations such as the World Bank to consider pro-viding the necessary support for this purpose.20. We invite UNCTAD and the OECD to jointly engage industrialized countries, emerg-ing economies and developing countries in the development of best practices for creat-ing an institutional environment conducive to increased foreign investment and sustain-able development. Such a comprehensive process should be closely connected with thetwelfth UN Conference on Trade and Development (UNCTAD XII) planned for 20th to25th April 2008 in Accra (Ghana).

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Investment and responsibility the social dimension of globalization21. Globalization and technological progress have resulted in rapid structural change inmany regions and economic sectors. We acknowledge that structural change is the in-


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evitable result of progress and that it brings dislocations along with opportunities. Openmarkets rest on political acceptance, social inclusion, gender equality and the integra-tion of traditionally under-represented groups such as older workers, youth, immigrantsand persons with disabilities. In order to address the social dimension of the globalisa-tion process, we identify the four following areas of action.

22. Promoting and further developing social standards: We are convinced that a global-isation that is complemented with social progress will bring sustainable benefits to bothindustrial and developing countries. We recognize our responsibility for an active contri-bution towards this objective. Therefore, we support the International Labour Organiza-tions (ILO) Decent Work Agenda with its four pillars of equal importance: the effectiveimplementation of labour standards, especially the ILO core labour standards, the crea-tion of more productive employment, further development of inclusive social protectionsystems and the support of social dialogue between the different stakeholders.23. While stressing that labour standards should not be used for protectionist purposes,we invite the WTO members and interested international organizations, in close collabo-ration with the ILO, to promote the observance of internationally recognized core labourstandards as reflected in the ILO declaration on Fundamental Principles and Rights andits follow-up. We also commit to promoting decent work and respect for the fundamentalprinciples in the ILO Declaration in bilateral trade agreements and multilateral fora.24. Strengthening the principles of Corporate Social Responsibility: In this respect, wecommit ourselves to promote actively internationally agreed corporate social responsi-bility and labour standards (such as the OECD Guidelines for Multinational Enterprisesand the ILO Tripartite Declaration), high environmental standards and better govern-ance through OECD Guidelines National Contact Points. We call on private corpora-tions and business organizations to adhere to the principles in the OECD Guidelines forMultinational Enterprises. We encourage the emerging economies as well as develop-

ing countries to associate themselves with the values and standards contained in theseguidelines and we will invite major emerging economies to a High Level Dialogue oncorporate social responsibility issues using the OECD as a platform.25. We stress in particular the UN Global Compact as an important CSR initiative; weinvite corporations from the G8 countries, emerging nations and developing countries toparticipate actively in the Global Compact and to support the worldwide dissemination of this initiative.26. In order to strengthen the voluntary approach of CSR, we encourage the improve-ment of the transparency of private companies performances with respect to CSR, andclarification of the numerous standards and principles issued in this area by many dif-

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ferent public and private actors. We invite the companies listed on our Stock Markets toassess, in their annual reports, the way they comply with CSR standards and principles.We ask the OECD, in cooperation with the Global Compact and the ILO, to compile themost relevant CSR standards in order to give more visibility and more clarity to the vari-ous standards and principles.27. Reinforcing Corporate Governance: Corporate governance is a key element in im-


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proving economic efficiency and growth as well as enhancing investor confidence. Goodcorporate governance provides proper incentives for the board and management topursue objectives that are in the interests of the company and its shareholders and fa-cilitates effective monitoring and surveillance. While corporate governance challengesare present everywhere, they are particularly acute in emerging economies. We en-

courage the widest adherence to the OECD Corporate Governance Principles and sup-port the continuation of the work of the OECD / World Bank Regional Corporate Gov-ernance Roundtables.28. Investing in social protection systems: Social protection is an investment in a coun-try's economic future and a cost-effective way of fighting poverty. It includes appropriateprotection against life's major risks and appropriate coverage for everyone, aiming atimproved education and health. Social protection has the capacity to contribute to indi-vidual employability and to ensure that those who can work obtain adequate support tofind employment and to obtain skills demanded by the labour market.29. Social protection systems contain some universal elements and should be based onvalues such as social equity, fairness, and justice in order to promote equal opportuni-ties and participation. We believe that social security systems require further develop-ment and extension of coverage taking into account nations abilities to provide suchcoverage given their varying states of economic growth and recognizing the fact thatthere can be no one size fits all model of social protection. We agree to keep this issueon our development policy agenda, encouraging relevant international organizations towork in close cooperation on this issue. We recognize that in conjunction with economicgrowth and active labour market policies, social security is an instrument for sustainablesocial and economic development.

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PROMOTING INNOVATION PROTECTING INNOVATION30. Science, research and innovation today more than ever form the basis of economicgrowth and prosperity. Political and economic strategies to foster innovation are there-fore key elements for the future development of industrialised countries, emergingeconomies and developing countries alike. We will undertake to bring forward an inter-national economic and political environment that promotes and protects innovation.Innovation for Sustainable Growth31. Forward looking innovation policy is geared towards promoting the research com-munity and towards translating ideas, the product of the research process, into innova-tive products and services. Whereas the promotion of research involves education andhigher-education policy, economic policy can play a crucial role in promoting the transla-tion of research into innovative products and in fostering an innovation-friendly businessenvironment. Both tasks benefit from the engagement of national governments. Interna-tional cooperation and exchanges can supply a substantial impetus in the shaping of national policy. Cooperation between advanced and developing countries in researchactivities in the field of science and technology should also be strengthened.32. Because we strive to provide scientific and technical leadership we also recognizeour responsibility for a long-term oriented research initiative that will focus on concentra-


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tion of scientific research and improved technological capacity in order to be able to re-act most effectively to future global challenges. We recognize the increasing signifi-cance of many emerging economies in science and research and invite them to activelyparticipate in this process by reinforcing already existing cooperative efforts in theOECD building also on the results of ongoing work promoted inter alia by the relevant

UN bodies.33. In this respect we support the engagement of the OECD to work on proposals fortopical international collaborative efforts. Based on the work of the Global Science Fo-rum (GSF), we recognize the value that the GSF will bring as the moderator of thisprocess. We also support the sharing of information among the G8 and emergingeconomies on national research endeavours in order to identify priorities that could beenhanced by collaborative research efforts, joint initiatives and programmes on areas of common interest. Possible areas of cooperation could be sustainable use of water and

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land and research in the field of energy efficiency as well as the promotion of environ-mentally-related innovations both in the public and in the business sector. We will work together to achieve more effective coordination and cooperation in our research effortsin these fields.Intellectual Property Protection as the Backbone of Innovation34. A fully functioning intellectual property system is an essential factor for the sustain-able development of the global economy through promoting innovation. We recognizethe importance of streamlining and harmonizing the international patent system in orderto improve the acquisition and protection of patent rights world-wide.35. The benefits of innovation for economic growth and development are increasinglythreatened by infringements of intellectual property rights worldwide. We therefore

strongly reaffirm our commitment to combat piracy and counterfeiting. Trade in piratedand counterfeit goods threatens health, safety and security of consumers worldwide,particularly in poorer countries. In this regard we welcome work on the WHO initiativetoimplement the International Medicinal Products Anti-Counterfeit Taskforce (IMPACT).Our common efforts in this combat are therefore in the interest of all countries at all lev-els of development.36. We commit to strengthen cooperation in this critical area among the G8 and othercountries, particularly the major emerging economies, as well as competent interna-tional organizations, notably the World Intellectual Property Organization (WIPO),WTO,the World Customs Organization (WCO), Interpol, the World Health Organization(WHO), the OECD, APEC, and the Council of Europe. We invite these organizations toreinforce their action in this field.37. We welcome the joint Declaration of the business communities of all G8 countrieson Strategies of G8 Industry and Business to Promote Intellectual Property Protectionand to Prevent Counterfeiting and Piracy which highlights actions companies are takingto secure their intellectual property rights at home and abroad and to keep their global


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supply chains free of pirated and counterfeit goods from producers and distributors,retailers and merchandisers. Industry and business have an essential role to play in pro-tecting innovation, and we will engage our respective private sectors on effective solu-tions with regard to both the supply and the demand side of piracy and counterfeiting.We also welcome educational campaigns with the help of business communities in our

countries directed at raising awareness of consumers with regards to the negative ef-fects of counterfeiting and piracy.38. In light of the urgency to implement concrete measures which will improve anddeepen cooperation among G8 partners and deliver real enforcement results, we decideto undertake the following:

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(a) We endorse the Guidelines for Customs and Border Enforcement Cooperation de-signed to strengthen cooperation and coordination among our national customs and lawenforcement administrations. In this context we especially welcome the development of an effective information exchange system where appropriate - in close associationwith the WCO which will lead to improved cooperation among the relevant enforcementauthorities worldwide.(b) We endorse new Guidelines for Technical Assistance on intellectual property rightsprotection to interested developing countries, as well as a mechanism to better coordi-nate and leverage existing G8 assistance to such countries with a view to building thecapacity necessary to combat trade in counterfeited and pirated goods to strengthenintellectual property enforcement. In partnership with certain developing countries weagree to launch technical assistance pilot plans with a view to building the capacity nec-essary to combat trade in counterfeited and pirated goods to strengthen intellectualproperty enforcement. The progress on these pilot plans will be reviewed by the G8 in

2008.(c) We endorse the recommendations aimed at improving G8 member countries coop-erative actions to combat serious and organized intellectual property rights crimes andthe further work on their basis to facilitate structured international cooperation regardingthe investigation and prosecution of those crimes.(d) While appreciating the information contained in the OECD report estimating the eco-nomic impacts of counterfeiting and piracy on national economies and right holders, aswell as public health and safety, we will encourage the OECD to work with memberstates to further identify and target in its report specific areas for concrete actions.(e) We recognize the need for continued study by national experts of the possibilities of strengthening the international legal framework pertaining to IPR enforcement.(f) We consider the establishment of an IPR Task Force focusing on anti-counterfeitingand piracy to look together at how best to improve the working of the international IPRprotection and enforcement, and produce recommendations for action including im-proved peer review. The issue will also be considered in the Heiligendamm Process.

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A New Dialogue on Innovation and Intellectual Property Protection


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39. Lively interaction between science and business, strong protection and enforcementof intellectual property rights, and the combination of market-based entrepreneurshipand science-based research are increasingly decisive factors in promoting economicgrowth and development around the world. We invite the major emerging economies toa follow up process using the OECD as a platform with the aim of establishing a new

international dialogue on innovation and intellectual property protection as part of theHeiligendamm Process. Such a dialogue will provide a forum for the positive exchangeon topics critical for growth of successful knowledge economies and the promotion of aninnovation-friendly business environment also taking into account the needs of smalland medium sized enterprises, including: (a) the crucial role and economic value of in-tellectual property protection and implementation as a central framework condition forthe development of a future-oriented economy based on technological progress andinnovation; (b) effective market incentives for innovation and the diffusion of knowledgeat the national level taking into account recent developments in technology markets;and (c) the crucial importance of efficient innovation value chains that promote busi-ness commercialization of patented research results and exploit licensing as a majordriver for the international transfer of technology. The dialogue could furthermore ascer-tain measures the industrialized countries and major emerging economies can take toachieve fully effective implementation and protection of intellectual property rightswithintheir own territory. Fully respecting the mandate, function and role of the competentmultilateral organizations, in particular the WTO and the WIPO, participants in the dia-logue may also discuss initiatives aimed at strengthening intellectual property rights pro-tection which should then be addressed in the appropriate international fora. The G8Summit 2009 will take stock of the progress made by that date.

Page 1413CLIMATE CHANGE, ENERGY EFFICIENCY AND ENERGYSECURITY -CHALLENGE AND OPPORTUNITY FOR WORLD ECONOMICGROWTH40. Humanity today faces the key interlinked challenges of avoiding dangerous climatechange and ensuring secure and stable supplies of energy. Since we met in Glenea-gles, science has more clearly demonstrated that climate change is a long term chal-lenge that has the potential to seriously damage our natural environment and the globaleconomy. We firmly agree that resolute and concerted international action is urgentlyneeded in order to reduce global greenhouse gas emissions and increase energy secu-rity. Tackling climate change is a shared responsibility of all, and can and must be un-dertaken in a way that supports growth in developing, emerging and industrialisedeconomies, while avoiding economic distortions.41. We recognise the important opportunities offered by effective action addressing cli-mate change, in particular for innovation, technological development as well as povertyreduction. Strong economies together with a wide range of policy instruments such as


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market-based mechanisms, including emissions-trading, tax incentives, and regulatorymeasures as well as technology cooperation and a shared long-term vision, are key toguide investment decisions, to generate technology commercialisation, to enhance en-ergy security, to promote sustainable development and to slow, stabilize and then sig-nificantly cut global emissions of greenhouse gases.

42. We are committed to take strong leadership in combating climate change. We con-firm our determination to work among ourselves and with the global community onglobal solutions that address climate change while supporting growth and economicdevelopment. We commit ourselves to implement approaches which optimally combineeffective climate protection with energy security. To this end, we are committed to thefurther development of the international regime to combat climate change, especially inthe run-up to the UN Climate Change Conference in Indonesia at the end of this year.Addressing climate change is a long term issue that will require global participation anda diversity of approaches to take into account differing circumstances.

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43. Energy is a fundamental driver of growth and development around the world, andthe use of energy has been steadily expanding along with the worlds populations andeconomies. Our ability to provide secure access to clean, affordable and safe sourcesof energy to maintain global economic growth complements our desire to protect ourenvironment. Addressing the challenge of energy security will require unprecedentedinternational cooperation in several areas, including market transparency, enhancingenergy efficiency, diversifying energy supplies and developing and deploying new andtransformational technologies.44. Energy has been a major field of action for the G8, not least in recent years. Werecall that after focusing on resource efficiency in a broader sense (in particular the 3R-

Initiative) following the Evian and Sea Island Summits, the Gleneagles G8-Action Plandealt intensively with clean energy. At the St. Petersburg Summit we adopted ground-breaking decisions on energy security and committed ourselves to a set of agreed areasof cooperation, inter alia to increase transparency, predictability and stability of globalenergy markets, improving investment climate in the energy sector, enhance energyefficiency, diversify the energy mix, ensure the security of critical energy infrastructure,reduce energy poverty and address climate change. To maintain the momentum of those achievements we herewith strongly reaffirm our commitment to Global EnergySecurity Principles, including our commitment to enhance dialogue on relevant share-holders perspectives on growing interdependence, security of supply and demand is-sues, facilitate diversification of different types of contracts, including market-basedlong-term and spot contracts, promote investment in upstream and downstream assetsinternationally, support the principles of the Energy Charter and the efforts of the par-ticipating countries to improve international energy co-operation.45. To maintain the momentum of that groundbreaking achievement, weinvite China, Brazil, India, Mexico and South Africa and other major emergingeconomies to adopt these Global Energy Security Principles,will prepare national reports, with the assistance of the IEA, evaluating G8 mem-


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ber states efforts to adhere to those principles, for delivery at the 2008 G8 sum-mit, andnote the importance of government-controlled strategic oil reserves, to lessen theimpact of sudden and severe natural or man-made disruptions to oil supplies,

Page 1615and encourage the IEA to further assist major emerging oil consuming countriesto adopt best practices with regard to building, maintaining and coordination therelease of strategic oil reserves.46. This year we have focussed our discussions on energy efficiency in order to makean effective contribution towards meeting global climate and energy security challenges.Improving energy efficiency worldwide is the fastest, the most sustainable and thecheapest way to reduce greenhouse gas emissions and enhance energy security.47. We welcome the progress made so far at the meetings of the Gleneagles Dialogueon Climate Change, Clean Energy and Sustainable Development, held in the UnitedKingdom in 2005 and Mexico in 2006. We also welcome the intentions of Germany andJapan to host the Dialogue meetings during their G8 Presidencies. We look forward toreceiving a report of the Dialogue at the G8 Summit next year under the Japanese G8Presidency.CLIMATE CHANGE48. We take note of and are concerned about the recent UN Intergovernmental Panelon Climate Change (IPCC) reports. The most recent report concluded both, that globaltemperatures are rising, that this is caused largely by human activities and, in addition,that for increases in global average temperature, there are projected to be majorchanges in ecosystem structure and function with predominantly negative conse-quences for biodiversity and ecosystems, e.g. water and food supply.

Fighting Climate Change49. We are therefore committed to taking strong and early action to tackle climatechange in order to stabilize greenhouse gas concentrations at a level that would preventdangerous anthropogenic interference with the climate system. Taking into account thescientific knowledge as represented in the recent IPCC reports, global greenhouse gasemissions must stop rising, followed by substantial global emission reductions. In set-ting a global goal for emissions reductions in the process we have agreed today involv-ing all major emitters, we will consider seriously the decisions made by the EuropeanUnion, Canada and Japan which include at least a halving of global emissions by 2050.

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We commit to achieving these goals and invite the major emerging economies to join usin this endeavour.50. As climate change is a global problem, the response to it needs to be international.We welcome the wide range of existing activities both in industrialised and developingcountries. We share a long-term vision and agree on the need for frameworks that willaccelerate action over the next decade. Complementary national, regional and globalpolicy frameworks that co-ordinate rather than compete with each other will strengthen


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the effectiveness of the measures. Such frameworks must address not only climatechange but also energy security, economic growth, and sustainable development objec-tives in an integrated approach. They will provide important orientation for the neces-sary future investment decisions.51. We stress that further action should be based on the UNFCCC principle of common

but differentiated responsibilities and respective capabilities. We reaffirm, as G8 lead-ers, our responsibility to act. We acknowledge the continuing leadership role that devel-oped economies have to play in any future climate change efforts to reduce globalemissions, so that all countries undertake effective climate commitments tailored to theirparticular situations. We recognise however, that the efforts of developed economieswill not be sufficient and that new approaches for contributions by other countries areneeded. Against this background, we invite notably the emerging economies to addressthe increase in their emissions by reducing the carbon intensity of their economic devel-opment. Action of emerging economies could take several forms, such as sustainabledevelopment policies and measures, an improved and strengthened clean developmentmechanism, the setting up of plans for the sectors that generate most pollution so as toreduce their greenhouse gas emissions compared with a business as usual scenario.52. We acknowledge that the UN climate process is the appropriate forum for negotiat-ing future global action on climate change. We are committed to moving forward in thatforum and call on all parties to actively and constructively participate in the UN ClimateChange Conference in Indonesia in December 2007 with a view to achieving a compre-hensive post 2012-agreement (post Kyoto-agreement) that should include all majoremitters.53. To address the urgent challenge of climate change, it is vital that major economiesthat use the most energy and generate the majority of greenhouse gas emissions agree

Page 1817on a detailed contribution for a new global framework by the end of 2008 which wouldcontribute to a global agreement under the UNFCCC by 2009.We therefore reiterate the need to engage major emitting economies on how best toaddress the challenge of climate change. We embrace efforts to work with these coun-tries on long term strategies. To this end, our representatives have already met with therepresentatives of Brazil, China, India, Mexico and South Africa in Berlin on 4 May2007. We will continue to meet with high representatives of these and other major en-ergy consuming and greenhouse gas emitting countries to consider the necessary com-ponents for successfully combating climate change. We welcome the offer of the UnitedStates to host such a meeting later this year. This major emitters process should in-clude, inter alia, national, regional and international policies, targets and plans, in linewith national circumstances, an ambitious work program within the UNFCCC, and thedevelopment and deployment of climate-friendly technology.This dialogue will support the UN climate process and report back to the UNFCCC.Technology54. Technology is a key to mastering climate change as well as enhancing energy secu-rity. We have urgently to develop, deploy and foster the use of sustainable, less carbon


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intensive, clean energy and climate-friendly technologies in all areas of energy produc-tion and use. We have to develop and create supportive market conditions for accelerat-ing commercialisation of new less carbon intensive, clean-energy and climate-friendlytechnologies. Furthermore, to ensure sustainable investment decisions worldwide, weneed an expanded approach to collaboratively accelerate the widespread adoption of

clean-energy and climate-friendly technologies in emerging and developing economies.Therefore, we willstimulate global development, commercialisation, deployment and access to tech-nologies,promote major emerging and developing economies participation in internationaltechnology partnerships and collaborations,scale up national, regional and international research and innovation activities and

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undertake strategic planning and develop technology roadmaps to strengthen the

role of advanced technology in addressing climate change.Market Mechanisms55. Private sector investment is and will remain the primary means of technology de-ployment and diffusion. Strong economies and a wide range of policy instruments arerequired to develop, deploy and foster climate-friendly technologies. Market mecha-nisms, such as emissions-trading within and between countries, tax incentives, per-formance-based regulation, fees or taxes, and consumer labelling can provide pricingsignals and have the potential to deliver economic incentives to the private sector. Fos-tering the use of clean technologies, setting up emissions-trading systems and, as manyof us are doing, linking them are complementary and mutually reinforcing approaches.Therefore, we will share experience on the effectiveness of the different policy instru-ments in order tobetter provide the international business community with a predictable and long-term perspective, andstrengthen and extend market mechanisms by, inter alia, developing and extend-ing existing programmes, taking into account the appropriate metrics for such sys-tems.Reducing Emissions by Curbing Deforestation56. We are determined to assist in reducing emissions from deforestation, especially indeveloping countries. Reducing, and in the long term halting deforestation provides asignificant and cost-effective contribution toward mitigating greenhouse gas emissions

and toward conserving biological diversity, promoting sustainable forest managementand enhancing security of livelihoods. To this end, we willencourage the establishment of a pilot project dedicated to building capacity,creating and testing performance-based instruments to reduce emissions fromdeforestation in developing countries, in support of and without prejudice to on-going UN climate change discussions. We therefore encourage the World Bank,in close cooperation with the G8, developing countries, the private sector, NGOs


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and other partners, to develop and implement such a forest carbon partnershipas soon as possible.continue to support existing processes to combat illegal logging. Illegal logging is

one of the most difficult obstacles to further progress in realising sustainable for-est management and thereof, in protecting forests worldwide,remain engaged in supporting developing countries to achieve their self-commitments for halting forest loss and to implement sustainable forest man-agement, as stated in various regional initiatives, i.e. the Congo Basin and theAsia Forest Partnerships. Good results and good practice in international coop-eration have also been achieved through ITTO projects and the Brazilian PilotProgram to conserve the tropical rain forests.57. At the St. Petersburg Summit, we agreed to enhance international co-operation inthe area of sustainable forest management. We welcome the recent agreement at theUN Forum on Forests on a non-legally binding instrument on the sustainable manage-ment of all types of forests. We note that the effectiveness of this instrument will be re-viewed by the UN Forum on Forests in 2015. Building on these initiatives, we are de-termined and urge the international community to strengthen co-operation and the shar-ing of best practices at all levels. Consideration of additional actions on sustainable for-est management could be a possible next step for parties willing to expand on theircommitments.Adapting to Climate Change58. We acknowledge that even implementing the ambitious mitigation steps describedabove will not avoid further climate impacts, especially in those developing countriesand regions which are most vulnerable to climate change. We are committed to enhanc-

ing resiliency to climate variability and climate change in a way that fully supports ourcommon goal of sustainable development. We welcome the adoption of the Nairobiwork programme on impacts, vulnerability, and adaptation to climate change. We alsonote the importance of the UN adaptation funds in helping developing countries main-stream adaptation into policies and programming. We emphasise our willingness to con-tinue and enhance cooperation with and support for developing countries in adapting toclimate change and enhancing their resilience to climate variability, in particular thosemost vulnerable to the negative impacts of climate change. We also emphasise our will-

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ingness to work with developing countries on the costs and benefits of climate changeadaptation measures to help integrating them in national development planning. Wereaffirm our commitment to assist with climate research and risk assessments includingthrough helping developing countries benefit from satellite observation systems.59. We will also endeavour under the Montreal Protocol to ensure the recovery of theozone layer by accelerating the phase-out of HCFCs in a way that supports energy effi-ciency and climate change objectives. In working together toward our shared goal of speeding ozone recovery, we recognize that the Clean Development Mechanism im-


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pacts emissions of ozone-depleting substances. We will continue to exercise leadershipin the development of the Global Earth Observation System of Systems (GEOSS).60. We will report on the progress achieved in the areas mentioned above at the G8Summit in 2008.Biodiversity

61. We emphasise the crucial importance of the conservation and the sustainable useof biodiversity as an indispensable basis for the provision of vital ecosystem servicesand the long term provision of natural resources for the global economy. We acknowl-edge the "Potsdam Initiative Biological Diversity 2010" presented at the G8 Environ-mental Ministerial meeting in March 2007 and will increase our efforts for the protectionand sustainable use of biological diversity to achieve our agreed goal of significantlyreducing the rate of loss of biodiversity by 2010.ENERGY EFFICIENCY62. The global potential for saving energy is huge. According to the International EnergyAgency, successfully implemented energy efficiency policies could contribute to 80% of avoided greenhouse gases while substantially increasing security of supply.63. We recognise that enhanced international cooperation offers enormous opportuni-ties. Against this background we are committed to further strengthening and increasingour efforts of co-operation, both at inter-state level as well as within the framework of the respective international fora and organisations.

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To this end, we willcontinue and further substantiate our energy-efficiency dialogue begun at Evian;move forward with implementing the Gleneagles and St. Petersburg ActionPlans, thereby retaining and supporting the IEAs close involvement;

take forward the concrete recommendations on energy efficiency presented bythe IEA and consider drawing on these when preparing national energy effi-ciency plans;encourage the World Bank and other IFIs to further broaden and improve theirfinancial framework for energy efficiency and clean energy;note the EUs proposal for an international agreement on energy efficiency andask the Gleneagles Dialogue on Climate Change, Clean Energy and SustainableDevelopment and the IEA to explore the most effective means to promote en-ergy efficiency internationally, including through the exchange of best practices,sharing methodologies and further cooperation and by inviting other countries

with significant energy needs to join;promote international research, encourage investment and development co-operation aimed at energy efficient technologies and other greenhouse gas miti-gation options;report on progress in the policies and measures on energy efficiency outlinedbelow at the G 8 summit in 2008.64. We note that, in view of their high energy needs, industrialised and emerging econo-mies have a fundamental joint interest in taking measures to encourage the most effec-


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tive use of their energy.65. Against this background we commit ourselves to a model of efficient energy sys-tems and call on other countries with high energy demand, including the major emerg-ing economies, to join us in this endeavour. Our goal of building less energy intensiveeconomies will also advance economic growth and competitiveness. To this end, we will

promote the appropriate policy approaches and instruments, including inter alia eco-nomic incentives and sound fiscal policies, minimum standards for energy efficiency,sound and ambitious energy performance labelling, information campaigns aimed at

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consumers and industry that enhance national awareness, sector-based voluntarycommitments agreed with industry, investment in research and development and guide-lines for public procurement. We will develop and implement national energy efficiencyprogrammes and advance international cooperation on energy efficiency, notably onefficiency standards. We ask the IEA to continue to support our national efforts by ap-propriate advice and make proposals for effective international co-operation.66. We will furthermore work together with the major emerging economies towards areduction in energy consumption in priority sectors. To this end we will invite the IEA,itsmembers and their respective industries to increase the dialogue with the major emerg-ing economies on more efficient energy policies and develop guidance mechanisms.Sustainable Buildings67. The opportunities for making buildings more efficient are enormous. Following theEU/G8 conference on energy efficiency, held in Berlin in April 2007, we willset up a "Sustainable Buildings Network", involving the G8 and open for partici-pation of the major emerging economies. The network will develop practical in-

struments for assessing and advising on the implementation of energy efficiencyin buildings and the use of renewable energies, especially for cooling and heat-ing, taking into due consideration the different situations of new and existingbuildings, and development and deployment of low and zero-carbon buildings,invite the IEA to take a central role in creating this network,work to increase energy efficiency in the building sector, and to reach a consid-erable expansion of renewable energies in this area. To this end we will considerthe role of nationally determined targets in sustainable buildings and their impor-tance for energy efficiency in the medium to long term. We will actively supportthe energy efficient technologies and the use of renewable energies by employ-ing market mechanisms, promotion instruments and framework legislation, aswell as through public-private-partnership initiatives to move towards low orzero-energy buildings. Instruments to this end include consumer informationsuch as energy performance certificates (building passports) and individual en-ergy standards which also consider renewable energies - for new buildings,modernisation or household equipment.

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Transportation68. Today there are 600 million motor vehicles around the globe, a figure which is pro-

jected to double by 2020. With this in mind, we willwork to increase energy efficiency in the transport sector. To this end we will ask our governments to foster a large number of possible measures and various in-

struments that can clearly reduce energy demand and CO2 emissions in thetransport sector, including inter alia innovative engine concepts, alternative fuels,city planning measures, public transport, best possible inter-linkage of transportmethods, increase the share of alternative fuels and energy carriers (biofuels,hydrogen, LPG/CNG, electricity, hybrid, etc.) in total fuel consumption; fuel di-versification, for example synthetic and cellulosic biofuels and CO2-free hydro-gen, particularly in combination with the fuel cell, will be decisive in reducingtransport CO2 emissions, provided that second generation biofuel technologiesbecome commercially available,step up coordination on development of international biofuel quality standards

from various feedstocks to achieve optimal interoperability and emission profiles,avoid possible negative side-effects in biofuel development, particularly in devel-oping countries in order to prevent competition between different forms of landuses, and promote sustainability in biomass cultivation. We invite the GlobalBioenergy Partnership (GBEP) to continue its work on biofuel best practices andtake forward the successful and sustainable development of bioenergy,monitor the implementation of the necessary measures and discuss progress attwo-year intervals during the Environmentally Friendly Vehicles Conference theresults of which shall be reported to G8-leaders,introduce energy efficiency labels for new cars along the lines of those alreadyon some white goods.

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Power Generation69. Over the next 25 years, fossil fuels will remain the worlds dominant source of en-ergy. Making power generation more efficient, climate friendly and sustainable is there-fore crucial.70. Current innovations in power station design bear significant saving potential. There-fore, we willstimulate investments in high efficient power plants and grids and promote refur-bishment of existing ones by an appropriate national policy framework. By this

we aim to increase average power plant efficiencies in each of our countries.continue and expand national and international research and development ef-forts to further advance modern power station technologies, with the aim of achieving higher efficiency levelsadopt instruments and measures to significantly increase the share of combinedheat and power (CHP) in the generation of electricity.71. The centre of gravity of global energy demand is continuously shifting towards theemerging economies. We will


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enhance energy co-operation with those countries as a priority issue, includingby actively supporting co-operative research, voluntary technology partnershipsand private investment in clean technologies,work in close partnership with industry, science and with governments of otherindustrialised countries and, in particular, of major emerging economies in order

to foster the diffusion and adoption of best practices along the entire fossil fuelprocess chain with a focus on fuel treatment as well as new and existing powerplants. We particularly underline the need to promote capacity building and tech-nology transfer on plant renovation and modernisation. To achieve these goalswe will invite the IEA to take a central role in guiding our joint efforts.72. In recognition of the increasingly urgent needs to achieve longer term greenhousegas abatement, we will work on accelerating development and deployment of carboncapture and storage (CCS), including byprioritising national and international research and development efforts and en-

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couraging international research and technology cooperation, to minimise effi-ciency losses of the different carbon capture technologies and to clarify geo-technical conditions for secure CO2 storage,encourage research, development and deployment of clean coal technologies inboth developed and emerging economies with the highest energy needs,supporting national and international geoscientific and political efforts in the fieldof CCS on ensuring security of storage and the provision of necessary legalframeworks to create a stable investment climate, thereby working in co-operation with industry as well as national and international research pro-grammes,reinforcing our commitment made under the Gleneagles and St. PetersburgPlans of Action to support the initiatives taken by IEA and Carbon SequestrationLeadership Forum (CSLF),encouraging our governments to design mechanisms to stimulate the construc-tion and operation of a growing number of large-scale demonstrations of sus-tainable fossil fuels technologies in commercial power generation.encouraging industry to consider the concept of capture ready when developingnew fossil fuel power plant73. We reaffirm our support of the efforts of the Global Gas Flaring Reduction Partner-ship (GGFR) and we commit ourselves to reduce to minimal levels natural gas flaring,

and to encourage all oil producing states and private sector stakeholders to do likewise.Industry74. Over the next 25 years, global energy consumption in the industrial sector is pro-

jected to increase significantly. There is a considerable potential for improving energyefficiency. Therefore, we willcooperate more closely with major emerging economies and leading industrieson improving energy efficiency in energy intensive industries utilising on-goingwork of the IEA for developing sector energy efficiency indicators and combining


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good practices.encourage the introduction of cost-effective technology as well as promote re-

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search and development for further innovation for breakthrough of the technol-

ogy in such areas as iron, steel and cement.Energy Diversification75. Diversification of energy sources, markets, transportation routes and means of transport and types of energy is essential to energy security and to a low-carbon energypath. Increasing and varying our sources of energy helps to defuse the risks of disrup-tion from any one source. Increasing the use of alternative sources of energy can overtime greatly relieve pressure on markets for conventional fossil fuels and reduce theadverse environmental impacts of energy use.76. Underlining the importance of energy diversification, and recognising that G8 mem-bers will choose different ways to achieve their energy diversity goals, wewill continue to develop and implement the policy frameworks needed to sup-port our intensive commitment to the global use of all clean fuels, includingclean coal, renewable energy sources (wind, solar, geothermal, bioenergy,hydro power). We will make efforts to integrate renewables into the powergrid,reaffirm our pledge at former summits regarding the peaceful use of nuclearenergy. Those of us who have or are considering plans relating to the useand/or development of safe and secure nuclear energy believe that its devel-opment will contribute to global energy security, while simultaneously reduc-ing harmful air pollution and addressing the climate change challenge.reaffirm our commitment to work towards the reduction or, where appropriate,the elimination of tariff and non-tariff barriers to environmental goods and ser-vices through the WTO Doha negotiations, which will also help us to addressour shared energy security and climate goals,welcome concerted global action to promote renewable energy and the sup-port of interested parties for initiatives and partnerships such as the Renew-able Energy Policy Network for the 21st Century (REN21), the RenewableEnergy and Energy Efficiency Program (REEEP), the Global Bio-EnergyPartnership (GBEP) and the Mediterranean Renewable Energy Partnership(MEDREP),

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take note of national and international initiatives to go along with the furtherdevelopment of a peaceful use of nuclear energy including the Global NuclearEnergy Partnership (GNEP), the Russian initiative on multinational centres toprovide nuclear fuel cycle services, the Six party proposal of a standingmechanism for reliable access to nuclear Fuel, the Japanese initiative onIAEA standby arrangements system for the assurance of nuclear fuel supply,and the German initiative for an enrichment centre under the exclusive control


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of the IAEA as well as ongoing debate on other multilateral approaches to anuclear fuel cycle for a reliable fuel supply program, the work of the Interna-tional Project on Innovative Nuclear Reactors and Fuel Cycles (INPRO), andadvanced nuclear energy research under the Generation IV International Fo-rum (GIF).

77. We are committed to the paramount importance of safety, security and non prolif-eration in using nuclear power. We reiterate common interest to continuously improvenuclear safety, radiation protection, waste management, nuclear security and nuclearliability in our respective countries, and we call upon all other states to do the same.IAEA standards and recommendations form a good basis for the continuous improve-ment of nuclear safety and security, as well as national nuclear regulatory systems. Weunderline the need for effective national regulatory infrastructures, in particular the im-portance for national regulatory body to have sufficient authority, independence, andcompetence.We remain committed to a robust regime for assuring nuclear non-proliferation as wellas a reliable safety and security system for nuclear materials, radioactive wastes andnuclear facilities. We ensure full implementation of the international conventions andtreaties in force today which are a prerequisite for a high level of nuclear safety and se-curity as well as a basis to achieve a peaceful and proliferation-resistant nuclear energyuse. The responsibility of all nations to support the work of the IAEA and all measures toimplement these conventions and treaties in these fields is emphasized.78. Considering the above mentioned challenges, the G8 Nuclear Safety and SecurityGroup (NSSG) will continue in its work to consider nuclear safety and security issues.79. In recognition of the Chernobyl accident in 1986 we reaffirm our commitments under former G7/G8 Summit declarations and memoranda of understanding andthrough Chernobyl Shelter Fonds (CSF) and Nuclear Safety Account (NSA) pro-

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grammes to undertake joint efforts with Ukraine to convert the damaged reactor unitsite into safe conditions.

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RESPONSIBILITY FOR RAW MATERIALS:TRANSPARENCY AND SUSTAINABLE GROWTH80. Raw materials produced by the extractive sector are a key factor for sustainablegrowth in industrialised, emerging and developing economies. They are a particularly

valuable asset for sustaining growth and reducing poverty in many of the poorest coun-tries in the world. It is in our common global interest that resource wealth be used re-sponsibly so as to help reduce poverty, prevent conflicts and improve the sustainabilityof resource production and supply. We firmly agree that significant and lasting progressin this area can only be achieved on the basis of transparency and good governance.Against this background, we support increased transparency with regard both to theextractive sector and the subsequent trade and financial flows. In doing so, we will work closely together with resource rich economies as well as important raw-material con-


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suming emerging economies.81. Free, transparent and open markets are fundamental to global growth, stability andsustainable development. We therefore,reaffirm our strong commitment to the principles of free trade and to a furtherstrengthening of the multilateral trading system.

will work to promote global applicability of and compliance with WTO rules, alsowith regard to trade in primary and secondary mineral raw materials.call on our trading partners to refrain from restraints on trade and distortion of competition in contravention of WTO rules and to observe market economy prin-ciples.82. Mineral resources have a great potential to contribute to poverty alleviation and sus-tainable development. In some cases, nonetheless, extraction and processing of re-sources are associated with misuse of revenues, environmental destruction, armed con-flict and state fragility. We firmly agree on the need to further enhancing the contributionof mineral resources to sustainable growth and will continue to support resource rich

Page 3130countries in their efforts to further expand their resource potential while promoting sus-tainable development and good governance. To this end we will build capacity for goodgovernance of mineral resources consistent with social and environmental standardsand sound commercial practices by reducing barriers to investment and trade, throughthe provision of financial, technical and capacity building support to developing coun-tries for the mining, processing and trading of minerals. Based on sound life cycleanalyses, we will also encourage conservation, recycling and substitution of raw materi-als, including rare metals, for sustainable growth.83. Increased transparency in the extractive sector, is of crucial importance for achiev-

ing accountability, good governance and sustainable economic growth worldwide. Wewelcome the proposal of the G8-Presidency to convene in 2007 a global conference ontransparency in the extractive sector with the participation of governments, business,civil society and science from industrialised, emerging and developing economies.84. The development of a consolidated set of principles and guidelines that apply to theinternational mining sector in developing countries would help ensure that the sectorcontributes to development while at the same time providing a clear and more predict-able set of expectations for investors. It is important that all stakeholders be involved ina process to build consensus around a set of recognised principles and guidelines inthe mining sector. In order to encourage such a consensus among key stakeholders we:reaffirm our support of the OECD Guidelines for Multinational Enterprises asimportant international benchmark for corporate social responsibility,will promote wider understanding of and support for the following standards,tools and best practices for the mining sector: the OECD Risk Awareness Toolfor Multinational Enterprises in Weak Governance Zones, the Voluntary Princi-ples on Security and Human Rights and the International Finance Corporation(IFC) Performance Standards,encourage active engagement of mining sector companies with the UN Global


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Compact,encourage mining sector companies to undertake regular reporting using interalia the Global Reporting Initiative (GRI) framework, and welcome the adapta-tion of this instrument for small and medium enterprises as well as to the spe-cific needs of the mining sector,

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will support the work of the UN Special Representative of the Secretary Generalfor Business and Human Rights.85. Certification systems can be a suitable instrument in appropriate cases for increas-ing transparency and good governance in the extraction and processing of mineral rawmaterials and to reduce environmental impacts, support the compliance with minimumsocial standards and resolutely counter illegal resource extraction. Therefore, we reaf-firm our support for existing initiatives such as the Kimberley Process, Green Lead, theIntergovernmental Forum on Mining, Minerals, Metals and Sustainable Development,the International Council on Mining and Metals or the International Cyanide Manage-ment Code, and encourage the adaptation of the respective principles of corporate so-cial responsibility by those involved in the extraction and processing of mineral re-sources,86. The artisanal and small-scale mining sector provides important livelihoods to manypeople in developing countries, and also contributes to global production of minerals.We are concerned that these activities often are conducted in an informal manner anddo not meet minimum social and environmental standards which apply to the extractivesector. In order to better support the development of sustainable livelihoods and positivedevelopmental impacts associated with artisanal and small-scale mineral production, weencourage collaborative partnerships between public, civil society and private

actors in the mining sector in order to develop systems for the transparent useof funds for local development from mining companies and donors, consistentwith aid effectiveness principles,support a pilot study, in co-operation with the World Bank and its initiatives,concerning the feasibility of a designed certification system for selected raw ma-terials. In taking this initiative we will focus on the artisanal and small scale min-ing sector and work in close partnership with governments from mineral re-source rich developing countries as well as industry on the basis of their volun-tary commitments. The pilot study shall strive on the basis of the existing princi-ples and guidelines, in order to comply with internationally recognised minimumstandards by verifying the process of mineral resource extraction and trading.We invite major emerging economies to work with us on this issue,encourage support for the Communities and Small-scale Mining (CASM) initia-tive, housed at the World Bank, and for the multistakeholder Diamond Devel-

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opment Initiative (DDI), which emerged from the Kimberley Process tostrengthen the developmental impacts associated with artisanal diamond mining


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in Africa,support efforts to develop techniques to limit pollution associated with artisanalmining, such as education and training to encourage the use for example of safer retorts for gold extraction.87. We emphasise our determination to fight corruption and mismanagement of public

resources in both revenue raising and expenditures. As part of our ongoing efforts tofoster transparency with regard to resource-induced payment flows, we will continue tosupport good governance and anti-corruption initiatives, such as the Extractive IndustryTransparency Initiative (EITI), and wecommit to provide continuous assistance to strengthen EITI, as appropriatethrough financial, technical and political means. Equally, we invite all stake-holders to provide support for the implementation of the EITI,call on implementing countries and companies participating in EITI to implementthe Initiative and comply with their disclosure commitments. Equally, we en-courage further countries to participate in EITI as appropriate,

welcome the

fact that an independent validation-process has been initiated tomonitor the national implementation measures. We encourage prompt applica-tion and further development of the validation methodology,welcome the fact that a number of large banks have already signed the UnitedNations Environmental Program (UNEP) Finance Initiative and the EquatorPrinciples. We call on further major banks to follow suit to adopt the EquatorPrinciples for project finance and implement the International Finance Corpora-tion (IFC) standards, particularly those standards that relate to transparentpayments and contracts in the extractive sector, and finallyinitiate, within the framework of the 2007 global conference on transparency, adialogue with the major emerging economies to enlist the governments and es-pecially the state-owned companies domiciled in these countries as participantsin EITI.

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FIGHT AGAINST CORRUPTION88. Promoting the fight against corruption, both at the national and international levels,remains one of the most important tasks of the G8. We are aware of their leadershiprole in setting examples in the fight against corruption, and are taking concerted actionto live up to their commitments and responsibilities. We are committed to full implemen-tation of their obligations under existing international agreements created to combat cor-

ruption, particularly those of the United Nations and the Organisation for Economic Co-operation and Development (OECD). This includes the partners commitment to effectiveinvestigation and prosecution of domestic and foreign bribery cases.89. We will intensify their common efforts to effectively combat corruption worldwide.This includes:Supporting the ratification of the UN Convention against Corruption (UNCAC)by all countries;


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Coordinating closely to promote effective implementation of the UNCAC, par-ticularly related to developing effective review mechanisms, strengthening inter-national measures on asset recovery, and encouraging provision of technicalassistance;Supporting the work of the United Nations Office of Drugs and Crime (UNODC),

Interpol, the OECD and other international bodies to coordinate the implementa-tion of UNCAC;Ensuring that developing countries can access and develop technical expertiseto help them recover illicitly-obtained assets;Reaffirming a shared commitment to effective monitoring through the implemen-tation of a continuous, rigorous and permanent peer review mechanism underthe OECD Anti Bribery Convention, and strategic advancement of the Conven-tion through continued engagement with non-party emerging economies;

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Supporting

International Financial Institutions efforts to combat corruption, in-cluding the implementation of the World Banks Governance and Anti-Corruption Strategy to increase assistance to countries to strengthen govern-ance and reduce corruption;Denying safe havens through our national laws to individuals found guilty of cor-ruption and the return of illicitly-acquired assets with high priority and develop-ing additional measures to prevent such individuals from gaining access to thefruits of their criminal activities in our financial systems;Urging all financial centers to implement the highest international standards of transparency, exchange of information and the fight against money laundering;Supporting the efforts of the private sector in combating and preventing corrup-tion, including through promoting greater accountability and transparency of payments in key sectors;Providing assistance to countries that show willingness and ability to use fundseffectively;Welcoming the entry into force of the AU Convention on preventing and com-bating corruption and encouraging all AU Countries to ratify and implement it.90. We will continue to develop concrete strategies and best practices regarding spe-cific aspects of combating corruption; for example, this will include implementing re-gional G8 workshops on the recovery of illicitly-obtained assets. We will also providedeveloping countries with enhanced capacity building assistance.

91. We are aware of the increasing role of investments from emerging countries and willkeep this topic on the agenda. Emerging countries are encouraged to meet the interna-tional anticorruption standards and are invited to adhere to international anticorruptioninstruments.92. Building on the St. Petersburg Statement of 17 July 2006, we will focus on prevent-ing corruption and of raising public awareness, in collaboration with civil society. Weagree that corruption should be combated most effectively by measures which reducethe vulnerability of the public sector to corruption. We will work actively to promote ap-


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propriate preventive measures, particularly in the government and administration, interPage 36

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alia through transparent public procurement and will also provide support to otherStates in working up best practices in this area.

93. We understand the critical relationship that exists between providing a stable, trans-parent, and corruption-free business climate, and the ability to attract much needed for-eign direct investment. Potential investors look at a range of issues in making invest-ment location decisions, and a corruption-free environment is high among those deter-minants.

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THE HEILIGENDAMM PROCESS WITH MAJOR EMERGING ECONOMIESHIGH LEVEL DIALOGUE BETWEEN G8 MEMBER COUNTRIESAND BRAZIL, CHINA, INDIA, MEXICO AND SOUTH AFRICA94. At the Heiligendamm Summit we discussed with the leaders of Brazil, China, India,Mexico and South Africa the major challenges that have arisen in the world economy.Neither the G8 countries nor major emerging economies will be able to cope with thesechallenges individually. Against the background of our respective responsibilities, com-mon solutions need to be developed. Both the G8 countries and the major emergingeconomies have the chance to define a new partnership responding to these world eco-nomic challenges.95. Building on our discussions, we decided to launch a new form of specific coopera-tion with major emerging economies in order to discuss substantive topics in a compre-hensive follow-up process with the aim of reaching tangible results in two years.

96. We will initiate a new form of a topic-driven Dialogue in a structured manner basedon this new partnership. We agreed to address four issues:Promoting and protecting innovation,Enhancing freedom of investment through an open investment environment in-cluding strengthening corporate social responsibility principles,Defining common responsibilities for development with special regard to Africa,Sharing knowledge for improving energy efficiency and technology cooperationwith the aim to contribute to reducing CO2

-emissions, consistent with the Glen-eagles Dialogue on Climate Change, Clean Energy and Sustainable Develop-ment, and the St. Petersburg Plan of Action on Global Energy Security,

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97. We ask the OECD to provide a platform for this new dialogue process, with the IEAbeing the relevant organisation in the field of energy efficiency. The dialogue processwill begin in the second half of 2007. The G8 Summit in Japan in 2008 will receive aninterim report on the progress made and at the G8 Summit in Italy in 2009 a final report


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on the outcomes of the Dialogue Process will be presented.

BRICs, emerging markets and

the world economyNot just straw menJun 18th 2009From The Economist print edition

The biggest emerging economies are

rebounding, even without recovery inthe West

EPA

THE inaugural summit of the BRICsBrazil, Russia, India, Chinacame and went in Yekaterinburg this week with more rhetoric thansubstance. Although Russias president, Dmitry Medvedev, called it

the epicentre of world politics, this disparate quartet signally failed torival the Group of Eight industrial countries as a forum for economicdiscussion.


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Decoupling means not simply that emerging markets tend to growfaster than rich industrial ones, although that is certainly true; it alsoimplies that to some extent the two groups dance to different tunes,with emerging markets growing or shrinking autonomously, not justunder the influence of rich ones. A study last year by Ayhan Kose of

the IMF, Christopher Otrok of the University of Virginia and EswarPrasad of Cornell University gave some support to this idea.

You would expect less decoupling as a result of globalisation. Thecycles of output, consumption and investment should become moreclosely aligned in countries engaged in world trade. Yet when theauthors looked at these indicators, they found something different.The cycles of output, consumption and investment did indeed becomemore closely aligned in rich countries. And the same thing happened inemerging markets. But when the authors compared the two groups,they found they were diverging. The business cycles of America andEurope converged. The business cycles of India and China converged.The business cycles of rich and emerging markets had decoupled.

When this study came out in mid-2008 the worldwide crash seemed torender it instantly obsolete. Yet the sheer size of the meltdown maytemporarily have swamped deeper trends that are now reassertingthemselves as the initial shock recedes. In 2000 developing countriesaccounted for 37% of world output (at purchasing power parities). Lastyear their share rose to 45%. The share of the BRICs leapt from 16%to 22%, a sharp rise in such a short period. Almost 60% of all the

increase in world output that occurred in 2000-08 happened indeveloping countries; half of it took place in the BRICs alone (seechart).


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If this pattern of growth were resuming, it would be good news: nearlyhalf the world economy would be bouncing back. And there are one ortwo signs that the benefits of growth in the BRICs are being feltfarther afield. Anecdotal evidence suggests south-south trade andinvestment by richer emerging markets in poorer ones c

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