Regional dimensions of recent investment weakness: Facts, investment needs and policy responses

Ekaterine Vashakmadze, Gerard Kambou, Derek Chen, Boaz Nandwa, Yoki Okawa, Dana Vorisek

Abstract


Investment growth in many emerging market and developing economies (EMDEs) has slowed sharply since 2010. Investment growth performance has varied significantly across different regions, however. This paper examines the evolution of investment growth in six EMDE regions, documents remaining investment needs, especially for infrastructure, and presents a set of region-specific policy responses to address these needs. It reports three main findings. First, investment growth has been particularly weak in EMDE regions hosting a large number of commodity exporters. In regions with a substantial number of commodity-importing economies, investment growth has been somewhat resilient but has also declined steadily since 2010. Second, sizable investment needs remain in most EMDE regions to make room for expanding economic activity and rapid urbanization. A large portion of these investment needs is in infrastructure and human capital. Finally, while specific policy priorities vary across regions, several policy options to address remaining investment needs apply universally. These include more, and more efficient, public investment and measures to improve overall growth prospects and the business climate. Improved project selection and monitoring, as well as better governance, may enhance the efficiency and benefits from public investment.


Keywords


Growth; regional investment; investment; human capital; infrastructure; fiscal policy; emerging markets; developing economies

Full Text:

PDF

References


ADB (Asia Development Bank) (2009). Infrastructure for a seamless Asia. Manila, the Philippines: Asia Development Bank.

______ (2012). Infrastructure for supporting inclusive growth and poverty reduction in Asia. Manila, the Philippines: Asia Development Bank.

Alfaro L and Chari A (2014). “Deregulation, misallocation, and size: Evidence from India”. The Journal of Law and Economics, 57(4): 897–936. doi: 10.1086/680930.

Al-Sadig A (2009). “The effects of corruption on FDI inflows”. Cato Journal, 29(2): 267¬–294.

Anbumozhi V and Intal PS (2015). “Can thinking green and sustainability be an economic opportunity for ASEAN?” Discussion Paper ERIA-DP-2015-66. Jakarta, Indonesia: Economic Research Institute for ASEAN and East Asia (ERIA).

Andres L, Biller D and Herrera Dappe, M (2014). “Infrastructure gap in South Asia: Infrastructure needs, prioritization, and financing”. Policy Research Working Paper Series 7032. Washington, DC, USA: World Bank.

Bhattacharya A, Romani M and Stern N (2012). “Infrastructure for development: Meeting the challenge”. London, UK: Centre for Climate Change Economics and Policy; London, UK: The Grantham Research Institute on Climate Change and the Environment.

Bhattacharyay BN (2012). “Estimating demand for infrastructure 2010–2020”. In: Bhattacharyay BN, Kawai M and Nag RM (eds.). Infrastructure for Asian Connectivity. Cheltenham, UK: Edward Elgar Publishing. doi: 10.4337/9781781003138.00010.

Bloom DE and Rosenberg L (2011). “The future of South Asia: Population dynamics, economic prospects and regional coherence”. Program on the Global Demography of Aging Working Paper Series 68. Cambridge, MA, USA: Harvard University, T.H. Chan School of Public Health.

BMI Research (2016). “Asia infrastructure report”. London, UK: BMI Research.

Calderón C and Servén L (2008). “Infrastructure and economic development in Sub-Saharan Africa”. Policy Research Working Paper No. 4712. Washington, DC, USA: World Bank. doi: 10.1596/1813-9450-4712.

Calderon C, Moral-Benito E and Servén L. (2014). “Is infrastructure capital productive? A dynamic heterogeneous approach.” Policy Research Working Paper 5682, World Bank, Washington, DC.

Dabla-Norris E, Brumby J, Kyobe A, et al. (2012). “Investing in public investment: An index of public investment efficiency”. Journal of Economic Growth, 17(3): 235–266. doi: 10.1007/s10887-012-9078-5.

Dethier J-J and Moore A (2012). “Infrastructure in developing countries: An overview of some economic issues”. Zentrum für Entwicklungsforschung (Center for Development Research) ZEF Discussion Papers on Development Policy No. 165. Bonn, Germany: University of Bonn.

EBRD (2015). EBRD Transition Report 2015–16. London, UK: European Bank for Reconstruction and Development.

European Investment Bank (2016). “Responding to Africa’s energy needs”. Luxembourg: European Investment Bank.

Ellis P and Roberts M (2016). Leveraging urbanization in South Asia: Managing spatial transformation for prosperity and livability. Washington, DC, USA: World Bank. doi: 10.1596/978-1-4648-0662-9.

Engel E, Fischer R and Galetovic A (2011). “Public-private partnerships to revamp U.S. infrastructure”. Discussion Paper 2011-02, February 2011. Washington, DC, USA: The Brookings Institution.

ESCAP (2015). Economic and social survey of Asia and the Pacific 2015. Bangkok, Thailand: United Nations Economic and Social Commission for Asia and the Pacific.

Estache A and Garsous G (2012). “The impact of infrastructure on growth in developing countries”. IFC Economics Notes Note 1. Washington, DC, USA: World Bank.

Estache A, Ianchovichina E, Bacon R, et al. (2013). Infrastructure and employment creation in the Middle East and North Africa. Washington, DC, USA: World Bank. doi: 10.1596/978-0-8213-9665-0.

Fay M and Yepes T (2003). “Investing in infrastructure: What is needed from 2000 to 2010?” Policy Research Working Paper 3102. Washington, DC, USA: World Bank. doi: 10.1596/1813-9450-3102.

Fay M, Toman M, Benitez D, et al. (2011). “Infrastructure and sustainable development”. In: Fardoust S, Kim Y and Sepúlveda C (eds.). Post-crisis growth and development: A development agenda for the G-20. Washington, DC, USA: World Bank. doi: 10.1596/9780821385180_CH08.

Foster V and Briceño-Garmendia C (2010). “Africa’s infrastructure: A time for transformation”. Washington, DC, USA: World Bank.

Global Infrastructure Facility (2015). “Global Infrastructure Facility results framework: As adopted by the GIF Governing Council on 25 May, 2015”. Washington, DC, USA: World Bank.

Gobat J and Kostial K (2016). “Syria’s conflict economy”. IMF Working Papers 16/123, Washington, DC, USA: IMF. doi: 10.5089/9781498336826.001.

Gramlich EM (1994). “Infrastructure investment: A review essay”. Journal of Economic Literature, 32(3): 1176–1196.

Gutman J, Sy A and Chattopadhyay S (2015). “Financing African infrastructure: Can the world deliver?” Washington, DC, USA: The Brookings Institution.

Henckel T and McKibbin W (2010). “The economics of infrastructure in a globalized world: Issues, lessons and future challenges”. Washington, DC, USA: The Brookings Institution.

Henckel T and McKibbin W (2017). “The economics of infrastructure in a globalized world: Issues, lessons and future challenges”. Journal of Infrastructure, Policy and Development, 1(2): 254–272. doi: 10.24294/jipd.v1i2.55

IADB (Inter-American Development Bank) (2010). “Urbanization in Latin America and the Caribbean: Trends and challenges”. Washington, DC, USA: IADB.

______ (2016). Time to act: Latin America and the Caribbean facing strong challenges. Washington, DC, USA: IADB.

Ianchovichina E, Estache A, Foucart R, et al. (2013). “Job creation through infrastructure investment in the Middle East and North Africa”. World Development, 45(May): 209–222. doi: 10.1016/j.worlddev.2012.11.014.

IMF (International Monetary Fund) (2014a). “Is it time for an infrastructure push? The macroeconomic effects of public investment.” In: World economic outlook: Legacies, clouds, uncertainties. Washington, DC, USA: International Monetary Fund.

______ (2014b). “Middle East, North Africa, Afghanistan, and Pakistan”. In: Regional economic outlook: Middle East and Central Asia. Washington, DC, USA: International Monetary Fund.

______ (2014c). “Staying the course”. In: Regional economic outlook: Sub-Saharan Africa. Washington, DC, USA: International Monetary Fund.

______ (2015a). World economic outlook: Adjusting to lower commodity prices. Washington, DC, USA: International Monetary Fund.

______ (2015b). “Recent investment weakness in Latin America: Is there a puzzle?” In: Western hemisphere regional economic outlook: Northern spring, southern chills. Washington, DC, USA: International Monetary Fund.

______ (2016a). “Latin America and the Caribbean: Are chills here to stay?” Regional economic outlook update, Fall 2016. Washington, DC, USA: International Monetary Fund.

______ (2016b). “Middle East, North Africa, Afghanistan, and Pakistan”. In: Regional economic outlook: Middle East and Central Asia. Washington, DC, USA: International Monetary Fund.

Inderst G (2016). “Infrastructure investment, private finance, and institutional investors: Asia from a global perspective”. ADBI Working Paper Series 555. Tokyo, Japan: Asian Development Bank Institute.

International Energy Agency (2014). Special report: World energy investment outlook. Paris, France: International Energy Agency.

International Finance Corporation. (2016). “Transforming African Development: Partnerships and Risk Mitigation to Mobilize Private Investment on a New Scale.” IFC, World Bank, Washington, DC.

Kohli H A and Basil P (2010). “Requirements for Infrastructure Investment in Latin America under Alternate Growth Scenarios: 2011–2040.” Global Journal of Emerging Market Economies, 3(1): 59–110.

KPMG (2011). “Survey on bribery and corruption: Impact on economy and business environment”. KPMG.

Le Borgne E and Jacobs TJ (2016). “Lebanon: Promoting poverty reduction and shared prosperity. Systematic country diagnostic”. Washington, DC, USA: World Bank.

Lee K and Pang T (2015). “Asia and the Pacific: Health policy challenges of a region in transition”. Asia & the Pacific Policy Studies, 2(2): 211–213. doi: 10.1002/app5.94.

McKinsey Global Institute (2011). “Powering India: The road to 2017”. McKinsey Global Institute.

______ (2013). “Infrastructure productivity: How to save $1 trillion a year”. McKinsey Global Institute.

______ (2014). Southeast Asia at the crossroads: Three paths to prosperity. McKinsey Global Institute.

______ (2016). “Bridging global infrastructure gaps”. McKinsey Global Institute.

Nataraj G (2007). “Infrastructure challenges in South Asia: The role of public-private partnerships”. Asian Development Bank Institute Discussion Paper No. 80. Tokyo, Japan: Asian Development Bank Institute.

OECD (Organisation for Economic Co-operation and Development) (2006). Infrastructure to 2030: Telecom, land transport, water and electricity. Paris, France: OECD. doi: 10.1787/9789264023994-en.

——— (2012). Strategic transport infrastructure needs to 2030. Paris, France: OECD. doi: 10.1787/9789264114425-en.

Perrotti D and Sánchez RJ (2011). “La brecha de infraestructura en América Latina y el Caribe” [Spanish] (The infrastructure gap in Latin America and the Caribbean). Serie Recursos Naturales e Infraestructura no. 153. Santiago, Chile: Economic Commission for Latin America and the Caribbean (ECLAC).

RBS (2011). “The roots of growth. Projecting EM infrastructure demand to 2030”. Emerging markets strategy. Edinburgh, Scotland: Royal Bank of Scotland.

Romer P (2016). “To end poverty, give everyone the chance to learn”. Speech at the End Poverty Day Event, Dhaka, Bangladesh, October 17. Washington, DC, USA: World Bank.

Ruiz-Nuñez F and Wei Z (2015). “Infrastructure investment demands in emerging markets and developing economies”. Policy Research Working Paper 7414. Washington, DC, USA: World Bank. doi: 10.1596/1813-9450-7414.

Sahoo P, Nataraj G and Dash RK (2014). Foreign direct investment in South Asia: Policy, impact, determinants and challenges. New Delhi, India: Springer. doi: 10.1007/978-81-322-1536-3.

Sathanapriya M and Jesintha P (2011). “Public private partnership in India”. Journal of Management and Science, 1(1): 61–68.

USAID (United States Agency for International Development) (2010). “Urbanization in Latin America and the Caribbean: Trends and challenges”. USAID, Washington, DC.

Vashakmadze E, Kambou G, Chen D, et al. (2017). “Regional dimensions of recent weakness in investment: Drivers, investment needs and policy responses”. Policy Research Working Paper 7991. Washington, DC, USA: World Bank. doi: 10.1596/1813-9450-7991.

World Bank (2006). India: Building capacity for public-private partnerships. Washington, DC, USA: World Bank.

——— (2008). The road not traveled: Education reform in the Middle East and Africa. Washington, DC, USA: World Bank.

——— (2011). Learning for all: Investing in people’s knowledge and skills to promote development. Washington, DC, USA: World Bank.

——— (2015a). East Asia's changing urban landscape: Measuring a decade of spatial growth. Washington, DC, USA: World Bank.

——— (2015b). Adjusting to a changing world. East Asia and Pacific economic update. April issue. Washington, DC, USA: World Bank.

——— (2015c). Global monitoring report 2015/2016: Development goals in an era of demographic change. Washington, DC, USA: World Bank.

——— (2015d). “Azerbaijan: Systematic country diagnostic”. Washington, DC, USA: World Bank.

——— (2015e). “Rebalancing Bosnia and Herzegovina: A systematic country diagnostic”. Washington, DC, USA: World Bank.

——— (2015f). “Bulgaria’s potential for sustainable growth and shared prosperity: Systemic country diagnostic”. Washington, DC, USA: World Bank.

——— (2015g). “Serbia: Systematic country diagnostic”. Washington, DC, USA: World Bank.

——— (2015h). “Bolivia—Systematic country diagnostic: Rebalancing inclusive growth to deepen gains on poverty and inequality reduction”. Washington, DC, USA: World Bank.

——— (2015i). “Colombia: Systematic country diagnostic”. Washington, DC, USA: World Bank.

——— (2015j). “Costa Rica’s development: From good to better. Systematic country diagnostic”. Washington, DC, USA: World Bank.

——— (2015k). “El Salvador: Building on strengths for a new generation. Systematic country diagnostic”. Washington, DC, USA: World Bank.

——— (2015l). “Guatemala: Closing gaps to generate more inclusive growth. Systematic country diagnostic”. Washington, DC, USA: World Bank.

———. (2015m). “Haiti: Toward a new narrative. Systematic country diagnostic”. Washington, DC, USA: World Bank.

——— (2015n). “Honduras: Unlocking economic potential for greater opportunities.

Systematic country diagnostic.” Washington, DC, USA: World Bank.

——— (2015o). “Panama: Locking in success. Systematic country diagnostic.” Washington, DC, USA: World Bank.

——— (2015p). “Uruguay: Systematic country diagnostic”. Washington, DC, USA: World Bank.

——— (2015q). “Egypt: Promoting poverty reduction and shared prosperity. A systematic country diagnostic”. Washington, DC, USA: World Bank.

——— (2016a). Global economic prospects, January 2016: Spillovers amid weak growth. Washington, DC, USA: World Bank.

——— (2016b). “Live long and prosper: Aging in East Asia and Pacific”. World Bank East Asia and Pacific regional report. Washington, DC, USA: World Bank.

——— (2016c). “Moldova: Paths to sustained prosperity. A systematic country diagnostic”. Washington, DC, USA: World Bank.

——— 2016d. “Retaking the path to inclusion, growth and sustainability. Brazil systematic country diagnostic”. Washington, DC, USA: World Bank.

——— (2016e). The commodity cycle in Latin America: Mirages and dilemmas. Washington, DC, USA: World Bank.

——— (2016f). Doing business 2016: Measuring regulatory quality and efficiency. Washington, DC, USA: World Bank.

——— (2016g). “Commodity markets outlook: OPEC in historical context”. Washington, DC, USA: World Bank.

——— (2016h). South Asia economic focus, Fall 2016: Investment reality check. Washington, DC, USA: World Bank.

——— (2016i). World development indicators. Washington, DC, USA: World Bank.

——— (2016j). “Sri Lanka systematic country diagnostic: Ending poverty and promoting shared prosperity”. Washington, DC, USA: World Bank.

——— (2016k). “Africa region: Sustaining growth and fighting poverty amid rising global risks”. Regional update 2016. Washington, DC, USA: World Bank.

——— (2017a). Global economic prospects, January 2017: Weak investment in uncertain times. Washington, DC, USA: World Bank.

——— (2017b). Doing business 2017: Equal opportunity for all. Washington, DC, USA: World Bank.

World Bank and Development Research Center of the State Council, the People’s Republic of China (2014). Urban China: Toward efficient, inclusive, and sustainable urbanization. Washington, DC, USA: World Bank. doi: 10.1596/978-1-4648-0206-5.

World Bank and Ministry of Planning and Investment of Vietnam (2016). Vietnam 2035: Toward prosperity, creativity, equity, and democracy. Washington, DC, USA: World Bank. doi: 10.1596/978-1-4648-0824-1.

World Economic Forum (2013). Strategic infrastructure: Steps to prepare and accelerate public-private partnerships. Geneva, Switzerland: World Economic Forum.

——— (2015). The global competitiveness report 2015–16. Geneva, Switzerland: World Economic Forum.

——— (2016). The global competitiveness report 2016–17. Geneva, Switzerland: World Economic Forum.




DOI: http://dx.doi.org/10.24294/jipd.v2i1.159

Refbacks

  • There are currently no refbacks.


Copyright (c) 2018 Ekaterine Vashakmadze, Gerard Kambou, Derek Chen, Boaz Nandwa, Yoki Okawa, Dana Vorisek

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Creative Commons License
This site is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.