www.ifc.org/thoughtleadership NOTE 73 • OCT 2019 Closing the SDG Financing Gap—Trends and Data By Djeneba Doumbia and Morten Lykke Lauridsen How big is the financing gap to achieve the 2030 Sustainable Development Goals (SDGs)? Can private capital fill the gap? This note provides an updated overview of estimates of SDG financing in low- and middle-income countries and gives an analytical and data-based foundation for discussion. Based on a review of recent studies, as well as IFC’s own calculations of cross-border flow trends, the note documents the ongoing and significant SDG financing gap. Raising taxes to expand public spending is an option for many middle-income countries to fill the gap, but it will be insufficient for low-income countries. Private financing, especially of infrastructure, can also contribute to bridging the gap, but it will depend on the availability of investable projects. Capital market development and improved domestic financial systems can help intermediate more private capital into available investment opportunities. Meeting the Sustainable Development Goals (SDGs) will Financing Requirements to Meet the 2030 Agenda require the global community to increase development A key reference for SDG financing needs over the last financing from “billions” to “trillions,” which implies five years has been UNCTAD’s World Investment Report a substantial financing gap. In addition to much needed (2014).1 UNCTAD estimates that to meet the SDGs by increases in domestic revenues, getting to “trillions” will 2030, total annual investments in SDG-relevant sectors in also require significant contributions from cross-border developing countries will need to be between $3.3 trillion inflows, including private capital inflows (Figure 1). Investment gap in key SDG sectors 1000 950 900 SOURCES OF FINANCING Billion of US dollars, constant price 850 800 770 700 630 600 DOMESTIC FOREIGN 550 500 480 400 410 400 350 Tax Private Private inflows 300 330 revenues savings Public inflows 230 (e.g., FDI, 200 210 210 (e.g., ODA, portfolio 100 120 debt, other 80 70 investment, 0 official flows) Power Climate Food Water Transport Education Telecom- Health Climate Eco-system/ remittances) change security and and mitigation agriculture sanitation munications change biodiversity adaptation FIGURE 2 Investment gap for developing countries FIGURE 1 Potential sources of financing for the SDGs Source: Authors using UNCTAD estimates – World Investment Report Source: Authors’ own elaboration. 2014, UNCTAD. About the Authors Djeneba Doumbia, Economist, Thought Leadership, Economics and Private Sector Development, IFC; and Morten Lykke Lauridsen, Principal Multilateral Engagement Officer, Development Partnerships and Multilateral Engagements, IFC. Their emails are ddoumbia@ifc.org and mlauridsen@ifc.org respectively. 1 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. and $4.5 trillion. Such estimates mean there is an annual Looking at the infrastructure financing gap, a 2019 financing gap of some $2.5 trillion between current funding World Bank report found that the costs for new SDG- and what is required.2 related infrastructure could range from $637 billion (or A closer look at the sectoral level reveals significant 2 percent of GDP) to $2.74 trillion (8 percent of GDP) in investment gaps, with some of the largest funding needs low- and middle-income countries (LMICs) depending related to economic infrastructure. At up to $950 billion, on the spending efficiency and the quality of services power infrastructure carries the greatest financing need, delivered (Figure 4).5 Investments of 4.5 percent of GDP followed by climate change mitigation ($850 billion) and will allow LMICs to reach the infrastructure related SDGs transport infrastructure ($770 billion). There are also and stay on track to limit climate change to 2 degree sizeable investment gaps in social infrastructure, ranging Celsius. In addition to new infrastructure spending needs, from $140 billion in health to $250 billion in education LMICs would need to spend between 1.9 and 3.8 percent (Figure 2). In a recent paper, the IMF estimated that meeting of GDP (2.7 percent using the preferred scenario) per the SDGs in five priority areas—education, health, roads, year to maintain their existing and new infrastructure.6 electricity, and water and sanitation— by 2030 will require Consequently, with the preferred spending scenario, the additional private and public annual spending of $528 overall investments required would be on the order of 7.2 billion for low- and lower middle-income countries and $2.1 percent of GDP. trillion for emerging countries (Figure 3).3 These estimates Annual cost for infrastructure investments, by sector, 2015–2030 are comparable to those from UNCTAD for similar sector 3500 grouping (roads, electricity, and water and sanitation).4 3000 2,744 (8.15%) Billion of US dollars 2500 600 Low- and lower middle-income countries 2000 1,546 (4.5%) Billion of 2016 US dollars 500 $528 billion 1500 400 (0.5 percent of global GDP) 1000 637 (1.93%) 0.3 percent 300 of global GDP 500 0 200 High spending Preferred spending Low spending 100 Scenarios Increased tax Transport Energy Flood protection Water supply and sanitation Irrigation 0 2.5 Emerging countries FIGURE 4Infrastructure investment needs in low- and middle-income countries Trillion of 2016 US dollars 2 $2.1 trillion Source: Authors using World Bank. 2019. http://www.worldbank.org/en/ (2 percent of global GDP) data/interactive/2019/02/19/data-tableinfrastructure-investment-needs-in- 1.5 low-and-middle-income-countries investment in percent of GDP. Note: Numbers in brackets represent the annual cost for infrastructure. 1 0.5 ~Raising tax revenue The 2019 World Bank report provides the first consistently by 5pp. of GDP estimated data set on infrastructure investments and finds 0 that meeting infrastructure investment requirements in all regions except Asia will require much higher spending FIGURE 3Financing gap for low- and lower middle- income countries and emerging countries levels.7 LMICs spent between 3.4 percent and 5 percent of Source: Gaspar et al. 2019. “Fiscal policy and development: human, social, GDP in 2011, with a central estimate of around 4 percent. and physical investment for the SDGs.” International Monetary Fund. These estimates vary by region, ranging from 2.5 percent of Note: The sample comprises 72 emerging market economies (the median of GDP per capita in 2016 US$ is 7,954), and 49 low- and lower middle- GDP in Sub-Saharan Africa to 5.7 percent in East Asia and income developing countries (the median of GDP per capita in 2016 US$ Pacific, using the central estimates. The East Asia and Pacific is 900). The list of these countries can be found in Gaspar et al (2019). 73 region also spends the most in absolute terms. The region percent of the emerging countries used in Gaspar et al (2019) are upper middle-income countries as classified by the World Bank. The remaining accounts for more than half (54 percent) of total LMIC emerging countries are either non-advanced high-income (Bahrain, Barbados, spending on infrastructure, with China alone accounting for Chile, Croatia, Hungary, Kuwait, Poland, Qatar, Saudi Arabia, Trinidad and Tobago, and United Arab Emirates) or low-middle income (Angola, Bolivia, 48 percent. In contrast, Sub-Saharan Africa accounts only India, Indonesia, Mongolia, Philippines, Timor-Leste, Tunisia and Ukraine). for 4 percent of total LMIC infrastructure spending. 2 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. Zooming in on country-specific contexts and gaps, in a recent blog Kharas and McArthur (2019) show that the lowest- BOX 1Public Investment Management income countries tend to have the largest SDG financing Assessment gaps.8 For instance, the estimated gaps in terms of GDP per The IMF’s Public Investment Management capita for Burundi and South Sudan are approximatively Assessment (PIMA) framework, introduced in $310 and $530, respectively. These figures are more than 100 2015, is a tool to help improve infrastructure percent of GDP per capita in those countries. governance by identifying strengths and Improving the efficiency of infrastructure investment is an weaknesses of country practices and important element that will facilitate meeting the SDGs, providing tailored recommendations. The especially in low-income countries where resources are PIMA index captures 15 key institutional limited. As illustrated by the Public Investment Management features across the three stages of the public Assessment (PIMA) overall index, the efficiency of capital investment management cycle: (i) planning spending tends to be lower for less developed countries. For public investment; (ii) allocating public instance, the average PIMA score is lower for low-income resources to sectors and projects; and (iii) developing countries than for emerging economies (Box 1). implementing productive public assets. According to a 2017 McKinsey report, there is significant PIMAs provide rigorous assessment of the scope to improve the effectiveness and efficiency of how key public investment management (PIM) infrastructure investment is spent. Up to 38 percent of institutions and processes of a country. PIMA global infrastructure investment is not spent effectively scores vary across regions with advanced because of bottlenecks, lack of innovation, and market countries in Europe scoring higher, on average, failures. Efficiently spending infrastructure investment than other regions. Disparities are also (fact-based project selection, streamlined delivery, and the noticeable between countries from the same optimization of operations and maintenance of existing region. For instance, Africa displays a large infrastructure) can reduce spending by more than $1 dispersion, with scores ranging from 1.3 to 6.4. trillion a year for the same amount of infrastructure delivered and can help close the existing financing gap.9 Average PIMA Scores by Region 8 Achieving the SDGs will require significant contributions from both private and public sectors, including cross-border inflows. 6 However, the challenge is not only quantitative, it is also important to use public funds more sparingly, ensure a better 4 mobilization of private capital and spend more efficiently. 2 Domestic Revenue Mobilization 0 Africa Asia and Europe Middle East Western Emerging Low-income Domestic revenue mobilization is one of the most critical the Pacific and Central Asia hemisphere economies developing countries development priorities and is essential to financing Minimum Average Maximum sustainable development investments. Over the last two decades, many developing countries have PIMA SCORES BY REGION achieved substantial progress in revenue mobilization. For Source: International Monetary Fund. 2018. “Public Investment the median low- and lower middle-income countries, total Management Assessment – Review and Update.” Note: Calculations are based on PIMA reports. Scores range revenues excluding grants increased from 15.5 percent from 0 to 10, with 10 indicating full alignment with good Public of GDP in 2000 to 18.5 percent in 2017 (Figure 5). For Investment Management (PIM) practices. Africa = 13 countries, Asia and the Pacific = 5 countries, Europe = 5 countries, Middle the median upper middle-income country, total revenues East and Central Asia = 3 countries, Western Hemisphere = excluding grants rose from 20 percent of GDP in 2000 4 countries. Low-income developing countries include low- and lower-middle income countries as classified by the World Bank. to 26 percent in 2017. In contrast, over this period total The graph does not include advanced countries as Ireland is the only country in this group. revenues excluding grants to GDP have shown a slightly downward trend for the median high-income country (from 34 percent in 2000 to 33 percent in 2017). 3 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. Total revenue excluding grants, in percent of GDP, In addition to government revenues, private savings can be Median, 2000–2017 40 tapped through the financial sector to provide resources for the SDGs. Notwithstanding progress in financial 30 development (both financial institutions and markets) in low-income countries and emerging countries, the 20 IMF financial development index is much lower in these countries (0.15 in LICs and 0.33 in emerging economies) 10 compared to advanced economies (0.64 in 2017).11 Capital 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 markets—which help intermediate funds directly from savers to governments and firms seeking financing— Tax revenue, in percent of GDP, Median, 2000–2017 also remain underdeveloped or are nonexistent in many 25 developing countries. 20 Cross-Border Inflows To assess the options for SDG financing, it is also critical 15 to consider the trends in cross-border flows. In addition to 10 domestic revenue mobilization, other sources of financing can help close the financing gap and help meet the 2030 5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 agenda. Total cross-border flows to developing countries increased by 32 percent from 2015—the year of adoption High-income Low- and lower-middle income Upper-middle income of the Addis Ababa Action Agenda (AAAA)—to reach $1.6 trillion in 2017.12 This increase was mainly driven by FIGURE 5 Trends in Domestic Revenue Mobilization greater portfolio investment. Source: Authors, using International Monetary Fund Government Finance Total 2017 cross-border flows to low- and lower middle- Statistics Yearbook and data files, and World Bank and OECD GDP estimates. income and upper middle-income countries are estimated at $0.234 trillion and $0.819 trillion, respectively (Figure 6).13 Notwithstanding recent progress, tax revenue mobilization Directing a portion of these flows to SDG related sectors could presumably make it easier to meet the SDGs in upper continues to underperform in developing countries. For middle-income countries by lowering the need for greater instance, tax revenues for the median low- and lower domestic revenue mobilization through taxation. For low- middle-income country increased from 11 percent of GDP and lower middle-income countries, assuming that the in 2000 to 15 percent in 2017 (Figure 5). Even though potential for higher domestic revenue mobilization is fully the 2017 figures are higher for the median upper middle- realized ($170 billion), cross-border flows will still need income country compared to the median low- and lower- to increase by more than 60 percent (from $234 billion to middle income country, tax revenue as a percent of GDP $358 billion) to close the financing gap in order to meet the falls short of the desired level and remains below that of the SDGs by 2030.14 median high-income country (21 percent).10 The trends and needs for cross-border flows differ In a 2019 report the IMF estimated that, assuming efficient significantly across regions, with the greatest need to scale public spending, raising tax revenue by 5 percentage up in Africa. Cross-border flows to Sub-Saharan Africa points of GDP could finance about $170 billion in new rose by 9 percent between 2016 ($143 billion) and 2017 infrastructure, or a third of the total additional needs for ($157 billion). During the same period, FDI inflows to the low- and lower middle-income countries. As such, domestic region decreased by 27 percent to $27 billion, primarily due revenue mobilization will not be sufficient to finance to the lasting macroeconomic impacts of the 2014-2016 oil outlays needed to meet the SDGs. However, for most price decline (Figure 6).15 While other official flows also emerging countries, the extra tax revenues—if effectively decreased during this period, portfolio investment almost realized—could be sufficient to finance an additional $2.1 tripled and remittance inflows and multilateral loans trillion required to deliver on the SDG agenda (Figure 3). exhibited an upward trend. 4 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. 250 a. Low- and lower middle-income countries 200 Billion of US dollars 150 100 50 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 900 b. Upper middle-income countries 800 700 600 Billion of US dollars 500 400 300 200 100 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 200 c. Sub-Saharan Africa 150 Billion of US dollars 100 50 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 FDI inflows Remittances inflows Portfolio investment ODA grants Other official inflows Bilateral loans Multilateral loans FIGURE 6 Cross-border finance to developing countries Source: Authors’ calculations using OECD Creditor Reporting System database; UNCTAD FDI Statistics; World Economic Outlook (2018); World Bank Migration and remittances data, and World Development Indicators (2019). Note: All the variables are in current US dollars. To allow comparison between the gap in financing SDGs and the cross-border flows, the sample of low- and lower middle-income countries used in Figure 6a comprises 49 countries as in Gaspar et al. (2019). The sample of upper middle-income countries comprises 47 countries. SSA figures represent 48 countries. Due to data availability, the note considers the period 2002-2017. Samples may vary. 5 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. Investments in projects with private participation highlighting lower PPI investment figures ($95 billion in 160 2017 and $43 billion in the first half of 2018), this can indicate an even greater need to raise PPI investments. 120 Billion of US dollars Hypothetically, increasing PPI investments eightfold in low- and lower middle-income countries from $46 billion 80 to $368 billion could bring SDGs closer within reach when 40 combined with higher domestic revenue mobilization efforts and increased cross-border flows.16 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 However, this would imply a significant scale-up of private Total investment H2 Total investment H1 sector engagement in low- and lower middle-income Investment, low- and lower middle-income countries countries. which in turn could be facilitated by an enabling Investment,upper middle-income countries business environment. Here the International Finance Corporation (IFC) is scaling its upstream support to help Share of sectoral investment in projects with private participation creating markets including attracting private investment 100% and helping viable projects get started. Recent trends in PPI investments in developing countries 80% show greater private sector participation in transport and 60% energy (Figure 7).17 More than half of PPI investments in H1 2018 were in transport and less than two-fifths 40% in the energy sector. Information and communications technology (ICT) and water and sanitation represent a 20% small portion of PPI investments in developing countries. 0% A closer look at income levels reveals some disparities in 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 sectoral PPI investments. Energy Transport Water and sewerage ICT In H1 2018, investments in the energy sector represented about two-thirds of total PPI investments in low- and lower FIGURE 7 Trends in investments in infrastructure middle-income countries, while they were only one-fourth projects with private participation, developing countries in upper middle-income countries (Figure 8). Source: Authors, using World Bank PPI database. Existing large needs for energy and transport infrastructure Note: H1 and H2 indicate first half and second half. The latest data available is for the first half of 2018. PPI data record commitments rather in most developing countries indicate room for additional than actual spending. Samples may vary by year. investments in these sectors. In addition, the still embryonic ICT sectors in most developing countries—in light of the The role of the private sector rapid digitalization of economies across the world and the Both private and public sectors play fundamental roles in associated economic gains—point to great potential for financing the SDGs. The public sector clearly dominates increased investment in this sector. in terms of infrastructure investments in low- and middle- There is significant room for the private sector to crowd income countries. The private sector accounts for only 9 in more investment into SDG-related sectors with high to 13 percent of total infrastructure investments in LMICs development impact, which is crucial to the World Bank (Fay et al. 2019). As Chinese infrastructure investments are Group’s focus on Maximizing Development Finance. public rather than private, excluding China from the sample Financing for sustainable development requires better of LMICs shows the private sector share is substantially orchestration of all private and public resources.18 The larger (14 to 31 percent). project of universal electrification in Myanmar by 2030 is An increased participation by the private sector could a concrete example of such coordination. Here the World potentially help close the SDG financing gaps. PPI (Private Bank Group (WBG) used a coordinated and comprehensive Participation in Infrastructure) investments in developing approach to mobilizing resources. In 2017, the WBG countries reached $150 billion in 2012. With recent data introduced a new way to maximize development finance to 6 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. fully leverage the private sector for sustainable development Looking Forward and only rely on public funds in areas where private sector There is no time to waste in increasing the level of engagement would not be feasible.19 development finance from billions to trillions to address Low- and lower-middle income countries the SDG financing gap. Making progress toward the SDG 100% 50 2030 goals will require comprehensive solutions to support stronger co-investment platforms, to enable business Sectoral share, in percent Billion of 2015 US dollars 80% 40 environments in low- and middle-income countries, to 60% 30 advance financial deepening, and to increase the efficiency of public spending. 40% 20 ACKNOWLEDGMENTS 20% 10 The authors would like to thank the following colleagues 0% 0 within the Vice Presidency Economics and Private 2015 2016 2017 2018 Development of IFC for their reviews and suggestions: Neil Gregory, Chief Thought Leadership Officer, Thought Upper-middle income countries Leadership; Arthur Karlin, Consultant; Facundo Martin, 100% 100 Principal Economist, Global Macro and Market Research; Florian Moelders, Operations Officer, Global Macro and Sectoral share, in percent 80% 80 Billion of 2015 US dollars Market Research; Jennifer Keller, Lead Economist, Macro, 60% 60 Trade and Investment Global Practice, World Bank, currently on assignment to Thought Leadership, IFC; Jonathan Timmis, 40% 40 Economist, Thought Leadership; Sebastian Essl, Economist, 20% 20 Macro, Trade and Investment Global Practice, World Bank; and Thomas Rehermann, Senior Economist, Thought 0% 0 Leadership. 2015 2016 2017 2018 LEFT AXIS Please see the following selected additional EM Energy Transport Water and sewerage ICT Compass Notes: Institutional Investing: A New Investor Forum RIGHT AXIS and Growing Interest in Sustainable Emerging Markets Investments PPI, total (Note 64); Peru’s Works for Taxes Scheme: An Innovative Solution to Accelerate Private Provision of Infrastructure Investment FIGURE 8Trends in investments in infrastructure projects (Note 55); Crowding-In Capital: How Insurance Companies Can with private participation, developing countries Expand Access to Finance (Note 52); Toward a Framework for Source: Authors, using World Bank PPI database. See https://ppi. Assessing Private vs. Public Investment in Infrastructure (Note 29); worldbank.org/data. Note: H1 2018 indicates first half of the year 2018 which is the latest Mitigating Private Infrastructure Project Risks (Note 20). period available. PPI data record commitments rather than actual spending. Samples may vary by year. 1 UNCTAD. 2014. “World Investment Report: Investing in the SDGs: An Action Plan.” United Nations Conference on Trade and Development. UNCTAD (2014) estimated financing needs for developing countries. UNCTAD figures on financing needs came out before launch of SDGs and the formal adoption of the 2030 Agenda for Sustainable Development by the 193-Member United Nations General Assembly on September 2015. 2 UNCTAD (2014) estimated current annual investment at around $1.4 trillion. Given that the mid-point estimate of total annual SDG-related investment is about $3.9 trillion, subtracting current annual investment gives a mid-point estimated investment gap of $2.5 trillion. 3 Gaspar, Vitor, David Amaglobeli, Mercedes Garcia-Escribano, Delphine Prady, and Mauricio Soto. 2019. “Fiscal Policy and Development: Human, Social, and Physical Investment for the SDGs. IMF Staff Discussion Note. www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2019/01/18/ Fiscal-Policy-and-Development-Human-Social-and-Physical-Investments-for-the-SDGs-46444. The authors estimate the additional total—private and public—spending required to make substantial progress toward the SDGs in five areas (education, health, roads, electricity, water and sanitation). They used a costing methodology relying on a sample of 155 countries: 49 lowand lower middle-income countries, 72 emerging market economies, and 34 advanced economies. 4 While IMF estimates suggest that additional annual spending needed in these sectors is approximately $1.4 trillion in low-income countries (LICs) and emerging economies, UNCTAD estimates suggest that figure is higher, at about $1.8 trillion. For low- and lower middle-income countries, Schmidt- Traub (2015) finds annual infrastructure spending of US$660 billion, compared with IMF estimates of US$725 billion for the same country grouping. See Schmidt-Traub, Guido. 2015. “Investment Needs to Achieve the Sustainable Development Goals—Understanding the Billions and Trillions.” SDSN Working Paper Version 2. 5 Rozenberg and Fay (Eds). 2019. “Beyond the Gap – How Countries Can Afford the Infrastructure They Need while Protecting the Planet.” The World Bank. Washington DC. 7 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. 6 The three scenarios are as follow: high spending scenario refers to ambitious goals and low efficiency; preferred spending scenario refers to ambitious goals and high efficiency; and low spending scenario refers to less ambitious goals and high efficiency. For more details regarding the three scenarios by sector, see Rozenberg, Julie and Marianne Fay. 2019. “Beyond the Gap: How Countries Can Afford the Infrastructure They Need while Protecting the Planet.” Sustainable Infrastructure Series. World Bank. Washington, DC. 7 See World Bank. 2019. “Overview of Infrastructure Investment Needs in Low- and Middle-Income Countries by 2030.” Policy Note 1/6. https:// openknowledge.worldbank.org/bitstream/handle/10986/31291/33266_Policy_Note_1.pdf. 8 Kharas, Homi and John McArthur. 2019. “How Much Does the World Spend on the Sustainable Development Goals?” Future Development, Brookings Institution. https://www.brookings.edu/blog/futuredevelopment/2019/07/29/how-much-does-the-world-spend-on-thesustainable-development-goals/. 9 Woetzel, Jonathan, Nicklas Garemo, Jan Mischke, Priyanka Kamra, and Robert Palter. 2017. “Bridging Infrastructure Gaps: Has the World Made Progress?” McKinsey Global Institute. www.mckinsey.com/industries/capital-projects-andinfrastructure/our-insights/bridging-infrastructure-gaps-has- theworld-made-progress. 10 Gaspar, Jaramillo and Wingender (2016) estimated the tipping point as a minimum tax-to-GDP of 12 ¾ percent that enable the state to perform some of its most important functions, especially adequate spending on developmental programs. This threshold is likely associated with changes in social norms of behavior and state capacity. See Gaspar, Vitor, Laura Jaramillo and Philippe Wingender. 2016. “Tax Capacity and Growth: Is there a Tipping Point?” IMF Working Paper WP/16/234. 11 See IMF Financial Development Index Database. https://data.imf.org/?sk=F8032E80-B36C-43B1-AC26-493C5B1CD33B 12 Due to limited data availability and to avoid double counting, cross-border flows in this note include FDI, portfolio investment, remittances, ODA grants, other official flows, multilateral and bilateral loans. The sample of developing countries includes 49 low and lower middle-income countries and 72 emerging economies as in Gaspar et al. (2019). All the figures in Section 3 (Cross-border inflows) are in current US dollars. Because of data availability regarding cross-border flows, the note considers the period 2002–2017 which is covered by all indicators. 13 Total 2017 cross-border flows to emerging countries as defined in Gaspar et al. (2019) are estimated at $1.36 trillion. 14 To allow comparisons between cross-border flows and the estimates of additional spending required to meet the 2030 Agenda, the same samples of low- and lower middle-income countries are used. 15 According to UNCTAD’s World Investment Report 2019, FDI flows to SSA increased between 2017 and 2018. 16 Assuming efficient public spending and that countries could raise their tax revenues by 5 percentage points of GDP (Gaspar and others, 2019). While the methodology accounts for synergies across the sectors (education, health, roads, electricity, water and sanitation) analyzed in Gaspar et al. (2019), spending estimates presented in this paper should be viewed with caution, as other SDG areas might involve substantial additional costs. 17 UNCTAD’s SDG Investment Trends Monitor (2019) shows that in developing countries, investment (private and public) in the power sector has only marginally increased, despite increases in FDI and domestic private flows. Available data suggest that investment has steadily increased in the transport sector. The report also notes that limited data availability and poor data quality constrain the ability to estimate investment trends in all SDG-relevant sectors. See https://unctad.org/en/PublicationsLibrary/diaemisc2019d4_en.pdf. 18 See Da Silva, J. M. 2018. “For better returns on development investments, we need a better market.” https://blogs.worldbank.org/developmenttalk/ better-returnsdevelopment-investments-we-need-better-market 19 A Cascade Decision-Making Approach. Infrastructure Finance – Guiding Principles for the World Bank Group. 2018. World Bank Group. (Booklet). See also World Bank Group. 2017. “Maximizing Finance for Development: Leveraging the Private Sector for Growth and Sustainable Development.” Additional Selected EM Compass Notes Previously Published by IFC Thought Leadership SEPTEMBER 2019 MARCH 2019 Note 72: Blended Concessional Finance: The Rise of Note 66: Blended Concessional Finance: Governance Returnable Capital Contributions Matters for Impact Note 71: Artificial Intelligence: Investment Trends and Note 65: Natural Gas and the Clean Energy Transition Selected Industry Uses FEBRUARY 2019 AUGUST 2019 Note 64: Institutional Investing: A New Investor Forum Note 70: How Insurtech Can Close the Protection Gap in and Growing Interest in Sustainable Emerging Markets Emerging Markets Investments JULY 2019 JANUARY 2019 Note 69: The Role of Artificial Intelligence in Supporting Note 63: Blockchain and Associated Legal Issues for Development in Emerging Markets Emerging Markets Note 62: Service Performance Guarantees for Public JUNE 2019 Utilities and Beyond—An Innovation with Potential to Note 68: Basic Business Models for Banks Providing Attract Investors to Emerging Markets Digital Financial Services in Africa NOVEMBER 2018 APRIL 2019 Note 61: Using Blockchain to Enable Cleaner, Modern Note 67: The Case for Responsible Investing in Digital Energy Systems in Emerging Markets Financial Services Note 60: Blended Concessional Finance: Scaling Up Private Investment in Lower-Income Countries 8 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group.