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Domestic resource mobilisation in developing countries – interesting graphs

Added 14/Nov/12

by Jesse Griffiths

I’m in the middle of updating Eurodad’s summary of financial inflows and outflows to developing countries – watch this space – but thought I’d share some really interesting graphs.

Here’s the first, which I put together from the World Bank’s online database. It shows “Gross capital formation” - which used to have the more straightforward title of “Gross domestic investment” - as a share of GDP. It shows just how successful developing countries have become in mobilising resources for investment, even despite the global economic crisis. Impressive stuff, isn’t it?

Gross capital formation by income group (% GDP)

This measure is a mix of many different things.  It includes private and public investment,which could be funded by earnings or borrowing.  It also includes some foreign direct investment, but this is a small proportion of the total (though it may be large for some countries.) Overall, though it shows that developing countries are managing to stabilise, and in many cases increase investment, despite global economic problems.

Note also how the global average has slumped since 2008 – dragged down by the poor performance of rich countries. Which kinda makes me wonder why the World Bank’s Doing Business Report keeps ranking rich countries as the best places in the world to do business… Let’s hope they ditch their unscientific and unhelpful ranking system in the current review.

The story for public sector revenue is similar but nowhere near as impressive.

Government revenue (excluding grants) by income group (% GDP)

Source: IMF, “Revenue Mobilization in Developing Countries”, 2011, p12

Overall, since 2000, developing countries have begun to mobilise an increasing share of GDP as public sector revenue, though far less than rich countries.

Now imagine what they could do if the world got serious about stopping the hundreds of billions lost each year by developing countries in illicit outflows, and clamping down on global tax dodging by multinationals ….