China, India, Brazil could dominate global investment by 2030
Analysts say that level of financial development comparable to U.S. in the early 1980s
A major global shift in the next 15 or more years will result in the developing world controlling roughly half of the world's capital, up from less than a third today. In other words, "financial markets in economies like Brazil, India, and those of the Middle East will develop considerably, with these countries attaining, by 2030, a level of financial development comparable to the United States in the early 1980s", a new report from the World Bank, a Washington-based development lender states.
One report last year estimated that North African countries alone lost nearly a half-trillion dollars over the past four decades, almost the equivalent of their combined gross domestic product for 2010.
The report states that developing countries could control some $158 tn (at 2010 rates) by 2030, particularly in East Asia and Latin America. The developing world, in a relatively brief time span could account for 87 to 93 percent of global growth.
The report suggests that developing countries will shortly have the resources necessary to bankroll the major investments that the World Bank says will be necessary, such as infrastructure and services, in stark contrast to recent history.
World Bank analysts say that while international investment from developing economies constituted just a fifth of the global total, this could now triple over the next decade and a half.
"We found that developing economies will come to dominate investment," Maurizio Bussolo, a World Bank lead economist and author of the new Global Development Horizons report says. "By 2030, for every dollar invested around the world, 66 cents will be in developing countries. That's a dramatic change, as for almost four decades such investments made up just 20 cents on the dollar."
Asian titans China and India are expected to be the largest investors by 2030, accounting for 38 percent of all global investment, almost as much as all high-income countries combined.
China by itself could be responsible for nearly a third of global investment by that time. Brazil, India and Russia will together constitute a larger investment bloc than the United States, at around 13 percent.
The downside to this economic growth? "Even if wealth will be more evenly distributed across countries, this does not mean that, within countries, everyone will equally benefit, Bussolo adds
"Developing countries are currently almost absent from international financial markets, so you can see that we have a very long way to go in a historically short time period - 15 or 20 years for developing financial markets is not long," Hans Timmer, director of the Development Prospects Group at the World Bank said.
"But we have seen in high-income countries that if you deregulate too rapidly you have a very dangerous situation. So we have a dilemma: the role of developing countries is increasing very rapidly, but we must deepen these financial markets only very gradually."
For example, one report last year estimated that North African countries alone lost nearly a half-trillion dollars over the past four decades, almost the equivalent of their combined gross domestic product for 2010.
Dev Kar, formerly with the International Monetary Fund (IMF) and currently the chief economist with Global Financial Integrity, a Washington advocacy group says this figure accounts for instability found in that part of the world.
"Our studies suggest that the unrecorded capital coming from developing countries is absolutely huge - the losers are losing far more than the gainers are gaining. As a result of these developments, you can understand why the North African countries blew up, as that kind of massive outflow of resources must have some kind of social impact."
© 2014 - Distributed by THE NEWS CONSORTIUM
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