Financing the anticipated and wide-ranging Sustainable Development Goals (SDGs) in Asia and the Pacific alone could cost well over $1 trillion per year, according to a new ADB report on financing for development released today during the Asia-Pacific High-Level Consultation on Financing for Development in Jakarta, Indonesia. 2015 is a crucial year for development, and for development finance in particular ahead of the upcoming 3rd International Conference on Financing for Development scheduled for July in Addis Ababa, Ethiopia. The report argues that a more effective use of public and private funds is needed to finance the SDGs, set to replace the Millennium Development Goals (MDGs) when the latter expire at the end of 2015. Here are a few things to consider about development finance in Asia and the Pacific we selected from the report.
- Meeting the MDGs has been estimated to require over $100 billion per year in financing, while eliminating poverty at the $2 per day threshold will require over $300 billion. Meeting infrastructure needs may require over $750 billion per year over 2010-2020.
- In 2012, official development assistance to the region stood at $26 billion, a fraction of international sources of finance. Other sources of international funds include private remittances, which in recent years has stood at $205 billion annually and foreign direct investment, at $568 billion.
- In Asia and the Pacific, private sources of financing could provide over $10 trillion in additional resources for developing countries. Potential sources include over $6.2 trillion in private savings, $3.5 trillion in sovereign wealth and pension funds, and $1.3 trillion in insurance premiums.
- The region’s wealthiest citizens have $20.5 trillion in collective assets, much of which is invested outside of the region.
- Philanthropy is an important source of assistance for the region. In 2012 over $39 billion was spent on charitable giving in the Asia and Pacific region and is predicted to grow at a rate of 9.8% per year.
- Tax revenues in Asia and the Pacific lag global averages. In recent years, taxes have represented an average of just 17.8% of GDP in developing Asia versus 28.6% worldwide. Non-tax revenues also lag, representing only 2.5% of GDP in developing Asia versus 4.5% globally.
- Increasing personal income tax revenues by 1% has been estimated to reduce income inequality by 0.573%.
- Trade finance requires an additional $1.1 trillion. A 5% increase in trade finance has been estimated to increase production and labor by 2%.
- Achieving the post-2015 sustainable development goals in Asia and the Pacific will require a variety of actions from all stakeholders, both public and private. This will include increasing regional cooperation just as national governments set the pace for change. Cities and local governments will need to play a more active role in building bottom-up solutions.
- Businesses, which are also beneficiaries of good development conditions, will need to play new roles as development partners. The financial sector will need to move money more strategically, drawing upon increasing knowledge and awareness from global and regional thought leaders.
- Finally, multilateral development banks, including ADB, will need to increase and improve their financing while also strengthening support to expand fiscal space, promote and catalyze private investment, and provide capacity support through technical assistance.
How would you leverage existing resources to make more development funds available in the region for post-2015? Join the conversation by leaving a comment below.