developing countries in constant 2008 dollars for 2013 under different scenarios.<sup>25</sup> They also estimate that financing for infrastructure projects amounts currently to roughly US$850 billion in developing countries. Assuming that this amount of financing continues to be available in the medium term, the estimated infrastructure financing gap would be between US$400 billion and US$650 billion per year.

37. What would be the impact on exports in advanced economies if this financing gap were to be closed? A US$1 increase in investment in developing countries is associated with a US$0.50 increase in imports.<sup>26</sup> In 2009, about 70 percent of traded capital goods from low-income countries were sourced from high-income countries (see Table 1). A US$1 increase in investment in developing countries is therefore likely to be associated with a US$0.35 increase in exports from high-income countries. Assuming that an infrastructure gap in the developing world of around US$500 billion annually were to be closed, the associated demand for capital goods imports worldwide for infrastructure investment alone would correspond to US$250 billion, of which about US$175 billion would be sourced from high-income countries. This corresponds to about 7 percent of total capital goods exports from high-income countries in 2010.

**Table 1: Source of capital good imports to developing countries (2009)**

|Exporters→|Hig|h Income E|conomies|(HIE)||L|ow and Mi|ddle Inco|me Econo|mies(LMI)|||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Importers↓|All HIE|HIEuro<sup>1</sup>|USA|Other HIE|All LMI|EAP|China|ECA|LAC|MNA|SAS|SSA|
|LMI|69.06%|29.12%|20.65%|19.28%|28.85%|24.09%|17.89%|2.16%|2.02%|0.06%|0.04%|0.47%|
|LDC|50.69%|32.49%|10.93%|7.27%|48.59%|37.00%|31.21%|1.56%|1.47%|0.23%|0.34%|7.99%|
|EAP|73.73%|22.34%|14.77%|36.62%|25.58%|24.66%|12.44%|0.37%|0.48%|0.00%|0.02%|0.05%|
|ECA|62.42%|52.67%|4.90%|4.86%|28.42%|18.99%|18.45%|9.07%|0.22%|0.01%|0.01%|0.11%|
|LAC|72.59%|15.79%|49.79%|7.01%|26.80%|19.59%|17.78%|0.35%|6.72%|0.00%|0.04%|0.10%|
|MNA|68.94%|55.95%|6.48%|6.51%|29.18%|22.24%|20.75%|5.68%|0.38%|0.64%|0.07%|0.16%|
|SAS|50.38%|28.50%|10.14%|11.74%|48.32%|45.02%|39.60%|2.26%|0.66%|0.01%|0.18%|0.19%|
|SSA<br>|62.25%<br>|44.15%<br>|11.13%<br>|6.96%<br>|35.88%<br>|26.52%|24.44%|0.96%|1.68%|0.17%|0.07%|6.49%|
|*Capitalgood|s imports|exclude tr|ansportat|ion equipme|nt.||||||||

1HIEuro is comprised of the following high income European nations: Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Source: Authors' calculations based on WITS, UN COMTRADE database.

25 Yepes (2008) presents an estimate of about US$1.1 billion dollar in 2005 constant US dollars. These estimates are based on the methodology presented in Fay and Yepes (2003), which uses predicted GDP growth to estimate the demand for infrastructure services. This may be considered a lower bound. On the one hand, Yepes (2008) does not estimate infrastructure services required to achieve a given level of growth. On the other hand, detailed country studies provide estimates of the demand for infrastructure services in excess of Yepes’ estimates. For Sub-Saharan Africa, Yepes estimates correspond to 94 billion, or 8.9 percent of GDP. A recent study by Foster and BriceñoGarmendia (2010) concludes that expenditure needs for Africa are significantly higher, corresponding to 15 percent to GDP.

> 26 Based on 2008 trade data from WITS/COMTRADE.

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