develop new technologies; collaboration between different sectors in research and technological developments; and the protection of intellectual property. These activities can be buttressed by well-educated workers who are able to perform complex tasks and adapt rapidly to their changing environment and the evolving needs of the production system (WEF 2016). The quality of education is particularly weak in South Africa and in Brazil and other parts of LAC (Figure 4).

How large could total investment needs be over the next decade? For infrastructure, specifically, a number of studies have estimated sizeable investment needs. At the global level, the OECD (2006) estimated that key infrastructure sectors (land transport, telecomunications, electricity and water) require additional annual investment of 2.5 percent of global GDP ($53 trillion) until 2030 to keep pace with rising global demand. Electricity generation and other energy-related infrastructure in oil, gas and coal require an additional investment of 1.5 percent of global GDP ($3 trillion per year; OECD 2011; McKinsey 2013; and WEF 2013a). Global environment-related infrastructure needs represent another 1.7-2.5 percent of global GDP ($3.5-5 trillion per year; WEF 2013a).

Since EMDEs tend grow faster on average than advanced economies, investment needs for maintenance and increased capacity of infrastructure are estimated to be highest in EMDEs (6-8 percent of GDP on average; Fay et al., 2011). However, there are significant differences in the size and the composition of investment needs across regions and countries depending on development and income levels, demographic and urbanization trends. Estimated infrastructure investment needs are largest in U.S. dollar amounts in fast-growing, populous Asia ($9.5-16 trillion by 2030). However, relative to GDP, infrastructure needs are largest in Africa and South Asia where, by some estimates, they reach double-digits (Foster and Briceno-Garmendia 2010; Inderst 2016). On average across EMDEs, investment requirements are largest in electricity generation, followed by construction and upgrading of transportation networks, real estate development, water and telecommunications (RBS 2011). In Asia, about half of investment needs are for energy, about one third for transport and the rest for telecommunications and water.

A sizable portion of these infrastructure investment needs remain unmet, although estimates vary widely and are subject to large uncertainty (e.g., Gramlich 1994 and Dethier and Moore 2012). For example, the difference between expected investment needs and current actual investment in EMDEs is estimated at $1-2 trillion per year (1.25 to 2.5 percent of EMDE GDP; WEF 2013a; Bhattacharya et al. 2012, McKinsey 2013, 2016).

Public investment in infrastructure can catalyze private investment (World Bank 2017a). However, public investment is more likely to crowd in private investment in the presence of economic slack, accommodative financial conditions, sizable investment needs, well-developed institutions, and a sufficiently skilled labor force. Improved project selection and monitoring, as well as better governance, may enhance the benefits from public investment.

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