Date:30/09/2004 URL: http://www.thehindu.com/2004/09/30/stories/2004093000291500.htm

International

`Corruption harming poor nations'

By Charlotte Moore

LONDON, SEPT. 29. Red tape, corruption and a lack of public support for Government policies are hampering investment in the poorest countries, a report from the World Bank revealed yesterday.

The Bank also called on the international community to remove trade restrictions and subsidies. The benefits to developing countries would be four or five times the value of aid they receive, it says. The annual World Development Report, which surveyed more than 30,000 companies in 53 developing countries, says a vibrant private sector creates jobs, improves living standards and provides the taxes necessary for investment in public services. ``But too often, Governments stunt the size of those contributions by creating unjustified risks, costs and barriers to competition,'' said Francois Bourguignon, the Bank's senior vice-president and chief economist.

Uncertainty about the interpretation of Government policy is the main concern of firms in developing countries, with nearly 90 per cent of those in Guatemala, for example, finding interpretation of regulations unpredictable.

Policy-practice mismatch

More than 90 per cent of firms reported gaps between policy and practice, with the informal economy accounting for more than half of the output in many developing countries.

A challenge

Warrick Smith, lead author of the report, said: ``Governments need to close these gaps and confront deeper sources of policy failure that can undermine the investment climate.''

One of the four ``deeper challenges'' is reducing corruption. —