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Bribery culture harming poor nations { September 29 2004 } Original Source Link: (May no longer be active)
http://www.guardian.co.uk/business/story/0,3604,1315082,00.htmlhttp://www.guardian.co.uk/business/story/0,3604,1315082,00.html
Bribery culture harming poor nations
Charlotte Moore
Wednesday September 29, 2004
The Guardian
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 François 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% of those in Guatemala, for example, finding interpretation of regulations unpredictable.
More than 90% of firms reported gaps between policy and practice, with the informal economy accounting for more than half of the output in many developing countries.
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. The majority of companies in developing countries report having to pay bribes when dealing with officials, and many rate corruption as the most serious obstacle. Bribes average more than 6% of companies' sales in Algeria, Cambodia and Nicaragua.
Regulation and taxation can improve the investment climate in developing countries but can also introduce too much red tape. Often policies create unnecessary risk, costs and barriers to competition which increase the size of the informal economy.
The report does accept the challenges may have to be tackled selectively. Improving property rights in China, for example, launched a process that lifted 400 million people out of poverty.
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