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World bank urges private investment { September 28 2004 } Original Source Link: (May no longer be active)
http://seattlepi.nwsource.com/business/apbiz_story.asp?category=1310&slug=World%20Bank%20Developmenthttp://seattlepi.nwsource.com/business/apbiz_story.asp?category=1310&slug=World%20Bank%20Development
SEATTLE POST-INTELLIGENCER
Tuesday, September 28, 2004 · Last updated 12:45 p.m. PT
World Bank urges good investment climate
By HARRY DUNPHY
ASSOCIATED PRESS WRITER
WASHINGTON -- To stimulate economic growth and reduce poverty, governments in developing countries should strive to improve conditions for private investment, the World Bank said Tuesday.
The bank said a good investment climate provides opportunities and incentives for entrepreneurs and businesses ranging from street vendors to multinational corporations to invest, create jobs and expand.
"A good investment climate is central to growth and poverty reduction," said Francois Bourguignon, the bank's chief economist presenting the Washington-based lending institution's annual World Development Report.
But he said too often governments put up roadblocks to such a climate by creating unjustified risks, costs and barriers to competition.
The 271-page report, "A Better Investment Climate for Everyone," draws on surveys of more than 26,000 firms in 53 developing countries and other bank data.
"While governments have limited influence on such factors as geography, they have more decisive influence on the security of property rights, approaches to regulation and taxation, the provision of infrastructure and the functioning of broader labor markets," the report said.
As a result of investment climate improvements in the 1990s, the report said, private investment as a share of gross domestic product nearly doubled in China and India; In Uganda it more than doubled.
"Indeed, investment climate improvements in China drove the most dramatic poverty reduction in history, lifting 400 million people out of poverty over 20 years," the report said.
Many firms doing business in the developing world rate uncertainty over government policies as their top concern, the report said.
Significant risks that chill incentives to invest and create jobs include economic instability, arbitrary regulation and weak enforcement of property rights.
The report found that improving policy predictability alone can increase the likelihood of new investment by more than 30 percent.
"Over 90 percent of the firms report gaps between policy and practice," said Warrick Smith, lead author of the report.
Citing the successes of India, China and Uganda, the report said that government need not make changes all at once, but be persistent in addressing constraints that face firms.
The report said the international community can do more to help developing countries in part by removing trade restrictions, subsidies and other market distortions.
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