The World Bank launched the World Development Report 2005 in Washington Tuesday, highlighting opportunities for governments to improve their investment climates.

Accelerating growth and poverty reduction requires governments to reduce the policy risks, costs, and barriers to competition facing firms of all types -- from farmers and micro-entrepreneurs to local manufacturing companies and multinationals -- concludes the report.

The report, A Better Investment Climate for Everyone, draws on surveys of over 30,000 firms in 53 developing countries. It highlights opportunities for governments to improve their investment climates by expanding the opportunities and incentives for firms of all types to invest productively, create jobs, and expand.

Policy-related risks dominate the concerns of firms in developing countries, the report said. And uncertainty about the content and implementation of government policies is the top-rated concern, with other significant risks including macroeconomic instability, arbitrary regulation, and weak protection of property rights. The report said that the policy-related costs shouldered by firms can also be substantial, and make many potential investment opportunities unprofitable.

Unreliable electricity supply and other infrastructure, crime, and corruption can impose costs that are more than double those of regulation. Together with weak contract enforcement and onerous regulation, these costs can amount to over 25 percent of sales, it said.

It also said that barriers to competition are also pervasive and dull incentives for firms to innovate and increase their productivity -- the key to sustainable growth.

High risks and costs restrict competition, but governments also limit competition through policy barriers to market entry and exit, and through inadequate efforts to curb anticompetitive behavior by firms, it added.

While many investment climate improvements require changes to laws and policies, the report highlights four deeper challenges that governments need to address to improve their investment climates:

-- Restraining corruption and other forms of rent-seeking;

-- Building the credibility of government policies;

-- Fostering public support for policy improvements;

-- Ensuring policy responses are adapted to local conditions.

The report calls on the international community to strengthen efforts to help developing countries improve their investment climates, saying the growth and poverty reduction unleashed by investment climate improvements in a country can easily dwarf the impact of international aid flows.

(Xinhua News Agency September 29, 2004)