Better institutions the key to poverty reduction - World Bank

Weak institutions, tangled laws, corrupts courts, deeply biased credit systems and elaborate business registration requirements hurt poor people and hinder development, the World Bank said in its latest report on Tuesday.

The Bank said in its ‘World Development Report 2002: Building Institutions for Markets’ that countries which “systematically” addressed these problems and created new institutions suited to local needs could “dramatically” increase incomes and reduce poverty. The report said that many African countries had extremely complex and time consuming business entry procedures which led to higher corruption and larger unofficial economies.

“Overly complex regulations are especially problematic in poor countries,” Roumeen Islam director of the report said in a World Bank news release. “Despite some successful reforms in the Africa region, many countries are left out of markets opportunities because of overly complex rules and regulations. For markets to work for everyone, further simplification of institutions and more emphasis on innovative programmes that complement existing informal systems are needed.”

The report cited the example of Mozambique and Zimbabwe. In Mozambique registering a new business requires 19 steps and five months, and costs more than the average annual income. In Zimbabwe it takes five steps, 47 days and costs an estimated 13 percent of the average annual income.

The Bank said that simplifying the judicial procedure could increase efficiency without sacrificing fairness. It said that “alternative” conflict resolutions systems, such as those based on social norms, could also improve poor people’s access to legal services. In Senegal for example, the reports noted, it takes an estimated 450 days to enforce a judgement on debt collection.

According to the report in many countries, legal systems do not serve the needs of poor people, who are unable to pay legal services or read complex judicial documents. The report cited the example of Tanzania where the establishment of a specialised commercial courts have cut the average settlement time from 22 months to about three months. In Uganda small claims courts are beginning to rely on simplified, sometimes merely spoken procedures which have been found to resolve disputes faster and at a lower cost than regular courts.

The Bank also noted that open information flows have increased the public demand for more effective institutions, improving governance and social economic outcomes. Countries with more prevalent state ownership of print and broadcast news outlets tended to have fewer political rights, higher corruption, inferior economic governance, less developed financial markets and inferior health and education system.

It added that state ownership of the media in Africa was very high compared with other regions. “On average 3 out of 5 top newspapers and 4 out of 5 top television stations are controlled by the state in the region. Many African countries have tight regulations on the press, such as insult laws and restrictive licensing regulations,” the report said.

For more details: http://www.worldbank.org