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World Bank Says Corruption Hurts World Economies

A new World Bank study indicates countries with low tolerance for corruption have more successful economies and increased rates of development. The World Bank's comprehensive index of corruption indicators is designed to measure global trends in good governance.

A key finding in this World Bank study is that political will is the key to making progress against corruption.

The bank's anti-corruption director, Daniel Kaufmann, says that corruption can be found everywhere, but the countries deemed the least corrupt, led by the five Nordic states and New Zealand, have several traits in common. These include a high regard for human rights, political stability, an effective, accountable government bureaucracy, market-friendly policies, and a strong rule of law.

Mr. Kaufmann says another key finding is that in developing countries where corruption is low, living standards are up to 300-percent higher. In addition, countries making progress against corruption attract more foreign investment. "Corruption affects the investment climate in ways that are more powerful than some traditional investment climate measures themselves, like the number of days it takes to open a business, for instance," he said.

Good news for developing countries is that with strong, sustained anti-corruption action, significant progress can be registered in just six to eight years.

The World Bank study assessed 352 measures of corruption in more than 200 high income and developing economies.

Mr. Kaufmann cautions against paying too much attention to a country's specific ranking in a corruption index or its change from year to year. The margin for error, he says, makes this an imprecise tool.

But Mr. Kaufmann says it does make sense to put countries into groups on a corruption index and it is possible to measure trends during the past eight years, like who has made progress and who has fallen back.

He starts by giving a sample of the countries that are falling back and then a sample of so-called green countries, those that have made progress against corruption. "The Ivory Coast, Zimbabwe, Nepal, Central African Republic, the Kyrgyz Republic, Venezuela, Belarus; they are all there. Very much in contrast with the green countries [on his chart], where we can say with a high degree of confidence that there has been a major improvement, like in some of the former Yugoslavia, the Slovak Republic, Ghana, Bosnia, Indonesia, and so on," he said.

In his presentation, Mr. Kaufman concludes that past anti-corruption efforts have had only mixed results. "Over the past eight years we do not see a significant improvement. So this (report) is an implicit call for action," he said.