Foreword xiii 
Acknowledgments xv 
Abbreviations and Data Notes xvi 
Overview 1 
The investment climate is central to growth and poverty redúction 1 Tackling costs, risks, and barriers to competition 4 
Progress requires more than changes in formal policies 5 A process, not an event 7 
Focus on delivering fue basics 9 
Going beyond the basics involves additional challenges 12 The international cQmmunity can lend a hand 14 
PART 1 
Improving fue Investment Climate 17 
1 The investment climate, growth, and poverty 19 
Understanding the investment climate 20 
How investment climate improvements drive growth and reduce poverty 24 Sharpening the focus on poverty reduction 31 
Creating a better investment climate for everyone 35 
2 Confronting fue underlying challenges 36 
The basic tension: Firm preferences or fue public interest? 37 Restraining rent-seeking 40 Establishing credibility 45 
Fostering public trustand legitimacy 50 
Ensuring policy responses reflect a good institutional fit 53 Making progress 54 
3 Tackling a broad agenda 56 
The investment climate as a package 56 Setting priorities 58 
Managing individual reforms 68 Maintaining momentum 71 Strengthening capabilities 74 
PART 11 , 
Delivering the Basics 77 
4 Stability and security 79 
Verifying rights to land and other property 80 Facilitating contract enforcement 84 Reducing crime 89 
Ending the uncompensated expropriation of property 92 
5 Regulation and taxation 95 
Regulating firms 95 Taxing firms 106 
Regulating and taxing at the border 111 
6 Finance and infrastructure 115 
Financial markets 115 
Infrastructure-connecting firms and expanding opportunities 124 
7 Workers and labor markets 136 
Fostering a skilIed and healthy workforce 137 
Crafting interventions to benefit alI workers 141 Helping workers cope with change 151 
PART III 
Going Beyond the Basics? 157 
8 Selective interventions 159 
The alIure-and traps-of selective interventions 159 Experience in specific afeas 163 
9 International rules and standards 175 
lnternational arrangements and fue investment climate 175 Enhancing credibility 176 
Fostering harmonization 180 
Addressing international spillovers 182 Future challenges 184 
PART IV , 
How the International Community Can Help 187 
10 How fue international community can help 189 
Removing distortions in developed countries 189 Providing more, and more effective, assistance 190 Tackling the substantial knowledge agenda 195 
Bibliographical note 198 Endnotes 199 
References 210 
Background papers for fue WDR 2005 241 Case studies commissioned by the U.K. Department for lnternational Development for the World Development Report 2005 242 
Selected Indicators 243 
Measuring fue investment climate 244 
Challenges in measuring the investment climate 244 The World Bank's new measures 245 Technical notes 250 
Selected world development indicators 253 
Data sources and methodology 253 
Changes in fue System of National Accounts 253 
Classification of economies and summary measures 254 Terminology and country coverage 254 Technical notes 265