WASHINGTON: Privatization and trade liberalization policies foisted on developing countries in return for financial help are often bad for the poor, according to a confidential UK government paper.

The document, drawn up jointly by the UK's department for international development, the UK Treasury and the UK Foreign Office, says the World Bank, the International Monetary Fund and individual governments should limit and streamline so-called "conditionality" for aid money.

Hilary Benn, the UK's international development secretary, has been the driving force behind the review, which will be cited by the British delegation at this weekend's annual meeting of the World Bank and the IMF in Washington.

The paper says: "We believe that developing countries must have room to determine their own policies for meeting millennium development goals and can use aid most effectively if they can predictably rely on it as part of their long-term budget plans."

Signalling Mr Benn's misgivings about aspects of the Washington consensus - the raft of policies urged on developing countries by the IMF and the World Bank - the report commits Britain to a softer line.

"In sensitive policy areas such as privatization, the UK will only use conditions to back reforms where partner governments have had space to debate - including where appropriate in parliament - the full range of policy options, and have made their own decision informed by clear evidence of the benefits to poor people, it says.

The paper adds that evidence on the impact of privatization is not clear-cut. "Some privatizations have increased investment in service delivery while others have worsened the standard of service received by the poor - particularly where governments have limited capacity to define contracts and regulate the behaviour of private sector providers."

The government believes that the evidence on trade reform is also mixed, with some signs that over-rapid liberalization is preventing poor countries from emulating the strong growth of east Asian nations, where trade barriers were removed only gradually as industrialization took root.

"Overall, trade reforms have been an important element explaining growth of poor countries and hence poverty reduction," the paper says. "But there are concerns, that aid conditions have constrained poor countries from following the development path of successful east Asian economies." -Dawn/The Guardian News Service.