The World Bank has urged developing countries to reconsider their approach to governance as unequal distribution of power in a society interferes with policies' effectiveness and, in effect, ends any ambitions of eradicating extreme poverty and boosting shared prosperity.

Improving governance will be key to mitigating security, growth and equity challenges in developing countries, the ‘World Development Report: Governance and the Law’ report, released on Monday, has shown.

The report suggested that good policies were often difficult to introduce and implement because “certain groups in society who gain from the status quo may be powerful enough to resist the reforms that are needed to break the political equilibrium”.

“Power asymmetries help explain, for example, why model anticorruption laws and agencies often fail to curb corruption, why decentralisation does not always improve municipal services or why well-crafted fiscal policies may not reduce volatility and generate long-term savings,” World Bank president Jim Yong Kim said.

To produce better governance outcomes, the World Bank suggested institutions bolster their commitment to policies in the face of changing circumstances; enhance coordination to change expectations and elicit socially desirable actions by all, and encourage cooperation by limiting opportunistic behaviour, such as tax evasion, through credible mechanisms of rewards or penalties.

“Government officials do not act in a vacuum. Their decisions reflect the bargaining power of citizens who jockey with each other to advance competing interests,” said World Bank chief economist Paul Romer, adding that there was a need to confront a complicated political process in every country, where power can influence the outcome of that process, and where the question of how that process could lead to progress for all needed to be asked.

Meaningful change was possible with the engagement and interaction of citizens – through coalitions to change the incentives of those who make decisions; elites, through agreements among decision-makers to restrict their own power; and the international community, through indirect influence to change the relative power of domestic reformers, the World Bank concluded.