By Jeremy Clarke NAIROBI, May 4 (Reuters) - The indirect costs of doing business in Kenya from crime, corruption and disorder are stifling economic growth in the east African nation, the World Bank said on Friday. Cheap labour gives Kenya an advantage, yet worker productivity lags well behind other countries on the continent, such as South Africa and Senegal, World Bank spokesman Giuseppe Larossi told a gathering of government figures in Nairobi. "Corruption and disorder, as well as unreliable infrastructure, transport and electricity all combine to create a constrained investment climate," Larossi said. Kenya, east Africa's biggest economy, grew 6 percent in 2006, up from 5.8 percent in 2005, but is still seen by many as underperforming. It has been on an upward trend since President Mwai Kibaki took power in 2002, when it was 0.6 percent. The World Bank was launching its second investigation into Kenya's investment climate on Friday. The first, in 2003, found rampant corruption as the major constraint on business operations in the country. And inadequate transport posed nearly twice the threat to business in Kenya as it did in neighbouring Uganda and Tanzania, the report said. David Nalo, permanent secretary for the Ministry of Trade and Industry, told those present the government would form policy to fight corruption and struggling technology in the private sector, thereby reducing the cost of doing business. "The potential of the private will be unleashed to contribute to the country's long-term goal of becoming a middle income economy," Nalo said. Donors, especially the World Bank, have withheld funds to Kenya because of concerns over corruption. Last year, the Netherlands suspended aid to Kenya worth 118 million euros ($160 million) over graft concerns. Kibaki won power on an anti-corruption ticket in 2002, pledging to reverse the graft that characterised the 24-year reign of his predecessor Daniel arap Moi, under whom the economy nearly collapsed.
