By C. Bryson Hull NAIROBI, Feb 28 (Reuters) - Crime is hampering the growth of east Africa's largest economy by forcing businesses to spend heavily on private security services in the absence of effective policing, the United Nations said. Poverty has also increased slightly in four of Kenya's eight provinces, a new report by the United Nations Development Programme (UNDP) released this week said. The capital Nairobi has been gripped by a wave of at least 50 murders in the last three months that caught international attention when the wife of a U.S. embassy employee and a top Kenyan AIDS researcher were shot and killed. The Kenya National Human Development report said crime and insecurity are a "major impediment to investment in Kenya." "The direct loss to industry due to crime ... is 4 percent of annual sales revenue in addition to the burdensome indirect cost of contracting security services, estimated at 2.7 percent of sales," the report said. At least 82 percent of business spend an average of $1,300 per month on security services, including hiring guards and running electric fences. Kenya's police force is stretched too thinly and underequipped to manage the problem, with a ratio of one officer to every 850 people and corruption in its ranks, the paper said. And when business owners are not worrying about theft and violent crime, they must contend with widespread graft, it said. Donors have periodically withheld aid to Kenya over what they see as tolerance of major public theft which became an entrenched way of doing business under the autocratic 24-year reign of President Mwai Kibaki's predecessor, Daniel arap Moi. "Corruption is one of the most significant barriers to development in Kenya," said the report, adding that tax authorities and utilities were among the worst offenders. Investors regularly criticise Kenya for having dilapidated infrastructure and roads, a poorly-run port and inefficient customs services, which all hamper its prime position as one of the main supply routes into east and central Africa. Kibaki's government, which has focused on cutting red tape to make it easier for companies to do business, has predicted economic growth of more than 6 percent for 2006 once final figures are tallied, versus 5.8 percent in 2005. The government touts economic growth as one of its strongest achievements since coming to power in late 2002, and is expected to campaign on that point as December's election approaches. But some critics in Kenya say the growth has not translated into more money in the pockets of ordinary Kenyans.
