WASHINGTON. Oct 9: State-run enterprises in developing countries are holding back economic growth there, a World Bank working report said Sunday, reports AFP.

While applauding the rapid conversion from a command economy to a market economy in Russia and

Eastern Europe, only three firms per year have been cut from state direction in the developing world, the bank said in its report.

"Large state enterprise sectors are hindering economic growth. They worsen government fiscal deficits, crowd out private investment, and consume scarce funds that could be better spent on health and education," World Bank Chief Economist and Vice President of Development Economics Michael Bruno said.

"All of these hurt the economy and make it harder for people to escape poverty," he added.

Bruno cited Chile. Mexico and South Korea as examples of countries that have substantially improved the performance of their state-owned firms by divesting extensively and introducing competition as well as compelling fiscal prudence.