WASHINGTON: Environmental disasters, income inequality and social upheaval that have arisen from bad economic policies are threatening to derail the battle against poverty around the world, the World Bank warned on Wednesday.

In an annual report on development, the bank said poverty is falling, but the next 50 years - when the world's population could grow by 3 billion and the global economy to US$140 trillion - will present more challenges to the establishment of sustainable world economic growth.

"The development path has left a legacy of accumulated environmental and social problems that cannot be repeated," World Bank President James Wolfensohn said in a forward to the 2003 World Development Report released in Washington.

The report said the gulf between rich and poor nations has doubled in the past 40 years, air pollution is rising, fresh water has grown increasingly scarce, soil is being degraded, biodiversity is vanishing and forests are being destroyed.

From the collapse of US energy giant Enron under the cloud of an accounting scandal to the drying out of the central Asian Aral Sea due to cotton production, unsustainable policies are at fault, the Washington-based lender said.

The bank admits that it, along with other institutions, has been guilty of supporting some of those "misguided" policies, but said rather than apportioning blame, the world must strive to ensure policies can be adjusted to improve the situation.

The gloomy assessment coincides with devastating floods in Europe and Asia that have heightened awareness of environmental policies. On top of this came a United Nations warning that a 3-kilometre-thick smog cloud shrouding southern Asia is threatening the lives of millions of people in the region.

That warning and the World Bank's report came ahead of the UN Earth Summit in Johannesburg which begins this weekend.

Some 40,000 people, including heads of state, environmental lobbyists and business leaders, are expected at the conference to discuss how to make development policies more sustainable.

The bank, which will unveil a new carbon initiative at the meeting, urged these groups to reach an agreement on steps that can be taken now to ensure growth accompanied by poverty reduction does not come at a cost to future generations.

"The goal ... should be to establish truly global alliances ... and fairly work toward ensuring that development gains do not exhaust our environment and its resources or threaten social upheaval because they exclude poor people," said Ian Johnson, vice president of the bank's Environmentally and Socially Sustainable Development Network, in a statement.

In particular, Africa, home to about 70 per cent of the world's people living on less than a US dollar a day and where water shortages are expected to become the most severe, should get a special focus at the conference, the bank said.

The bank repeated its call for rich countries to open their markets, slash agricultural and energy subsidies and boost aid. The bank has blasted the United States and Europe for their whopping agricultural subsidies and measly aid budgets.

The US farm bill, signed earlier this year, boosted subsidies to farmers by US$6.4 billion annually, a move that provoked outrage around the world, particularly in Africa.

"The agricultural subsidies are the single most important action which rich countries can take that would directly affect the livelihoods of poor people," Ian Goldin, the bank's Director of Development Policy, told a press conference in Johannesburg.

Organizers of the 10-day summit say farm subsidies are a thorny subject which many Western delegates will fight hard to keep off the agenda.

Agencies via Xinhua