The planning process and the issuing of licences by the State by way of "beauty contests" should be reformed so as to reduce the opportunities for corruption and the perception that corruption exists, according to a leading economist writing in the ESRI's autumn quarterly review.

Mr Colm McCarthy of DKM Economic Consultants said the perception, if not the reality, of political corruption has risen sharply, with the Republic falling in the annual Transparency International Index of perceived political probity from joint 11th position in 1995 to 19th last year.

He said the economic literature suggests that a perception of corruption can have adverse economic impacts, such as on the inflow of foreign direct investment.

"Ireland now has a problem in this regard, even if a sanguine view about the incidence of actual corruption turns out to be justified," according to Mr McCarthy.

He said there has been little discussion about the extent to which design features of the Irish economic policy system make it prone to corruption or at least to a heightened perception of corruptibility. He suggested two areas for reform - planning and licence allocations.

On planning, Mr McCarthy said it appeared to be generally accepted that it has been corrupted on a substantial scale.

He said the most radical solution to the "evident corruptibility" of the planning process would be to "scrap zoning by politicians and officials". A less radical approach would be to shift the legal presumption that sites will not be zoned to one that they will. "Local authorities could declare that all land within a stated distance of town and city centres would be zoned residential."

It would then be up to objectors to argue their case in the administrative or legal domains.

In relation to the granting of licences such as telecoms or broadcasting licences, Mr McCarthy said the case for auctions as against "beauty contests" was clear. It was possible that innocent explanations existed for payments being investigated by tribunals in relation to such licences.

On political donations, Mr McCarthy observed that some politicians "would appear to have gotten the firm's money mixed up with their own". He said it was curious that limits had been imposed on spending by politicians without greater consideration being given to further "generic" restrictions on politicians, such as banning their use of newspaper advertisements, cinema advertisements or the use of outdoor hoardings.

At a press conference, Mr McCarthy said there was a need to review "the entire microeconomic basis for planning laws". He said the process was littered with "occasions of sin" and no-one should be surprised to discover that corruption existed.