BERLIN, Nov 17, 2009 (AFP) - A leading watchdog named Afghanistan Tuesday as the world's second most corrupt country in a league table topped by lawless Somalia, highlighting President Hamid Karzai's failure to tackle rampant graft.

Transparency International's annual corruption list showed how countries devastated by conflict have become overrun by graft with Iraq, Sudan and Myanmar accounting for the three other states in the bottom five of the chart.

The Berlin-based organisation said that countries whose infrastructure had been 'torn apart' by conflict needed help from outside to prevent a culture of corruption taking root.

'The international community must find efficient ways to help war-torn countries to develop and sustain their own institutions,' said TI's head Huguette Labelle.

Overall, the 2009 corruption list is 'of great concern,' the organisation said, with the majority of countries scoring under five in the ranking, which ranges from zero, highly corrupt and 10, which is very clean.

Six years after the US-led invasion and the chaos that followed, Iraq was perceived to be slightly cleaner, with its score rising to 1.5 points from 1.3 points. It also climbed two places in the list.

But Afghanistan slid from 1.5 points in 2008 to 1.3 in 2009, giving further ammunition to critics of Karzai who was re-elected as president last month after a vote marred by rampant fraud.

US Secretary of State Hillary Clinton warned Karzai this week that future financial support from Washington would be linked to steps to tackle graft and said that a culture of 'impunity for those who are corrupt' had to end.

The Afghan government announced Monday it had formed a major crime unit to tackle corruption, in a move designed to assuage Western concerns about Karzai who is due to be inaugurated for a second term later this week.

The most corrupt nation on Earth remained Somalia, the impoverished and war-torn Horn of Africa state that has been without a functioning government for two decades, notching up a score of 1.1 points.

But it was not just countries riven by conflict that saw their ratings slide. Italy, a member of the Group of Seven rich countries came in at 63rd on the list, from 55th last year.

Fellow EU member Greece fared even worse, at 71st, slipping from 57th. Seemingly winning the fight against corruption were Liberia - whose score improved from 2.4 points to 3.1 points, shooting up 41 places on the list to 97th - and Gambia, which went from 158 on the list to 106.

Other significant improvements were registered by Norway, Qatar, Saudi Arabia, Montenegro and Malawi.

The United States inched up from 7.3 points to 7.5 but dropped one place in the rankings to 19th. China's rating was stable at 3.6 points but also fall seven places to 79th.

Russia continued to be very low down in the list, coming in at 146th place, although its score edged higher to 2.2 points from 2.1 points.

The five countries seen as least afflicted by corruption were New Zealand, Denmark, Singapore, Sweden - and Switzerland, the Alpine country seen as a bastion of bank secrecy.

New Zealand scored 9.4 points whereas Somalia scored 1.1 points.

The score is based on perceptions of the degree of corruption as seen by business people and country analysts.