Marketization in ASEAN 9789814376990

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The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia, particularly the many-faretecl problems of stability and securitv, economic dc\-clopment, and political and social change. The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government, the National L:niversity of Singapore, the various Chambers of Commerce, and professional and civic organizations. A ten-man Executive Committee m·ersees day-to-day operations; it is chaired by the Director. the Institute's chief academic and administrative officer. The ASEAN Economic Research Unit is an integral part of the Institute, coming under the overall supervision of the Director who is also the Chairman of its Management Committee. The Unit was formed in 1979 in response to the need to deepen understanding of economic change and political developments in ASEAN. The day-to-clay operations of the Unit are the responsibilitv of the Co-ordinator. A Regional Advisory Committee, consisting of a senior economist from each of the ASEAN countries, guides the work of the Unit.

MARKETI ZATION IN ASEAN

Contributors

Ahmad D. Habir Faculty Member Indonesian Institute for Management Development Jakarta Indonesia Florian A. Alburo Professor School of Economics University of the Philippines Philippines Zinnia F. Godinez Head Public Affairs Program Philippine Institute for Development Studies Philippines Klaus Konig Professor Postgraduate School of Administrative Science Speyer Germany Linda Low Senior Lecturer Department of Economics and Statistics National University of Singapore Singapore Heinrich Siedentopf Professor Postgraduate School of Administrative Sciences Speyer Germany

Sununta Siengthai Associate Professor School of Business Administration National Institute of Development Administration Bangkok Thailand Ian Thynne Senior Lecturer Faculty of Law National University of Singapore Singapore 1oh Kin Woon Associate Professor Faculty of Economics U niversiti Kebangsaan Malaysia Malaysia Toh Mun Heng Senior Lecturer Department of Economics and Statistics National University of Singapore Singapore Vuthiphong Priebjrivat Manager Corporate Planning Department Bangkok Bank Limited Bangkok Thailand

MARK ETIZ ATIO N IN ASEA N

Edited by

Ng Chee Yuen Norbert Wagner

ASEAN Economic Research Unit Institute of Southeast Asian Studies

Published by Institute of Southeast Asian Studies Heng Mui Keng 'Ierrace Pasir Panjang Singapore 0511 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies.

© 1991 Institute of Southeast Asian Studies The responslhlllty for facts and oplnzons expres.sed ln thzs publlcatzon rests excluslvely wlth the authors and their interpretations do not neassarlly refle::t the ulews or the polzcy of the Institute or lts supporters.

Cataloguing in Publication Data Marketization in ASEA;'\J/edited by ;'\Jg Chce Yuen and Norbert Wagner. Papers presented to the Workshop on Marketization in ASEAN, 25-28 Sept. 1989, Singapore. 1. Government business enterprises -ASEAN countries- Congresses. 2. Privatization- ASEA~ countries- Congresses. I. Ng, Chee Yuen. II. Wagner, Norbert. III. Workshop on Marketization in ASEAN (1989 Singapore). HD4295.8 A4M34 1991 sls90-152045 ISBN 981-3035-72-2 Typeset by The Fototype Business Printed in Singapore by Kin Keong Printing Co Pte Ltd

Contents

List

of

List

of Figures

Tables

Acknowledgements

Vll

Vlll

!X

PART ONE 1.

Introduction: Marketization of Public Enterprises Ng Cftee Yuen and Norbert Wagner

3

PART TWO 2.

The Role of the State in Southeast Asia 1oft Kin T#Jon

11

3.

The Role of the State in Europe Heinrich Siedentopf

25

4.

Transformation of Public Enterprises: Changing Patterns of Ownership, Accountability and Control Ian Tftynne

33

5.

The Transfer of Public Functions: A European Perspective Klaus Konig

50

PART THREE 6.

Making Public Enterprises More Efficient Ahmad D Habir

63

7.

Marketization of Telecommunications in Southeast Asia Toh Mun Heng and Linda Low

80

Contents

\'l

8.

Marketization of Public Utilities in ASEAN: Focus on the Public Transport Sector Zinnia F Godinez and Florian A. Alburo

102

9.

Can Efficiency Co-exist with Equity? A Case Study of Public Transport in Thailand Sununta Siengthai and Vuthiphong Priebjrivat

121

List of Tables

6.1

Factors Affecting Public Enterprise Performance

66

7.1

Contribution of the Transport and Communication Sector to GDP of Southeast Asian Countries Change in Shares in Volume of Outgoing Telecommunication Services between 1975 and 1985 Some Telecommunication Indicators of Regions, 1986 Summary of Privatization Rationale and Problems in ASEAN

82

Contributions of the Public Enterprise Sector within the Asian Region, 1984, 1985 and 1987 Number of Public Enterprises by Sector in Thailand, Fiscal Years 1984-1988 Size of the Public Enterprise Sector by Assets, Employment, and Capital Expenditure in Thailand, Fiscal Year 1987 Profile of SRT Personnel Thai Public Enterprises by Category of Establishment

123

7.2 7.3 7.4 9.1 9.2 9.3 9.4 9.5

82 83 96

124 125 130 137

List of Figures

3.1

Systems of Controls

30

4.1 4.2

35 36

4.3

Organizations and Governmental Activity The Extent of Public Enterprise Activity in Eighteen Countries, 1978 and 1986 Enterprise Transformation Matrix

6.1

Framework for Analysing the Behaviour of Public Enterprises

69

7.1

Telephone Density and GNP Per Capita, 1986

84

9.1 9.2 9.3

Three Regimes of SRT, 1983 to present Monitoring Process of Public Enterprises in Thailand Existing Structure of the Monitoring System of Thai Public Enterprises Proposed Privatization Procedures for Public Enterprises

9.4

40

131 134 135 140

Acknowl edgemen ts

This research, part of the project on Privatization and Deregulation in ASEAN, was prepared with financial support from the Konrad Adenauer Foundation. We are grateful for the assistance rendered by Ms Anne Yeo in the preparation of this manuscript, and for the editorial assistance rendered by the I SEAS Publications Unit.

PART ONE

1

Introduct ion: Marketiza tion of Public Enterpris es Ng Chee Yuen and Norbert Wagner

The year 1989 probably marked the culmination of a period of significant changes in perceptions of the role of the state. The revolutionary changes and upheavals in the Communist world and the concomitant crumbling of many (communist or non-communist) dictatorial regimes in Europe and in Asia are unmistakable indications that these states have simply not delivered the goods, material and immaterial, which were promised. The romantic idea of creating a "new" or "socialist" man has proved to be a complete failure. After decades of experimentation and repeated promises, disillusionment is spreading. It is not only in (formerly) socialist countries with their strong tradition of centralized decision making, and government interference and involvement in the economy that the role of the state in general, and of the government in particular, as an agent of political and economic development is being increasingly questioned and disputed. In fact, it can be argued that the movement for less government interference and more individual decision making originated in the late 1970s and early 1980s within the industrialized countries with already more or less open societies and economies. Interventionist policies, restrictive regulations, and state involvement in economic activity in the industrialized countries failed to achieve low unemployment, low inflation and high economic growth when external shocks were felt in the 1970s and 1980s. Quite to the contrary, interventionism and state involvement hampered structural adjustment and, thus, made the unavoidable changes even more painful in the long run. Whilst these observations and interpretations are valid generally and few would arguably dispute them, there must, however, be some logic and reasons behind the state's greater involvement in the production of goods and services in particular, and its interference in the economy in general earlier on. Traditionally there have been various rationale and objectives for the state's involvement in the economy: one rationale and objective is related to macroeconomic stabilization and the realization of a certain level of economic growth. Another important rationale and objective is to achieve a, by whatever definition, "fair and just" distribution of income and/or wealth among the various socio-economic groups of society. The third major objective of economic policy making is to secure the efficient use and allocation of scarce resources. In addition, the state is often expected to play an important role as an agent of development.

Ng Chee Yuen and Norbert Wagner

4

I. Macro-economic Stabilization Interventionist policies, the enlargement of the public sector, and the emphasis given to public enterprises have, among other steps, been justified on the grounds that they are necessary to serve the purposes of macro-economic stabilization, particularly when there was a strong conviction among economists that macro-economic "fine-tuning" and Keynesian deficit spending was an appropriate macro-economic policy. Policy makers attempted to achieve full employment and enhance economic growth through substantial anti-cyclical spending programmes. In addition to these objectives, the stabilization policy includes price level stability within a reasonable range and balance in the foreign account. Generally, the instruments used to achieve these goals include: (1) fiscal policies in terms of changes in tax status, and adjustments in expenditure programmes, and (2) monetary policies in regulating and changing the cost and availability of credit. Selective credit controls, and control in the interest rates and public sector borrowing were increasingly used as instruments to fine-tune the macro-economic performance of the country. As a result the share of the public sector in Gross National Product (GNP) in general and the relative importance of public enterprises increased considerably.

II. Distribution of Income and Wealth Another important rationalization for government intervention in the economy was the objective of attaining a distribution of income and wealth which was perceived as "just and fair" by policy makers. Notwithstanding the insurmountable difficulties of defining "justice and fairness" in that respect, governments have frequently pursued these objectives both at the macro-economic level (via taxes, social charges and benefits, and subsidies) and on the micro-economic level via "entrusted tasks" assigned to public enterprises such as railways, regional air transport, telecommunications, mail and utilities. The output of these public enterprises was seen as a package of public services. And in order to allow poorer members of society access to these "basic needs" services, governments resorted to cross-subsidization or heavy discounts on user charges. In addition, mixtures of public ownership and economic regulation were applied, whereas private ownership of utilities subjected to price and supply regulation played only a limited role.

III. Efficient Allocation of Scarce Resources Market Failure and Imperfections

1o really understand and evaluate the effectiveness of the organization and modes of production, it is imperative that we differentiate the various types of goods and services by noting their nature and characteristics.

Introduction: Marketization of Public Enterprises

5

With regard to normal private goods and services which have U -shaped cost curves, production of such goods are best left to the initiative of private enterprises. Adam Smith's "invisible hand" has proved to be most effective in both efficient allocation and optimal production. However, the efficiency criteria is not that clear cut for goods with specific characteristics and peculiarities which lead to various forms of market imperfections or market failure: for instance, goods with an L-shaped cost curve due to economies of scale, thus resulting in monopolistic market structures, or goods subject to economies of scope (like transport systems or telecommunication networks), or the production or consumption of goods which causes positive or negative externalities, or goods which are nondivisible, non-exclusive, and non-rejectable (goods with such characteristics are commonly known as public goods).

Monopolistic Market Structures

One type of market imperfection/failure arises from goods that have L-shaped cost curves because there is a built-in tendency for a monopolistic market structure; if left unregulated this would result in a sub-optimal level of output and prices higher than those occurring under conditions of perfect competition, and therefore detrimental to the consumer. The methods used in developed economies to try to rectify this market imperfection include promoting competition through instruments such as antitrust laws or introducing authorities to control these markets. But in so doing they fail to reap the full benefits of economies of scale. In less developed economies, the general tendency has been the direct involvement of the state in the production of such goods although there are significant differences in the sense that, in some countries, allocation and production continue to be subjected to market forces whilst others resort to administrative procedures. Both methods have their shortcomings although the latter is observed to have more adverse results.

Externalities

The problem becomes much more complex when dealing with positive or negative externalities and particularly with public goods. In the case of public goods in the strict sense such as security, the general perception is that it is best produced by the state given the high transaction costs of private production and the tendency of consumers to understate their preferences and/or to benefit as free riders from the production of these goods, not to mention the danger of abuse and misdirection intrinsic to the control of such goods. However, parts of this good may be best produced by the private sector. With regard to those that exhibit externalities, the major problem is that social marginal cost is not equal to private marginal cost, resulting in underproduction in the case of positive externalities, and over-production in the case of negative externalities. Of course it can be shown that there are economically optimal solutions to internalize these externalities, for instance through a system of compensation, taxes, subsidies, etc.

Ng Chee Yuen and Norbert Wagner

though in practical terms transaction costs are very high because those that are affected by, for example, negative externalities tend to overstate the damage they sustain. Moreover, in order to claim damages or to ask for compensation, property rights must be precisely defined.

IV. State as Development Agent

Thus, there is good economic rationale for state involvement in the production of the types of goods just discussed that lead to market imperfections. In addition, for developing economies, there are other persuasive and non-persuasive arguments, such as underdeveloped capital markets, inability of the private sector to mobilize capital funds, high risks of certain economic activities, lack of managerial skills and/or technical know-how, and lack of information, that presumably force and encourage the state to participate more actively in production. Because of the lack of efficient capital markets and well functioning basic infrastructure, and given the reluctance or inability of the private sector to invest in those sectors or industries with unusually high commercial and non-commercial risks and to implement projects requiring large amounts of capital, public enterprise was believed to be the only effective option for a wide range of developmental activities, such as (critical) imports and exports, the provision of basic needs such as public transport and utilities, the construction of infrastructure such as ports and a telecommunication network, etc. Moreover, there was a general conviction prevailing among development economists, development agencies, and governments of industrial as well as developing countries throughout the 1950s, 1960s and even early 1970s that only governments can undertake the steps necessary to promote and guide the development process. Multi-year development plans, therefore, required instruments of control as opposed to a mere structure of market-driven incentives. The public good character of many such activities suggested that markets would fail to supply the output in sufficient quantity or quality. Expectations of the state were high and together with the natural tendency for state enterprises to grow, not as a result of profitability but more so in terms of bureaucratic empire building and a lack of control, public enterprises expanded out of proportion and into areas that should, by economic considerations, be left to the private sector. Public enterprises are thus not confined to activities with characteristics of increasing returns, non-exclusivity, or externalities, where optimal outcomes are unlikely to be achieved through private markets because of high transaction costs. A detailed account of the growth, types, and performance of public enterprises in Southeast Asia has been carried out elsewhere (ASEAN Economic Bulletin, Vol. 5, No. 3, 1989). It suffices to note here that perceptions of both the state and the populace have changed, given the general observation and experience that most public enterprises are run inefficiently. Without adequate attention given to profitability, accountability, cost control, selection of personnel, and motivation, these enterprises sustained huge losses leading to burgeoning external debt. The problem is compounded by the common tendency of public enterprises

Introductzon: lvfarketization of Public Enterprises

7

to be inward looking, seeking protection for monopolistic practices. This emerges through interlocking interests at the political and institutional levels where the recruitment of executive staff is guided by political considerations rather than managerial competence.

Objectives of This Volume Developing economies can ill-afford to continue to squander away their scarce resources in this manner. A set of questions, therefore, arises: What must these economies do to minimize the losses sustained by public enterprises? Where should the line between public and private production be drawn? How can public enterprises be made more efficient? What is the current perception of the role of the state in production in Southeast Asia, particularly in ASEAN member countries? What are the political, legal and administrative constraints pertaining to the divestment or marketization of public enterprises? Is the situation in Southeast Asia different from those in other regions, say Europe? These are some of the questions this volume attempts to tackle. To highlight the issues and operational problems, the telecommunication and transportation sectors have been specifically chosen for case studies. These are sectors with a strong Lradition of government involvement based on the various rationale and objectives discussed earlier. Both sectors are particularly affected by various forms of market failure. Monopolistic market structures due to economies of scale and network economies (economics of scope) play an important role as do positive and negative externalities. Moreover, governments very often sec telecommunications and transport as strategically important sectors where the government has to play a crucial role as development agent. The improvement of physical infrastructure is always understood to be a prerequisite and a key to more rapid economic and social development. The volume is divided into two parts. Articles in the first part attempt to discuss the changing perceptions of the role of the state, and to develop and lay down the conceptual framework necessary to analyse the marketization of two sectors - transportation and telecommunications. Why rnarketization rather than privatization? The idea here is to discipline state enterprises, where possible, through the use of market forces as there may exist areas where the transfer of ownership and control may not be possible or may not produce the expected results. The most obvious case in point occurs when privatization would merely result in the transfer of a monopoly from the public to the private sector. Competition and efficiency would clearly not be improved. Therefore, privatization is not a sufficient instrument. In other words, other ways and means have to be applied to bring about the expected benefits of more competition. Or in the case of network externalities, two or more companies running their own telecommunication networks, for example, may do this only at higher costs compared with one single network. In other instances, it may not be acceptable to privatize for strategic and security reasons, but this should not automatically imply less efficiency and competition.

8

Ng Chee Yuen and Norbert Wagner

In orgamzmg the selection of conceptual articles in the first part, it was a guiding principle that the operative factors that have contributed to the process in more advanced Western countries cannot be assumed to be present in exactly the same manner here in Southeast Asia. Therefore, in the articles by Toh Kin Woon and Ian Thynne, wide discretion was given to interpret events and draw conclusions entirely on the basis of existing legal, administrative, and bureaucratic constraints, and the political, social, and economic realities in the region. This, however, does not imply that development in the West has no relevance or that there are no universally applicable factors. On the contrary, ideas, concepts, and practices developed in the West contain important lessons for other regions and countries. In this regard, the articles by Heinrich Siedentopf and Klaus Konig give a European perspective of the role of the state, and discuss the European experience in the transfer of public functions. Through comparison of the different and possibly conflicting perceptions and experiences, one can hope to better understand the specific problems and trends, difficulties and complications of marketizing public enterprises and transferring public functions. In Part Two, the general article by Ahmad Habir deals with the issue of how to make public enterprises more efficient by subjecting them to market forces. The author examines public enterprises in ASEAN in general and, in addition, analyses experiences from Singapore and Malaysia as examples. The analysis by Ahmad Habir is followed by studies on telecommunications (by Toh Mun Heng and Linda Low) and on transportation (by Zinnia Godinez and Florian Alburo, and Sununta Siengthai and Vuthiphong Priebjrivat). These studies highlight an important set of issues namely the operational, legal, bureaucratic, and administrative problems associated with the marketization of public enterprises and the transfer of public functions.

REFERENCES Pelkmans, Jacques and Norbert Wagner, eds. Making Markets More Effectiue: Privatization and Deregulation in A SEAN and the EC. Singapore: Institute of Southeast Asian Studies, 1990. Ng Chee Yuen and Norbert Wagner. "Privatization and Deregulation in ASEAN: An Overview". ASEAN Economic Bulletin 5 no. 3 (March 1989): 209-23

PART TWO

2

The Role of the State Southeast Asia

• ID Toh Kin Woon

At first glance, it seems odd that the subject of the state should be brought into a volume that has as its primary focus that of privatization, deregulation and marketization. But after some careful. thinking, it is not all that difficult to see the relevance, indeed the pertinence, of bringing in the subject of the state, for the issue of state involvement in the economy versus "rolling back the frontiers of the state" basically revolves around the proper role of the state in national development. Indeed, the state has played a central role as an institution in the politics and economics of development in Third World countries. However, discussion of the nature and role of the state was, for a long time, left very much in the cold by both mainstream political scientists and sociologists on the one hand as well as economists on the other. This is not difficult to understand for the former have already taken as resolved "some of the larger questions which have traditionally been asked about the state, and makes unnecessary, indeed almost precludes, any special concern with its nature and role in Western-type societies" (Miliband 1969: 2). To the latter, the role of the state is often assumed away as an exogenous parameter or as a neutral arbiter in the economic system. While discussions on the nature and role of the state have been very much neglected by mainstream social scientists, the performance of the radical social scientists (those on the left of the political spectrum) has not been much better. Except for some early contributions made during the nineteenth and early twentieth centuries, the period up till the 1950s and much of the 1960s in this century was marked by a dearth of literature on this subject. It was not until the late 1960s and 1970s that attention began to be focused on the state as an institution. Stimulated by books and articles by Miliband, Murray, Poulantzas, EspingAnderson, Friedland and Wright, to name but a few, there is by now a substantial collection of works on the nature and role of the advanced capitalist state in the process of development (Miliband 1969; Murray 1971; Poulantzas 1973, 1975; Esping-Anderson, Friedland and Wright 1976). Even so, no general theory of the state has been derived. Similarly, the nature and role of the state in post-colonial peripheral capitalist societies or what are essentially referred to as underdeveloped societies have also been subjected to much scrutiny, particularly during the seventies (see, for example, Fitch and Oppenheimer 1966; Kalecki 1967; Murray 1967; Meillassoux 1970; Alavi 1981).

12

Toh Kin Woon

Although most of these studies are country specific with some features of the state being particular to the country under study, some essential characteristics common to all can still be identified. This is not to say, however, that a general theory of the state in developing societies following the capitalist path of development has been developed, just as no general theory of the advanced capitalist state has been derived. This failure to derive a general theory of the state in both developing and developed societies is evidence that the subject of the state is both complex and broad. It is thus impossible to discuss the subject of the state in its totality. Instead, this article's approach focuses on the economic aspects with discussions on the political aspects being kept to a minimum. Such an approach towards the subject of the state risks being over-economistic but this is perhaps extenuated by the need to keep the focus within manageable proportions, and remain consistent with the rest of the articles in this volume. This article attempts to discuss the role of the state in Southeast Asia, with particular focus on the economic aspects. But before such a discussion can be done meaningfully, some theoretical perspectives on the economic role of the state will first be briefly presented. This is done in Section 1. With these perspectives constituting the theoretical background, we proceed next to discuss the nature of the state in Southeast Asia (Section 2). Clearly such a task is gargantuan and not easy to perform. For a start, different countries in this region arc at different levels of development. Next, there are two blocs of countries with diametrically opposed ideologies. There is, on the one hand, the Association of Southeast Asian Nations (ASEAN) - comprising Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand - following essentially the capitalist path while, on the other hand, there is Indo-China comprising Vietnam, Kampuchea and Laos following the socialist path with Myanmar having a military regime. Discussing the role of the state in a politically and economically more homogeneous region such as ASEAN is difficult enough. To discuss the topic for such a politically and economically diverse region as Southeast Asia is obviously that much more difficult. The author has, therefore, opted for the more modest task of discussing the role of the state in ASEAN, though some features of the state in ASEAN may be relevant and applicable to the state in Indo-China. The discussions in this section will cover the political aspects as well. This will then be followed by a discussion on the economic role of the state in ASEAN with particular focus being paid to its changing economic role (Section 3). Specifically, attention will be paid to the forces impinging upon the state that have led to (1) the proliferation of public enterprises and the taking of a relatively more "nationalistic" stance towards transnational corporations (TNCs) during the 1960s and early 1970s; (2) the subsequent reversal of the earlier policy and its replacement by a more open-door policy during the latter part of the 1970s and 1980s, as well as ( 4) the increasing trend towards privatization and deregulation best summed up in, for want of a better term, marketization. The main arguments of the paper will then be summarized in the concluding section (Section 4 ).

Role of the State in Southeast Asia

13

1. The Economic Role of the State Traditional textbooks on economics have us believe that the econom1c role of the state straddles a broad spectrum. At one end is the free enterprise system where the economic role of the state is minimal, being restricted to the provision of public and a portion of the merit goods as well as the performance of regulatory and supervisory functions. At the other end is the centrally-planned system where the state is the major owner of the means of production and is therefore a major producer of all types of goods and services. We shall, however, only discuss the economic features of the state in the former, since it is more relevant to the Southeast Asian context, and the latter system is getting more and more irrelevant by the day. In market economies, the job of resource allocation and the consequent pattern of output are largely left to the market forces of demand and supply through whose interaction prices are determined. And prices are key signals through which relative returns to factors of production are compared. Prices are, therefore, signals through which incentives and information are provided. Left on their own, and with competitive market structures, market forces will determine appropriate prices that will in turn induce an optimal allocation of resources, where all firms within all industries produce up to where marginal cost equals price (the marginal cost pricing principle). But the reality is of course far from this textbook ideal. The truth is that there are several major types of industrial or market structures involved in the production of private goods, with the competitive structure being the exception rather than the rule. In industries where the minimum efficient scale is small in relation to market size, where economies of scale are unimportant and where there is ease of entry and exit, many firms may be found and competition encouraged. Output from these industries are normally produced by privately-owned firms, with minimal state participation in production. Then, there are some industries where the minimum efficient scale is fairly large in relation to market size. Such industries, described as oligopolies, are normally dominated by a few giant firm; (with four, three or even two firm concentration ratios normally in excess of half). Again the majority of these oligopolies are usually privately-owned, though some state participation may well be likely. But the role of the state in relation to these industries is usually that of a regulator, with a view to preventing collusion by the giants to form cartels that are de facto monopolies which may exploit their market power to the detriment of consumers. In the United States of America, the role of the state in this regard is manifested in the implementation of antitrust laws while in Britain, this role of the state is performed by the Monopolies and Mergers Commission that, among other duties, investigates unfair trading practices by giant firms. Finally, we have the case of natural monopolies where the minimum efficient scale is very large in relation to the size of the market. With industries of this nature, where scale economies are substantial, the existence of two or more firms will lead to duplication, and therefore gross underutilization of capacity, wastage and high costs of production. Industries of this nature are best dominated

14

CToh Kin Woorl

by single producers. The latter can either be private or public, though penetrac tion into these industries by public enterprises is fairly frequent since private initiative may not be that forthcoming, given the indivisibility of capital, the high risks involved and the long gestation period. The direct involvement of the state in industries of this nature may also be deliberate, given the strategic importance of some of these goods to the nation's security. Examples of some of these are the utilities and aircraft industries. In the more developed free market economies, private goods produced under competitive and oligopolistic market conditions are normally left to private enterprises as mentioned earlier, with the state essentially performing regulatory functions, such as ensuring the maintenance of product quality and the minimization of social costs, where these diverge from private costs, through the internalization of the former via taxes. Even in the case of natural monopolies, private ownership and therefore production is quite often the norm, though in the case of utilities such as telecommunications, electricity, water and gas, the state may undertake to develop the social capital in addition to keeping tabs on prices, but with production privatized. In countries where production has been undertaken by state enterprises, steps have been taken to privatize these enterprises. The trend is therefore unmistakably clear - there is increasing reliance on private sector efforts even in the production of goods normally produced by the public sector, with the boundary of this sector being shifted back. But the market mechanism is not infallible and there are market failures. These include the existence of externalities, the distortion of market prices that in turn leads to a sub-optimal allocation of resources, the failure to produce public or collective goods, and an income distribution pattern that is often incongruent with the social goal of equity. Under these circumstances, state intervention, including state production, seems the logical response. The case of public goods (defence and police protection) is abundantly clear. With characteristics of nonexcludability and non-rivalry in consumption leading to the free rider problem and the tendency of consumers to understate the intensity of their need, not to mention the high transaction costs of private production, public goods have been perceived to be best produced by the state, though private production of some portion of these goods is not impossible. Then there is the case of goods that exhibit externalities, of which there are two types. The first is that of merit goods (education, public libraries) with social benefits in addition to private ones. When left entirely to private production, there is the possibility of underproduction and therefore underconsumption of these merit goods. The state therefore steps in to correct this market deficiency through direct production of most of these goods, with private enterprises producing the rest. The other category of goods is where there is a divergence between social and private costs and where prices do not accurately reflect the costs imposed on society. As a result, there is often both over-production and over-consumption of these goods, thereby increasing the economic costs borne by society. Here, the state often intervenes to minimize the social costs by attempting to internalize these costs through, for example, increased taxation, though some economists would argue that the divergence between private and social costs can be accommodated through

Role of the State in Southeast Asia

15

payment of compensation to those adversely affected. The problem here is that those afiected by the external diseconomies may overstate the damage they have sustained. Apart from production, regulation and supervision, the state's other economic role is that of the maintenance of an environment of price stability which wili facilitate business expansion. Attempts at achieving price stability usually entails the use of monetary policy. This role of the state seems to have assumed some urgency in recent years in developed societies where inflation has become a serious problem consequent upon the overheating of these economies. And with balance of payment deficits thrown in, as in the case of the United States of America, the state has also stepped in to protect the interests of local industries unable to compete with foreign industries, through the imposition of both tariff and non-tariff barriers. The market failures mentioned above are often exacerbated in less developed societies where, over and above those problems, the market mechanism, when left on its own, often fails to generate a real rate of sufficiently high economic growth that will continuously raise the income levels of their population. In less developed societies such as those in Southeast Asia, the state also acts as an agent of development. Unable to rely on the market mechanism to generate the required increases in growth rates to meet rising development expectations, the state often steps in directly to mobilize and allocate resources for production, especially in industries where there are increasing returns to scale, where both entry costs and risks are high, and where there may well be substantial external benefits. Then, there are countries confronted with the problem of inequitable distribution of income, wealth and opportunities, especially between different ethnic communities. If it so happens that the economically backward happens to be the indigenous community which provides the state elites with most of their electoral support, then the state may assume an even more expanded role of direct participation in the economy through the realm of public enterprises. But with the failure of many of these enterprises and the consequent fiscal crisis, the state is now faced with the exigency of either closing down some of these or else divesting them to the private sector. Finally, a few words ought to be said about the politics of the state. The author essentially agrees with the view that most governments are not malevolent (Pang and Chan 1984). Nor are their policies and actions simply an articulation of aggregated individual interests. Most have clear visions of the kind of society they want to create, and the kind of policies required to realize their visions. Although governments may have differing ideological orientations, all seek to enlarge, or at least maintain, the support of key groups in their societies. They will pursue policies that will help them retain or enlarge their political base while weakening their political opponents. When these policies strengthen political support and promote economic efficiency as well, the outcome, according to Pang and Chan, is not only regime stability but also significant economic progress. But when these policies lead to economic inefficiency without seriously eroding the political base of the state or are largely responsive to powerful interest groups, the outcome is regime survival but at the cost of slow development progress and widening income disparities.

ioh K in Woo n

Hi

2. The State in ASEAN It is really very difficult to describe and an alyse the ch anging n atu rc and role of the state in ASEAN. There a rc six states, each with it s own peculiarities. To discuss these would require tim e a nd space far beyond th e scope of this article. Therefore, though at the risk of oversimplification, only the universalities will be discussed, and o bvious deviations that occur in specific states will be pointed out.

Features of the State in ASEAN M ost states in ASEAN (except Brunei) have adopted a variant of the parlimentary d emocratic regime. But the relative strengths a nd importance of the different organs, and the elites that constitute the state and its wielders of power do show some degree of variation. The In dones ian state is dominated by the all-powerful military-bureaucratic alli a nce. Thi s military-bureaucrati c alliance of the New Orde r regime that cam e to power through a very chaotic political succession in 196 6, while being dominated by these two organs of state power, has represe ntation from technocrats, businessmen , politician s a nd trade unionist s as we ll (Heri Akhmadi 1988). Until rec e ntly, the a rmy was , and perhaps still is, a very powerful state organ in Thailand. But the in st itutionali zation of the va riou s democratic institutions, such as the political parties, businessme n's associations, labo ur unions and peasant uni ons , has proceeded at a very vigorous pace si nce the popular student upri sin g in 1973 (Thirayuth Boonmi 1988). In fact, this instituti onalization process h as ga thered such momen tum that the instituti ons of d emoc racy h ave currently gained the dominant position. M eanwhile, the legitim acy of traditional in stitutions such as the army in directly exercising political power h as diminished though the ideology of kingship h as not wa ned in the least. If anything, the a uth o rit y of kin gship in Thailand is still all-powerful as can be wi tnessed in it s successful m edi ation of the conflict between the army a nd the political parties that had resulted in two abortive mili tary coups in April 1981 and September 1985 (Thirayuth Boonmi 1988) . But the potential source of conflict between the traditional military a uthorit y and the formal-legali st ic authority ves ted in the politi cal p a rties rema in s real as can be seen in the not too recent struggle between the two institution s over constitutional amendments, a rms deals, budgetary allocations, and ideology. 1o maintain stability a nd to avert open con flict, a subtle balance between the political parties, the army, a nd the kingship has always to be maintained in Thailand. The Philippines, on the other h and, has had a much longer tradition of parli am e nt ary democracy although, for obvious histo rical reasons, it has ado pted the American style. For a lon g time, the democratic organs of state power such as the executive and the legislatures h ave occupied a more central p osition h ere. But this was reversed wh en former President Ferdinand M a rcos declared martial law in 1972 . With this pro mulgatio n of martial law, powe r became concentrated in the hand s of the Chief Executive backed by the military that was in turn led

Role of the State in Southeast Asia

17

by the cronies of Marcos. The democratic institutions were disbanded. In 1978, Marcos re-introduced a semblance of electoral democracy through the creation of the legislature called the Batasan. With this re-introduction of the legislature, legal opposition, centring around Marcos' opponent, Ninoy Aquino, once again resurfaced. But legal opposition was not the only opposition to the Marcos dictatorship. The underground movement and its front organization, the National Democratic Front (NDF) managed to gain and mobilize a great deal of popular support against the regime. But the assassination ofNinoy Aquino in 1983 changed the entire political terrain in the Philippines. It was this assassination coupled with the ensuing economic crisis that provided the necessary push to the forces that later came to be known as the Cory centrist coalition (David 1988). These forces were not about to allow the underground movement to fill the power vacuum created by the departure of Marcos, which they then foresaw as imminent. When Marcos finally called a snap Presidential election in 1986, these forces decided that this was their moment to make a bid for power. And to spearhead their movement, they found in Cory Aquino a popular symbol to mobilize mass support. The rest is history, and require no more elaboration. For the moment at least, the Philippines has returned to the parliamentary democratic style of government a Ia United States of America, with President Aquino firmly occupying the central seat of state power. Enroute, she not only toppled a long-time dictator with the help of people's power but survived several coup attempts, including the bloodiest that took place towards the end of 1989. Malaysia and Singapore have many features of the state system in common, having inherited a British-style parliamentary democratic system of government and a relatively efficient bureaucracy. State elites have primarily been led by politicians with good support from the bureaucracy, the military, the judiciary and the people at large. Where conflicts have arisen between these different organs of state power, for example between the executive and the judiciary, or between the executive and the monarchy, changes have been effected by the executive, using the legislatures, to ensure greater compliance, congruence and harmony with tht: wishes of the executive. There has thus been this increasing concentration of state power in the hands of the political elites, legitimized as the need to ensure greater expression of popular sentiment, as represented by the elites, in state policies. Changes have also been instituted to contain opposition to state power whenever this has been found to be necessary.

Regime Stability While the different states in ASEAN may have different forms of parliamentary democracy wherein the relative strengths of the different state organs differ, they all have some semblance of regime stability. In most cases, such regime stability may be attributed to the pursuit of marketoriented economic policies that have promoted growth and rising prosperity with the result that political support for ruling parties has been readily forthcoming. For example, both Malaysia and Singapore have been ruled by the same political

18

70h Kin Wr}(}n

parties since their independence while Indonesia has been governed by the forces led by President Soeharto since 1966. The successful pursuit of good and sound economic policies has meant an ability to raise the absolute incomes of the poor, cater to their basic needs such as food, health and education, and to provide basic infrastructure. This has, in turn, contained the social threat from below, thus averting the class confrontation that has so often occurred in many Third World countries such as those in Latin America. But many would insist that the pursuit of efficient economic policies is not the only cause for regime stability. The adoption of repressive measures is also important (Heri Akhmadi 1988; David 1988). For example, a few ASEAN states have adopted pre-emptive custodial measures, such as the Internal Security Act in Malaysia, that empower the state to arrest without trial political dissidents, besides other legislative measures aimed at controlling the political involvement of students, the activities of pressure groups, and the media. The latter, both print and electronic, are in many instances owned and controlled directly by the government or by institutions sympathetic to the government. Such ownership and control has meant almost total monopolization of the ideological arena so vital for regime stability. Then there is the symbolic ·legitimation, besides the economic performance legitimation, and the usc of measures to weaken the opposition. By symbolic legitimation is meant the adoption and propagation of a state philosophy around which citizens are to rally, exemplified by the adoption of the Pancasila in Indonesia and the Rukunegara in Malaysia. In some instances, symbolic legitimation has been important in containing political movements based on Islamic fundamentalism . The ubiquity of grandiose mosques is one such example of symbolic legitimation aimed at presenting an image of the ruling regime as no less Islamic than the opposition. This is indeed vital in states where Islamic revivalism is on the rise and popular support for Islamic-based opposition parties is fairly widespread. Finally, military support provided by the external powers such as the United States, Britain, Australia and New Zealand has also contributed to regime stability in ASEAN.

3. Changing Economic Role of the State in ASEAN

The Changing Economic Role The economic role of the states in ASEAN has undergone some changes since the beginning of the 1970s. While all states in ASEAN have essentially been relying on the free market mechanism to allocate resources, they have also intervened to correct what they perceive as market failures, i.e. inequitable distribution of income and opportunities between races, classes and regions, and the inability of the market mechanism to provide both collective and merit goods. A common mode of intervention has been via the state enterprises which proliferated during the 1960s and 1970s, although some of them were created even before that.

Role of the State in Southr:alt Asia

19

To boost economic growth, foreign investments, especially by transnational corporations (TNCs ), have been encouraged. Again, while this has remained a major thrust of economic policy of all ASEAN states throughout the 1970s till the present, it might be noted that at the beginning of the 1970s, some attempts to control the activities of TNCs were made. This was in a sense encouraged by the success of the Organization of Petroleum Exporting Countries (OPEC) in capturing a somewhat more respectable share of the great wealth Third World countries continue to contribute to the world. It was also part of a world-wide trend where "all around the world, TNCs are under attack, and nowhere is this more true than in the Third World" Clurner 1973). But by the beginning of the 1980s, some fundamental changes had begun to occur. Economic statism, which was a feature of the earlier period, had to be rolled back through privatization while the earlier more cautious attitude towards TNCs had changed to one of indiscriminate acceptance of their role. This short description raises several interesting questions with respect to the changing economic role of the states in ASEAN. Why were state enterprises initially created on a huge scale? What caused the states in ASEAJ\i to reduce their involvement in their respective economies? Why, in the brief span of a decade, did the initial cautious attitude towards TNCs change to one of enthusiastic and almost uninhibited welcome?

The Proliferation of State Enterprises Let us attempt to answer the first question. It has been suggested that the nature, role and creation of public enterprises are initially determined by the pattern of the colonial relationship and the manner in which national independence was attained (Rehman Sobhan 1980). Subsequently, the nature and role of public enterprises are influenced to a large extent by the configuration of forces that underlie the state. Let us examine each of these ideas in greater detail. There are two main patterns of colonial relationship. The first is characterized by the all-pervading influence and domination of the colonial power in the commanding heights of the economy (plantation, mining, trade, banking, manufacturing) in addition to controlling the state during the colonial era. As a result of this domination by colonial capital, developing countries during the colonial era lacked a strong indigenous entrepreneurial class. Local businessmen who existed were mainly compradore in nature, and their development depended very much on the patronage of the colonial capitalists. This ethnic composition of the dominant business and trading community continued to prevail till the time of independence and for some years thereafter. The second pattern is characterized by the emergence of a sufficiently strong indigenous entrepreneurial class, out of the middle class, able to contend with the colonial businessmen for dominant control of both the state as well as the economic sectors of the country. Some of the countries that had those patterns attained their political independence in a peaceful manner. For these countries, there was thus no dramatic break between those who inherited the mantle of political power and the departing colonialists, and hence no entrepreneurial vacuum

20

7oh Kin Woon

existed on the morrow of independence that required to be filled immediately. In the post-colonial phase, either the colonial capitalists continued to dominate the economic sectors, as happened in countries characterized by the first pattern of colonial relationship (Malaysia), or they were gradually displaced by the indigenous capitalists, as occurred in the second case. In both the cases, the role of public enterprises is limited to one of providing cheap inputs and services to the private sector. These cases must, however, be distinguished from those where the colonial relationship was terminated after a bitter nationalist struggle (Indonesia). The bitterness created as a result of these struggles !or independence led in turn to a mass exodus of colonial capital, dominant in most sectors of the economy during the colonial era, on the morrow of independence. In societies where the near monopolization of all economic sectors by colonial capital hampered and constrained the growth and development of an indigenous entrepreneurial class, this mass exit of colonial capital gave rise to a huge entrepreneurial vacuum that required to be filled urgently. This vacuum is out of necessity often filled by the state through the takeover of enterprises left behind by the colonial capitalists, and the creation of new public enterprises. This extension in the role of public enterprises is not confined, however, only to countries which witnessed discontinuities in their social order arising out of the nationalist struggle. It may take place, too, in countries where there is a radical shift in the balance of class forces caused by internal soc.al upheavals or external events. While the pattern of the colonial relationship and the manner in which it was terminated determine the initial nature and role of public enterprises, the changing balance of social forces has an important bearing on the subsequent role of public enterprises. For example, the outbreak of a major racial conflict in May 1969 in Malaysia led subsequently to the ascendence to power of a group of elites sympathetic to demands of the Malay middle and upper class that the state intervenes more directly in the economy on their behalf, using state enterprises. State enterprises have also been used in Thailand and Indonesia to wrest control of various sectors from the local Chinese business class. Other reasons for the increase in the number of state enterprises have also been suggested - the reluctance or inability of the private sector to invest in those sectors or industries with unusually high commercial and non-commercial risks, the need to implement investment projects which require large amounts of investment and the general conviction prevailing among development economists, development agencies, and governments of industrial as well as developing countries throughout the 1950s, 1960s, and even early 1970s that only governments can undertake the steps necessary to promote and guide the development process (Ng and Wagner 1989).

Rolling Back the Frontiers of the State While the 1970s was characterized by a marked degree of economic statism throughout ASEAN, the 1980s witnessed a slow but determined withdrawal of the state not only from what has traditionally been regarded as the province of

Role of the State in Southeast Asia

21

the private sector but even from economic sectors, such as the public utilities and hospitals, where state ownership and participation have been the norm. This withdrawal has mainly been in the form of privatization, though there has also been renewed emphases on markets and competition. Several reasons have been put forward to explain this perceptible shift in the economic role of the state in ASEAN. First, with the exception of Singapore, state enterprises in most other ASEAN states were inefficiently managed and operated. Huge losses, particularly in Malaysia and the Philippines, were incurred by state enterprises that in turn required huge budgetary outlays. This contributed to the incurring of huge debts. The case of the Philippines is particularly telling in this regard. Between 1981 and 1987, the Philippines Government would have had budget surpluses for all years except 1982 and 1987 but for the need to provide support to state enterprises (Godinez 1989: Table 3 p. 264 ). As a consequence, public debt, in particular external debt, ballooned. As of August 1988, the external debt of the Philippines was estimated to be US$28.06 billion of which roughly US$12.02 billion, or almost 50 per cent of the total, had been incurred by state enterprises. There arc several reasons for the poor performance of public enterprises.

1. There was no clear objective for the public enterprises, and this had led to the inevitable problem of overlapping functions. 2. There is often some degree of ambiguity on the criteria for selection of programmes and projects, i.e. whether they are to be entirely commercially oriented or to take into account non-commercial or social factors. 3. Many of these public enterprises have been inefficiently managed as they essentially draw their managers from among public sector employees. 4. There is the- problem of co-ordination, regulation and control, especially financial control. The maintenance of comprehensive and up-to-date information on each enterprise has been less than satisfactory and the reporting of performance has been somewhat problematic. 5. Finally, some public enterprises have high gearing ratios, less than optimal capacity utilization, high input costs and in some cases, inadequate technology. The Malaysian state, too, had a similar albeit less senous problem. By end 1987, total accumulated losses of the non-financial public enterprises (NFPEs) in this country came to about US$850 million (New Straits Times, 22 October 1988). The external debt service ratio of these NFPEs increased from 4.6 per cent in 1985 to 5.8 per cent in 1986 which increased further, albeit marginally, to 5.9 per cent in 1987. The huge losses that led to the rapid accumulation of external debt resulted in a severe strain on the state's fiscal capacity. And it is to relieve itself of this fiscal burden that had encouraged most states in ASEAN, with the exception of Singapore, to reduce the size of the state sector. Moreover, the direct participation of state enterprises in business had led to a certain degree of "crowding-out" of local private entrepreneurship. Concerned that the latter should be developed, the states in ASEAN felt it urgent to reconsider

the whole public-private sector mix. with a view to expanding the private sector while concomitantly reducing the state sector. Pressure from international financial insritutions such as the International l\Ionetary Fund (IMF) and the \!Vorld Bank on debtor countries such as the Philippines and Indonesia to privatize and deregulate have also played an important part in the shift of economic policy of these states. Implementing pro-market policies, that include privatization and deregulation, is normally a condition for obtaining further financing from these international as well as other private financial institutions. Finally, it may be interesting to note that the chief architect behind privatization in the United Kingdom, Prime Minister l\Iargaret Thatcher, had the weakening of militant trade union power via privatization as a priority objective in the Conservative Party's 1979 Election l\Ianifesto. Privatization, deemed to have been very successfully carried out in the United Kingdom, is thus an important instrument of the state to weaken workers' unions, thus containing the opposition to capital from the side of labour. As it turned out, privatization has also been a key instrument in winning some electoral support for the ruling elites from workers who were able to appropriate capital gains from shares of newly privatized agencies during a stock-market boom. It is highly doubtful, however, that these are important issues in ASEAN. For a start, union power, except perhaps in Thailand, is relatively weak so that there is no real threat from labour that requires containment by the state. Next, given the skewed distribution of share ownership in those ASEAN states that ha\'C relatively well-developed stock markets, the prospect of appropriating capital gains from shares of newly privatized state agencies is clearly irrelevant to a large segment of the working population.

The State and TNCs in ASEAN At the beginning of this section, an important question was posed: Why was the initially more cautious attitude shown by the state in the early 1970s towards TNC participation in the local economies translated into one of more open and indiscriminate welcome manifested in the drawing up of new policies desired by the TNCs in the early 1980s? The answer to this question can be looked at from two levels. At one level, the crises of the global economy, to which all ASEAN states were so highly exposed during the early 1980s can be cited as the major causal factor to explain the changed responses of some ASEAN states to TNCs. The argument goes like this: in times of economic adversity, states can be expected to be more solicitous of those productive forces that continue to provide significant sources of wealth for the state and jobs for the people than during periods of prosperity (Stauffer 1985: 6). The slowdown of the world economy since the early 1980s till a couple of years ago that led to severe unemployment provided the ideal political climate for the responses just described. At the other level, there are those who argue that the change in attitude shown by the host nations, including ASEAN states, towards TNCs has been clue to the relative strengthening of the TNC bargaining position because of their move into

23

Role of the State in Southeast Asia

manufacturing and services, and the provision of new export markets (Newfarmer 1984 ). These two explanations constitute the major reasons for the greatly reduced level of conflict between TNCs and Third World states, pointing out in the process two quite important variables affecting TNC-state relationships.

4. Conclusion This article attempts to look at the nature and role of the state in Southeast Asia, with particular focus on ASEAN. Beginning with a discussion of the economic features of the state in market economies, it is argued that the role of the state is, to a certain degree, circumscribed by the nature of the goods produced as well as the market structures. This is true of all market economies though, very frequently, the state in less developed societies assumes the added role of an entrepreneur in a bid to promote the interests of certain classes or ethnic communities. But with the fiscal crisis, concerted efforts arc now being made to reduce this role of the state or at least its more direct participatory stance. We also argue that state elites are not malevolent; that, being rational, they seek to pursue policies designed to prolong their grip on power while at the same time seeking to contain any threat to their hold on state power. Where such policies lead to the raising of economic growth and income, especially of the poorer strata, state elites are better able to obtain support, resulting in both regime stability and greater economic affluence. But such policies do not succeed all the time. Where they have failed and people's frustrations mount, the elites will increasingly recourse to the coercive institutions of the state to maintain power. Fortunately, such recourse has been relatively rarer in ASEAN than in many other Third World countries such as in Latin America, in part because of the success of states in ASEAN to bring about rising economic affluence. While there has been economic success, other factors have, however, loomed as potential threats to regime stability. These include the rise of Islamic fundamentalism and the uneasy ethnic relations that exist, for example in Malaysia. And where the elites have felt threatened by these contradictions, they have not hesitated to use coercive measures to contain such conflicts.

REFERENCES Esping-Anderson, G., R. Friedland and E.O. Wright. "Modes of Class Struggk and the Capitalist State". Kapz'tahrtate 4, no. 5 (1976). Fitch, R. and M. Oppenheimer. Ghana: End of An Illusion. New York: Monthly Review Press, 1966. Godinez, Zinnia F. "Privatization and Deregulation in the Philippines: An Option Package Worth Pursuing?" ASEA]\' Economic Bulletin 5, no. 3 (March 1989). Hamza Alavi. "State and Class under Peripheral Capitalism". In Introduction to the Sociology of the 'Developing Societies' edited by Hamza Alavi and T. Shanin. London: Macmillan, 1981. Heri Akhmadi. "Military-Bureaucratic Political Machinery in Indonesia". New Asian Visions 1, no. 1 Qune 1988).

24

1oh Kin Woon

Kalccki, M. "Observations on Social and Economic Aspects of Intermediate Regimes". Coexistence 4 (196 7). :'v1eillasoux, C. ''A Class Analysis of the Bureaucratic Process in Mali". journal of Development Studies 6, no. 2 (1970). Milihand, R. The State in Capitalist Society. New York: Basic Book Publishers, 1969. :'vlurray. R. "Second Thoughts on Ghana''. New Left Review no. 42 (1967). Murray, R. "The Internationalisation of Capital and the Nation State". New Left Review no. 67 (1971). Newfarmer, R. "Multinationals and Marketplace Magic in the 1980s". In The Political Economy of Development and Underdevelopment edited by Charles K. Wilber. Third Edition. :'\lew York: Random House, 1984. :'-lg Chee Yuen and Norbert Wagner. "Privatization and Deregulation in ASEAN: An Overview". ASEAN Economzc Bulletin 5, no. 3 (March 1989). Pang Eng Fong and Chan Hcng Chcc. ''An Approach to the Political Economy of Development in ASEAN Countries". Background note prepared for the !SEAS Research Workshop on Political Economy of Development in ASEAN Countries, Singapore, 1984. l'oulantzas, N. Political Power and Social Classes. London: New Left Books, 1973. Poulantzas. N. Classes in Contemporary Capitalism. London: New Left Books, 197 5. David, Randolf S. "The Cory Presidency: The Limits and Possibilities of Reform". New Asian Viszons V, no. 1 (] unc 1988). Rehman Sobhan. "The Nature of the State and its Implication for the Development of Public Enterprises in Asia". journal of Contemporary Asia 10, no. 1 (1980). Stauf!t'r, Robert. 7Tansnational Corporations and the State. Transnational Corporations Research ProJect. Sydney: University of Sydney, 1985. Thirayuth Boonmi. "Dynamics of Thai Politics". New Asian VIrions V, no. 1 (June 1988). Turner, L. Multinational Cornpanzes and the Third World. New York: Hill and Wang, 1973.

3

The Role of the State in Europ e Heinrich Siedento pf

"'Deregulatio n' in the sense of eliminating unnecessary regulations has an intrinsic value, because freedom has a value in itself. Just this fact alone is sufficient, and therefore, it is not even necessary to use 'effects' as a justification. " With this self-confiden t statement delivered in March 1990, the West German Deregulation Committee, an independent commission of experts in favour of the reduction of market-adve rse regulations, introduced its programme with an accompanyin g list of recommenda tions citing examples from the insurance and transportatio n sectors. Deregulation is the restraint of the state, in favour of market self-regulatio n. The call for more freedom from state regulations and restrictions in the political, cultural, social and economic sectors was successful in the socialist countries of Eastern Europe in the autumn of 1989. Systems of political suppression and economic failure were dissolved and discarded by the people of these countries. The evident success of politically pluralist and market-orien ted systems, contrasted with socialist-com munist systems, appeared attractive and convincing. The citizens opted for freedom. Nevertheless there is no way to substitute state control entirely by market forces, regardless of how radical the changes in these systems, and despite the fact that the period of Marxist experimenta tion in Europe has ended in complete failure. In addition to this 1Vfarxist conception of the srate, there are other competing European models and experiments. These specific European perceptions of the state's role will be discussed from three perspectives. In Section 1, various theories of the state, which have traditionally accompanied and influenced the conception, structure and practice of the state in Europe, will be presented. Of interest is the observation that there are differences not only between the continental and the Anglo-Saxon tradition, but between neighbouring continental countries as well. Even with respect to a single country, an evolutionary perspective demonstrates great variations. Germany is an extreme example, having experienced four alternative state systems since the beginning of the twentieth century. These oscillations can be of short duration and may have far-reaching implications, for instance, changes from social-democ ratic to conservative governments or majorities. Section 2 will deal with the so-called confrontatio n between a centralized state system and a free market economy. It will be argued that such a conceptualizatio n does not reflect social, political and legal reality. Instead, state and market are intensively bound together, interwoven, and mutually dependent.

26

Heinrzdz Siedentopj

Furthermore, there is a Third Sector which exists and overlaps with state and societal structures. Separate and probably overlapping areas of responsibilities and quite subtly differentiated forms of action and control exist amongst these sectors. In the concluding section the actual measures which European states have taken with regard to the significance of state activity and regulation will be presented. These range from marginal corrections to serious interventions.

1. Discussions of State Theories in Europe It cannot be the task of this article to draw up the lines of the European evolution of various conceptions and models of political science in European history. They have all influenced, contributed to, and sometimes initiated the historic development from absolutist royal rule, to the emergence of a bourgeois society, and later of an industrial society. Under bourgeois society, the state developed as an institution which was dependent on legislation as its instrument of power. Industrial society also requires the state to maintain order, as it is not a completely self-regulating system of social coexistence, but requires regulation from outside by a relatively independent system. Political science discussions therefore concentrate on two central and fundamental questions: 1. Which theoretical and practical creative power does the state have with

regard to society and the interests "ruling" in it? 2. What degree of independence is necessary to preserve the state in the face of society and its prevailing interests·~ Various political theories arc constructed by answering these questions. Relevant topics are the tasks of the state with regard to the economic, social and party systems, and the organization of democratic parliamentarism. According to the liberal perspective, the state's task is merely to offer a framework of order and certain common benefits, which should enable the economy and society to develop independently. Self-determination is not on! y a value in itself, confirmed by human rights. According to this conceptualization, allowing men self-determination yields the best results possible. The law is the regulatory mechanism of this concept - functioning as a boundary and control device for state economic activity. Positively formulated, this is the concept of the legal state. The principles of neutrality and minimization of state activities define the relationships between the state and society. Nevertheless in modern industrial society this image of stable harmony docs not correspond to reality. The principle of the state under the rule of law requires an additional element. The social state, where the state must absorb and correct the shortcomings of a self-regulated economy and negative effects of the free play of unequal economic and social forces, is necessary. Such corrections are viewed critically by the neo-classical economists who, considering themselves successors of Adam Smith and David Ricardo, took, as their point of departure, the freedom of the individual from the state as well as from other individuals.

Role of the State in Europe

27

To them, state intervention m economiC and social processes in general lead to failures and in the long run, to a predictable sectoral specific breakdown of the state, for example in the areas of labour market or competitive market policies. Practical experience include the world economic crisis or the oil price shock of 1973/74 which demonstrated that the market could not function independently. The concept of the self-regulation mechanism must be broadened by the order of the market to encompass the state's task. In the European conservative-normative concept of state, the state is regarded as predetermined and taking precedence over society. According to Hegel, the state is assigned the areas of spirit and morality: "The state is the reality of the moral idea". The state has extensive authority and authorative power, for it alone conceives, guarantees and realizes public welfare. It is the individual's guarantor of freedom from the stereotyping of society and collectivism, the guarantor of security in times of crisis. This idea of the state is endangered in industrial societies, because the state there has become the hotbed of societal conflicts, and the distributor of state benefits. The conservative idea of the state in principle assigns to the state sovereign authority above society, an overall competence, and full power of attorney. The problems of governments in industrial societies are understood in the context of the "ungovernability" of modern democracies. This is characterized by excessive dem;cmds, with a corresponding lack of efficiency, which in turn may undermine the state's claim to authority. The state must therefore exercise a more strict selection of duties and reduce itself to the central issues of its sovereign tasks. This results in a "de-nationalization" characterized by criticism, privatization and the simplification of law and administration. In pluralistic st'lte theory, the state in a pluralistic society is not an elevated institution within society with its own right to autonomous self-determination. Rather, the state is tied via representation to society, which is itself determined by a pluralism of interests. According to Gustav Radbruch, "The non-partiality of the state is the sham existence of the authoritarian state:' The state is responsible for generating legal and social principles, is based on a constitution, and is responsible for regulating all state economic activities. Therefore the state is not passive, but must consider various interests, including often unformulated public interests, and seek to balance them. The separation of state and society can no longer be maintained, and the modern state is necessarilv a corporate state. Neo- Marxist interpretations of state and the position of "state monopoly capitalism" profoundly influenced intellectual discussions in the 1960s. Such interpretations conceive of the state as a societal superstructure. The apparatus of the state expands immensely and controls more and more areas of society. "Nationalization" creates societal zones of conflict and potential for resistance, against which the government reacts with more supervision and control. This increases the state's susceptibility to crisis: State and monopolies melt together in "state monopoly capitalism" to form a unified crisis-prone functional mechanism. In the East European "socialist" countries the system of command economy proved to be extremely vulnerable in 1989/90.

2il

Heinrich Siedentopj

2. State, Market, and the Third Sector The different state theories discussed above should not be perceived as only abstract models, divorced from reality. They do have concrete consequences for the determination of the state's duties, the assignation and steering of all public tasks, and the degree of societal self-determination. According to the constitutional tradition of continental European countries, the state's tasks and aims arc, to a certain extent determined by constitutions, whilst in the United Kingdom, neither this constitutional tradition, nor this abstraction of the term "state" is known. On the other hand the Anglo-Saxon distinction between "protective" and "productive" state is applicable to the continental states as well. The "protective state" guarantees internal and external security. It alone is representative of all power, having legislation as jurisdiction, which also protects individual liberty. Intrinsic tasks of the state in the areas of security and order are basically undisputed. This can be distinguished from the tasks of the "productive state", which include welfare benefits and social insurance. In a "productive state", the constitution determines the state's purposes, and proposes solutions to the problems of a pluralistic, industrial society, which is based on the division of labour. Some European constitutions offer relatively concrete descriptions of what the state's purpose should be, or provide catalogues of tasks. vVe have to distinguish bet'ween state goals, public goals and private goals. State goals are set by virtue of constitutional authorization; public duties are carried out by non-governm

Privately owned: 0 100% or nearly all r/ same as 1978 b 1986 a 1978

Publicly owned: ~ 25% K data not available

()50%

*

a 75%

including Conrail

SOURCES: Adapted from Thr Economist :;o December 197B, as reproduced in Borcherding (1983, p 106): and from OECD (1986), as reproduced in OECD (19B8, p. 61).

• 100% or nearly all na not applicable or negligible production

"'"' ;;:1

""'~

Hansformation of Public Enterprises

normally created under a special Act of Parliament or, if not, then under an executive order or decree issued pursuant to such legislation, whereas the second type, a government company, is usually established in accordance with a more general piece of legislation in the form of a Companies Act or the equivalent which regulates companies in both the public and private sectors. In respect of both types of organizations: 1. the relevant functions, powers and duties are vested in a governing board, council, committee, or the like, rather than in a member of the executi\·e government (as is the case with the ministerial or departmental type of organization); 2. these boards, councils, etc. are located at the apexes of the organizations' administrative structures; :3. the staff of the organizations arc normally employed on terms and conditions determined by the respective boards, etc. (though frequentlv in keeping with guidelines set by the government); and 4. the work of the organizations is expected to be financed through the sale of goods and services and through returns on any investments.

These sorts of arrangements arc intended to give the organi'zations a degree of operational autonomy, in the sense of their being freed from some of the policy, financial and personnel controls to which ministerial or departmental organizations arc directly subject. The belief is that this kind of autonomy is essential to the successful achievement of their commercial objectives. Quite often, though, it is more apparent than real, for there is a variety of means, subtle or otherwise, by which it can easily be curtailed by a government or individual ministers. This issue of an appropriate balance between autonomy and control is fundamental to the structure and operation of public enterprises in most countries of the world. On the one hand, for instance, their relationship with members of a community in the discharge of their commercial responsibilities is usually expected to be that of "producer and consumer" or "producer and client", rather than that which is more readily associated with the notirms of "provider and recipient" or, very generally, "governor and governed" and "state and subject". On the other hand, they do, after all, exist within, rather than beyond, a governmental system and, therefore, are rightly subject to some form of political control as a means, among other things, of ensuring their accountability to the public at large. In this respect, the extent and significance of their control and accountability will usually be aflected by at least two important factors. First, they often are not simply or solely production entities in the sense in which the term "producer'' is used above and "production" is used in Figure 4.1. This is especially so in the case of those enterprises which arc constituted as statutory bodies; for the latter frequently have both production as well as various regulatory, facilitative and/or provision-type responsibilities, as indicated in Figure 4.1. In these circumstances, they arc, one and the same time, oriented both politically and towards the community in differing ways, and so their political and community relationships are inevitably multi-dimensional.

Jan Thynne

38

Secondly, the formal relationship between a government and an enterprise established as a statutory body is different from that between a government and an enterprise created as a government company. The first relationship is akin to that of "principal and agent" and exists within the realm of public law, whereas the second is that of "owner and manager" and is governed by private law. Consequently, there are important differences in the legal rights and duties of the parties to the relationships in the case of the two types of enterprises. What is more, there could well be, and really should be, significant differences in the expectations of the parties regarding the performances of the enterprises and the criteria by which their performances ought to be assessed. These latter differences arc bound to be most marked when one of the two types of enterprises has a variety of responsibilities and the other does not, as was recognized above with reference to their differing political and community relationships. The responsibilities, relationships and the like, as identified here, exist for those enterprises which arc structured as statutory bodies and government companies. In some countries, however, including Malaysia, the enterprise arrangements arc further complicated by the fact that there are also enterprises structured as "departments" which are subject to direct and close political control. Arrangements of this kind are most often a feature of those older-establishe d political systems in which commercial responsibilities have sometimes been assumed by a government without the latter making any significant changes to its existing, traditional administrative machinery. The essence of these arrangements is that the departmental enterprises are usually structured along normal departmental lines in that: 1. they are created by a government largely, if not solely, in its executive capacity rather than pursuant to a special or more general piece of legislation; 2. they are each ht:aded by a government minister (or the equivalent) in whom the relevant functions and powers are vested in law; 3. they are integrated into a public service or civil service system in which their staff are employed on terms and conditions that apply to all such

organizations; and 4. they are financed through a formal process of parliamentary appropriation from consolidated revenue (to which they themselves will have contributed through the sale of goods and services). Accordingly, the nature of their accountability and control in the context of their political and community relationships is obviously different again from that of both statutory bodies and government companies. These relationships, etc. in the case of all three types of enterprises are influenced, if not shaped, by the various political, economic and social forces of the kind discussed in Chapter 2 above. They are also influenced by the more specific features of the different countries' enterprise arrangements. Thus, for example, cnterpcises of the non-company type in Thailand vary in terms of whether they were established by Royal decree, by a resolution of the Cabinet, or directly by statute. Also, several of the government-link ed companies in Singapore were created, and continue to operate, as joint ventures with private sector enterprises, but

Tran.rformatlon of Publzc Enterprises

39

with the government, in most instances, retaining control over them through majority or dominant shareholding s. Nevertheless , in general, the various implications of these differing arrangements, relationships , etc. are not matters to which governments in ASEAN and elsewhere in the world have traditionally paid a lot of attention. Their main interest seems rather to have been that of responding to immediate situations by often doing little more than assigning responsibiliti es to some structure or another, and providing for that structure to get on with its designated job or jobs. The lessons learnt in this process have seldom been systematicall y aggregated as a means, for example, of possibly ensuring that past mistakes are not repeated and that both the design and operation of enterprises are well suited to the tasks at hand. The pragmatic, reactive approach has tended to reign supreme. This unfortunate practice-lear ning divide, as it were, is still readily apparent, with the important qualification that, recently, many governments , faced with large budget deficits, ever increasing foreign debts, the existence of inefficient enterprises, and/or the need to stimulate private sector activity and growth, have finally been forced to make some hard decisions involving detailed planning and the evaluation of a range of options concerning their enterprise arrangement s. Thus, the last few years have seen various development s occurring, of the kind to which the discussion now turns.

Transforma tion Strategies and Issues The more significant of the development s to date indicate that there are three main strategies by which the transformati on of public enterprises can be pursued. These three strategies are depicted in Figure 4.3 with reference to all three types of enterprises identified above: departments , statutory bodies, and government companies. The first of the strategies involves the "commercial ization" of all three types of enterprises in terms of their operational arrangement s, with no accompanyin g changes in their legal status and ownership. The second strategy also has a commerciali zation objective but, unlike the first strategy, it seeks to achieve this objective largely through legal-structu ral changes in the form of the "corporatizat ion" of enterprises of the departmenta l and statutory body type. The third strategy likewise involves some form of legal-structu ral change which, this time, actually culminates in the ownership of enterprises of the company type being altered, in part or in full, through a process of "divestment".

Commercial ization: Transforma tion through Changes in Modes of Operation This strategy, as already indicated, can be applied, where necessary with varying emphases, to all three types of enterprises. The crux of the strategy is that all such enterprises must be recognized as working within a definite commercial context and, therefore, while still retaining their "publicness" in basic accountabilit y

40

Jan Thynne

FIGURE 4.3 Enterprise Transformati on Matrix

.................... .................. Public sector.................... .................... ....... Private sector High .................. degree of policy, financial and ................ Low personnel control by government

IDepartment I ~

.... ..,___ Counter forces-- ----

Commercialization Statutory Body (unincorpor ated)

11

:::-

~--------~--~

~

eg: resistance of enterprise's managemen t and employees; political (including union) opposition; and/or inadequate private sector capital and entrepreneu rial talent

Commercialization

.

Corporatzzatwn ( 1)

I'

l Statutory Body ,_____. (incorporate d) Statutory Body (either unincorpora ted or incorporate d)

I

v

Corporatization (2) -Stimul i eg: desire to increase enterprise's efficiency, profitability and market responsivene ss; and/or to reduce government 's budget deficit, foreign debt, and organization al burden

'

Commercialization

•

L--~•Divestment

(Partial)

-::IJI>-- (FullJ

._I

Low.................... degree of legal and operational. . ............. High autonomy within government .................... .................. Public sector .................... .................... ....... Private sector

'Transformation of Public Enterprises

41

and control terms, should be both expected and allowed to operate in a manner very similar to that of private enterprises. More specifically, the strategy has a number of important components, including: 1. the creation, or further development , of a workably competitive commercial environment by de-monopoli zing and/or deregulating an area, or areas, of enterprise activity or, in the case of a natural monopoly, the creation of at least a potentially contestable environment , if only in the sense that the enterprise in question is made aware of the probability of its being

restructured if its performance is found wanting; 2. the separation organization ally of an enterprise's production responsibiliti es from any responsibiliti es that it might have of a provision, facilitative, and/or regulatory type or, where this is inappropriat e, then the formal recognition on the part of a government (or the relevant responsible minister) that the enterprise concerned could well need to be compensated financially for the performance of its non-producti ve responsibiliti es; 3. the streamlining of an enterprise's managerial practices and procedures by giving it increased personnel and financial flexibility and greater freedom to contract out the performance of certain tasks concerning its production responsibiliti es; and 4. the formal negotiation and agreement between a government (or, again, the relevant responsible minister) and the management of an enterprise as to performance targets and appropriate measures of performance so that the various aspects of the actual performance of that enterprise can be assessed both meaningfully and with some degree of certainty and sensitivity. Each of these four components needs to be briefly elaborated upon. They are obviously all interrelated, but specific things can be said about each of them in turn. The first component mentioned rests on the belief that competition is the key stimulus to increased efficiency on the part of all types of enterprises in both the public and private sectors; therefore, its absence ought really to be remedied, or any seemingly unnecessary restrictions on it removed. Thus, enterprises in the public sector are often immune from any form of (direct) competition by reason of their enjoying monopoly rights over certain areas of commercial activity. If this is not the case, they frequently are able to operate above or beyond any significant interplay of competitive forces to the extent that they are given, for example, tax concessions and privileged borrowing opportunities , and also to the extent that entry into various areas of activity by private enterprises is limited by a government's regulatory policies and practices. Accordingly, it is felt that if public enterprises are to be made much more efficient than they usually tend to be, then all of the granted or ascribed advantages which they have over their counterparts in the private sector need to be neutralized or removed completely. This question of something being neutralized is also significant in relation to the second-noted component, the focus of which is those enterprises that have responsibilities of both the productive and non-producti ve kind. The basic argument here is that, if such enterprises are genuinely to compete with private enterprises

42

Ian Thynne

in a liberalized commercial environment , then it is important not only to remove their distinct advantages, but also to ensure that they are not disadvantage d in any significant way, such as by having to concentrate their energies and resources on the performance of a variety of tasks rather than on just the production of goods and services for sale. Hence, in this regard, the development of a workably competitive environment depends, at least in part, on enterprises in the public sector being put in what is essentially a "neutrally competitive" position by having their advantages removed and their other, non-producti ve, community service-type responsibiliti es, etc. reassigned to other organization s within government or financially compensated for by way of a government grant authorized by parliament. The third component identified above concerns all three types of enterprises, but with decreasing significance in so far as their operational autonomy actually, in practice, increases considerably from department, to statutory body, to government company. Thus, particularly in the case of those enterprises which are structured as departments , there is usually a definite need to loosen some of the controls that are imposed on them by the central personnel and financial authorities within government, including such controls as those governing the contracting- out of work in certain areas where its cost-effective ness is able to be demonstrate d. Yet, there obviousiy are limits to how far this loosening can and should be taken; for there comes a point where the affected enterprises ought really to be formally reconstituted as another type of enterprise rather than simply freed a little through adjustments being made to the established control systems. The fourth and final component noted also concerns all three types of enterprises, but more uniformly and with particular reference to their needing, in the world of business, to be "results-orien ted" rather than "process-orie nted". Of all four components considered here, this one is potentially the most troublesome because organization al objectives as targets of performance , and the criteria for evaluating actual performance in terms of results, ought appropriatel y to reflect the various enterprises' commercial concentratio n while, at the same time, not lose sight of their "publicness" as public rather than private sector bodies. This is particularlv important where pro(c.uction responsibiliti es ot enterprises such as those, for example, in the public utility and telecommuni cation areas have a definite social value and significance. The discharge of responsibiliti es of this kind should not be judged in terms of profit-genera tion or profit-maxim ization alone. Other measures of performance also need to be adopted, including those embodied in such broad notions as the "public interest" and "community good". Thus, especially in these cases, some sort of formal "memorandu m of understandin g" on performance expectations and associated means of evaluation is ideally required between a government and the management of each of its enterprises.

Corporatiza tion: Transforma tion through Changes in Legal-Struct ural Arrangemen ts

This second strategy of transformati on is relevant to those enterprises which are structured as departments and statutory bodies. It seeks to increase the commercial

Tran;formation of Public Enterprises

43

flexibility and viability of these two types of enterprises by giving them an existence which is legally separate from that of a government as an established legal entity. The strategy, in practice, can take one or other of two forms. The first form, which is the more traditional of the two, recognizes the important distinction which often exists in the case of statutory bodies between those that are "incorporated" under their governing Acts and those that are not. The incorporated bodies, unlike the unincorporated bodies and departments, have distinct legal personalities as "bodies corporate" and, therefore, are able in their own corporate names to do such things as to enter into contracts, to sue and be sued, and to buy and sell property. Consequently, where an enterprise is presently structured as a department or as an unincorporated statutory body, it could be given increased autonomy within government by being corporatized in the sense of being reconstituted in law as an incorporated statutory body. But it would still exist and operate essentially within the domain of public rather than private law, and would still be subject especially to the issuance of policy directives by its responsible minister. This form of corporatization remains significant as a possible means of transforming selected enterprises, particularly where a government desires to maintain a reasonably even balance in respect of their autonomy and control. In recent years, however, it has tended to attract a lot less attention than has the second form - largely, it seems, because many governments are now very interested to have their enterprises constituted as much as possible like private enterprises and of a type that is amenable to at least some degree of privatization through divestment. Thus, the second form, consistent with this kind of interest, involves the reconstitution of departments and statutory bodies (both incorporated and unincorporated) as government companies. These new companies, as with other existing enterprises of the company type, would be registered under a Companies Act or the equivalent, the main effect of which is that they would acquire a new set of legal rights, duties, obligations, etc. as prescribed in the relevant legislation and expressed in their memoranda and articles of association. Accordingly, they would be transformed to a more significant extent than would be the case under the first form. For one thing, as a result of their reconstitution, they would thereafter become subject to the dictates of private rather than public law. In pursuing this latter form of corporatization, a government might simply decide, for example, to treat all enterprises separately, with varying arrangements possibly being made, depending upon the differing areas of activity in which the enterprises are involved. Alternatively, it could well think it appropriate to introduce an omnibus-type piece of legislation which complements a Companies Act and spells out any expectations and/or requirements it has concerning such matters, for example, as:

1. the question of who within government ought to hold the shares in these restructured enterprises and also be responsible for the appointment of their governing boards and chief executives; 2. the specific work of the enterprises in respect of which relevant members of the government are to have the authority to issue policy directives and in other ways become involved;

Ian Thynne

44

3. the methods, criteria, etc. by which the performa nces of the enterprise s are to be formally assessed; s 4. the various executive and parliamen tary mechanis ms by which the enterprise and are actually to be called to account for their performa nces; of 5. the means of determin ing and respondin g to the financial effects of any ty the enterpris es having to meet certain obligation s of a social or communi service kind. in These and related matters would have to be addressed in one way or another their to nt subseque would, d concerne s enterprise the that fact recogniti on of the being corporati zed, still be an integral compone nt of governme nt and, therefore, some should continue to be subject, just like any other governme nt company, to degree of political control. A possible, if only partial, solution to this need for political control and accountfor ability would be to incorpora te in law the position, for example, of Minister the of all hold position that of t Finance and, according ly, to have the incumben s, in shares in a small number of "holding companie s". These holding companie thus ies, subsidiar their as s turn, would register the newly-est ablished companie operate could latter the creating an integrate d corporate framewor k within which with considera ble autonom y while still being susceptib le, through their respective nt holding companie s, to political direction regarding , for example, their investme policies and any expansio n plans or programm es.

Divestme nt: Transfor mation through Changes in Ownersh ip

corOnce enterpris es structure d a:.; departme nts and statutory bodies have been then , described been just have which poratized in the second of the two forms s, to they are open, along with other longer-es tablished governme nt companie s enterprise Only t. divestmen having their ownershi p altered thmugh a process of s enterprise of types other of the company type are able to be divested directly. The governa by ned have first to be reconstit uted as companie s that are wholly-ow than ment; for, as departme nts and statutory bodies, they exist as public rather unable private law entities, and hence individua l and institutio nal investors are to acquire a financial stake in them.

nt As with the other two strategies which have been considere d, this divestme to strategy is frequentl y seen by governme nts to be an appropria te response deficits, budget of problems related wider, the to and cies enterpris e inefficien that etc. In this respect, the driving force can often be negative to the extent hand, other the On nt. governme a by d off-loade simply various enterpris es are the though, there can sometime s also be a more positive motive which lies in effort greater much a make to likely are es belief, for example, that most enterpris they to be efficient and responsiv e to consume r demands in situations where rather ers sharehold interested of are watched- over and influence d by a number than left largely in the hands of a governme nt or responsib le minister.

Transformation of Public Enterprises

45

Yet, whatever the reasons might be for the adoption of the strategy, there are several matters to which a government would normally need to give quite serious attention. These include:

1. to what extent, by what means, and according to what time frame is the divestment of its enterprises to be pursued?; 2. by what means, if any, other than possibly through the ownership of a percentage of ordinary shares, is some degree of internal control going to be maintained over the structure and operation of divested enterprises?; and 3. what external regulatory mechanisms, if any, should be established to monitor and control, for example, the prices and profits which divested enterprises are able to charge and make? As to the first of these questions, the actual extent of divestment in percentage terms could well vary from one enterprise to another and will largely be determined by the degree of internal control which a government wishes to maintain over a divested enterprise through share-ownership of either the majority, dominant, prominent, or passive kind. The implication of this is that there are definite options available to a government, just as there are in relation to the timing and to the specific means or modes of divestment, both of which will be inf1uenced, among other things, by the size of a country's private sector and especially by the absorptive capacity of its capital markets. Thus, some enterprises might be divested only partially, but to varying degrees, whereas others could be divested in full and (possibly) no longer be subject to any form of internal control by a government. Similarly, and given in part the matter of timing as affected by a combination of political and socio-economic considerations, the appropriate mode of divestment for some enterprises might be a private, negotiated sale, or sale by invited tender or auction, whereas for other enterprises it will more appropriatelv be that of a public f1otation, with a heavy emphasis, for example, on ensuring a wide spread of share-ownership. That is, there are both private and public modes available. Moreover, the outcome in individual cases could be, depending on the .'Tlode and the number of new shareholders, either the continued existence of a "private company", or the creation of a new "public company", in the usual legal definition of these concepts or terms. This, therefore, suggests the possibility of divestment often being viewed as more of an exercise in "publicization" than "privatization"! In the course of determining these matters in respect of various enterprises, a government might, in the name of the public or national interest, also decide:

1. to place a limit on foreign ownership and/or the percentage of shares which is able to be acquired by each individual and institutional investor; and 2. to retain, for example, the right of veto over the appointment of directors and possibly the chief executives as well. These sorts of restrictions and rights would have to be spelled out m the enterprises' memoranda and articles of association, and also entrenched or protected by one means or another if the government's continuing internal control of the enterprises is to be ensured, as envisaged in the second of the three questions

46

Ian Thynrw

posed above. Thus, where the government is to remain the majority shareholder, then the necessary protection will be provided through its exercise of the normal rights of ownership. In other cases, however, an alternative mechanism will have to be established so that the restrictions and rights in question cannot be altered or removed by a majority vote by non-government shareholders. In these situations, it is now common for governments to include in the relevant memoranda and articles of association a clause creating a "golden share" which they hold, and which gives them the right to veto any proposed changes both to that clause and to the restrictions and rights as formally provided. This type of share guarantees the primacy of control over ownership and, ideally, should only be established for those purposes indicated above; for it enables a government to continue to exercise significant control over an enterprise while retaining in that enterprise little or no equity and, therefore, little or no direct financial interest in its performance. Finally, in addition to determining the extent and form of its internal control of divested enterprises, a government will often also have to consider whether or not these enterprises should be subject to some form of external regulatory control governing, for example, prices and profits, as acknowledged in question (3) above. This form of control will be particularly important where an enterprise is to continue, after divestment, to be a monopoly. In these and other controlrelated circumstances, the main choices available to a government will normally concern the use of a formally established regulatory body which:

1. is either of the judicial or quasi-judicial/administrative kind; and 2. has a jurisdiction that is either specialist in nature, or of a ·Nider generalist kind covering most, if not all, areas of commercial activity. Such bodies of an appropriate type might already exist within government; or, where they do not, they will have, where necessary, to be established in direct response to the various kinds of divestment decisions taken and the perceived implications of these decisions. Their structures and jurisdictions will largely be determined by the kind of role a government expects them to play: be they, for example, corrective or preventive in focus, or created as a surrogate for market forces in the absence of a commercially competitive environment.

Transformation in Practice From the discussion so far, it should be apparent that, m some cases, two or even all three of the strategies which have been outlined could be applied to the one enterprise, but normally over time rather than simultaneously. Thus, for example, Singapore's postal and telecommunications board, Singapore Telecom, began its life as two separate entities, namely a department and a private company (whose telephone operations were subseqently assumed by a newly-formed statutory body), was later reconstituted in an amalgamated form as an incorporated statutory body, was more recently restructured to enhance its commercial capacity and image, and is now being considered for incorporation as a government company, with possibly some 20 to 25 per cent of its shares to be listed on the Singapore

47

Tramjorrnation of Publz'c Enterprises

Stock Exchange. Also, Malaysia's railway department, Malayan Railway, is soon to be corporatized in the second of the two forms identified, with the aim of increasing its commercial flexibility, and of providing ultimately for its divestment, probably only in part, through flotation on the Kuala Lumpur Stock Exchange. These kinds of developments throughout ASEAN are increasingly becoming more systematic in the sense of their being guided by detailed plans, recommendations, etc. For example, in Malaysia, a Privatization Master Plan prescribing an extensive range of divestment and related initiatives has recently been unveiled by the Federal Government; in the Philippines, a structured programme of divestment was formulated in 1986-87 by a Cabinet-level Committee on Privatization and is being implemented by a specially constituted body called the Asset Privatization Trust; and in Singapore, the divestment process has been guided by principles announced in early 1985 by the Minister for Finance and also, more recently, by the analysis and recommendations of a government-appointed Public Sector Divestment Committee. The significance of these and associated aspects of change in these three countries, as well as in Indonesia and Thailand, has been examined, respectively, by Toh (1989), Godinez (1989), Ng (1989) plus Thynne and Ariff (1989), Pangestu and Habir (1989), and lngavata (1989). In addition, more specific sector analyses are provided in Pelkmans and Wagner (1990) and in the chapters below. Given these analyses, it remains here to stress the value to the processes of transformation of sensitive and well informed cross-national comparisons and learning. In this regard, for example, the references earlier to the use of holding companies, of omnibus-type legislation, and of specialist regulatory agencies with a surrogate function need to be traced back, respectively, to the experiences of Singapore (Thynne 1989), New Zealand (Roberts 1987a; Rodger 1989) and Britain (Kay et a!. 1986; Veljanovski 1987). The arrangements made in these countries merit at least some attention especially by those governments which are seeking to transform their enterprise systems in a manner that ensures the retention of a reasonable degree of political accountability and control.

Concluding Remarks Underlying these observations regarding the practice of transformation is the recognition that, while the strategies considered above are easy enough to define and delimit, their adoption and the success of their implementation will often be quite different matters altogether; for they will usually be dependent on a wide range of factors, both tangible and intangible. A lot of these factors will relate and vary according to the specific conditions of the enterprises on which attention is focused, and to the differing political and economic environments in which these enterprises are required to operate, whereas others would seem to be more universal in application and significance. In either case, they need not be addressed explicitly here, with the exception that two of the latter type are especially important and worth highlighting. The first is the need for a genuine and sustained commitment to reform on the part of the relevant government.

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Ian Thynne

The second is the necessity for the enterprises involved to experience a posittve change in their organizational cultures. Without full political support and without an appropriate cultural re-adjustment, the success of a transformation exercise is certain to be put in jeopardy. Yet, neither the support nor the re-adjustment ideally required can ever be guaranteed. The level of support, for example, will inevitably be atTected by the willingness and ability of a government both to confront and to balance the competing demands of the various groups which have an interest in enterprise structures and activities, including managements, employees, unions, consumers, and present or potential competitors and/or investors. Similarly, effective cultural change will usually require considerable flexibility and the reasonably rapid internalization of new attitudes and values on the part of all members of the enterprises concerned; otherwise, old habits and practices will persist and clearly reduce the efficacy of the new arrangements. Thus, the transformation of enterprises will often be a lot less straightforward and much less certain than the discussion of the difTerent strategies might have implied.

REFERENCES Bishop, M.R. and ].A. Kay. ''Privatization and Performance of Public Firms". In /odaking lv!arkets lv!ore FJ!ectiue: Privatization, Its Alternatives and Complements in ASEAN and Europe, edited by .J. Pelkmans and N. \Nagner. Singapore: Institute of Southeast Asian Studies, 1990. Borcherding, T.E. "Toward a Positive Theory of Public Sector Supply Arrangements". In Crown Corporations in Canada: The Calculus of Instrument Choice, edited by j.R.S. Prichard. Toronto: Butterworths, 1983. Canberra Bulletin of Public Administrat£nn. Special Issue on Privatization and Deregulation 13, no. :1 (1986). Godinez, Z. F. "Privatization and Deregulation in the Philippines: An Option Package Worth Pursuing?" ASEAN Economic Bulletin 5, no. 3 (1989). Graham, C. and T. Prosser. "Golden Shares: Industrial Policy by Stealth?" Public Law (Autumn 1988). Gregory, R. "The Reorganization of the Public Sector: The Quest for Efficiency". In The Fourth Labour Government: Radical Pohtics in New Zealand, edited by]. Boston and M. Holland. Auckland: Oxford Uni\ersity Press, 1987. Hemming, Rand A.M. 2'vlansoor. Privatization and Public Enterprises. L\1F Occasional Paper, no. 56. \Nashington: International 2'vlonctary Fund, 1988. lngavata, P. "Privatization in Thailand: Slow Progress Amidst Much Opposition". ASEAN Economu Bulletin 5, no. 3 (1989). Kay, J.A. ct a!., cds. Pn"vatisation and Regulation.· The UK Experience. Oxford: Clarendon Press, 1986. Ng, C.Y. and:'-/. Wagner. "Privatization and Deregulation: An Overview". ASEAN Economic Bulletin 5, no. 3 (1989). Ng, C.Y. "Privatization in Singapore: Divestment With Control". ASEAN Economic Bulletin 5, no. 3 (1989). Organization for Economic Co-operation and Development. Economic Survey of Canada. Ottawa: OECD. 1986.

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49

Economic Survey of Su·itzerland. Organiz ation for Econom ic Co-oper ation and Develop ment. Geneva: OECD, 1988. ation and Deregul ation Pangest u, M. and A.D. Habir. "Trends and Prospec ts in Privatiz (1989). 3 no. 5, Bulletin in Indonesi a''. ASEAN Economic in ASEAN and the EC. Making Pelkman s, J. and::'-/. Wagner , eds. Privatiza tion and Deregulation Studies, 1990. Asian /'vfarkets l'vfore Effective. Singapo re: Institute of Southea st , edited by .J.S.T. Quah Singapore of Politics Quah, J.S.T. "Statuto ry Boards". In Government and 1985. Press, ity et a!. Singapo re: Oxford Univers re Nationa l Printers , 1987. Report of the Public Sector Divestme nt Committee. Singapo re: Singapo ton: Victoria Univers ity Roberts , J. Politicians, Public Servants ond Public Enterprise. Welling

Press, 1987 a. The Fourth Labour Government.· Roberts , J. "Ministe rs, the Cabinet and Public Servants ". In Holland . Aucklan d: Oxford M. and Boston J. by edited Zealand, Radical Politics in New Univers ity Press, 198 7b. at Seminar on Privatiz ation Rodger, S. "The New Zealand Experien ce". Paper Presente d of Public Adminis tration Institute an Australi Royal the by d and Corpora tization, organize ent Departm ent. Governm land Queens of ity Univers the and ) Division (Queens land Brisbane , May 1989. Theory" . International Review Seidman , H. "Public Enterpri se Autonom y: Need for a New of Administ rative Sciences 49, no. 1 (1983). With Equity~ A Case Siengtha i, Sununta and V. Priebjriv at. "Can Efficien cy Co-exist 1990. Study of Public Transpo rt in Thailand ". Chapter 9 below. and Dilemma s. London : Steel, D. and D. Heald, eds. Privatising Public Enterprises: Options 1984. tration, Royal Institute of Public Adminis Presente d at Seminar on Sturgess , G.L. "Corpor atizatio n in New South Wales". Paper an Institute of PuiJlic Australi Privatiz ation and Corpora tization , organize d by the Royal land Governm ent Queens of ity Univers Admini stration (Queens land Division ) and the 1989. Departm ent, Brisbane , May e in Perspective. Singapo re: Thynne , I. and M. Ariff, eds. Privatization: Singapor e\ Experienc L1mgma n, 1989. trative State in 1ransiti on': Thynne , I. "A Framew ork for Analysis " and ''The Adminis I. Thynnc and l\1. Ariff. by edited e, Perspectic cn e Experienc In Privatiza tion: Singapore:> 1989. n, Longma Singapo re: Efiicienc y?" ASEAN Economic Toh, K.V\. "Privati zation in Malaysi a: Restruc turing or Bulletin 5, no. 3 (1989). : \!Veidenfeld and Nicolson , Veljanov ski, C. Selling the State: Privatiza tion in Britain. London

1987.

nisterial Organiz ation". Wettenh all, R.L. "Quango s, Quagos and the Problem s of Non-Mi G.R. Curnow. Sydney and s Saunder A. C. by In Quangos: The Australian Experience, edited Hale and Iremong er, 1983a. Private and Public Sectors" Wettenh all, R.L. "Privati zation: A Shifting Frontier Between Current Affairs Bulletin 60, no. 6 (19836). n Penpectivr. :\1elbou rne Wiltshir e, K.W. Privatizatc'on: The British Experience -- An Australia Longma n Cheshir e, 1987.

5

The Transfer of Public Functions: A European Perspective Klaus Konig

I. National and International Developments 1. Privatization as a National Phenomenon The modern state in Europe, developed out of the national consciousness of its citizens, is by its very nature a national state. This does not mean that we cannot find different forms of public life in a country or congruence between governments in different countries. Belgium may serve as an example; after establishing a new constitution, the Walloon and the Flemish parts of the public administration have developed in different directions. The nature of public law, which is quite similar on the whole continent, confirms the second statement. However, the administrative practice of the European Community (EC) highlights what in administrative science is classified as the difference between classical administration - such as in France, Germany, etc. - and civic culture administration - for example Great Britain. Despite such distinctions, the line between public and private functions is drawn by the political-administrative culture of the national state. This can clearly be seen by the different meanings for the term "privatization". Even within the European context, it is difficult to discuss privatization under this term as different approaches are subsumed according to the various national experiences. For some, extending the autonomy of a public enterprise or introducing profit orientation constitutes privatization. For others the term privatization is restricted to a transfer of ownership either in the formal sense of changing the legal structure, or in the material sense of an actual transfer of ownership. Taking into consideration the situation outside Europe, including the developing countries, means adding more problems to the understanding of the term privatization. Often, the only solution is to specify the respective politico-economic pwblem. The distinction between public and private functions in the first place determines which instruments can be applied later to change this distinction in favour of the private sector. This is obvious in the case of the United States of America. In accordance with the distinctive administrative culture there the discussion on privatization centres on certain instruments such as contracting-out, franchise, voucher system and self-service arrangements. For the Federal Republic of Germany we have analysed the following strategies on how the public tasks can be reduced:

The Transfer of Public F'unctz'ons

51

1. Budget consolidation. This particularl y means the reduction of social services by limiting the available funds. By reducing the number and amount of scholarship s to students, for example, parents are forced to contribute more to the costs of their children's education, i.e. using private funds. 2. Reduction of staff in the civil service. A retrenchm ent of the police force would lead inevitably to a transfer of their tasks to private security services as society cannot do without them. 3. Reduction of subsidies. The cutback on grants to private enterprises for research and developme nt purposes has forced them to take over the financing themselves . In this context we have to mention the internal grants given to public authorities . A reduction of subsidies to local governmen ts implies a reduction of their activities for the public. 4. Simplificatio n of law. Reducing the number of regulations pertaining to the maintenan ce of standards in constructio n, for example, may increase the likelihood that citizens would shoulder these responsibil ities. 5. Deregulation. The liberalizati on of closing hours for shops would increase competitio n, and the sovereignty of consumers . This must be accompani ed by lowering legal standards for institution s which are connected indirectly to these moves, like the example of child care centres. 6. Marketizatio n. This method, for example, permits competitio n between the state postal and communic ation services, and private companies as suppliers of telephones . 7. Privatization of property. This means that the transfer from state ownership in industrial companies to private shareholde rs. 8. Privatization of auxiliary administrative services. The cleaning of public buildings has been handed over to private enterprises . 9. Privatization of public tasks. This means, for example, that refuse collection and cleaning of public areas have been transferred to private enterprises . These different approaches to limit the scope of public tasks do not necessarily follow the same patterns of argument. The pluralism of the participati ng actors docs not allow this. It was out of the primary intention to restore financial soundness in the budgets of the 1980s that developed a broader tendency to restrict the public sector to important tasks. Non-essen tial tasks were subjected to market competitio n even if they were seen traditionall y as public responsibili ties. Therefore, the criteria for selecting what can be privatized is becoming increasingl y important.

2. Internatio nal and Supranati onal Influences

Despite differences in the instrument s used by states to privatize their public enterprises , the influence of the internation al "climate" on privatizati on should not be underestim ated. The adjustmen t process in economic structure and policy further enhances this developme nt, but this process does not necessarily implv imitation. Great Britain, France, and the Federal Republic of Germany follow their own strategies in many cases but the major industriali zed countries of the United

52

Klaus Kon(g

States of America, Japan, and Europe have developed certain leadership functions for the world economy. Success or failure in the public or private sector of those countries leaves an impression on neighbouring states. Therefore, many industrialized countries are following a policy of reducing the public function and of extending the private sector. This applies not only to the United States of America, Japan, Western Europe, some Asian and Latin America countries, but also to the communist countries of the Eastern bloc which are now looking to the dynamic forces of the market system. For member countries of the European Community the growing political and economic integration at the supranational level and the aim of forming a common internal market in the 1990s have to be taken into account. This is clearly shown in the field of deregulation. Faced with the future European common market, regulations cannot be left in national hands. Continuing state intervention in the single market would lead to intolerable distortion of competition because manufacturers in a country with high standards would no longer be able to compete with manufacturers in countries with lower standards. Therefore, further harmonization is required. A strategy of standardization either at the highest or lowest level can hardly be pushed through. Attempts to uphold the highest standards according to the national interpretation have already failed, examples being German beer and Italian spaghetti. It is more feasible to accept minimum requirements for common regulations in security, health, environment, and consumer protection, and to accept products as long as they fulfil the minimum requirements. However, the need for both regulation and deregulation can hardly be overlooked. In cases where the Federal Republic of Germany upholds higher standards than those of other European countries, greater pressure to deregulate will develop. Manufacturers of products and service enterprises faced with higher requirements than competitors from neighbouring countries will urge the politicians for lowering of standards to enable them to maintain their position in the market. In the fields of environment, health, protection of employees, etc. this will be met in Germany by an enormous amount of political opposition. This reference to the European controversies shows clearly that privatization there is still a subject of serious political conf1icts. In Germany, France, and Great Britain there exists a polemic debate on these subjects. Traditionally, supporters and opponents of privatization can be identified within a certain political spectrum, as in Great Britain with the Conservative Party on the one hand and the Labour Party on the other. But it would be too simple to look only at party politics. Conservatives in the southern parts of Germany show a preference for strong state activity, if not by words then by actions. One should not forget that the state in eighteenth century Central Europe was a successful mercantilist. Nowadays it is possible to make a distinction between "northern" and "southern" countries in the European Community. While the highly industrialized countries in the North rely more on the dynamics of market forces, the less industrialized countries in the South do not want to do without state protection and intervention in favour of their economies. In the Federal Republic of Germany of the 1980s, the government put more emphasis on a market approach and, therefore, handled public functions more

The Hansfer

o/ Publz'c

Functzom

53

restrictively. This policy was carried out rather carefully as can be seen in the marketization of public tasks. Private suppliers have been licensed to operate next to former state monopolies. A balance between public functions and private participants was sought, and proves to be worth looking at in Europe.

II. Marketization for Private Suppliers 1. Radio and Television Broadcasting in the Federal Republic of Germany In Germany one can find services which are traditionally provided by both public and private suppliers. The transport of letters and packages is carried out by the Federal Postal administration as well as by private companies. In the financial sector there exists an extremely complex structure of banks, saving banks and loan institutions which are both private and public. Moreover, production in state and society cannot be reduced to a simple dualism of the public and private sectors. Between these two sectors there is a third sector made up of churches, trade unions, welfare associations and self-help groups. Their activities are scattered over a vast area but are all focused on the field of social economy and common interests. That means they arc operating without profit or using their profits in the public interest. An example is the case of hospitals administered by the churches. However, hospitals are also operated by the public sector at the local, regional, and national levels. In addition, private persons run hospitals to make profits. Starting from such a situation, one would suppose that markctization in the sense of a broader coexistence of public and private sectors poses less of a political problem. The opposite is true as was recently shown very clearly by two examples: the postal reform, and the institutionalization of a dual broadcasting system. Constitutional disputes, campaigning by the political parties, demonstrations, parliamentary controversies, interest group, protests, and demonstrations characterized the processes of opening up the markets. These are indications of how sensitive the reactions are, and how ideologies can override realities when the existing borderline between the public and private sectors is touched. This reaction is valid up to the level of constitutional jurisdiction. In this context, it is enough to be uncertain of the result of a certain policy. Marketization of public enterprises are not inevitable zero-sum-games where one wins at the expense of others. This is especially the case in extending markets like broadcasting. The dynamic changes in the technical development of telecommunication and the increasing international economic interdependence have made it impossible for the political groups involved to decide about the reorganization of the broadcasting system by "non-decision". Some federal states have changed their media law and have licensed private companies in addition to the public broadcasting. A dual broadcasting system for the Federal Republic of Germany was made possible finally by a series of judgements of the Federal Constitutional Court

5±

Klaus Konig

which slowed clown the process but at least tolerated it. The federal states agreed to a new contract to reorganize the broadcasting system. Public broadcasting will continue to rely mainly on fees for financing. Private companies have to make do with fees and revenues from commercials which are, however, regulated. One of the main functions of public broadcasting, to provide people a basis for forming inclependen t and personal opinions, seemed to be threatened by allowing private companies to operate without any regulations. Therefore, they were subjected to regulations. These regulations aimed to guarantee a variety of opinions from the private broadcasting stations as well. The daily programmes, according to the state treaty on broadcasting (Runclfunkstaatsvert rag), have to give significant political, ideological, and social groups sufficient coverage to ensure a pluralism of opinions. This regulation applies as long as there are at least three private nation-wide programmes.

2. The Telecommunication Sector of the Federal Postal Administration

For years the Federal Postal Administration's telecommunication sector has been the object of controversies in politics, economics and science. The debate is nurtured by developments abroad and has given rise to a lot of literature. In the technical sphere, the interrelation between microelectronics, data processing and telecommunication is becoming more and more obvious. In economic terms, telecommunication is a sector of outstanding importance to the future developments of Gross National Product (GNP), export and the labour market. The protagonists of privatization doubt whether state administered telecommunication services can cope with the new requirements and they argue that a market-oriented organization offers better chances f(w innovations. The federal government had set up a committee which submitted a report in 1987. The committee's proposal to reorganize the telecommunication sector started from questioning the distribution between the public and private sector. The report provides for the establishment of a public enterprise, TELEKOM, within the framework of the Federal PTT Administration. TELEKOM would retain the network monopoly and would be obliged to lease lines. Should developments turn out to be unsatisfactory, the federal government will permit the installation of rival networks. TELEKOM would retain the monopoly of telephone services for vocal transmission only. All other telecommunication services would be open to free competition. The marketing and maintenance of end-use equipment including telephone sets would be subjected to competition between TELEKOM and private companies. According to the current plans, TELEKOM would not engage in the production of equipment. This is to be left to private enterprises. The committee's proposals have met with criticism both from the supporters and the opponents of privatization. The former fear the consolidation of monopolies, the latter the dismantling of the customer-oriented post service. In September 1988 the federal government drafted its conception of reorganization and submitted it to the parliament (Poststrukturgesetz). The reform became effective on 1 July 1989.

17ze li-ansfer of Public Functz"om

55

This reform does not intend privatization in the sense of ownership transfer but rather a mixture of partial marketization and organizational streamlining. The main feature is the separation of sovereign and operative tasks to the Ministry of Post and 1elccommunica tion, and the Postal Administration respectively. The administration is to be divided into three public enterprises - mail service, banking, and TELEKOM. The balancing of subsidies between the three sectors, however, is to be kept in the old form. Changes are not intended either in the mail service or in banking. No more private suppliers of mail services will be allowed and the position of the postal bank service within the German financial system will be unchanged. TELEKOM, however, will only retain the network monopoly and the normal telephone system. Other telecommunicat ion services and the supply of equipment will bt' subjected to competition. In satellite communication and car telephones, private companies will be admitted as fringe competitors. The postal services will be shaped to cope with future economic and technical development. The infrastructure, and especially that serving the general public, has to be able to cope with further developments in demand. These stipulations show that the Federal Post Administration will not abandon public functions completely and will keep certain responsibilities. This is proven by the existence of other structural obligations, for example the maintenance of the civil service status of the staff. Meanwhile, the federal government has indicated that TELEKOM will devote itself to the so-called value-added services like data communication , electronic mail and network management services. The Federal Post Administration has obtained shares in several foreign corporations which offer such value-added services. In a further, very important step, TELEKOM has set up offices in Washington, Tokyo, Paris, Brussels, and London. In addition to their public relations work, these offices are supposed to survey the respective markets and to co-operate with local telecommunicat ion services.

III. Economical, Social, Legal Aspects of Functional Transfers

1. Criticism Viewed from a Market Economy Point of View Compared to some other industrial countries, the German approach to marketization is rather cautious and faces criticism both from supporters and opponents of privatization. For the former there should be more privatization; for the latter there is too much of it already. Postal reform, in particular, is criticized by supporters of liberalism as well as the trade unions. Beyond the theoretical and ideological positions, the economic facts must be considered, especially the market for telecommunicat ion in the future. The turnover for telecommunicat ion sets worldwide is about DNI 1,200 billion a year. Growth rates between 5 and 10 per cent are expected, and growth expectations for this area are clearly higher than those for the entire economy. The European

Klaus Konig

Commission specified in a Green Book that telecommunication branch's share in the gross national product of the European Community vvill be doubled by the turn of the century from 3 to 7 per cent. About 60 per cent of all jobs will depend either directly or indirectly on this industry. The Deutsche Bank mentioned in a market analysis that the significance of telecommunication is much higher than indicated by growth rates, market shares, and the number ofjobs. The products and components of the telecommunication industry will influence decisively the competitive capacity of a country's economy Availability of modern telecommunication infrastructure will become one of the most important local conditions that will determine which countries qualify for know-how intensive and value-added activities. In this context it has to be mentioned that the United States, Japan, and Great Britain have taken the lead in telecommunication industrit·s, and will provide for 50 per cent of the volume in the world telecommunication market share. It is assumed that reforms, through decentralization, privatization, and deregulation, carried out in these countries laid the foundations for their strong positions. It is further assumed that a national monopoly is no longer a suitable pattern of organization in a market which is to be characterized by increasing interdependence and overlapping, and drastically reduced investment and innovation cycles. As early as 1982, American Telephone and 1clcgraph (AT&T) was deregulated. The enterprise handed ovet three-quarters of its assets to seven regional telephone corporations. The monopoly of Kl'&I' in all fields of activity - network, services, equipments - was drastically reduced. Only local telephone service is still reserved for monopolies. In all other fields there are competitors, with AT&T still the dominant participant. In Europe it is Great Britain which has reformed its telecommunication structures most thoroughly. In 1969 the government separated bank service from the British Post Office. In 1981, mail and package services followed. The remaining British 1clecorn (BT) was exposed to competition and was finally also privatized. l(xlay private shareholders hold the majority in BT Likewise, Japan has also ch. Sec special issues on privatization: ASEA,V Economic Bulletin 5, no. :l (March 1989) and World Development 17, no. 5 (1989 ). fi. A. Choksi, State Intervention m the Indu.1trialization of Developing Countries: Selected lsmes, \\'orld Bank Staff Working Paper, no. 341 (1979), pp. 54-66. ; . :VI Shirlcv. l'vfanaging State 01cned Enterprises, \Vorlcl Bank StatT \\'orking Papers. no. 5 77 (1983). pp 69-71. 8. H. \'crnon-VVortzel and L. \'\;ortzcl, "Pri,·atization: :'\;ot tht' Only Answer': \'\'orld Derclojnnmt 17, no. 5 (1989), pp. 637-39. 9. lVI. Bishop andj. Kay, "Privatisation and Performance of Public Firms". Paper prt'sentcd at the Confcrcnct' on Pri,·atisation: Lessons from Europe and ASEAN. Singapore, February 1989, pp. 24-2:-J. 10. l\1. Ayub and 0. Hegstad, Public Industrial Enterprises: Determinants of Performance, Industry and Finance Series, 17 (\\'ashi:1gton, D.C.: World Bank, 1986). p. 1. 11. L. .Jones. ''The Linkage between Objectives and Control :'vlechanisms in the Public Manufacturing Sector''. Industry and Development no. 7 (l!NIDO, 19H3). p. 8. 1:2. Y. Aharoni, op. cit., p. 382. J:l . .J.A. Allende, ·'State Enterprises and Political Em·ironments: Chile's :\fational Copper Corporation'', Cnpublished dissertation. 1985. pp. 127-30. 1·1. '\lg Chec Yuen, "Privatization i.< Singapore: Divestment with Control", ASEAi\' Economic Bulletin 5, no. :1 (\larch 19SCn: 298. FJ. Asher B. .'v1ukuL "An Economic Perspective", in Privatization. Singapore\ Experienu: in Per,pettwe. edited by Ian Thynne and l'vlohamrned Arifl (Singapore: Longman Publishers, 1989). p. 81. 16. P.:\f. Pillai, State Entcrpn.1e zn Singapore. l_egal Importation and Development (Singapore: Singapore University Press, !'Jational University of Singapore. 19S:l), pp. 207-11. 17. Kompas, 29 .June 1989. 18. ".'vlengguncang Status Quo BUMN", Eksrkutif, November 1989, p. :)0. 19. Kampa.\, 13 '\1m-ember 1989. :20. A. Peters, "Wings of Fortune'', Asia A1aga::ine, 12-14 May 1989, p. 8. 21. A. Pt'ters, ibid., p. 12. :22. A. Peters, ibid., p. 14. 2:). "Comparatin· Case Studies of National Airlines", n.d. :\1irneo., pp. 4-5. This article was subsequently revised and published without including the corporate objectives of SIA, quoted lw this author. Sec D. Sikorski, "A Comparative Evaluation of the Gm-crnmcnt's Role in National Airlines". Asia Panfic Journal of Management 7, no. 1: 97-120. 2+. S. Sudomo, and I. Setiawan, Garuda Indonesia: Ca.1e Uakarta: lnstitut Pengembangan .'v1anajemen Indonesia, 1989), pp. 1-.53. 25. S. Sudomo and I. Setiawan, ibid., p. 21. 26. A. Schwarz, "Uncharted skies", Far Eastern Economic Review, :21 September 1939, p. 72.

.'vfaking Public Enterpn.ses ,'v/ore n1fz"cient

79

REFERENCES Aharoni, Y. The F"'volution and Management of State Owned Entnprz"ses. Cambridge: Rallinger, 1986. Allende, JA "State Enterprises and Political Environments: Chile's National Copper Corporation''. Unpublished dissertation, 1985. Asfwr, l\1ukul G. "An Economic Perspective". In Privatization: Singajxne\ E:"xperience in Ehspectiue, edited bv Ian Thynne and Mohammed Ariff. Singapore: Longman Puhlishns, 1'l89. Ayuh, ,'v/_ and 0 Hegstad. Public Industrial Enterprises.· Detnminan/.1 of Performanu Industry and Finance Series, vol. 17. Washington, D.C.: \'\lorld Bank, 1986. Rienen, H. and J \'\laterbury "The Political Economv of Privatization in Dewloping Countries''. VYorld Development 17, no. 5 (1989): 617-32. Bishop, .'vl.R. and JA. Kay ''Privatisation and Performance of Public Firms". Paper presented at the Conference on Privatisation: Lessons from Europe and ASEA:\'. Singapore, February 1'JB'l. Choksi, A. State Intervention m the Industrialization of Developirt,l', C:ozmtries: Selected Irsun. \!Vorld Rank Staff \Vorking Paper, no. 341. 1979. "Comparative Case Studies qf \rational Airlines", n.d .. Mimco., pp. l-B4. ,) enkins, G. and .\1. I ~ahouel. "E\·aluation of Performance of Indus trial Public Enterprises". Industry and !Jez·elopment no. 7 (1983): 13-23. Jones, L. "The Linkage between ObjectiH'S and Control Mechanisms in the Public \1anufacturing Sector". Industry and Development no. 7 (1983): 1-12. Jusmaliani. "Tini~man 'Jerhadap Sistcm Strategis R L: 1\1:\'" (Study of the Strategic Svstcms of Public Enterprises). ,'vfasyarakat Indonesia XIV, no. 2 (August 1987): 141-62. ''\Iengguncang Status Quo BUI\1:--.1'' (Shaking State Enterprise Status Quo). Hk.1ekutzj; :\'ovember 19B9, pp. 28-44. l\1ushkat, \1. and EV. Roberts. "Perceptions of the Political Environment and 'l(,p l'vlanagement Orientations in Hong Kong Public Enterprises". A.1ia PacificJournal ol~t1anagernml +, no. I (19B6\ 55-6il. \!ellis, J and S. Kikeri. "Public Enterprise Reform: Privatization and the \Vor!d Rank". vYinld Developwnt 17, no. 5 (19B9): 659-72. :\'g Chce Yuen. "Privatization in Singapore: Divestment with Control". ASF:",JS Lconomit Bnlletin 5, no. 3 (Mar-ch 1989). Peters, A. ''Wings of fortune", Asia Magazine. 12-14 May 19B9. pp 8-17. Pillai, P.N. State Hnterprise in Singapore: Legal Importation anrl Development. Singapore: Singaport> L:niwrsity Press, National University of Singapore, 198:l. Shirley, M. Managing State-Owned Enterpri.1e.1. \!Vorld Bank Staff V\'orking Papers, no. 577. Washington, D.C.: \Vorlcl Bank, 19B3. Sudomo, S. and I. Setiawan. Canula Indonesia. Crne. ,)akartd: Institut Pcngemhangan f\Ianajerncn Indonesia, 1989. Schwarz, A. "Uncharted Skies". Far Eastern Economic Raine. 21 September 1989, pp. 71-72. Vcrnon-\Vortzel, H. and L. \!Vortzcl. "Pri\·atization: Not the Only Ans\vcr'~ vvi;rld Dtrelopment 17, no. 5 (1989): 633-41. \Varwick, D. A 7i-ansactional Approach to the Publlc Entnprz.re. :V1inwo., pp. 1-:H.

7

Marketization of • Telecommuni cations tn Southeast Asia Toh Mun Heng and Linda Low

Introduction

A process to re-cquilibrate the balance between the public and private sectors is perceived as a new economic force which is changing economic behaviour and expectations on a global scale. Deregulation and privatization or marketization in short, to imply a return to the competitive conditions of the market, is widely pursued in as many countries as in the sectors aflectcd. The terminology used, including other terms such as liberalization, divestment. divestiture, etc. arc, hovvever, as diverse and varied as the mechanisms and means to achieve them. J\1 uch depends on the objectives and resource availability in the sectors or countries concerned. The consensus that privatization or marketization cannot be all things to all people or that "everybody is doing it - differently" (Economist, 21 December 1985), is a rcsounrling one. The literature on marketization and privatization is growing, and the impact and evidence of this trend in Southeast Asia is also well documented. 1 Studies of deregulation in the telecommunication sector arc prolific especially in the developed countries such as the U nitcd States, Canada, Japan, the European Community, Australia, New Zealand and others (sec Snow and Jussawalla 1986 and References). Similar studies on privatization in the telecommunication sector in Southeast Asian countries are, however, lacking although efforts especially by regional research institutions and the governments are being initated.' In particular, Malaysia and Singapore appear to have formalized their objectives for privatization in general and in their telecommunication sectors in particular, which are documented and published (Malaysia, Planning Unit 1985; Singapore, Ministry of Finance 1987, respectively). Privatization of telecommunications in other Southeast Asian countries appears to be less rigorously documented and implemented. Because of this general lack of enunciated privatization policy and indepth analyses in other Southeast Asian countries, the approach adopted in this article will be two-fold. The first attempts a general discussion of the telecommunication sector and telecommunication policy in the Southeast Asian countries, and the second concentrates on a comparative focus between Malaysia and Singapore on one hand, and between these Southeast Asian countries and some industrialized countries on the other. The basic objective

A1arketizatzon of 'felecommuniwtion.1 in Southeast Asia

81

is to draw out lessons and implications from the experience of these countries which have privatized, or are in the process of privatizing their telecommunication sectors, for the rest of Southeast Asia. In Section I, a brief description of the telecommunication sector in ASEAJ\: (Association of Southeast Asian Nations) countries, a discussion of the nature and extent of state involvement, and an evaluation of the efficiency and distributional impact of telecommunication services are presented. Section II assesses the rationale and mechanisms of privatization, the procedural problems, and legal and social aspects of the transformation and deregulation efforts. A more intensive case study is made of Singapore Telecom in this section. The discussions in these sections aim to draw out some lessons and policy implications for Southeast Asian countries, presented in Section III.

I. Industry Profile, Government Involvement and Impact

1o provide a background to the telecommunication sector and telecommunication policy in some Southeast Asian countries, a brief description of each country is presented in this section. First, to give some order of magnitude of the contribution of the telecommunication sector in these Southeast Asian countries, two proxy measures are employed. The choice of these proxies is really determined by the availability of information rather than the suitability of the indicator. One is the size of the primary information sector which has a functional relationship to the telecommunication sector in terms of the collection, processing and dissemination of information. In general, the contribution of the information sector to national income in the ASEAN countries is quite uneven (Jussawalla et a!., 1988). In Indonesia. the share ofthe primary information sector in 1975 in terms of output to Gross Domestic Product (GDP) was 19.2 per cent but its share in the national product was only 9 per cent. The percentage for the Thai primary information sector's share to its GDP in 1975 was at 10 per cent. For the Philippines, its primary information sector accounted f(w 12 per cent of Gross National Product (GNP) in 1974. Compared with these three ASEAN countries, Malaysia appears to be able to attract greater investments and benefits because the contribution of its primary sector to GNP was 14.7 per cent in 1975. In contrast to all these four ASEAN countries, Singapore's primary information sector contributed 24 per cent to its GDP in 1974, which grew to 26 per cent in 1978. From national accounts statistics, the information sector is not segregated but is part of the transport and communications sector. The contributions of the transport and communications sector as a whole to GDP for the Southeast Asian countries are shown in Table 7.1. The share in Singapore appears to be the largest, reflecting its urban service-oriented economic structure. As an indication of the region's share of global telecommunication traffic, Table 7.2 shows the change in shares of various telecommunication services between 1975 and 1985. The ASEAN countries' share in both international telephone calls and telex traffic (outgoing traffic, not total volume) is quite close to those of the Asian newly-industrialized economies (ANIEs). The drop in international telegram

7oh lvfun Heng and Linda LolL TABLE 7.1 Contribution of the Transport and Communication Sector to GDP of Southeast Asian Countries (In percentages) Countries

1970

1975

1980

1985

')

+ +

4

51·

na 6 9 14

Burrna

6

,)

Indonesia \lalaysia Philippines Thailand Singapore

3 5

4 511

:,

:)

()

6 11

1+

7 11

7

NOTES: "1973 figure 1 ' 19 78 figure SOCRCE: Cnitcd Nations. Sational Aarmn/.1 Statistics: Analy.1is ofA1ain Aggregate.\, 19!!.5. Genc,·a.

TABLE 7.2 Change in Shares in Volume of Outgoing International Telecommunication Services between 1975 and 1985 (In percentages) Telephone call North America .Japan China A:\I Es A SEAN Ocania

15.+ +.7

Telex traffic -9.0 - :).0

:u

5

2.7 2.5

2 ..'i 2. :l

2.:;

1. 7

j

Telegram - 2.1

- :l.6 JO.:l

:u -2.6 -5.3

SOURCE: Extracted from Centre for Pacific Business Studies, \1itsui Research Institute for .Japan National Committee f()r Pacific Economic Cooperation (JANCPEC). PECC TripleT Project, Vol III on Telecommunications, April 1939.

traffic reflects the change in mode of international communications which shifted first from international telegram to international telex and then to international telephone. The level of development and sophistication of telecommunication services is very diverse among the countries in Southeast Asia. In Southeast Asia, only Indonesia has satellite communication facilities although the overall level of telecommunication services and development is probably the most sophisticated in Singapore. Table 7.3 shows some telecommunication development indicators of the ASEAN countries compared with other regional groupings. While Brunei has the highest GNP per capita among the ASEAN countries in 1986, its telephone density is

8'1

.'vfarket£zat£on o/ 7r;lfrommunimt£oru· £n Southea1·t Asw

TABLE 7.3 Some Telecommunicat ion Indicators of Regions, 1986

Canada CSA Japan China Hong Kong South Korea Chinese Taipei A SEAN Brunei Indonesia .\1alaysia Philippines Singapore Thailand Australia Nt'\\ Zealand

Share of total telephone sets

Density of telephone sets per 100 population

Densitv of telephone rna1n lines per 100 population

G:"--P per capita (USS)

6.5 58.5 22.1 :2.3 O.B

76.8B 73.CH 55 .S:l () 67 H.04 22.:l4 21.43

18.06 10.91 3 7 07

1:l ,768

() 6:2

257

:n.o1 1B.42 11!.00

6,961 2,292 4,06B

15.6:) OH B.53 1.51 42.91 1.39

'l. 70 (U1 (iH 0.8B :11 (H

15,+00 ·129 ISH 5-t:l 7 '() 1:1 763 l(l,() 11

:u 1.4 neg" 0.2

0. :) 0.3 0.+ (J.:l

2.9 0.7

:J:dJ5 66.CJCJ

1.G6 11.H 39.:l7

17.529 16.1B+

B,:Z+B

"Brunei has :16,000 telephone sets. SOURCE: L nitcd ;\latiom. Sa/zonal Accoon/1 Statist us.·

o/.ifmn Ag~;rr~~;ates. Geneva: 198:1.

only second highest to Singapore's, Indonesia has the lowest telephone densitv rhough its share of telephone sets in the total Pacific region (0.2 per cent) is only marginally lower than those of the Philippines and Thailand (0.3 per cent each). Figure 7.1 shows the positive relationship between the number of telephones per 100 population and the level ofGl'\P per capita. It is shown that while telephone density generally increases with the level of G :\'P, the rate of growth of telephone density seems to decline as GNP per capita rises, implying some "saturation" point being reached. If a regression line to represent a "normal'' relationship between telephone density and GNP per capita is fitted, Figure 7.1 shows Singapore to be slightly off the norm, like Hong Kong, Australia, rHtiwan and South Korea. The more advanced countries like Japan, the United States and Canada are further from the fitted regression line, as is Brunei, Malavsia, Thailand, the Philippines, Indonesia and the People's Republic of China are on the line though at the lower end of it.

Brunei

Under the Fifth National DeYelopment Plan, 1986-1990 for Brunei Darussalam, expenditure for the transport and communication sector recorded an increase of B$229 million compared to B$408 million under the Fourth Plan. In line with

FIGURE 7.1 Telephone Density and GNP Per Capita, 198fi

80

~

DCanada USAD

70

0 1\'ew Zealand

§60 Ojapan

'.:I ell

"5

g. 50 0..

0 0

......

t

0..

40

"'v _g 30 .:

0..

v

]

'0

zci

South KoreaD

20 ~

DBrunei

;:,..

,_, ·~

""'

10

:J::

""'

Ooo

"i'L

0

:-:;

People's Republic of China

i} t-
-

-llows: (Simasathicn 1986: Hi-L'; Ingavata 1'JB'J). Catcgorr! Those which han· be!"n established to generate rewnues for the state. These PEs are engaged in the direct, production of goods and sen ices. As long as the state needs revenues from them. there is no consideration f()r privatization as yet. Categorr [[ Public enterprises which prm·ide basic infrastructure and public utilities. Category Ill Public enterprises which hm-c been specially t'stablished by the state policies. These include rinancial institutions and those dealing with conservation of natural resources. agricultural, or comt>wrcial acti,·itics. Category IV Public enterprises which \\l'fl' set up for the production of goods strategic to national sccuritv. Categorr ~, Public enterprises which have been established k>r other purposes. This section draws hea,·ily from Krz,iyudht Dhiratavakinant (19WJ). The gm-crnrnent then was led by .\fr Kukrit Pramoj who took up the idea of public transport from L'nited Kingdom. This implementation has been one of the two most recognized public policy programmes by this government. One was the nationalization of the Bangkok bus system and the other was the public works programmn in rural areas hlr the purpose of creating ofl-fitrm employment. Initialk the BMT\ pro,·ided the driH-rs and conductors as well as fuel to operate these rented bust'S. As the result of cost cwerrun, the BI\1TA decided to change the renting approach. The renting companies would supply both the buses and the drivers while the B\ITA supplit>d the conductor and fi1cl to operate them. Later, however, the arrangement was changed again. These private buses were to supply evervthing required to operate the buses and had to pa' the B"11A a dailv fee for tht· right to provide the bus sen·ice. This is how!"ver denied by one of the Bl\11A senior personnel. PE employees receive higher pay and benefits than the civil servants per \1!. The losses have been rt>duced from baht 1.239.6 million in 1984 (Suwanbol 1989: I) to baht 912.9 million in 19B7, and 766.23 million in 1988 (CGO 1989).

145 'l. ThcTc were· altogether fin· fine hikes, starting from the same basic rate. In 1981, the fare was baht :2.00 instead of baht 1.00. But the change lasted for only 20 days; the Bl'vlTA was forced to change back to baht 1.50. The flat rate was reinstated in 1985 and the rate was changed from baht 1.50 to baht 2.00 (Suwanbol 1989: 2). 10. The consequence of that strike led to the resignation of the previous Governor of the SRT and imposed great pressure on the then :VIinister of Communication, Mr Banharn Silpa-Archa, to solve the situation. 1\ilany of the SRT union leaders ha\T alwavs been in\olved in the labour mmTmcnt in Thailand. Some han· even been closely involved in the political process. For example, a kw among them, narrwly Ahmad Khamthedtong ;mel Thawec l'rapai, were nominated senate members. \Nhether this was a cooptation on the part of the government to sustain the political interests or whether it was a dcmomtration of democracy is still to be observed. This, however, resulted in criticism of the labour union leaders of Thailand that thcv were using the labour movement as a stepping-stone for social mobility. 11. For example, public c·nterprise annual budget. investment projects, corporate plan. appointment of board nwr. 25 July 1CJB:1. p ()CJ, Dhiratayakinant, Kraiyudht. "Public Enterprise in Thailand''. Paper presented at the International Conkrence on Thai Studies, organized by the Australian :--.lational Uniwrsit\', Canberra, :3-6 Julv 1CJ87. ()7 pp. (1\limco .. in Thai) I )hiratayakinant, Kraivudht "Pri,·atization of Bangkok IV!ctropolitan Bus Snvice" Paper presented at the Symposium on Privatization: Lessons from Europe and ASEA:'\. Jointly organized by EIPA and !SEAS, Hi-IB February ICJB'J. Singapore. Express and Rapid Transit Authority of Thailand . . 1nnual Report, 1987. (In Thai) ( ;;wrlncr. Greg·ory H. "Organizational Effectiveness: An Alternati\'l· Perspectiw". of.Hrmagemml Rez.·iew 8, no. 1 (1983): 1!7-107. Godinez, L:innia F ''Pri,·atization and Deregulation in the Philippines: An Option Package \\'orth Pursuing:'" ASLA.\' £conomic Rullctin 5, no. :; (l\!arch 11JB')): 2:>9-89. Hafsi. Taieb, l\loses :'-i. Kiggundu and Jan J Jorgensen. "Strategic Apex Configurations in State-Owned Enterprises". Acadml)' ojAfanagrment Rerim' 12, no. 4 (1987): 714-:30. lngavata, Poonsin. "Pri,·atization in Thailand: Sluw Progress Amidst Opposition". ASEA:\ Economic Bulletin 5, no. 3 (l\!arch 1989): 319~:l5. Kimberly, JR. and R. H . .\1 iles. The Organi::ational l.ije C:yclr:. San Francisco: J ossev- Bass. I'JBO. Kiinig, Klaus \'OIL "The Transfer of Public Functions: A European Pnspcctivc''. Paper prepared fclr the \Norkshop on Marketization in ASEAN, Institute of Southeast Asian Studies, Singapore, 2'J-2il September 19il'J. Krvnetr, Prachob and Kovit Km·anonda. "Chapter :2: Thailand". In llze ASt,'A.\' -Australian Hamporl Interchange, edited by Peter J Rimmer. Proceedings of the JCHJ:) Australian \\'orkshop Jilr Senior ASEAN 'l!·anspon Officials, National Centre for Dc\Tloprnent Studies, the Australian National Uniwrsity. Canberra. 1987. Pp. :25-:W. (In Thai) ".\lonorail for "-lass 'lhmsit Svstcrn''. Real E,tale.\ 3. no. 29. Pp. :H-41. (In Thai) .National Economic and Social De\ clopmcnt Board (NESDB). ~11hitr Paper on Approaches to lncrewe the Role oftlu: Pnra/r Sator zn lnzprrn·ing the Perfrmnarza of thr Public f,'ntrrpriiP,

:30 November 198il, 52 pp. (In Thai) National State Enterprise Cmnmitt:J-fi1. (In Thai). Th,nne. Ian. "Public Enterprise 'Ji·;lllsf(mnation: Changing Patterns ufOwncrship ..·\ccountabilit\· and Control". Paper presented at the \\'orkshop on l\Iarketization in .-\SF.-\:'\. Institute of Southeast Asian Studies. Singapore, :Z:1-:W Septcmbn l9B9. (:\limco.) '](>h. Kin \Voon. "Pri,·atization in !\lalaysia: Restructuring or Efficiencv"" ASEA:'\ Economic Bulletin :J, no. 3 (:\1arch 1'Hl'l): :Z+:Z