The story of the transformation of customary land tenure in West Africa begins with the imposition of colonial rule. Colonial rule established the framework within which indigenous actors operated. Colonial institutions created the channels through which local actors could gain access to British decision-making; designated which groups of indigenous actors would be eligible to work through those channels; and allocated responsibilities between national and local level institutions. Colonial institutions thus shaped the strategies that indigenous and European actors used to redefine property rights to land, and they determined the actors' capacity to enforce those rights at the state or local level.

In this chapter, I explore the logic of indirect rule. First, I ask how British officials defined their goals in West Africa, and consider the institutions they forged to realize those goals. I then assess the institutions' impact on indigenous and European efforts to redefine property rights to land and claim a now-valuable resource.

THE LOGIC OF INDIRECT RULE

It is difficult to ascribe a single motivating force to the creation of the British empire. Nevertheless, the search for economic profit clearly played a large role in the British colonization of West Africa and other regions. West Africa offered a new and potentially expansive market to European traders, and an abundant supply of inexpensive raw materials to European manufacturers. The British colonial government sought to exploit these opportunities by creating an environment in which trade and commercial agricultural production would thrive.

This book explores the transformation and enforcement of property rights to land in two traditional states in colonial Ghana. In so doing, it engages themes of concern to diverse audiences. Most obviously, the book is relevant to students of African politics. The case studies contained herein ask how colonial institutions transformed indigenous political and economic life; and how colonization and decolonization affected prospects for future economic development and political stability in Africa.

The case studies in this book are equally relevant to property rights theorists and rational choice institutionalists. Theories of the emergence and maintenance of property rights institutions are “the least developed area of Neoinstitutional Economics. ” Scholars recognize the importance of secure property rights, but they cannot explain how conflict over the distribution of property rights affects the demand for and supply of secure rights. Neither have they identified the conditions under which rulers will choose to enforce property rights, and the conditions under which such enforcement is credible. The latter omission is crucial: Property rights serve as a foundation for economic growth only when citizens perceive those rights to be secure.

The introduction to this book addresses these questions, outlining a theory of the transformation and enforcement of property rights. The remaining, empirical chapters illustrate and refine these theoretical insights within an African context.

Finally, the case studies in this book are of concern to critics of rational choice theory. Critics charge that most rational choice scholars do not engage in rigorous empirical work.

The Cambridge series on the Political Economy of Institutions and Decisions is built around attempts to answer two central questions: How do institutions evolve in response to individual incentives, strategies, and choices, and how do institutions affect the performance of political and economic systems? The scope of the series is comparative and historical rather than international or specifically American, and the focus is positive rather than normative.

In a work rich with insights from anthropology and neoclassical economics, Kathryn Firmin-Sellers exposes an important, ubiquitous dilemma facing developing countries in the transition from customary land tenure systems to potentially more productive private property rights systems. The dilemma is that this productive potential of a property rights system depends not only on how the rights are assigned but also on the degree to which the rights can be and are enforced. Private property rights will only inspire significant individual investment and/or economic growth if political institutions convey to the ruler of a community or nation sufficient coercive authority to silence any who advocate alternative, perhaps politically attractive, allocations of property rights. Nevertheless, once they are vested with such coercive authority, institutions must also create political incentives for rulers to establish a credible commitment to enforce those rights, rather than to use their coercive authority to implement distributionally more favorable systems of rights. However, in transitional societies the institutions themselves are “up for grabs, ” frequently being created by the same rulers for whom the institutions must establish the conditions for credible commitment.

The passage of the Coussey Constitution marked the first in a series of constitutional reforms that would culminate in Gold Coast independence in 1957. With each change, indigenous politicians gained greater responsibility over domestic affairs. By 1954, indigenous politicians exercised most powers of internal self-government; and in 1957, they gained control over matters concerning internal security and external defense. Prior to 1957, however, indigenous actors did not wield coercive authority themselves, and therefore remained dependent on the British to enforce (implicitly or explicitly) their policy decisions.

The changes in the constitutional framework profoundly altered the battle to define property rights in the Gold Coast. Nkrumah used the instruments of central government to redefine property rights. On behalf of his constituency, he claimed for the state land, mineral resources, and even the profits from some individual investments.

The Gold Coast elite resisted the redefinition of property rights and the concomitant redistribution of wealth. In the face of a hostile central government, the elite sought to vest the power to define and enforce property rights in the traditional state. To this end, they launched a campaign to bolster traditional institutions and traditional rulers, placing them at the center of political life; and to redraft the constitution, decentralizing authority so that the central government might not intervene in local affairs.

Under indirect rule, the British sought to govern the colonies by delegating authority to traditional rulers. The British relied upon these traditional authorities to maintain peace and prosperity in their states, implementing British policy and even advising officers during policy making. The strategy was unsuccessful, as the analysis in Parts I and II demonstrates.

Chiefs and non-chiefs manipulated the institutions of indirect rule to advance their own political and economic agendas. Yet, colonial institutions left both indigenous and European actors ill-equipped to deal with the ensuing conflict. Colonial institutions denied chiefs the coercive authority needed to enforce their decisions in the local arena; and colonial institutions failed to provide British officers with the information they needed to decide which claimant merited their support.

By the 1940s, colonial officials acknowledged their failure. Indirect rule had not promoted peace and prosperity. Instead, it had promoted widespread unrest and discontent as indigenous actors battled to claim the spoils of office or protested the chiefs' corrupt behavior. Only rarely did citizens succeed in making the chiefs accountable for their actions, as they had in Akyem Abuakwa.

Confronted with this failure, officials in London and Africa began to formulate an alternative system of governance for their colonial holdings. Their work was unhurried. By the end of World War II, officials had agreed to little more than the broad outlines for reform: Social and economic development must be prioritized over the maintenance of law and order; and the ‘educated African’ must be incorporated into the machinery of government.

Introduction

Vietnam began the first steps of its reform of state-owned enterprises (SOEs) in the early 1980s. This subsequently evolved into a massive and fundamental reform of SOEs, towards a greater degree of market orientation in the late 1980s and early 1990s. At first, the reform of Vietnam's SOEs was primarily in the area of management and planning, thereby providing more autonomy for SOEs within the framework of a centrally planned economy and the gradual reduction of state subsidies and allowances. Until the implementation of the doi moi (economic reform) programme in 1986, whilst there had been some renovation of the state sector, SOEs were still operating within an environment without market competition. At that time the economy simply consisted of the state and collective sectors, with no private sector. Under such conditions, the management of SOEs was a purely administrative exercise. Without the pressure of competition, SOEs found no motive for the revision and improvement of regulations intended to make them more operationally efficient. Instead, SOE managers tended to concentrate all their efforts on fulfilling mandatory targets assigned to them, and dutifully obeying directives or orders stemming from the resolutions and decrees of the ruling party and government.

To implement the economic renovation process, and develop a multisectoral economy, is to develop a wide range of production factors, including: SOEs, family and collective enterprises, individuals’ businesses, private limited companies, shareholding companies, joint ventures with foreign firms, and so on. Economic reform, therefore, is to change from a centrally planned economy into a market-oriented, multi-sectoral economy, operating under a market mechanism. Enterprises with different forms of ownership structure are encouraged to develop and compete in this market environment. In such a context, a demand arises for a better defined and more appropriate legislative framework, in order to ensure the equality of all enterprises before the law, and the concretization of the legal provisions needed to regulate the economy and the various enterprises (including SOEs).

Introduction

In the rapid economic growth and significant improvement in living standards achieved by each of the ASEAN countries over the last three decades, the government has played an important role. This role, however, has not been static, and the mix between the public and private sectors has undergone significant changes over time. In some countries such as Indonesia, the state's relative role in the economy has varied positively with resource mobilization possibilities by the state, and inversely with the need to attract foreign investment. ASEAN countries have over time shown a strong tendency towards co-operative relationships between the public and the private sectors. The demarcation line between the two, however, has not always been clear in ASEAN because of the importance of government-linked companies (GLCs) and the close connections between the ruling parties and certain business groups. As a result, collusive behaviour is regarded as a normal state of affairs. This has resulted in the absence of an active competition in key sectors in ASEAN.

The main objective of this chapter is to examine the role of government in ASEAN, particularly as it concerns the mix between the public and private sectors. It is, however, useful to begin with the examination of the recent developments in the literature concerning the role of government in the economy (section two), and the privatization phenomenon which has gathered momentum since the mid-1980s (section three). Section four provides the main features of the role of government and privatization efforts in ASEAN. It should be stressed that the government can influence the economy not only through its budgetary activities but also through state-owned enterprises (SOEs), rules and regulations in both economic and other spheres, credit policies, and the like. Seen in this broader context, the role of government has been most pervasive and extensive in Singapore, followed by Indonesia, Malaysia, post-Marcos Philippines, and Thailand.

Vietnam became the newest member of the Association of Southeast Asian Nations (ASEAN) on 1 July 1995. Its membership marks the beginning of a new chapter in the rapidly developing Southeast Asian region. Barely three decades ago, in the 1960s, the region was classified as one of the most turbulent in the world, and ASEAN was established in 1967 in an attempt to help change that view. Today, Southeast Asia is regarded as one of the most economically dynamic regions in the world. Undoubtedly, the upheavals in the socialist bloc during the late 1980s, leading to the crumbling of many planned economies, have proven that the command system is not sustainable. These economies simply did not deliver the goods, material and immaterial, which had been anticipated. Consequently, there has been a recent trend of command economies changing towards market-oriented principles.

The performance of the market economies of the ASEAN member countries and Japan, amongst others, has undoubtedly impressed Vietnam, to the extent that it is now trying to learn from their experiences. An added motive is the relatively handicapped position of Vietnam's integration with the other ASEAN economies; a substantial number of its state-owned enterprises (SOEs) are just too inefficient to compete in the international market-place. However, should Vietnam have refrained from joining ASEAN, and side-stepped the economic transformation that is now taking place, the prospect of an ever-widening gap with the ASEAN economies and the risk of being left in the backwaters of development would have been real. Vietnam has little alternative but to change its economic system to a more market driven one, and at the very centre of this change is the reform of its SOEs. But the successful transition from a command to a market-oriented economy is no easy task. The path is wrought with pitfalls and problems that can at times seem intractable. Whilst Vietnam has done much to reduce drastically the cumulative number of SOEs — undertaken by various means since 1986 — the arguably harder task of transforming their operating structures has still to be done.

In early 1994 the Institute of Southeast Asian Studies (ISEAS), an institution devoted to the generation, enhancement, and dissemination of research on the region and beyond, proposed a study on the reforms of SOEs in Vietnam, to help better facilitate the country's integration with the ASEAN economies.

Introduction

Both in the immediate future and in the long term, Vietnam's state-owned enterprises (SOEs) will still play an extremely important role — and hold key positions — in various sectors of the national economy. However, the recent shift of the centrally planned economic system, towards a market-oriented economy under state control, has exerted a marked impact on the need to restructure the state sector, and there is an urgent need to improve the efficiency of these SOEs. Therefore, the main topic of this chapter is a study of the present status of SOE restructuring, as part of Vietnam's aim of advancing towards industrialization and modernization, and will address two key issues. First, an analysis of the present state of Vietnam's SOEs: by size, sectoral profile, and management and ownership structures. Based on this analysis, an evaluation of SOE efficiency can be made, from which we can have a sound basis to understand the process of restructuring Vietnam's SOEs. Secondly, the chapter will advance views on the orientations needed to restructure the SOEs, to achieve the aim of industrializing and modernizing Vietnam.

Current State of SOEs in Vietnam

The current system of SOEs in Vietnam was formulated both through a process of industrialization and through the establishment of new SOEs, of which the latter was more important. A series of SOEs, spanning various sectors — run either by national ministries and general departments, or by provincial authorities — was set up in North Vietnam between 1960 and 1970, and this policy was initiated across the entire country after 1975. Since the late 1980s, however, a process of reforming and reducing the cumulative number of SOEs has been under way. By the end of 1989, there were 12,297 SOEs in operation in Vietnam, with a total capital value of 34,216 billion dong. Over the last three years, under the market mechanism, the country's SOEs have been revamped and re-registered under government decree No. 388/CP. And by June 1993, the total number of SOEs had dropped to 7,060, with a total capital value of 44,965 billion dong. Between June 1993 and April 1994, SOEs continued to be reformed, and the cumulative number of SOEs reduced further, to 6,264, with a total capital of 53,150 billion dong (approximately US$5 billion).

Introduction

State-owned enterprises (SOEs) have been operating in Vietnam for a long time. SOEs, together with non-corporate economic institutions — such as the State Bank of Vietnam, the national reserves, and the country's infrastructural system — constitute the state-managed economic system in Vietnam. They comprise all the capital, assets, and natural resources of the country, owned by the nation. The Government of the Socialist Republic of Vietnam is the sole representative of that ownership.

The existing SOE system came into being with the founding of the Democratic Republic of Vietnam, in 1945. Since then, the country and its SOEs have passed through a series of wars and peace-time construction periods. Most notably, since 1975, the SOE system has consisted of enterprises from the north, enterprises taken over from the pre-1975 Saigon administration (in the south), and a number of nationalized private enterprises. Until now, SOEs have had a dominant share of the Vietnamese economy. According to the statistical review of 1 January 1990, Vietnam at that time had 12,297 SOEs in operation. However, as a result of economic reforms — including the crucial restructuring of SOEs — the number of SOEs was reduced to 6,264 by April 1994.

The reform and restructuring of these SOEs towards market forces, albeit with continued state control, has not only reduced the total number of enterprises, but also considerably strengthened every aspect of the SOEs' performance. At the same time it should be noted that the contribution of the state enterprise sector to Vietnam's gross domestic product (GDP) has increased at a faster rate than the growth of the national economy's GDP growth rate in the five consecutive years between 1990 and 1994. As a result, the share of total GDP contributed by SOEs has increased considerably. Recently, SOEs have been the main driving force for high economic growth. Vietnam's SOEs have been developed primarily in the industrial, construction, trade, and service sectors of the economy.

Introduction

Notwithstanding the flurry of divestment activity around the world over the last ten to fifteen years, state-owned enterprises (SOEs) continue to occupy a prominent place in many societies. Indeed, while numerous enterprises have been divested in part or in full, others have been relatively untouched by divestment decisions. New ones have also been established in areas of considerable public concern, including health and education. In these and other cases, governments have recognized a definite need, on the one hand, to remain in the business of producing or providing selected goods and services in the public interest but, on the other, to enhance by various means the capacity of the relevant enterprises to cope with the demands that are inevitably made on them. One such means, in circumstances in which it has not already been adopted, is to transform the enterprises into legally, freestanding corporate entities through a process of corporatization. It is this means which is addressed here by drawing, in large part, on material published elsewhere over the last two years (Thynne 1994a, 1995).

Modes of Corporatization

In practice, there are two main modes of corporatization which need to be examined with reference to the four broad types of organizations whose basic characteristics are outlined in Table 8.1. Both modes seek to increase an enterprise's operational flexibility and viability by giving it an existence as an established legal entity which is legally separate from that of a government. This separate status as a recognized ‘legal person’ enables the enterprise to enter into contracts, to buy and sell property, and to sue and be sued in its own corporate name (Birkinshaw, Harden, and Lewis 1990; Boo 1989; Coates 1990; Taggart 1990, 1993; Wettenhall 1990, 19936, 1995; Thynne 1991, 19946). In other important respects the two modes are different from each other. This applies especially to their legal bases and the extent to which the resulting enterprises are subject or open to some form of legislative control and judicial review.

Introduction

Japan implemented a far-reaching privatization policy of public enterprises in the mid-1980s. Nippon Telegraph and Telephone Public Corporation (NTTPC) was privatized in 1985 and Japan National Railways (JNR) was reorganized as a private company in 1987. Since these public enterprises provide the basic infrastructure for economic and social development, privatization of these giant public entities symbolizes a drastic alteration in the traditional thinking of how to deal with monopolies. The Japanese experiment of privatization is an acid test to determine whether these public services could be supplied efficiently by private organizations. The Japanese privatization policy indicates that privatization is essentially a political issue. Since privatization and deregulation may destroy the vested interests, how to create a favourable political climate for change and who takes the initiatives are the key elements which ensure that the difficult regulatory reforms proceed smoothly.

Japan's privatization policy has not been successful in all respects. Many unresolved questions remain. Moreover, Japan's privatization policy reflects the peculiar economic and social characteristics of the Japanese traditional setting. Japan's experience could not be directly transferable to other countries because of the differences in the development stage and traditional economic system. However, it is also true that there are various economic rationales behind the Japanese privatization policy that are common in any economy. Although Japan's privatization has not been completed, the experience of privatizing Japanese public enterprises could provide many interesting lessons to Vietnam in its attempt to reform its state-owned enterprises (SOEs).

This chapter is organized as follows. Section II explains the major reasons why Japan's public enterprises were privatized. The next sections focus on two case studies of Japan's privatization policy. Section III examines a case study of NTTPC — it discusses the main characteristics of the NTTPC privatization policy and assesses the results of privatization. Section IV considers a case study of JNR — it discusses the major features of JNR privatization practices and evaluates the economic effects on its performance after privatization. Section V outlines some of the political and economic implications of the Japanese experience and applicability for Vietnam.