Performances of public enterprises, in both developed as well as less developed countries, have in general been disappointing. Many lose money and many are inefficient. However, profit measures do not by themselves provide an accurate picture of public enterprise performance. Not all public enterprises lose money. Some are profitable because they are managed well; others because they have monopoly positions or enjoy favourable government protective policies. The second case of efficiency is more complex and includes such issues as “whether the resources invested in a firm are being used well or optimally (productive efficiency) or whether the economy benefits as a result of the investments in the enterprises (allocative efficiency)”.

However, this article will not discuss the problems of measuring efficiency of public enterprises, important as they are. Neither will it discuss the often contentious comparisons between the efficiency ol private sector companies and public enterprises.’ Privatization and its implications for allocative efficiency have been discussed extensively elsewhere.’ The focus will instead be on commonly held measures necessary to improve public enterprise performance (productive efficiency) and on the constraints faced by many governments in implementing them.

The first section outlines those generally agreed upon determinants for efficient public enterprise performance, and the constraints. The second section links those determinants in a useful framework which illustrates the dynamics involved in environmental as well as enterprise level factors that affect the behaviour of public enterprises.

Introduction

A process to re-equilibrate 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 affected. The terminology used, including other terms such as liberalization, divestment, divestiture, etc. arc, however, as diverse and varied as the mechanisms and means to achieve them. Much 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 resounding one.

The literature on marketization and privatization is growing, and the impact and evidence of this trend in Southeast Asia is also well documented. Studies of deregulation in the telecommunication sector are prolific especially in the developed countries such as the United States, Canada, Japan, the European Community, Australia, New Zealand and others (see 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.

Traditionally, services play very different roles as sources of export earnings in ASEAN countries. They are least important for Indonesia where they accounted for only 5 per cent of total earnings including merchandise exports in 1987, although there has been a gradual increase since 1980 (Table 1). Malaysia is the other ASEAN country relying on earnings from services but to a small extent (about 12 per cent in 1987) whereas the three other members display service shares of 20 per cent and more. The Philippine result, however, has to be discounted somewhat as it depends on a catch-all sub-sector in the IMF accounting scheme (“other goods, services and income”) and hence cannot be verified with respect to clearly defined non-factor services.

In terms of surplus or deficit positions of individual countries in individual service sectors, the basic results analysed by Lee Yuan (1988, Table 5.1) for 1984 and reported again by Arndt (1989, p.6) still hold: first, Indonesia remained a net importer of shipment services and other transportation as well as of all services. Secondly, Malaysian residents seem to have travelled abroad more frequently, although the country enjoyed a surplus in passenger services and a balanced position in other transportation services. Thirdly, the Philippines, the smallest ASEAN trader in services, has maintained surplus positions in other transportation as well as in travel but displays large deficit positions in shipment and - less importantly — passenger services. Fourthly, Singapore is a net importer of shipment services and a net exporter in other transportation services which, however, as far as the latter sector is concerned, appears to be a net position. Its travel surplus is still remarkable though it has declined since 1984. Singapore's service performance in general is subject to special attention because of the country's role as an entrepôt trader. Finally, Thailand as a tourist resort has continuously expanded its travel surplus which was larger than its deficit in other identifiable services.

Rapid economic growth and structural changes in the Malaysian economy during the last two decades have led policy planners and analysts to reassess the efficiency in the use of energy resources and their availability for future requirements. Special concern is focused on the extent to which natural gas can be used for power generation and the suitable timeframe for the introduction of the 2,400 MW Bakun hydroelectric project in Sarawak. To reduce the economy's dependence on oil, the government has embarked on the four-fuel diversification strategy for the optimal mix of oil, natural gas, coal, and hydro in energy use.

With the revisions of the production-sharing contracts (PSCs) in December 1985, Malaysia is set to attract foreign capital to invest in the upstream and downstream activities of the energy sector. In 1988, Malaysia led an upturn in upstream investment in the Asian-Pacific region. Malaysia also overtook Australia as the second largest producer of oil in the AsianPacific region in 1989 (Petroleum News, 1989).

The strategy to diversify natural gas development from the limited liquefied natural gas (LNG) export markets (dominated hitherto by Japan) for domestic uses is actively pursued with the construction of the 726-km pipeline to supply natural gas to the power plants and the industrial sector in West Malaysia and eventually Singapore.

The development of a new oil refinery with a capacity of 100,000 b/d in Malacca and the proposed Methyl Tertiary Butyl Ether (MTBE) and polypropylene plants for petrochemical development reinforce energy investments in the 1990s to turn Malaysia into the powerhouse of the ASEAN region. Refinery integration in response to the changing demand for light and middle distillates (as environmental concern catches on in the ASEAN region with new legislations in Malaysia, Singapore, Thailand, and Indonesia to reduce lead pollution in gasoline) has provided new opportunities in the highly risky exploration and development of oil/gas.

Among the three EC Central Banks which for the purpose of this study were prepared to release information on bilateral payments transactions in service sectors, the West German Bundesbank sources are the most disaggregated ones. This is due to the fact that – for statistical purposes only – West German commercial banks are legally obliged to report individual transborder payments/ receipts to the Central Bank if they exceed a relatively low threshold level. Of course, one doubts whether the reasons for transactions are correctly stated, especially if services are involved but to some extent such doubt is also valid with respect to merchandise trade. Besides the four basic service sectors, that is, travel, transport, insurance and other private services (OPS), information is available on some sub-sectors, especially on the important catch-all sector OPS, that is, business and financial services, but also on transport. Thus, in total, there are fifteen sub-sectors which the Bundesbank classifies as services. They are all non- factor services excluding income from short- and long-term capital movements and also income of guest workers. Labour remuneration listed under OPS refers to temporary employee contracts between residents and non-residents, for instance, in construction activities and consulting, and not to contracts with individuals (such as guest workers or receivers of an honorarium).

Major Findings

Tables Al - A10 provide a complete breakdown of exports and imports of services between West Germany and the five founding member states of ASEAN between 1971 and 1988. Tables All and A12 sum individual country data up to the ASEAN level. Incomes from capital transactions (factor services) are broken down under “Memo”. This additional information is provided in order to interpret the important link between foreign direct investments and services, both of which can be substituted as well as complemented by one another. Official services are disregarded as they they are quantitively negligible. They mostly include diplomatic and military services.

The idea for the Generalized System of Preferences (GSP) was mooted in the first United Nations Conference on Trade and Development (UNCTAD) in 1964 but it was not until 1972 that the first GSP scheme under the European Community (EC) was implemented. The GSP is to give exports from developing countries (beneficiary) reduced or duty-free tariff rates in the markets of developed countries (preference-giving or donor countries). The difficult birth of the GSP reflects the controversy behind the effectiveness of such a scheme to attain the objective of accelerating industrial development among developing countries.

Such GSP schemes violate the principles of free trade under the General Agreement on Tariffs and Trade (GATT) based on the most-favoured-nation (MFN) treatment and reciprocity. Since the exports of non-beneficiary countries would continue to attract MFN duties, the benefits of the GSP are twofold. First, it enables developing countries to compete on more equal terms with the domestic producers of preference-giving countries. Second, it gives producers from developing countries a price advantage over exporters from non-beneficiary countries. The objectives of the GSP, namely, to increase the export earnings of developing countries, promote their industrialization, and accelerate their rates of economic growth, were accepted at UNCTAD II in 1968. But it was very difficult to have one unified system under which identical concessions can be applied across the board. This is because donor countries have their own divergent interests. The issue was settled on the principle of equal burdensharing, with each donor country assuming obligations in keeping with their relative strengths. Thus, the GSP came to be understood as a system composed of individual national schemes each based on common goals and principles to provide developing countries with broadly equivalent opportunities for export expansion.

In June 1971, the contracting parties of GATT approved a waiver on MFN treatment. This enabled the EC, followed by other members of the Organization of Economic Co-operation and Development (OECD), and the United States, to complete the GSP system. However, right from the beginning the GSP represented a delicate balance between contracting parties.

APPENDIX 1

Understanding the U.S. GSP Scheme

The purpose of this appendix is to present a simplified understanding of the U.S. GSP scheme in terms of its evolution, requirements, coverage, implementation, and usefulness as of 1 September 1988. It is noted that with effect from 1 January 1989, the Tariff Schedules of the United States (TSUS) was replaced by the Harmonized System (HS) tariff nomenclature. The HS is a new uniform international tariff nomenclature which the United States has negotiated with its major trading partners to facilitate international trade by eliminating problems resulting from each country's use of a different classification system. The conversion from TSUS to HS has ensured “trade neutrality”, with no change to GSP coverage. The information for this appendix is drawn heavily from the Handbook on the Scheme of the United States of America (UNCTAD/TAP/163/Rev. 12).

Evolution

The United States offers under its GSP, preferential duty-free entry to approximately 4,100 products from 136 designated beneficiary countries. The programme was instituted on 1 January 1976 for a ten-year period, and renewed through 4 July 1993 by the Trade and Tariff Act of 1984. The new law, completed on 2 January 1987, introduced important changes including a mandatory General Review of the U.S. GSP.

How to qualify

The importer makes the request for GSP treatment. The product must be included in the GSP list and be from a designated beneficiary country, satisfying the value-added requirements. The sum of the cost or value of materials produced in the beneficiary country plus the direct cost of processing must equal at least 35 per cent of the appraised value of the article at the time of entry into the United States. Imported materials can be counted towards this 35 per cent value-added requirement if they are “substantially transformed” into new and different constituent materials of which the eligible article is composed.

An Overview

The ASEAN Preferential Trading Arrangements (PTA) were introduced in 1979 in order to move towards regional growth through an increase in intra-regional trade and investments. The PTA aimed at gradual harmonization in policies regarding trade development, moving towards economies of scale and efficient factors allocation.

Following the Bangkok Declaration of 8 August 1967 (also called the ASEAN Declaration), a later Bali Summit (1976) modified ASEAN's strategy by adopting a two-pronged approach for co-operation. The modification of strategy was felt necessary in view of non-attainment of tangible economic achievements. Subsequently two documents were signed: (a) the Declaration of ASEAN Concord and (b) the Treaty of Amity and Co-operation in Southeast Asia. Both documents underlined the need for co-operation in various fields including basic commodities, industry, trade, a common approach on international trade issues, etc.” The Bali Summit recognized that co-operation in trade could promote development and growth and the PTA specifically were identified as a vehicle to move towards this direction.

ASEAN PTA signed on 24 February 1977 came into force on 1 January 1978. It was envisaged to encompass the following:

1. 1. long-term quantity contracts;

2. 2. purchase finance support at preferential interest rates;

3. 3. preference in procurement by government entities;

4. 4. extension of tariff preferences;

5. 5. liberalization of non-tariff measures on a preferential basis; and

6. 6. others

The goods seeking preferential treatment under PTA is to comply with content requirements under “the origin criteria”, “the consignment conditions” and “the documentary requirement”. The origin criteria were aimed at confining benefits to the goods produced or manufactured in ASEAN member countries. The ASEAN tariff “margin of preference” (MOP) is based on “item-by-item” concessions offered voluntarily by individual countries. The margin ranged from 10 to 50 per cent and has already covered about 14,000 items.

Introduction

Among the factors leading to the creation of an European internal market the most important is probably the growing perception that Europe was lagging behind the United States and Japan in terms of technological development and world market shares for high-tech products (Wagner 1989, p. 5).

Nowhere is this European concern for being left behind more powerfully manifested than in the electronics industry. Throughout Europe, there is a growing consensus that the electronics industry in general and more particularly the information technology (IT) industry that it encompasses is fundamental to the industrial survival of Europe for the next century. Widespread fear has been expressed in many quarters that Europe is losing the IT race to the United States and Japan, and that this necessitates nothing short of a concerted pan-European response involving a major restructuring of existing firms and massive co-ordinated government-supported programmes to enable Europe to catch up (see, for example, MacKintosh 1986 and Von Gizycki and Schubert 1984). The creation of a single internal EC market thus represents a major — though not the only — element of this pan-European strategy to revive Europe's competitiveness in the electronics industry. Indeed, the EC electronics industry has been leading the overall EC private sector in its campaign for the completion of the internal market, and has been largely instrumental in the creation of the various major pan-European co-operative projects in research and development (R&D) in the electronics-related technology (such as the European Strategic Programme of Research in Information Technology [ESPRIT], Research in Advanced Communication Technologies for Europe [RACE], European Research Co-ordination Agency [EUREKA], Basic Research in Industrial Technologies for Europe [BRITE], and Joint European Submicron Silicon [JESSI]).

While the impending creation of a single, unified EC market after 1992 provides a very important framework that guides and influences the future restructuring strategy of the European electronics industry, it must be recognized that significant restructuring and transformation of the industry has in fact been taking place over the last few years, and that various major EC-wide and individual Member State government policies related to the industry have been put in place prior to, and in some cases, independent of, the Single Market Act.

Overview

Trade expansion has been an integral constituent in almost all of the regional groupings. The SAARC on the other hand has so far identified 12 sectors for mutual co-operation which excludes trade co-operation. A total of 270 activities relating to seminars, workshops, technical committee meetings, training, etc. have not incorporated any trade related issues. The apprehension that co-operation in trade may be difficult to achieve under divergent political and economic systems adopted by the regional countries has so far precluded this vital aspect from its framework. However, there have been interactions among academics and businessmen focusing on trade related issues. In September 1988, an SAARC group of experts in its meeting held in Islamabad initiated a move to prepare the groundwork on SAARC co-operation in trade, manufacturing, and services.

Trade co-operation in the SAARC region by no means is a smooth process. Economic and trade co-operation in trade expansion in the SAARC region is largely dependent upon political situations. The ethnic problem in Sri Lanka and the India-Pakistan dispute over Kashmir are some of the burning political problems in the process of regionalism in South Asia.

South Asian trade is marginal in relation to world trade. That it has not been increasing over the years indicates that prevailing arrangements are not effective enough to trigger the process of development through trade co-operation in the region. The countries in the region are operating highly protected trade regimes. Tariffs and NTBs are considered quite high in India, Pakistan and Bangladesh while they are relatively low in Nepal and Sri Lanka.

Even in the absence of the SAARC multilateral framework, most SAARC countries can exchange tariff preferences among them under the Bangkok Agreement within the framewrok of ESCAP. The Bangkok Agreement initially had three South Asian countries, viz., India, Bangladesh, and Sri Lanka apart from other non-SAARC nations.

The energy economy of Singapore is unique. The country possesses no conventional energy resources and its primary energy needs are met entirely by imports, almost exclusively petroleum-based. Yet, Singapore has deservedly been called the “Houston of Asia” as its petroleum industry has placed the nation at the heart of the Pacific Basin's energy markets (Fesharaki 1984, 1986; Doshi 1989a). Singapore ranks as the world's largest fuel oil bunkering centre. Its refineries collectively constitute the world's third largest refining centre, and its spot market is the focal point of oil trade in the Asian-Pacific time zone. In February 1989, the Singapore International Monetary Exchange (SIMEX) launched a High Sulphur Fuel Oil contract, the first petroleum futures instrument east of Suez.

The first section of this chapter attempts an interpretative look at economic growth and structural change in Singapore with a view to setting the wider context of the country's distinctive energy economy. Section two, directed towards the domestic aspects of the energy economy, summarizes salient attributes of the growth and configuration of domestic energy demand. The third section surveys the Singapore petroleum industry which provides a wide range of petroleum-related products and services largely for export markets. The impact of the oil price shifts on the Singapore economy is examined in the fourth section. The fifth section provides a discussion of energy policy in Singapore. The chapter concludes with some remarks on the linkages between public policy, economic development, and the energy sector.

ECONOMIC GROWTH AND STRUCTURAL CHANGE

Classified by the World Bank as a high-income developing economy with a GNP per capita of US$7,940 in 1987 (IBRD 1989), Singapore's standard of living (as measured by this basic indicator) is next only to Japan's in all of Asia. Since the late 1960s, Singapore has on the average achieved one of the world's best overall economic performance. It boasts one of the highest average growth rates among all countries of the world.

The empirical evidence presented for ASEAN's trade in services with West Germany, France, and the Netherlands, badly needs a yardstick, either a theoretical one or an empirical companion piece. Both are not yet available. Theory does not go beyond broad Heckscher-Ohlin type of explanations, and empirical analyses have been widely discouraged by conceptual confusion and lack of data. The paper has revealed earnings from exporting services to be important income sources for some ASEAN countries compared to merchandise trade. Payments to European residents for their services were shown to concentrate increasingly on skill-intensive business services. Singapore and Thailand are leading ASEAN suppliers of merchandise-related services as well as travel services but Indonesia and very recently, also Malaysia, made strong efforts to divert some flows of service payments directly to their accounts instead of participating in service packages offered mainly by Singapore.

Policy interventions implemented by ASEAN countries were not the subject of this study but they are very relevant aspects to be analysed later, for example, compulsory health standards to be met by foreign tourists, or cargo sharing principles in liner conferences. So are structural changes in the EC countries, mainly in the context of income elasticities in consumer services rising with growing personal income, particularly as far as deregulation in EC service industries is concerned. Thus, empirical evidence presented above is not only skimpy but is bound to become outdated with rapid technological innovations spurring new internationally tradable services, a more liberal trading environment and rising income levels of consumers.

Indonesia proclaimed its independence in 1945, and after several armed clashes with the Dutch obtained international recognition in 1950. But it was only after the 1965 attempted coup d’état and a political and economic stabilization programme that Indonesia in 1969 embarked on planned economic development. Energy was already an important part of the first five-year development plan, or the first REPELITA, covering the period 1969-73.

THE FOUR REPELITAS

During the early 1960s Indonesia had already prepared to consolidate the fledgling domestic oil industry, set up in the aftermath of a series of acts of nationalization on assets of several foreign oil companies during the latter part of the 1950s. Following the turmoil of 1965-66, the Indonesian economy was opened to foreign investors, and one of the first groups of investors consisted of a few small, independent oil companies. When these companies succeeded in finding oil, the large oil companies followed suit. Oil production then steadily increased.

In the meantime, the government launched a stabilization and rehabilitation programme to improve the economy. Inflation was greatly reduced from 500-600 per cent per year during 1965-66 to less than 30 per cent within three years, and the currency was thus stabilized. Concurrently the physical infrastructure was restored and upgraded. The government gave the highest priority to agriculture, especially to food production. The textile industry was also accorded top priority. The most important policy change was on the government's own role of assuming only indirect control of the economy in contrast to the previous “Old Order” practice of direct control: the prices of only a few basic necessities remained under control. The private sector responded in a positive manner.

Investment increased and the economy grew rapidly. The basic needs of the people for food and clothing were met. Trade and industrial activity picked up. The increased oil exploration activity brought results: oil production expanded rapidly, and large reserves of gas were discovered in 1972.