ABSTRACT
The half-hearted attempt in the 1980s to reform the state-owned sector – in which managerial incentives were improved and enterprises were ‘depoliticized’ – not only failed, they backfired. To counter severe information asymmetry problems, the authorities decided to strengthen centralization of the information flow and resource allocation. Steps taken to grant greater autonomy to SOEs did not also credibly harden their budget constraints and only led to hoarding of material resources and labour.
