Propertv rights and larger firms The problems particular to larger firms (ULLEs and corporations) are interesting both for their immediate effect and because of what they portend for the growth potential of smaller, less formal enterprises. A major concern appears to be related to the security of property rights, in the broadest sense. Policy uncertainty, failure of justice, fraudulent competition (i.e. competition by those not complying with laws and regulations), and iureaucratic procedures cover various different aspects of the same problem: the failure of public institutions to generate, enforce and adjudicate good law.' Each of these emerged as a moderate to large obstacle for ULLEs and Corporations in our sample. For contracts to be reliable, and income from investment and productive activity dependable, businesses need a system of consistent, equitable, understandable laws and regulations, and the institutions to assure equal protection under law, and its impartial and speedy enforcement. Yet interview data suggests that access to the formal legal system is essentially unavailable to informal firms and that, within the formal sector, adjudication is neither speedy nor impartial.

While most larger, formal enterprises (corporations and ULLEs) report litigation experience, few sole proprietorships and unregistered firms have been so involved. Once engaged in litigation, the experience has been uniformly frustrating, with corporate litigation requiring many years to resolve (an average of four and a quarter in the CECPS survey). This is bound to result in high transaction costs and, thus, increase the profitability threshold for private investments to be sustainable. Furthermore, the system of justice is regarded as anything but just.<sup>1</sup> ' The combination of unfairness and slowness has discouraged many entrepreneurs from the use of legal recourse. This weakens the contracting system, forcing businesses to rely less on credit and to deal more with known trading partners. For new entrants, these conditions can be extremely restrictive and the net effect is likely to be reduced competition -- and efficiency.

Fmally, uncertainty over the nation's political future and stability of policy appears to most as a significant obstacle to growth. The high degree of concern with political uncertainty is common to all registered entrepreneurs; unregistered entrepreneurs have little to lose. Political uncertainty appears to reflect a perceived worsening and reduced predictability of the security of property rights. Its negative effect on the prospects for private sector development cannot be overemphasized.

Is One representative of a trade association descnrbed public regulation in this wayr "Regulation is a machine that lives on its own without control of the state. The chance to live when the cost of living is highest lies in having power and monetizing it. The result is a system of corrupt, bad management. The State goes from being the motor of developmen **t** o the brake of development.' I The fairness of civil suits was reportedly largely undermined by payments to court officials or jurists. One respondent felt that the only honest judges were those who were independently wealthy. In many cases, one contracting party is able to avoid enforcement of contractual obligations by the other party (hence payment of debts) by corrupting the civil legal process.

18