Cover Image
close this bookThe Courier N 156 - March - April 1996 - Dossier: Trade in Services - Country Report : Madagascar (EC Courier, 1996, 96 p.)
close this folderDossier
close this folderTrade in services
View the document(introduction...)
View the documentA trailblazing project for services in Africa
View the documentServices potential in the Caribbean
View the documentWhat do ACP nations have to win or lose from global liberalisation of services?
View the documentImplications for developing countries of liberalised financial services
View the documentTemporary movement of persons
View the documentNew realities for national shipping in Africa
View the documentState-owned airlines try to avert crash-lanclings
View the documentAir Jamaica: the bride without dowry soars to new heights
View the documentGlobal tourism
View the documentThe 'phone' phenomenon

The 'phone' phenomenon

Telecommunications nowadays have an essential role in economic development. The world is moving towards an 'information society'- but some regions are much further ahead than others. Developed countries are leading the way with the introduction of new and advanced technologies. As a result, they have been able to introduce better infrastructures, which help in attracting new hightech businesses.

Traditionally, the state was dominant in the telecoms industry. The system was essentially one of monopoly control with or no competition.

The result was that standards of service dropped while profits soared. Change was clearly required and today we find most governments opening up their markets through liberalisation and deregulation. The entry of new, private competitors has resulted in better value for money and improved customer service.

Newly-industrialised countries (NlCs) such as Hong Kong, Thailand, Malaysia, and Singapore are making great strides, linking to the global network and catching up with new technologies. This has contributed immensely to the wider economic development of these countries. In Latin America things have also bean moving fast. Indeed, this region is privatising and liberalising at a faster rate than any other part of the world. The process has attracted foreign companies eager to invest in the new opportunities. In Chile, for instance, the number of telephone operators has risen from two to nine while the big reduction in the cost of phone calls has resulted in a dramatic increase in demand. Another significant example is Turkey, which began upgrading its network in the 1 980s. The number of phone lines per 100 people rose from just 3.5 in 1983 to 16 in 1992 and the expansion is continuing. Today, the revenue generated is sufficient to pay for further development of the system without the need for foreign loans.

In short, emerging nations now realise that they cannot hope to compete in world markets without top notch communications systems. And with the global economy shifting increasingly towards services, countries that are not adequately wired up are acutely aware of the danger of falling further behind.

Africa's untapped need

In sub-Saharan Africa, with a few notable exceptions such as South Africa and Botswana, the technology gap vis-is the industrialised world is very wide indeed. Most countries lack the modern communications infrastructure that is vital for today's global markets. One of the problems is their continuing dependence on out-dated materials (such as inefficient copper wires). A change to digital systems and fibre optics is required. But this implies a massive infusion of investment, skills and technologies. Global telephone companies are scouring the markets for new opportunities and in Africa there is a big untapped need. So while the Third World may lack capital and technical know-how, they do offer potential for profitable investment.

In a typical deal, telecom companies investing in a country would fund the network and perhaps even run it for a number of years, getting in return, a guaranteed share of future revenues. This kind of arrangement is popular in many countries that cannot afford to upgrade their communications systems on their own. One problem is that some countries, perhaps understandably, are reticent about giving stakes in strategic resources to foreign companies. Plans are also currently being drawn up to lay an undersea cable to link Africa with the global telecommunications network. This should be up and running by 1999, giving African countries a direct terrestrial link to the outside world.

Despite signs of progress, there are a number of factors which make outside investors reluctant to commit themselves to sub-Saharan Africa. Many countries suffer from internal strife and serious economic problems. Even where the situation is relatively peaceful, there are risks involved. Long-term political stability can often not be guaranteed. A new regime that takes power may choose to suspend work on projects entered into by their predecessors, even where a contract has been signed. Other problems include currency depreciation, corruption, trade union disputes, upsurges in nationalistic sentiment and weak support infrastructures. Given these circumstances, and in an atmosphere of increasing competition for investment funds, Africa is tending to lose out to other parts of the world where there is a proven track record of growth and openings for new market entrants.

The responsibility for the future development of the telecommunications market in Africa lies firmly on the shoulders of national governments, and it is clear that they have a challenging task. There needs, in particular, to be a continuing reduction in legislative constraints in favour of a more open telecommunications market-place. Asia has shown the world that it is possible. If Africa can get its act together and welcome the new technological age with open arms, there is no reason why it should not become globally competitive as well. The Courier