Paving the way for better telecom performance: Evidence from the telecommunication sector in MENA countries

Since the 1980s, developing countries started adopting telecom reforms due to pressures from international institutions. However, Middle East and North African (MENA) countries lagged in adopting such reforms. Even after introducing telecom reforms in the MENA region beginning in 1995, not all countries became better off in terms of various performance indicators. Therefore, this paper empirically assesses the effects of regulation, privatization and liberalization reforms, as well as their simultaneous presences, in the telecommunication sector on the sector's performance using a sample of 17 MENA countries for the period 1995-2010. We assume that different reforms are affected by institutional, political and economic variables with respect to the level of democracy, the legal origin, the natural resources rents per country and the year of independence from colonization. We correct for the endogeneity of telecom reforms, and we use IV-2SLS (Instrumental Variable-Two Stages Least Squares) estimation to analyze their effect on telecom performance in terms of access, productivity and affordability. We find that the privatization of the main incumbent operator and the fixed-line market's liberalization affect the sector's performance negatively in terms of fixed access and affordability. Moreover, we find that the simultaneous presence of an independent regulator and a privatized incumbent helps to eliminate the drawbacks on the sector performance resulting from privatization. However, the simultaneous presences of the other reforms in terms of regulation-competition and privatization-fixed competition do not help to improve the sector's performance