Paving the Way for Better Telecom Performance: Evidence from the Telecommunication Sector in MENA Countries

Abstract Since the 1980s, developing countries started to adopt 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 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, on the sector performance in the telecommunication sector using a sample of 17 MENA countries for the period 1995–2010. We assume that different reforms are affected by institutional, political and economic determinants with respect to the level of democracy, the legal origin, the natural resources rents per country and the year of independence from colonization. We use IV-2SLS (Instrumental Variable Two-Stage Least Squares) estimation to analyze the effect of different reforms on telecom performance in terms of access, productivity and affordability in the fixed and the mobile sector. We find that privatization of the main incumbent operator and fixed-line market liberalization affect the sector 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 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 performance.