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The Impact of Liberalizing the Telecommunication Sector in Morocco

Auteur : Achy Lahcen
Année de Publication : 2005
Type : Article
Thème : Equipements et infrastructures
Couverture : Maroc

Résumé/Sommaire :

Over the last decade, the telecommunication sector has embarked in a period of deep change initiated by technological innovation, liberalization of national markets, and by partial or full liberalization of incumbent operators. Historically, telecom operators were state-owned and vertically integrated monopolists. Due to large fixed costs of building a network, the activity of providing telecommunication services was considered as natural monopoly. However, technological progress and innovation generated new transmission systems and decreased the cost of building infrastructure. Therefore, the idea of a natural monopoly is no longer seen as valid. In addition, evidence indicates that the absence of competition does not provide incentives to decrease costs, leads to inefficiencies and welfare loss. As a consequence, most historical operators, all over the world, have been subjected to privatization plans.

Since the early nineties, Morocco, like most other countries, has put substantial emphasis on telecommunication and information technologies because of their role in the digital age. The significant development recorded over the last decade can be traced back to three major causes: legal and institutional telecommunications reforms; political openness and democratisation; and, technological changes.

The purpose of this paper is to present the major developments recorded in telecommunication sector in Morocco and assess the impact of regulating the telecommunication sector in Morocco along the European Union lines. The basic assumption underlying this work is the following. Further liberalization of various market segments of the telecommunication sector would benefit communications intensive industries that provide key “backbone services” to the economy, such as transport, distribution and finance. It would also improve competitiveness of exporting industries by reducing their costs and facilitating their integration to transnational production networks. The quality and price of telecommunication services directly affect business costs, but also affects the capacity of firms to network and compete in foreign and domestic markets. Finally, development of telecommunication services sector would create more investment opportunities for the domestic private sector, and help attract more FDI and portfolio investment. Regulatory reforms that inject more competition in markets for services and network industries are, in turn, instrumental in forcing operators to improve efficiency and pass on the lower production costs to users. But because in many developing countries domestic providers of services often operate below international efficiency standards, opening up markets to competition has to go in tandem with lowering trade barriers in services and making room for increased foreign entry in domestic markets. Cross-border supply of almost all services relies on telecommunication services. From the Moroccan perspective, it is an area where trained and cheap labor force can represent a significant comparative advantage.

However, better performance in Telecom may result from liberalization, but is also partly driven by economic development. Income growth bolsters demand for telecommunications and networking services, both from businesses and households, and at the same time provides the financial resources for investment necessary to expand the telecommunications infrastructure. Moreover, in higher-income countries services markets are generally more competitive, so that further empirical analysis is needed to disentangle the impact of market liberalization from that of economic development and other factors2.

The association agreement between the European Union and Morocco, which entered into force in March 2000, represents the legal basis of EU-Morocco relations. This agreement provides for the gradual establishment of an industrial free-trade zone by 2012 and progressive liberalization of trade in agriculture. The agreement between Morocco and the EU foresees, in addition to that, to start negotiations for a free trade area in services. Although the signed agreement contains no binding commitments in the area of services, it has provisions on freedom of establishment, free movement of capital and competition rules. In addition, Morocco is expected to deepen further its relationships with Europe within the framework of the “N eighboring Policy”. In addition, As WTO member, Morocco has committed itself to gradually liberalize its telecommunication services, and signed a FTA with the US that covers telecommunication services.

So far, the potential impact of liberalizing trade in goods on the Moroccan economy has received a relatively significant academic attention (Rutherford and Tarr (1997), Chater and Hamdouch (2001), Achy and Milgram (2003) and Chater (2004)). In contrast, the potential impact of liberalizing trade in services in general, and telecommunications services more specifically, have not received comparable interest. The main objective of this research is to filling this gap in the literature. The potential impact of liberalizing telecommunications services goes beyond the telecommunication sector itself since these services enter as intermediate inputs in other activities. Further liberalization is expected to lead to increase competition, decrease prices for users, and improve quality and access to various telecommunications services.

The rest of this paper is organized as follows. The first section presents the major developments in the Telecommunication sector in Morocco. Section two examines the Moroccan regulations as well as institutions in charge of supervising Telecommunication sector activity. Section three computes the degree of trade restrictiveness in this sector in Morocco with respect to that of the European Union. Section four provides a first approximation of the potential welfare effects of

harmonizing the Moroccan regulations in the Telecommunication sector with those of

the EU. Finally, section five concludes.

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