Paying lip service to competition

As the deadline for entrance to the World Trade Organisation (WTO) looms ever closer, those of us who either read or write the news know that an increasing number of countries in the Middle East are talking about market liberalisation.

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By  Mark Sutton Published  October 19, 2002

As the deadline for entrance to the World Trade Organisation (WTO) looms ever closer, those of us who either read or write the news know that an increasing number of countries in the Middle East are talking about market liberalisation.

State owned companies are being opened up, and markets are being prepared for competition.

In the last few months alone, both Saudi Arabia and Jordan have unveiled initial public offerings (IPOs) for their incumbent telecommunication operators and both Saudi Telecommunications Company (STC) and Jordan Telecom (JT) are said to be embracing the thought of competition with open arms.

Elsewhere in the region, Bahrain's monopoly PTT, Batelco, is already acting as though it was in a competitive environment in terms of innovation and openness.

Despite these signs of encouragement however, the fact remains that none of the region's fixed line markets are actually open to competition and even the most optimistic industry analysts are suggesting that this will remain the case for some time yet.

The Middle East's telecommunications market is not the only industry sector that appears to be paying only lip service to the ideal of competition. For all its innovation and posturing over the growth of the internet and its e-services, the UAE's attitude to trade and agency agreements is ensuring that business-to-business (B2B) ventures fail to attract large numbers of local organisations online and that they continue to rely heavily on both government trading and funding.

After all, why would either a buyer or supplier go online if there is only one company per product allowed in any one market?

What's more, it appears as though the perpetuation of monopolies is far from over. During September, The IT division of the Federation of Egyptian Chambers of Commerce (ITFECC) had to fight tooth and nail to stop the country's government creating a monopoly in the country's PC market.

Egypt's Ministry of Communication and Information Technology (MCIT) was willing to award a single license to a partly government owned company, called Centra, to sell locally assembled PCs through Telecom Egypt outlets. Rather than paying for a PC upfront and in cash, customers would have had their monthly phone bill debited for a set amount.

As far as ITFECC was concerned, this was a clear case of monopolising the market using a state owned asset and they suggested that it would have jeopardised the business of some 88,000 engineers and technicians working for some 4400 small-to-medium sized companies in Egypt. Although thwarted in its first attempt, Egypt's MCIT is supposedly looking to establish a similar deal through state owned utilities instead.

Whether or not the MCIT finally succeeds in creating a PC monopoly remains to be seen. Either way, the point remains that despite the protestations of many industry players and government mouthpieces, there is little evidence that the Middle East is going to embrace the free market at any point soon. And while this unflinching adherence to monopolies may benefit the few, it is detrimental to those of us outside of the inner circle.

Not only do monopolies reduce the quality of service received by citizens, stifle creativity and dampen the competitive spirit, they also weaken the region's ability to play on the global stage. Where free trade and competition rein, innovation rules. Where the status quo remains, nations follow. Unless the Middle East's businessmen are both able and encouraged to operate in a free market, they will struggle to survive when they enter the global market.

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