Does Sequencing Matter? Regulation and Privatization in Telecommunications Reforms
The question of the most effective order of reforming state-owned enterprises has been hotly debated over the years. In the early 1990s, many western advisers encouraged Eastern European countries, and the former Soviet Union, to privatize firms qu...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, D.C.
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2002/04/1758948/sequencing-matter-regulation-privatization-telecommunications-reforms http://hdl.handle.net/10986/14813 |
| Summary: | The question of the most effective order
of reforming state-owned enterprises has been hotly debated
over the years. In the early 1990s, many western advisers
encouraged Eastern European countries, and the former Soviet
Union, to privatize firms quickly under the assumption that
market institutions would develop once firms were privately
owned. The thinking since then has emphasized the importance
of establishing an institutional framework conducive to
promoting competition before privatizing firms. To date,
there has been little empirical work clarifying the debate.
The author attempts to address this gap, by examining the
effects of the sequence of reform in telecommunications,
particularly the effects of establishing a regulatory
authority, prior to privatizing incumbent telecommunications
firms. Consistent with current thinking, the author finds
that countries that established separate regulatory
authorities, prior to privatization, saw increased
telecommunications investment, fixed telephone penetration,
and cellular penetration compared with countries that did
not. Moreover, he finds that investors are willing to pay
more for telecommunications firms, in countries that
established a regulatory authority before privatization.
This increased willingness to pay is consistent with the
hypothesis that investors require a risk premium to invest,
where regulatory rules remain unclear. |
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