The Rise of Foreign Direct Investment in the Telecommunications Services of Developing Countries

Abstract

Since the early 1990s, foreign direct investment has assumed a leading role in the provision of telecommunications services in developing countries. Host countries, having perceived telecommunications services as the backbone of a modern service economy, have deregulated their telecommunications industries and implemented privatization programmes open to foreign investors. Transnational firms, looking for survival in global competition, have responded to that opening up, making telecommunications one of the fastest growing industries worldwide. Foreign direct investment in telecommunications has a robust impact on economic growth. It leads to increased access to, and better quality of, services but often at a cost of some social groups or areas being left off the map of accessibility. These problems require policy intervention. In the near future, foreign direct investment in telecommunications is expected to grow rapidly in many developing countries in which demand for services is unlikely to be met by domestic resources only.

Keywords: foreign direct investment, transnational corporations, telecommunications, developing countries, competitiveness

JEL Classification: L96, F21, F23, K23