Strategies to Attract FDI in Telecommunications

Size: px

Start display at page:

Download "Strategies to Attract FDI in Telecommunications"

Darrell Harvey
5 years ago
Views:

1 Strategies to Attract FDI in Telecommunications Meeting of Experts on FDI, Technology & Competitiveness 8-99 March 2007 UNCTAD, Geneva, Switzerland Phillippa Biggs Strategy & Policy Unit, ITU International Telecommunication Union The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of the ITU or its Membership.

2 Agenda 1. The problem: the digital divide for business infrastructure 2. Regulatory reforms 3. Specific tax incentives 4. Conclusions 2

3 Source: ITU Helping the world communicate 1.1 Digital Divide: Broadband For Business Number of countries with broadband commercially available start Source: ITU World Information Society Report

4 1.2 Ever more rapid adoption Passing the 1 billion and 2 billion user milestones Source: ITU Source: ITU Information Society Statistics 4

5 But what does the digital divide mean for firms and business infrastructure for competitiveness? 5

6 1.3 Limited infrastructure Broadband subscriber penetration, 2005 Source: ITU Per 100 inhabitants Africa Americas Asia-Pacific Europe World 6

7 Helping the world communicate 1.4 at lower speeds Maximum broadband speed commercially available, 2006 Africa Americas Europe Asia-Pacific Source: ITU 7 Number of countries '024 1'536 2'048 2'560 3'072 3'584 4'096 4'608 5'120 5'632 6'144 7'168 8'192 9'216 10'240 20'480 25'600 26'624 28'672 30'720 40'960 51'200 61'440 71'680 81'920 92' '400

8 1.5 but higher cost 300 Cost of broadband access (US$ per 100 kbit/s) Source: ITU USD per 100 kbit/s $ $68.55 $12.10 $5.24 Africa Americas Asia Europe 8

9 What are countries doing to promote better, new and more widely available infrastructure at lower prices? 9

10 Promoting Investment in Telecoms 2. Regulatory reforms - Privatisation and competition to establish a sound enabling environment 3. Specific incentives to boost investment (domestic & foreign) - tax incentives. 10

11 2.1 Regulatory reform in telecommunications Trends in Regulatory Reform World Telecommunication Development Reports 11

12 2.2 World Telecommunication Development Report 2002 Privatisation is beneficial, privatisation+competition is better; The more competitive, the better open comp n > duopoly > monopoly; The earlier, the better; Regulators need adequate powers and should be as independent as possible. 12

13 2.3 Privatization, % 80% 70% 60% 50% 40% 30% 20% 10% 0% Privatization of incumbent operators, % Europe & CIS 74% Americas 53% Asia- Pacific 43% 42% Arab States Africa Source: ITU 13

14 2.4 Competition, % 80% 70% 60% 50% 40% 30% 20% 10% Competition in fixed telephony, 2005 Monopoly Competition 82% 66% 61% 59% 49% 51% 39% 41% 34% 18% 39% 61% Source: ITU 0% Africa Americas Asia-Pac Arab Europe World 14

15 2.5 Regulation, 2006 Countries with separate regulators 2006 With regulators Without 100% 90% 80% 88% 70% 60% 73% 74% 66% 50% 53% 40% 30% 20% 10% 20% 0% Africa Americas Asia Europe Oceania World Source: ITU 15

16 3. Specific measures to attract FDI 1. Corporation tax exemptions 2. Tax holidays 3. Accelerated depreciation write-offs 4. Investment Tax Credits IP strategies tend to focus on MNCs, but SMEs may gain more from tax incentives (Coyne, 1994) 16

17 3.1. Corporation tax exemptions Below 30-35% to have any impact Effective tax rate is what counts Moves to flat-rate tax - any investment is good investment Specific by sector: key signalling role BUT May result in a race-to-the-bottom Impact on revenue based on elasticity 17

18 3.2. Tax Holidays Duration None Selected countries Botswana, Lesotho, Mexico, Peru, Rwanda 1-5 years Ethiopia, S. Korea, Nigeria, Philippines, Sri Lanka, Tanzania 6-10 years Ghana, Kenya, Mauritius, Nepal Singapore, Uganda, Uzbekistan years Brazil, Ecuador, Egypt 18

19 3.3. Accelerated Depreciation Maximum None Usually on a sliding scale e.g. Botswana Max. 10% Max. 20% Max. 25% Selected countries Nigeria, Philippines. Buildings 2.5% Office equipment 10-15% Plant & buildings 25% Ecuador Egypt, Ghana, Peru, Uganda Lesotho, Nepal 50%-100% Rwanda, Tanzania 19

20 3.4. Investment Tax Credits Range Selected countries None Botswana, Brazil, Egypt, Ghana, Kenya, Lesotho, Nepal, Peru, Rwanda, Sri Lanka, Tanzania, Uganda 6-10% Rep. of Korea 5-20% Nigeria 19-25% Mexico 3-50% Singapore % Philippines 20

21 4. Conclusions Privatisation and competition can help attract FDI and promote telecom. Tailored tax incentives can help attract investment, but questions re how they are being used and their effectiveness Priorities ICT infrastructure for business quite different from universal service where do the priorities lie? ICTs more available new divide in speed/quality of business infrastructure 21

22 Thank you very much for your attention International Telecommunication Union 22

Meeting of Experts on FDI, Technology and Competitiveness

CONFÉRENCE DES NATIONS UNIES SUR LE COMMERCE ET LE DÉVELOPPEMENT UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT Meeting of Experts on FDI, Technology and Competitiveness A conference convened in honour