Service Sector Restrictiveness and Economic Performance: An Estimation for the MENA Region

Abstract

This article aims to assess barriers to service provision in the banking and telecom sectors of four Middle East and North Africa (MENA) countries, and the impact of these barriers on firm performance. Our methodology involves the computation of aggregate and modal trade restrictiveness indices (TRIs) by sector, and utilisation of these TRIs as regressors of firms’ economic performance. Our analysis shows that significant regulatory reforms have taken place in the service sectors over the last decade in the MENA region, but that a broad range of restrictions still remain. The most significant change in these service sectors has been the lifting or softening of constraints on foreign equity participation. These regulatory reforms, however, have had varying degrees of impact on market structure depending on the country, the sector and the mode. Moreover, service restrictions have had an impact on economic performance in the three studied sectors. While a rent‐creating effect seems to dominate restrictions on banking and fixed telecom sectors, a cost‐inefficiency effect seems to dominate the mobile telecom sector. Finally, we find evidence of interactions between modal restrictions for banking services. Our results suggest a complementarity between Modes 3 and 1, as well as a substitution effect between Modes 3 and 4 in the banking sector.

International mobile roaming in the Arab states

“…Nonetheless, while regulators are found in almost all countries in Africa and Asia, nearly half the Arab states do not yet have an operational regulator:Djibouti;Iraq;Libya;Kuwait;Palestine;Somalia;Syrian Arab Republic;Union of the Comoros; andYemen.Telecommunications markets were less open to competition than elsewhere in the developing world, competition was hindered, private participation was scarce and foreign ownership more severely constrained, while regulatory regimes did not support fair competition (Varoudakis and Rossotto, 2004). There is little to dispute the view that further liberalisation could deliver significant benefits (Bottini and Marouani, 2009). For example, this is still seen as a prerequisite for progress on the growth of broadband (Herbert, 2010).…”

Services Trade Restrictiveness, Mark-Ups and Competition

“…policy indicators for banking, insurance, telecoms, engineering and distribution services. More recent studies include Bottini et al (2011) on banking and telecoms in four Middle East and North Africa countries, and Fontagné and Mitaritonna (2013) on distribution and telecoms in 11 emerging countries.…”

A new dawn for MENA firms: service trade liberalization for more competitive exports

“…While MENA countries made significant progress in lowering import tariffs, barriers to trade and investment in services are still often significant (Marouani et al, 2011;Borchert et al, 2014). Averaging across countries, Figure 1 shows that the overall value for the STRI in the MENA region is the largest among regions excluding South Asia, and that the sectoral value of the STRI for the MENA region is the highest for professional, transport and telecommunication services, highlighting the fact that the region is mostly "closed" to foreign competition in those 3 sectors.…”