Academic journal article Federal Communications Law Journal

Financing Telecommunications Projects in Asia: A Promising Regulatory Perspective

Academic journal article Federal Communications Law Journal

Financing Telecommunications Projects in Asia: A Promising Regulatory Perspective

Article excerpt

I. INTRODUCTION

Asia's telecommunications market has long been viewed as lucrative and fast growing. The value of the Asian market is estimated at $180 billion, while a recent study shows that the "Asia-Pacific excluding Japan has been the fastest growing information and communications technology market, moving at a compound rate of over 14.5%."(1) Given this rapid growth and potential, foreign investors (particularly major global communications operators) have shown strong interest in investing in the region's telecommunications infrastructure upgrades.

At the same time, telecommunications authorities and governments have been moving away from the traditional monopoly model of regulation and separating and privatizing their telecommunications operators. A worldwide trend to introduce competition to the telecommunications sector--often beginning with the wireless telephone market--has continued the liberalization movement, particularly in developed economies. Competition brought new investment in infrastructure, lower rates, and innovation to the market. As the benefits of a competitive telecommunications market become apparent, many Asian governments also recognize that global corporations require, and in fact demand, state-of-the-art telecommunications infrastructure. They realize that priorities must be placed on telecommunications infrastructure projects in order to attract new business and development to their countries. Finally, in the last five years, the stunning emergence of the Internet and its potential to promote global electronic commerce caused governments and telecommunications authorities to place a higher priority on promoting and studying information infrastructure issues, so that their countries will not be relegated to the category of information "have nots."

After several years of strong growth, however, the severe economic crisis that affected all industry segments in Asia caused investors to pause and reevaluate the risks involved in financing infrastructure projects. The Asian economic crisis stalled projects in every industry segment. Beginning in 1998, the crisis resulted in a hold on numerous telecommunications projects, especially in countries such as Indonesia, Thailand, and Malaysia.(2) Thailand and Indonesia postponed privatizations of state-owned incumbent telecommunications providers.(3)

One positive result of the capital crisis is that it prompted some countries to open their telecommunications markets to increase foreign investment.(4) For example, in 1998, Malaysia reformed its laws to allow foreign investors to own up to 61% of a local telephone company.(5) During the World Trade Organization (WTO) Basic Telecommunications Agreement negotiations, Korea also submitted that it would raise the ceiling on foreign ownership from 33% to 49% by 2001.(6) In an effort to jumpstart this process, the government recently raised the ceiling to 49% effective July 1, 1999.(7)

The WTO Basic Telecommunications Agreement(8)--signed by sixty-nine nations in February 1997--also helped to push forward liberalization schedules that were underway. In Singapore, the termination of Singapore Telecom's monopoly on wireline services moved from 2007 to 2000.(9) In Korea, a third international operator was added,(10) In Thailand, the government committed to initiate liberalization in three years instead of ten.

The greatest effect of the WTO Agreement, however, is expected to come from the adoption of regulatory principles binding certain signatories to rules on anticompetitive practices, interconnection, universal service, the public availability of licensing criteria, and other issues.(12) The adoption of these regulatory principles is very significant to foreign investors for two reasons. First, a stable regulatory environment provides investors with a secure investment climate. Second, as discussed below, certain regulatory safeguards enhance and protect competitive conditions. …

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