Foreign investment policies, sovereignty and growth

Abstract

Policies on foreign investment in the communications sector have often been regarded as an indicator of a government's stance on sovereignty vis-a-vis economic growth. Since some of the poorest members of the World Trade Organization agreed to open basic telecommunications services to foreign investment in 1998, many more had followed suit. Are these nations surrendering sovereign control for foreign investment, and hopefully, economic growth? Despite an overall trend towards the open market ideal, this study has found significant differences among Third World countries regarding foreign investment policies related to telecommunications services. From the analyses a pattern of regulatory control over foreign ownership in basic services emerges when the key determinants of policy decisions are taken into consideration: the size of domestic market, the competitiveness of national industries, the quality of policy design and decision making, and the urgency of needs and availability of different options. The key to the issue is perhaps that control is not the best representation of sovereignty, but rather the autonomy in making decisions regarding the retention or surrender of control in the interests of the state and the public, through a commonly accepted procedure. In other words, surrendering control does not necessarily lead to the erosion of sovereignty, yet having to surrender control for reasons of sheer survival.