singapore telecom
...e state to the monopoly of private interest groups. To ignore this problem is to confuse policy success (eg. a successful privatization) with the aims of policy (eg. achieve an efficient and universal telecoms service). Again, I think Petrazzini's assessment of the success or failure of policy implementation does not give this problem sufficient attention. TELECOMMUNICATIONS REFORMS My argument is that where a clear vision of national economic development arises in the ASEAN countries, reform in the form of corporatization and privatization has, and will, proceed. The following paragraphs try briefly to substantiate this argument by member states. 1. INDONESIA: Indonesia is one of the states Petrazzini classifies, alongside Malaysia, as having a " state corporatist" political system, in contrast to Thailand's "openly- pluralist" one. Yet Indonesia's approach to telecommunications reform is far closer to Thailand's than Malaysia's (see below). That is to say, it has hardly begun, and liberalization such as there is ties new entrants to revenue-sharing arrangements with the state corporate -10- monopolist. And Indonesia and Thailand very obviously share a powerful military influence over both state machine and many industrial activities. Rather surprisingly, Petrazzini pays little attention to this factor. There is little evidence of any social force in Indonesia closely identified with the theme of national economic development as such. Recently the FEER (22nd April 1993) noted that "Indonesia is yet to show any signs of evolving a real middle class, the main impetus for local consumer- targeted domestic manufacturing." (p.42) Indeed the main thrust of the Government's policy to promote economic growth is rather to focus upon tourism, oil extraction and duty-free status for off-shore investment in the string of islands closest to Singapore. The Batam island development began the process, with the assistance of Singapore Telecommunications. The snail's pace of telecommunications reform was initiated by the Telecommunications Law Number 3 of 1989, which amended 1964 legislation. It introduced the private sector into the market by licencing small shops and kiosks known as WARTELS to operate telephone, telex and fax services, handing over 30 per cent of the revenues to Perumtel, the state monopoly domestic carrier. There are 650 WARTELS of which 70 per cent are privately-owned. (Prasetyo and Djiwatampu, 1991). Perumtel was corporatized in 1991 and subsequently renamed PT Telkom. The idea of 'privatizing' by entering into revenue- -11- sharing agreements with small operators cannot be called radical. It just represents a way around a management problem. That problem was not just insufficient exchange capacity, but a chronic failure to utilize capacity. Exchange lines were simply not connected to subscriber premises. Tapping small scale private capital by contracting-out line connections was a safe way to leave the monopoly intact. For example, preferential treatment is offered to building contractors who pay for the line connections and recoup the money in the enhanced value of their property sales. Compensation agreements allow others to buy their way to the head of the waiting list in exchange for a period of free service. Until recently all the deregulated services, from Vsat data communications to cellular phones to pagers, were run on a revenue-sharing basis with PT Telkom, and the views expressed by the Director-General of Posts & Telecoms (Prasetyo and Djiwatampu, 1991) justified this arrangement on the grounds that it ensures a revenue to the carrier with responsibility to provide national services. In the paper he suggests that not until telephone penetration rates have reached between 10-20% should more radical forms of privatization be contemplated. That will be more than a decade off. Only 50% of district capitals and only 25% of Indonesia's 65,000 villages have telephone access. But in a 1991 World Bank -12- report consultants Booz, Allen & Hamilton apparently took a different view, arguing that the lack of a telecommunications infrastructure was already costing Indonesia about US$2.5 billion annually in lost GDP. The Government in Indonesia has been studying this report and its implications ever since. I understand that one of the many issues discussed is how to reconcile more thorough-going privatization with service to rural and remote areas. This is clearly an issue where sharing experience from other countries would be valuable. But overlying this aspect of reform is another. The political spoils of power. It was expected that PT Indosat, the monopoly international satellite carrier, would be corporatized in 1993. Recently the Government has announced the setting up of a joint venture company, PT Satelindo, to manage the new C-generation of Palapa satellites, in which PT Indosat has only a 10% stake, PT Telkom a 30% stake, and PT Bimagraphia (a subsidiary of Bimantara, a company closely associated with the President's second son) is given the controlling share. No public tendering was involved, and decision by decree is expected. One concession to private, especially foreign-owned companies, that has been discussed is the dropping of insistence upon the BTO form of co-operation and allowing a BOT involvement in non-basic service areas. According to -13- Hukill (1992) Singapore Telecom has secured such an arrangement with PT on the islands of Batam and Bintan which form part of the "Golden Triangle" between the Riau group of islands, Singapore and Johor State. What is to be concluded from the brief review? That the process of corporatization has just begun. That privatization remains a very restricted concept. That competition is as yet given little debate. But what is more, there is no evidence quoted here of seeing telecommunications as a vehicle of national development. Yet obviously national development is a growing feature of Indonesia's record as a NIC, and Indonesia's Second Long Term Plan does emphasize more balanced regional growth. (Tirta Hidayat, 1993) All we may conclude at this stage is that telecommunications does not seem to be debated in these terms. We should expect discussion of industrial sectors and their contribution in decisive terms if it were the case. Without this perspective, telecommunications policy reform seems not yet to go beyond redistributing scarce resources among influential players. 2. MALAYSIA: In Malaysia assertive and educated professional middle- classes from the Malay, Chinese and Indian communities have constituted a social force for development. The New Economic Policy provided development goals, chief among which was to -14- raise the bumiputra share of national asset wealth from 2.4 per cent to 30 per cent. This policy was a knife-edge between equitable growth to achieve national unity and racial divisiveness. The emphasis upon redistribution (which officially achieved a 20.3 per cent share for bumiputra groups) is replaced under the National Development Plan with an emphasis upon raising the quality of bumiputra management, national labour skills, and quality in technology and production. The 6th Malaysia Plan (1991-5) and the Second Outline Perspective Plan (OPP2: 1991-2000) aim between them to sustain a 7 per cent annual average rate of real GDP growth. Within this framework of national development strategies the role of utilities first as infrastructure, and then, in the case of telecommunications and information technology, as sources of economic growth in their own right, has been positively identified. At the same time the power elite have made sure that reforms in these areas fall under the control of people and groups allied to their own political parties. For example, the Renong Group of companies, which may be considered the industrial investment arm of the ruling Umno Baru party, lists numerous utilities among its holdings, including PLUS which has the contract to construct the North- South coastal highway and Time Engineering which is laying an optical fibre cable along the highway for traffic communications and is licenced for telecommunications -15- services. This cable will be the backbone for a second national network announced by the Telecoms Ministry in January 1993. (Business Times 10/2/93). For the moment Telekom Malaysia holds the exclusive franchise on basic PSTN services, although since 1974 the Ministry's telecommunications department, Jabatan Telekom Malaysia (JTM) has awarded Uniphone, owned by Sapura Holdings (a well-connected equipment company who also hold a paging licence) a revenue- sharing contract to install urban public telephone booths. The decision to corporatize and privatized Telekom was planned as early as 1984 (Bruce and Cunard, 1992). The impetus came very much from Dr Mahathir who became Prime Minister in 1981, and who instructed the Cabinet's Economic Planning Unit to initiate a series of policy changes, partly to relieve the Government of growing fiscal problems. (Aziz, 1992). But Dr Mahathir's proposals went far beyond averting financial crisis. They clearly constitute a vision of development. Between 1984 and 1987 Syarikat Telekom Malaysia was corporatized and equity in the company was offered in November 1990. The Government retained a 76 per cent share, 16 per cent went to local investors, and 8 per cent to overseas interests. -16- As part of the NDP, a National Telecommunications Policy (NTP) was draw up in 1990 with the following aims: (i) to make telephony available to every citizen at affordable prices; (ii) to support national economic and technological development; (iii) promote competition in supply of equipment and services; (iv) encourage the growth of the industry itself; (v) promote resource and human skills development in the sector; (vi) promote growth of value-added services; (vii) promote connectivity with global networks. (See Salih et al., 1993). And within the scope of Prime Minister Mahathir's Vision 2020 for Malaysian development, public utilities like telecoms are expected to match developed country standards by 2005. To this end, Telekom Malaysia is committing 20 per cent of its investment to the year 2000 to rural telecommunications. (K.H.Chan, 1992) Competition is a clearly stated aim of policy, but it is closely tied to the issue of planning national development, and in practice closely associated with promoting interests close to the ruling political elite who clearly identify their interests with national development. So, for example, while Time Engineering was more or less required to sell its stake in Celcom, the second cellular network which competes with TM's NMT 450MHz system and an AMPS 800MHz system run by a TM-joint venture which includes Sapura, Time Engineering has also acquired 60 per cent of INC which offers satellite data services. Another company with good political -17- connections, Binariang, has been offered a GSM licence and a licence to launch and operate MEASAT if they can obtain an orbital slot. Interconnection between these alternative private networks will eventually give rise to a second PSTN network firmly under Malaysian control. But the process is far from transparent. Public announcements are usually made weeks if not months after licences have been promised. And there is no clear regulatory framework yet emerging. Petrazzini's account focuses upon the weakness of the opposition, mainly from the labour unions, to corporatization and privatization, as evidence of the ability of a corporatist state to push through its policies, but the really glaring weakness of the process is not opposition, or lack of it, but opaqueness and meanderings. National development ultimately requires more transparency of process, and a more open information system if debate is to add value to policy. 3. THE PHILIPPINES: The ruling elite of the Philippines, the "lords of privilege" as the World Bank representative called them (FEER 6/5/93), is not known for its commitment to national economic and social development. The Marcos years did not invent graft and corruption, and the Aquino years apparently had little success in eradicating it. And few wealthy Filipinos seem to -18- want to keep their riches invested in their own country. Can President Ramos help turn the tide by introducing into the mainstream of Philippines political economy the concept of national development? Proclaiming 'Philippines 2000' in January 1993 - a highly optimistic vision aiming to raise per capita GNP from US$700 to US$1,000 by 1998 - he is reported as saying "We must bring down the old economic order... Competition has been distorted by political entrepreneurship, crony capitalism, and oligarchic power" (FEER 6/5/93) The Philippines Long Distance Telephone Company (PLDT) has been the first of the old order to feel the sting in these words. Long regarded as a bastion of crony capitalism and dubious practices (see Manapat, 1993), its Board of Directors have been removed by the President who exercised the voting power of the Government's shareholding, following a scandal in the Courts in which PLDT is accused of fixing a judgement against an application by Eastern Telephone (a Cable & Wireless joint-venture) for an international gateway. (See FEER 11/2/93; 25/3/93; 6/5/93) For years national telecommunications development has been sacrificed to this private unregulated monopoly, while over sixty small operators in country areas have been denied interconnection or forced into unprofitable revenue-sharing arrangements. -19- Far from contributing to the development of the Philippines, the manipulation of the PLDT by powerful private interests has contributed to its underdevelopment. (See Ure, 1990). This sad state of affairs has not been helped by the chronic lack of any independent regulatory framework. Licences have to be agreed by Congress but the committees of the House of Representatives and Senate have "almost no technical resources, and are therefore open to influence from politically well-connected stakeholders." (MacPherson, 1993) In theory the National Telecommunications Commission (NTC) is the Government regulatory arm, but its three members are appointed directly by the President and, by past practice, they have not be able to exercise independent judgement. The NTC is attached to the Department of Transportation and Communications (DOTC) which is responsible for telecommunications policy. That policy has been committed in recent years to liberalizing the markets, that is private sector competition, but in practice little can be achieved quickly. (See de Vera, et al, 1992). Most policy recommendations get bogged down in Congress, while any licence awards which conflict with the interests of the PLDT face lengthy and expensive litigation from well-funded corporate lawyers aided, it is claimed, by some of the best judges money can buy. -20- The results are inevitable. In 1992 the waiting list was nearly 800,000. (Cunard, 1992). Eighty-five per cent of lines are concentrated in Metro Manila leaving hundreds of municipalities throughout the country with no telephone connections at all. To fill the gap the Government's Telecommunications Office (TELOF) tries to act as supplier of last resort through a National Telecommunications Programme, with development aid from the World Bank, the ADB, Japan, France and Italy. One aim, through the Municipal Telephone Programme, is to establish Public Calling Offices (PCOs) in each municipality, and to seek a private sector partner to develop each project. So far only five private firms are involved in six of the forty-one provinces, including Digital, a Cable & Wireless joint venture, which operates two concessions. Part of the reason maybe the uncertain terms of interconnect and revenue-sharing with the PLDT on long- distance calls. (See DOTC, 1990). The PLDT's stranglehold, and the withholding of interconnection, has so far prevented meaningful competition in cellular mobile services market as well. Two operators are currently licenced and two more tenders are up for bidding. In PSTN, the PLDT has four international gateways. Besides Eastern, Philcom (Philippines Global Communications) was also granted a licence. "This brought down international toll rates by at least 20 per cent." (Under-Secretary Sibal, 1992). International record carriers are Capitol -21- Wireless and Globe-Mackay and Radio Corporation who are teaming up with Singapore Telecoms to apply for a gateway voice licence. On the domestic front two record carriers among nine dominate the market. They are the Philippines Telegraph and Telephone Co. (PT&T which owns Philcom) and Radio Communications of Philippines (RCPI). Domestic satellite and Vsat operators include the Philippines Communications Satellite Corp. (PhilcomSat), Clavecilla Radio Systems, Liberty Broadcasting Network Inc., and International Communications Corp. A 1989 mandate abolishing monopolies provides the constitutional backing for entry into these markets. The picture is one of chaotic and ill-defined competition, with no guaranteed interconnection standards, no means of enforcing genuine competition, oligopolistic collusion is reportedly rife, and there is no clear delineation of jurisdictions between policy, legislative and regulatory functions. Optimists may see glimmers of light through the gloom and mist, and patches of sunlight are emerging, but the fundamental problem remains. There are no social forces sufficiently strong or united to offer an alternative to the "old economic order" and to "oligarchic power" and there wont be until a way is found to bring an end to armed conflict and reunite civil and -22- political society. National development is still not yet on the agenda, and a way has to be found to put it there. Only then will the necessary administrative reforms (legal, political, regulatory) be possible to make a success of sectoral policies, including telecommunications. 4. THAILAND: Thailand shares, and suffers, with Indonesia and the Philippines the role of the military in politics. It is said of Thailand that the military only allow civilian Governments when the armed forces cannot decide between themselves which of them should rule. It remains to be seen whether that is still true, but no study of the Thai military suggests that it is a social force which identifies particularly with national development. On that basis we should expect that telecom policy is not far advanced despite rapid economic growth of recent years. This growth, brought about largely through foreign investments, is now running into increasingly severe communications bottlenecks. (Pupphavesa and Stifel, 1993) For years the Communications Authority of Thailand (CAT), which is responsible for international telecommunications services, was the fiefdom of the Air Force, while the Telephone Authority of Thailand (TOT), which is responsible for domestic PSTN services and traffic to Malaysia and Laos, -23- was the fiefdom of the Army. Both organizations are unregulated monopolies. Recently the civilian Government has removed the armed forces chiefs from these two bodies, a move widely seen as preparation for the privatization of both bodies in the near future. A complication is the past practice of issuing revenue- sharing concessions to private companies, which both CAT and TOT have been instructed to halt. The TOT has issued thirteen concessions since 1989, including 2 million lines in Bangkok to TelecomAsia, and the CAT has issued five since 1986. But the Posts & Telegraph Department (PTD) has also issued two, and the Ministry of Transport and Communications (MOTC) has issued concessions. The really big concessions have also been fought over at Cabinet level between the appointees of rival political parties, often alongside accusations of payoffs. The overlapping of authorities in Thailand reflects the past practices of sharing the spoils of the telecoms markets between well-connected interest groups. A common practice is to raise considerable sums of capital through local stock markets on being awarded licences, but since the concessions are usually on a BTO (Build-Transfer- Operate) basis there is no necessary long-term commitment to technology improvement, especially when the concessionary period enters its latter half. So large sums of money are made for the licensees, but long-term public benefits are not -24- guaranteed. This is not a way to roll-out telecommunications networks if national development is the aim. In the past it hasn't been. Despite these all too familiar scenarios there are signs of an emerging concern with national development issues. After all, rapid economic growth has been regionally and socially unbalanced, and while development may imply growth, growth does not equate with development. The concern with development is expressed at central level through the National Economic and Social Development Board (NESDB) and through the Office of the Prime Minister which has recently established a National Telecommunications System and Information Technology Development Committee to facilitate telecoms policy. The NESDB is responsible for drawing up the Eighth 5-Year Plan (1996-2000) under which the privatization of CAT and TOT is likely by amendments to the 1934 Telephone & Telegraph Act. The TOT has appointed an international accountancy firm to prepare for this, and the CAT has appointed the Thailand Development Research Institute to advise it. Of course, the proposal to privatize the CAT and TOT was floated in the 1980s only to be defeated by labour opposition and military opposition. Labour concerns will still need addressing, but for the moment the military factor has diminished. -25- The closest Thailand has to a regulator is the Director - General of the PTD who has been appointed Chairman of the CAT. He is said to be opposed to the idea of a separate regulatory body being established to oversee privatization and competition, but last year the MOTC proposed a National Communications Board to do this job. Unfortunately this body was to consist of leading Ministry officials, chaired by the MOTC, and including armed forces personnel. (Asian Communications, January 1992). Needless to say, a body constituted in such a way would just build political brokerage back into the system. It will be a major test of change to see how this issue is handled. The profile of Thailand's telecommunications markets looks fairly open. The CAT operate a paging system and have licenced three private networks including Pacific Telesis, while TOT has licenced two, Shinawatra and Hutchison. The TOT operates a trunk radio network, as does the CAT which has also licenced one other. The CAT operate a manual radio ...