Digital Hotspots: Developing Digital Economies in a Context of Fragility,Conflict and Violence 1 © 2023 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution—Please cite the work as follows: “World Bank. 2023. Digital Hotspots: Developing Digital Economies in a Context of Fragility, Conflict and Violence” © World Bank. All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Cover image: © Sam Smouha. Used with the permission of Sam Smouha. Cover design: Martha Oringo. 2 Digital Hotspots: Developing Digital Economies in a Context of Fragility, Conflict and Violence i Table Of Contents Foreword v Acknowledgments vi Summary vii List of acronyms and abbreviations xi 1. Keeping the telecommunications sector 1 afloat in FCV economies 1.1 Motivations and objectives 1 1.2 Methodology 3 1.3 Findings and results across the case study countries 10 1.4 Summary of the derivative data developed in the case studies 11 1.5 Implications for donor interventions in conflict countries 16 1.6 Lessons learned and how the Bank engaged in the digital sectors 16 of Afghanistan, Somalia and South Sudan 1.7 The Bank’s Digital Investment in FCV economies 18 2. The Republic of Afghanistan 22 2.1 Afghan context 22 2.2 Assessment of internal Afghan telecom investment climate factors 28 2.3 Assessment of external Afghan telecom investment climate factors 32 2.4 Afghanistan’s projected and actual teledensity evolution 335 2.5 Correlating Afghanistan’s supply-side investment climate and teledensity 39 3. The Republic of Iraq 40 3.1 Iraqi context 40 3.2 Assessment of internal Iraqi telecom investment climate factors 46 3.3 Assessment of external Iraqi telecom investment climate factors 49 3.4 Iraq’s projected and actual teledensity evolution 51 3.5 Correlating Iraq’s supply-side investment climate and teledensity 53 3.6 Iraq’s post-conflict performance 53 4. The State of Libya 56 4.1 Libyan context 56 4.2 Assessment of internal Libyan telecom investment climate factors 63 4.3 Assessment of external Libyan telecom investment climate factors 67 4.4 Libya’s projected and actual mobile teledensity evolution 70 4.5 Correlating Libya’s supply-side investment climate and teledensity 72 ii 5. Federal Republic of Somalia 73 5.1 Somali context 73 5.2 Assessment of internal Somali telecom investment climate factors 82 5.3 Assessment of external Somali telecom investment climate factors 85 5.4 Somalia’s projected and actual teledensity evolution 89 5.5 Correlating Somalia’s supply-side investment climate and teledensity 91 6. The Republic of South Sudan 92 6.1 South Sudanese context 92 6.2 Assessment of internal South Sudanese telecom investment climate factors 93 6.3 Assessment of external South Sudanese telecom investment climate factors 100 6.4 South Sudan’s projected and actual teledensity evolution 103 6.5 Correlating South Sudan’s supply-side investment climate and teledensity 105 7. The Syrian Arab Republic 106 7.1 Syrian context 100 7.2 Assessment of internal Syrian telecom investment climate factors 110 7.3 Assessment of external Syrian telecom investment climate factors 113 7.4 Syria’s projected and actual teledensity evolution 115 7.5 Correlating Syria’s supply-side investment climate and teledensity 117 8. The Republic of Yemen 118 8.1 Republic of Yemen context 118 8.2 Assessment of internal Republic of Yemen telecom investment climate factors 121 8.3 Assessment of external Republic of Yemen telecom investment climate factors 124 8.4 Republic of Yemen’s projected and actual teledensity evolution 126 8.5 Correlating Republic of Yemen’s supply-side investment climate and teledensity 129 Annex: 131 FY23 List of Fragile and Conflict-Afflicted Situations iii iv Foreword One in ten of the world’s population live in countries affected by Fragility, Conflict, and Violence (FCV), and their number is growing. Improving the lives of these people, including their experience of using digital technologies, lies at the heart of the World Bank’s mission. In this report, we visit some of the world’s “Digital Hotspots” to explore how to preserve and develop the telecommunications sector in FCV settings, as the prerequisite for using digital technologies. This report was prepared during a time in the world’s history when the COVID-19 pandemic overlapped with a war in Ukraine, rising costs of living, higher levels of unemployment in developing countries, climate-change-induced natural disasters and growing food insecurity. Countries already experiencing fragility have generally become more vulnerable during this period. Yet, the growth of the internet and of mobile communications has continued, almost unchecked. Since the start of COVID-19 in early 2020, there has been a remarkable rise in the use of international bandwidth as remote working and schooling have become more common. Equally, many people around the world have come to rely even more on mobile money and other digital financial services as a source of resilience. This has put pressure on service providers to constantly upgrade their services while remaining responsive to changes in consumer demand and new challenges. The report draws upon analysis of seven case study countries over the period from 2000-2020 (with some variations among individual countries, to correspond to their FCV period). The main performance indicator considered is change in mobile teledensity over this period, and this is considered in relation to ten different factors, both internal and external to the country. Although all the countries struggled, the ICT sector in some countries proved more resilient than others -- notably Afghanistan, Iraq and Somalia – and the report looks at the reasons behind this. Looking ahead, there will be no shortage of FCV countries to work in, unfortunately, as well as fragile regions in otherwise stable countries. Increasingly, the Bank’s lending operations have a digital flavor to them, either directly, as projects managed by the Digital Development Global Practice, or indirectly as digital activities embedded into the program of other sectors. We will use the learnings from this analysis to inform better operations in future, and we are happy to share this analysis with the countries themselves and other development partners. v Acknowledgments This World Bank report was drafted under the leadership of Tim Kelly and was authored by a team comprising Anne-Elisabeth Costafrolaz, Eric Dunand, Fatimah Mutlaq H Alotaibi, Roku Fukui, and Naomi Halewood from the World Bank and Richard Keck and Andrew Johnson from the firm MacMillan Keck. The MacMillan Keck team was supported by Rory MacMillan, Jason Blechman, Scott Garvey and Lale Tuzmen. The report was carried out under the guidance of Isabel Neto (Practice Manager, Digital Development Global Practice in Eastern and Southern Africa) and Casey Torgusson (Program Manager, Digital Development). It was edited by Sandra Gain and typeset by Arnold Birungi and Martha Oringo. The report was written with information from country case studies as of 2021 that may not still be current at the time of publication. At the decision meeting, held on October 26 2022, chaired by Isabel Neto, the report benefitted from comments from Bank peer reviewers Puteri Watson, Rajendra Singh, and Indira Konjhodzic and external peer reviewer David Souter (ICT Development Associates). Additional comments were received from Alain Aeschlimann. The team would also like to express their gratitude to all those who offered insights and gave their time to provide guidance and support at various stages of the project, including: Abdallah Jabbour, Audrey Sun Oh, Bernard Metz, Bertram Boie, Casey Torgusson, Caroline Vagneron, Elena Babkova, Estelle Allano, Firas Raad, Fatima Shah, Ida Mboob, Isabella Hayward, Jennifer Gui, Lamia Naji, Lavanya Choudhary, Kelly Cameron, May Ibrahim, Mouna Couzi, Nadia Piffaretti, Nadia Selim, Omar Al-Aqel, and Paul Viet- Minh Nguyen, The report was developed and made possible by the generous support of the members of the Digital Development Partnership (DDP) Trust Fund. The DDP is the World Bank’s program that helps developing countries leverage innovation and technology to solve their most pressing challenges. For more information about the DDP, see: https://www.digitaldevelopmentpartnership.org/. Authors Note: In several cases in the report, country names are shortened, or abbreviated, for instance in tables or graphs. The official names of the case study countries are as follows: The Islamic Republic of Afghanistan The Republic of Iraq The State of Libya The Federal Republic of Somalia The Republic of South Sudan The Syrian Arab Republic The Republic of Yemen Photo Sources: p6 and p12, Central Bank of Somalia, Tim Kelly, WBG p 16, Assessing war damage in Ethiopia, Prof Zelalem Assefa, EthERNet vi Introduction Currently, about 10 percent of the global As such, support to FCV countries is a major focus of population lives in economies affected by Fragility, the efforts of the World Bank (WB) to meet the twin Conflict, and Violence (FCV).1 FCV situations threaten goals of ending extreme poverty and boosting shared efforts to end poverty. As of July 2022, there were prosperity. In February 2020, the World Bank Group some 37 economies recognized on the harmonized (WBG) launched the Strategy for Fragility, Conflict World Bank Group list of economies characterized and Violence 2020-2025 (FCV Strategy),5 which aims as having fragile or conflict-affected situations to enhance the WBG’s effectiveness in supporting (FCS).2 These economies accounted for around half countries in addressing the drivers and impacts of of the world’s poor, a figure expected to grow to two- FCV and strengthen their resilience, especially for thirds by 2030.3 Conflicts alone drive an estimated their most vulnerable and marginalized populations. 80  percent of all of the humanitarian needs and Four main areas of engagement have been identified: reduce Gross Domestic Product (GDP) growth by two pivoting toward prevention, remaining engaged percentage points per year, on average4. The impact of in situations of active conflict and crisis, helping FCV is particularly profound on the most vulnerable countries in recovery escape the fragility trap, and individuals and communities, whose livelihoods and mitigating the spillovers of FCV to support countries economic opportunities are threatened. The global and the most vulnerable communities impacted by FCV landscape has also worsened significantly. cross-border crises. The commitment to addressing Violent conflict has spiked dramatically since 2010, the challenges of FCV is underpinned by a growing with more violent conflicts than at any time in the share of the financing for development allocated past 30 years, the largest forced displacement crisis by the International Development Association since World War II, and high levels of interpersonal (IDA). Already, under the 19th replenishment of and gang violence. Climate change, rising inequality, IDA resources (IDA-19), some USD 18.7  billion demographic change, sovereign debt and other global (22.8 percent of the total) was earmarked for FCV trends render fragility increasingly more complex. economies, an increase from USD 7 billion under IDA- There is thus an imperative to ensure that fragility, 17. Under the IDA-20 replenishment, announced in conflict, and violence are tackled, and FCV states are December 2021 for fiscal years 2023 to 2025, the rebuilt. It is also crucial to ensure that benefits are FCV envelope is expected to increase further, with a shared, and that inequality is reduced. focus on Africa, particularly the Horn of Africa, the Sahel, and the Lake Chad region. 1 https://www.worldbank.org/en/topic/fragilityconflictviolence/overview. For the purpose of this study, the defining features of FCV are to be found in large- scale violence or conflict, and/or the weakening of core state functions, characterized by the inability to provide physical security, legitimate political institu- tions, sound economic management, and basic services delivery. The population estimate includes those living in regions (as well as whole countries) living in FCS. 2 See the Annex for the current (fiscal year 2023) list of FCS countries. 3 https://documents1.worldbank.org/curated/en/844591582815510521/pdf/World-Bank-Group-Strategy-for-Fragility-Conflict-and-Violence-2020-2025.pdf. 4 World Bank estimate, using the FY19 Harmonized List of Fragile Situations. This estimate illustrates what poverty would be like if historical growth rates (rates from 2006–15) continue onto 2030. 5 https://documents1.worldbank.org/curated/en/844591582815510521/pdf/World-Bank-Group-Strategy-for-Fragility-Conflict-and-Violence-2020-2025. pdf. vii In recent years, it has become widely recognized WBG and the African Union (AU),7 which commits, that the adoption of digital technologies “can’’ make inter alia, to ensuring that all of Africa’s citizens, a significant contribution to poverty reduction firms, and governments are digitally enabled by and socio-economic development in countries 2030. The continent-wide initiative seeks to help and regions around the globe, both FCV and non- countries in Africa turn the opportunities provided FCV alike, though it is far from sure that they “will”. by digital technologies and the digital economy and Information and Communication Technologies unlock new pathways for more rapid and inclusive (ICTs) have developed rapidly, becoming central economic growth, innovation, job creation and access to governments, businesses, and citizens, for to affordable services. Similar interventions are being the sharing of knowledge, and for interactions carried out in other regions, such as the MENAtech between individuals and within communities. The initiative in the Middle East and North Africa (MENA). 2030 Agenda for Sustainable Development refers to ICTs as critical catalysts to all 17 Sustainable Several WBG programs that aim to capitalize on Development Goals (SDGs) established by the United digital technologies and promote the development Nations General Assembly in 2015 as they can help of inclusive digital economies are being designed or accelerate development progress6. The 2016 World implemented in FCV countries. Recently announced Development Report on Digital Dividends also points digital development investments in FCV countries out the tremendous opportunities in using digital include Digital Ethiopia (USD 200 million, approved technologies to improve service delivery, foster in 2021), Haiti Digital Acceleration (USD 60 million, transparency and efficiency in public administration, approved in 2020), Smart Villages Niger (USD 100 promote innovation and empower citizens and million approved in 2021), Digital West Bank and entrepreneurs. Gaza (USD 20 million, also approved in 2021), with new projects under development in and the Horn of Yet many FCV-affected countries struggle with Africa region among others. The World Bank currently low and/or unreliable access to power, low access has over US$1 billion committed in investment to internet, poor connectivity, both physical and lending project in FCV countries. The rationale for digital, and high illiteracy.  For many people, a mobile such programs is that FCV environments should not phone is the only digital device they have. This means be left behind in the digital age, in particular, where that, in many FCV settings, particularly rural ones, digital technology solutions can help deliver services efforts to leverage digital technologies to address to the most vulnerable. In such contexts, virtual FCV challenges or increase resilience will most likely connectivity and digital technologies can act as a need to be linked with mobile phones. catalyst for reducing extreme poverty and promoting inclusive growth, by: (i) growing and integrating The WDR16 also points to the importance of economies, connecting at-risk populations, rebuilding strengthening the analog foundations of the digital social cohesion, and mitigating conflict; (ii) enhancing economy, noting that if other systemic problems in governments’ ability to deliver critical services; and economy and society are not addressed, then the (iii) boosting countries’ resilience to conflicts, public benefits from digital technologies may be limited. In health, climate or economic shocks. this context, analog foundations include ensuring that the economy benefits from good governance, and that any underlying problems of fraud and corruption are tackled. Use of digital technologies can contribute to this effort. How can the digital economy develop and survive Recognizing the transformative role of digital in an environment of fragility, conflict, and technologies, the WBG and its development partners violence? Can it thrive and be harnessed as a driver have launched ambitious corporate initiatives to of economic growth, job creation, improved public help countries lay the foundations for a vibrant services, and resilience in such conditions?’’ digital economy. This is reflected, for instance, in the Digital Economy for Africa (DE4A) initiative of the 6 2030 Agenda for Sustainable Development, United Nations, 2015. 7 https://www.worldbank.org/en/programs/all-africa-digital-transformation. viii The purpose of this report is therefore to provide The report presents case studies of countries that an analytical backbone to underpin financial are recovering from different levels and stages of commitments to growing digital economies conflict, with a view towards identifying needed in FCV countries. The report seeks to identify actions to keep ICT sectors afloat in FCV economies.8 the actions needed to stabilize and develop the The seven case study countries are all identified on telecommunications/ICT sector, which is an upstream the FCS list for FY23 and have been on the list for a requisite of a digital economy, in order to broaden while. The case studies are preceded by an analytical economic growth and contribute to the World section that identifies similarities and patterns among Bank’s historical commitment to reconstruction and the case study countries, together with scores on key development. The target audience for the report is indicators, which help to classify the countries and the FCV countries themselves, especially government highlight differences. In addition to these countries, ministries and the private sector, which seek to which are presented in detail, lessons drawn from build a digital economy. A secondary audience is the other economies are reflected throughout the report. development community and practitioners, working in those countries, who seek to craft projects and programs aimed at promoting digital development. 8 This section was contributed by the consultant firm McMillan Keck under a contract commissioned for this study. ix x Acronyms and Abbreviations st of acronyms and s 2G Second-generation cellular digital mobile ATRA Afghanistan Telecom Regulatory telecommunications network technology, Authority which was designed initially to carry voice, and later low-speed data (text) AU African Union and communications, and includes GSM technology BOT Build-operate-transfer 3G Third-generation cellular digital CDMA Code division multiple access, a mobile telecommunications network, communications standard developed for which is designed to carry voice, low- 3G mobile networks speed data (text), and high-speed data (internet) at speeds ranging up to 384 CMC Communication and Media Commission, kilobits/second, including Universal the sector regulator in Iraq which was Mobile Telecommunications Service established in 2004 (UMTS) system, first offered in 2001, standardized by 3GPP and CDMA2000 COVID-19 Coronavirus disease of 2019 3.5G/3.75G Enhanced third-generation cellular digital CPA Coalition Provisional Authority of mobile telecommunications network Iraq established by the United States technology, which is designed to carry and its allies pursuant to UN Security voice, low-speed data (text), and high- Council Resolution 1483 and the laws speed data (internet) at speeds in excess of war, which held executive, legislative, of those of a standard 3G network but and judicial authority over the Iraqi less than a 4G network (ranging from government from April 21, 2003, until 2 to 21 megabits/second and later 84 June 28, 2004 megabits/second) DE4A Digital Economy for Africa initiative 4G/LTE Fourth-generation cellular digital mobile (WBG and AU) telecommunications network technology, also known as long-term evolution (LTE), DFG de facto government (Republic of Yemen) which is designed to carry voice, low- speed data (text), and high-speed data EBITDA earnings before interest, taxation, (internet) at speeds ranging from 100 depreciation, and amortization megabits/second to 1 gigabits/second. The term 4G+ refers to 4G, 5G and future EDGE Enhanced Data for Global Evolution, a mobile cellular technologies. GSM standard 5G Fifth-generation cellular digital mobile EIU Economist Intelligence Unit telecommunications network, which is designed to provide download speeds EVDO Evolution-data optimized, a CDMA of between 50 megabits/second and 2 standard gigabits/second, depending on available bandwidth and software release – EU European Union extending ultimately to 20 gigabits/ second in later iterations FCS Fragile or conflict-affected situation ADB Asian Development Bank FCV Fragility, conflict, and violence ADSL Asymmetric digital subscriber line GDP Gross domestic product xi GEMS Geo-Enabling initiative for Monitoring and IPF Investment Project Finance Supervision IRG Internationally-Recognized Government GNA Government of National Accord (Libya) (Republic of Yemen) GNC General National Congress (Libya) ISAF International Security Assistance Force (Afghanistan) GPTC General Posts and Telecommunications Company (Libya) ISG Islamic State group GSM Global System for Mobile Communications ISIL Islamic State of Iraq and the Levant GSMA Global System for Mobile Communications ISP Internet service provider Association ITPC Iraqi Telecommunications and Posts HSDPA High-speed downlink packet access Company, the former incumbent and monopoly fixed line operator in Iraq HTG Hormuud – Telesom – Golis, operator grouping in Somalia ITU International Telecommunication Union IBRD International Bank for Reconstruction and KM Kilometer Development LAP Libya African Portfolio ICSID International Center for Settlement of Investment Disputes (part of the World LEO Low Earth Orbit satellites Bank Group) LPTIC Libya Posts Telecommunications and ICT information and communications Information Technology Company technology LTE Long-Term Evolution ICU Islamic Customs Union (Somalia) LTT Libya Telecoms and Technology IDA International Development Association (part of the World Bank Group) MCIT Ministry of Communications and Information Technology (Afghanistan) IDP Internally displaced person MHz Megahertz, or cycles per second, which is IFC International Finance Corporation (part of used as a measure of the radio frequency the World Bank Group) modulation IGC Iraqi Governing Council, a 25-member MIGA Multilateral Investment Guarantee Agency governance body appointed by the (part of the World Bank Group) Coalition Provisional Authority of Iraq in July 2003 to assume limited governing MoU Memorandum of understanding functions over Iraq initially and then full sovereignty over Iraq from June 28, 2004, MTC Ministry of Transportation and until constitutional elections were held Communications (Iraq) IMF International Monetary Fund MVNO Mobile virtual network operator Internet Global system of interconnected NATO North Atlantic Treaty Organization telecommunications networks that use Transmission Control Protocol/Internet NCA National Communications Authority Protocol to transmit and exchange data (Somalia) xii NGO Nongovernmental organization SOE State-owned enterprise NOW Network of the World (South Sudan) SPLA-IO Sudan People’s Liberation Army-in- Opposition NTC National Telecommunication Corporation (Sudan) TFG Transitional Federal Government (Somalia) NTC National Transitional Council (Libya) TNG Transitional National Government OCHA United Nations Office for the (Somalia) Coordination of Humanitarian Affairs UN United Nations ODI Overseas Development Institute UNCTAD United Nations Conference on Trade and PTC Public Telecommunication Corporation Development (Republic of Yemen) UNDP United Nations Development Programme RAS Reimbursable Advisory Services UNFPA United Nations Population Fund RoC Rate of change UNICEF United Nations Children’s Fund SCALED-UP Somalia Capacity Advancement, Livelihoods and Entrepreneurship, USAID United States Agency for International through Digital Uplift Program Development SIGAR Special Inspector General for Afghanistan VSAT very small aperture terminal, a two-way Reconstruction satellite Earth station with a relatively small dish antenna SIM Subscriber identity module, an integrated circuit chip installed inside a mobile WCDMA Wideband Code Division Multiple Access phone or similar device, which is used to store the international mobile subscriber WiMAX Worldwide Interoperability for identity (IMSI) number and its related Microwave Access key used to identify and authenticate subscribers on a mobile network xiii xiv 1 Keeping the telecommunications sector afloat in FCV economies The section delves into the telecommunications sector 1.1 Motivations and objectives of the seven FCV countries chosen as case studies and examines factors that encourage and discourage The World Bank commissioned this series of country case development, in the aim to identify what factors should studies to develop an evidence-based foundation for how be prioritized and supported by the international best to preserve and strengthen a country’s telecom sector community in order to keep the sector afloat during during times of conflict. Conflicts between states have conflict. Without this foundational infrastructure, the become less common since World War II (until the recent various benefits described in Part 1 would remain limited invasion of Ukraine); nevertheless, intrastate conflicts and the real impact unrealized. Communications services (particularly those with foreign intervention) have become often come at a premium in FCV and low-income countries, much more common in recent years. Figure 1 tracks yet experience shows that even in challenging situations, the total number and mix of armed conflicts from 1946 there is latent demand that is not being served. As such, through 2019.1 there are a handful of mobile operators that appear to be willing to invest in FCV countries, where it is allowed, and as long as there are longer-term profits to be made. These operators take into account the additional costs in deploying and managing infrastructure securely into their operating expenses, despite the fact that, in Somalia for instance, these could increase costs by 30 percent or more. Figure 1: Armed conflict, by type, 1946–2019 Source: https://ucdp.uu.se/downloads/charts/. 1 Pettersson. Therese and Magnus Öberg. 2020. “Organized Violence, 1989-2019,” Journal of Peace Research 57, no. 4. 1 The WBG has conducted several non-sector-specific Revenues decrease while costs increase, and investors evaluations that offer practical lessons learned from its are reticent to fund high-risk or uncertain ventures until experience in FCV countries, with the key insight being to there is more clarity and certainty. An example here “do things differently” by adapting assistance programs and would be how the conflict in the Tigray region of Ethiopia instruments to the low capacity of governments and the (designated as an FCV country on July 1, 2021) coincided informality of the private sector.2 An earlier World Bank with the government’s efforts toward partial privatization publication, dating from 2014, looked at the experience of of the incumbent operator, EthioTel, and auction a license how information and communications technologies (ICTs) for a third operator. Both processes were postponed in could assist countries in post-conflict reconstruction, early 2022, with investors citing the lack of a clear outcome with case studies of Afghanistan, Liberia, Rwanda, Timor- from the conflict as one reason for their hesitation.6 Leste, and Tunisia.3 But the World Bank has not heretofore carried out any rigorous studies of how best to address the Historically, the telecom sector has been one of the most telecom sector during conflict. profitable parts of low-income economies, and one of the few sectors able to generate significant amounts of foreign Research and data on the topic is extremely limited. A study currency revenue, through the mechanism by which foreign telecom operators paid settlement fees to terminate comparing mobile penetration with a ranking of 141 low- international incoming calls. Several FCV countries have and middle-income countries on their relative economic, fallen into the trap of trying to monopolize this revenue, political, security, and social welfare in a single year, 2008, by inviting a gateway operator to handle international did not find a statistically significant correlation between calls and by criminalizing operators that seek to bypass the security indicator and mobile phone penetration.4 this bottleneck, In Burundi, for instance the government Other studies have focused on the impact of mobile has imposed a single international gateway since 2016, coverage or use on increasing or diminishing the likelihood operated by ITS.7 This is an inefficient form of taxation of conflict, again with inconclusive results.5 because ITS makes a guaranteed profit, even though traffic inevitably fell.8 The persistence of conflict, often impacting the countries that are most in need of international assistance, is a reality The key objective of this study is to identify actions that that must be addressed. Experience and observation authorities in FCV settings and/or the international indicate that conflict adversely impacts the mobile market community may take or refrain from taking during a in an affected country. Infrastructure and equipment are period of conflict to mitigate these and other adverse damaged or destroyed. Deployments of new facilities and impacts on telecom sector performance. repairs of damaged facilities are canceled or delayed due to the inability to reach sites, lack of trained personnel, difficulty to import spare parts, or safety concerns. Service is frequently interrupted and service quality declines. 2 See, for instance, Independent Evaluation Group. 2013. “The Private Sector in Fragile and Conflict-Affected States,” IEG Insights (World Bank Group, Washington, DC), https://ieg.worldbankgroup.org/sites/default/files/Data/reports/ieginsights_psd.pdf. For the full 2013 report, see Independent Evaluation Group. 2013. Assistance to Low-Income Fragile and Conflict-Affected States: An Independent Evaluation (World Bank, Washington, DC), https://ieg.world- bankgroup.org/sites/default/files/Data/reports/chapters/fcs_eval.pdf. An evaluation of the International Finance Corporation’s experience in fragile and conflict-affected countries was also published; see Independent Evaluation Group. 2019. The International Finance Corporation’s Engagement in Fragile and Conflict-Affected Situations: Results and Lessons – Synthesis Report (World Bank, Washington, DC), https://ieg.worldbankgroup.org/sites/default/files/ Data/reports/Synthesis_IFC_in_FCV.pdf. 3 Kelly, Tim and David Souter. 2014. The Role of Information and Communication Technologies in Post-Conflict Reconstruction (World Bank, Washington, DC), https://openknowledge.worldbank.org/handle/10986/16679?show=. For the full country case studies, see https://www.infodev.org/postconflict. 4 See Michael L. Best. 2011. “Mobile Phones in Conflict-Stressed Environments: Macro, Meso and Microanalysis,” in Mobile Technologies for Conflict Management, edited by Marta Poblet (Springer, New York), 15–17, http://tid.gatech.edu/static/pdfs/mobilePhonesInConflict.pdf. The Best study evaluates the correlation between economy, politics, social welfare, and security (based on a Brookings index of state weakness in the developing world) and mobile penetration. The Best study considers the impact of each variable on mobile penetration in a single year, 2008. It does not assess the impact of various combinations of these variables nor use time-series data to measure their impact on rates of penetration growth. 5 See, for example, Catie Snow Bailard. 2015. “Ethnic Conflict Goes Mobile: Mobile Technology's Effect on the Opportunities and Motivations for Violent Collective Action,” Journal of Peace Research 52, no. 3 (2015): 323–37, https://journals.sagepub.com/doi/10.1177/0022343314556334; Eran Fraenkel. 2014. A Critical Analysis of Digital Communications and Conflict Dynamics in Vulnerable Societies” (Internews, Arcata, CA, https://internews.org/wp-con- tent/uploads/legacy/Internews_DigComminconflict_2014-11.pdf; Jan Pierskalla and Florian Hollenbach. 2013. “Technology and Collective Action: The Effect of Cell Phone Coverage on Political Violence in Africa,” American Political Science Review 107, no. 2 (2013): 207–24, https://www.jstor.org/sta- ble/43654011. 6 https://www.reuters.com/world/africa/ethiopia-says-has-postponed-sale-stake-ethio-telecom-2022-03-19/. 7 ITS is a French/HK company, registered in Turkiye, that uses military intimidation to collect dues. The gateway is a virtual switch through which all mobile operators (EcoNet Leo, Lumitel and SMART) are obliged to pass their international traffic (incoming and outgoing). ITS then levies a fee of 46.5 US cents per minute. Incoming international traffic in January 2016 stood at 2.39 million minutes, but by March 2017 it had fallen to just 0.96 million minutes – a fall of 60 per cent in just 15 months -- and the decline continued. Later, a similar monopoly gateway was awarded to BBS for data services. BBS began as a public private partnership, with private sector owners alongside the Government, but later was fully nationalized. 8 World Bank. 2017. Burundi ICT Sector Evaluation 2 The study adopts a “natural experiment” approach to the 1.2 Methodology analysis of causal relationships.9 It focuses on gaining insights that may inform the current and future actions The study evaluates the impact of barriers to investment of the World Bank, other international organizations, and in the telecom sector on the performance of the sector in state actors with a view to mitigating the adverse impact of seven current or former FCV countries in Africa, the Middle conflict on the telecom sector of client countries. This focus East, and South Asia: Afghanistan, Iraq, Libya, Somalia, led to formulating and testing a key hypothesis through the South Sudan, the Syrian Arab Republic, and the Republic comparative study of seven countries in conflict over a 21- of Yemen.11 Each country faces different circumstances, year period. Namely, the following hypothesis was tested: and the types of FCV they have endured have had different causes, durations, starting dates, and ending dates. Two of the countries are landlocked (Afghanistan and South Sudan) while the others all have a coastline, which is important for provision of international connectivity via The degree of adverse impact on mobile teledensity10 submarine cables. Five of the conflicts had intrastate during conflict is significantly driven by internal and origins, while two had interstate origins, but most attracted external barriers to mobile telecom investment in the some level of outside intervention (and in some cases, the affected country.” internal conflict became a proxy war between or among foreign powers). If the hypothesis is valid, then the findings from this In assessing cause and effect, the study focuses on retail study can inform potential interventions by international mobile markets. The intention is to assess the impact of organizations during times of conflict. conflict and investment barriers on mainstream investment flows. Mobile services have been by far the predominant Studying the impact of conflict on the performance of the form of end-user connectivity growth in low- and middle- telecom sector offers many potential insights beyond the income countries over the past two decades and this trend scope of this study. For example, it would be informative to is continuing.12 By 2021, some 94 percent of the world’s study the relationship between a conflict’s impact on the population had mobile broadband coverage,13 and, by 2020, macro-economy and its derivative impacts on the telecom mobile services represented 87  percent of all broadband sector. It would also be useful to consider how variations in connections in low- and middle-income countries.14 Due the type and duration of conflict have different impacts on to the more scalable cost structure of wireless networks the telecom sector. Yet another topic would be the impact compared with wired networks,15 and the ability of mobile of telecommunications on causing, avoiding, or resolving coverage to reach deep into the population, efforts to conflict. Such questions are potentially useful topics for introduce competition and attract private investment have future research, but they are beyond the scope of the been consistently more successful in mobile markets in current exercise of identifying and evaluating potential developing countries than efforts to introduce competition practical intra-conflict interventions. and attract private investment in fixed broadband markets.16 For example, by 2010, 92 percent of countries 9 See, for example, Bruce D. Meyer. 1995. “Natural and Quasi-Experiments in Economics,” Journal of Business and Economic Statistics 13, no. 2 (1995): 151–61, https://www.jstor.org/stable/1392369?seq=1#page_scan_tab_contents or https://www.nber.org/system/files/working_papers/t0170/t0170.pdf. The 2021 Nobel Prize in Economic Sciences was awarded to three economists based on their natural experiments approach to cause and effect in the social sciences. See The Royal Swedish Academy of Sciences, “The Prize in Economic Sciences 2021,” Press Release (October 11, 2021), https://www.nobelprize. org/prizes/economic-sciences/2021/press-release/. 10 Mobile teledensity refers to the number of mobile subscribers in a country or region per 100 inhabitants. It may be expressed as total subscribers (as mea- sured by subscriber identity module (SIM) cards in service) or unique mobile subscribers, which include multiple ownership of SIM cards or machine usage of SIMs (for example, embedded in motor vehicles for automatically generated emergency calls). 11 The seven countries were selected because they had experienced a major conflict since the wide-scale introduction of mobile technology in developing countries and were considered geographically, demographically, and/or culturally relevant to the Republic of Yemen. Countries in East Asia, Europe, South America, and West Africa that may have suffered conflicts during the relevant time were not evaluated in this study. 12 See World Bank > World Development Indicators > Mobile cellular subscriptions (per 100 people) > Lower & middle income countries > Metadata, https://databank.worldbank.org/reports.aspx?source=2&series=IT.CEL.SETS.P2&country=. 13 See GSMA. 2021. The State of Mobile Internet Connectivity 2021 (GSMA, London), 6, https://www.gsma.com/r/wp-content/uploads/2021/09/ The-State-of-Mobile-Internet-Connectivity-Report-2021.pdf. 14 GSMA Intelligence. 2021. The State of Mobile Internet Connectivity Report 2020 (GSMA, London), 5, https://www.gsma.com/r/wp-content/up- loads/2020/09/GSMA-State-of-Mobile-Internet-Connectivity-Report-2020.pdf. 15 See, for example, OECD. 2015. Working Party on Communication Infrastructures and Services Policy, “The Development of Fixed Broadband Networks” (Organisation for Economic Co-operation and Development, Paris), 11, https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DSTI/ ICCP/CISP(2013)8/FINAL&docLanguage=En. 16 For example, in a 2011 study of privatizations in 108 countries from 1985 to 2007, the outcomes were strongly positive in Organisation for Economic Co-operation and Development countries and resource-scarce African coastal countries, weakly positive in countries in Latin America and the Caribbean, and strongly negative in resource-rich African countries and resource-scarce African landlocked countries. See F. Gasmi, A. Maingard, P . Noumba, and L. Recuero Virto, “Empirical Evidence on the Impact of Privatization of Fixed-Line Operators on Telecommunications Performance – Comparing OECD, Latin American, and African Countries” (2011), http://publications.ut-capitole.fr/18415/1/medias/doc/wp/2011/gasmi_privatization_final_2011.pdf. 3 had successfully introduced 3G mobile broadband The independent variables – internal and external factors competition.17 Conflict may have less impact on foreign that make a country more or less hospitable for telecom direct investment in mobile markets than in other sectors.18 investment – are largely qualitative rather than quantitative Nonetheless, mobile network coverage, the quality of in nature. A methodical exercise was undertaken to break service, and technology deployments are often adversely down the independent variables into their component impacted by conflict and, according to the hypothesis to be factors (or subvariables), to evaluate those subvariables tested in this study, FCV countries with a less hospitable qualitatively and convert the qualitative evaluations into investment climate are more severely impacted than those quantitative data. with a more hospitable investment climate. Internal investment climate factors were assessed The approach to testing the hypothesis and developing for each of the seven countries by assigning ratings associated evidence-based knowledge, while perhaps from 0 (least hospitable) to 10 (most hospitable) based appearing to be straightforward, was extremely complex. It on five key internal factors relevant to private sector involved collection, compilation, verification, and analyses telecom investment. Each factor was assigned 2 points if of a vast database of events and measurements across clearly favorable, 1 point if uncertain, or 0 points if clearly multiple countries during conflicts that began in the past unfavorable, yielding a possible point range of 0 to 10 over and some of which continue to the present. To ensure all five internal investment climate factors. The following that it covers the entire conflict period in each country, explains each internal investment climate factor and the the study considers data from 2000 (the year before the basis for the point allocations: invasion of Afghanistan began) through 2020 (the last full year before the study was conducted). This entire 21-year (1) Market openness to entry. This internal factor period is considered for six of the seven countries, while focuses on the presence or absence of legal or consideration of South Sudan is limited to the period from regulatory barriers to market entry in the mobile 2011, when it first became a separate state from Sudan. communications market. Conditions were considered favorable for market entry if two or more private Two categories of “independent” variables (factors) sector operators had received long-term authorization impacting each country during a conflict period were to enter the mobile market. They were considered assessed: (1) internal factors that impact the mobile uncertain where multiple mobile operators were market investment climate, and (2) external factors that authorized but all were owned or controlled by the impact the mobile market investment climate. For this state, or where licensing was open but haphazard. purpose, “investment climate” is used as a relative term to Conditions were considered unfavorable where existing mean the degree to which conditions in a country enable or operators could not obtain long-term authorizations discourage telecom investment. One “dependent” variable (new or renewed) or where market entry was legally in each country, teledensity evolution, was assessed before, restricted. The recent emergence of low earth orbit during, and after the conflict. While the independent (LEO) satellite companies, such as Starlink or OneWeb, variables were not controlled by the research team, their dramatically lowers the barriers to entry for internet variations across the seven countries allowed evaluation service providers, and their service offering seems of their impact on the dependent variable as controlled particularly appropriate for FCV countries where variables through natural experiment methodology. backbone terrestrial infrastructure may be inadequate, or damaged by conflict, such as in the case of the The research team evaluated the relationship between northern regions of Ethiopia, where it is estimated that the dependent and independent variables to determine over 3,000 km of fiber may have been destroyed as a whether teledensity evolution is favorably impacted by result of the recent conflict. But the services still need factors that make a conflict country more hospitable to be licensed for local provision of services. for supply-side telecom investment. If the hypothesis is valid, then it would be expected that there would be more (2) Ease of private investment. This internal factor positive teledensity evolution in countries with a more focuses on potential barriers to private investment in favorable internal and external investment climate. If mobile markets other than service licensing (considered the hypothesis is not valid, then it would not be expected under market openness to entry) or spectrum licensing to see strong correlation between the dependent and (considered under spectrum needs being met). This independent variables. factor considered legal or regulatory limitation of market participation to wholly or partly state-owned enterprises, foreign investment restrictions, local ownership requirements, foreign exchange restrictions 17 ITU (International Telecommunication Union), Trends in Telecommunication Reform (ITU, Geneva, 2011), https://www.itu.int/net/itunews/is- sues/2011/03/04.aspx. 18 See Charles Kenny. 2013. “Moving beyond Mines and Mobiles: How Can IFC Add Value in Fragile States?” CGD Policy Paper 030 (Center for Global Development, Washington, DC), https://www.cgdev.org/sites/default/files/moving-beyond-mines_wcover_0.pdf. 4 on loan repayments or dividends, and other legal or Conditions were considered favorable if the market practical limitations on private investment. Conditions appeared to be functioning competitively without were considered favorable where no significant barriers any significant bias for or against a specific network existed. They were considered uncertain where some operator, regardless of whether this situation was barriers materially hindered private investment but it based on law, regulation, or other circumstances. They was nonetheless possible. Conditions were considered were considered uncertain where bias was present and unfavorable if private investment was barred or heavily had an adverse impact on market participants, but it restricted. As a caveat here, it should be noted that was not sufficient to thwart the viability of disfavored ultimately the attractiveness of the market is more market participants. Conditions were considered likely to determine foreign investment rather than unfavorable if one or more market participants had a regulations. Thus a large FCV market, such as Nigeria clear and enduring advantage, whether by virtue of or Ethiopia, is more likely to attract an investment than state ownership, an exclusive or special license, or a smaller one, such as Comoros or Tuvalu, and thus significant market power in the absence of effective regulators in larger markets can perhaps afford to be regulatory restraints on anticompetitive or predatory more demanding. activity. (3) Spectrum needs being met. This internal factor (5) Fiscal reasonableness. This internal factor considers considers the availability of spectrum to support the reasonableness of the overall fiscal burden imposed mobile communications. Spectrum requirements on licensed mobile network operators, whether by were assessed from the perspective of prevailing de jure or de facto authorities. It encompasses the full and emerging technology at the relevant time (so it range of taxes, license and regulatory fees, and other may involve spectrum required for 2G, 3G, or 4G as fiscal impositions (with the exception of spectrum appropriate). Conditions were considered favorable fees, which are considered separately as an aspect if licensees or other authorized operators were of spectrum needs being met). Reasonableness was generally able to acquire sufficient blocks of spectrum assessed by comparing the fiscal burden in the relevant for sufficient periods of time to justify the deployment country with international best practices for fiscal of the relevant technology. They were considered policy in developing countries,19 with an emphasis on: uncertain if the bandwidth, duration, or timing of General taxes applicable to all or most businesses, spectrum releases was short-term, unpredictable, or such as corporate income tax, value-added tax, and inadequate. Conditions were considered unfavorable goods and services tax. if the spectrum bands required for new technologies Sector-specific taxes targeted to telecom equipment, (such as 3G or 4G) were withheld from operators or handsets, service activation, and service provision, other limitations suppressed investment in existing or including surtaxes, excise taxes, and customs duties.20 new technologies. Nontax impositions such as non-spectrum regulatory (4) Level playing field. This internal factor focuses on fees, license fees, revenue sharing, concession fees, whether the legal, regulatory, and practical framework universal service fees, and fees charged by the state in the relevant country offers mobile market or state-owned enterprises for essential wholesale participants equal opportunities to succeed. inputs other than spectrum.21 Transparency and predictability of the tax base, rate, and incidence and enforcement. 19 See Thornton Matheson and Patrick Petit. 2017. “Taxing Telecommunications in Developing Countries,” IMF Working Paper WP/17/247 (International Mon- etary Fund, Washington, DC), https://www.imf.org/en/Publications/WP/Issues/2017/11/15/Taxing-Telecommunications-in-Developing-Countries-45349; ITU (International Telecommunication Union). 2013. “Taxing Telecommunication/ICT Services: An Overview” (ITU, Geneva, 2013), https://www.itu.int/en/ ITU-D/Regulatory-Market/Documents/Taxation%20Study-final-en.pdf. The GSMA has also sponsored numerous financial and economic studies quantifying and comparing the impact of various types of fiscal impositions on mobile ownership and use across both developed and developing countries over the past 15 years. The geographic scope of these reports has been global, regional, and focused on individual countries. The most recent reports are catalogued on GSMA’s website at GSMA > Regulatory environment > Public Policy > Taxation, https://www.gsma.com/publicpolicy/regulatory-environment/taxation. The GSMA, as an industry association, may ordinarily be regarded as having a greater anti-tax bias than the IMF or the ITU. However, due to the comparative nature of GSMA-sponsored studies and their identification of potential revenue-neutral approaches to reduce market distortions, their data and findings merit consideration. For a general discussion of the current methodology employed by GSMA, Ernst & Young, and Deloitte in these studies, see Ernst & Young. 2017. Mobile Taxation Studies: Methodology Documentation (GSMA, London, 2020); Deloitte, Mobile Taxation Survey: A Methodological Note for GSMA (Deloitte, London), https://www.gsma.com/publicpolicy/wp-content/uploads/2020/04/Mobile_taxation_studies_Methodology_documentation.pdf; https://www.gsma.com/publicpolicy/wp-content/uploads/2021/02/Mobile-taxation-survey-methodology-note.pdf. 20 For a comprehensive discussion of the “pecking order” of sector-specific taxes that could be levied in addition to standard income and value-added taxes, based on capturing rents and minimizing distortions, see ITU. 2013. “Taxing Telecommunication/ICT Services: An Overview” (ITU, Geneva), https://www.itu. int/en/ITU-D/Regulatory-Market/Documents/Taxation%20Study-final-en.pdf. Although telecom taxes are generally disfavored because (unlike, for example, tobacco and alcohol) telecommunications results in positive externalities, the administrative costs of assessing and collecting telecom taxes make it an attractive source of revenue for developing countries with limited capacity. 21 International practice recognizes the need for regulatory and licensing fees. In general, regulatory fees should be no greater than required to provide prop- er regulation. 5 In evaluating fiscal reasonableness, conditions were host country were disregarded, as these are separately considered favorable if mobile operators faced a low considered in relation to the relevant internal or moderate overall fiscal burden, with the caveat investment climate factor. The non-state military or that conditions were considered uncertain if sector- paramilitary forces considered include those deployed specific taxes or nontax impositions were likely to by actors not supported by the officially recognized distort market performance or suppress investment, government of the host country, whether the non- such as taxes on capital inputs or consumer access, state actor is located within or outside the host or if the base, rate, or incidence of tax or conditions country, and such actors as Al-Shabaab, the Islamic of enforcement were sufficiently nontransparent or State, al-Qaeda, or the Taliban.22 Collateral damage unpredictable to suppress investment. Conditions to telecom facilities and activities generally resulting were considered unfavorable if fiscal impositions were from an ongoing conflict were disregarded unless the high compared with international norms or otherwise interference directly targeted telecom facilities or had a significant dampening impact on investment activities. Conditions were considered favorable if no or mobile market performance. Where the fiscal such interference occurred during a conflict period or burden was disproportionate in its impact on different if any interference was extremely limited in duration or mobile operators, this was considered as part of the impact. They were considered uncertain if interference assessment of a level playing field rather than fiscal occurred for some duration, but it was well short of reasonableness. the entire conflict period, or if an extended period of interference was weak or only partially effective. As a general point, while one can be sympathetic to Conditions were considered unfavorable if strong and the position that lower taxes are better for ICT sector effective foreign military or paramilitary interference (favorable fiscal reasonableness), one cannot avoid occurred for a significant portion of the conflict wondering what this means in the broader context period or otherwise had significant adverse impact on of state building and consolidation in FCV context.  investment. Especially as governments in fragile states have limited resources to manage crises and help their population (7) International sanctions. This external factor become more resilient to shocks.  Revenue mobilization focuses on broad-based sanctions and/or sanctions can raise funds and support social expenditures for targeted at communications technology. Sanctions that better resilience of poor and vulnerable to shocks, targeted specified individuals or companies that were including conflict. Afghanistan represents an example not involved in the telecom sector were excluded from where tax revenue raised from the digital section consideration. Conditions were considered favorable was generally successful, and Somalia a case where if no relevant sanctions were present. They were considerable improvement has been made but where considered uncertain if sanctions were only present for the overall financial contribution from the ICT sector is part of the conflict period or if the sanctions were weak much lower than it should be. or ineffective. This also included cases in which despite strong and effective sanctions from most countries, the External investment climate factors were assessed in equipment or software needed for communications a similar manner. Countries were rated from 0 (least technology remained readily available from at least hospitable) to 10 (most hospitable) based on five key one major supplier in the country. Conditions were external factors relevant to private sector telecom considered unfavorable if strong and effective investment. Again, each factor was assigned 2 points sanctions were present for all or most of the conflict if clearly favorable, 1 point if uncertain, or 0 points if period. clearly unfavorable, yielding a possible point range of 0 to 10 over all external factors. The following explains (8) Travel restrictions. This external factor considers each external investment climate factor and the basis travel restrictions or border closures imposed by for the point allocations: countries other than the host country that were related to the conflict and restricted inbound and (6) Military or paramilitary interference, and overall outbound travel by operator executives and vendor security environment. This external factor focuses on technicians. Customary visa requirements were deployment of foreign state forces or non-state military disregarded. Travel restrictions or temporary border or paramilitary forces to block supplies from entering closures due to COVID-19 or other health-related or moving within a conflict country or to engage in circumstances were also disregarded. General security other actions intended to interfere directly with or threats were disregarded unless they severely limited block the construction, operation, maintenance, or scheduled flights or ground travel and their impact was repair of telecom networks or infrastructure. Domestic involuntarily to restrict travel to operator facilities in actions by the officially recognized government of the the host country. Conditions were considered favorable 22 Unauthorized paramilitary actors within a host country are considered “foreign” and hence external for these purposes because they are outside the control of the officially recognized government of the host country. 6 if no relevant travel restrictions or border closures Converting qualitative data to quantitative data is not were imposed. They were considered uncertain if travel without perils or shortcomings. Do some qualitative factors restrictions or border closures were in effect for only merit more quantitative weight than others? What is the part of the conflict or if no formal travel restrictions appropriate quantitative assessment of a factor based on were imposed but ingress and egress to and from the the qualitative information on a complex topic? The study host country were effectively restricted. Conditions endeavored to account for these potential shortcomings in were considered unfavorable if formal and effective several ways. First, each point assignment for each factor travel restrictions or complete border closures were for each country was evaluated and made by the same present for all or most of the conflict period. team as a joint decision through an iterative and interactive process of study, discussion, and debate. Second, a strong (9) International aid for telecommunications. This effort was made to grade each country on the same curve external factor relates to bilateral and multilateral – so any systemic biases would not impact the relative aid during the conflict that was targeted to or directly evaluation of individual countries. The combined effect benefited the civilian telecom sector. Qualifying aid of these efforts was meant to ensure consistency in the could include both technical assistance (in kind or evaluation of all seven countries. Thus, while the study may financially underwritten) and financing (grants, loans, or not provide sufficient output knowledge to discern the equity) for investment or operating costs. Non-civilian relative importance of any individual investment climate aid to provide non-public telecommunications for factor, it offers relatively robust insights into the combined military, security, or relief personnel was disregarded impact of those factors on outcomes across countries. unless the funds supported the development of public telecommunications. Conditions were considered Teledensity evolution – the dependent variable in the favorable if aid was significant in relation to the study – was used to assess the impact of the supply-side needs of the conflict country or the size of the sector. investment climate – measured through a combination of Conditions were considered uncertain where some aid 10 independent variables – on telecom sector performance was provided, but the level or focus was not significant. over time. Teledensity is a common demand-side measure They were considered unfavorable where negligible of customer adoption. It was considered a better proxy for or no aid was provided. Of course, the actual needs of telecom sector outcomes than supply-side measures such different FCV countries for international assistance as coverage (access) or investment (capital expenditures) are very different in range, and this is not necessarily because it combines access with affordability and other reflected in the actual supply of international aid. demand-side considerations to measure the extent to which individuals actually use telecommunications and (10) International security intervention. This external hence benefit from connectivity. The long-term nature factor considers bilateral or multilateral external of this study requires selection of a reliable teledensity interventions to promote security in the conflict measure covering the entire 2000–20 period. Due to the country. This may include military interventions study’s focus on mobile communications, teledensity directed at terrorist groups or insurgents, or measures for fixed telephony or fixed broadband would not peacekeeping interventions intended to quell internal be relevant.23 conflict between competing factions. Conditions were considered favorable if strong and effective international security intervention occurred for an extended portion of the conflict period. They were considered uncertain if intermittent or weak international security intervention occurred. Conditions were considered unfavorable if no international security intervention occurred or if any interventions were largely ineffective. 23 Fixed telephony (voice services) teledensity has been measured throughout the 21-year study period, but it is not a good indicator. Fixed telephony penetra- tion was never significant in most developing countries and has declined in many countries during the 21-year period due to substitution of mobile voice for fixed telephony and substitution of voice-over-Internet Protocol and voice-over-broadband for basic telephony. See UNCTAD (United Nations Conference on Trade and Development). 2009. Information Economy Report 2009 – Trends and Outlook in Turbulent Times at (UNCTAD, Geneva, 2009), 2–3, https:// unctad.org/system/files/official-document/ier2009_en.pdf. Fixed broadband teledensity has only been measured in recent years and would not cover the entire 21-year study period. 7 The two primary sources of comprehensive and reliable study period, mobile penetration also offers a fuller picture data on mobile teledensity are the International of mobile teledensity evolution as consumers shift from Telecommunication Union (ITU), a specialized agency of narrowband to broadband use. For these reasons, the the United Nations responsible for ICT data,24 and the study adopts mobile penetration – the general category Global System for Mobile Communications (GSMA), a that includes all narrowband and broadband mobile nonprofit global organization that promotes the interests connections – as its teledensity measure. Data for unique of the mobile communications industry.25 mobile subscribers are used rather than total subscriber identity module (SIM) card subscriptions. Both the ITU and GSMA collect and report two mobile teledensity measures, mobile penetration and mobile Another consideration was whether demand for mobile broadband penetration. Mobile penetration is technology services in the seven countries remained sufficiently below and content agnostic, counting all mobile subscriptions market saturation so as to be sensitive to supply-side regardless of whether they are used for voice, text, or developments. In some countries, mobile penetration has internet. Mobile broadband penetration counts only those saturated the market and changes in mobile penetration mobile subscriptions that include broadband service. may no longer reflect changes in the underlying supply- Mobile penetration data are available from both the ITU and side investment. As shown in figure 2, mobile penetration GSMA for the entire 21-year study period, whereas mobile in the seven countries, measured by the number of unique broadband penetration data are only available for recent subscribers as a percentage of total population, remained years during the study period. Specifically, the ITU has well below 100 percent over the entire 21-year period.26 only tracked mobile broadband penetration in the relevant With the possible exception of Libya, where mobile countries since 2009 and data before 2015 are incomplete, penetration has exceeded the adult population, mobile although the absence of data probably implies that no 3G penetration thus appears to have remained a relevant service had yet been launched. GSMA has reported mobile teledensity measure for all seven countries over the 21- broadband penetration since 2010, but some of the earlier year period studied. years appear to have been reverse-extrapolated from data collected in more recent years, even if 3G+ services had not yet been launched. Apart from covering the entire Figure 2: Mobile teledensity (unique mobile subscribers per 100 inhabitants) in the seven conflict countries studied, 2000–20 Mobile Penetration - Conflict countries 2000-2020 80% 70% 60% 50% 40% 30% 20% 10% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Afghanistan Iraq Libya Somalia South Sudan Syria Yemen Source: MacMillan Keck, adapted from GSMA data. 24 The ITU has collected and reported mobile penetration every year since before 2000. It typically collects data annually from national telecom ministries or regulatory authorities and national statistical offices, which in turn collect data from operators and other sources, based on ITU-standardized criteria. If a country does not submit data, the ITU may include its own estimates. See ITU > Home > ITU-D > ITU-D Statistics > World Telecommunications / ICT Indicators (2021) https://www.itu.int/en/ITU-D/Statistics/Pages/publications/wtid.aspx. 25 GSMA provides estimated data on every mobile operator in every country. It has collected and reported mobile penetration data from its members every year since 2000. GSMA collects data daily, directly from mobile operators, based on standardized criteria. See GSMA Intelligence > Home > Products and Services > Data (2021) https://www.gsmaintelligence.com/data/. However, two major limitations with GSMA data are that not all mobile operators are GSMA members (Somalia is an example where operators are not generally GSMA members), and the data are generated through algorithmic projections to make up for missing data. 26 GSMA data (2021). 8 Although2008 2007 both the ITU 2009 2010 as comprehensive and GSMA serve 2011 2012 penetration mobile 2013 2014 data sources 2015 of their data for , the usefulness 56.9% this study 63.4%is not equal. 65.9%ITU mobile penetration 67.4% data measure 68.5% 69.7%all active mobile SIMs, 70.7% while GSMA 71.3% mobile penetration data 71.6% measure 75.3% SIMs and unique both total155.4% 121.8% mobile subscribers. 175.9% 160.1% In some countries, 152.5% mobile133.6% 161.9% customers have multiple active SIMs, 151.9% a practice that arises, among other reasons, when mobile customers endeavor to keep all their calls “on net” to avoid extra 75.3% charges imposed by operators for “off net” calls. Because multi-SIM practices vary significantly from country to country, ITU data have limited value in conducting a comparative assessment of teledensity outcomes across countries. Use of ITU data in this study would introduce a substantial risk that differences between countries in mobile penetration may be ascribed to differences in supply-side investment climates when they are instead due to differences in multi-SIM use practices between countries. For example, figure 3 compares ITU and GSMA mobile penetration data for Libya. The ITU data show wide swings in active SIMs, which may have little or nothing to do with supply-side investment, and data are missing from 2018 through 2020. The GSMA data show more gradual and stable growth in unique subscribers, because the data are generated by algorithmic progressions rather than actual data. Mobile penetration comparison - ITU vs GSMA for Libya 2000-2020 200% 3: Mobile penetration in Libya – ITU versus GSMA measures, 2000–20 Figure 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: MacMillan Keck, adapted from ITU and GSMA. GSMA ITU Note: GSMA = Global System for Mobile Communications; ITU = International Telecommunication Union. Despite their obvious limitations, GSMA data were used for the study to avoid data anomalies caused by variations in multi- SIM-use practices across countries. GSMA data also provide a more accurate view of how many individuals actually use mobile communications, which is a better statistical measure of teledensity. Teledensity evolution was assessed based on comparative teledensity impact during the conflict period in each country. This was accomplished by first considering actual teledensity evolution for the 21-year period from 2000 through 2020 (except in the case of South Sudan, where the assessment began in 2011, when South Sudan first became a separate country). GSMA data for actual mobile penetration levels were retrieved and tested for completeness for each country before, during, and after the conflict period. In addition, projected “but-for-the-conflict” mobile penetration levels were developed for each country during and after the conflict period. These projections required the exercise of reasonable judgments. To inform those judgments, the team considered a country’s actual penetration evolution before the conflict and the penetration evolution in neighboring countries before, during, and after the conflict to gauge the “but-for-the-conflict” projections. The adult (age 15 and over) population as a percentage of total population was also considered in each country as a potential restraint on unique subscriber penetration levels. Some wealthier countries have achieved unique subscriber penetration levels (as estimated by GSMA) well in excess of the adult population size, meaning that a sizable number of youths have and use mobile phones (or, more likely, that GSMA data, which are based on algorithmic projections, are not corrected for demographics). In less wealthy countries, adult population size typically functions to some degree as an invisible asymptote on the growth curve for unique subscriber mobile penetration. 9 The projection model adopted the most likely market 1.3 Findings and results across the case evolution scenario that would have occurred but-for- the-conflict if the conflict country had seen gradual study countries improvement in its internal investment climate factors over time and received typical levels of international aid, This section presents comparative findings and results in line with what was generally characteristic of other across all the countries. Later sections present more countries in the region. The projections thus assume a level detailed findings and results for each case study country. A of institutional reform that would have gradually improved reader wanting a deeper understanding of the qualitative the market, allowing for greater investor confidence, and quantitative data should review the separate section and anticipate the regionally competitive introduction for each country. of new technologies (3G and 4G). Benchmarking against developments in the region was employed to guide the The core output of this study, at the aggregate level, is a modeling process to ensure that the but-for-the-conflict comparison of telecom investment climate ratings with projections for a conflict country do not assume it would teledensity outcomes. This analysis brings together have become or remained an outlier in the region. This all the source and derivative data that were collected, approach attenuates but-for-the-conflict investment developed, and analyzed across all seven countries to test climate differences between countries to enable a more the core hypothesis that the degree of adverse impact on controlled assessment of whether investment climate teledensity during conflict is driven in part by internal and differences during conflict impact mobile teledensity external barriers to telecom investment, comprising two outcomes. sets of factors over which state actors (whether or not officially recognized) and international actors have some After the actual and projected mobile penetration levels control. were calculated for each country, year-on-year growth rates were derived for actual and for projected but-for- As set out in the following passages, the results of this study the-conflict mobile penetration. It was important to use demonstrate that the data strongly support the hypothesis. The teledensity growth rates, rather than actual teledensity, root causes of internal and external institutional barriers to to enable cross-country comparisons. Differences in telecom investment during periods of conflict often stem teledensity across countries are caused by many factors from circumstances over which state and international other than the internal and external telecom investment actors have some control, even during the conflict; hence, climate factors being assessed. Such other factors include, there are opportunities to improve outcomes through the for example, the strength of the economy of a country and manner by which they exercise that control. the year of measurement of teledensity (which varies due to the different timeframes of the conflicts being studied). This is powerful evidence-based information that can be Assessing growth rates partially corrects for these applied by the World Bank and other state and international differences. actors in countries affected by FCVf to fashion practical interventions to reduce the negative impact of FCV on The mobile penetration growth rate deficit for each country telecom sector performance. was derived by comparing actual penetration growth rates to projected but-for-the-conflict penetration growth rates. This enabled calculation of the average annual level of growth underperformance during the conflict period. This calculation was used to measure the impact on teledensity evolution. By comparing a country’s actual growth rate to its own potential growth rate, this measure is intended to complete the process of correcting for differences in teledensity unrelated to the internal and external investment climate factors. Finally, the study assessed the degree of correlation between the independent variables and the dependent variable. The goal was to determine whether and to what extent low scores on internal and external telecom investment climate factors impact the teledensity growth rate deficit. This evaluation concluded with an overall assessment of the implications of the findings for potential intra-conflict and post-conflict interventions by the World Bank in conflict countries. 10 1.4 Summary of the derivative data developed in the case studies Each country was rated based on the internal and external telecom investment climate criteria discussed above. For each factor, a 0 signifies unfavorable conditions, a 1 signifies uncertain conditions, and a 2 signifies favorable conditions. The maximum country score is 10 for internal factors and 10 for external factors. The investment climate results are set out in tables 1 and 2 and depicted in figure 4. Table 1: Comparative internal investment climate factor ratings for all seven countries, 2020 Internal investment climate factor AF IQ LY SO SS SY YE Market open to entry 2 2 0 2 0 1 1 Ease of private investment 2 1 0 1 0 1 0 Spectrum needs met 2 1 2 2 1 2 0 Level playing field 2 2 0 0 0 0 1 Fiscal reasonableness 1 2 1 2 0 0 0 Total 9 8 3 7 1 4 2 Source: MacMillan Keck. Note (for Tables 1 and 2): AF = Afghanistan; IQ = Iraq; LY = Libya; SO = Somalia; SS = South Sudan; SY = Syrian Arab Republic; YE = Republic of Yemen. In the table, 0 signifies unfavorable conditions, a 1 signifies uncertain conditions, and a 2 signifies favorable conditions. Table 2: Comparative external investment climate factor ratings for all seven countries, 2020 External investment climate factor AF IQ LY SO SS SY YE Military or paramilitary interference 1 1 0 1 0 1 0 International sanctions 2 2 2 1 1 1 2 Travel restrictions 2 2 0 1 1 0 0 International aid for telecommunications 2 2 0 1 0 0 0 International security intervention 2 2 0 1 0 0 0 Total 9 9 2 5 2 2 2 Source: MacMillan Keck. Each country’s teledensity growth rate deficit was derived by comparing actual mobile penetration evolution with projected but-for-the-conflict mobile penetration evolution. This involved calculating the actual average annual mobile penetration growth rate and the average annual projected but-for-the-conflict mobile teledensity growth rate over each country’s conflict period. The growth rate deficit is the percentage of the average projected but-for-the-conflict growth rate represented by the difference between the two average growth rates. 11 Figure 4: Relative internal oftelecom and external Summary investment internal ratings, 2020 climate climateinvestment and external 10 Afghanistan, 9, 9 9 Iraq, 8, 9 8 7 External investment climate 6 5 Somalia, 7, 5 4 3 Libya, 3, 2 Syria, 4, 2 2 South Sudan, 1, 2 Yemen, 2, 2 1 0 0 1 2 3 4 5 6 7 8 9 10 Internal investment climate Source: MacMillan Keck. Table 3 sets out for each country the actual and projected but-for-the-conflict annual mobile penetration growth rates over the conflict period, and the resulting growth rate deficit, alongside the internal and external factor investment climate rating totals. Together, the entries in the first, second, and fifth columns in table 3 comprise the independent and dependent variables derived from the underlying source data that will be used to test the hypothesis. Table 3: Comparative investment climate ratings and teledensity outcomes Country Internal factor External factor Actual annual Projected but- Teledensity growth investment investment mobile for-the-conflict rate deficit (%) climate rating climate rating penetration annual mobile (out of 10) (out of 10) growth rate (%) penetration growth rate (%) Afghanistan 9 9 3.09 3.22 -4 Iraq 8 9 5.53 5.98 -7 Libya 3 2 0.76 1.07 -29 Somalia 7 5 2.01 2.30 -13 South Sudan 1 2 -0.39 1.34 -129a Syrian Arab 4 2 2.15 2.58 -17 Republic Yemen, Rep. 2 2 0.70 1.67 -58 Source: MacMillan Keck. a. The teledensity growth rate deficit for South Sudan is anomalous because it compares the difference between negative and positive quantities. 12 Correlation of the mobile teledensity trend with the internal and external investment climate Figure 5 plots the relevant data from table 3 in three dimensions. Figure 5: Relationship between investment climate and mobile teledensity growth rate deficit Mobile penetration growth rate (to projected growth) deficit during conflict 10 Afghanistan, -4% 9 Iraq, -7% 8 7 External investment climate 6 Somalia, -13% 5 4 3 Yemen, -58% Syria, -17% 2 Libya, -29% 1 South Sudan, -129% 0 0 1 2 3 4 5 6 7 8 9 10 Internal investment climate Source: MacMillan Keck. Note: Bubbles indicate the size of the teledensity growth rate deficit, from table 3. The mobile penetration growth rate deficit for a country (the dependent variable) is represented by the relative size of the circle for that country. The internal and external investment climates (the independent variables) are represented by the position of the bubble in relation to the x- and y-axes. If the hypothesis being tested is correct, the size of the bubble would be expected to decrease as a country’s investment climate moves to the right along the internal hospitability rating axis or upward along the external hospitability rating axis. The outputs graphed in figure 5 are generally consistent with this expectation, with decreasing ball size moving from the lower left corner to the upper right corner. In other words, the data consistently indicate that deficits in mobile teledensity growth rates decline as internal and external investment climate ratings improve. Although all the countries saw some degradation of teledensity growth during their conflict periods, some were more adversely impacted than others. The comparative relationship between the dependent and independent variables across the seven countries strongly supports the tested hypothesis that the combination of internal and external investment climate factors that impact supply-side telecom investment directly impact the extent of the teledensity growth rate deficit during conflict. The data do not show a linear relationship between investment climate and teledensity outcomes. Teledensity improvements appear to achieve diminishing returns with further investment climate improvements, but the data show a direct relationship without exception. These results indicate that steps to improve the telecom investment climate factors during periods of conflict should improve teledensity outcomes, particularly in countries with very low internal and external investment climate ratings. The detailed country-by-country analyses also indicate that other factors may be at work and therefore may result in less optimal outcomes in some countries compared with others, notwithstanding the presence of similarly favorable investment climate factors. 13 Correlation of the mobile teledensity growth rate with the internal investment climate The correlation of the mobile teledensity growth rate deficit with internal investment climate factors (ignoring external investment climate factors) was separately tested. There is a strong correlation between internal investment climate hospitability and teledensity outcomes, as shown in figure 6. The trend curve suggests that the relationship is logarithmic rather than linear. This portends significant returns on internal investment climate improvements where the baseline is low, such as in South Sudan and the Republic of Yemen, with diminishing returns as the baseline improves. Figure 6: Relationship between internal investment climate and teledensity growth rate deficit Mobile growth rate deficit (to projected growth) during conflict as a function of internal and external investment climate 20% Afghanistan, -4% 0% Somalia, -13% Syria, -17% Iraq, -7% -20% Libya, -29% -40% Growth rate deficit Yemen, -58% -60% -80% -100% -120% South Sudan, -129% Source: MacMillan Keck. -140% 0 1 2 3 4 5 6 7 8 9 10 Combined internal and external investment climate 14 Correlation of the mobile teledensity growth rate with the external investment climate The correlation of the mobile teledensity growth rate deficit and external investment climate factors (ignoring internal investment climate factors) was also separately tested. The results are depicted in figure 7.27 The data again reveal a logarithmic relationship between external investment climate hospitability and teledensity outcomes. As with the internal investment climate, returns on external investment climate improvements, in terms of increased teledensity growth rates, diminish significantly once a threshold level of investment hospitability has been reached. Mobile Figure 7: Relationship growth between rate deficit external (to projected investment growth) climate and duringgrowth teledensity conflict as a rate function of deficit external hospitability 20% Afghanistan, -4% 0% Somalia, -13% Iraq, -7% Syria, -17% -20% Libya, -29% -40% Growth rate deficit Yemen, -58% -60% -80% -100% -120% South Sudan, -129% -140% 0 1 2 3 4 5 6 7 8 9 10 External investment climate Source: MacMillan Keck. Overall, the data suggest that the potential for increasing mobile teledensity growth rates by improving the external investment climate may be most significant when supply lines have been cut off through blockades or other military or paramilitary interference, and/or sanctions, which appear to have been most effective for South Sudan and the Republic of Yemen. The correlation for the remaining countries is more subtle, although nonetheless consistent with the hypothesis. As discussed in detail in the individual country sections, Libya and the Syrian Arab Republic may have managed to source equipment from various sources, despite EU and US sanctions. Afghanistan, Iraq, and Somalia were generally less restricted in sourcing equipment. 27 The gradual effect is however less obvious: the difference between the Syrian Arab Republic and Iraq is only 10 percent, although their external investment climate ratings range from 2 to 9. There is a strong difference in the teledensity growth rates between Syria and South Sudan, although they are both rated 2. 15 1.5 Implications for donor interventions Four of the external telecom investment climate factors lie outside the domain of intervention by the international in conflict countries donors and are thus not part of its standard toolkit. These include military or paramilitary interference, international The findings from this study have significant implications sanctions, travel restrictions, and international security for the international community considering providing intervention. The data suggest that where unfavorable support to conflict countries. Numerous studies conditions concurrently subsist on several of these four provide support for donor support to the digital sector factors, this can significantly suppress sector performance in FCV countries, by demonstrating the positive impact during a conflict. of teledensity improvements. A 1996 study, one of the earliest on the subject, found evidence of a positive causal link between telecommunication infrastructure 1.6 Lessons learned and how the and economic growth, provided that a critical mass of Bank engaged in the digital sectors of telecommunication infrastructure was present.28 More recent studies have demonstrated the positive impact that Afghanistan, Somalia and South Sudan increased broadband penetration can have on poverty Political and economic situation is volatile in FCV settings reduction and economic growth. A 2020 study, sponsored and years of conflict and fragility can leave an economy by the World Bank, found that increased 3G mobile with a range of challenges, including acute poverty and broadband access and use in Nigeria from 2010 to 2015 vulnerability, a recurrent external trade deficit and weak improved household welfare, especially in rural areas, institutions. Active insurgency and incomplete political lifting some 2.5 million people out of extreme poverty.29 A settlement can also affect a country’s progress out of 2018 International Telecommunication Union–sponsored fragility. Under these settings, the Bank must continue study of 63 countries with gross domestic product (GDP) to engage. The Bank’s engagement in the digital sector of per capita less than USD 12,000 found that a 1.0 percent Afghanistan, Somalia, and South Sudan was through various increase in mobile broadband penetration yielded a 0.2 Bank lending projects, including but not limited to the percent increase in GDP.30 A study in 2015 sponsored by Digital CASA project in Afghanistan in 2018, the SCALED- the World Bank noted threshold effects, indicating that the UP project in Somalia in 2019, etc. Various lessons can be link between broadband and economic growth is stronger learned through these programs and applied to operational once the level of 30 broadband users per 100 inhabitants cases in other FCV settings. The following describes some is reached.31 lessons learned through Bank engagements: It is intuitive, and therefore often assumed, that improvements in the investment climate factors described AFGHANISTAN: above during conflict periods would also improve The WBG has had a number of digital interventions in teledensity outcomes, with flow-through benefits to the the Afghanistan during the study period, but cooperation underlying economy and quality of life. However, to the is currently suspended following the Taliban takeover in knowledge of the research team, the study presented in 2021. The main digital project was the Afghanistan ICT this report represents the first systematic effort to assess Sector Development Project (P121755) which ran from April and document the reasonableness of this assumption. The 2011 to December 2017 and disbursed US$41.8m of the study results confirm the assumed hypothesis, indicating US$50m grant originally allocated (83.6 percent) with that taking steps to improve internal and external telecom one activity cancelled (on support for an ICT Village). The investment climate factors during periods of conflict should project development objective (PDO) was to: to expand improve teledensity outcomes, particularly when baseline connectivity, mainstream use of mobile applications in strategic levels are low. sectors in the government and support development of the local IT industry. It was processed as an Emergency Recovery Loan and implemented by the Ministry of Communications and IT (MCIT). 28 Lars-Hendrik Röller and Leonard Waverman. 1996. “Telecommunications Infrastructure and Economic Development: A Simultaneous Approach,” WZB Dis- cussion Paper No. FS IV 96-16 (Wissenschaftszentrum Berlin für Sozialforschung, Berlin), https://www.econstor.eu/bitstream/10419/50958/1/219965056. pdf. 29 Kalvin Bahia, Pau Castells, Genaro Cruz, Takaaki Masaki, Xavier Pedrós, Tobias Pfutze, Carlos Rodríguez-Castelán, and Hernan Winkler. 2020. “The Welfare Effects of Mobile Broadband Internet: Evidence from Nigeria,” Policy Research Working Paper 9230 (World Bank, Washington, DC), https://docu- ments1.worldbank.org/curated/en/626011588705072099/pdf/The-Welfare-Effects-of-Mobile-Broadband-Internet-Evidence-from-Nigeria.pdf. 30 Raul Katz and Fernando Callorda. 2018. “The Economic Contribution of Broadband, Digitization and ICT Regulation” (International Telecommunication Union, Geneva), 14, https://www.itu.int/en/ITU-D/Regulatory-Market/Documents/FINAL_1d_18-00513_Broadband-and-Digital-Transformation-E.pdf. 31 Michael Minges. 2015. “Exploring the Relationship between Broadband and Economic Growth,” Background Paper prepared for World Development Report 2016: Digital Dividends (World Bank, Washington, DC), https://documents1.worldbank.org/curated/en/178701467988875888/pdf/102955-WP- Box394845B-PUBLIC-WDR16-BP-Exploring-the-Relationship-between-Broadband-and-Economic-Growth-Minges.pdf. 16 The Implementation Completion Report (ICR), published The Bank funds, used for the pre-purchase of internet in 2018, rated the outcomes of the project as “Moderately capacity for the Federal Government and the SomaliREN, Satisfactory” and noted that the successes of the project also helped stimulate the private sector to invest in a 48km included extension of connectivity, with the national fiber ring linking some 26 different ministry sites around backbone fiber optic network (around 1,000 km) being Mogadishu. The project met or exceeded all its targets. constructed on a turnkey basis, and adoption of an Open Somalia is ranked as the cheapest country in Africa to Access Policy in 2016. All five results indicators for the purchase a GB of mobile data, and the seventh cheapest project were met or exceeded. Notably, the number of country in the world, for US$0.5032. ITU data indicates that internet users in the country grew from 15,000 in 2011 the price of a low-user basket of mobile services (70 mins to more than 3.5 million by 2017, and a reduction in the of calls, 20 SMS and 500 MB of data) for Somalia fell from average monthly retail price of internet connectivity from US$15.40 in 2015, when the project started, to US$3.70 in US$450 in 2011 to US$37 in 2017. 2019, a fall of 76 percent. 33 The ICT sector development project was succeeded by the SOUTH SUDAN Afghanistan component of the Digital CASA (Central Asia/ There have been several advisory services and analytical South Asia; P156894) project, which provided for a grant program in South Sudan, in particular the grant-funded of US$51m, approved in March 2018. But only US$4.2m technical assistance program “ICT Sector Support had been disbursed (8.2 percent) before the project’s Program” which ran from March 2012 to June 2014. The cancellation in 2021, following the Taliban takeover, when main outcome from this passage of the South Sudan it was rated as “Unsatisfactory”. The ICR noted that although Communications Act in 2012 and the conduct of workshops the operating environment for telecoms improved during and regulatory training programs, together with partners the period, for instance the level of internet usage, the the African Development Bank (AfDFB), the ITU and changes were not attributable to the project. the Commonwealth Telecommunications Organisation (CTO). The program was also used for the preparation of SOMALIA two lending programs. The second of these, which would The main digital engagement was the ICT Sector Support have financed connectivity from the Uganda border Program in Somalia, which was implemented with grant into Juba, never materialised, because of the country’s funding as a series of two projects. Phase I (P145588), descent into civil war. But one program did at least start, of the project ran from 2014 to 2016, with a budget of the South Sudan- Eastern Africa Regional Transport, Trade US$2m. Phase II (P152358) of the project ran from 2015 and Development Facilitation Program (Phase One) (SS- to 2020, with an initial budget of US$14m. The program EARTTDFP; P131426). was supplemented with additional financing of US$2m, as well as parallel financing from the European Union The SS-EARTTDFP program was implemented from May of US$1.2m. A planned third phase of the program was 2014 to September 2018, with a budget of US$255m. The covered under the SCALED-UP program (P168115). The objective of the project was to enhance regional connectivity PDO for the project was to: Support the ICT Sector in Somalia and integration of the Recipient with its Eastern Africa by contributing to establishing an enabling environment and neighbouring countries, and its access to seaports. The by encouraging efficiency and equity in access to connectivity. project was rated as “Moderately Unsatisfactory”. Though The government counterparts were the Ministry of Posts, the project planned to install a total of 340km, alongside Telecommunications and Technology (MPTT), the National the road from Juba to the Kenyan border, no fiber had been Communications Authority (NCA; created in 2017), the installed up to the time of project cancellation, because Ministry of Finance, Central Bank of Somalia (CBS) and the of the ongoing civil war. Nevertheless, on the Kenyan side SomaliREN, the national Research and Education Network of the border, the same regional program has succeeded in laying fiber alongside the road that runs 640 km from The ICR, published in 2021, rated the outcomes of the Eldoret to the South Sudan border. Thus, as and when project as “Satisfactory” and noted that the successes of the the fiber on the South Sudan side of the border is laid, the project the passage of the Communications Act in 2017, as planned connectivity program can be completed. The Juba well as improved sector performance and monitoring was to Kenya fiber project has now been taken up under a new also achieved by strengthening the MPTT and establishing pipeline program, Eastern Africa – Regional Digital Integration the NCA. A significant achievement was the groundwork Program (P176181). done for the landing of the first submarine cable in Somalia, in 2013, with the arrival of the EASSy cable, part-financed by IFC. 32 Cable.co.uk, April 2021 survey. 33 https://www.itu.int/net4/ITU-D/ipb/#ipbtimeseries-tab. 17 Lessons Learned 1.7 The Bank’s Digital Investment in FCV economies Institutional instabilities. All three projects suffered from institutional instability. Ministers within various ministries, The World Bank has a growing portfolio of lending (mainly and heads of various organizations for which engagements in the form of grants) to FCV economies, and the portfolio and operations were necessarily changed several times of the Digital Development Global Practice is becoming during the project implementation (the Minister with an important part of this. Currently active digital projects responsibility for Telecoms changed five times during are worth more than 1.5 billion US dollars (US$1,545.8m) project implementation in Somalia, for instance), and this spread across 17 different FCV countries and territories. is characteristic for projects in FCV settings. This was Pipeline national and regional projects worth a further also the case in Afghanistan, and meant critical relations US$1,168m are under preparation, covering 7 different needed to be re-established multiple times and project countries, of which four are not covered in ongoing priorities re-agreed upon when there was a change in projects. Thus, in total, 21 out of 37 FCV countries and leadership in organizations. The changes of leadership territories (56.8 percent) are current covered by actual within organizations significantly slowed commencement or planned Digital Development operations. Recently of operations as key policies within the project typically approved projects and pipeline projects in FCV countries require deep institutional backing and new decision makers include the following: and leaders must be re-acquainted with these priorities. Intra-governmental discoordination. A lack of coordination Ongoing projects between government agencies and stakeholders has, in • Afghanistan Digital CASA project (US$51m, approved many cases, slowed project implementation, despite efforts in March 2018) to ensure alignment from various government agencies. • Burkina Faso e-Government project (US$20m, This was the case in all three countries. In South Sudan, approved in Jan 2017) for instance, the imperative of the Ministry of Finance to • Burundi Digital Foundations Project (US$50m, raise tax revenues led eventually to the cancellation of the approved in June 2022) license of the leading mobile operator at the time (Vivacell), • RCIP-4 Comoros (US$32m, in two phases, approved in which was adjudged to have defaulted on tax liabilities (even September 2013 and Nov 2018) though it had a license which provided for a tax waiver). • Digital Cameroon (US$100m, approved in September One outcome of this was that hundreds of thousands of 2021) customers lost service overnight. As a result of conflicting • Congo Digital Acceleration Program (US$100m, ministerial interest, coordinating and implementing the approved in June 2022) projects was difficult, delaying commencement of project • Digital Ethiopia (US$200m), approved in April 2021) activities, and hampering institutional ownership of results. • Haiti Digital Acceleration Program (US$60m, approved in October 2020) Industry push-back and regulatory capture. Under FCV • Kosovo Digital Economy (US$25m, approved in July settings, the digital sector can still operate, and even thrive, 2018) under unregulated conditions, as was the case in Somalia. • Nigeria Digital Identification for Development Project But this allows strong and entrenched stakeholders and (US$430m, approved in February 2020) telecom operators to benefit from this regulatory vacuum • Digital Marshall Islands Project (US$30m, approved in by establishing dominant market positions, for instance, August 2021) with limited payment of formal taxes. As a result, the Bank’s • Federated States of Micronesia Connectivity Project engagement can face resistance from stakeholders within (U$30.8m, approved in March 2020) the digital sector and industry players, and reform efforts • Mozambique Digital Acceleration Project (US$200m, can face significant opposition from vested interests approved in July 2022) that prefer the status quo. This has also been the case in • Niger Smart Villages Project (US$100m, approved in Afghanistan. By contrast in South Sudan, the operators July 2021) have supported the World Bank’s recommendations on • Scaled-up Somalia (US$68m in two phases, approved fiscal policy, as these were seen as much more moderate in March 2019 and June 2020) than those of the Government. As a general point, industry • Tuvalu Telecoms and ICT Development Project players claim to be burdened by informal taxes necessary (US$29m, approved in January 2019) to pay for security to operate within an FCV setting. • Digital West Bank and Gaza Project (US$20m, approved in March 2021) 18 Pipeline projects 1. Digital economy, enabling legal and regulatory • DR Congo Digital Foundations (US$400m, for approval environment (US$20m). This is intended to put in FY24 a competitive market structure in place, with the • Ethiopia Digital ID for Inclusion and Services licensing of the Safaricom Ethiopia consortium as a new (US$300m, for approval in FY24) market entrant, supporting the partial privatization • Mali Digital Transformation Program (US$100m, for of Ethio Telecom, the incumbent, and strengthening approval in FY23) regulatory authority, the Ethiopian Communications • East African Regional Digital Integration Program Authority (ECA). Also under this sub-component is a (covering Ethiopia, Somalia and South Sudan) pilot implementation of Ethiopia’s Digital ID program. (US$172m, for approval in FY23) Subsequently, the Government of Ethiopia has • West African Regional Digital Integration Program requested support for a full implementation of Digital (covering, inter alia, Guinea Bissau) (US$138m, for ID under a standalone project. approval in FY23). 2. Digital government and connectivity (US$133m). The The World Bank’s digital investments have generally biggest component in the project, the aim is to develop followed a three-stage template. the capacity of the Government to deliver digital services, and to crowd-in private sector investments • Digital Foundations projects. These are intended for to improve regional and domestic connectivity countries just embarking on the first steps of their infrastructure, to connect public institutions and digital journey, as is typically the case in most FCV educational institutions to broadband internet. It will countries. For these countries, the digital offer would build upon the market opening measures supported be focused on the first pillar – broadband connectivity in component 1 to stimulate private-sector-led access and use – with some of the second pillar too – investment to expand the geographic coverage of Digital Data Infrastructure. broadband networks, to better serve government institutions, businesses and citizens across the country. • Digital Acceleration projects. These projects are designed for countries a little further along their 3. Digital business and entrepreneurship (US$40m). This digital journey, with higher rates of adoption, and a component aims to nurture digital entrepreneurship more stable liberalized market environment, or where and incentivize digital businesses to train, provide the project is following on from an earlier project digital devices, and employ Ethiopians to participate focused on the infrastructure and market structure in the digital economy, and thereby to generate fundamentals. As well as the first two pillars, these income and jobs. It includes a technical assistance projects would typically focus additionally on fostering sub-component to the Ministry of Innovation and digital jobs and entrepreneurship and fostering the Technology for digital market regulations and trust environment (data protection and cybersecurity), implementation. and digital platforms (such as Digital ID). 4. Project management (US$7m). This is a standard • Digital Transformation projects. Though fewer in component in all Bank projects and supports the number (mainly because upper middle income and operation of a project implementation unit. high income countries don’t often need to borrow), these projects would include all elements in the digital 5. Contingent emergency response component (US$0). offer, but particularly focused on transformation in This has become a recommended element in all World particular sectors, such as education, healthcare or Bank programs, since the COVID-19 epidemic, and social protection. allows projects to be quickly adapted and financed to respond to emerging crises. As such, it is particularly A good example of a recent lending project designed for an appropriate for FCV countries. FCV country would be the Ethiopia Digital Foundations program (P171034), a US$200m investment project finance (IPF) approved in April 2021, and currently under implementation to 2026. The project has five components: 19 Although Digital Ethiopia is a standalone digital • In Somalia, the telecom story is already outlined in the development project, an increasingly common scenario report, but it is worth highlighting the importance of is for the World Bank’s “digital offer” to be embedded in the World Bank’s support to the ICT sector as being projects from other sector. A few recent examples include: an important state-building engagement – bringing a • In Sudan, an alert system, financed by the World Bank previously unregulated sector into dialogue with the And implemented by the Social Protection and Justice Government in a way which not only increased the (SPJ) Global Practice, seeks to match nomadic herders credibility of the state system (as an alternative to with water sources and allow owners of water sources conflict) but also improved the potential to i) increase to prepare for and ‘market’ water to nomadic herders. or social protection revenue; and ii) bring potentially This helps mitigate the potential for conflict between illicit fund flows into formal financial systems; the two communities; • ICTs can also help to address the trust deficit in • In Pakistan, a team from Social Sustainability and FCVs. There are many different examples of how Inclusion (SSI) used Big Data from social media to eGovernance, and in particular eProcurement, understand social and political dynamics in former can bring greater credibility and trust in low trust Federally Administered tribal areas of the country and environments. An example would be the introduction support a better understanding of what was expected of eProcurement in Aceh, a fragile region of Indonesia, from the state in these areas – thus potentially during post-tsunami reconstruction. This was a post- supporting improvements in the social contract; civil war context where trust in the state was very low. The eProcurement technology resulted in greater • Linked to the social contract – Africa’s Voices34 is public confidence in the Government’s reconstruction also a good example of use of mobile phone outreach efforts and also a reduction in the cost of goods and to communities who would otherwise not be reached services being procured. This latter point was due in FCV contexts. Similar mobile phone based citizens to the transparency of the system by not allowing/ engagement have been used in many FCV countries requiring bids that were “enhanced’ in price; and the Bank has used this type of platform for M&E in northern Mali, and for school attendance monitoring in • Relatively simple digital solutions for FCV countries DR Congo, for example; can often yield the best results – for example, the Mogadishu city government in Somalia increased revenue collection by digitizing licensing for small public vehicles which were registered using a bar code. 34 https://www.africasvoices.org/. 20 Country Case Studies 21 2 The Republic of Afghanistan This component of the study assesses the impact on the mobile market in Afghanistan of the conflict associated with the invasion by Nato-led forces in 200135 and continuing through the end of 2020, when the US-led military presence and internal conflict between the Taliban and the officially recognized Afghan government were still ongoing. Events occurring in 2021, including the collapse of the Afghan government to the Taliban and the subsequent full withdraw of US-led forces, are not considered here as they fall outside the period under consideration. 2.1 Afghan context The following passages provide information on Afghanistan’s geography, demographics, and economy; the conflict; and the telecom sector. Map 1: Afghanistan CH INA mu 64 ° 66 ° 68 ° 70 ° 72 ° Murgho 74 ° A Da a -ye AFGHANISTAN UZBEKISTAN rya b ry Pa Da nj Kerki Qurghonteppa (Kurgan-Tyube) TAJIKISTAN Mary Kiroya iz rm Dusti BADAKHSHAN Khorugh Mu Te Keleft Rostaq Fayz Abad rgab mi r Qala-I-Panjeh Andkhvoy JAWZJAN Jeyretan Pa KUNDUZ Taloqan TURKMENISTAN Shiberghan Mazar-e-Sharif Kunduz Jorm h Eshkashem s Dowlatabad BALKH Kholm Khanabad TAKHAR u K Baghlan Farkhar Tedzhen 36 ° Sari Pul Shulgarah Aybak uDowshi 36 ° Maymana d SAMANGAN BAGHLAN n Gilgit y shg FARYAB Tokzar i Gu Qeysar H PANJSHER AFGHANISTAN ISLAMIC Gushgy SARI PUL Bazarak n ar Mahmud-e- Jammu Ku BADGHIS NURISTAN Towraghondi Raqi Taybad runs KUNAR Qala-e-Naw Mo rghab BAMYAN Chaharikar N Po and KAPISA MA PARWAN Asad Abad Dowlat Bamyan Mehtarlam LAGH Ha Herat Karokh Owbeh Chaghcharan Yar Kabul Kashmir rirud Maydan Jalalabad Shahr KABUL WARDAK Mardan 34 ° DAY NANGARHAR 34 ° HERAT GHOR LOGAR KUNDI Khy Pul-e-Alam Islamabad REPUBLIC Peywar Pass Peshawar rP be d ass Nili an Gardez lm Ghazni He Rawalpindi - GHAZNI PAKTYA KHOST Shindand Qarah Bagh Khost (Matun) Anar Darreh Khas Uruzgan Sharan Bannu PAKISTAN URUZGAN b F ARAH da an ru gh Ar t Ha Farah Now Zad Tirin Kot PAKTIKA ZABUL ah 32 ° Kajaki ra h ar F Lu Tank 32 ° OF m Qalat nak Delara -e r Ta wd Ro Lashkar Gah National capital sh Kha Kandahar IRAN Indus Zhob Provincial capital Kadesh Zabol Town, village Zaranj HILMAND Spin Buldak The boundaries and names shown and the designations Airports  used on this map do not imply official endorsement or Chaman INDIA acceptance by the United Nations. NIMROZ Dotted line represents approximately the Line of Control International boundary in Jammu and Kashmir agreed upon by India and Pakistan. Hilmand Deh Shu KANDAHAR The final status of Jammu and Kashmir has not yet been agreed upon by the parties. Provincial boundary Chehar Main road 30 ° Borjak Quetta 0 50 100 150 200 250 km 30 ° Secondary road Zahedan Gowd-e Railroad Zereh 0 50 100 150 mi 62 ° 64 ° 66 ° 68 ° 70 ° 72 ° 74 ° Map No. 3958 Rev. 7 UNITED NATIONS Department of Field Support Source: UN Geospatial > Afghanistan (June 1, 2011), https://www.un.org/geospatial/content/afghanistan. June 2011 Cartographic Section 35 https://www.nato.int/cps/en/natohq/topics_8189.htm 22 Afghanistan’s geography, demographics, and Its primary commodity exports in 2019 were gold, grapes, economy opium, fruits and nuts, insect resins, cotton, handwoven Afghanistan is located in South Asia, northwest of Pakistan carpets, soapstone, and scrap metal. The labor force in 2020 and east of the Islamic Republic of Iran (map 1). It is also was almost 10.7 million.44 Unemployment was 11.7 percent bordered by Turkmenistan to the northwest, Uzbekistan in 2020.45 In 2016, over half the population lived below the to the central north, Tajikistan to the northeast, and China poverty line. In 2019, access to electricity (including on- to the extreme northeast along a short 91-kilometer (km) grid and off-grid supplies) was 97.7 percent,46 53 percent boundary. Afghanistan is a landlocked country. had access to sanitary facilities, and 70 percent had access to treated drinking water. The adult literacy rate was 43 Afghanistan has a population of about 39 million36 and a percent in 2018, including 55.5 percent of males and 29.8 land area of 652,860 square km (about 252,071 square percent of females.47 miles).37 The country’s population has clusters in the foothills and periphery of the rugged Hindu Kush range, The conflict in Afghanistan and smaller groups are found in many of the country’s As of this report’s publication, the Taliban has regained interior valleys. Generally, the east is more densely settled, control over Afghanistan. However, this component of and the south is sparsely populated. About 26 percent of the study assesses the impact of conflict on the mobile the population lives in urban areas.38 Kabul, the capital, has market in Afghanistan from 2001 through 2020 only, a population of about 4.3 million.39 Life expectancy at birth which continued for most of the 21-year period covered by was 64.8 years in 2019.40 this study. The inception of the conflict being studied was marked by the October 7, 2001, invasion and subsequent The terrain is mostly rugged mountains, with plains in the occupation of Afghanistan by a US-led coalition after the north and southwest. The Hindu Kush mountain range, Taliban refused to turn over Osama bin Laden following the which runs northeast to southwest, divides the northern terrorist attacks on the World Trade Center on September provinces from the rest of the country. The highest peaks 11, 2001. are in the northern Vakhan in the Wakhan Corridor. About 46 percent of the land area is used as permanent pasture and The 2001 invasion was only the most recent of an ongoing 12 percent is arable land used for farming. Afghanistan has cycle of war in Afghanistan. Before the inception of the an arid continental climate with considerable temperature US-Afghan-Taliban conflict in 2001, Afghanistan had been and precipitation variation between seasons. Temperatures through continuous conflict and civil war for over 20 years, also vary greatly by altitude, with mountainous regions tracing back to the 1973 coup that ended the country’s experiencing temperatures well below freezing on an annual post-colonial monarchy. basis, yet the southern arid regions regularly experience temperatures over 35°C. Precipitation varies widely The US-led coalition’s military intervention in Afghanistan with topography – the southwestern arid region typically targeted the Taliban and al-Qaeda. The Taliban was removed experiences little precipitation and the northeastern from power in December 2001 and an interim Afghan mountain range experiences heavy precipitation.41 government was formed, with extensive international experience, under Hamid Karzai. At the time, he was an Gross domestic product (GDP) per capita, based on influential former deputy foreign minister, head of the purchasing power parity, was nearly USD 2,088 in 2020.42 Popalzai tribe, and had led tribes around Kandahar against GDP composition by sector of origin in 2016, excluding the Taliban. Karzai became a key political figure after the opium, was 23.0 percent agriculture, 21.1 percent industry, removal of the Taliban regime in late 2001.48 and 55.9 percent services.43 Afghanistan’s primary natural resources are natural gas, petroleum, coal, copper, chromite, talc, barites, sulfur, lead, zinc, iron ore, salt, precious and semiprecious stones, and arable land. 36 World Bank > DataBank > World Development Indicators > Afghanistan (2020), https://databank.worldbank.org/source/world-development-indicators/ Type/TABLE/preview/on. 37 World Bank > Data > Land Area > Afghanistan (2020), https://data.worldbank.org/indicator/AG.LND.TOTL.K2?locations=AF. 38 World Bank > DataBank > Health Nutrition and Population Statistics > Afghanistan (2020), https://databank.worldbank.org/source/health-nutri- tion-and-population-statistics/Type/TABLE/. 39 World Population Review > World Cities > Kabul Population (2020, 2021), https://worldpopulationreview.com/world-cities/kabul-population. 40 World Bank > DataBank > World Development Indicators > Afghanistan (2020). 41 World Bank Group > Climate Change Knowledge Portal > Country > Afghanistan > Current Climate > Climatology 1991–2020 (2021), https://climate- knowledgeportal.worldbank.org/country/afghanistan/climate-data-historical. 42 World Bank > DataBank > World Development Indicators > Afghanistan (2020). 43 IndexMundi > Afghanistan GDP composition by sector (2021), https://www.indexmundi.com/afghanistan/gdp_composition_by_sector.html. 44 World Bank > DataBank > Health Nutrition and Population Statistics > Afghanistan (2020). 45 World Bank > DataBank > Health Nutrition and Population Statistics > Afghanistan (2020). 46 World Bank > DataBank > World Development Indicators > Afghanistan (2019). 47 World Bank > DataBank > Health Nutrition and Population Statistics > Afghanistan (2020). 48 “Hamid Karzai,” Britannica (2021), https://www.britannica.com/biography/Hamid-Karzai. 23 Afghanistan adopted a Constitution in 2004. Karzai was Afghanistan’s telecom sector elected president soon thereafter and again in 2009. The As a result of near continuous conflict since 1978 and first peaceful transfer of power in the officially recognized repressive Taliban rule since 1996, Afghanistan had little government occurred in 2014, when Ashraf Ghani was telecom infrastructure at the time of the 2001 Nato-led elected president to succeed Karzai. The US-led coalition invasion. formally ended its combat mission in 2014, and the Afghan National Defense and Security Forces assumed Telecommunications had first been introduced in responsibility for the country’s security.49 From 2014 Afghanistan in 1908 and had achieved slow but steady through 2020, the international coalition focused its efforts progress until the 1978 Soviet invasion. In 2001, the on anti-insurgency operations against the Taliban, al- responsible government ministry, the Ministry of Qaeda, and the Islamic State of Khorasan, while supporting Communications and Information Technology (MCIT), had the development of the officially recognized government. been in existence since 1955, when it was then the Ministry The war remained largely a stalemate for nearly six years, of Communications. The ministry operated a small wireline despite a small increase in US troops in 2017, continuing telephone network, built by the Soviets during their combat missions, and a shift in US military strategy to occupation, which sustained heavy damage during the target Taliban revenue sources, which involved air strikes 2001 Nato-led invasion.55 against drug labs and opium production sites.50 Afghanistan also had one mobile network by 2001. Afghan Following their removal from power in Kabul, Taliban Wireless Communication Company offered mobile voice leaders continued to operate from remote locations in service in Kabul and Kandahar, the Taliban’s political Pakistan, often employing paid foot soldiers in Afghanistan, base in the south. Afghan Wireless had been established and waged guerilla warfare against the internationally in 1998 as a joint venture between the Ministry of recognized government and coalition troops. By 2019, Communications, controlled by the Taliban, and Telephone almost half the districts in Afghanistan were not fully under Systems International from the United States. The US the control of the official government, with 33.9 percent company was led by Eshan Bayat, an Afghan-American contested and 12.3 percent under direct Taliban control. entrepreneur with backing from British, Swedish, and US The United States and the Taliban signed a peace agreement investors. It was forced to exit the venture in 1999 after on February 29, 2020, setting a timeline for withdrawal of the US government prohibited US companies from doing US troops and a pledge by the Taliban to prevent terrorism – business in Afghanistan. Following the US invasion in but the violence continued.51 Afghanistan’s 2020 elections 2001, Afghan Wireless, then controlled by Taliban-linked for the officially recognized government were disputed, officials in Kabul, continued to provide local, long-distance, and this led to competing inaugural ceremonies.52 and international calling services because its network continued to function “relatively well” following the initial Just as the United States and its allies were completing their invasion.56 withdrawal of all non-Afghan forces from Afghanistan,53 the Taliban retook control of the country in mid-August 2021, entering Kabul to find that Afghanistan’s elected president and internationally recognized leader, Ashraf Ghani, had fled the country as they approached.54 These post-2020 events are not reflected in the following analysis of this report. 49 “Global Conflict Tracker: War in Afghanistan” (Council on Foreign Relations, New York, last updated October 15, 2021), https://microsites-live-backend.cfr. org/global-conflict-tracker/conflict/war-afghanistan. 50 See Council on Foreign Relations > Timeline > The U.S. War in Afghanistan (2021), https://www.cfr.org/timeline/us-war-afghanistan. 51 “Global Conflict Tracker: War in Afghanistan” (Council on Foreign Relations, New York, last updated October 15, 2021), https://microsites-live-backend.cfr. org/global-conflict-tracker/conflict/war-afghanistan. 52 Mujib Mashal, “Ghani Takes the Oath of Afghan President. His Rival Does, Too,” The New York Times (March 9, 2020), https://www.nytimes. com/2020/03/09/world/asia/afghanistan-president-inauguration-ghani-abdullah-.html. 53 See, for example, Phil Stewart and Idrees Ali, “Last U.S. Troops Depart Afghanistan after Massive Airlift Ending America's Longest War,” Reuters (August 30, 2021), https://www.reuters.com/world/last-us-forces-leave-afghanistan-after-nearly-20-years-2021-08-30/. 54 See, for example, Joseph Krauss, “Taliban Take Over Afghanistan: What We Know and What’s Next,” AP News (August 17, 2021), https://apnews.com/ article/taliban-takeover-afghanistan-what-to-know-1a74c9cd866866f196c478aba21b60b6. 55 See Simon Romero, “A Nation Challenged: The Communications; Afghan Phone Links Are an American Legacy,” The New York Times (November 12, 2001), https://www.nytimes.com/2001/11/12/business/a-nation-challenged-the-communications-afghan-phone-links-are-an-american-legacy.html. 56 See Simon Romero, “A Nation Challenged: The Communications; Afghan Phone Links Are an American Legacy,” The New York Times (November 12, 2001), https://www.nytimes.com/2001/11/12/business/a-nation-challenged-the-communications-afghan-phone-links-are-an-american-legacy.html. 24 Shortly after the US-led coalition had gained control of The government established Afghan Telecom with an initial Afghanistan, the international community undertook capital contribution of USD 2 million and invested another reconstruction of the country’s physical and social USD 250 million by 2012. When it was formed in 2005, infrastructure. Beginning in 2002, the international Afghan Telecom inherited all the state-owned telecom community established a steering committee of donor infrastructure and services, including public projects such nations co-chaired by the United States, Japan, Saudi as the government’s communication network, the district Arabia, and the European Union to ensure coordination communication network, and the village communication of donor assistance and provide strategic support for network. It also provided commercial fixed and mobile redevelopment.57 (CDMA) services and operated the only nationwide fiber optic backbone. According to its bylaws, Afghan Telecom The effort implemented “best economic development was authorized to provide unified telecom services practices” through a private sector–led approach with throughout the country and cross-border transit telecom technical and financial support from international donors.58 services outside Afghanistan. Registered as a business After removing the Taliban from power in 2001, the US entity with the Afghanistan Investment Support Agency, government lifted the prohibition on participation by it was also expected to operate based on open market US-based Telephone Systems International in Afghan principles and was subject to the same rules and regulations Wireless.59 In April 2002, Afghan Wireless received as privately owned telecom operators.64 Efforts in 2008 an interim authorization to provide Global System for to privatize state-owned Afghan Telecom, the incumbent Mobile Communications (GSM) service in Afghanistan.60 fixed line operator and beneficiary of state investments in A longer term GSM license was issued to Afghan Wireless a national wholesale fiber network, proved unsuccessful. in 2003 on payment of a USD 5 million license fee.61 Also In 2013, Afghan Telecom (operating as Salaam Telecom) in 2003, Telecommunication Development Company was issued a 3G spectrum license, and in February 2014, it of Afghanistan (operating as Roshan) was awarded the launched 3G service.65 second GSM license.62 Afghan Telecom, established in September 2005 through a presidential decree as a wholly In late 2010, the Afghanistan Telecom Regulatory Authority state-owned enterprise, deployed a Code Division Multiple (ATRA) began assessing appropriate spectrum license Access (CDMA) mobile network in 2006. Also in 2006, two fees for the noncompetitive award of five 3G licenses to additional mobile licenses were issued, one to Etisalat and incumbent mobile operators and market readiness for the other to Investcom (operating as Areeba), which was competitive introduction of two new 3G entrants. Each later acquired by MTN. A sixth mobile operator, Wasel spectrum license (for both incumbents and new entrants) Telecom, was licensed in 2006 to operate a CDMA network would assign 2×10 megahertz (MHz) in the 2.1 gigahertz in 22 districts in northern Afghanistan and its licensed band.66 Afghan Telecom was automatically awarded its 3G territory was extended to the entirety of Afghanistan in spectrum license due to its status as a unified licensee. In 2014.63 March 2011, Etisalat announced plans to invest USD 100 million during 2012 and 2013 in a 3G network that would be launched in late 2012.67 Roshan also announced in April 2011 that it was planning to invest USD 100 million for the introduction of 3G in late 2011 or early 2012.68 57 See Ron van Rooden, “Overview,” in Reconstructing Afghanistan, edited by Adam Bennett (International Monetary Fund, Washington, DC, 2005), 1–2, https://www.imf.org/external/pubs/nft/2005/AFG/ENG/REAF.pdf. 58 See Ron van Rooden, “Overview,” in Reconstructing Afghanistan, edited by Adam Bennett (International Monetary Fund, Washington, DC, 2005), 3–5, https://www.imf.org/external/pubs/nft/2005/AFG/ENG/REAF.pdf. 59 By 2012, Telephone Systems International reportedly held an 80 percent interest in Afghan Wireless. See Jalal Shams, “First Ever Spectrum Auction in the History of Afghanistan,” Kabul Times (July 12, 2021), https://thekabultimes.gov.af/first-ever-spectrum-auction-in-the-history-of-afghanistan/. See also Javid Hamdard The State of Telecommunications and Internet in Afghanistan – Six Years Later 2006-2012 (US Agency for International Development, Washing- ton, DC, 2012), 13, https://reliefweb.int/report/afghanistan/state-telecommunications-and-internet-afghanistan-six-years-later-2006-2012. 60 See Caio Castro, “Afghan Telecom Sector a Big Question Mark after Taliban Take-Over,” 6GWorld (September 6, 2021), https://www.6gworld.com/exclu- sives/afghan-telecom-sector-a-big-question-mark-after-taliban-take-over/. 61 See Caio Castro, “Afghan Telecom Sector a Big Question Mark after Taliban Take-Over,” 6GWorld (September 6, 2021), https://www.6gworld.com/exclu- sives/afghan-telecom-sector-a-big-question-mark-after-taliban-take-over/. 62 See Caio Castro, “Afghan Telecom Sector a Big Question Mark after Taliban Take-Over,” 6GWorld, 6GWorld (September 6, 2021), https://www.6gworld. com/exclusives/afghan-telecom-sector-a-big-question-mark-after-taliban-take-over/. 63 See Jalal Shams, “First Ever Spectrum Auction in the History of Afghanistan,” Kabul Times (July 12, 2021), https://thekabultimes.gov.af/first-ever-spec- trum-auction-in-the-history-of-afghanistan/. 64 See Javid Hamdard, The State of Telecommunications and Internet in Afghanistan – Six Years Later 2006-2012 (US Agency for International Development, Washington, DC, 2012), 12–13, https://reliefweb.int/report/afghanistan/state-telecommunications-and-internet-afghanistan-six-years-later-2006-2012. 65 See Salaam > Home > About Us > Introduction (2021), https://www.salaam.af/en/about/first/first. See also Halberd Bastion Pty Ltd > Home > Intelli- gence > Mobile Networks > Salaam (2021), https://halberdbastion.com/intelligence/mobile-networks/salaam. 66 See “ATRA Calls for Consultant to Assist with 3G & 4G Spectrum Valuation,” CommsUpdate (TeleGeography, Washington, DC, November 15, 2010), https://www.commsupdate.com/articles/2010/11/15/atra-calls-for-consultant-to-assist-with-3g-4g-spectrum-valuation/. 67 See “Etisalat to Invest USD100 Million in Afghan Arm,” CommsUpdate (TeleGeography, Washington, DC, March 14, 2011), https://www.commsupdate. com/articles/2011/03/14/etisalat-to-invest-usd100-million-in-afghan-arm/. 68 See “Roshan Plans for 3G Intro,” CommsUpdate (April 27, 2011), https://www.commsupdate.com/articles/2011/04/27/roshan-plans-for-3g-intro/. 25 In July 2011, ATRA launched a tender for potential new • Afghan Wireless finally closed on its 3G spectrum entrants into the 3G market and notified the incumbent license in March 2014.80 mobile operators that they could acquire 3G spectrum at the auction reserve price of USD 25 million.69 None of Soon after awarding all the 3G spectrum licenses, in the three potential new entrants submitted a qualifying May 2014, MCIT announced that the introduction of technical bid.70 Multiple incumbents proceeded with 3G 4G was coming in the near future.81 Some three years investments under this program: later, in February 2017, MCIT announced that it would • Etisalat launched 3G service in March 2012.71 Etisalat publish the government’s 4G policy shortly and asked began upgrading to offer 3.75G service over its new interested parties to contact ATRA regarding the potential spectrum in August 2012.72 In February 2013, Etisalat introduction of 4G services.82 Afghan Wireless launched announced that it had successfully completed a 4G 4G service in May 2017.83 In October 2018, MCIT trial using its licensed spectrum that would support announced a consultation on the licensing process for transmissions of up to 100 megabits/second,73 only additional 4G spectrum.84 Etisalat launched 4G service in to be quickly reprimanded by MCIT and ATRA, who February 2019.85 In September 2019, state-owned Salaam denied granting Etisalat a 4G license, trial permissions, (Afghan Telecom) announced plans to launch 4G service or rights to use spectrum resources for 4G services.74 in early 2020,86 and it proceeded to launch the service in • MTN secured a 3G spectrum license in June 2012 and April 2020. At that time, neither MTN nor Roshan had yet planned to launch service.75 launched 4G service.87 • Roshan closed on its 3G spectrum license in September 201276 and launched 3G service in April 2013.77 • In November 2012, MCIT announced that it was investing USD 100 million over the next two years in 2G and 3G deployment by Afghan Telecom, which then operated a CDMA network that had been losing customers to other mobile networks.78 Afghan Telecom launched its 2G and 3G services under the Salaam brand in February 2014.79 69 See “Etisalat Launches 3G Network in Afghanistan,” CommsUpdate (TeleGeography, Washington, DC, March 19, 2012), https://www.commsupdate.com/ articles/2012/03/19/etisalat-launches-3g-network-in-afghanistan/. See also Javid Hamdard, The State of Telecommunications and Internet in Afghanistan – Six Years Later 2006-2012 (US Agency for International Development, Washington, DC, 2012), 43, https://reliefweb.int/report/afghanistan/state-tele- communications-and-internet-afghanistan-six-years-later-2006-2012. 70 See also Javid Hamdard, The State of Telecommunications and Internet in Afghanistan – Six Years Later 2006-2012 (US Agency for International Develop- ment, Washington, DC, 2012), 43, https://reliefweb.int/report/afghanistan/state-telecommunications-and-internet-afghanistan-six-years-later-2006-2012. 71 See “Etisalat Launches 3G Network in Afghanistan,” CommsUpdate (TeleGeography, Washington, DC, March 19, 2012), https://www.commsupdate.com/ articles/2012/03/19/etisalat-launches-3g-network-in-afghanistan/. 72 See “Etisalat Launches ‘3.75G’ in Herat,” CommsUpdate (TeleGeography, Washington, DC, August 4, 2012), https://www.commsupdate.com/arti- cles/2012/08/14/etisalat-launches-3-75g-in-herat/. 73 See “Etisalat Bags Another First with LTE Trial,” CommsUpdate (TeleGeography, Washington, DC, February 20, 2013), https://www.commsupdate.com/ articles/2013/02/20/etisalat-bags-another-first-with-lte-trial/. 74 See “ATRA Challenges Etisalat’s ‘Misleading’ 4G Announcement,” CommsUpdate (TeleGeography, Washington, DC, February 20, 2013), https://www. commsupdate.com/articles/2013/02/22/atra-challenges-etisalats-misleading-4g-announcement/. 75 See “MTN Bags Second Afghan 3G Licence,” CommsUpdate (TeleGeography, Washington, DC, June 21, 2012), https://www.commsupdate.com/arti- cles/2012/06/21/mtn-bags-second-afghan-3g-licence/. 76 See “Roshan Bags Third 3G Licence,” CommsUpdate (TeleGeography, Washington, DC, September 24, 2012), https://www.commsupdate.com/arti- cles/2012/09/24/roshan-bags-third-3g-licence/. 77 See “Roshan Wades into 3G Market,” CommsUpdate (TeleGeography, Washington, DC, April 16, 2013), https://www.commsupdate.com/arti- cles/2013/04/16/roshan-wades-into-3g-market/. 78 See “Incumbent Inks USD32m GSM/3G Rollout Deal with ZTE,” CommsUpdate (TeleGeography, Washington, DC, November 22, 2012), https://www. commsupdate.com/articles/2012/11/22/incumbent-inks-usd32m-gsm3g-rollout-deal-with-zte/. 79 See “Aftel Launches GSM, 3G Services,” CommsUpdate (TeleGeography, Washington, DC, February 10, 2014), https://www.commsupdate.com/arti- cles/2014/02/10/aftel-launches-gsm-3g-services/. 80 See “MCIT Awards Final 3G Licence,” CommsUpdate (March 20, 2014), https://www.commsupdate.com/articles/2014/03/20/mcit-awards-final-3g-li- cence/. 81 See “4G on the Horizon for Afghanistan,” CommsUpdate (TeleGeography, Washington, DC, May 21, 2014), https://www.commsupdate.com/arti- cles/2014/05/21/4g-on-the-horizon-for-afghanistan/. 82 See “MCIT Paves the Way for 4G Launch,” CommsUpdate (TeleGeography, Washington, DC, February 23, 2017), https://www.commsupdate.com/arti- cles/2017/02/23/mcit-paves-the-way-for-4g-launch/. 83 See “AWCC Rolls Out LTE to Herat and Baghlan,” CommsUpdate (TeleGeography, Washington, DC, December 6, 2017), https://www.commsupdate.com/ articles/2017/12/06/awcc-rolls-out-lte-to-herat-and-baghlan/. 84 See “ATRA Begins Consultation on 4G Spectrum and Allocation Process,” CommsUpdate (TeleGeography, Washington, DC, October 12, 2018), https:// www.commsupdate.com/articles/2018/10/12/atra-begins-consultation-on-4g-spectrum-and-allocation-process/. 85 See “Salaam Launches 4G in Kabul,” CommsUpdate (TeleGeography, Washington, DC, April 16, 2020), https://www.commsupdate.com/arti- cles/2020/04/16/salaam-launches-4g-in-kabul/. 86 See “Aftel Plots 4G Launch by Year-End,” CommsUpdate (TeleGeography, Washington, DC, September 26, 2019), https://www.commsupdate.com/arti- cles/2019/09/26/aftel-plots-4g-launch-by-year-end/. 87 See “Salaam Launches 4G in Kabul,” CommsUpdate, (TeleGeography, Washington, DC, April 16, 2020), https://www.commsupdate.com/arti- cles/2020/04/16/salaam-launches-4g-in-kabul/. 26 In May 2021, ATRA announced the auctioning of additional The fourth and fifth place operators, Etisalat and Salaam, 15-year licenses to 4G spectrum in the 1800 MHz, 2100 also had infrastructure sharing arrangements in place.93 MHz, and 2600 MHz bands. The regulator ATRA has set As mobile rollouts proceeded, at the end of 2006, the reserve prices of USD 17.2 million for each 1800 MHz Afghan government awarded China’s ZTE Corp a USD lot (2 x 5 MHz), USD 12.0 million for each 2100 MHz lot 64.5 million contract to build a 3,200 km national fiber (2 x 5 MHz), and USD 11.0 million for each 2600 MHz lot optic network for state-owned Afghan Telecom along (2x10 MHz) with no bidder permitted to acquire more the national ring road to connect Afghanistan’s major than 2x10 MHz in the lower two bands or more than 2 x population centers (Kabul to Ghazni to Kandahar to Heart 20 MHz across all three bands. ATRA also said that after to Mazar to Samangan to Baghlan to Kabul) and connect completion of the new spectrum licensing process, it would with Pakistan, Tajikistan, Uzbekistan, Turkmenistan, and invite mobile network operators to propose plans jointly to the Islamic Republic of Iran.94 Mobile operator Roshan consolidate their holdings into contiguous blocks.88 In the signed up to use the fiber network in July 2009.95 The auction, held in July 2021, there were no bidders for most original fiber project was delayed due to security and of the additional spectrum. State-owned Salaam (Afghan other challenges, and by 2012, it had reached only 12 of Telecom) was the only bidder, agreeing to pay the minimum the 34 provinces and parts of five additional provinces.96 price of USD 17.2 million for one 1800 MHz lot.89 That same year, the MCIT issued an Open Access Policy governing retail operator nondiscriminatory, cost-based The evolution of subscriber shares across Afghanistan’s access to the wholesale fiber network.97 By 2016, mobile mobile operators suggests the existence of effective operators had invested more than USD 2 billion in their competition in the market. By January 2012, the subscriber networks, which at the time relied primarily on microwave shares of the six mobile operators were 32 percent for and satellite for backhaul, and they increasingly required Roshan, 26 percent for MTN, 20 percent for Etisalat, fiber links to support the shift from mobile voice to mobile 20 percent for Afghan Wireless, 2 percent for Afghan broadband.98 Telecom, and 0 percent for Wasel Telecom.90 Five operators built 3G networks that covered at least 30 of Afghanistan’s In 2011, the World Bank agreed to provide an additional 34 provinces. CDMA operator Wasel Telecom, which also USD 50 million in grant funding to the Afghan government operated a fixed wireless internet service provider business, for telecom sector development, including USD 30 million to was struggling in the market and its owners were authorized extend the scope of the national fiber network about 1,000 in October 2018 by the High Economic Council to sell km to the central, northeast, and southern provinces and Wasel to United Arab Emirates–based Alokozay Group for related technical assistance.99 As a key part of its technical USD 300 million.91 By 2020, the mobile subscriber shares assistance, the World Bank supported an improved Open had evolved to 27.7 percent for Roshan, 27.7 percent for Access Policy, adopted on October 1, 2016, which, among MTN, 21.3 percent for Afghan Wireless, 14.9 percent for other reforms, sought to improve access to the national Etisalat, and 8.5 percent for Salaam (Afghan Telecom).92 fiber network (including the reasonableness of charges) 88 See “ATRA Issues Notice for 4G Auction,” CommsUpdate (TeleGeography, Washington, DC, May 10, 2021), https://www.commsupdate.com/arti- cles/2021/05/10/atra-issues-notice-for-4g-auction/. 89 See “ATRA Awards Aftel Spectrum Following Nation’s First Auction,” CommsUpdate (TeleGeography, Washington, DC, July 14, 2021), https://www.comm- supdate.com/articles/2021/07/14/atra-awards-aftel-spectrum-following-nations-first-auction/. 90 See Javid Hamdard, The State of Telecommunications and Internet in Afghanistan – Six Years Later 2006-2012 (US Agency for International Development, Washington, DC, 2012), 17, https://reliefweb.int/report/afghanistan/state-telecommunications-and-internet-afghanistan-six-years-later-2006-2012. 91 See Afghan Ministry of Communications and Information Technology, “Alokozy [sic] Private Companies (Alokozy [sic] Group) Purchase Wasel-Telecom to Invest $300 Million in Information Communication Technology (ICT) Sector,” press release (October 2018), https://mcit.gov.af/sites/default/files/2018-10/ Press%20Release%20on%20Wasel-Telecom-English.pdf. See also UNCTAD (United Nations Conference on Trade and Development), Afghanistan: Rapid eTrade Readiness Assessment (UNCTAD, Geneva, 2019), 16, box 2, https://unctad.org/system/files/official-document/dtlstict2019d5_en.pdf. 92 See “Afghanistan Has a Healthy Mobile Ecosystem but No Plans for 5G Yet,” Operator Watch Blog (September 21, 2020), https://www.operatorwatch. com/2020/09/afghanistan.html. The total is 100.1 percent due to rounding. 93 See “Aftel Sharing Etisalat Network,” CommsUpdate (TeleGeography, Washington, DC, September 28, 2018), https://www.commsupdate.com/arti- cles/2018/09/28/aftel-sharing-etisalat-network/. See also “Afghanistan Has a Healthy Mobile Ecosystem but No Plans for 5G Yet,” Operator Watch Blog (September 21, 2020), https://www.operatorwatch.com/2020/09/afghanistan.html. 94 See Larry Wentz, Frank Kramer, and Stuart Starr, Information and Communication Technologies for Reconstruction and Development: Afghanistan Chal- lenges and Opportunities (Center for Technology and National Security Policy, US National Defense University, Washington, DC, 2008), 23–24, https:// reliefweb.int/sites/reliefweb.int/files/resources/06706DBB24EEDCF5852573EC007E7240-NDU_AfgICT_Jan2008.pdf. 95 See “Roshan Agrees to Use Capacity on AT’s National Fibre-Optic Backbone,” CommsUpdate (TeleGeography, Washington, DC, July 7, 2009), https:// www.commsupdate.com/articles/2009/07/07/roshan-agrees-to-use-capacity-on-ats-national-fibre-optic-backbone/. 96 See Sriganesh Lokanathan, “ICT Sector Performance Review for Afghanistan” (LIRNEasia, Colombo, Sri Lanka, 2012), 21, https://papers.ssrn.com/sol3/ papers.cfm?abstract_id=2144045. 97 See Sriganesh Lokanathan, “ICT Sector Performance Review for Afghanistan” (LIRNEasia, Colombo, Sri Lanka, 2012), 5, https://papers.ssrn.com/sol3/pa- pers.cfm?abstract_id=2144045. A copy of the 2012 Open Access Policy is available at https://tech.af/afghanistan-open-access-policy/. 98 See Kristina Shevory, “Once a Bright Spot, Afghan Telecoms Face Unsustainable Losses,” The New York Times (April 8, 2016), https://www.nytimes. com/2016/04/09/business/international/once-a-bright-spot-afghan-telecoms-face-unsustainable-losses.html. 99 See World Bank, “Implementation Completion and Results Report on a Grant in the Amount of SDR (X31.8) Million (US$50 Million Equivalent) to the Islamic Republic of Afghanistan for the Afghanistan ICT Sector Development Project” (P121755), Report No. ICR00004450 (World Bank, Washington, DC, August 10, 2018), https://documents1.worldbank.org/curated/en/334521534181268872/pdf/P121755-FINAL-ICR-10-Aug-2018-08102018.pdf. 27 and authorized retail mobile to build and operate their own In 2006, additional mobile licenses were issued to Etisalat, fiber physical infrastructure.100 In March 2018, ATRA issued Areeba (which was later acquired by MTN), and Wasel three national fiber network licenses to private companies, (CDMA in northern districts, extended nationwide in 2014). including mobile operators Afghan Wireless and Etisalat Although it appears that Wasel never became a viable and new entrant Asia Consultancy Group. Mobile operator mobile market participant, by 2016, Afghanistan enjoyed MTN’s application for a fiber network license was denied market participation by five active mobile operators. due to apparent deficiencies, while Roshan’s application was approved subject to its clearance of outstanding tax Afghanistan was thus assigned a favorable score for market obligations.101 The fiber network reached 25 of the 34 openness to entry. provinces in 2020.102 Afghanistan: Ease of private investment? In September 2021, in the wake of the recent takeover by Afghanistan successfully introduced a pro–private sector the Taliban, it was reported that MTN Group, which had liberalized legal framework and licensed entry by six announced in August 2020 its intention to exit all countries mobile operators. Reliable reports suggest that mobile in the Middle East in which it had operations, as part of a operators had collectively invested more than USD 2 corporate strategy, and was seeking to accelerate its plans billion in their networks by 2016, but they were then facing to exit Afghanistan, where it had the largest subscriber declining revenues (down by some 10-25 percent) due to share, at 27.6 percent.103 the departure of foreign soldiers and contractors.104 2.2 Assessment of internal Afghan Mobile operators were initially permitted to self-deploy microwave and had access to satellite for network telecom investment climate factors backhaul, but fiber backhaul was initially reserved to the state monopoly over fixed services of Afghan Telecom, Five internal factors during the 2001–20 US-Afghan- which committed to build a national fiber backbone Taliban conflict that impacted the climate for mobile market network in 2006, a time when most mobile traffic was still investment were assessed: (1) market open to entry, (2) voice and Short Message Service so that fiber backhaul was ease of private investment, (3) spectrum needs met, (4) not yet necessary. Efforts to privatize Afghan Telecom in level playing field, and (5) fiscal reasonableness. Each factor 2008 stalled, and it experienced delays in construction of is discussed in turn below, followed by a summary of key the planned national fiber network, while mobile operators findings across all the internal factors. remained restricted from self-provisioning fiber. The government’s adoption of its original Open Access Policy Afghanistan: Market open to entry? in 2012, concurrently with the 2012 mobile broadband Following the 2001 invasion and occupation, the interim spectrum licensing process,105 continued Afghan Telecom’s coalition government was quick to open the mobile market fiber monopoly while seeking to ensure nondiscriminatory, for new entry. Only four months after the initial Nato- cost-based access to the national infrastructure. By led invasion, an interim telecom license was issued to April 2016, access to reliable and reasonably priced fiber incumbent mobile operator Afghan Wireless. The following backhaul had become a constraint on data traffic growth.106 year, in 2003, both Afghan Wireless and Roshan were issued 15-year GSM licenses. In 2005, Afghan Telecom was authorized to provide unified services and established a CDMA mobile network. 100 See World Bank, “Implementation Completion and Results Report on Afghanistan ICT Sector Development Project,” (World Bank, Washington, DC, August 10, 2018), 12, https://documents1.worldbank.org/curated/en/334521534181268872/pdf/P121755-FINAL-ICR-10-Aug-2018-08102018.pdf. A copy of the updated Open Access Policy is available at https://mcit.gov.af/sites/default/files/2021-06/Open%20Access%20Policy%20FInalized%20Ver- sion-Signed-English%281%29.pdf. 101 See “ATRA Issues Three Fibre-Optic Network Licences,” CommsUpdate (TeleGeography, Washington, DC, March 20, 2018), https://www.commsupdate. com/articles/2018/03/20/atra-issues-three-fibre-optic-network-licences/. 102 See “25 Provinces Connect to Fiber Optic Network,” Ariana News (June 24, 2020), https://ariananews.af/25-provinces-connect-to-fiber-optic-network/. For further background information on the fiber network, see Special Inspector General for Afghanistan Reconstruction (SIGAR), “Afghanistan’s Information and Communications Technology Sector: U.S. Agencies Obligated over $2.6 Billion to the Sector, but the Full Scope of U.S. Efforts is Unknown,” Audit Report (SIGAR, Arlington, VA, July 2016), 16–46, https://www.hsdl.org/?view&did=811082. 103 See “MTN Looking for Buyers for Afghan Business, Reports Say,” CommsUpdate (TeleGeography, Washington, DC, September 10, 2021), https://www. commsupdate.com/articles/2021/09/10/mtn-looking-for-buyers-for-afghan-business-reports-say/. 104 See Kristina Shevory, “Once a Bright Spot, Afghan Telecoms Face Unsustainable Losses,” The New York Times (April 8, 2016), https://www.nytimes. com/2016/04/09/business/international/once-a-bright-spot-afghan-telecoms-face-unsustainable-losses.html. 105 See Jalal Shams, “First Ever Spectrum Auction in the History of Afghanistan,” Kabul Times (July 12, 2021), https://thekabultimes.gov.af/first-ever-spec- trum-auction-in-the-history-of-afghanistan/. 106 See Kristina Shevory, “Once a Bright Spot, Afghan Telecoms Face Unsustainable Losses,” The New York Times (April 8, 2016), https://www.nytimes. com/2016/04/09/business/international/once-a-bright-spot-afghan-telecoms-face-unsustainable-losses.html. 28 The updated Open Access Policy adopted in October 2016 Despite initial delays in licensing mobile broadband addressed these issues by authorizing mobile operators spectrum,110 in 2012 ATRA issued all four incumbent to begin building their own fiber backhaul networks to GSM mobile operators 15-year technology-neutral 2x10 support their build-out of mobile broadband107 and seeking MHz spectrum licenses in the 2100 MHz band, for USD to improve the terms of access to the state-owned fiber 25 million each, permitting them to deploy either 3G or network. In 2018, several mobile operators were also 4G technology.111 The licensees initially deployed 3G licensed to self-provide their own fiber networks. equipment, and, by 2017, began deploying 4G network upgrades. Afghanistan was assigned a favorable score for ease of private investment in mobile networks, reflecting the In 2019, the government’s High Economic Council favorable legal framework and the heavy level of actual approved an ATRA proposal to use competitive auctions investment. Despite initial restrictions on fiber investment for additional mobile broadband spectrum assignments, a by mobile operators, this does not appear to have curtailed policy in keeping with international best practices. The first investment or service at times when traffic was largely such auction was not held until June 30, 2021,112 when only voice and text. As data traffic grew, the issue was ultimately state-owned mobile operator Afghan Telecom (operating addressed, first, in the 2012 policy of open access to the as Salaam Telecom) participated.113 This was likely caused state-owned fiber network; second, in the 2016 removal by the rapidly deteriorating investment climate due to of restrictions on private fiber infrastructure investment, the pending withdrawal of US-led forces and resurgence which also strengthened open access to the state-owned of Taliban control. Because it occurred after 2020, the network; and third, in authorizing mobile operators to self- outcome of the spectrum auction is not considered in this provide fiber. study’s analysis. Afghanistan: Spectrum needs met? Afghanistan received a favorable score for meeting mobile Afghanistan was proactive in allocating and awarding spectrum needs, notwithstanding earlier interference spectrum licenses to enable efficient wireless network complaints and some delay in releasing mobile broadband deployment and adoption of emerging technologies. A spectrum, due to the overall availability of spectrum to 2009 telecom regulatory environment study funded by the support five mobile broadband networks and a sixth CDMA Governments of Canada and the United Kingdom found network. that spectrum assignments were viewed favorably by the country’s four GSM operators (a fifth operator used CDMA and the sixth was not licensed until 2013).108 Although ATRA had been criticized by mobile operators for not protecting against interference in assigned bands,109 this did not stall their willingness to pay for additional spectrum or invest heavily in 3G and 4G network upgrades. 107 See UNCTAD (United Nations Conference on Trade and Development), Afghanistan: Rapid eTrade Readiness Assessment (UNCTAD, Geneva, 2019), 12–13, https://unctad.org/system/files/official-document/dtlstict2019d5_en.pdf. 108 Sriganesh Lokanathan, “Telecom Regulatory and Policy Environment in Afghanistan” (LIRNEasia, Colombo, Sri Lanka, 2009), 15, https://www.lirneasia.net/ wp-content/uploads/2008/04/AfghanTREV2.pdf. 109 See “ATRA’s Inability to Provide Facilities Created Problems for Private Telecommunication Companies,” Heart of Asia Daily (February 10, 2021), https:// heartofasia.af/atras-inability-to-provide-facilities-created-problems-for-private-telecommunication-companies/. See also Sriganesh Lokanathan, “Telecom Regulatory and Policy Environment in Afghanistan” (LIRNEasia Colombo, Sri Lanka, 2009), 15, https://www.lirneasia.net/wp-content/uploads/2008/04/ AfghanTREV2.pdf. 110 Sriganesh Lokanathan, “Telecom Regulatory and Policy Environment in Afghanistan” (LIRNEasia, Colombo, Sri Lanka, 2009), 15, https://www.lirneasia.net/ wp-content/uploads/2008/04/AfghanTREV2.pdf. 111 See Jalal Shams, “First Ever Spectrum Auction in the History of Afghanistan,” Kabul Times (July 12, 2021), https://thekabultimes.gov.af/first-ever-spec- trum-auction-in-the-history-of-afghanistan/. See also Javid Hamdard, The State of Telecommunications and Internet in Afghanistan – Six Years Later 2006-2012 (US Agency for International Development, Washington, DC, 2012), https://reliefweb.int/report/afghanistan/state-telecommunications-and-in- ternet-afghanistan-six-years-later-2006-2012. 112 See Jalal Shams, “First Ever Spectrum Auction in the History of Afghanistan,” Kabul Times (July 12, 2021), https://thekabultimes.gov.af/first-ever-spec- trum-auction-in-the-history-of-afghanistan/. 113 Mir Haidar Shah Omid, “Govt-Owned Telecom Company Wins Spectrum Assignment Auction” (July 8, 2021), https://tolonews.com/afghanistan-173338. 29 Afghanistan: Level playing field? Afghanistan: Fiscal reasonableness? The coalition government moved swiftly to ensure a After the fall of the Taliban in 2001, the Afghan government level playing field for mobile operators, even before the inherited a failed tax system. Although the existing tax law passage of a telecom law. In 2003, the Telecommunications was amended in 2005, a proper fiscal system with adequate Regulatory Board was established to serve as an interim administration did not come into force until the 2009 tax sector regulator until a proper legal framework could be law was adopted. It imposed a 20 percent corporate income enacted and implemented. The interim regulator issued the tax and a 2 percent business revenue tax.116 initial GSM licenses to Afghan Wireless and Roshan. The telecom law was passed in 2005, and in 2006 ATRA was Afghanistan’s 2009 tax system was generally well designed established and assumed its role as sector regulator. as a broad-based tax system with relatively low rates, but it raised insufficient revenue for the government to be In addition to the modern legal framework setting up self-sustaining without donor support. The International an independent regulator and establishing rules for fair Monetary Fund (IMF) therefore advised the government engagement and competition among operators, external to bring domestic revenues (including tax revenues reports have found that the mobile market is a level playing and nontax receipts) up to levels that would support field in practice. An independent 2009 study found that self-sustaining government budgets after donor funds ATRA acted fairly notwithstanding weak institutional receded. For example, in 2011, the IMF provided technical capacity.114 The international donor community has also assistance to the government in developing a plan to supported capacity building of ATRA. The nascent regulator increase domestic revenues from 11 to 15 percent of has received substantial technical assistance from the GDP by 2016.117 One component of the government’s World Bank to build capacity and implement regulatory effort to increase domestic revenue was the introduction reforms.115 of a 10 percent special levy on telecom revenues, which was approved by decree in August 2015 and took effect The evolution of market shares among mobile operators in September 2015 (notwithstanding being rejected in and the non-emergence of any operator that is clearly the lower house of Parliament).118 Imposition of this tax dominant also suggest that the market is relatively raised the overall mobile market fiscal burden from low to competitive. In addition, although state-owned Salaam moderate compared with international norms. Even after (Afghan Telecom) competed with the other four privately the imposition of this telecom-specific tax, Afghanistan’s owned mobile operators, its infrastructure sharing fiscal burden was modest for emerging international arrangement negotiated with rival Etisalat and modest countries.119 The levy netted the government USD 59.7 market share suggest that Salaam was not afforded any million in 2020.120 anticompetitive preference by the MCIT or ATRA. Afghanistan was assigned a favorable rating for its level playing field in the mobile retail market. 114 Sriganesh Lokanathan, “Telecom Regulatory and Policy Environment in Afghanistan” (LIRNEasia, Colombo, Sri Lanka, 2009), 22, https://www.lirneasia.net/ wp-content/uploads/2008/04/AfghanTREV2.pdf. 115 World Bank, “Emergency Project Paper on a Proposed Grant in the Amount of SDR 31.8 Million (US$ 50 Million Equivalent) to the Islamic Republic of Afghanistan for an ICT Sector Development Project” (March 11, 2011). 116 See Special Inspector General for Afghanistan Reconstruction (SIGAR), SIGAR 20-22 Audit Report 3 (Providing SIGAR Analysis of 2009 Income Tax Law) (SIGAR, Arlington, VA, January 2020), https://apps.dtic.mil/sti/pdfs/AD1137576.pdf. 117 See “IMF Survey: Afghanistan to Get $133.6 Million IMF Loan,” IMF News (November 15, 2011), https://www.imf.org/en/News/Arti- cles/2015/09/28/04/53/socar111511a. 118 See IMF (International Monetary Fund), “Islamic Republic of Afghanistan: Staff Report for the 2015 Article IV Consultation and the First Review under the Staff-Monitored Program” (IMF, Washington, DC, November 3, 2015), 25, 48, 64, https://www.imf.org/external/pubs/ft/scr/2015/cr15324.pdf. See also “Afghans Alarmed by New Telecoms Tax” (Institute for War and Peace Reporting, London, November 3, 2015), https://iwpr.net/global-voices/afghans- alarmed-new-telecoms-tax. 119 See Mayuran Sivakumaran, “Taxing Mobile Connectivity in Asia Pacific” (GSMA, London, 2018), 20–34, https://www.gsma.com/publicpolicy/wp-content/ uploads/2018/04/Taxing-mobile-connectivity-in-Asia-Pacific.pdf. 120 See “Afghanistan Gets over 59 Mln U.S. Dollars in Telecom Tax Revenue,” Xinhua (February 9, 2021), http://www.xinhuanet.com/english/asiapacific/2021- 02/09/c_139733107.htm. See also “Gov’t Collects More Than 2.2 Billion AFN from 10% Telecom Tax in Past Seven Months,” Ariana News (August 1, 2020), https://ariananews.af/govt-collects-more-than-2-2-billion-afn-from-10-telecom-tax-in-past-seven-months/. 30 Two aspects of the special levy adversely impacted the sector. First, the nature of the tax distorted market performance because it affected uptake, discouraging increased mobile usage. For example, according to 2019 estimates, sector-specific, consumer-level mobile taxes in Afghanistan levied on 1 gigabyte of data usage in 2017 exceeded 13 percent of income for the bottom 20 percent of earners and 3.5 percent of average income for all earners – thereby suppressing mobile adoption and usage among lower income Afghans.121 Second, the introduction of the special levy had a dampening impact on investment by undermining fiscal predictability. An independent review of the regulatory framework in 2009 found that operators had broadly favorable views on the level of mobile license and regulatory fees.122 However, during state-owned Afghan Telecom’s monopoly over fiber backhaul, which continued until late 2016, pricing of this essential wholesale service was considered excessive, having an unquantified impact on the mobile market. Overall, Afghanistan presented a fair and reasonable fiscal framework for investment in the telecom sector. As summarized in table 4, Afghanistan was assigned an uncertain score for fiscal reasonableness in the mobile retail market based on the combined impact of the 10 percent surtax, the high Afghan Telecom charges for wholesale inputs, and the lack of prior consultation on the 10 percent surtax. Table 4: Afghanistan: Fiscal reasonableness determination Afghanistan: fiscal reasonableness, 2001–20 General taxes Sector-specific taxes Nontax impositions Predictability License and regulatory 20% corporate income Generally reasonable 10% business revenue fees generally fair tax Insufficient warning tax rate introduced on High state-owned 2%-4% business revenue before imposing sector- telecom in 2015 enterprise wholesale tax specific tax charges through 2016 Afghanistan overall rating: Uncertain Source: World Bank. Afghanistan: Summary of key findings across all the internal factors Table 5 summarizes the scoring of the five internal factors impacting Afghanistan’s telecom investment climate. It also offers the key relevant facts that led to the score for each factor. Table 5: Afghanistan: Assessment of internal factors impacting the telecom investment climate Score Internal factor assessed Key relevant facts 2002, interim GSM license issued to Afghan Wireless Market open to entry 2 2003 Afghan Wireless and Roshan issued GSM licenses 2006, Areeba (later MTN) and Etisalat issued GSM licenses Introduction of pro–private sector liberalized legal framework 2005 Telecommunications Services Regulation Act Ease of private investment 2 2012 open access to national fiber network 2016 end of SOE monopoly over fiber investment Regular spectrum releases since 2002 Spectrum needs met 2 Broadband spectrum licenses, without technology restrictions, although delayed until 2012 Modern telecom law and independent regulator Five of six mobile licensees privately owned Level playing field 2 Reasonable balance of subscribers across multiple operators No apparent favoritism toward any operator Fiscal burden increased from low to moderate in 2015 Fiscal reasonableness 1 Special 10% tax levy distortive and introduced without consultation All 9 Source: MacMillan Keck. Note: GSM = Global System for Mobile Communications; SOE = state-owned enterprise. 121 See Xavier Pedros and Mayuran Sivakumaran, “Rethinking Mobile Taxation to Improve Connectivity” (GSMA, London, 2019), 7, 19, 22, 23, 25, 40, 41, https://www.gsma.com/publicpolicy/wp-content/uploads/2019/02/Rethinking-mobile-taxation-to-improve-connectivity_Feb19.pdf. 122 Sriganesh Lokanathan, “Telecom Regulatory and Policy Environment in Afghanistan” (LIRNEasia, Colombo, Sri Lanka, 2009), 15, https://www.lirneasia.net/ wp-content/uploads/2008/04/AfghanTREV2.pdf. 31 2.3 Assessment of external Afghan Based on all these factors, Afghanistan was assigned an uncertain score on military interference. telecom investment climate factors Five external factors during the 2001–20 conflict that Afghanistan: International sanctions? impacted the climate for telecom investment were assessed: Before the US-led intervention in Afghanistan, the UN (1) military or paramilitary interference, (2) international had imposed sanctions against the Taliban-controlled sanctions, (3) travel restrictions, (4) international aid Government of Afghanistan in 1999. These sanctions for telecommunications, and (5) international security were aimed at members of the Taliban and included an intervention. Each factor is discussed in turn below, arms embargo, asset freezes, and travel restrictions.127 followed by a summary of key findings across all the The United States had imposed even broader trading external factors. restrictions. In 1999, President Clinton imposed a trade embargo against the Taliban and the territory of Afghanistan controlled by the Taliban for allowing territory under its Afghanistan: Military or paramilitary control in Afghanistan to be used as a safe haven and base interference? of operations for Osama bin Laden and al-Qaeda.128 In During the US-Afghan-Taliban conflict, there were no 2001, following the September 11 attacks on the United enduring foreign military blockades, but Afghanistan faced States, President Bush extended the scope of the trade periodic restrictions on entry and the Taliban regularly embargo to a broader list of identified persons and entities disrupted telecom supply chains and targeted telecom associated with al-Qaeda.129 These had directly impacted infrastructure. the ability of Telephone Systems International to fulfill its joint venture commitments to Afghan Wireless. In 2012, Pakistan closed its border with Afghanistan for seven months, blocking passage of North Atlantic Treaty In July 2002, soon after the US-led removal of the Taliban Organization (NATO) trucks into the country. The border from power, President Bush lifted the restrictions on US closure was Pakistan’s response to the killing of 24 Pakistani investor and vendor participation in Afghan businesses.130 soldiers who were on duty at a border post. Because using Similarly, the UN sanctions were modified to target alternative routes for bringing telecom equipment into the individuals and entities known to be associated with al- country was more costly and time-consuming, the blockade Qaeda or the Taliban.131 Afghanistan was not at any time disrupted civilian supply chains during the border closure during the remainder of the conflict period subject to and two months after the border reopened.123 any broad UN, US, or EU sanctions as a destination for investment or technology transfer. As it increasingly gained control over provinces, highways, and borders, the Taliban set up roadblocks to impose Afghanistan therefore received a favorable rating on unlawful import-export duties on trade in goods, typically international sanctions because they only subsisted during at 2 percent of value, as a condition to allow passage.124 the first 10 months of the 2001–20 conflict period. The Taliban was also known to require protection money from mobile operators in exchange for not destroying their radio towers.125 MTN has been sued in the United States by families of Taliban victims who alleged that MTN paid bribes to the Taliban to avoid having to invest in expensive security for its transmission towers.126 123 See, for example, “First NATO Trucks Cross Pakistan Border after 7-Month Closure,” NBC News (July 5, 2012), https://www.nbcnews.com/news/world/first- nato-trucks-cross-pakistan-border-after-7-month-closure-flna864206. 124 See, for example, Abdul, Qadir Sediqi, “Taliban Tax Collectors Help Tighten Insurgents' Grip in Afghanistan,” Reuters (November 6, 2018), https://www. reuters.com/article/us-afghanistan-taliban-finance/taliban-tax-collectors-help-tighten-insurgents-grip-in-afghanistan-idUSKCN1NB19Y. 125 See Qadir Sediqi Abdul, “Taliban Tax Collectors Help Tighten Insurgents' Grip in Afghanistan,” Reuters (November 6, 2018), https://www.reuters.com/arti- cle/us-afghanistan-taliban-finance/taliban-tax-collectors-help-tighten-insurgents-grip-in-afghanistan-idUSKCN1NB19Y. 126 See, for example, “Telecom Giant MTN Accused of Paying Bribes to Taliban, al-Qaeda,” BBC News (December 19, 2019), https://www.bbc.com/news/ world-africa-50952001. 127 UN Security Council Resolution 1267 (United Nations, New York, 1999), http://unscr.com/en/resolutions/1267. 128 See Executive Office of the President of the United States, “Executive Order 13129 of July 4, 1999, Blocking Property and Prohibiting Transactions with the Taliban,” 64 Federal Regulation 36759 (published July 7, 1999), https://www.govinfo.gov/content/pkg/FR-1999-07-07/pdf/99-17444.pdf. 129 See Executive Office of the President of the United States, “Executive Order 13224 of September 23, 2001, Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism,” 66 Federal Regulation 49079 (published 25 September 25, 2001), https://www. govinfo.gov/content/pkg/FR-2001-09-25/pdf/01-24205.pdf. 130 See Executive Office of the President of the United States, “Executive Order 13268 of July 2, 2002, Termination of Emergency with Respect to the Taliban and Amendment of Executive Order 13224 of September 23, 2001,” 67 Federal Regulation 44751 (published July 3, 2002), https://www.govinfo.gov/ content/pkg/FR-2002-07-03/pdf/02-16951.pdf. 131 UN Security Council Resolution 1988 (United Nations, New York, June 17, 2011), http://unscr.com/en/resolutions/1988. 32 Afghanistan: Travel restrictions? Five privately owned mobile operators and one state- Travel to Afghanistan was severely restricted during the two owned mobile operator appear to have successfully moved years leading up to the October 2001 invasion by US-led personnel and contractors in and out of the country as they coalition forces. In October 1999, the UN Security Council oversaw multiple rounds of investment and the continuing suspended all international flights by state-owned Ariana operations of their networks. Afghan Airlines, except those classed as humanitarian or for the fulfillment of religious obligations. All Ariana company Afghanistan received a favorable rating for travel funds were blocked, and no spare parts, supplies, or training restrictions. could be provided by foreign companies.132 In January 2000, following the Taliban’s refusal to comply with its demands, Afghanistan: International aid for the UN Security Council banned all international flights to telecommunications? Afghanistan, closed all Ariana offices outside Afghanistan, Afghanistan received significant international aid for its and barred Taliban government officials from flying out of telecom sector during the period following the Nato-led the country.133 invasion through the end of 2020. Travel restrictions on Afghanistan were quickly lifted after The World Bank reopened its office in Afghanistan in May the Taliban was removed from power in 2001. In January 2002 after a 20-year absence. The World Bank provided 2002, the UN Security Council lifted the international support for a USD 24 million satellite-based emergency flight ban on Ariana and unfroze its assets, on the basis communications system in 2002 and more than USD that it was no longer owned, leased, or operated by or on 6 million in technical assistance for the government behalf of the Taliban.134 The Kabul airport was reopened to to implement telecom sector reforms. In 2011, the humanitarian and military flights in mid-January 2002, but World Bank approved a USD 50 million information and it remained closed for commercial flights pending removal communications technology (ICT) sector development of unexploded ordinance following the coalition bombing.135 grant, which included USD  30  million for the national On January 24, 2002, Ariana resumed operations with its fiber network.141 The ICT sector development project first flight from Kabul to New Delhi.136 Ariana also resumed also helped the young population of Afghanistan receive flights to Europe in September 2002.137 In 2003, direct technical training and supported development of the ICT flights by foreign air carriers were added from Germany sector.142 (LTU).138 The Asian Development Bank (ADB) provided USD 130 Thereafter, Afghanistan was not subject to any broad million in debt financing and debt guarantees for mobile security-related travel restrictions from the time of the operator Roshan from 2004 through 2006 to help finance Nato-led invasion through the end of 2020, except a travel its 2G rollout.143 In addition, the World Bank Group’s ban imposed on certain individuals associated with al- insurance arm, the Multilateral Investment Guarantee Qaeda and the Taliban.139 Although the Taliban continued Agency, provided USD 76.5 million credit risk support operations in certain areas of the country during the for MTN Group’s 2007 equity investment in purchasing conflict period,140 business air travel to and from Kabul was Areeba/Investcom (now MTN Afghanistan).144 fairly standard. 132 UN Security Council Resolution 1267 (United Nations, New York, October 15, 1999), http://unscr.com/en/resolutions/1267. 133 UN Security Council Resolution 1333 (United Nations, New York, December 19, 2000), http://unscr.com/en/resolutions/1333. 134 UN Security Council Resolution 1388 (United Nations, New York, January 15, 2002), http://unscr.com/en/resolutions/1388. 135 “Kabul Airport Reopens,” The New Humanitarian (January 16, 2002), https://www.thenewhumanitarian.org/news/2002/01/16/kabul-airport-reopens. 136 Nicholas Ionides, “New Dehli/Kabul Airlink Is Reopened,” FlightGlobal (February 4, 2002), https://www.flightglobal.com/new-dehli/kabul-airlink-is-re- opened/41315.article. 137 “Ariana Afghan Back on Western Europe Route,” FlightGlobal (September 30, 2002), https://www.flightglobal.com/ariana-afghan-back-on-western-eu- rope-route/45079.article. 138 “German Airline Criticized for Kabul Flights,” Deutsche Welle (September 1, 2003), https://www.dw.com/en/german-airline-criticized-for-ka- bul-flights/a-960483. 139 See Executive Office of the President of the United States, “Executive Order 13268 of July 2, 2002, Termination of Emergency with Respect to the Taliban and Amendment of Executive Order 13224 of September 23, 2001,” §1; Executive Office of the President of the United States, “Executive Order 13224 of September 23, 2001, Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism,” §2 and annex, https://www.govinfo.gov/content/pkg/FR-2002-07-03/pdf/02-16951.pdf. 140 B. R. Hughes, “Do Tourists Really Go to Afghanistan?” BBC News (August 4, 2016), https://www.bbc.com/news/world-asia-36974513. 141 See World Bank, “Implementation Completion and Results Report on Afghanistan ICT Sector Development Project,” (World Bank, Washington, DC, August 10, 2018), 7, para 12, https://documents1.worldbank.org/curated/en/334521534181268872/pdf/P121755-FINAL-ICR-10-Aug-2018-08102018.pdf. 142 World Bank, “Youth Gain Information and Communication Skills to Improve Afghanistan’s Future,” Feature (May 30, 2017), www.worldbank.org/en/news/ feature/2017/05/30/afghan-youth-undergo-training-to-power-future. 143 See ADB (Asian Development Bank), Development Effectiveness Brief: Afghanistan – Modernizing Asia’s Crossroads (ADB, Mandaluyong, Philippines, 2010), 7–8, https://www.adb.org/sites/default/files/publication/28759/decb-afg.pdf. 144 See MIGA (Multilateral Investment Guarantee Agency), “MIGA: Mobilizing Investments, Rebuilding Confidence,” in MIGABrief: Conflict-Affected and Fragile Countries (MIGA, Washington, DC, 2015), https://documents1.worldbank.org/curated/en/464361468162538473/pdf/77591-REVISED-BRI-MIGA-JAN- 2015-conflict.pdf. 33 The World Bank’s private sector arm, the International Afghanistan: International security intervention? Finance Corporation, provided USD 65 million in credit and The international community provided security and USD 10 million in equity to mobile operator MTN in 2009 peacekeeping forces to promote security in Afghanistan to help finance network expansion,145 and it provided USD after the Taliban was removed from power in 2001 through 65 million in credit to mobile operator Roshan in 2013 to the end of 2020. help finance its 3G rollout.146 After the September 11, 2001, attacks, the UN Security The United States has invested more than USD 2.6 billion in Council quickly acted to invite member states to send the Afghan ICT sector since 2002, but more than USD 2.5 peacekeepers to Afghanistan149 and authorized the billion was non-civilian investment by the US Department deployment of the International Security Assistance Force of Defense to strengthen the communications capabilities (ISAF).150 In addition to ISAF peacekeepers, the United of the Afghan National Army and Police. Some civilian aid Nations Assistance Mission in Afghanistan was established was supplied by the United States Agency for International in March 2002. Development (USAID) for communications and capacity- building programs such as an e-government resource center and a mobile money program.147 ISAF was initially designed to be led by allies of NATO on a rotational basis, but NATO took the lead of the ISAF Other members of the international donor community also operation in 2003. Its mandate later expanded to cover the supported development of the Afghan ICT sector through entire country. ISAF took over command from the US-led various projects and assistance programs. For example, coalition in certain parts of the country in 2006.151 the International Telecommunication Union (ITU) helped the MCIT create telecommunications policies and laws, The US-led coalition carried out significant security the United Nations Development Programme (UNDP) operations in the country from 2001 to 2014, when its supported the National Data Center project, and Microsoft combat mission ended. However, US troops remained in and Cisco provided training opportunities to the MCIT.148 the country as part of the Resolute Support Mission, which Afghanistan received a favorable rating for international was launched as a new NATO-led, non-combat mission aid for civilian telecommunications based on the support to train, advise, and assist the Afghan security forces and of the World Bank Group, ADB, ITU, USAID, UNDP, and institutions.152 private sector partners. Afghanistan received a favorable rating for international security intervention. 145 See “IFC Provides MTN Afghanistan with $75m to Expand Operations,” Creamer Media’s Engineering News (June 23, 2009), https://www.engineering- news.co.za/article/ifc-provides-mtn-afghanistan-with-75m-to-expand-operations-2009-06-23. 146 See IFC (International Finance Corporation), “Roshan,” IFC Inclusive Business Company Profile (IFC, Washington, DC, 2014), 4, https://www.ifc.org/wps/ wcm/connect/bfd8dc95-14d7-47d0-943a-2d65be03e881/Roshan.pdf?MOD=AJPERES&CVID=lv2UWMb. 147 Special Inspector General for Afghanistan Reconstruction (SIGAR), “Afghanistan’s Information and Communications Technology Sector: U.S. Agencies Ob- ligated Over $2.6 Billion to the Sector, but the Full Scope of U.S. Efforts is Unknown,” Audit Report (SIGAR, Arlington, VA, July 2016), 16–46, https://www. hsdl.org/?view&did=811082. 148 Donors, Ministry of Communications and Information Technology (accessed May 21, 2021), mcit.gov.af/node/6942. 149 UN Security Council Resolution 1378 (United Nations, New York, 2001), http://unscr.com/en/resolutions/1378. 150 UN Security Council Resolution 1386 (United Nations, New York, 2001), http://unscr.com/en/resolutions/1386. 151 “NATO and Afghanistan,” North Atlantic Treaty Organization (last updated April 15, 2021), https://www.nato.int/cps/en/natohq/top- ics_8189.htm. 152 Kay Johnson, “U.S.-Led Mission in Afghanistan Ends Combat Role; Thousands of Foreign Troops Remain,” Reuters (December 28, 2014), www.reuters.com/ article/us-afghanistan-war-idUSKBN0K60FB20141228. 34 Afghanistan: Summary of key findings across all the external factors Table 6 summarizes the scoring of the five external factors impacting Afghanistan’s telecom investment climate. It also offers the key relevant facts that led to the score for each factor. Table 6: Afghanistan: Assessment of external factors impacting the telecom investment climate Score External factor assessed Key relevant facts 2012, Pakistan imposed a seven-month blockade, closing its border to NATO trucks as retaliation for the killing of Pakistani soldiers Military interference 1 Taliban operations impeded import and movement of goods and targeted destruction of mobile towers and other infrastructure International sanctions 2 No broad US, EU, or UN sanctions No official travel restrictions Travel restrictions 2 Mobile operators relatively unimpeded from 2003 through 2020 International aid for 2 Major support from World Bank, ADB, IFC, MIGA, USAID, ITU telecommunications International security Significant security operations by US-led coalition 2 intervention 2002, UN Assistance Mission established All 9 Source: MacMillan Keck. Note: ADB = Asian Development Bank; IFC = International Finance Corporation; ITU = International Telecommunication Union; MIGA = Multilateral Investment Guarantee Agency; NATO = North Atlantic Treaty Organization; UN = United Nations; USAID = United States Agency for International Development. 2.4 Afghanistan’s projected and actual teledensity evolution The following subsections assess and analyze Afghanistan’s projected and actual mobile teledensity evolution from 2000 through 2020 and during the conflict period beginning in 2021. Afghanistan’s unique subscriber mobile penetration Afghanistan’s mobile penetration is considered from 2000 through 2020. The US-Afghan-Taliban conflict continued for much of the same period, from 2001 through 2020 (when it had not yet ended). Pakistan, Tajikistan, and Turkmenistan were considered as reasonable regional markets suitable for benchmarking. Afghanistan’s adult ( age 15+) population was also considered as a guide for full market penetration (unique subscribers), although mobile phone use by those younger than 15 years is growing in some markets. Afghanistan’s 2020 mobile penetration was 4.4 percentage points below the adult population percentage. The projected growth in the but-for-the-conflict scenario was modeled to represent a reasonable basis for what could have transpired absent the conflict, with realistic improvements in the investment environment and earlier stimulation of market growth. Afghanistan’s projected but-for-the-conflict growth follows a similar trend as that in Tajikistan from about 2010. The gap in Afghanistan’s mobile penetration between the actual and the but-for-the-conflict scenarios grew from zero at the onset of the conflict in 2001 to 2.5 percentage points by 2020. The results are shown in figure 8. 35 Figure 9: Afghanistan’s mobile penetration growth rate, 2000–20 Source: MacMillan Keck. Note: Penetration rates below 1 percent were disregarded due to the unreliability of data in this nascent stage of development. RoC = Rate of change As in most developing countries, the adult-age (15+) population (the green dashed line in figure 8) serves as an invisible upper bound on potential unique customer mobile penetration. Afghanistan had no measurable mobile penetration prior to 2001, after years of Taliban rule. Its peer group of Pakistan, Tajikistan, and Turkmenistan was in a similar situation. In the but-for-the-conflict scenario, Afghanistan’s mobile penetration (the orange curve in figure 9) is projected to have grown at a slightly faster rate than actual mobile penetration (the blue curve in figure 8). The projected growth would have been behind that of Tajikistan for almost the entire period, well behind Pakistan until 2009 (reflecting the fact that Pakistan’s penetration growth slowed considerably from 2007), and faster than Turkmenistan’s penetration to 2009 (after which Turkmenistan grew faster than the peer group, apart from an anomalous drop in 2011). Unique Afghan subscriber mobile penetration but-for-the-conflict is projected to have reached 55.7 percent by 2020, a similar level as the peer country average and very near full penetration of the adult population. The but-for-the-conflict projection is challenging in the case of Afghanistan because mobile penetration was effectively at 0 percent when the conflict began in 2001. Mobile services were in their infancy in Pakistan, Tajikistan, and Turkmenistan in 2001. Afghanistan’s actual mobile penetration grew at a rate below that of Pakistan and Tajikistan and above that of Turkmenistan until 2009, when Pakistan’s penetration slowed markedly. An approach to modeling the but-for-the-conflict projection is to follow the same trend but to be slightly higher than the actual penetration curve, ending 2.5 percentage points above the actual curve. 36 anticipates that unique subscriber mobile penetration As the projected endpoint is the most significant would eventually have exceeded the 58 percent adult point on this curve, two factors informed this end population and models penetration as approaching projection, namely the average of the peer group (56.1 this level by 2020. Two of the benchmarked percent) and the notional bound of the percentage neighboring countries were approaching this notional of population older than 14 years (58 percent). The limit in 2020, with Turkmenistan at 64.3 percent projection was constructed by mapping estimated penetration in an adult population of 69 percent and penetration on an annual basis and ensuring that year- Tajikistan at 62.5 percent penetration in an adult on-year increases followed a smooth and declining population of 63 percent. Meanwhile, Pakistan only trend as would be expected in normal development reached 41.5 percent mobile penetration by 2020 in conditions, also considering the three-year delay in an adult population of 65 percent – remaining well implementation of 4G services. below the notional limit. Afghanistan’s actual mobile penetration growth since Afghanistan has benefited from relatively favorable 2008 compares favorably with its neighbors, at around internal and external telecom investment climate the average of the peer group. Pakistan’s penetration factors throughout much of the 20-year conflict. exceeded Afghanistan’s until 2009, when Afghanistan As a result, although Afghanistan’s actual mobile overtook Pakistan and continued growing at a higher penetration has remained lower than its projected rate. Turkmenistan’s mobile penetration was initially but-for-the-conflict penetration, the differential less than Afghanistan’s but overtook Afghanistan in was more modest than it may have otherwise been. 2009 and continued to widen the gap through 2020. Afghanistan’s mobile penetration projection (the Tajikistan’s mobile penetration has been consistently orange curve in figure 8) tracks actual penetration higher than Afghanistan’s since 2003, reaching a 9.3 (the blue curve in figure 8) closely from 2002 percentage point difference by 2020. through 2007, reflecting the fact that Afghanistan experienced reasonably consistent growth over The but-for-the-conflict projection anticipates that the conflict period. Thus, actual penetration only 4G would have been introduced around 2014/15, fell to 2.5 percentage points below projected but- as the three peer country neighbors all launched for-the-conflict penetration by 2020. Afghanistan’s 4G service well before Afghanistan’s actual 4G mobile sector was born in conflict and has developed launch in 2017 – Turkmenistan in 2013, Tajikistan in consistently despite the challenging environment. 2014, and Pakistan in 2014. An earlier 4G launch in Afghanistan would have driven higher penetration Afghanistan’s mobile penetration growth rate levels, as Afghanistan’s actual penetration growth Afghanistan’s mobile penetration growth rate (which rate increased after 4G was launched in 2017. is the rate of change in penetration from one year to Afghanistan launched 3G services commercially in the next) is also considered over 2000–20. 2012, around the same time as its neighbors (2010– 14) and the delayed upgrade to 4G may well have been Afghanistan’s very low baseline infrastructure and influenced by the need to grow the market for mobile relatively favorable internal and external investment broadband service on 3G before spending more on climate since 2001 produced ripe conditions for further network technology upgrades. Indeed, three mobile investment. Teledensity growth rates since operators began deploying 4G equipment using their 2001 reflect the release of pent-up demand and original 3G spectrum assignments, and two operators supply-side investment to meet that demand. The chose not to upgrade to 4G when their rivals did. By growth rate was therefore positive throughout the the time of the auction of additional 4G spectrum in conflict period, meaning that total penetration has 2021 (which was after the end of the period being never declined. studied), the state-owned mobile operator was the only bidder. The actual growth rate was less than the but-for- the-conflict growth rate for most years from 2003 The but-for-the-conflict projection curve follows an through 2014, meaning that the total number of new S-curve, with steady growth continuing beyond 2009 unique subscribers added during this period was less resulting in a penetration differential of 4.7 percentage than would have been added but-for-the-conflict. points over actual penetration by 2020. The projection However, actual growth rates were greater than but- 37 for-the-conflict growth rates from 2015 through 2019, meaning that the total number of subscribers added during this period exceeded the number that would have been added under the but-for-the-conflict scenario. This enabled Afghanistan’s mobile penetration to make up some of the ground lost in prior years. Afghanistan has thus suffered relatively little impairment of teledensity growth rates when averaged over the entire conflict period. Actual penetration exceeded 85 percent of the adult population. The results are depicted in figure 9, in which the yellow line represents the average annual mobile penetration growth rate during the 2001–20 conflict period. The grey line in the figure represents the average but-for- the-conflict annual penetration growth rate during the conflict period. The difference between the grey and yellow lines during the conflict period is the average annual growth rate deficit. As graphed in figure 9, the deficit appears very small because the net effect over time is small. The main difference is that the growth occurs earlier in the period in the projected but-for-the-conflict penetration model, and it remains ahead of actual growth up to 2017 but never by more than 1 percent. Afghanistan - Mobile Penetra�on growth rate (RoC) Figure 10% 9: Afghanistan’s mobile penetration growth rate, 2000–20 US-AFGHANISTAN Conflict 8% 6% 4% 2% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Projected RoC Net RoC difference Actual RoC Average projected RoC Average actual RoC Source: MacMillan Keck. Note: Penetration rates below 1 percent were disregarded due to the unreliability of data in this nascent stage of development. RoC = Rate of change Even under ideal circumstances, growth in Afghanistan would have been challenging, and the but-for-the- conflict projections reflect that. However, with an actual annual growth rate of 3.09 percent and a but-for-the- conflict annual growth rate of 3.22 percent, Afghanistan experienced a relatively low 3.8 percent deficit in its average annual growth rate during the conflict. 38 2.5 Correlating Afghanistan’s supply- Afghanistan’s actual average annual teledensity growth rate during 2001–20 suffered only a 3.8 side investment climate and teledensity percent decline compared with its projected but-for- the-conflict teledensity growth rate. This was the The assessment of Afghanistan can inform an overall lowest growth rate deficit among all seven countries view of the relationship between the supply-side studied. Thus, despite having virtually no telecom telecom investment climate and the evolution of infrastructure at the onset of the conflict, by 2020 teledensity during the conflict. Afghanistan was able to achieve unique mobile subscriber penetration of about 85 percent of the During 2001–20, Afghanistan was assessed as having adult population. an internal factor investment climate rating of 8 and an external factor investment climate rating of 8. Key internal factors included (1) prompt issuance of interim and long-term licenses to multiple competing mobile operators and (2) early introduction of an independent regulator. Key external factors included (1) lifting or relaxation of pre-conflict sanctions after the US-led intervention, (2) facilitation of equipment imports by the occupying coalition, (3) significant foreign aid from international donors, and (4) extensive security assistance from NATO and the US- led coalition. 39 3 The Republic of Iraq This component of the study assesses the impact on the mobile market in Iraq of the 2003–11 conflict arising from the invasion, occupation, and withdrawal of the US-led coalition. 3.1 Iraqi context The following passages provide information on Iraq’s geography, demographics, and economy; the ongoing series of conflicts and civil instability that started in 2003; and the telecom sector. Iraq’s geography, demographics, and economy Iraq is located in the Middle East, with a narrow 58 kilometer coastline on the Persian Gulf, between the Islamic Republic of Iran to the east and Kuwait to the south (map 2). It is also bordered by Turkiye to the north, the Syrian Arab Republic to the northwest, Jordan to the west, and Saudi Arabia to the southwest. Map 2: Iraq 42° 44° 46° 48° Hakkâri IRAQ - - - Daryacheh-ye -- TURK EY Orumiyeh (Umia) - Orumiyeh Mianeh Qe (Lake Urmia) ze - - Zakhu lO wz - an - - DAHUK - -- Miandowab Al Qamishli Dahuk 'Aqrah - - Rayat - Al Mawsil ab Zanjan - t Z Sinjar (Mosul) ARBĪL ea Gr AS SULAYM - Tall 'Afar - Arbil 36° Ar Raqqah NINAWÁ - 36° Kuysanjaq SYRIAN ARAB Al Qayyarah - bur Makhmur ha- - ab Al Hadr Z REPUBLIC al K le As - - tt ĀN Li Sulaymaniyah Nahr - Sanandaj Dayr az Zawr KIRKŪK Kirkuk - ĪY Halabjah AH - Bayji Na hr - - Tawuq ISLAMIC REPUBLIC OF Tig al - Tikrit s IRAN Hamadan á ri l iya- 'U - z Euphrates aym SALAH AD D - Kamal - Buhayrat al hr - Abu Qadisiyah - -- Na DIN Qasr-e Shirin Al Qa'īm - - - 'Ānah - Thartha Sāmarra' Khanaqin Kermanshah 34° - Lake Al Hadithah 34° - Borujerd - - Al Habb - DIYĀLÁ 'Akashat - an - Al Walid a-n Hit iy Ba'qūbah -- Ilam awr - - - - ah - H Ar Ramadi Baghdad u- Khorramabad i- - di dh R Wa ha- Al - ¸ Habbaniyah jā BAGHDAD - ne h h Ar Rutbah Lake l Fallu - Mehran -ye Şīm A AL ANBAR are h - Razzaza JORDAN Trebil - -i al G ¸ a wi h ad Lake - - Dehloran Wad - Karbala' - WASIT BABIL Shaykh Sa'd - Al Hillah - Al Kut KARBALA' - - al Gharbi 'Ali - Al Hayy Dezful 32° - d-i al Ubayyi¸d - - - Ad Diwaniyah - Wa An Najaf MAYSAN - 32° Nukhayb Al 'Amarah - Sukhayr Abu - - AL QADISIYAH Shatt al Qal'at Sukkar Tigri - Qal'at Salih - - s Judayyidat 'Ar'ar Qaryat al Gharab DHI QAR Ahvāz Gh ra ar ahr Eup f Ar'ar AN NAJAF hrates Al Qurnah - - ād m s h A An Nasiriyah -s Sha - Hawr al Hammar tt Ab o r r a ān al Ar - - b K h Jalibah a As Salman Al Başrah AL MUTHANN Ā AL BASRAH 30° SAUDI ARABIA Umm Qasr 30° Makhfar al Busayyah - Al Faw - National capital Rafha KUWAIT Governorate capital Al Jahrah Persian Town, village Kuwait Gulf - Al Ahmadi Airport International boundary Governorate boundary IRAQ - Hafar al Batin Expressway Main road Secondary road 28° Railroad 0 50 100 150 200 150 300 km The boundaries and names shown and the designations 0 50 100 150 200 mi used on this map do not imply official endorsement or acceptance by the United Nations. 42° 44° 46° 48° Map No. 3835 Rev. 6 UNITED NATIONS Department of Field Support Source: UN Geospatial > Iraq (July 1, 2014), https://www.un.org/geospatial/content/iraq. July 2014 Cartographic Section 40 Iraq is heir to a large part of Mesopotamia, the land between Gross domestic product (GDP) per capita, based on the Tigris and Euphrates Rivers that was home to one of purchasing power parity, was nearly USD 9,764 in 2020. humankind’s earliest civilizations.153 Iraq has a population Estimated GDP composition by sector of origin in 2017 of 40.2 million154 and a land area of 434,128 square was 3.3 percent agriculture, 51 percent industry, and 45.8 kilometers (about 167,618 square miles).155 The population percent services.165 Iraq’s primary natural resources are is concentrated in the north, central, and eastern areas, petroleum, natural gas, phosphates, and sulfur.166 Its with many of the larger urban areas along the Tigris and primary commodity exports in 2019 were crude petroleum Euphrates Rivers, and much of the western and southern (90.4 percent), refined petroleum (5.26 percent), gold (3.11 areas lightly populated or uninhabited.156 About 71 percent), petroleum coke (0.44 percent), and tropical fruit percent of the population lives in urban areas.157 Baghdad, (0.44 percent).167 The labor force was about 10.4 million the capital, has a population of about 7.1 million.158 Life in 2020.168 Unemployment in 2020 was an estimated 13.7 expectancy at birth in 2019 was 70.6 years.159 percent.169 The poverty rate had declined to 24.8 percent in the second half of 2020 after the government eased Iraq’s terrain is mostly broad plains. The area along the measures taken to prevent the spread of COVID-19, after Iranian border in the south comprises reedy marshes with having risen to 31.7 percent during the lockdowns and large, flooded areas. The remainder of the border with business closures.170 Today, 100 percent of the population the Islamic Republic of Iran and the border with Turkiye has access to electricity.171 Although a large percentage of are defined by mountain ranges.160 About 27 percent of the population normally has access to sanitary facilities Iraq’s land area is potentially suitable for agriculture, but and treated drinking water, in 2019, more than 2.3 million only about 7-9 percent is actually used for crop production people, including 1.4  million internally displaced persons due to soil salinity, drought, irrigation water shortages, (IDPs), lacked adequate access to such facilities.172 fallowing, and the unstable political situation.161 About 9 percent of the land area, largely located in rocky and steep The literacy rate is 85.6 percent, including 91.2 percent of mountain areas that are unsuitable for farming, is used as males and 79.9 percent of females.173 permanent pasture for goats and sheep.162 Over 50 percent of the land is unused desert.163 The desert climate that prevails in much of Iraq is characterized by mild-to-cool winters and dry, hot, cloudless summers. The northern mountain regions along the Iranian and Turkish borders experience cold winters with occasionally heavy snows that melt in early spring, sometimes causing extensive flooding in central and southern Iraq.164 153 See Embassy of the Republic of Iraq > About Iraq (2021), http://www.iraqiembassy.us/page/about-iraq. 154 World Bank > DataBank > World Development Indicators (2020). 155 World Bank > Data > Land area (sq. km) – Iraq (2020). 156 See A. A. Jaradat, Agriculture in Iraq: Resources, Potentials, Constraints, and Research Needs and Priorities (US Department of Agriculture, Washington, DC, 2002), 21, https://www.ars.usda.gov/ARSUserFiles/50600000/Products-Reprints/2002/1107.pdf. 157 Statista > Economy & Politics > International > Iraq: Urbanization from 2010 to 2020 (2020), https://www.statista.com/statistics/326837/urbaniza- tion-in-iraq/. 158 World Bank > DataBank > World Development Indicators (2020). 159 World Bank > DataBank > World Development Indicators (2019). 160 Country Reports > Iraq Geography (2021), https://www.countryreports.org/country/Iraq/geography.htm. 161 Food and Agriculture Organization of the United Nations > Iraq at a Glance (2021), https://www.fao.org/iraq/fao-in-iraq/iraq-at-a-glance/en/. 162 See Food and Agriculture Organization of the United Nations > Iraq at a Glance (2021), https://www.fao.org/iraq/fao-in-iraq/iraq-at-a-glance/en/; Country Reports > Iraq Geography (2021), https://www.countryreports.org/country/Iraq/geography.htm; A. A. Jaradat, Agriculture in Iraq: Resources, Potentials, Constraints, and Research Needs and Priorities (US Department of Agriculture, Washington, DC, 2002), 60, https://www.ars.usda.gov/ARSUser- Files/50600000/Products-Reprints/2002/1107.pdf. 163 A. A. Jaradat, Agriculture in Iraq: Resources, Potentials, Constraints, and Research Needs and Priorities (US Department of Agriculture, Washington, DC, 2002), 25, https://www.ars.usda.gov/ARSUserFiles/50600000/Products-Reprints/2002/1107.pdf. 164 Country Reports > Iraq Geography (2021), https://www.countryreports.org/country/Iraq/geography.htm. 165 IndexMundi > Iraq GDP Composition by Sector (2017 est.), https://www.indexmundi.com/iraq/gdp_composition_by_sector.html. 166 Country Reports > Iraq Geography (2021), https://www.countryreports.org/country/Iraq/geography.htm. 167 The Observatory of Economic Complexity > Profile > Country > Iraq > Yearly Exports (2021) (data sourced from Centre d'Études Prospectives et d'Informa- tions Internationales), https://oec.world/en/profile/country/irq#yearly-exports. 168 World Bank > DataBank > Labor force, total – Iraq (2020). 169 World Bank > DataBank > World Development Indicators (2020) (modeled International Labour Organization estimate). 170 “Iraq: Poverty Rate Fell to 24.8 Per Cent during Second half of 2020,” Middle East Monitor (March 17, 2021), https://www.middleeastmonitor. com/20210317-iraq-poverty-rate-fell-to-24-8-per-cent-during-second-half-of-2020/. 171 World Bank > Data > Access to electricity (% of population) – Iraq (2019). 172 See UNICEF (United Nations Children’s Fund), “Iraq 2019 Humanitarian Situation Report” (UNICEF, New York, 2020), 2–3, https://www.unicef.org/iraq/ media/1056/file/Iraq%20Humanitarian%20Situation%20Report%20for%20End%20-Year%202019.pdf. 173 World Bank > DataBank > World Development Indicators (2017). 41 The conflict in Iraq among the rival parties (none with a majority) was reached This component of the study assesses the impact of the to form a new government on November 11, 2010. Talabani 2003–11 conflict on the mobile market in Iraq, starting would continue as president, Al-Maliki would continue as with the invasion by a US-led coalition in March 2003 prime minister, and Allawi would head the new Security and ending with the December 2011 withdrawal of the Council.178 coalition forces. The 2013 invasion by the Islamic State of Iraq and the Levant (ISIL) and subsequent conflict are Meanwhile, coalition combat operations ended on August briefly considered in the post-conflict analysis below. 31, 2010, and a troop drawdown began, with the final group of US-led forces withdrawing on December 18, 2011. The As part of the US-led invasion of Iraq on March 19, 2003, troops were succeeded by diplomatic missions from the US and British forces quickly defeated the Iraqi Army, coalition countries.179 which was disbanded in May 2003.174 Saddam Hussein was captured in December 2003 and later tried and executed In 2013, ISIL entered Iraq from neighboring Syria, quickly for crimes against humanity.175 established a foothold, and eventually controlled about 40 percent of the country’s territory. A US-led coalition The deposed government was replaced by the Coalition began airstrikes against ISIL in Iraq on August 7, 2014, and Provisional Authority (CPA) established by the United expanded the campaign to Syria the following month.180 US States and its allies pursuant to United Nations (UN) President Obama also deployed a small contingent of Security Council Resolution 1483 and the laws of war.176 US ground troops to Iraq to protect the US Embassy and The CPA vested itself with executive, legislative, and conduct training operations.181 The United States officially judicial authority over the Iraqi government from its concluded its Iraqi military operations against ISIL in inception on April 16, 2003, until its dissolution on June 28, 2018.182 2004, when sovereignty was transferred to an interim Iraqi government.177 As part of ongoing efforts to improve citizen support for representative government, Iraq’s National Assembly enacted a new election law on November 8, 2009. Among other things, the new law increased the size of the Council of Representatives from 275 to 325 members and made other changes in the apportionment system. The first elections under the new election law were held on March 7, 2010. Voter turnout in 2010 was lower (62.4 percent) than in 2005 (79.6 percent). Numerous allegations of fraud were made, and a recount of votes in Baghdad was ordered, but the Independent High Elections Commission found no fraud or violations. The new Parliament opened on June 14, 2010. After months of negotiations, an agreement 174 See Stephen T. Hosmer, Why the Iraqi Resistance to the Coalition Invasion Was So Weak (RAND, Santa Monica, CA, 2007), https://www.rand.org/content/ dam/rand/pubs/monographs/2007/RAND_MG544.pdf. 175 Council on Foreign Relations > Timeline > The Iraq War (2021), https://www.cfr.org/timeline/iraq-war. 176 See L. Paul Bremer, Administrator, Coalition Provisional Authority Regulation No. 1 preamble (May 16, 2003), http://gjpi.org/wp-content/uploads/ cpa-reg-1-the-coalition-provisional-authority.pdf. See also James Dobbins, Seth G. Jones, Benjamin Runkle, and Siddharth Mohandas, Occupying Iraq: A History of the Coalition Provisional Authority (RAND, Santa Monica, CA, 2003), https://www.rand.org/content/dam/rand/pubs/monographs/2009/RAND_ MG847.pdf. 177 See L. Paul Bremer, Administrator, Coalition Provisional Authority Regulation No. 1, preamble (May 16, 2003), §1, http://gjpi.org/wp-content/uploads/ cpa-reg-1-the-coalition-provisional-authority.pdf. See also James Dobbins, Seth G. Jones, Benjamin Runkle, and Siddharth Mohandas, Occupying Iraq: A History of the Coalition Provisional Authority (RAND, Santa Monica, CA, 2003), 11, 15, 325, https://www.rand.org/content/dam/rand/pubs/mono- graphs/2009/RAND_MG847.pdf. 178 “Nouri Maliki reappointed Iraqi prime minister,” BBC News (November 12, 2010), https://www.bbc.com/news/world-middle-east-11732158. 179 Council on Foreign Relations > Timeline > The Iraq War (2021), https://www.cfr.org/timeline/iraq-war. 180 See “Timeline: the Rise, Spread, and Fall of the Islamic State,” Wilson Center (October 28, 2019), https://www.wilsoncenter.org/article/timeline-the-rise- spread-and-fall-the-islamic-state. 181 See Tim Arango, “U.S. Troops, Back in Iraq, Train a Force to Fight ISIS,” The New York Times (December 31, 2014), https://www.nytimes.com/2014/12/31/ world/us-troops-back-in-iraq-train-a-force-to-fight-isis.html; “Legal Basis for Iraq Troop Deployment Called into Question as Days Wear On,” The Guardian (September 5, 2014), https://www.theguardian.com/world/2014/sep/05/us-troops-deployment-iraq-legal-justification. 182 “Global Conflict Tracker: Political instability in Iraq” (Council on Foreign Relations, New York, last updated May 18, 2021), https://www.cfr.org/global-con- flict-tracker/conflict/political-instability-iraq. 42 Iraq’s telecom sector The order prescribed a modern and predictable legal The 1991 Persian Gulf War following Iraq’s 1990 framework for the sector designed to encourage private annexation of Kuwait, subsequent international sanctions sector investment and competition.189 The order also imposed on Iraq, and restrictions on civilian activities under transferred licensing authority from the ministry to the Saddam Hussein’s rule together had a devastating impact CMC.190 on Iraq’s telecom sector. At the time of the March 2003 US- led invasion, Iraq had very limited telecom infrastructure. Although the GSM licenses issued in 2003 had been set In 2002, fixed voice teledensity was 4.5 percent183 and to expire at the end of 2005, the CMC regularly granted mobile penetration was zero,184 because public mobile three-month extensions of all three licenses until it could services had been banned under Saddam Hussein.185 complete a long-term licensing process, which occurred in August 2007.191 In August 2007, the CMC auctioned three In June 2003, CPA issued an order directing the Ministry 15-year GSM licenses, indicating that it did not intend to of Transportation and Communications (MTC) to assume issue any additional mobile licenses. The reserve bid price responsibility for licensing commercial telecom services in for each license was set at USD 300 million plus an 18 Iraq in accordance with International Telecommunication percent revenue share.192 The final bid price was USD 1.25 Union commitments.186 Under this directive, in October billion per license, which the government agreed could be 2003, the ministry issued three two-year Global System paid over five years.193 Incumbents MTC Atheer (owned by for Mobile Communications (GSM) licenses to mobile Zain) and Asiacell were successful, but Orascom-owned operators Asiacell, Atheer, and Orascom. The separate incumbent Iraqna was outbid by Korek Telecom, a small licenses required Asiacell to build out the northern region, Kurdish mobile operator that had previously only served Orascom to build out the central region, and Atheer Tel to the north of Iraq.194 Following the auction, Orascom entered build out the southern region. The three operators were into a short-lived alliance with Korek, before agreeing collectively required to pay a USD 5 million license fee several months later to sell its existing Iraqi mobile assets for the two-year period, to be shared in proportion to the to Zain for USD 1.2 billion.195 number of potential subscribers in each region.187 The market had become widely imbalanced by mid- In March 2004, the a government order was issued 2009. Zain had full national coverage and, due in part to establishing the Iraqi Communication and Media its acquisition of Orascom, had over 70 percent of the Commission (CMC) as an independent regulator with a subscribers, while Asiacell, with coverage inferior to Zain’s, converged portfolio including telecom, broadcasting, and had the remaining 30 percent of the subscribers. Korek media markets with a mandate that included fostering did not yet have the infrastructure in place to deploy competition and establishing market rules in Iraq’s telecom national services, with operations only in a small northern sector.188 Kurdish region, so its national subscriber share was still de minimis.196 183 ITU > ITU-D > Statistics > Fixed-Telephone Subscriptions 2000-2020 (2021), https://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx. 184 ITU > ITU-D > Statistics > Mobile-Cellular Subscriptions 2000-2020 (2021). 185 See Reuters, “Phones Come Alive in Baghdad,” Wired (July 22, 2003), https://www.wired.com/2003/07/phones-come-alive-in-baghdad/. 186 See L. Paul Bremer, Administrator, Coalition Provisional Authority Order No. 11, Licensing Telecommunications Services and Equipment (June 9, 2003), https://govinfo.library.unt.edu/cpa-iraq/regulations/20030609_CPAORD_11_Licensing_Telecommunications_Svc_and_Equipment.pdf. 187 See “Arab firms win Iraqi phone contracts,” Al Jazeera (October 9, 2003), https://www.aljazeera.com/news/2003/10/9/arab-firms-win-iraqi-phone-con- tracts. 188 See L. Paul Bremer III, Administrator, Coalition Provisional Authority Order No. 65, Iraqi Communications and Media Commission (March 20, 2004), https://govinfo.library.unt.edu/cpa-iraq/regulations/20040320_CPAORD65.pdf. 189 Al Tamimi & Co., “An Insight into the Communication Sector in Iraq” (August 1, 2016), https://www.lexology.com/library/detail.aspx?g=0f957745-56f4- 48f2-9836-f1b625d45f08. 190 See L. Paul Bremer III, Administrator, Coalition Provisional Authority Order No. 65, Iraqi Communications and Media Commission (March 20, 2004), §12.1, https://govinfo.library.unt.edu/cpa-iraq/regulations/20040320_CPAORD65.pdf. 191 See James Middleton, “Three Iraq GSM Licences Awarded,” Telecoms.com News (August 20, 2007), https://telecoms.com/634/three-iraq-gsm-licences- awarded/. 192 See Suleiman al-Khalidi, “Iraq Launches Sale of Mobile Phone Licenses,” Reuters (August 16, 2007), https://www.reuters.com/article/tech-telecoms-iraq- auction-dc/iraq-launches-sale-of-mobile-phone-licenses-idUKL1687621920070816. 193 See “Mobile Operators Asked to Pay USD2.85bn in Licence Fees, Fines,” CommsUpdate (TeleGeography, Washington, DC, August 12, 2011), https://www. commsupdate.com/articles/2011/08/12/mobile-operators-asked-to-pay-usd2-85bn-in-licence-fees-fines/. 194 Suheil Ahmed, “Egyptian Telecom Firm Withdraws from Iraqi Mobile Phone Auction,” Associated Press (August 17, 2007), https://www.taiwannews.com.tw/ en/news/504990. 195 Inal Ersan, “Zain's $1.2 Bln Deal Lets Orascom Telecom Quit Iraq,” Reuters (December 1, 2007), https://www.reuters.com/article/us-zain-orascom-iraq/ zains-1-2-bln-deal-lets-orascom-telecom-quit-iraq-idUSL016863420071201. 196 “Iraq Approves Auction of Two Mobile Licences,” IHS Markit (July 15, 2009), https://ihsmarkit.com/country-industry-forecasting.html?ID=106595310. 43 By May 2010, Korek, owned by a group of Kurdish These sums represented the balance of their 2007 investors, had reportedly fallen behind on payments for its license fees, which were to be paid over five years, but 2007 license (which Zain and Asiacell had paid).197 Korek the new government claimed that the deferred payment would eventually secure financial resources from Orange, arrangements approved by the previous government were of France, and Kuwaiti logistic company Agility, which unlawful.203 together agreed to purchase a 44 percent stake in March 2011.198 In November 2012, the government began publicly discussing the terms of issuing “3G concessions,” hoping to By May 2010, among the three existing national licensees, raise at least USD 3 billion for each. The existing licensees Zain’s subscriber share had declined, but it was about 48 responded that they had been issued technology neutral percent, while Asiacell had about 38 percent and Korek had licenses in 2007 and that all they needed was additional about 12 percent of the national subscriber market (with spectrum to support 3G or 4G broadband rollout. The Kurdish operator SanaTel holding just over 2 percent).199 licensees also argued that they should be licensed additional spectrum without paying additional license fees.204 Nearly Also in May 2010, the government approved plans to a year later, the government was still deliberating over the auction a fourth mobile license (in which the government structure of its 3G auction, hinting that it would authorize a would hold a 35 percent revenue share).200 The Ministry of fourth entrant.205 In May 2014, the government reportedly Communications later announced plans to hold the auction agreed to assign each incumbent 15 Megahertz (MHz) of in the first quarter of 2011.201 The proposed structure later spectrum in the 2100 MHz band for 3G use.206 In October changed to reduce the offer to a 40 percent share of the 2014, the government asked them to pay USD 307 million fourth licensee, which would be allocated to the winning each for the 3G spectrum, leading them to object because bidder, with 35 percent to be offered to the public through their licenses only had eight years remaining and, by this an initial public offering and 25 percent to be held by the time, the ISIL incursion was disrupting their businesses.207 Ministry of Communications – and the proposed timing of Shortly thereafter, the three incumbent mobile operators the auction was pushed back to the first quarter of 2012 – accepted the government’s proposal and agreed to pay the with the government hoping to raise about USD 2 billion in USD  307  million asking price for 3G spectrum, making a the auction.202 USD 73 million down payment and paying the remainder in four instalments over 18 months.208 In August 2011, the new government that formed after the 2010 elections reportedly decided to demand that By 2013, the market had become more balanced, with Zain Zain, Asiacell, and Korek pay USD 2.85 billion in license facing stronger competition. Its market share had declined fees and fines within a month (roughly USD 803 million for to 53 percent in 2013, while Asiacell had grown to 31 Zain, USD 768 million for Korek, and USD 625 million for percent and Korek had reached 16 percent.209 Asiacell). 197 See “Iraq’s Cabinet Approves Plan to Auction Fourth Mobile Phone Licence,” Connectivity Business (May 23, 2010), https://connectivitybusiness.com/news/ iraqs-cabinet-approves-plan-auction-fourth-mobile-phone-licence/. 198 See “France Telecom, Agility Ink Agreement to Acquire 44% Stake in Korek,” CommsUpdate (TeleGeography, Washington, DC, March 14, 2011), https:// www.commsupdate.com/articles/2011/03/14/france-telecom-agility-ink-agreement-to-acquire-44-stake-in-korek/. 199 See “Iraq to Award Fourth Mobile Licence in Q1 2011,” CommsUpdate (TeleGeography, Washington, DC, October 7, 2010), https://www.commsupdate. com/articles/2010/10/07/iraq-to-award-fourth-mobile-licence-in-q1-2011/. 200 See “Iraq’s Cabinet Approves Plan to Auction Fourth Mobile Phone Licence,” Connectivity Business (May 23, 2010), https://connectivitybusiness.com/news/ iraqs-cabinet-approves-plan-auction-fourth-mobile-phone-licence/. 201 See “Iraq to Award Fourth Mobile Licence in Q1 2011,” CommsUpdate (TeleGeography, Washington, DC, October 7, 2010), https://www.commsupdate. com/articles/2010/10/07/iraq-to-award-fourth-mobile-licence-in-q1-2011/. 202 See “Auction of Fourth Mobile Licence to Take Place in Early 2012,” CommsUpdate (TeleGeography, Washington, DC (October 27, 2011), https://www. commsupdate.com/articles/2011/10/27/auction-of-fourth-mobile-licence-to-take-place-in-early-2012/. 203 See “Mobile Operators Asked to Pay USD2.85bn in Licence Fees, Fines,” CommsUpdate (TeleGeography, Washington, DC, August 12, 2011), https://www. commsupdate.com/articles/2011/08/12/mobile-operators-asked-to-pay-usd2-85bn-in-licence-fees-fines/. 204 See “Govt Slaps USD3bn Price-Tag on 3G Licences,” CommsUpdate (TeleGeography, Washington, DC, November 5, 2012), https://www.commsupdate. com/articles/2012/11/05/govt-slaps-usd3bn-price-tag-on-3g-licences/. 205 See “Iraqi 3G Auction Likely to Include Fourth National Operating Concession,” CommsUpdate (TeleGeography, Washington, DC, September 23, 2013), https://www.commsupdate.com/articles/2013/09/23/iraqi-3g-auction-likely-to-include-fourth-national-operating-concession/. 206 See “Iraqi Government Approves Distribution of 3G Frequencies,” CommsUpdate (TeleGeography, Washington, DC, May 6, 2014), https://www.commsup- date.com/articles/2014/05/06/iraqi-government-approves-distribution-of-3g-frequencies/. 207 See “Govt. Demands USD307m for 3G Spectrum,” CommsUpdate (TeleGeography, Washington, DC, October 15, 2014), https://www.commsupdate.com/ articles/2014/10/15/govt-demands-usd307m-for-3g-spectrum/. 208 See “Trio to Cough Up USD307m for 3G Licences,” CommsUpdate (TeleGeography, Washington, DC, November 7, 2014), https://www.commsupdate. com/articles/2014/11/07/trio-to-cough-up-usd307m-for-3g-licences/. 209 “Telecommunication Companies in Iraq & Kurdistan” (Marcopolis, Paris, 2013), https://marcopolis.net/telecommunication-companies-in-iraq-a-kurdis- tan-telecom-list.htm. 44 By 2018, the mobile market was beginning to stabilize, with submarine fiber optic cable system, in cooperation with Zain at 39 percent market share, Asiacell at 34 percent, ITPC, to connect Iraq with Qatar, the United Arab Emirates, and Korek at 19 percent. All three offered 3G service.210 the Islamic Republic of Iran, Kuwait, Bahrain, Oman, and Although the government recently agreed to renew their Saudi Arabia in a ring configuration and to connect onward licenses, which were set to expire in 2022, renewal was to Mumbai and Sicily.216 Also in 2012, Reliance Globalcom blocked by an Iraqi court over claims of corruption and connected Iraq to its FALCON submarine cable system, at anti-competitive behavior.211 a landing station built in partnership with ITPC, providing connectivity from Iraq to all the countries in the Middle Kurdistan also developed a regional mobile market. Although East region and onward connectivity to the rest of the mobile networks had been prohibited in Iraq by Saddam world.217 Hussein’s regime, the Kurdistan Regional Government had exercised its autonomy to issue regional licenses to Asiacell The 2007 licenses also imposed requirements on the three and Korek in 1999 and 2000, respectively. When the CPA licenses to list at least 25 percent of their shares on the established the CMC, the new regulator formalized the Iraq Stock Exchange. In 2013, Asiacell, majority owned by Kurdistan regional licenses previously issued to Asiacell Qatar’s Ooredoo, successfully floated USD 1.27 billion in and Korek, extending their GSM operating permission to shares on the exchange, valuing the company at USD 4.95 all of Iraq.212 Kurdistan continued as the more progressive billion.218 The process of undertaking and completing these region of Iraq’s telecom sector, awarding regional licenses listings proved more difficult for Zain and Korek.219 Both to Mobitel to provide 2G and 3G services in 2007 and a Zain and Korek faced administrative difficulties in floating 4G license to Fastlink in 2013. The latter thus became the shares, including the requirement to be registered as a first operator to launch 4G services in Iraq.213 Kurdistan is joint stock company rather than a limited liability company, home to about 17 percent of Iraq’s population, however, proof of profitability, and clearance from tax authorities. so its separate regional market did not materially impact Korek, as a smaller company primarily located (and with the overall evaluation of Iraq’s internal business climate a tax residence) in Kurdistan, found the administrative factors. requirements particularly challenging.220 Iraq never enacted a modern telecom law during the Although it is outside the scope of impacts assessed in conflict period or in the post-conflict period ending in this study, the invasion of Iraq by ISIL forces in 2013 and 2020. One result is that the Ministry of Communications the subsequent conflict caused another round of adverse and the CMC have overlapping and potentially conflicting impacts on Iraq’s telecom sector. Other issues also arose mandates and authority over the sector.214 The state following the 2003–11 conflict. For example, in October has retained a monopoly over fixed services, held by the 2020, Orange brought an expropriation claim against state-owned Iraqi Telecommunication and Post Company the Iraqi government before the World Bank Group’s (ITPC), including all terrestrial fiber network investment. International Centre for the Settlement of Investment As an apparent consequence, Iraq has the highest regional Disputes (ICSID). Orange alleged that the Iraqi state disparity between mobile penetration and broadband breached international trade agreements by refusing subscriptions.215 In 2012, soon after the end of the conflict Orange and its Kuwaiti partner, Agility, the ability to period, Qatar-based Gulf Bridge International landed a challenge the ruling of sector regulator CMC, which they claimed had denied them their equity investment 210 See World Bank, “Mashreq 2.0: Digital Transformation for Inclusive Growth and Jobs” (World Bank, Washington, DC, 2018), 28, https://documents1. worldbank.org/curated/en/246561561495359944/pdf/Mashreq-2-0-Digital-Transformation-for-Inclusive-Growth-and-Jobs.pdf. 211 J. Barton, “Iraqi Court Blocks Licence Renewals over Corruption Allegations," Developing Telecoms (November 16, 2020), https://www.developingtelecoms. com/telecom-business/telecom-regulation/10293-iraqi-court-blocks-licence-renewals-over-corruption-allegations.html. 212 Invest in Group, “Plugging In: Telecom and Internet," Kurdistan Region Review (October 2013), https://investingroup.org/review/242/plugging-in-tele- com-and-internet-kurdistan/#:~:text=The%20Kurdistan%20Region%E2%80%99s%20telecom%20industry%20is%20largely%20dominated,with%2010%- 20million%20and%204.8%20million%20subscribers%2C%20respectively. 213 P. Bell, “Iraq and Roll: Telecoms in Kurdistan,” TeleGeography (October 16, 2017), https://blog.telegeography.com/iraq-and-roll-telecoms-in-kurdistan. 214 World Bank, “Mashreq 2.0: Digital Transformation for Inclusive Growth and Jobs” (World Bank, Washington, DC, 2018), 28, https://documents1.world- bank.org/curated/en/246561561495359944/pdf/Mashreq-2-0-Digital-Transformation-for-Inclusive-Growth-and-Jobs.pdf. 215 See World Bank, “Mashreq 2.0: Digital Transformation for Inclusive Growth and Jobs,” (World Bank, Washington, DC, 2018), 7, 21, https://documents1. worldbank.org/curated/en/246561561495359944/pdf/Mashreq-2-0-Digital-Transformation-for-Inclusive-Growth-and-Jobs.pdf. 216 See “GBI lands Submarine Cable in Iraq,” CommsUpdate (TeleGeography, Washington, DC, January 18, 2012), https://www.commsupdate.com/arti- cles/2012/01/18/gbi-lands-submarine-cable-in-iraq/. 217 See “Reliance Hooks Up Iraq to Cable System,” CommsUpdate (TeleGeography, Washington, DC, July 3, 2012), https://www.commsupdate.com/arti- cles/2012/07/03/reliance-hooks-up-iraq-to-cable-system/. 218 Reuters, “Qatar Telecom Now Owns 64.1% of Asiacell,” Arab News (February 5, 2013), https://www.arabnews.com/economy/qatar-telecom-now-owns- 641-asiacell. 219 See “Zain IPO Delayed Again; Now Anticipated by End-2013,” CommsUpdate (TeleGeography, Washington, DC, April 16, 2013), https://www.commsup- date.com/articles/2013/04/16/zain-ipo-delayed-again-now-anticipated-by-end-2013/. 220 See Sneha Abraham, “Iraq Poses Difficult Challenges” Middle East Business Intelligence (October 6, 2014), https://www.meed.com/iraq-poses-diffi- cult-challenges/. See also “Interview with Ghada Gebara, CEO of Korek Telecom,” in Kurdistan Region of Iraq Report (MacroPolis, February 22, 2013), https://marcopolis.net/korek-telecom-an-iraqi-telecom-with-nationwide-coverage.htm. 45 in Korek.221 However, the tribunal that convened in the Iraq: Ease of private investment? arbitration rejected Orange’s claim on jurisdictional A March 2004 CPA order quickly established a favorable grounds.222 framework for private investment in mobile networks, enabling Iraq to attract and retain three investor-owned mobile operators that invested extensively in building out 3.2 Assessment of internal Iraqi telecom national networks. investment climate factors Although they were permitted to build their own radio access networks, Iraq’s new mobile operators faced other Five internal factors during the conflict and after that investment barriers. Following the handover of governing impacted the climate for mobile market investment in Iraq authority by the CPA in June 2004, Iraq’s new government were assessed: (1) market open to entry, (2) ease of private was slow to adopt a new telecom law to replace the investment, (3) spectrum needs met, (4) level playing field, CPA’s earlier order and still had not done so by the time and (5) fiscal reasonableness. Each factor is discussed in the coalition forces withdrew in December 2011.223 This turn below, followed by a summary of key findings across resulted in Iraq being without a working telecom law for all all the internal factors. but three months during the conflict period – with mobile licenses serving as the primary sources of mobile operator Iraq: Market open to entry? rights and obligations. For example, some mobile licensees Prior to 2003, public mobile networks were illegal in Iraq faced issues around the requirement in their licenses that (except in Kurdistan) and no national commercial operator they list at least 25 percent of their shares on the Iraq Stock had been licensed. The CPA acted quickly to issue interim Exchange. licenses. Asiacell, Atheer, and Orascom were issued two- year interim GSM licenses in 2003 to provide nationwide The legacy legal framework also preserved a state mobile service and, following the handover of control, monopoly over fiber optic fixed infrastructure and the were routinely granted extensions by the new Iraqi international gateway, hampering the ability of mobile government until long-term licenses could be issued. The operators to invest in their own fiber backhaul and government issued three 15-year licenses in 2007 through international capacity required for broadband service.224 a competitive auction process, two of which were won by Combined with the delay in releasing broadband spectrum the original incumbents and one of which was won by a new bands (discussed below), this forced the three mobile entrant from Kurdistan. The government later considered operators to invest in 2G rather than 3G or 4G technology licensing a fourth entrant, but apparently concluded that when building out their networks, although they were well- the market would not support a fourth national operator. financed and the Gulf states region is known for aggressive mobile broadband build-outs. One apparent cause of these shortcomings in the investment framework was lack of There have been rumors of issues arising over renewal of a clear allocation of responsibilities between the sector the licenses in 2020, but as this occurred well after the ministry and the sector regulator.225 end of the 2003–11 conflict period, it had no impact on the evaluation of market openness during the conflict period. Iraq was assigned an uncertain rating for ease of private Iraq successfully introduced three national investor-owned investment in mobile networks during the 2003–11 rival mobile networks and some additional regional rivals. conflict period, balancing the relative openness to private Iraq was assigned a favorable rating for openness to mobile investments in mobile radio access networks with the market entry during the conflict period. difficulties of local listing requirements and the restrictions on private investment in backhaul fiber and international capacity. 221 See “Orange Launches Arbitration against Iraqi Government,” CommsUpdate (TeleGeography, Washington, DC, October 15, 2020), https://www.comm- supdate.com/articles/2020/10/15/orange-launches-arbitration-against-iraqi-government/. 222 See “International Tribunal Rejects Korek Telecom Case,” CommsUpdate (TelegeoGraphy, Washington, DC, February 24, 2021), https://www.commsup- date.com/articles/2021/02/24/international-tribunal-rejects-korek-telecom-case/. 223 GSMA, “Green Paper on Iraq Draft Telecommunications Laws” (summarizing recommendations of multi-stakeholder expert workshop on Iraq's proposed legal framework) (GSMA, London, April 2018), https://www.gsma.com/mena/wp-content/uploads/2018/11/Green-Paper-on-Iraq-Draft-Telecom-Laws-Fi- nal.pdf. 224 See, for example, Hussein Al Bayati, “It’s Time for Iraq to Seriously Invest in Internet Infrastructure” (Iraq Energy Institute, London, June 9, 2019), https:// iraqenergy.org/2019/06/09/business-perspectives-part1-internet-infrastructure-iraq-stock-market-modernisation/. 225 See GSMA, “Green Paper on Iraq Draft Telecommunications Laws” (GSMA, London, April 2018), 7, 21, https://www.gsma.com/mena/wp-content/up- loads/2018/11/Green-Paper-on-Iraq-Draft-Telecom-Laws-Final.pdf. 46 Iraq: Spectrum needs met? Iraq: Level playing field? Operators in Iraq were able to source 2G spectrum during The CPA acted quickly to establish the CMC as an the conflict period, beginning with short-term 2G licenses independent regulator in 2004 and the 2007 licensing issued in late 2003. Spectrum prices for the three national process appears to have been both transparent and fair. operators were set in an open and transparent auction Regulatory actions taken through 2011 also appear to process in 2007 through which the successful licensees have been reasonable and balanced. Gradual convergence bid more than four times the government’s reserve price. of market shares toward a balanced market during 2003– After being outbid in the auction, Orascom’s ability to 11 is further evidence of relatively effective competition sell its existing assets to Zain for USD 1.2 billion in 2007 in which all three national mobile operators were able to suggests that it had built a vibrant business with its compete for new customers and churning customers. spectrum allocation during 2003–07. Mobile penetration Iraq was assigned a favorable score for level playing field in had reached 90 percent by 2011, when the conflict period its mobile retail market during the conflict period. ended. Iraq: Fiscal reasonableness? Availability of mobile broadband spectrum was ultimately During the conflict period, Iraq’s tax system was governed delayed by the new government’s inexperience, political under a 2004 CPA order.226 The order amended the existing divisions, and limited capacity. Spectrum policy also Iraqi tax system to establish a flat 15 percent corporate appeared more focused on raising revenue than supporting income tax and personal income taxes at relatively low mobile market development. In 2010, the government was rates with a range of exemptions. During the 2003–11 making plans to auction a fourth mobile license, even as it conflict period, Iraq’s general corporate tax burden was had not yet announced plans to license broadband (3G or low, and it had no sector-specific telecom taxes. 4G) spectrum. While plans to auction a fourth license were eventually abandoned, 3G spectrum was not released until Faced with mounting budget pressures, in 2015 Iraq November 2014, some seven years after the 2G auctions. introduced new taxes designed to reduce budget shortfalls, Although these developments occurred near the end of including a 20 percent surtax on mobile telephone the conflict period in 2011, the delay in releasing spectrum services and internet subscriptions. A 2017 report by the required for mobile broadband forced mobile operators International Monetary Fund observed that these revenue to deploy 2G equipment at a time when they may have sources were necessary to replace petroleum revenue, instead deployed 3G or 4G equipment, thereby delaying which had historically generated 90 percent of government the availability of mobile broadband in Iraq. receipts but had declined due to the global fall in oil prices since 2013.227 The impact of this sector-specific tax was Iraq was therefore assigned an uncertain score for meeting not considered in the evaluation because it occurred after mobile spectrum needs during the conflict period due to the 2011. delayed release of the bands required for broadband. Since the end of the conflict in 2011, the government’s handling However, ITPC, a state-owned enterprise, held a monopoly of spectrum needs, in terms of both renewing existing over terrestrial fiber infrastructure and international licenses and releasing additional spectrum, has continued connectivity throughout the 2003–11 conflict period. This to neglect mobile market performance and would likely be state holding enabled the government to extract additional considered unfavorable if those later years were evaluated nontax revenues from mobile operators by imposing high for this study. wholesale prices on international connectivity (which was a significant revenue source at the time due to the large volume of international voice traffic generated by foreign military personnel, private contractors, and international donor staff) and domestic backhaul (which was a less significant revenue source at the time because most mobile traffic was voice and text).228 226 L. Paul Bremer, Administrator, Coalition Provisional Authority Order No. 49, Tax Strategy of 2004 (February 19, 2004), https://govinfo.library.unt.edu/cpa- iraq/regulations/20040220_CPAORD_49_Tax_Strategy_of_2004_with_Annex_and_Ex_Note.pdf. 227 See Csaba Feher et al., Iraq: Selected Issues, IMF Country Report No. 17/252 at 16-25 (International Monetary Fund, Washington, DC, July 25, 2017), 16–25, https://www.imf.org/-/media/Files/Publications/CR/2017/cr17252.ashx. 228 Iraq Business News, “High Costs Hamper Iraqi Telecoms” (May 6, 2011), https://www.iraq-businessnews.com/2011/05/06/high-costs-hamper-iraqi-tele- coms/3/. 47 Fiscal predictability was reasonable in Iraq throughout the 2003–11 conflict period. Notwithstanding potential fiscal drag from the ITPC monopoly, Iraq was assigned a favorable score based on its low general taxes, absence of sector-specific taxes, and reasonable fiscal predictability during the conflict period, as summarized in table 7. Table 7: Iraq: Fiscal reasonableness determination Iraq: fiscal reasonableness, 2001–11 General taxes Sector-specific taxes Nontax impositions Predictability None during period Fixed state-owned 15% corporate income 20% telecom tax enterprise monopoly Reasonable tax instituted in 2015 (after resulting in high the reviewed period) wholesale prices Iraq overall rating: Favorable Source: World Bank. Table 8: Iraq: Assessment of internal factors impacting the telecom investment climate Score Internal factor assessed Key relevant facts 2003, Asiacell, Atheer, and Orascom issued two-year GSM licenses, which were renewed through 2007 Open entry to market 2 2007, Asiacell, Korek, and Zain issued 15-year Global System for Mobile Communications licenses 2004, provisional government issued order to develop sector Ease of private investment 1 Legal restrictions on competitive fiber investment Restrictive type approval regulation 3G and 4G available early in Kurdistan but delayed elsewhere Spectrum needs met 1 High spectrum costs 2004, provision establishes the Communication and Media Commission as independent Level playing field 2 regulator No telecom-specific taxes during the study period Fiscal reasonableness 2 State-owned enterprise monopoly fixed operator resulting in fiscal drag All 8 Source: MacMillan Keck. Iraq: Summary of key findings across all the internal factors Table 8 summarizes the scoring of the five internal factors impacting Iraq’s telecom investment climate during the 2003–11 conflict period. It also offers the key facts that led to the score for each factor. 48 3.3 Assessment of external Iraqi telecom Iraq: Travel restrictions? As part of the aftermath of the 1991 Gulf War and resulting investment climate factors sanctions, international travel to Iraq was severely restricted before the 2003 invasion. All commercial flights Five external factors during the 2003–11 conflict period into Iraq were suspended during the period of active that impacted the climate for mobile market investment combat, which quickly ended, and until Iraq’s airspace in Iraq were assessed: (1) military interference, (2) could be secured by the coalition forces. In October 2004, international sanctions, (3) travel restrictions, (4) national carrier Iraqi Airways resumed commercial flights international aid for telecommunications, and (5) to Jordan. It was soon followed by multiple other carriers international security intervention. Each factor is discussed in the Gulf and Middle East region offering flights to in turn below, followed by a summary of key findings across capital cities and onward intercontinental travel. Direct all the external factors. intercontinental flights to Iraq were slower to resume, however, in part as a hangover of the earlier sanctions. In Iraq: Military or paramilitary interference? October 2010, a French airline operated the first European After the initial US-led invasion ended (within about six scheduled flight to Iraq since 1990.232 months), Iraq faced no formal military blockades or foreign military interference during the 2003–11 conflict period. The flights available and lack of any travel restrictions or However, removal of the Ba’athist regime created a power border closures from mid-2003 were sufficient for the vacuum in the border regions. The Iraq-Syria border mobile operators and their investors to establish and build became a jihadi stronghold, even before the ISIL incursion. their businesses during the conflict period without any In addition, the Baghdad-Trebil highway, which was used undue limitations on necessary travel. for 40 percent of Iraq’s land trade at the time, became too dangerous to pass because of al-Qaeda activities.229 There were no travel restrictions or border closures imposed by other countries that were likely to impact Due to fragility and conflict on the Iraq-Syria border and the inbound and outbound travel of telecom operator the main land trade route, Iraq received an uncertain rating executives or vendor technicians. for military or paramilitary interference. Iraq received a favorable rating for travel restrictions during Iraq: International sanctions? the 2003–11 conflict period. Before the conflict, the UN Security Council had imposed an embargo on Iraq in various forms from 1990 to 2003.230 Iraq: International aid for telecommunications? Following the invasion of Iraq in 2003 and the fall of the Iraq received substantial international assistance for regime, the UN Security Council largely lifted the embargo reconstruction of its telecom sector during the coalition- in May 2003, with limited exceptions for arms sales and led occupation. payments for petroleum.231 There were no other broad sanctions imposed by the international community during The United States Agency for International Development the remainder of the conflict period. (USAID) funded various efforts to restore the country’s communications infrastructure, including assessing the Iraq received a favorable rating on international sanctions routes and condition of the state-owned terrestrial fiber during the 2003–11 conflict period. optic cable, performing emergency repairs, providing necessary tools and equipment, and installing a satellite gateway system to restore international calling service in 2003. In 2005, USAID installed new fiber optic connections to complete the USD 70 million project connecting the Ministry of Electricity to the Iraqi Telephone and Postal Company’s fiber optic network, which ultimately served to reduce blackouts and disruptions in the grid system.233 229 Harith Hasan and Kheder Khaddour, The Transformation of the Iraqi-Syrian Border: From a National to a Regional Frontier (Carnegie Middle East Center, Beirut, Lebanon, March 31, 2020), https://carnegieendowment.org/files/Hasan_Khaddour_Iraq-Syria_Border2.pdf. 230 UN Security Council Resolution 661 (United Nations, New York, 1990), http://unscr.com/en/resolutions/661. 231 UN Security Council Resolution 1483 (United Nations, New York, 2003), http://unscr.com/en/resolutions/1483. 232 Delphine Touitou, “French Airline to Fly to Iraq Again,” Blog Post (Skyscraper City Forum, 2010), https://www.skyscrapercity.com/threads/iraq-aviation-sec- tor.1091379/page-8#post-66057317. 233 “Reconnecting Iraq: Telecommunications – Iraq.” ReliefWeb (June 16, 2006), https://reliefweb.int/report/iraq/reconnecting-iraq-telecommunications. 49 The UN Assistance Mission for Iraq was established in 2003.234 Its mandate was greatly expanded in 2007 to include facilitating economic reform, capacity building, and setting conditions for sustainable development and recovery and reconstruction.235 The World Bank Group also provided significant financial assistance to Iraq’s telecom sector. These projects included rehabilitating the microwave network in Iraq and USD 65 million in financing for construction of the Iraq Inter-Banking Network, which connected all 52 banks in Iraq.236 In 2011, the International Finance Corporation provided Zain a USD 155 million loan as part of a larger USD 400 million syndicated loan facility for improvements to its mobile network.237 Iraq received a favorable rating for international aid for telecommunications during the conflict period. Iraq: International security intervention? International efforts were strengthened to try to improve the security in the country which deteriorated in the aftermath of the US led invasion. Consequently, the US had to significantly increase security operations in the country The US-led occupying forces provided security operations in the country. The United States had a combat mission in Iraq for seven years between 2003 and 2010. Even after the last US troops left Iraq, US military advisors and trainers remained to provide support and assistance to the local government, though could not guarantee security.238 Though contested, for the purpose of this report Iraq received a favorable rating for international security intervention. Iraq: Summary of key findings across all the external factors Table 9 summarizes the scoring of the five external factors impacting Iraq’s telecom investment climate during the 2003–11 conflict period. It also offers the key relevant facts that led to the score for each factor. Table 9: Iraq: Assessment of external factors impacting the telecom investment climate Score Internal factor assessed Key relevant facts No formal military blockades but al-Qaeda controlled some parts of border and main Military interference 1 trade route International sanctions 2 No broad US, EU, or UN sanctions Travel restrictions 2 Security-related travel restrictions International aid for Substantial USAID assistance for telecom reconstruction 2 telecommunications World bank assistance International security Extensive security provided by US-led occupying forces 2 intervention UN Assistance Mission established in 2003, expanded in 2007 All 9 Source: MacMillan Keck. Note: UN = United Nations; USAID = United States Agency for International Development. 234 UN Security Council Resolution 1500 (United Nations, New York, 2003), http://unscr.com/en/resolutions/1500. 235 UN Security Council Resolution 1770 (United Nations, New York, 2007), http://unscr.com/en/resolutions/1770. 236 World Bank, “Information and Communication Technologies: Results Profile” (April 13, 2013), www.worldbank.org/en/results/2013/04/13/ict-results-pro- file.print. 237 See IFC (International Finance Corporation), “IFC-Led Financing for Zain Iraq to Improve Telecoms Services, Support Growth in Iraq” (IFC, Washington, DC, March 1, 2011), https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=22518. See also “Zain Receives USD400m IFC Debt Facility,” CommsUpdate (TeleGeography, Washington, DC, March 2, 2011), https://www.commsupdate.com/articles/2011/03/02/zain-receives-usd400m-ifc-debt-facility/. 238 United States Institute of Peace, Iraq Timeline: Since the 2003 War (United States Institute of Peace, Washington, DC, May 29, 2020), www.usip.org/iraq- timeline-2003-war. 50 3.4 Iraq’s projected and actual teledensity evolution The following passages assess and analyze Iraq’s projected and actual mobile teledensity evolution during the 2003–11 conflict period. The post-conflict period from 2012 through 2020 is discussed further below. Iraq’s unique subscriber mobile penetration Iraq’s mobile penetration is presented from 2000 through 2020 and assessed in detail for the 2003–11 conflict period. The results are shown in figure 10. The Islamic Republic of Iran, Jordan, and Turkiye were compared as a peer group for benchmarking Iraq’s progress. The adult-age (15+) population (green dashed line in figure 10) serves as a potential invisible upper bound on unique customer mobile penetration. The projected growth in the but-for-the-conflict scenario was modeled to represent a reasonable basis for what could have transpired absent the conflict, with realistic improvements in the investment environment and the earlier stimulation of market growth. The projected but-for-the-conflict growth in Iraq is similar to the profiles of Turkiye and Jordan. The projection anticipated that 4G would have been introduced around 2015, neighboring Islamic Republic of Iran (2014), Turkiye (2015), and Jordan (2016) all launched well before the launch of national 4G service in Iraq (2021). Iraq’s but-for-the-conflict mobile penetration projection (orange line in figure 10) closely tracks actual penetration (with very little differential) until 2007, after which actual penetration begins falling further behind projected but-for-the- conflict penetration. There is clear evidence of retarded actual penetration growth from 2007 onward, especially when Iraq’s performance is compared with its immediate neighbors. The primary conflict period, from 2003 to 2011, exhibits growth in unique mobile subscriber penetration in Iraq that is largely similar to its peers, especially over the period from 2006 to 2011. Figure 10: Iraq’s unique subscriber mobile penetration, 2000–20 Source: MacMillan Keck. Note: ISIL = Islamic State of Iraq and the Levant. The but-for-the-conflict projection is similar to the case of Afghanistan because mobile penetration was also very low (1 percent) when the conflict began in 2003. However, mobile services were already reasonably well developed in Jordan and Turkiye, with the Islamic Republic of Iran showing signs of slow growth, having begun service three years earlier. Iraq quickly overtook the Islamic Republic of Iran and remained there despite the conflict until 2009 as the Iranian market growth accelerated in a competitive environment. Iraqi mobile penetration was modeled using a standard S-curve model, which tracked the average growth of its peers from 2009 and ends at just below the notional bound of the adult population (62 percent). 51 Again, the projection was constructed by mapping estimated penetration on an annual basis and ensuring that year-on-year increases followed a smooth and declining trend as would be expected in normal development conditions. This is the normal business modeling method for projecting market growth using a top-down approach, factoring in the delayed launch of 4G services, which would have provided greater growth impetus. The projection curve follows a steep S-curve to 2008, with steady growth thereafter, resulting in a penetration increase of 4.93 percentage points over actual penetration by 2011. The projection does not exceed the notional limit (adult population of 62 percent), but it does begin to approach this level. Iraq’s neighbors were all approaching this notional limit by 2020: the Islamic Republic of Iran, at 72.9 percent penetration with an adult population of 75 percent; Turkiye, at 66.9 percent penetration with an adult population of 76 percent; and Jordan, at 64.0 percent penetration with an adult population 66 percent. Iraq benefitted from early action by the CPA, including issuance of two-year GSM licenses to Asiacell, Atheer, and Orascom in 2003. The new self-determined government issued 15-year GSM 2G licenses in 2007. Benefiting from extensive international technical assistance, Iraq also adopted pro-development telecom policies and established an independent regulator in the early years of the conflict. Iraq’s mobile penetration growth rate Iraq’s mobile penetration growth rate (which is the year-on-year rate of change in penetration) is also presented for the period from 2000 through 2020 and assessed for the 2003–11 conflict period. The results are shown in figure 11.239 Figure 11: Iraq’s mobile penetration growth rate, 2000–20 Iraq - Mobile Penetra�on growth rate (RoC) 12.0% US-IRAQ Conflict ISIL Conflict 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -2.0% -4.0% Projected RoC Net RoC difference Actual RoC Average projected RoC Average actual RoC Source: MacMillan Keck. Note: ISIL = Islamic State of Iraq and the Levant; RoC = Rate of Change. Due to the unique nature of the conflict in Iraq, where the foreign invasion and removal of the prior regime were short-lived and followed by a lengthy period of occupation and peacekeeping, the adverse impact of the conflict on market performance was relatively minimal. Iraq experienced tremendous subscriber growth through 2005/2006, but then growth rates began to decline through the end of the conflict in 2011, after power was transferred back to the country’s self-determined government. 239 Penetration rates below 1 percent were disregarded due to the unreliability of data at this nascent stage of development. 52 3.5 Correlating Iraq’s supply-side investment climate and teledensity The assessment of Iraq can inform an overall view of the relationship between the supply-side telecom investment climate and teledensity evolution in Iraq during the conflict. Iraq was assessed as having an internal factor investment climate rating of 8 and an external factor investment climate rating of 8. Key internal factors included (1) prompt issuance of interim licenses, (2) adoption of a provisional decree to establish sector rules ahead of adoption of a formal telecom law, and (3) establishment of an independent provisional telecom sector regulator ahead of adoption of a formal telecom law. Key external factors included (1) lifting or relaxation of pre-conflict sanctions after the US-led intervention, (2) facilitation of equipment imports by the occupying coalition, (3) significant foreign aid from the United States and the World Bank, and (4) extensive external security assistance. Iraq’s actual average annual teledensity growth rate suffered a 7.4 percent decline compared with its projected but-for- the-conflict teledensity growth rate. After Afghanistan, which faced similar circumstances in terms of the impact of military occupation, Iraq experienced the second lowest growth rate deficit among all seven countries studied. Thus, despite having limited telecom infrastructure at the onset of the conflict in 2003, by 2011, Iraq was achieved unique mobile subscriber penetration of 45.3 percent, equal to about 83 percent of the adult population. 3.6 Iraq’s post-conflict performance Iraq’s conflict was resolved in 2011, well before 2020, the final teledensity measurement year covered in these case studies. This makes Iraq unique among the countries studied as having the only significant post-conflict period and therefore the only country where post-conflict teledensity evolution and its potential causes can also be studied. Although Iraq incurred a teledensity growth rate deficit during the eight years of conflict, and accordingly ended the period with lower actual mobile subscriber penetration than may have been reached but-for-the-conflict, it may have been expected that Iraq would have made up for lost time after the conflict. To see how this might have impacted teledensity evolution, the actual and projected mobile subscriber curves for Iraq presented in figure 10 were supplemented by a projected mobile subscriber curve with its inception in 2011 rather than 2003. This set of subscriber penetration curves is shown in figure 12. Figure 12: Iraq’s lost opportunity in post-conflict mobile subscriber penetration, 2011–20 Source: MacMillan Keck. Note: ISIL = Islamic State of Iraq and the Levant. 53 The post-2011 projection (shown by the dashed blue curve The research team sought an explanation for Iraq’s in figure 12) anticipates an acceleration of teledensity disappointing post-conflict performance. Two potential growth immediately after the conflict, followed by a forces appear to have contributed to underperformance deceleration, and then a gradual convergence of post- but do not fully explain it. First, violence continued to conflict teledensity with the teledensity that was originally disrupt Iraq after the official end of the conflict in 2011. projected to have been achievable but-for-the-conflict. The Second, ISIL’s deep incursion into sovereign Iraqi territory conditions for the surge in growth after the 2011 end of and establishment of a caliphate in 2013 and the ensuing the conflict were ripe. Iraq had adopted and implemented conflict to recapture Iraqi territory and drive out ISIL may positive public institutional reforms during the conflict have been expected to have had an impact on telecom period and these actions had led to a strong positive sector performance. However, the actual timing of the ISIL response in private investment. The end of the conflict and conflict does not appear to explain the observed sector the withdrawal of occupying forces should have enabled underperformance. The gap between but-for-the-conflict these factors to drive up teledensity to make up for lost subscriber penetration and actual subscriber penetration time. actually widened in the non-conflict period from 2011 through 2013, whereas it remained relatively constant Figure 12 reveals that this was not the case. Mobile from 2013 through 2017 and began to widen again in 2017. penetration has not followed the projected post-conflict The more significant force in Iraq’s post-conflict path based on a 2011 starting point and has actually fallen underperformance appears to have been increasingly further behind the projected but-for-the-conflict levels inhospitable internal factors and the difficulties faced by (and the peer country levels shown in figure 10) during the the government in maintaining or fulfilling the reforms nine years after 2011. undertaken during the conflict. An analysis of Iraq’s penetration in 2003, 2011, and 2020 Licensing has been slow and uncertain, undermining investor reveals that Iraq lost ground to all the benchmarked confidence. All three national mobile licenses that were countries (except Turkiye and then only marginally) by issued during the conflict were set to expire in 2022. The 2020. Table 10 illustrates the penetration deficit. Iraqi government in 2020 approved a five-year extension of these licenses, in part to compensate the operators Table 10. Analysis of Iraq’s penetration deficit compared for lost business opportunities during the Islamic State with its peers, 2003, 2011, and 2020 conflict. However, a Baghdad court recently blocked the extension of the existing mobile licenses. An Iraqi politician Country 2003 2011 2020 who brought the suit persuaded the court that the license renewals stemmed from corruption, that the operators Unique subscriber mobile penetration in Iraq were not fully competitive, and that preventing the license renewal could open the market to further Iraq 1.0% 45.3% 54.3% competition.240 This of course undermines the commitment Percentage point differential compared of the incumbent operators to continue investing in their with Iraq networks. Iran, Islamic +3.8 +13.2 +18.6 Investment barriers have become worse. The state monopoly Rep. over fixed services and lack of a modern telecom law Jordan +16.4 +7.6 +9.7 persisted through 2020, and have become more of a barrier as the mobile operators need increased middle- Turkey +27.2 +13.1 +12.6 mile capacity to support their 3G and 4G rollouts. The current dispute over renewal of existing GSM licenses, Source: MacMillan Keck. if not addressed swiftly, could also undermine investor Although the Islamic Republic of Iran’s penetration grew at confidence in the stability of Iraq’s regulatory framework. a slower rate than Iraq’s between 2004 (when it was equal to In addition, two allegations of expropriation by Iraqi Iraq) and 2008 (when it again matched Iraq’s penetration), authorities involving the telecom sector have been the Islamic Republic of Iran accelerated to 12.3 percentage lodged with the ICSID. Both incidents occurred after the points higher penetration than Iraq in 2020. This was withdrawal of US forces in 2011. The first claim, lodged in mainly due to the introduction of competition in the Iranian 2017 by Agility, a Kuwaiti investor in Korek, was dismissed. mobile sector from 2006. All three of the benchmarked The second claim, lodged by Orange Telecom for alleged peer countries have grown to higher penetration levels expropriation of its investment in Korek, is currently than Iraq since 2008. pending. Both cases involved the decision by CMC in 2013 to transfer control of Korek to local investors (including a relative of the President of the Kurdistan Regional 240 “Baghdad Court Revokes Licence Renewal,” CommsUpdate (TeleGeography, Washington, DC, November 16, 2020), https://www.commsupdate.com/ articles/2020/11/16/baghdad-court-revokes-licence-renewal/. 54 Government) without providing any compensation to the A level playing field has not been achieved. Since 2013, foreign investors. Orange and Agility had purchased 44 there have been serious allegations of impropriety within percent of Korek (with an option to acquire a majority the sector in Iraq, although these are currently pending in share) in 2011. The reason given by CMC for the forfeiture courts and arbitral tribunals. was the failure of Agility and Orange to fulfill coverage rollout obligations and to list the company on the Iraq Stock Fiscal costs are unreasonably high and rising. After Exchange. Court filings in the United States on the same consistent budget shortfalls, a 20 percent telecom services matter also allege that Korek’s senior director purchased a tax was introduced in 2015. Kurdistan and Iraq are subject house in London in cash for the head of the communications to different tax regimes, but both regions are facing regulator.241 increases in fiscal burdens.246 The status of taxes paid by service providers in Kurdistan is currently being disputed Spectrum needs are not being met adequately or in a timely between the federal government and regional authorities fashion. Spectrum in Iraq has become increasingly expensive in Kurdistan.247 and spectrum policy has translated into higher prices and delayed both 3G and 4G rollout. Iraq has only recently Thus, although these case studies are focused on how the (2021) opened up 4G spectrum nationwide, despite investment climate during a conflict can impact outcomes, recommendations from the international community and this glimpse into Iraq’s post-conflict performance illustrates requests from operators.242 Although 3G services were how quickly the state can undo any benefits that were commercially launched by Asiacell from 2015, at that time, gained from an above-average investment climate during Iraq’s neighbors were already moving to 4G. The Cabinet a conflict by regressing to a below-average investment stipulated introduction of 4G by early 2021 as one of the climate after the conflict period. conditions for renewal of the existing national licenses that were set to expire in 2022.243 Although 4G continues to be available regionally in Kurdistan, in early 2021 Zain rolled out a pilot 4G network followed by Korek and Asiacell. As of September 2021, Asia Cell, Korek, and Zain have high- speed 4G service (over 30 megabits/second download244) in Baghdad, with more limited 4G penetration into Mosul, Erbil Sulaymaniyah, Karbala, and Najaf, providing evidence of concerted national 4G rollout by all three operators. Spectrum is extremely expensive in Iraq. The 2018 GSMA study found that Iraq spectrum allocations were priced almost 15 times the global median during 2000–17, resulting in higher prices and a more challenging mobile environment. While the prices paid by Asiacell, Korek, and Zain for 2G spectrum in 2007 were in the top 5 percent of global spectrum prices, the cost of 3G spectrum was also unusually high by international standards, and mobile prices in Iraq are correspondingly high.245 241 See M. Pham, “Orange Opens Court Case against Iraq Government,” Developing Telecoms (October 15, 2020), https://www.developingtelecoms.com/ telecom-business/telecom-regulation/10130-orange-opens-court-case-against-iraq-government.html; P . Belton, “Orange Takes Iraq to Arbitration over Its Korek Stake,” LightReading (October 14, 2020), https://www.lightreading.com/services/orange-takes-iraq-to-arbitration-over-its-korek-stake/d/d- id/764616. See also Orange S.A. v. Republic of Iraq (ICSID Case No. ARB/20/42), https://icsid.worldbank.org/cases/case-database/case-detail?Case- No=ARB/20/42. 242 V. Jervis, “Roadmaps for Awarding 5G Spectrum in the MENA Region” (GSMA, London, October 2020), https://www.gsma.com/spectrum/wp-content/up- loads/2020/10/Roadmaps-for-awarding-5G-spectrum-in-the-MENA-region.pdf. 243 J. Barton, “Iraq Attaches Strings to Licence Renewal Offer,” Developing Telecoms (July 9, 2020), https://www.developingtelecoms.com/telecom-business/ telecom-regulation/9753-iraq-attaches-strings-to-licence-renewal-offer.html. 244 Based on OpenSignal test results on September 30, 2021. These can be obtained using the OpenSignal app, which is available at https://www.opensignal. com/apps. 245 C. Garbellini, “Spectrum Pricing in Developing Countries: Evidence to Support Better and More Affordable Mobile Services” (GSMA, London, July 2018), 26, https://data.gsmaintelligence.com/api-web/v2/research-file-download?id=33292319&file=Spectrum%20pricing%20in%20developing%20countries. pdf. 246 Middle East Tax Handbook 21 (Deloitte, London, 2021), https://www2.deloitte.com/ly/en/pages/tax/articles/deloitte-middle-east-tax-handbook.html. 247 Dilan Sirwan, “KRG Will See 20 Billion Dinars Monthly from New Corporate Tax on Internet and Telecom Companies” (Rudaw Media Network, Kurdistan Region, Iraq, February 21, 2021), https://www.rudaw.net/english/business/21022021. 55 4 This component of the study assesses the impact on Libya’s mobile market of civil war and internal conflict from 2011 The State of Lybia through 2020, at which time the conflict was still continuing and the country effectively had two governments. The entire 2011–20 period is treated as a single conflict period for the purposes of this study, although it may technically reflect two civil wars separated by a brief pause, due to the heavy presence of armed groups and continuance of widespread violence during the pause between the two civil wars. 4.1 Libyan context The following passages provide information on Libya’s geography, demographics, and economy; the 2011–20 conflict; and the telecom sector. Map 3: Libya MALTA GREECE Valleta LIBYA M E D I T Crete E R R A N E A N S E A h h ripoli) llonia) ya ulus (T Apo a wi h ( Hilal ar b sa 's al ra Zuw TUNISI A rna) Za m s a h (De u rna Su h -n Ta Da a's at Ti mbah R Az lK Al Bayda R Bu 3 lij al A Al Marj (Barce) Al' Aziziyah Zlīten Kha Tarh ūn ... Misratah Banghazi .. . Tubruq (Tobruk) Yafran . .. Gharyan a . .. ... Gu l f o f Si dra (Benghazi) . ... Al Adam , Nalut .. h Bani ... . (K h a l i j Su rt ) - . Walid .. . ... Li Surt (Sidra) . by za m an Sinawin am Plateau - d-i Z Ajdabiya Wa Wa h ... Wad di Tilal Al Qaryah Marsa al Brega rig .. . i al Hamim Dirj - Fa .... . .. ash Sharqiyah i al Al Ghadāmis SURT Wad . .. .. . . .. . Jaghbub A .. Sabkhat AL JABAL . . .. . . Shunayn AL WAHAT E AL GHARBI AL BUTNAN Awjilah L Hun Waddan Maradah Jalu nrhert G de Ti Zillah G adat Ham ASH SHĀȚI Al Fuqaha Al Fuqaha S ar ī r E Birak AL JUFRAH Kalan s hiy ū Y Sahra Adiri ' A w bar Sabha R i Awbari P Tmassah GHAT I L Umm al Al' Uwaynat Aranib i Marzuq Tazirbu A T b Waw al Kabir Zighan Ghat Sahra' Al Qatrun y Marzuq S ahra ' Mes MURZŪQ Madrusah Rab y ana h a ac Al Wigh Al Kufrah Tahrami hM Rabyanah Al Jawf n S a elle r i r t T i b Toummo a s NIGER D t i e Ma'tan as Sarra Al Awaynat s National capital Major cities e Town CHAD r Major airport t International boundary Expressway Main road Secondary road LIBYA SUDAN 0 100 200 300 km 0 100 200 mi The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations. Map No. 3787 Rev. 10 United Nations Department of Field Support November 2015 Geospatial Information Section (formerly Cartographic Section) Source: UN Geospatial > Libya (November 1, 2015), https://www.un.org/geospatial/content/libya. 56 Libya’s geography, demographics, and economy By February 18, 2011, the opposition controlled most Libya is located in North Africa on the Mediterranean Sea of Benghazi, Libya’s second largest city. Elite troops and between the Arab Republic of Egypt, Algeria, and Tunisia militia dispatched by the government to recapture the (map 3). It is also bordered by the Sub-Saharan African city were repelled. By February 20, protests had spread to nations of Sudan to the southeast, Chad to the south, and Tripoli. The rising death toll, numbering in the thousands, Niger to the southwest. drew international condemnation and internal calls for regime change. The international community responded on Libya has a relatively small population of about 6.97 million February 26, 2011, passing UN Security Council Resolution and a relatively large land area of about 1.77 million square 1970, which called for an immediate ending of the violence kilometers (about 685,000 square miles). Over 90 percent in Libya. and an arms embargo,254 establishing a no-fly zone of the population lives along the Mediterranean coast and authorising the use of force under chapter 7 of the UN between Tripoli to the west and Tobruk to the east. The charter. interior, which lies in the Sahara Desert, remains vastly underpopulated, with a population density of less than 1 Gaddafi’s removal from power in 2011 ended over four per square kilometer.248 Likewise, over 90 percent of the decades of autocratic rule, while precipitating Libya’s land area is largely unused.249 fracture along political, regional, sectarian, and tribal lines. The 2011 Constitutional Declaration (as amended) Real gross domestic product (GDP) per capita was USD provided for the GNC to elect a special body to prepare a 15,174 in 2019. GDP composition by sector of origin in draft Constitution within 120 days from the date of its first 2017 was 1.3 percent agriculture, 52.3 percent industry, session. However, the GNC grew concerned that this was and 46.4 percent services.250 Libya’s primary natural insufficient time to draft the Constitution and provided a resources are petroleum, natural gas, and gypsum. Its mechanism for the committee’s work to be extended.255 primary exports in 2019 were crude petroleum, natural gas, This extension of the mandate proved controversial gold, refined petroleum, and scrap iron. Libya’s economy because it delayed new elections. It was challenged in was heavily dependent on its crude oil industry. Before the court and sparked public protests.256 Thousands of Libyans popular uprising, the country produced around 1.6 million protested in Tripoli and Benghazi, demanding the interim barrels a day. The labor force was about 2.4 million in 2020. government to step down as promised. Unemployment is in the region of 19.4 percent. Today, 68.5 percent of the population has electricity, 92.1 percent has General Khalifa Haftar, a former Libyan military officer access to sanitary facilities, and 99.9 percent has access to who had defected to the United States in the late 1980s, treated drinking water. The literacy rate is relatively high, returned to Libya after Gaddafi’s downfall. Haftar at 86 percent, including 93.9 percent of males and 77.8 cultivated support from local tribes and businesses and percent of females.251 gathered former soldiers of the Libyan Army to build his owned armed forces, which were referred to as the Libyan The conflict in Libya National Army. He also sought foreign support. Haftar then The current conflict in Libya began during the Arab Spring launched a campaign, known as Operation Dignity, through protests against poor social and economic conditions, which he claimed to protect Libya from terrorists. His which initially erupted in neighboring Tunisia in December forces first captured Benghazi. Armed groups from Zintan, 2010.252 Protests led to regime change in Tunisia in January who had controlled the airport since 2011, also took part 2011 and Egypt in February 2011.253 The unrest spilled over in the clashes over the airport. Libya Dawn then gained into Libya. Before the crisis, Muammar Gaddafi had been control of the airport and Tripoli. in power for 42 years. Simmering unrest from decades of political oppression boiled over on February 15, 2011. 248 World Population Review (2021), https://worldpopulationreview.com/countries/libya-population. 249 IndexMundi > Factbook > Countries > Libya > Geography > Land Use (2018), https://www.indexmundi.com/libya/land_use.html. 250 IndexMundi > Factbook > Countries > Libya > Economy > GDP – Composition by Sector (2017), https://www.indexmundi.com/libya/gdp_composition_ by_sector.html. 251 World Bank > DataBank > World Development Indicators > Libya (2020). 252 See Elie Abouaoun, “Tunisia Timeline: Since the Jasmine Revolution” (United States Institute of Peace, Washington, DC, July 12, 2019), https://www.usip. org/tunisia-timeline-jasmine-revolution. 253 See Erin Blakemore, “What Was the Arab Spring and How Did It Spread?” National Geographic (March 29, 2019), https://www.nationalgeographic.com/ culture/article/arab-spring-cause. 254 255 See International Commission of Jurists, “The Draft Libyan Constitution: Procedural Deficiencies, Substantive Flaws” (International Commission of Jurists, Geneva, December 2015), 16–17, https://www.refworld.org/pdfid/57ee86814.pdf. 256 P. Markey and G. Shennib, “In Standoff, Libyans Protest over Parliament Extension,” Reuters (February 7, 2014), https://www.reuters.com/article/us-libya-cri- sis/in-standoff-libyans-protest-over-parliament-extension-idUSBREA161MH20140207. 57 Libya Dawn’s victory in Tripoli fostered the conditions for The western faction, Tripoli-based GNA, had the support of two opposing governments and two parliaments in Libya. the GNC and was the officially recognized government, but The GNC was reinstated in Tripoli, while the elected House it did not control Libya’s army. The Tobruk-based eastern of Representatives moved to the eastern city of Tobruk. faction had the support of the House of Representatives Neither body recognized the legitimacy of the other.257 and had appointed General Khalifa Haftar as the leader of During this reprisal of conflict in 2014, oil production again the Libyan National Army. In addition to the two primary fell, especially as rival militias fought for control of key oil factions, a variety of armed militia groups, including the facilities.258 Islamic State, had been involved. Numerous external military interventions in Libya occurred over the course of In November 2014, the Libyan Supreme Court ruled the 2014–20 period of the conflict, often involving various that the House of Representatives was unconstitutional external actors supporting the different sides. because the committee that wrote the election law violated Libya’s provisional Constitution. Peace talks led to In 2019, the eastern-backed forces led by Field Marshal the Libyan Political Agreement in December 2015, which Khalifa Haftar launched a full-scale attack on Tripoli. Both was endorsed by the UN. At the time the agreement was sides actively solicited military support from foreign actors. signed, the Presidential Council was expected to lead The fighting only came to a standstill after it became clear during the transitional period. The planned government that neither side could achieve a military victory, and after was made up of the nine-member Presidential Council, the eastern branch of the central bank was no longer able to called the Government of National Accord (GNA); the provide financing to the parallel institutions. This paved the elected House of Representatives serving as parliament; way for a United Nations facilitated ceasefire agreement in and the State Council to serve as the consultative chamber. October 2020, which in turn fostered the conditions for The international community and the outgoing GNC political talks under the multi-track Berlin Process (Libyan accepted the GNA as the legitimate Libyan government. Political Dialogue Forum (LPDF) that led to the formation The Presidential Council was required to name a new of a new Government of National Unity (GNU), effectively government within a month, which a UN Security Council ending the period of divided government. The national resolution promised to endorse. elections were planned in December 2021, in accordance with a political roadmap agreed upon by the LPDF. The peace did not hold for long. A few months after Libya’s tentative steps toward peace, Haftar and his armed forces The end of 2020 brought hopeful signs, but the Libyan launched a second offensive and took over key oil ports in conflict has still not seen an effective resolution. Meanwhile, mid-September 2016. Haftar’s forces clashed directly with Libya’s borders remain porous, particularly in the southern fighters loyal to the GNA. Gaining control of the oil ports Fezzan, facilitating an increase in trafficking and smuggling was widely viewed as a way for Haftar to gain leverage in of illicit materials, including weapons.259 political negotiations. Previously, the oil ports had been controlled by the Petroleum Facilities Guard, an armed Once an upper-middle-income country with health and group led by Ibrahim Jathran and loyal to the Tripoli-based education indicators among the highest in Africa, Libya had government. by 2019 become a lower-middle-income country navigating a challenging transition.260 Economic circumstances further These actions effectively returned Libya to a failed state deteriorated in 2020 ahead of the national conflict slowing with competing factions in the east and west, a scenario later that year. In 2020, a blockade of petroleum exports, that continued through the end of 2020. The two factions which generate 60 percent of GDP and 90 percent of state reflect deep internal divisions in Libya; the diverse mix of revenue,261 contributed to a 31.3 percent decline in real tribal groups fighting for their own interests and having GDP.262 coalesced under government and military alliances 257 “Libya Faces Chaos as Top Court Rejects Elected Assembly,” Reuters (November 6, 2014), https://www.reuters.com/article/us-libya-securi- ty-parliament/libya-faces-chaos-as-top-court-rejects-elected-assembly-idUSKBN0IQ0YF20141106. 258 See Zineb Abdessadok, “Libya Today: From Arab Spring to Failed State,” Al Jazeera (May 30, 2017), https://www.aljazeera.com/features/2017/5/30/libya- today-from-arab-spring-to-failed-state. 259 United States Institute of Peace, “The Current Situation in Libya” (United States Institute of Peace, Washington, DC, December 30, 2020), https://www.usip. org/publications/2020/12/current-situation-libya. 260 IBRD, IFC, and MIGA (World Bank, International Finance Corporation, and Multilateral Investment Guarantee Agency), “Country Engagement Note for the State of Libya for the Period 2019-2021,” Report No. 123985-LY (IBRD, IFC, and MIGA, Washington, DC, February 19, 2019), https://documents1.world- bank.org/curated/zh/750661550977483586/pdf/Libya-CEN-to-Board-final-01252019-636865562772741763.pdf. 261 World Bank, Libya’s Economic Update (World Bank, Washington, DC, April 2020), https://www.worldbank.org/en/country/libya/publication/economic-up- date-april-2020. 262 World Bank, Libya’s Economic Update (World Bank, Washington, DC, April 2020), https://www.worldbank.org/en/country/libya/publication/economic-up- date-april-2020. 58 Libya’s telecom sector GPTC later established a second mobile subsidiary, Libyana Libya had virtually no public telecommunications Mobile Phone Company, which began offering services in infrastructure at the inception of the Libyan Cultural September 2004.269 At the outset, Almadar and Libyana Revolution in 1969.263 The new government developed offered complementary rather than competitive services, extensive public telecommunications systems in the late and they have never competed on price. Almadar continued 1970s and early 1980s. Libya’s domestic market was to provide a low-end offering of relatively low-quality basic served by a combination of terrestrial radio relay, coaxial voice and text services over a limited coverage area, while cable, and a domestic satellite system. The number of the government invested to enable Libyana to establish telephone lines increased from 90,000 in 1978 to 215,000 a high-end offering, launching 3G mobile broadband in in 1985. International links included submarine cables from 2006,270 with better coverage and higher service quality.271 Tripoli to Marseilles, France, and Catania, Italy, and satellite In 2005, the government decided to replace GPTC with a connections served by Intelsat and Arabsat.264 holding company and subsidiary structure, establishing the Libyan Post Telecommunications and Information In 1984, the government established the General Posts Technology Company (LPTIC) as the holding company, and Telecommunications Company (GPTC) to corporatize and setting in motion a process to restructure GPTC’s state provision of telecommunications and postal subsidiaries, operating businesses, and investments as services265 under the responsible sector ministry.266 As LPTIC subsidiaries and investments.272 Over the next a state-owned enterprise, GPTC was able to access the several years, GPTC transferred its operating assets to new government’s financial resources for investment and LPTIC subsidiaries. GPTC transferred its postal unit to the served as part of Gaddafi’s planned-economy approach to LPTIC subsidiary Libya Post Company.273 In 2008, GPTC domestic markets. Although it was originally set up as an transferred its national fixed telephone network unit to operating company, GPTC eventually began establishing LPTIC subsidiary Hatif Libya.274 In 2009, GPTC transferred new business lines through separate subsidiaries. In 1995, its wholesale international voice and data business unit to GPTC established Libya’s first mobile operator through LPTIC subsidiary Libya International Telecommunication a newly formed subsidiary, Almadar Aljadid Company,267 Company.275 Prior to 2010, GPTC also transferred to LPTIC which launched 2G service in November 1996.268 GPTC the shares of its existing subsidiaries, mobile operators similarly established Libya Telecom & Technology Company Almadar and Libyana and ISP LTT. GPTC was dissolved in (LTT) as a subsidiary in 1997 to serve as the country’s first 2010.276 internet service provider (ISP). 263 See Amr Hamby, “ICT in Education in Libya,” in Survey of ICT and Education in Africa: Libya Country Report at 5 (infoDev, World Bank, Washington, DC, June 2007), https://www.infodev.org/infodev-files/resource/InfodevDocuments_412.pdf. 264 See Helen Chapin Metz, ed., Libya: A Country Study (Federal Research Division, US Library of Congress, Washington, DC, 1988), 169, http://www.memory. loc.gov/master/frd/frdcstdy/li/libyacountrystud00metz_0/libyacountrystud00metz_0.pdf. 265 Freedom House, “Freedom on the Net 2020: Libya” (Freedom House, Washington, DC, 2020), https://freedomhouse.org/country/libya/freedom-net/2020. 266 See Helen Chapin Metz, ed., Libya: A Country Study (Federal Research Division, US Library of Congress, Washington, DC, 1988), 168, http://www.memory. loc.gov/master/frd/frdcstdy/li/libyacountrystud00metz_0/libyacountrystud00metz_0.pdf. 267 See Almadar Aljadid > About Almadar > Who We Are (2021), https://almadar.ly/en/Pages/Who-we-are.aspx. 268 See “Second GSM Operator Launched,” CommsUpdate (TeleGeography, Washington, DC, September 9, 2004), https://www.commsupdate.com/arti- cles/2004/09/09/second-gsm-operator-launched/. 269 See “Second GSM Operator Launched,” CommsUpdate (TeleGeography, Washington, DC, September 9, 2004), https://www.commsupdate.com/arti- cles/2004/09/09/second-gsm-operator-launched/. 270 See Libyan Post Telecommunications and Information Technology Company > Subsidiaries > Libyana Mobile Phone Company (2021), https://lptic.ly/en/ subsidiary/. 271 See, for example, Natalija Gelvanovska, Michel Rogy, and Carlo Maria Rossotto, Broadband Networks in the Middle East and North Africa: Accelerating High-Speed Internet Access (World Bank, Washington, DC, 2014), 179, https://openknowledge.worldbank.org/handle/10986/16680. 272 Libyan Post Telecommunications and Information Technology Company > About Us > Overview (2021), https://lptic.ly/en/about/overview/. 273 Libya Post > About Us (2021), https://libyapost.ly/en/about-us/. 274 Hatif Libya > About Us > Who We Are (2021), https://hlc.ly/en/about.php?pid=2&13bad68c83302aae89a790f3342b6fce. 275 The Libyan International Telecom Company > About Us (2021), https://litc.ly/en/about-us/. 276 See Libyan Post Telecommunications and Information Technology Company > About Us > Overview (2021), https://lptic.ly/en/about/overview/. 59 During this period, LPTIC also acquired or made portfolio and winners to be announced in June.283 Both Etisalat and investments in overseas telecom companies in Argentina, Turkcell submitted bids, but after a long-delayed process, Canada, Côte d’Ivoire, Italy, Mauritius, Saudi Arabia, the they were rejected as “unsuitable” in July 2010,284 although United Arab Emirates, and the United Kingdom.277 LPTIC Turkcell later claimed to have declined the concession due acquired a 14.8 percent stake in Retelit (an Italian fiber to perceived lack of a level playing field.285 No further plans network and data center operator) and held discussions, to attract private investment or introduce competition into later aborted, to acquire a stake in Telecom Italia.278 the sector were announced or consummated before the Separately, by 2011, the Libyan government’s investment conflict. However, in February 2011, just before Gaddafi’s arm, through the Libya African Portfolio (LAP), had made removal from office, state-owned fixed broadband ISP investments in controlling stakes in telecom operators LTT announced that it had launched LibyaPhone Mobile or greenfield licenses, operating under the LAP Green as Libya’s third mobile service, offering both 2G and 3G Network (LAP GreenN) brand, in Côte d’Ivoire, Niger, service.286 LibyaPhone Mobile was an LTT-branded mobile Rwanda, Sierra Leone, South Sudan, Togo, Uganda, and virtual network operator (MVNO) service287 offered to Zambia.279 LTT’s fixed broadband customers, enabling them to roam on one of the mobile networks. Over time, LTT had migrated its During and after GPTC’s restructuring and dissolution, ISP offerings from dial-up to asymmetric digital subscriber LPTIC and its subsidiaries remained in the portfolio of the line (ADSL) and Worldwide Interoperability for Microwave responsible sector ministry, then called the Libyan Ministry Access (from 2009, operating in 2.5 gigahertz band).288 of Telecommunication. LPTIC was headed and partially owned by Gaddafi’s eldest son, Mohammed Gaddafi, prior A year later, LibyaPhone had only reached about 0.4 to 2011,280 a time when LPTIC and its subsidiaries were percent subscriber share, while Libyana had 66.4 percent allegedly saddled by corruption and inefficiency.281 and Almadar had 33.2 percent.289 In 2007, the government floated plans to privatize its two Libya’s relatively high GDP had enabled significant public state-owned mobile operators, Almadar and Libyana, which investment in infrastructure despite the dampening were then still owned by GPTC,282 but those plans were effect of corruption and inefficiency. By 2011, Libya had aborted. In February 2009, the General Telecommunication a relatively developed telecom sector, with two mobile Authority, which was the sector regulator, announced an networks, extensive wired and wireless fixed networks, international tender to issue a combined fixed and mobile three international submarine cables, two international license to a privately owned operator, with bids due in May 277 See Media Landscapes > Country > Libya > Company Profiles (European Journalism Centre, 2021), https://medialandscapes.org/country/libya/telecom- munications/company-profiles. 278 See “Factbox – Libyan Investments in Italy,” Reuters (August 29, 2010), https://www.reuters.com/article/uk-italy-libya-economy/factbox-libyan-invest- ments-in-italy-idUKTRE67S11420100829. 279 See “LAP Paints Subsidiaries GreenN,” CommsUpdate (TeleGeography, Washington, DC, March 9, 2010), https://www.commsupdate.com/arti- cles/2010/03/29/lap-paints-subsidiaries-greenn/. See also “Digicel Owner Buying Gaddafi Telecom Assets?” CommsUpdate (TeleGeography, Washington, DC, November 25, 2011), https://www.commsupdate.com/articles/2011/11/25/digicel-owner-buying-gaddafi-telecom-assets/. 280 Media Landscapes > Country > Libya > Company Profiles (European Journalism Centre, 2021), https://medialandscapes.org/country/libya/telecommuni- cations/company-profiles. 281 Abdulla A. Abouda, “Telecom Sector in Libya: History and Recent Developments” (MarcoPolis, Paris, May 21, 2013), https://marcopolis.net/telecom-sec- tor-in-libya-history-and-recent-developments.htm. 282 “Sale Planned for Libyan Cellcos,” CommsUpdate (TeleGeography, Washington, DC, February 26, 2007), https://www.commsupdate.com/arti- cles/2007/02/26/sale-planned-for-libyan-cellcos/. 283 “Libya Launches Licence Tender,” CommsUpdate (TeleGeography Washington, DC, February 19, 2009), https://www.commsupdate.com/arti- cles/2009/02/19/libya-launches-licence-tender/. 284 See “LibyaPhone Mobile Enters Libyan Wireless Sector, Becomes Third State-Owned Cellco in Market,” CommsUpdate (TeleGeography, Washington, DC, February 9, 2011), https://www.commsupdate.com/articles/2011/02/09/libyaphone-mobile-enters-libyan-wireless-sector-becomes-third-state-owned-cell- co-in-market/. 285 See “Turkcell Pinpoints Libya, Somalia as Expansion Targets,” CommsUpdate (TeleGeography, Washington, DC, September 19, 2011), https://www.comm- supdate.com/articles/2011/09/19/turkcell-pinpoints-libya-somalia-as-expansion-targets/. 286 “LibyaPhone Mobile Enters Libyan Wireless Sector, Becomes Third State-Owned Cellco in Market,” CommsUpdate (TeleGeography, Washington, DC, Febru- ary 9, 2011), https://www.commsupdate.com/articles/2011/02/09/libyaphone-mobile-enters-libyan-wireless-sector-becomes-third-state-owned-cellco-in- market/. 287 See Val Jervis, Tim Miller, Yi Shen Chan, Akhiljeet Kaur, and Aude Schoentgen, Roadmaps for Awarding 5G Spectrum in the MENA Region (GSMA, London, October 2020), 41, https://www.gsma.com/spectrum/wp-content/uploads/2020/10/Roadmaps-for-awarding-5G-spectrum-in-the-MENA-region.pdf. See also Michael Dargue and Tim Heal, “Middle East and North Africa: The Next Growth Market for MVNO?” (Cartesian, Boston, MA, April 26, 2012), slide 3, figure 2, https://www.slideshare.net/CSMGGlobal/csmg-viewpoint-mena-the-next-growth-market-for-mvno. See also Lauri S. Scherer, ed., Supporting Peace and Stability in Libya: A Compilation of Existing Analysis on Challenges and Needs (European Union, United Nations, and World Bank Group, consulta- tion draft, 2019), 117, https://documents1.worldbank.org/curated/en/832481591363718980/pdf/Supporting-Peace-and-Stability-in-Libya-A-Compila- tion-of-Existing-Analysis-on-Challenges-and-Needs.pdf. 288 See “LibyaPhone Mobile Enters Libyan Wireless Sector, Becomes Third State-Owned Cellco in Market,” CommsUpdate (TeleGeography, Washington, DC, February 9, 2011), https://www.commsupdate.com/articles/2011/02/09/libyaphone-mobile-enters-libyan-wireless-sector-becomes-third-state-owned-cell- co-in-market/. 289 See “Etisalat Looks to Expand into Libya,” CommsUpdate (TeleGeography, Washington, DC, February 14, 2012), https://www.commsupdate.com/arti- cles/2012/02/14/etisalat-looks-to-expand-into-libya/. 60 terrestrial cables, and an extensive national terrestrial fiber In 2013 and 2014, the new government introduced optic network.290 In 2017, a UN expert report valued LPTIC several unsuccessful efforts to liberalize the market, at USD 20 billion, even after the impact of the conflict. The including drafting and introducing a telecom law to report noted that LPTIC and its subsidiaries were major establish an independent regulator and open the market employers, comprising 10 percent of the state’s budget, but to private investment and competition.295 These efforts they presented fiscal risks of investment duplication and stalled, partly due to ongoing disputes over the country’s funds misappropriation. For example, during the conflict, political governance, and Libya has so far neither enacted one of LPTIC’s mobile subsidiaries had allegedly been a new telecom framework to allow private investment improperly directed to channel USD 70 million in spectrum and develop competition nor established an independent fees to a rival political faction.291 regulator. Even the existing framework has been fractured by internal east-west conflict. After the 2014 disputed The 2011 revolution caused significant damage to elections, these factions disputed ownership and control Libya’s telecom sector, destroying about 20 percent of its of LPTIC. The House of Representatives/Tobruk faction infrastructure, with a replacement cost in excess of USD established an LPTIC headquarters in Malta, and the GNC/ 1 billion.292 The government invested heavily in rebuilding Tripoli faction took over LPTIC operations in western Libya, network infrastructure in 2012 and early 2013, rebuilding including its headquarters in Tripoli.296 LPTIC’s board was about 95 percent of the major mobile networks and making reunified in March 2018.297 plans to modernize networks and invest in a five-year rollout of fiber to homes.293 Legacy legal and regulatory barriers and government indecision continued to prevent private investment and Responsibility for policy, regulation, and governance of competition in Libya’s mobile market. Soon after the 2011 Libya’s state-owned telecom operators during the conflict change in government, multiple high-profile international period was centralized in the Ministry of Communications mobile operators publicly expressed interest in entering and Informatics. Within the ministry, some staff Libya’s mobile market, including Etisalat (February would oversee the state’s telecom operations through 2012),298 Orascom (July 2012),299 Qatar Telecom (April governance of LPTIC and other staff would oversee 2012),300 Saudi Telecom (April 2012),301 and Turkcell policy and regulation through the General Authority of (September 2011).302 In April 2012, the Communications Communications and Informatics, which had replaced the Minister said the ministry would wait until after planned pre-2011 General Telecommunication Authority. Before elections before deciding on a way forward, while the the conflict, LPTIC had made licensing decisions, but the general manager of Libya’s stock exchange had previously transitional government moved licensing authority from indicated that pre-war plans to list shares in Almadar and LPTIC to the General Authority of Communications and Libyana would go ahead in 2013.303 Shortly thereafter, the Informatics.294 new government announced a tender for management contracts for Almadar and Libyana.304 290 See Broadband Networks in the Middle East and North Africa: Accelerating High-Speed Internet Access (World Bank, Washington, DC, 2014), 178–80, https://openknowledge.worldbank.org/handle/10986/16680. 291 Letter dated June 1, 2017, from the Panel of Experts on Libya established pursuant to Resolution 1973 (2011) addressed to the President of the Security Council (United Nations, New York, 2017), 58–59, https://reliefweb.int/sites/reliefweb.int/files/resources/N1711623.pdf. 292 Interview with Eng. Usama Siala, Minister of Communications and Informatics of Libya, “Libya: Detailed Overview of the Telecom Sector” (Marcopolis, Paris, June 1, 2013), https://marcopolis.net/libya-detailed-overview-of-the-telecom-sector.htm. 293 Interview with Eng. Usama Siala, Minister of Communications and Informatics of Libya, “Libya: Detailed Overview of the Telecom Sector” (Marcopolis, Paris, June 1, 2013), https://marcopolis.net/libya-detailed-overview-of-the-telecom-sector.htm. 294 See Freedom House, “Freedom on the Net 2017: Libya” (Freedom House, Washington, DC, 2017), https://freedomhouse.org/sites/default/files/FOTN%20 2017_Libya.pdf. 295 Interview with Eng. Usama Siala, Minister of Communications and Informatics of Libya, “Libya: Detailed Overview of the Telecom Sector” (Marcopolis, Paris, June 1, 2013), https://marcopolis.net/libya-detailed-overview-of-the-telecom-sector.htm. 296 "Sami Zapita, “Libya's State Telecoms Sector Agrees to Reunify Its Board under the GNA," Libya Herald (June 24, 2016), https://www.libyaherald. com/2016/06/24/libyas-state-telecoms-sector-agrees-to-reunify-its-board-under-the-gna/. 297 Freedom House, “Freedom on the Net 2021: Libya” (Freedom House, Washington, DC, 2021), note 20 and accompanying text, https://freedomhouse.org/ country/libya/freedom-net/2021. 298 “Etisalat Looks to Expand into Libya,” CommsUpdate (TeleGeography, Washington, DC, February 14, 2012), https://www.commsupdate.com/arti- cles/2012/02/14/etisalat-looks-to-expand-into-libya/. 299 “Orascom in Talks to Manage Libyan Cellcos,” CommsUpdate (TeleGeography, Washington, DC. July 5, 2012), https://www.commsupdate.com/arti- cles/2012/07/05/orascom-in-talks-to-manage-libyan-cellcos/. 300 See “International Telcos Line Up to Enter Libya; Post-Election Time-Frame Mooted,” CommsUpdate (TeleGeography, Washington, DC, April 10, 2012), https://www.commsupdate.com/articles/2012/04/10/international-telcos-line-up-to-enter-libya-post-election-time-frame-mooted/. 301 See “International Telcos Line Up to Enter Libya; Post-Election Time-Frame Mooted,” CommsUpdate (TeleGeography, Washington, DC, April 10, 2012), https://www.commsupdate.com/articles/2012/04/10/international-telcos-line-up-to-enter-libya-post-election-time-frame-mooted/. 302 See “Turkcell pinpoints Libya, Somalia as expansion targets,” CommsUpdate (TeleGeography, Washington, DC, April 10, 2012), https://www.commsup- date.com/articles/2012/04/10/international-telcos-line-up-to-enter-libya-post-election-time-frame-mooted/. 303 See “International Telcos Line Up to Enter Libya; Post-Election Time-Frame Mooted,” CommsUpdate (TeleGeography, Washington, DC, April 10, 2012), https://www.commsupdate.com/articles/2012/04/10/international-telcos-line-up-to-enter-libya-post-election-time-frame-mooted/. 304 See “FT-Orange Determined to Enter Additional African Countries,” CommsUpdate (TeleGeography, Washington, DC, January 15, 2013), https://www. 61 Initial interest in the management contracts was publicly LPTIC’s management was reunited as a single team based expressed by Airtel, Digicel, Etisalat, FT-Orange, Orascom, in Tripoli in March 2018 after four years of being divided Ooredoo (Qatar Telecom), Vimpelcom, and Vodafone,305 by Libya’s warring factions.312 LPTIC’s plans at the time and this group was later joined by Zain.306 However, the were to consolidate its six non-mobile subsidiaries into government abruptly halted the management contract a single telecom company and improve connectivity and tender in March 2013.307 Then, in September 2013, the access to services throughout Libya.313 These projects Communications Minister said the government intended to included a six-year, last-mile project to ensure high-speed award a third mobile license to a privately owned operator connections to commercial and residential areas through in three to six months.308 The third mobile license tender Libya’s 15,000-kilometer fiber optic network and mobile never materialized and the government went largely broadband projects for Almadar and Libyana.314 Outside silent on private sector participation in its mobile markets observers have questioned the durability of LPTIC’s through the end of 2020.309 reunification.315 No comprehensive assessment has been made of the disruption and destruction to Libya’s telecom Thus, although the post-2011 government initially issued sector that occurred after 2014.316 some licenses for privately owned ISPs and value-added service providers,310 Libya’s mobile market remained Today, not much has changed in terms of market structure, tightly closed to private sector participation from 2001 as virtually all the post-2011 plans have been disrupted by through 2020. the conflict. LPTIC still owns mobile operators Almadar and Libyana and ISP LTT, which operates the LibyaPhone Mobile Increased violence and territorial divisions after 2013 MVNO business. The state also retains monopoly control further stressed the sector. In 2014, LPTIC suspended its over wholesale domestic terrestrial fiber and submarine restructuring and investment plans when fighting in Tripoli cable and cross-border terrestrial fiber services. Although led to rival governments being set up in the capital and the the state has continued to invest in the sector during the east311 – events that led to bifurcation of the LPTIC by the conflict, significant additional financial resources would be competing governments at a time when it faced significant required to restore the existing built infrastructure.317 rebuilding needs. In 2021, LPTIC appears to have resumed outreach efforts to introduce international private investment into the telecom sector,318 but these post-2020 efforts have been disregarded in the study. commsupdate.com/articles/2013/01/15/ft-orange-determined-to-enter-additional-african-countries/. 305 See “FT-Orange, Vodafone, Vimpelcom, Digicel among Telcos Vying for Libyan Management Contracts,” CommsUpdate (TeleGeography, Washington, DC, January 24, 2013), https://www.commsupdate.com/articles/2013/01/24/ft-orange-vodafone-vimpelcom-digicel-among-telcos-vying-for-libyan-manage- ment-contracts/. See also “Orascom in Talks to Manage Libyan Cellcos,” CommsUpdate (TeleGeography, Washington, DC. July 5, 2012), https://www. commsupdate.com/articles/2012/07/05/orascom-in-talks-to-manage-libyan-cellcos/. 306 “Zain Throws Hat into Libyan Ring,” CommsUpdate (TeleGeography, Washington, DC, April 8, 2013), https://www.commsupdate.com/arti- cles/2013/04/08/zain-throws-hat-into-libyan-ring/. 307 “Libyan Government Slams the Brakes on Telco Management Tender,” CommsUpdate (TeleGeography, Washington, DC, March 18, 2013), https://www. commsupdate.com/articles/2013/03/18/libyan-government-slams-the-brakes-on-telco-management-tender/. 308 “Libya to Offer Third Mobile Licence within Six Months,” CommsUpdate (TeleGeography, September 11, 2013), https://www.commsupdate.com/arti- cles/2013/09/11/libya-to-offer-third-mobile-licence-within-six-months/. 309 See, for example, CommsUpdate > Lists > Country > Libya (TeleGeography, Washington, DC, 2021), https://www.commsupdate.com/lists/country/libya/. 310 See “Deputy Telecoms Minister Confirms Flurry of Licensing Activity, Cites WiMAX Targets, CommsUpdate (TeleGeography, Washington, DC, June 10, 2013), https://www.commsupdate.com/articles/2013/06/10/deputy-telecoms-minister-confirms-flurry-of-licensing-activity-cites-wimax-targets/. See also Freedom House, “Freedom on the Net 2020: Libya,” (Freedom House, Washington, DC, 2020), https://freedomhouse.org/country/libya/free- dom-net/2020. 311 See Aidan Lewis, “Reunited, Libya Telecom Starts $1.7 Bln Work Plan,” Reuters (March 23, 2018), https://www.reuters.com/article/ozabs-uk-libya-tele- coms-idAFKBN1GZ24C-OZABS. 312 See Aidan Lewis, “Reunited, Libya Telecom Starts $1.7 Bln Work Plan,” Reuters (March 23, 2018), https://www.reuters.com/article/ozabs-uk-libya-tele- coms-idAFKBN1GZ24C-OZABS. 313 See Aidan Lewis, “Reunited, Libya Telecom Starts $1.7 Bln Work Plan,” Reuters (March 23, 2018), https://www.reuters.com/article/ozabs-uk-libya-tele- coms-idAFKBN1GZ24C-OZABS. 314 See Aidan Lewis, “Reunited, Libya Telecom Starts $1.7 Bln Work Plan,” Reuters (March 23, 2018), https://www.reuters.com/article/ozabs-uk-libya-tele- coms-idAFKBN1GZ24C-OZABS. 315 Freedom House, “Freedom on the Net 2020: Libya” (Freedom House, Washington, DC, 2020), https://freedomhouse.org/country/libya/freedom-net/2020. 316 See Lauri S. Scherer, ed., Supporting Peace and Stability in Libya: A Compilation of Existing Analysis on Challenges and Needs (European Union, United Nations, and World Bank Group, consultation draft, 2019), 115, https://documents1.worldbank.org/curated/en/832481591363718980/pdf/Support- ing-Peace-and-Stability-in-Libya-A-Compilation-of-Existing-Analysis-on-Challenges-and-Needs.pdf. 317 See Lauri S. Scherer, ed., Supporting Peace and Stability in Libya: A Compilation of Existing Analysis on Challenges and Needs (European Union, Unit- ed Nations, and World Bank Group, consultation draft, 2019), https://documents1.worldbank.org/curated/en/832481591363718980/pdf/Support- ing-Peace-and-Stability-in-Libya-A-Compilation-of-Existing-Analysis-on-Challenges-and-Needs.pdf. 318 See, for example, Libyaninvestment.com, “Libya’s State Telecoms Sector Seeks Cooperation with U.S Tech Companies, Open Sector to Foreign Direct Invest” (February 27, 2021), https://www.libyaninvestment.com/libyas-state-telecoms-sector-seeks-cooperation-with-u-s-tech-companies-open-sector-to-foreign- direct-investment/. 62 4.2 Assessment of internal Libyan Libya: Ease of private investment? Libya’s two mobile operators and one MVNO are all state- telecom investment climate factors owned enterprises as prescribed by the current legal framework. All wholesale inputs to these mobile service Five internal factors during the 2011–20 conflict that providers are also state-owned. Libya has allowed private impacted the mobile market investment climate were investment in small fixed ISPs and very small aperture assessed: (1) market open to entry, (2) ease of private terminal providers by individuals with strong ties to investment, (3) spectrum needs met, (4) level playing field, governing authorities.319 However, despite a strong show of and (5) fiscal reasonableness. Each factor is discussed in interest by numerous well-funded and respected operators turn below, followed by a summary of key findings across that are active in the region, no private investment in Libya’s all the internal factors. mobile market was permitted during 2011–20. Libya was therefore assigned an unfavorable rating on ease of private Libya: Market open to entry? investment in the telecom sector. The economic benefit of a market being open to entry is to make it contestable, thereby strengthening competition. Libya: Spectrum needs met? Before the conflict, Libya had already admitted two state- Throughout the 2011–20 conflict period, all three owned operators to the mobile market in 1995 and 2004 wireless operators, including mobile operators Almadar and an MVNO in 2011. However, all the operators are held and Libyana and fixed broadband provider LTT (which and governed under the same holding company. also offers LibyaPhone MVNO services), had generous spectrum allocations to support their existing technology Before setting up the MVNO, the Gaddafi regime had deployments. considered licensing a private sector operator to enter Figure 13 shows Libya’s spectrum assignments by the market to provide both mobile and fixed services, but technology, band, generation, operator, and date. Figure 14 after entertaining proposals from Etisalat and Turkcell, shows the total spectrum bandwidth assigned, by band and the government rejected both and instead established the operator. MVNO. Since the conflict began in 2011, multiple plans to open the mobile market have been proposed, but none were adopted or implemented. Regardless of the reasons, the market has remained impenetrable to new entrance in any form throughout the conflict period. Even if licensing a third mobile operator were not viable, the possibility of authorizing a new entrant not affiliated with the state, through full or partial privatization, joint venture, management agreement, or otherwise, would make the market contestable and strengthen competition. However, the market has instead remained closed. For these reasons, Libya was assigned an unfavorable score for the openness of its mobile market to new entry during the 2011–20 conflict period. 319 See Freedom House “Freedom on the Net 2021: Libya” (Freedom House, Washington, DC, 2021), https://freedomhouse.org/country/libya/free- dom-net/2021. 63 Figure 13: Libya’s spectrum assignments, by technology, band, generation, operator, and date Technologies deployed by operator by band It can be seen from Figure 13 that 2G services were intro- It is understood that LibyaPhone provides internet services duced in 1996-2004 in the 900MHz band, 3G services in using the 800 and 2600 Mhz bands and LTE technology but 2006 -2007 in the 2100 MHz band and 4G in 2017-2018 in it is not clear whether they are the licensed. LibyaPhone is the 1800 Mhz band. a MVNO TECHNOLOGIES DEPLOYED BY OPERATOR BY BAND Technologies Bands(MHz) Generation LibyaPhone Libyana Almadar Alijadeed GSM 900 2G Sep 2004 Nov 1996 WCDMA 2100 3G Sep 2006 Mar 2007 WCDMA HSDPA 2100 3G Dec 2007 WiMAX now LTE 2600 Feb 2009 LTE 4G Mar 2018 Mar 2017 LTE-Advanced 1800 4G Oct 2018 Number of Connections by Technology It can be seen in Figure 13 that both 2G and 3G connections are falling and 4G connections are rising . No demand for 5G has been identified. Overall connections are rising due to the increased in 4g connections. Source: Val Jervis, Tim Miller, Yi Shen Chan, Akhiljeet Kaur, and Aude Schoentgen. 2020. Roadmaps for Awarding 5G Spectrum in the MENA Region (GSMA Intelligence, London), 40, 41. Used with permission. Note: GSM = Global System for Mobile Communications; HSDPA = high-speed downlink packet access; LTE = Long-Term Evolution; MHz = megahertz; WCDMA = Wideband Code Division Multiple Access; WiMAX = Worldwide Interoperability for Microwave Access. Figure 14: Libya’s spectrum bandwidth assignments, by band (left chart) and by operator (right chart), 2020 120 150 99.6 100 90 100 100 20 20 60 BandWidth (MHz) 48.8 40 40 50 46.6 50 30 40 25.6 23.2 0 0 Libya Almadar Libyana 800 900 1800 2100 2600 Phone Aljadeed Source: Val Jervis, Tim Miller, Yi Shen Chan, Akhiljeet Kaur, and Aude Schoentgen. 2020. Roadmaps for Awarding 5G Spectrum in the MENA Region (GSMA Intelligence, London), 40, 41. Used with permission. Note: MHz = megahertz. 800 900 1800 2100 2600 64 The state’s sector investments have resulted in relatively All major network operators in Libya are state-owned early adoption of 3G and 4G and other new technologies. enterprises. The financial statements of LPTIC and its Both Almadar and Libyana have introduced 4G service.320 subsidiaries are not published, and the state provides no Although it is not shown in figures 13 and 14, Almadar also transparency with respect to fiscal impact on its mobile launched 5G service in Libya’s main cities in 2020.321 Libya operators. In 2017, the telecommunications sector was assigned a favorable rating on meeting spectrum needs. supplied 18 percent of Libya’s state revenues.325 Libya: Level playing field? The World Bank recently observed that the Libyan The concept of a level playing field is premised on the government continues to derive substantial revenue existence of rivalry between independently owned from telecommunications.326 However, in both cases, the network operators. With its ban on rival ownership of revenue source appears to be state ownership, rather than mobile operators during the 2011–20 conflict period, Libya taxation, of Libya’s telecom operators. not only prevented market entry and private investment, but also prevented any possibility of true rivalry and a level The government has invested heavily in international playing field. Libya was therefore assigned an unfavorable connectivity and the national fiber backbone. At the rating on establishing and maintaining a level playing field. same time, heavy government involvement in the sector is troubling. In 2020, the General Authority for Communications and Informatics issued a decree cutting Libya: Fiscal reasonableness? internet prices from state-owned telecom companies by 50 Libya has a general corporate income tax of 20 percent percent in an effort to improve service. However, the result with a 4 percent jihad (defense) surtax. No sector-specific of this effort, absent cost-based justification, effectively taxes appear to have been in place or imposed during the forced operators to subsidize subscribers.327 The UN has 2011–20 conflict period. Prior to 2010, Libya imposed also reported that the telecom sector in Libya has been a progressive corporate income tax with rates up to 40 prone to effort duplication and funds misappropriation. percent,322 along with the 4 percent jihad tax. In 2010, the corporate income tax rate was reduced to 20 percent, As summarized in table 11, Libya was assigned an while the jihad surtax remained at 4 percent.323 There uncertain rating on fiscal reasonableness due to the lack of was no special rate for mobile operators. The stamp tax transparency and heavy state involvement in supply-side applied to telecom services (along with other utilities) was markets. 2 percent.324 As 90 percent of government revenues derive from the energy sector, Libya has historically not relied on the telecom sector as a major component of its public sector budgets. 320 Open Signal, “Libya Mobile Network Experience Report,” October (Open Signal, London, 2020), https://www.opensignal.com/reports/2020/10/libya/mo- bile-network-experience. 321 See “Al Madar Switches on 5G Services,” CommsUpdate (TeleGeography, Washington, DC, October 31, 2019), https://www.commsupdate.com/arti- cles/2019/10/31/al-madar-switches-on-5g-services/. See also Abdulkader Assad, “Libya's Almadar Aljadeed Mobile Network Launches 5G Service,” The Libya Observer (October 30, 2019), https://www.libyaobserver.ly/news/libyas-almadar-aljadeed-mobile-network-launches-5g-service. 322 See Art. 79 of Law No. 11 of 1372 P .D (2004) regarding income tax, https://www.almontaser.com/Laws/Income%20Tax%20Law%20No.%2011%20of%20 2004.pdf. 323 See Art. 70 of Law No. (7) of 1378 FDP (2010 AD) on income taxes, https://security-legislation.ly/sites/default/files/law/815-Law%20No.%20%287%29%20 of%202010_EN.pdf; Money Jihad, “Libya Amends Income Tax, Keeps ‘Jihad Tax,’” https://moneyjihad.wordpress.com/2010/07/25/libya-amends-income- tax-keeps-%E2%80%9Cjihad-tax%E2%80%9D/. 324 See Law No. 12 of 1372 P .D. regarding stamp tax (2004), https://www.almontaser.com/Laws/Stamp%20Tax%20Law%20No.%2012%20for%202004.pdf. 325 See Abdalla Bader Hamed (Al Hasse), An Introductory Study on the Status, Challenges and Prospects of the Libyan Economy (United Nations, New York, 2020), 22, https://undocs.org/pdf?symbol=en/E/ESCWA/CL6.GCP/2020/TP .3. 326 See World Bank, Libya Economic Monitor, spring (World Bank, Washington, DC, 2021), 4, https://thedocs.worldbank.org/en/doc/3d3cd- 163628175d3add84db3c707eaa5-0280012021/original/ENG-Libya-Economic-Monitor.pdf. 327 Safa Alharathy, “General Authority for Communications and Informatics to Reduce Internet Prices,” The Libya Observer (February 20, 2020), https://www. libyaobserver.ly/inbrief/general-authority-communications-and-informatics-reduce-internet-prices. 65 Table 11: Libya: Fiscal reasonableness determination Libya: fiscal reasonableness, 2011–20 General taxes Sector-specific taxes Nontax impositions Predictability 24% corporate None identified Misappropriation of state-owned enterprise income tax during the relevant funds Lack of transparency 2% stamp tax period Investment policy not market-driven Libya overall rating: Uncertain Source: World Bank. Table 12: Libya: Assessment of internal factors impacting the telecom investment climate Score Internal factor assessed Key relevant facts State ownership of both mobile operators Market open to entry 0 No pathway for new entry permitted, whether via licensing, privatization, joint venture, or management agreement Ease of private investment 0 Private participation in mobile market not permitted Generous spectrum assignments and reasonably early deployment of mobile Spectrum needs met 2 broadband State ownership of incumbent mobile operators and mobile virtual network operator Level playing field 0 Common governance through state holding company precludes functional independence No excessive fees or taxes Fiscal reasonableness 1 State ownership without fiscal transparency All 3 Source: MacMillan Keck. Libya: Summary of key findings across all the internal factors Table 12 summarizes the scoring of the five internal factors impacting Libya’s telecom investment climate. It also offers the key relevant facts that led to the score for each factor. 66 4.3 Assessment of external Libyan These circumstances were exacerbated when petroleum exports were blocked during 2020 until the ceasefire went telecom investment climate factors into effect in October.329 Five external factors during the 2011–20 conflict that Libya was assigned an unfavorable score on this external impacted Libya’s climate for telecom investment were factor due to paramilitary and military interference from assessed: (1) military or paramilitary interference, 2011 through mid-2012 and from 2014 through late 2020. (2) international sanctions, (3) travel restrictions, (4) international aid for telecommunications, and (5) international security intervention. Each factor is discussed Libya: International sanctions? in turn below, followed by a summary of key findings across Libya had been considered a pariah state during a long all the external factors. stretch of Gaddafi’s reign, but international sanctions that were imposed in the late 1980s were lifted in 2004 and had no impact during the 2011–20 study period. Libya: Military or paramilitary interference? After a hopeful period from July 2012 through late 2013, During the 2011–20 conflict, Libya was subject to various by early 2014, Libya was spiraling into a protracted internal international sanctions. In March 2011, the European Union conflict that would not end until a ceasefire went into imposed a broad ban on exporting military technology and effect in October 2020. Following the June 2014 elections, technical assistance to specified individuals and entities Libya remained a bifurcated country for most of the period in Libya that were associated with the Gaddafi regime, through 2020. The west of the country was controlled by including his son, who was identified as chairperson of the the internationally recognized GNC (and, for a time, the GPTC.330 The sanctions were amended shortly thereafter,331 GNA as its successor), while the east of the country was supplemented by various decisions and ultimately replaced controlled by General Haftar and the Libyan National by a consolidated regulation in January 2016, which no Army with the support of the House of Representatives. longer showed Gaddafi’s son as associated with Libya’s In addition, other armed militia groups, including the state-owned telecom operators.332 These EU sanctions are Islamic State, disrupted Libya’s internal territory and order. still in effect today.333 External actors exacerbated Libya’s problems by funneling money and weapons to proxies on both sides. UN efforts to Commencing in February 2011, the UN imposed embargoes broker peace did not succeed until October 2020.328 on the supply of arms and military equipment to Libya. In March 2011, a no-fly zone was imposed over Libya. Libya’s geographic fracture and its governance fracture After the UN recognized the NTC as the legitimate Libyan along political, regional, sectarian, and tribal lines had an government, provision of arms to the government was adverse impact on the country’s mobile market and its permitted subject to a notification requirement, which was telecom sector more broadly for the entire conflict period, removed in 2013. In August 2014, the UN imposed stricter with the possible exception of the second half of 2012 and requirements, including advance approval by the Sanctions most of 2013. This fracture, and corresponding interference Committee.334 The UN Security Council resolutions of 2011 by active non-state militias prior to 2012 and the Libyan established a long list of sanctioned individuals.335 Specified National Army from 2014 through late 2020, effectively individuals continue to be subject to UN sanctions under stopped all efforts to invite private sector investment into Security Council Resolutions 1970 and 1973, with the list Libya’s mobile market and disrupted LPTIC’s efforts to updated as recently as April 29, 2021. preserve and rebuild its infrastructure. In addition to prohibition against arms sales, the listed individuals and entities are subject to travel bans, asset freezes, and other business restrictions.336 328 See “Libya: Ceasefire, Planned Elections, Offer Rare Window of Hope, Security Council Hears,” UN News (May 21, 2021), https://news.un.org/en/sto- ry/2021/05/1092542. 329 World Bank, “Libya Is Aspiring for Recovery and Healing, but Challenges Abound,” Press Release (World Bank, Washington, DC, April 22, 2021), https:// www.worldbank.org/en/news/press-release/2021/04/22/libya-is-aspiring-for-recovery-and-healing-but-challenges-abound#. 330 See Council Regulation (EU) No 204/2011, concerning restrictive measures in view of the situation in Libya (March 2, 2011), annex III, entry 13, https:// eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:058:0001:0013:EN:PDF. EU Council Regulation 296/2011. 331 See Council Regulation (EU) No 296/2011 of March 25, 2011, amending Regulation (EU) No 204/2011 concerning restrictive measures in view of the situation in Libya, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32011R0296&from=EN. 332 See Council Regulation (EU) 2016/44, concerning restrictive measures in view of the situation in Libya and repealing Regulation (EU) No 204/2011 (Janu- ary 18, 2016), https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32016R0044&from=en. 333 Council Regulation (EU) 2016/44 and subsequent implementing regulations and interpretations have been consolidated at https://eur-lex.europa.eu/ legal-content/EN/TXT/PDF/?uri=CELEX:02016R0044-20210731&from=EN. 334 “UN Arms embargo on Libya,” Stockholm International Peace Research Institute Database (August 20, 2020), https://www.sipri.org/databases/embargoes/ un_arms_embargoes/libya/libya_2011. 335 Security Council resolution 1970 (2011) and Resolution 1973 (2011) (United Nations, New York). 336 The list of currently sanctioned individuals and description of the sanctions is available at https://www.un.org/securitycouncil/sanctions/1970/materials. 67 The US Executive Order337 echoed the UN Security Council and 2019,343 and other governments also ordered their air resolutions and froze the assets of members of the Gaddafi carriers to avoid Libyan airspace from time to time during family and the Government of Libya. Shortly after closing the conflict.344 Civilians who managed to get to Libya its embassy in Tripoli in February 2011, the United States were unsafe, as an atmosphere of persistent lawlessness imposed an asset freeze on Gaddafi, his family, and senior enabled militias, criminals, and terrorist groups to operate members of the government.338 In 2016, the United States with impunity, while recurrent conflict endangered civilian added individuals opposed to the UN-sponsored unity rights and safety.345 government to its Libya sanctions list.339 Libya was assigned an unfavorable rating on travel The EU, UN, and US sanctions in effect since 2011 were restrictions. narrowly tailored to restrict the sale of arms and financial transactions with specified individuals and entities Libya: International aid for associated with the Gaddafi regime (such as Gaddafi’s telecommunications? family members and associates and entities in which they International aid for Libya’s telecom sector from 2011 had ownership interest). These sanctions do not prohibit through 2020 was very limited. the supply of telecommunications equipment or technology and have not been directly applied to any of Libya’s domestic Libya’s status as a pariah state until 2004 and the Gaddafi state-owned telecom operators, although LAP GreenN was regime’s distrust of nongovernmental organizations initially subject to sanctions due to its previous relationship (NGOs)346 largely precluded its active financial support with the Gaddafi regime.340 Throughout the conflict, LPTIC from global and regional donor organizations before the and its subsidiaries have not been restricted by these 2011 revolution. The legal framework for NGOs in Libya sanctions from investing in infrastructure restoration or was the most restrictive in the region, and Libyan law upgrades. prohibited receiving financial assistance from organizations headquartered outside Libya. These legal restrictions Libya was assigned a favorable score on international significantly restricted the availability of foreign financial sanctions. assistance under the Gaddafi regime.347 Libya: Travel restrictions? In addition, Libya had more of the posture of a donor nation Libya faced extreme travel restrictions throughout most prior to the conflict. The government had channeled a of the 2011–20 conflict period, with the exception of 2012 significant part of the state’s petroleum revenues into a and 2013. The UN Security Council imposed a no-fly zone sovereign wealth fund, the Libyan Investment Authority. over Libya from March through October 2011.341 As a result Through this fund, Libya had state-financed extensive LAP of the renewed fighting, all foreign air carriers suspended telecom development projects throughout Africa. The all international flights to Libya from 2014 through May international telecom investments were operated under 2021, with TunisAir operating the last foreign carrier the LAP GreenN brand. After the onset of the conflict, flight in August 2014 and the first resumed flight in May because LAP GreenN was on the original sanctions list, 2021. During this period, the only scheduled international many of these investments were frozen by international flights to Tunisia, Turkiye, and Egypt were operated by sanctions and local ministries. Regulators in some cases Libyan companies, which did not have access to European attempted to terminate the licenses and/or confiscated the or US airspace.342 The Libyan National Army also imposed assets of LAP GreenN’s local subsidiaries.348 relatively short no-fly zones over parts of Libya in 2018 337 Executive Order 13566 of February 25, 2011. 338 Helene Cooper and Mark Landler, “U.S. Imposes Sanctions on Libya in Wake of Crackdown,” The New York Times (February 25, 2011), https://www. nytimes.com/2011/02/26/world/middleeast/26diplomacy.html. 339 Declan Walsh, “U.S. Penalizes Libyan Politician in Effort to Bolster Unity Government,” The New York Times (April 19, 2016), https://www.nytimes. com/2016/04/20/world/middleeast/us-libya-sanctions-unity-government.html. 340 EU Council Regulation No 204/2011 concerning restrictive measures in view of the situation in Libya (March 2, 2011), https://eur-lex.europa.eu/legal-con- tent/EN/TXT/PDF/?uri=CELEX:02011R0204-20150802. 341 Security Council Resolution 1973 (United Nations, New York, 2011). 342 See “TunisAir First Foreign Carrier to Resume Libya Flights,” Al Jazeera (May 18, 2021), https://www.aljazeera.com/news/2021/5/18/tunisair-first-for- eign-carrier-to-resume-libya-flights. 343 Patrick Wintour, “Libyan Army Chief Strengthens Hand by Taking More Territory,” The Guardian (March 11, 2019), https://www.theguardian.com/ world/2019/mar/11/libya-khalifa-haftar-gains-control-of-majority-of-country-onshore-oil-fields. 344 For example, the United States issued an emergency do-not-fly order regarding Libyan airspace in late 2019. See David Mumford, “US Issues Emergency DO NOT FLY Order for Libya” (Opsgroup, October 23, 2019), https://ops.group/blog/hlll/. 345 US Congressional Research Service, “Libya: Conflict, Transition, and U.S. Policy” (June 26, 2020), https://fas.org/sgp/crs/row/RL33142.pdf. 346 See Barah Mikaïl, Civil Society and Foreign Donors in Libya (Arab Forum for Alternatives, Fride, and Hivos, Netherlands, 2013), 2–3, https://www.files.ethz. ch/isn/167258/Civil%20society%20and%20foreign%20donors%20in%20Liby.pdf. 347 Barah Mikail, “Civil Society and Foreign Donors in Libya” (Arab Forum for Alternatives, Fride, and Hivos, Netherlands, 2013), 2, https://www.files.ethz.ch/ isn/167258/Civil%20society%20and%20foreign%20donors%20in%20Liby.pdf. 348 “LAP Green Seeks to Lift Sanctions, Denies Sale,” Reuters (November 30, 2011), https://www.reuters.com/article/libya-telecom/lap-green-seeks-to-lift-sanc- tions-denies-sale-idUSL5E7MU63520111130. 68 During the conflict, Libya received significant humanitarian assistance from the UN, Red Cross, various governments, and NGOs.349 The International Telecommunication Union provided some technical assistance on telecom-related matters in 2017,350 but broader international aid for telecom technical assistance and infrastructure investment was minimal through the end of 2020. In September 2011, the World Bank announced that it was joining the UN and the European Union as one of the three institutions invited by Libya’s NTC to coordinate assistance for Libya as it forged a path forward after months of violent conflict. The World Bank was asked to lead the effort in the areas of public expenditure and financial management, infrastructure repair, job creation for young people, and service delivery.351 By the end of 2020, however, the World Bank’s role had not yet included significant technical assistance to the telecom sector and involved no investments in the telecom sector. Libya received an unfavorable rating on international aid for telecommunications during 2011–20. Libya: International security intervention? Libya experienced competing international and bilateral security interventions throughout the conflict. Often supporting opposite sides in the conflict, these interventions were ineffective in restoring security within the country – particularly prior to October 2020. In 2011, a North Atlantic Treaty Organization–led international coalition undertook a short-lived military intervention to restore order in Libya.352 No subsequent interventions helped restore or maintain order. Instead, from 2014 through October 2020, the two rival governments received external support from different countries or groups of countries. As a recent example, Turkiye deployed troops to Libya in January 2020 to support the UN-recognized GNA.353 At the same time, the United Arab Emirates launched air and drone strikes to support the opposing Libyan Arab Armed Forces, previously known as the Libyan National Army.354 Libya received an unfavorable rating on international security intervention. Libya: Summary of key findings across all the external factors Table 13 summarizes the scores assigned and key relevant supporting facts on the external factors that are likely to have had an impact on the development of the telecom sector in Libya. Table 13: Libya: Assessment of external factors impacting the telecom investment climate Score External factor assessed Key relevant facts Internal blockades between east and west fractured LPTIC and other SOE operations Military interference 0 Border blockade on petroleum transport in 2020 EU, US, and UN sanctions did not apply to telecom equipment or technology or Libya’s International sanctions 2 domestic telecom SOEs LPTIC was able to procure supplies for infrastructure renewal No-fly zone at outset of conflict Travel restrictions 0 Heavily restricted commercial travel State of lawlessness impacting travel International aid for No significant international investment aid for telecom 0 telecommunications Some ITU technical assistance International security Competing security interventions were ineffective at ensuring peace and supported both 0 intervention sides of the internal conflict All 2 Source: MacMillan Keck. Note: ITU = International Telecommunication Union; LPTIC = Libyan Post Telecommunications and Information Technology Company; SOE = state-owned enterprise; UN = United Nations. 349 See, for example, “OCHA Financial Tracking Service, Libya 2019” (United Nations Office for the Coordination of Humanitarian Affairs, New York, 2021), https://fts.unocha.org/countries/127/summary/2019. 350 Safa Alharathy, “ITU to Support Libyan Telecommunications Sector,” The Libya Observer (October 22, 2017), https://www.libyaobserver.ly/inbrief/itu-sup- port-libyan-telecommunications-sector. 351 “World Bank to Help Libya Rebuild and Deliver Essential Services to Citizens,” Press Release (World Bank, Washington, DC, September 13, 2011), https:// www.worldbank.org/en/news/press-release/2011/09/13/world-bank-to-help-libya-rebuild-and-deliver-essential-services-to-citizens. 352 “Libya Still Plagued by Conflict, 10 Years after NATO Intervention,” DW News (March 18, 2021), https://www.dw.com/en/libya-still-plagued-by-conflict-10- years-after-nato-intervention/a-56921306. 353 “Libya Conflict: Turkey Sends Troops to Shore Up UN-Backed Government.” BBC News (January 6, 2020), www.bbc.com/news/world-africa-51003034. 354 “Libya: UAE Strike Kills 8 Civilians.” Human Rights Watch (March 30, 2021), www.hrw.org/news/2020/04/29/libya-uae-strike-kills-8-civilians#. 69 4.4 Libya’s projected and actual mobile teledensity evolution The following passages describe Libya’s actual teledensity evolution from 2000 through 2021 and its projected but-for- the-conflict teledensity evolution since 2011. Libya’s unique subscriber mobile penetration Libya’s mobile penetration was considered from 2000 through 2020, including the Libyan Civil War from 2011 through 2020 (when the conflict was still ongoing). Algeria, Egypt, and Tunisia were compared as benchmarks. Libya’s adult-age (15+) population was also considered, although Libya evidences some penetration in its younger population. The projected growth in the but-for-the-conflict scenario was modeled so as not to be overly aggressive or conservative, but instead to represent a reasonable basis for what could have transpired absent the conflict. The gap in Libya’s mobile penetration between the actual and but-for-the-conflict scenarios grew from zero at the onset of the conflict in 2011 to 1.5 percentage points by 2020. The results are depicted in figure 15. Figure 15: Libya’s unique subscriber mobile penetration, 2000–20 Source: MacMillan Keck. Prior to the conflict, Libya had well-developed telecom infrastructure, experienced extraordinary teledensity growth from 2004 through 2007, and reached unique mobile subscriber penetration levels that were near the share of the adult population by 2011, far surpassing Algeria, Egypt, and Tunisia. In the but-for-the-conflict scenario, Libya’s mobile penetration (the orange curve in figure 15) is projected to have grown at a slightly faster rate since 2011 than actual mobile penetration (the blue curve in the figure). Actual growth declined from 2011 to 2013, even as order was being restored and potential legislative and regulatory reforms were promised. However, in 2014, further civil unrest effectively flattened the growth curve for three years until 2017. In 2018, LPTIC reunited across the east and west, after being bifurcated in 2014. This appears to have boosted growth in the market. In April 2018, 4G services were introduced and began to have a positive impact on mobile penetration. Prices were high initially (as in most 4G launches in Africa), but growth has been steady and download speeds (as crowdsourced by OpenSignal) and 4G use have risen significantly. Use of 4G services rose 16.4 percent over the last six months of 2018 due to significant improvements in coverage.355 Libya’s projected but-for-the-conflict growth is similar to the growth profile experienced in Egypt, while both Algeria and Tunisia grew faster than the projection for Libya during the same period. The but-for-the-conflict projection anticipates that 4G would have been introduced three to four years earlier than it was, but it follows a similar growth slope to actual growth since 2018. The projection curve follows the actual S-curve to 2011 and models steady growth thereafter at a slower rate due to saturation. 355 See, for example, Mnas Associates, “Libya’s Telecoms Launches 4G Access” (Mnas Associates, London, April 4, 2018), https://www.menas.co.uk/blog/lib- yas-launches-4g-access/. 70 The but-for-the-conflict teledensity model projects that mobile penetration would have exceeded the adult population by 2013. This is not uncommon in the region. For example, Algeria has achieved 71.3 percent mobile penetration against an adult population of only 69 percent, Tunisia has achieved 76.6 percent mobile penetration against an adult population of 76 percent, and Egypt has achieved 68.1 percent mobile penetration against an adult population of 66 percent. Despite the lack of competition from private operators before 2011, Libya’s mobile telecom sector prospered relative to neighboring countries. It stagnated for seven years following the revolution and civil unrest, but the gap in total mobile teledensity remained relatively small, at 1.5 percentage points, aided by growth recovery since 2017. Libya’s mobile penetration growth rate Libya’s mobile penetration growth rate (the year-on-year rate of change in penetration) is also considered during 2000–20. The results are depicted in figure 16. Figure 16: Libya’s mobile penetration growth rate, 2000–20 Civil War Source: MacMillan Keck. Note: RoC = Rate of Change. Mobile penetration growth rates have remained relatively flat since the inception of the conflict. The increased deceleration in 2015 and 2016 correspond to the escalations in violence in 2014 and 2015. Libya experienced positive growth rates from 2018 through 2020, which appears to reflect some pent-up demand released by improved domestic stability and the launch of 4G networks (and with additional subscriber identity modules rereleased for data-only usage), although these figures may not yet capture the impacts of the escalation of conflict during the first nine months of 2020. The yellow line in figure 16 represents the average annual mobile penetration growth rate during two periods – the pre- conflict period from 2000 through 2010 and the conflict period from 2011 through 2020. The grey line in the figure represents the average but-for-the-conflict annual penetration growth rate during the conflict period. The difference between the grey and yellow lines during the conflict period is the average annual growth rate deficit. The difference, as graphed in figure 16, appears small because both the actual and but-for-the-conflict growth rates since 2011 are relatively low as Libya approaches saturation of the pool of unique mobile subscribers. However, with an actual annual growth rate of 0.76 percent and a but-for-the-conflict annual growth rate of 1.07 percent, Libya experienced a 28.9 percent deficit in its average annual growth rate during the conflict. 71 4.5 Correlating Libya’s supply-side Libya’s average annual teledensity growth rate suffered a 29 percent decline – the growth rate deficit – compared investment climate and teledensity with its projected average annual but-for-the-conflict teledensity growth rate. Nonetheless, teledensity The assessment of Libya can inform the overall view of the continued to grow (albeit at a reduced rate) during the relationship between the supply-side telecom investment conflict. Significantly, Libya continued to enjoy the benefits climate and teledensity evolution during the conflict. of the high teledensity level that had been achieved prior to the onset of the conflict. It also enjoyed the benefits of Libya was assessed as having an internal factor investment its comparative pre-conflict infrastructure advantage and climate rating of 4 and an external factor investment the state’s investments to restore damaged or destroyed climate rating of 3. Key internal factors included (1) state infrastructure in 2012. ownership and control of all mobile operators, (2) the state’s failure to liberalize the sector despite stated intentions, and (3) the state’s failure to establish an independent regulator or issue new licenses to private investors. Key external factors included (1) broad sanctions against designated individuals and entities, (2) travel difficulties, (3) lack of international aid, and (4) lack of effective international security interventions. 72 5 Federal Republic of Somalia This component of the study assesses the impact of civil war and civil unrest on the mobile markets in Somalia (inclusive of Puntland and Somaliland) during 2000–20. 5.1 Somali context The following passages provide information on Somalia’s geography, demographics, and economy; the conflict; and the telecom sector. Map 4: Somalia Caluula DJIBOUTI GULF OF ADEN Bandar Murcaayo Breeda Gees Asayita Gwardafuy Djibouti Boosaaso Saylac Raas (Bender Cassim) Butyaalo Dikhil Surud Qandala Bargaal Raas Maskan ceel Raas Ja Raas Silil Khansiir Xiis Maydh Laasqoray Binna Karin Da Dahot Hurdiyo ro Raas AWDAL Bullaxaar Berbera r Ceerigaabo (Erigavo) BARI Xaafuun Baki Xaafuun SANAAG Iskushuban Boorama WOQOOYI Karkaar Mountains Dire Dawa GALBEED Burco (Burao) Garadag Qardho De Togwajaale Bandarbeyla r Hargeysa Dudo Nazret Jijiga Oodweyne Harer Xudun Kiridh Taxeex TOGDHEER SOOL Ey l Buuhoodle Garoowe Degeh Bur Laascaanood NUGAAL Raas Gabbac Gori Rit Eyl Berdaale Xamure ETHIOPIA Werder Beyra Seemade Megalo K'ebri Dahar Gaalkacyo (Galcaio) Garacad Imi MUDUG War Galoh Gode Shilabo Baxdo Mirsaale Hilalaya Mereer-Gur Dhuusamarreeb Hargele (Dusa Marreb) Hobyo GALGUDUUD Ferfer Ceel Huur Ceel Buur Beledweyne Xarardheere BAKOOL We bi Derri Dolo Bay Xuddur (Oddur) H IR A A N Buulobarde INDIAN OCEAN Sha Luuq Tayeeglow Ceeldheere bee lle Garbahaarrey Baydhabo KENYA (Baidoa) SHABELLE Mahadday DHEXE GEDO Weym Cadale Buurhakaba Wanlaweyn El Beru Hagia Diinsoor Jawhar (Giohar) Baardheere BAY Balcad Afgooye Muqdisho (Mogadishu) SOMALIA We Qoryooley bi Wajir BANADIR JUBA Jub SHABELLE Marka (Merca) National capital DHEXE ba HOOSE Haaway Regional capital Baraawe Town, village Bu'aale Afmadow Airport Jilib International boundary Bilis Qooqaani Regional boundary Jamaame Undetermined boundary JUBA HOOSE SOMALIA Main road Kismaayo (Chisimayu) Track Isole Railroad Giuba 0 50 100 150 200 km Buur Gaabo Raas 0 50 100 mi Kaambooni The boundaries and names shown and the designations used on this map - do not imply official endorsement or acceptance by the United Nations. - Garsen Lamu Map No. 3690 Rev. 10 UNITED NATIONS Department of Field Support December 2011 Cartographic Section Source: UN Geospatial > Somalia (December 2011), https://www.un.org/geospatial/content/somalia. 73 Somalia’s geography, demographics, and the land area was forest,363 representing a decline of 83 economy percent since the 1980s.364 Somalia is located in East Africa, bordering the Gulf of Aden and the Indian Ocean, east of Ethiopia (map 4). Forming the In 2020, gross domestic product (GDP) per capita, based tip of the area known as the Horn of Africa, Somalia is also on purchasing power parity, was about USD 875.365 GDP bordered by Kenya to the southwest and Djibouti to the composition by sector of origin in 2013 was 60.2 percent northwest. It has the longest coastline of any country in agriculture, 7.4 percent industry, and 32.5 percent Africa’s mainland. services.366 Somalia’s primary sources of natural capital are petroleum and mineral resources, fisheries, pasturelands, In 2020, Somalia’s population was about 15.9 million,356 and forests; agricultural land and water are relatively minor and the country’s land area is 627,340 square kilometers357 contributors to natural capital wealth.367 The country’s (about 242,217 square miles), in both cases inclusive of the primary legal exports in 2019 were gold, sheep and goats, disputed territories of Somaliland and Puntland. Population sesame seeds, insect resins, and cattle,368 but exports density varies widely throughout Somalia. The least of charcoal369 and re-exports of drugs370 also contribute densely populated areas are in the northeast and central outside the formal economy. In 2019, about 32.4 percent of regions and areas along the Kenyan border. The most the adult population (those age 15 and over) participated populated areas are in and around the cities of Mogadishu, in the formal labor force, and the estimated unemployment Marka, Boorama, Hargeysa, and Baidoa.358 In 2020, over rate was 21.4 percent.371 In 2020, only about 36 percent 46.1 percent of the total population lived in urban areas.359 of the population had electricity, in 2019 only 39 percent Life expectancy at birth in 2019 was 57 years.360 had access to sanitary facilities, and 56.5 percent had access to treated drinking water.372 Water scarcity is a Somalia occupies a strategic location in the Horn of Africa. major environmental challenge.373 The literacy rate is 37.8 Over 70 percent of the land area is used for pastures,361 percent, including 49.7 percent of males and 25.8 percent which is predominantly nomadic pastoralism, with a of females.374 growing private sector livestock export industry. Goats, sheep, camels, and cattle are the primary animals reared The conflict in Somalia by pastoralists, with Somalia being second in global sheep The current conflict in Somalia began when General Barre exports after Australia. This industry is the largest source of was forcibly removed from power in January 1991 at the revenue in Somalia, surpassing crop production at fourfold onset of a long and bloody civil war that has been followed in value, employing over 60 percent of the population, by an enduring period of civil instability. Barre’s removal and accounting for over 80 percent of Somalia’s foreign left a power vacuum, plunging Somalia into a decades-long exchange earnings.362 In 2020, about 9.5 percent of cycle of instability and civil war, characterized in part by north-south divisions tracing back to the colonial era, and 356 World Bank > Data > Population, Total – Somalia (2020). 357 World Bank > Land Area (sq. km) – Somalia (2020). 358 IndexMundi > Factbook > Countries > Somalia > Somalia Geographic Profile (2021), https://www.indexmundi.com/somalia/geography_profile.html. 359 World Bank > Data > Urban Population (% of total population) – Somalia (2020), https://data.worldbank.org/indicator/SP .URB.TOTL.IN.ZS?locations=SO. 360 UNESCO Institute for Statistics > By Country > Somalia > General Information > Life Expectancy at Birth (years) (2019), http://uis.unesco.org/en/country/so. 361 World Bank > Data > Indicators > Agricultural Land (% of land area) – Somalia (2018), https://data.worldbank.org/indicator/AG.LND.AGRI.ZS?locations=SO. 362 Somalia Water and Land Information Management project > Land Use (Food and Agriculture Organization of the United Nations, Rome, 2021), http:// www.faoswalim.org/land/land-use. 363 World Bank > Data > Indicator > Forest Area (% of land area) – Somalia (2020), https://data.worldbank.org/indicator/AG.LND.FRST.ZS?locations=SO. 364 See “Reforesting Somalia from the Air,” Delegate: The UN Intranet-iSeek for Member States (United Nations, New York, April 23, 2021), https://www. un.org/en/delegate/reforesting-somalia-air. 365 World Bank, Word Development Indicators (World Bank, Washington, DC, 2021), https://databank.worldbank.org/source/world-development-indicators. 366 IndexMundi > Countries > Somalia > Economy > Somalia GDP – Composition by Sector (2013 est.), https://www.indexmundi.com/somalia/gdp_compo- sition_by_sector.html. 367 See Abdirahman Zeila Dubow and Tracy Hart, Somalia Country Environmental Analysis: Diagnostic Study on Trends and Threats for Environmental and Natural Resources Challenges (World Bank, Washington, DC, June 2020): 24, https://openknowledge.worldbank.org/bitstream/handle/10986/34058/ Somalia-Country-Environmental-Analysis-Diagnostic-Study-on-Trends-and-Threats-for-Environmental-and-Natural-Resources-Challenges.pdf;jsessionid=E- CAE1485208FE37C81BC63A15E4EA475?sequence=4. 368 Organization of Economic Complexity > Profile > Country > Somalia (2019), https://oec.world/en/profile/country/som. 369 See “Somalia Calls for International Cooperation to Stop Illegal Charcoal Trade,” Press Release (United Nations Environment Programme, Nairobi, Kenya, May 7, 2018), https://www.unep.org/news-and-stories/press-release/somalia-calls-international-cooperation-stop-illegal-charcoal-trade. 370 See Mohamed Daghar, “Regulating Khat Could Disrupt East Africa’s Illegal Drug Economy,” ISS Today (Institute for Security Studies, Pretoria, South Africa, April 29, 2021), https://issafrica.org/iss-today/regulating-khat-could-disrupt-east-africas-illegal-drug-economy. 371 Somalia National Bureau of Statistics, Somali Labor Force Survey Report 2019 (Somalia National Bureau of Statistics, Mogadishu, September 2021), 5, https://www.nbs.gov.so/wp-content/uploads/2021/10/LFS-Report_2021.pdf. 372 World Bank > Databank > World Development Indicators > 2020, 2019, https://databank.worldbank.org/source/world-development-indicators. 373 See Nita Bhalla and Mohammed Omer, “Three-Quarters of Somali Families Found Lacking Water as Drought Looms,” Reuters (March 22, 2021), https:// www.reuters.com/article/us-global-water-climate-somalia/three-quarters-of-somali-families-found-lacking-water-as-drought-looms-idUSKBN2BE1X3. 374 Matthew Cline, “10 Important Facts about Girls’ Education in Somalia,” Blog Post (Borgen Project, Tacoma, WA, July 28, 2018), https://borgenproject.org/ tag/literacy-in-somalia/#. 74 lacking an effective centralized government.375 A US-led December 2003, when its mandate ended at the same time. UN peacekeeping coalition landed in Somalia in 1993 and Even as the TNG was clearly failing, a successor government stayed until 1995, when Somalia still had no government. known as the Transitional Federal Government (TFG) Puntland (forming the area east of Somaliland in the was being brokered, again under the auspices of the northeast) also declared itself an autonomous region in Intergovernmental Authority on Development. The 1998, but did not seek full independence, instead intending product of two years of international mediation, the TFG to remain part of a federal Somali state.376 was the 14th attempt to create a functioning government in Somalia since the end of Muhammad Siad Barre’s From April through May 2000, a series of meetings known dictatorial rule in 1991. Formed in October 2004, the as the Somalia National Peace Conference were held in TFG saw a peaceful handover of presidential power from Djibouti under the auspices of the Intergovernmental TNG leader Abdiqasim Salad Hassan to Abdullahi Yusuf Authority on Development, a regional intergovernmental Ahmed. Still, the TFG “governed” from neighboring Kenya body with participation by Djibouti, Eritrea, Ethiopia, until June 2005. Its Parliament did not convene on Somali Kenya, Somalia, Sudan, and Uganda. The conference soil until February 2006, when it met in a converted grain sought to bring together representatives of the warring warehouse in the western city of Baidoa because security factions of Somalia to end the civil war that had claimed concerns kept the legislature from entering Mogadishu. more than 300,000 lives since 1991. The conference led Even when it did convene, the TFG lacked cohesion, which to the establishment of the Somali Transitional National undermined its power.379 Government (TNG). The outcome was militarily and politically opposed by the Somalia Reconciliation and The TFG was unable to establish a government seat in Restoration Council, which was formed by faction leaders Mogadishu or consolidate power.380 The TFG faced fierce including Hussein Mohamed Farrah Aidid and Mohamed opposition from the Islamic Courts Union (ICU) – a coalition Dhere. The Transitional National Charter, which established of Islamic courts that arose as an indigenous security the TNG, recognized de facto regional autonomy and the response to the anarchy prevailing around Mogadishu existence of new entities in the north of the former Somalia, and southern Somalia after the fall of the Barre regime – home to relatively homogeneous clans.377 which took effective control of Mogadishu in 2006.381The TFG, supported by Ethiopia, defeated ICU forces in 2007 The TNG was not successful. Although by 2002 it had all and entered Mogadishu, but it was not viewed by the the organs of a national government, including executive, local population as a legitimate government and failed to legislative, and judicial structures; a police force; and a establish control over southern Somalia. After 2009, the standing army, its institutions were weak, lacking territorial civil war has concentrated in the southern and central areas control, the ability to raise tax revenue, and basic physical of Somalia. Thus, the TFG nominally governed Somalia from resources. Due to these limitations, the TNG was unable 2005 until 2012, but it never gained control over much of to provide basic social services. Ministers and legislators the territory.382 often expressed frustration at being shut out of the real decision-making process, and often receiving irregular The ICU was eventually disbanded in 2007, but its armed and limited salaries. The TNG’s internal problems led to wing transformed into Al-Shabaab, a militant group the replacement of the prime minister four times in three associated with al-Qaeda that continues to serve as a years.378 The administrative body was bankrupt by primary element of Somalia’s instability.383 375 Sally Healy and Mark Bradbury, “A Brief History of the Somali Conflict,” in Whose Peace Is It Anyway? Connecting Somali and International Peacemaking (Conciliation Resources, London, February 2010), 10, https://www.c-r.org/accord/somalia/endless-war-brief-history-somali-conflict. 376 “Puntland Profile,” BBC News (March 11, 2019), https://www.bbc.com/news/world-africa-14114727. 377 See, generally, AMISOM > About Somalia > Somalia Peace Process (African Union Mission in Somalia, 2021), https://amisom-au.org/about-somalia/so- mali-peace-process/. 378 See, generally, Stig J. Hansen “Warlords and Peace Strategies: The Case of Somalia,” Journal of Conflict Studies 23, no. 2 (2003): 57–78, https://www. erudit.org/en/journals/jcs/2003-v23-n2-jcs23_2/jcs23_2art04.pdf. 379 See Stephanie Hanson and Eben Kaplan, “Somalia’s Transitional Government” (Council on Foreign Relations, New York, May 12, 2008), https://www.cfr. org/backgrounder/somalias-transitional-government. 380 Political Instability Task Force, Polity IV Country Report: Somalia (Wilson Center, Washington, DC, 2010), http://www.systemicpeace.org/polity/Soma- lia2010.pdf. 381 Center for International Security and Cooperation > Mapping Militants > Profiles > Islamic Courts Union (Center for International Security and Coopera- tion, Stanford University, CA, 2019), https://cisac.fsi.stanford.edu/mappingmilitants/profiles/islamic-courts-union. 382 See Harish Venugopalan, “Somalia: A Failed State?” ORF Issue Brief (Observer Research Foundation, New Delhi, India, February 6, 2017), https://www. orfonline.org/research/somalia-a-failed-state/. 383 Center for International Security and Cooperation > Mapping Militants > Profiles > Islamic Courts Union (Center for International Security and Coopera- tion, Stanford University, CA, 2019), https://cisac.fsi.stanford.edu/mappingmilitants/profiles/islamic-courts-union. 75 An effort to establish a single federal government was In summary, since 1991, Somalia has suffered an unending, attempted in 2012. A new Federal Parliament of Somalia was sometimes undulating, civil war among its rival clans, inaugurated as the legislature of the Federal Government aspiring separate states, warlords, and Islamic groups. of Somalia, the first permanent central government in Officially recognized state institutions have repeatedly the country since the start of the civil war. With a new failed despite extensive international efforts to rebuild Constitution and a new Parliament representing diverse them and stabilize the country. Mogadishu-based national parties and factions, Somalia’s national political structure governments have had limited operational capacity and appeared more stable.384 Hassan Sheikh Mohamud, an physical reach into most of the country. They have been academic and activist with a moderate stance, was elected debilitated by local political competition among clans president on September 10, 2012. His term was not highly and powerbrokers. The official state was mostly unable successful, and he was nearly impeached. As the original to deliver governance to local populations while battling goal of holding direct elections in 2016 proved impossible, strong and agile military opponents and separatism. preparations were instead made to hold indirect elections. Islamist groups that have administered uniform rule The Parliament’s election of Somalia’s new president also have connections to global jihadist movements and occurred on February 8, 2017. After multiple rounds participate in terrorism, rendering them unacceptable to of voting, former Prime Minister Mohamed Abdullahi the international community and causing resentment by Mohamed emerged with a commanding lead, Mohamud Somalis. However, the internationally recognized state conceded to Mohamed, and Mohamed was sworn in as has not been able to provide adequate and equitable Somalia’s new president.385 This step was widely heralded governance.391 as the most positive step since 1991. In April 2021, Somalia’s President signed a disputed law extending his Somalia’s telecom sector mandate for two years, setting the nation on a collision In 1990, Somalia had only 8,500 fixed lines, mostly course with donors who strongly opposed the move.386 located in Mogadishu, and mobile networks had not yet But elections were finally held for the house of the People been introduced.392 All infrastructure was then under between November 2021 and April 2021, and a new government control.393 Most of it was destroyed during the President was elected in May 2022. violence that ensued after General Barre was deposed in 1991.394 Guerrilla warfare in the areas of Somalia other than Somaliland and Puntland has been ongoing. This primarily After the government fell in 1991, Somalia effectively involves clashes with Al-Shabaab and other militants ceased regulating its telecom sector (a situation that would by forces of the officially recognized government and continue for about 27 years). Although the Barre regime supporting international forces. In 2016, more than 150 had decreed a telecommunication law in 1975, this was at separate armed militia groups were active in Somalia,387 a time when the telecom sector had been nationalized395 and in 2020, some 60 separate armed groups were and the law did not address topics relevant to private active,388 indicating the extent of the security challenges sector participation in a competitive market.396 In addition, and weakness of centralized authority. In addition to there was no longer a viable government to implement or violence and COVID-19, Somalia is also dealing with severe enforce the law. As a result, the early growth of Somalia’s drought389 and locusts.390 mobile market occurred without any legal framework or regulation. Anyone with enough capital could enter the market. The evolution of Somalia’s telecommunications 384 See “Somalia Swears In Historic New Parliament,” Al Jazeera (August 23, 2012), https://www.aljazeera.com/news/2012/8/23/somalia-swears-in-histor- ic-new-parliament. 385 Britannica > Place > The Somali Republic > A New Government (2021), https://www.britannica.com/place/Somalia/A-new-government. 386 “Somalia's President Signs Law Extending His Term, 15 Killed in Attack,” Reuters (April 14, 2021), https://www.reuters.com/world/africa/somalias-president- signs-law-extending-his-mandate-two-years-state-news-agency-2021-04-14/. 387 Brookings Institution, “Somalia's Path to Stability” (October 2, 2019), https://www.brookings.edu/blog/future-development/2019/10/02/soma- lias-path-to-stability/. 388 World Bank, “Somalia Crisis Recovery Project Appraisal Document” (World Bank, Washington, DC, April 29, 2020), http://documents1.worldbank.org/ curated/en/155201589207732331/pdf/Somalia-Crisis-Recovery-Project.pdf. 389 UN Office for the Coordination of Humanitarian Affairs (OCHA), “Somalia Humanitarian Response Plan” (OCHA, New York, February 2021), https://relief- web.int/sites/reliefweb.int/files/resources/HRP_2021-Somalia.pdf. 390 World Bank, Somalia – “Re-Engagement and Reform Supplemental Development Policy Financing Program Document” (World Bank, Washington, DC, June 9, 2020), http://documents1.worldbank.org/curated/en/839191593223511618/pdf/Somalia-Re-engagement-and-Reform-Supplemental-Develop- ment-Policy-Financing.pdf. 391 Vanda Felbab-Brown, “Developments in Somalia,” Testimony before the Standing Committee on Foreign Affairs and International Development of the Canadian House of Commons (Brookings, Washington, DC, November 14, 2018), https://www.brookings.edu/testimonies/developments-in-somalia/. 392 See Robert L. Feldman, “Somalia: Amidst the Rubble, a Vibrant Telecommunications Infrastructure,” Review of African Political Economy 34, no. 113 (2007): 565–72, https://community.apan.org/cfs-file/__key/docpreview-s/00-00-00-06-64/2007_2D00_09_2D00_01-Somalia-Amidst-the-Rubble_2D00_a-Vi- brant-Telecommunications-Infrastructure-_2800_Feldman_2900_.pdf. 393 See “Hormuud, Somtel, Nationlink Sign Interconnection Deal,” CommsUpdate (TeleGeography, Washington, DC, July 23, 2014), https://www.commsup- date.com/articles/2014/07/23/hormuud-somtel-nationlink-sign-interconnection-deal/. 394 Robert L. Feldman, “Somalia: Amidst the Rubble, a Vibrant Telecommunications Infrastructure,” Review of African Political Economy 34, no. 113 (2007): 565–72, https://community.apan.org/cfs-file/__key/docpreview-s/00-00-00-06-64/2007_2D00_09_2D00_01-Somalia-Amidst-the-Rubble_2D00_a-Vi- brant-Telecommunications-Infrastructure-_2800_Feldman_2900_.pdf. 395 See Peter T. Leeson, “Better Off Stateless: Somalia before and after Government 76 Collapse,” 35 Journal of Comparative Economics 35 (2007): 689, 693, https://www.peterleeson.com/Better_Off_Stateless.pdf. 396 See Ibrahim Hashi Jama, ed., Somaliland Telecommunications & Posts Laws (SomalilandLaw.org, 2019), http://www.somalilandlaw.com/communications_ markets, as with other key industries, followed geographic In 1994, Al-Barakaat, which had entered Somalia’s boundaries that arose or reemerged during the conflict, remittance market in 1987 and grown to prominence during thus often resulting in separate operators or operations in the civil war, entered the telecom market by founding central and southern Somalia, Puntland, and Somaliland. Barakaat Telecommunications Company. Telecom Somalia Very small aperture terminals were among the first forms (operating as Olympic Telecom) also entered the market of telecom infrastructure introduced after the national in 1994. Barakaat and Olympic were followed in 1997 by government’s fall.397 Another early form of communication NationLink Telecommunications, which was founded by the was the use of high-frequency radios looted from military owners of Tawfiiq NationLink, one of the oldest remittance camps, which were used throughout Mogadishu and many firms in Mogadishu.402 Somtel was founded in Somaliland in villages in the countryside (and were still extensively 1998.403 used in the countryside as late as 2002).398 Terrestrial wireless installations, both mobile and fixed, were the By 2001, Barakaat had become Somalia’s largest telecom next technologies to be deployed, representing the first operator. However, on November 7, 2001, Barakaat was significant post-1991 telecom infrastructure investments abruptly shut down when Concert Communications in Somalia. (jointly owned by British Telecom and AT&T) terminated their relationship as required by US sanctions designating From the outset, development of the foreign remittance Barakaat as a terrorist organization in the wake of the business and Somalia’s post-1991 telecom sector had a September 11 terrorist attacks.404 Barakaat had been symbiotic relationship.399 After the collapse of the formal under scrutiny by US authorities since 1996 due to the banking system, remittance providers in Somalia employed large sums of money that moved across borders on a daily a traditional, trust-based money transfer business model, basis and suspicions by US financial institutions, which known as hawalas, to enable expatriate Somalis to send had filed hundreds of reports, about their connection with funds to relatives. Hawalas were an ancient money transfer terrorism emanating from Somalia.405 system, developed in India, by which providers of the remittance service (hawaladars) trade among themselves in commodities or repayment of existing debts, rather than moving funds, to balance their books after effecting remittances for customers in different nations.400 The telecom business was essential to enable the hawalas and was also akin to the remittance business because profits came from charges to foreign carriers for overseas expatriates to call back home.401 397 Robert L. Feldman, “Somalia: Amidst the Rubble, a Vibrant Telecommunications Infrastructure,” Review of African Political Economy 34, no. 113 (2007): 565–72, https://community.apan.org/cfs-file/__key/docpreview-s/00-00-00-06-64/2007_2D00_09_2D00_01-Somalia-Amidst-the-Rubble_2D00_a-Vi- brant-Telecommunications-Infrastructure-_2800_Feldman_2900_.pdf. 398 Roland Marchal, A Survey of Mogadishu’s Economy (European Commission, Brussels, Belgium, August 2002), 22, https://eeas.europa.eu/archives/delega- tions/somalia/documents/more_info/mogadishu_economic_survey_en.pdf. 399 Roland Marchal, A Survey of Mogadishu’s Economy (European Commission, Brussels, Belgium, August 2002), 22, https://eeas.europa.eu/archives/delega- tions/somalia/documents/more_info/mogadishu_economic_survey_en.pdf. 400 See Mohammed El-Qorchi, “Hawala,” Finance & Development (International Monetary Fund, Washington, DC, December 2002), https://www.imf.org/ external/pubs/ft/fandd/2002/12/elqorchi.htm. 401 Roland Marchal, A Survey of Mogadishu’s Economy (European Commission, Brussels, Belgium, August 2002), 22, https://eeas.europa.eu/archives/delega- tions/somalia/documents/more_info/mogadishu_economic_survey_en.pdf. 402 Roland Marchal, A Survey of Mogadishu’s Economy (European Commission, Brussels, Belgium, August 2002), 24, https://eeas.europa.eu/archives/delega- tions/somalia/documents/more_info/mogadishu_economic_survey_en.pdf. 403 “Dahabshiil CEO Reveals Secret to International Success in Financial Times Interview,” Press Release, allAfrica (July 8, 2011), https://allafrica.com/sto- ries/201107081390.html. 404 See “Telecommunications Shut Down,” The New Humanitarian (November 15, 2001), https://www.thenewhumanitarian.org/news/2001/11/15/telecom- munications-shut-down. 405 See John Roth, Douglas Greenburg, and Serena Wille, “Monograph on Terrorist Financing,” Staff Report to the Commission (US National Commission on Terrorist Attacks Upon the United States, Washington, DC, 2004) 67–86, https://govinfo.library.unt.edu/911/staff_statements/911_TerrFin_Monograph.pdf. 77 The US decision to shut down Barakaat initially caused Mogadishu.413 Other operators also entered the market chaos and hardship for thousands of consumers in Somalia’s during this time and the ensuing years. NetXchange remittances and telecom sectors.406 But a replacement entered the market in late 2001 or early 2002.414 Somafone enterprise, Hormuud Telecom, based in Mogadishu and entered the Mogadishu market in 2004415 and expanded backed by Barakaat’s former backer, Ahmed Nur Ali to Puntland in 2009.416 The Dahabshiil remittances group Jimaale,407 local Somali investors, and former Barakaat acquired a controlling stake in Somaliland’s incumbent employees,408 quickly entered the Somali telecom market Somtel in 2008.417 Somcable entered the Somaliland to fill the void in 2002.409 Hormuud affiliates also entered market in 2009, and was issued an exclusive 25-year the Somaliland telecom market in 2003 under the Telesom license by the Somaliland licensing authority to deploy brand410 and the Puntland telecom market under the Golis Somaliland’s first fiber optic infrastructure, under a brand; hence, the acronym for Hormuud Telesom Golis concession that also authorized last-mile fiber and wireless (HTG).411 access deployments.418 The HTG group quickly launched a new remittance business All these operators offered mobile services and many also that enabled it to reclaim a leading role in the money offered fixed services using wireless technology.419 By transfer market. The HTG entities adopted a relatively 2007, Somalia (including Somaliland and Puntland) was unusual and complex share ownership structure involving home to up to nine telecom operators, with 105,000 fixed thousands of shareholders in each entity to ensure that lines420 and nearly 654,000 unique mobile subscribers.421 all relevant stakeholders had an interest in the entity’s success.412 Multiple mobile networks, all Global System for Mobile Communications initially, were eventually upgraded for After Mogadishu had been without internet for about broadband. In mid-2011, Telesom, HTG’s Somaliland two months following the Barakaat shutdown, and before affiliate, launched 3G service,422 while Hormuud launched Hormuud formed and entered the market, the other two 3G service in central and southern Somalia in early 2013.423 incumbents in central and southern Somalia, Olympic Somtel deployed 3G in Somaliland in 2010 and expanded and NationLink, established their own internet links in its 3G network in March 2012.424 Somtel announced 406 See Khalid Mustafa Medani, “Financing Terrorism or Survival? Informal Finance and State Collapse in Somalia and the US War on Terrorism,” Middle East Report (Middle East Research and Information Project, Chicago, IL, Summer 2002), https://merip.org/magazine/223/. 407 See UN Security Council, “Security Council Committee on Somalia and Eritrea Adds One Individual to List of Individuals and Entities,” Press Release (United Nations, New York, February 17, 2012), https://www.un.org/press/en/2012/sc10545.doc.htm. 408 See Jos Meester, Ana Uzelac, and Claire Elder, Transnational Capital in Somalia: Blue Desert Strategy, CRA Report (Clingendael Netherlands Institute of In- ternational Relations, Wassenaar, Netherlands, June 2019), 45, box 6, https://www.clingendael.org/sites/default/files/2020-02/transnational-capital-in-so- malia.pdf. 409 Hiraal Institute, Doing Business in a War Zone: Somali Banks and Telecoms Providers (Hiraal Institute, April 2019), https://hiraalinstitute.org/wp-content/ uploads/2019/04/English-PDF-final.pdf. 410 “Telsom Deploys GSM Network,” CommsUpdate (TeleGeography, Washington, DC, September 25, 2003), https://www.commsupdate.com/arti- cles/2003/09/25/telsom-deploys-gsm-network/. 411 See Jos Meester, Ana Uzelac, and Claire Elder, Transnational Capital in Somalia: Blue Desert Strategy, CRA Report (Clingendael Netherlands Institute of In- ternational Relations, Wassenaar, Netherlands, June 2019), 45, box 6, https://www.clingendael.org/sites/default/files/2020-02/transnational-capital-in-so- malia.pdf. 412 See Jos Meester, Ana Uzelac, and Claire Elder, Transnational Capital in Somalia: Blue Desert Strategy, CRA Report (Clingendael Netherlands Institute of In- ternational Relations, Wassenaar, Netherlands, June 2019), 45, box 6, https://www.clingendael.org/sites/default/files/2020-02/transnational-capital-in-so- malia.pdf. 413 See Economist Intelligence Unit (EIU), Country Report: Ethiopia, Eritrea, Somalia & Djibouti, EIU Country Report (Economist Intelligence Unit, London, March 2002), 33, https://www.iuj.ac.jp/mlic/EIU/Report/Ethiopia/March_2002_Main_report.pdf. 414 “Internet Returns to Mogadishu,” The New Humanitarian (January 23, 2002), https://www.thenewhumanitarian.org/report/29898/somalia-internet-re- turns-mogadishu. 415 “New GSM Network for War Torn State,” CommsUpdate (TeleGeography, Washington, DC, December 21, 2004), https://www.commsupdate.com/arti- cles/2004/12/21/new-gsm-network-for-war-torn-state/. 416 “Somafone Expands Network in Puntland,” CommsUpdate (TeleGeography, Washington, DC, November 6, 2009), https://www.commsupdate.com/arti- cles/2009/11/06/somafone-expands-network-in-puntland/. 417 “Dahabshiil CEO Reveals Secret to International Success in Financial Times Interview,” Press Release, allAfrica (July 8, 2011), https://allafrica.com/sto- ries/201107081390.html. 418 “Somcable Partners Alepo, Airspan for Somaliland LTE Launch,” CommsUpdate (TeleGeography, Washington, DC, January 6, 2016), https://www.comm- supdate.com/articles/2016/01/06/somcable-partners-alepo-airspan-for-somaliland-lte-launch/. 419 See “Somalia Hopes to End Telecoms Sector Anarchy,” CommsUpdate (TeleGeography, Washington, DC, January 17, 2011), https://www.commsupdate. com/articles/2011/01/17/somalia-hopes-to-end-telecoms-sector-anarchy/. 420 Robert L. Feldman, “Somalia: Amidst the Rubble, a Vibrant Telecommunications Infrastructure,” Review of African Political Econo- my 34, no. 113 (2007): 565–72, https://community.apan.org/cfs-file/__key/docpreview-s/00-00-00-06-64/2007_2D00_09_2D00_01-Soma- lia-Amidst-the-Rubble_2D00_a-Vibrant-Telecommunications-Infrastructure-_2800_Feldman_2900_.pdf. 421 GSMA Intelligence database (April 30, 2021). 422 “Telesom Unveils 3G Network in Somaliland,” CommsUpdate (TeleGeography, Washington, DC, July 14, 2011), https://www.commsupdate.com/arti- cles/2011/07/14/telesom-unveils-3g-network-in-somaliland/. 423 “HorTel Launches 3G Service,” CommsUpdate (TeleGeography, Washington, DC, January 2, 2013), https://www.commsupdate.com/articles/2013/01/02/ hortel-launches-3g-service/. 424 “Somtel Expands 3G Network Coverage,” CommsUpdate (TeleGeography, Washington, DC, March 28, 2012), https://www.commsupdate.com/arti- cles/2012/03/28/somtel-expands-3g-network-coverage/. 78 contracts to deploy 4G service in May 2014.425 Somtel As Somalia’s mobile market matured, some operators later expanded its service into Puntland.426 In 2018, grew faster than others and have emerged as market Somtel expanded 3G and 4G coverage to Mogadishu and leaders. Publicly available data on market revenue or other areas in central and southern Somalia,427 becoming subscriber shares are limited and not necessarily reliable. a national operator. Somcable launched 4G fixed and HTG is the acknowledged leader in market share in all mobile services in Somaliland in 2016.428 Somnet Telecom, three geographic submarkets, having grown from some a new operator based in central and southern Somalia, 50 percent of subscribers in 2010 to some 75 percent of announced the launch of 4G service in Mogadishu in March subscribers in 2020, while Somtel comes in second in the 2017.429 Globalsom and Sahal Telecom had also launched Puntland and Somaliland submarkets and NationLink time division duplex long-term evolution networks in comes in second in central and southern Somalia.436 Mogadishu by this time.430 Although mobile tariffs have been driven down and remain very low by international standards,437 the trend in market In July 2021, HTG announced plans to extend its 4G shares suggests that HTG has attained dominance in the coverage to the entirety of Somalia, including rural areas, market. Almost certainly, the growth in market share is despite not having a license to do so.431 attributable to HTG’s success in becoming the dominant player for mobile money.438 Somalia also developed fiber-based domestic backhaul and international links. Dalkom Somalia, which is privately Following the 1991 overthrow of the Barre regime, the 1975 owned by Somali investors, operates the Mogadishu national telecom law adopted for a state-owned monopoly local landing station of the East Africa Submarine System did not offer Somalia a fit-for-purpose legal framework submarine cable system, which was put into service in to rebuild its telecom sector. Puntland was the first to 2010, and in which Dalkom also owns 10 percent of the establish a new legal framework for telecommunications, capacity.432 In late 2013, Liquid Telecom completed a passing an initial communications law in December 2007439 cross-border fiber link from Kenya, which interconnected (nine years after declaring its independence), and updating with microwave links built by Hormuud from the border and replacing that law in November 2020.440 Somaliland to Mogadishu.433 Somcable developed a fiber backbone in passed a telecommunications law in 2011 (20 years Somaliland in 2014.434 In March 2021, service commenced after declaring its independence).441 Somalia’s national at landings in Mogadishu and Bosaso (in Puntland) over government, whose legislative acts effectively cover the Djibouti Africa Regional Express 1 submarine cable central and southern Somalia and the Mogadishu area, did in which Somtel has a minority share alongside Djibouti not pass a new telecom law until 2017, with support from Telecom.435 the World Bank Group (26 years after removal of the Barre regime). 425 “Somtel Rolls Out LTE in Somalia with Alcatel-Lucent,” CommsUpdate (TeleGeography, Washington, DC, May 21, 2014), https://www.commsupdate.com/ articles/2014/05/21/somtel-rolls-out-lte-in-somalia-with-alcatel-lucent/. 426 See “Somtel Set to Roll Out LTE-A,” CommsUpdate (TeleGeography, Washington, DC, March 28, 2019), https://www.commsupdate.com/arti- cles/2019/03/28/somtel-set-to-roll-out-lte-a/. 427 “Somtel Expands Services to Mogadishu,” CommsUpdate (TeleGeography, Washington, DC, November 6, 2018), https://www.commsupdate.com/arti- cles/2018/11/06/somtel-expands-services-to-mogadishu/. 428 “Somcable Partners Alepo, Airspan for Somaliland LTE Launch,” CommsUpdate (TeleGeography, Washington, DC, January 6, 2016), https://www.comm- supdate.com/articles/2016/01/06/somcable-partners-alepo-airspan-for-somaliland-lte-launch/. 429 “New Somali Operator Somnet Launches 4G in Mogadishu,” CommsUpdate (TeleGeography, Washington, DC, March 21, 2017), https://www.commsup- date.com/articles/2017/03/21/new-somali-operator-somnet-launches-4g-in-mogadishu/. 430 See “New Somali Operator Somnet Launches 4G in Mogadishu,” CommsUpdate (TeleGeography, Washington, DC, March 21, 2017), https://www.comm- supdate.com/articles/2017/03/21/new-somali-operator-somnet-launches-4g-in-mogadishu/. 431 “Hormuud Embarks on Nationwide 4G Rollout,” CommsUpdate (TeleGeography, Washington, DC, July 12, 2021), https://www.commsupdate.com/arti- cles/2021/07/12/hormuud-embarks-on-nationwide-4g-rollout/. 432 See Dalkom Somalia > About Us (2021), http://dalkomsomalia.com/about.php. 433 “Liquid Telecom Unveils Somalia’s First International Fibre Link,” CommsUpdate (TeleGeography, Washington, DC, November 13, 2013), https://www. commsupdate.com/articles/2013/11/13/liquid-telecom-unveils-somalias-first-international-fibre-link/. 434 “SomCable Rolls Out IP over DWDM Network,” BizTech Africa (August 14, 2012), https://www.biztechafrica.com/article/somcable-rolls-out-ip-over-dwdm- network/3846/. 435 See “Cable Compendium: A Guide to the Week’s Submarine and Terrestrial Developments,” CommsUpdate (TeleGeography, Washington, DC, April 1, 2021), https://www.commsupdate.com/articles/2021/04/01/cable-compendium-a-guide-to-the-weeks-submarine-and-terrestrial-developments/. 436 See Hiraal Institute, Doing Business in a War Zone: Somali Banks and Telecoms Providers (Hiraal Institute, April 2019), 3, https://hiraalinstitute.org/wp-con- tent/uploads/2019/04/English-PDF-final.pdf (“Hormuud . . . claims to have 75% market share in south and central Somalia . . . [while] other telecoms companies accuse it of having an even larger share and using its local influence to its advantage”). See also Jos Meester, Ana Uzelac, and Claire Elder, Transnational Capital in Somalia: Blue Desert Strategy, CRA Report (Clingendael Netherlands Institute of International Relations, Wassenaar, Netherlands, June 2019), 57, box 7, https://www.clingendael.org/sites/default/files/2020-02/transnational-capital-in-somalia.pdf. Also relevant here is a videoconfer- ence interview between Rory Macmillan and the then Director-General of the Somali National Communications Authority, Abdi Sheikh (April 29, 2019). 437 International Telecommunication Union (ITU), Measuring the Information Society Report, Volume 2 (ITU, Geneva, 2018), 166, https://www.itu.int/en/ITU-D/ Statistics/Documents/publications/misr2018/MISR-2018-Vol-2-E.pdf. 438 World Bank and Altai, Mobile Money in Somalia: Household Survey and Market Analysis (World Bank and Altai, Washington, DC, 2017), https://www. calpnetwork.org/publication/mobile-money-in-somalia-household-survey-and-market-analysis/. 439 See Puntland Law No. 15 of 2007 on Communications and Fees (December 17, 2007). 440 “Puntland Parliament Approves Telecommunications Act,” Somali Dispatch (November 14, 2020), https://www.somalidispatch.com/latest-news/punt- land-parliament-approves-telecommunications-act/. 441 See Somaliland Law No. 50/2011 & Decree No. 0164/072011 (July 5, 2011), http://www.somalilandlaw.com/Xeerka_Isgaadhsiinta___DM.pdf. 79 Apart from avoiding any artificial legal barriers to entry, the The absence of a functional government also left Somalia’s absence of a legal framework and functioning government mobile operators without legal obligation to pay taxes or were detrimental to the sector in terms of interconnection regulatory or spectrum fees. In 2014, operators started and competition. The lack of domestic interconnection making “voluntary contributions” to the Treasury, but the arrangements stemmed from the absence of any legal duty levels of the fiscal contributions were low by international to interconnect until 2017. The fact that interconnection benchmarks.448 Although the absence of a tax may have has remained difficult to achieve even after the law was freed up more money for reinvestment and dividends and passed points to HTG’s ability to exploit its dominant helped drive prices lower, it also established reliance on an position, especially in mobile money, to avoid an obligation unsustainable fiscal bargain. to interconnect. In turn, the refusal to interconnect has further contributed to the growing disparity in market The international community, especially the World Bank shares among operators, particularly where traffic is Group and the ITU, continued to support the Somali carried over the public switched telephone network government in efforts to gain control over its telecom sector rather than the internet.442 It also forced consumers to over the years, in particular supporting the passage of the acquire multiple devices or subscriber identity modules new law in 2017, the establishment of the sector regulator, (SIMs) to enable them to communicate with customers the National Communications Authority (NCA) in 2018, on other networks than their primary network and to and the adoption of an information and communications use mobile money transfer.443 In the absence of a duty technology (ICT) sector strategy in 2019. to interconnect, most operators in Somalia had initially deployed largely autonomous, standalone networks that In 2011 and 2014, the recognized national government in did not interconnect to exchange domestic traffic.444 office undertook to establish policy and regulation without a new legal framework, although the initial efforts failed. To address this issue, both the United Nations Development In early 2011, the TFG’s Ministry of Information, Posts Programme and the International Telecommunication and Telecommunications449 said that the government had Union (ITU) encouraged Somali operators to form the drafted rules for managing spectrum, phone numbers, Somali Telecom Association in 1998.445 Cooperation was and interconnection and that the Finance Ministry was slow in yielding results but eventually led Somalia’s three finalizing details of a telecom tax to be introduced.450 In largest operators, Hormuud, NationLink, and Somtel, mid-2013, under the newer government, the Minister with support from the World Bank, to reach a notional of Information, Posts and Telecommunication held agreement on national interconnection arrangements in discussions in Dubai with Somalia’s network operators, 2014.446 By this time, HTG already served the vast majority facilitated by the ITU and the World Bank, on a proposed of subscribers and the arrangement did not include telecom bill.451 A few months later, the same government smaller rivals. In addition, the voluntary interconnection announced that it was seeking to find a private partner to arrangements quickly fell apart in the absence of form a joint venture to invest USD 100 million in the rollout independent and credible regulation.447 of a national network.452 442 See Rachel Firestone, Tim Kelly, and Axel Rifon, "Supporting the ICT Sector in Somalia," Digital Development Blog (World Bank, Washington, DC, July 23, 2015), https://blogs.worldbank.org/digital-development/supporting-ict-sector-somalia. 443 “Minister for Post, Telecom and Technology Opens Mogadishu Tech Summit,” Hiiraan Online (October 23, 2018), https://www.hiiraan.com/news4/2018/ Oct/160781/minister_for_post_telecom_and_technology_opens_mogadishu_tech_summit.aspx. 444 Robert L. Feldman, “Somalia: Amidst the Rubble, a Vibrant Telecommunications Infrastructure,” Review of African Political Economy 34, no. 113 (2007): 565–72, https://community.apan.org/cfs-file/__key/docpreview-s/00-00-00-06-64/2007_2D00_09_2D00_01-Somalia-Amidst-the-Rubble_2D00_a-Vi- brant-Telecommunications-Infrastructure-_2800_Feldman_2900_.pdf. 445 See Tatiana Nenova and Tim Harford, “Anarchy and Invention: How Does Somalia’s Private Sector Cope without Government?” Viewpoint (World Bank, Washington, DC, November 2004), 2, https://documents1.worldbank.org/curated/en/774771468781541848/pdf/310270PAPER0VP2801nenova- 1harford.pdf. 446 See “Hormuud, Somtel, Nationlink Sign Interconnection Deal,” CommsUpdate (TeleGeography, Washington, DC, July 23, 2014), https://www.commsup- date.com/articles/2014/07/23/hormuud-somtel-nationlink-sign-interconnection-deal/. 447 See Rachel Firestone, Tim Kelly, and Axel Rifon, "Supporting the ICT Sector in Somalia" Digital Development Blog (World Bank, July 23, 2015), https://blogs. worldbank.org/digital-development/supporting-ict-sector-somalia. 448 See Jos Meester, Ana Uzelac, and Claire Elder, Transnational Capital in Somalia: Blue Desert Strategy, CRA Report (Clingendael Netherlands Institute of In- ternational Relations, Wassenaar, Netherlands, June 2019), 57, box 7, https://www.clingendael.org/sites/default/files/2020-02/transnational-capital-in-so- malia.pdf. “Somali Government Eyes $100m Annually from Telcos with New Law,” Goobjoog News (August 12, 2017), https://goobjoog.com/english/ somali-government-eyes-100m-annually-from-telcos-with-new-law/. 449 The name of the ministry has changed several times, with the Ministry of Information being separated and the remaining part becoming the Ministry of Posts and Telecommunications, then the Ministry of Posts, Telecommunications and Technology, and later the Ministry of Communications and Technology. 450 “Somalia Hopes to End Telecoms Sector Anarchy,” CommsUpdate (TeleGeography, Washington, DC, January 17, 2011), https://www.commsupdate.com/ articles/2011/01/17/somalia-hopes-to-end-telecoms-sector-anarchy/. 451 “Somalia Moves to Regulate Anarchic Telecoms Sector,” CommsUpdate (TeleGeography, Washington, DC, July 3, 2013), https://www.commsupdate.com/ articles/2013/07/03/somalia-moves-to-regulate-anarchic-telecoms-sector/. 452 “Somali Government Seeks Private Investor,” CommsUpdate (TeleGeography, Washington, DC, September 13, 2013), https://www.commsupdate.com/ articles/2013/09/13/somali-government-seeks-private-investor/. 80 In mid-2014, a company called SomCom Telecom In April 2019, Somalia’s Ministry of Posts, announced that it was seeking investment of USD 100 Telecommunications and Technology began public million and claimed to hold a national spectrum license consultations on a draft National ICT Policy and Strategy issued by the Ministry of Posts and Telecommunications prepared with support from the ITU and the World Bank.457 with an initial 15-year term, a renewal option, and no In October 2019, the NCA began public consultations rollout or service obligations. SomCom claimed that it had on the country’s first telecom licensing regime, with the spectrum assignments for 2×20 megahertz (MHz) in the intention of establishing a unified licensing framework.458 900 MHz band, 2×40 MHz in the 1800 MHz band, 2×60 In December 2019, the Cabinet approved the new National MHz in the 2100 MHz band, and 2×20 MHz in the 2600 ICT Policy and Strategy, which covered the period from MHz band.453 2019 through 2024.459 The NCA introduced the new licensing framework in February 2020, which permitted The process accelerated after the 2017 elections. In unlicensed incumbents to apply for grandfathered licenses August 2017, Somalia’s Parliament passed the National by April 1, 2020.460 The deadline for unlicensed operators Communications Act, which was signed by the president to apply for a new license was August 31, 2021, although on October 2, 2017. The law provided for establishment not all did so.461 The Communications Act provides for the of an independent sector regulator, the NCA, and industry to be formally represented on the new sector sought to protect the rights of operators and consumers, regulator’s board,462 and this has resulted in a perception address cybercrime, and encourage more private sector that HTG is able to influence regulatory decisions. participation in developing the telecom market.454 Under the new act, Somalia appointed the first director-general The affinity between money transfers and of the NCA in January 2018.455 A key objective of enacting telecommunications persisted. A 2016 survey found Somalia’s National Communications Act 2017 was to that 83 percent of mobile phone owners in Somalia also maintain open market entry456 while establishing a more subscribed to a mobile money service.463 This connection level playing field, fostering greater cooperation among between telecommunications and financial services has rival operators in matters such as interconnection and also been preserved by the new government. In March infrastructure sharing, and prohibiting anticompetitive 2021, the Central Bank of Somalia awarded the country’s behavior. first mobile money license to Hormuud Telecom.464 453 “New Somali Licensee SomCom Seeking Investment,” CommsUpdate (TeleGeography, Washington, DC, June 27, 2014), https://www.commsupdate.com/ articles/2014/06/27/new-somali-licensee-somcom-seeking-investment/. 454 “Somalia Enacts New Telecoms Law,” CommsUpdate (TeleGeography, Washington, DC, October 4, 2017), https://www.commsupdate.com/arti- cles/2017/10/04/somalia-enacts-new-telecoms-law/. 455 “Somalia Appoints Head of Country’s First Telecoms Regulator,” CommsUpdate (TeleGeography, Washington, DC, February 20, 2018), https://www.comm- supdate.com/articles/2018/02/20/somalia-appoints-head-of-countrys-first-telecoms-regulator/. 456 Somalia National Communications Law, 2017, Art. 2(f). 457 “Somalia Consults on Draft ICT Policy,” CommsUpdate (TeleGeography, Washington, DC, April 23, 2019), https://www.commsupdate.com/arti- cles/2019/04/23/somalia-consults-on-draft-ict-policy/. 458 “Somalia Consults on Licensing Framework for ICT Sector,” CommsUpdate (TeleGeography, Washington, DC, October 22, 2019), https://www.commsup- date.com/articles/2019/10/22/somalia-consults-on-licensing-framework-for-ict-sector/. 459 “Somali Cabinet Approves National ICT Policy and Strategy,” CommsUpdate (TeleGeography, Washington, DC, December 3, 2019), https://www.comm- supdate.com/articles/2019/12/03/somali-cabinet-approves-national-ict-policy-and-strategy/. 460 “Somalia Introduces Licensing Framework for ICT Sector,” CommsUpdate (TelegeoGraphy, Washington, DC, February 19, 2020), https://www.commsup- date.com/articles/2020/02/19/somalia-introduces-licensing-framework-for-ict-sector/. 461 “Somali Service Providers Urged to Apply for Licences by 31 August,” CommsUpdate (TeleGeography, Washington, DC, August 3, 2021), https://www. commsupdate.com/articles/2021/08/03/somali-service-providers-urged-to-apply-for-licences-by-31-august/. 462 Somali National Communications Act, Art. 10. 463 Altai Consulting, “Mobile Money in Somalia: Household Survey and Market Analysis” (World Bank, Washington, DC, April 2017), https://www.mfw4a.org/ sites/default/files/resources/Mobile_Money_in_Somalia_-_WBank.pdf. 464 “Hormuud Telecom Awarded Somalia’s First Mobile Money Licence,” CommsUpdate (TeleGeography, Washington, DC, March 1, 2021), https://www. commsupdate.com/articles/2021/03/01/hormuud-telecom-awarded-somalias-first-mobile-money-licence/. 81 5.2 Assessment of internal Somali More accurately, HTG has successfully blocked the entry of foreign investors. The locally backed operators have not telecom investment climate factors interconnected their networks, beyond the HTG affiliates, although in February 2022 Telesom and Somtel announced Five internal factors during 2020–20 that impacted the that they had reached an agreement on interconnection in climate for mobile market investment in Somalia were Somaliland.466 assessed: (1) market open to entry, (2) ease of private investment, (3) spectrum needs met, (4) level playing field, The officially recognized Somali government has since 2017 and (5) fiscal reasonableness. Each factor is discussed in begun adopting reforms to attract competitive private turn below, followed by a summary of key findings across investment in the telecom sector and has adopted a policy all the internal factors. in favor of linking government policies with incentives for private investment.467 Somalia: Market open to entry? Somalia’s mobile market (outside Somaliland and Puntland) The 2017 National Communications Act, while protecting had no legal barriers to entry in the absence of regulation the rights of national communication companies and from the fall of the government in 1991 through 2017. national investors,468 establishes a framework that protects Adoption of the National Communications Act in 2017 all investors with greater legal and regulatory certainty. initiated the transition of the national market from being Somalia was assigned an uncertain rating for ease of private completely unregulated to having an open licensing regime investment in mobile markets, reflecting the absence of and that process is now well underway. a stable legal and regulatory framework for most of the conflict period, while also recognizing the substantial Somaliland and Puntland also initially lacked any formal private investment that has been attracted. legal framework, but Puntland established an open licensing framework in 2007 and Somaliland established Somalia: Spectrum needs met? one in 2011. Somalia’s wireless operators, both mobile and fixed, have Somalia was assigned a favorable score for its mobile had their spectrum needs largely satisfied throughout the market being open to entry, reflecting the combination of conflict period, although some spectrum assignments were minimal legal barriers prior to the adoption of telecom laws not necessarily efficient. Mobile operators have generally and open licensing thereafter. been able to self-resolve minor interference issues that arise from time to time.469 Somalia: Ease of private investment? For most of 2000–20, Somalia had no formal investment Since 2018, the new national regulator has issued some framework for the sector. Investors faced regular spectrum assignments that reportedly conflict with those destruction of telecom infrastructure. Constructing a previously made by sector regulators in Somaliland and telecom network required informal agreements with a Puntland, but the operators and regulator appear to be variety of stakeholders, including armed groups and locally working to resolve these issues. The new regulator does influential political or business interests. Lack of security not yet have the equipment or ability to monitor spectrum has also contributed to the absence of a national fiber use and interference. backbone network and delayed rollout of international connectivity infrastructure, which has resulted in relatively Somalia’s mobile operators currently pay negotiated fees for poor broadband access despite high mobile penetration.465 their spectrum. A study carried out by WRAP International, Notwithstanding these impediments, several locally backed funded by the World Bank ICT Sector Support Program, operators with interests in the foreign remittance business suggested a guideline of about USD 50,000 per year per were able to establish and develop successful mobile MHz of spectrum in the mobile bands. This benchmark has operations in the years following the 1991 fall of the Barre been broadly followed in the negotiations over spectrum regime. However, Somalia has not been able to attract the fees.470 more traditional regional operators that invested heavily in neighboring markets during the same period, and this has For these reasons, Somalia was assigned a favorable rating no doubt limited competition and market performance. on spectrum needs being met. 465 Albany Associates, Strategy and PPP Options for Supporting the ICT Sector and Broadband Connectivity in Somalia (World Bank, Washington, DC, January 2017), 11, figure 2, https://ppiaf.org/documents/5419/download?otp=b3RwIzE2MzY1OTUwMzQ=. 466 See https://www.commsupdate.com/articles/2022/02/21/somaliland-operators-sign-interconnection-agreement/. 467 Federal Republic of Somalia National ICT Policy & Strategy: 2019-2024 34, https://mptt.gov.so/en/wp-content/uploads/2019/11/National-ICT-Policy-Strat- egy-2019-2024.pdf#:~:text=As%20the%20first%20National%20ICT%20Policy%20and%20Strategy%2C,and%20objectives%20to%20be%20achieved%20 by%20all%20stakeholders. 468 Somalia National Communications Act, art. 58(1). 469 Videoconference Interview by Rory Macmillan with Hormuud Management Team (August 8, 2019). 470 Videoconference Interview by Rory Macmillan with the then Director-General of the Somali National Communications Authority, Abdi Sheikh (April 29, 2019). 82 Somalia: Level playing field? and USD 119 million per year to the public coffers, whereas Somalia lacked any pro-competitive framework during most Somalia’s telecom operators made voluntary contributions of 2000–20. In the early years of this period, no operator of only USD 4.8 million per year to the official public purse had sufficient market power to suppress the efforts of its in that year.471 rivals. Combined with the absence of any artificial legal or regulatory constraints on competition, this resulted in a In 2017, the Somali federal government began trying to relatively level playing field. enforce preexisting tax laws from the 1960s, providing for a progressive corporate income tax with rates up to 30 HTG appears to have captured an early market lead through percent and a 15 percent sales tax on telecommunications greater efficiency, market knowledge, and good service. services.472 The World Bank noted that implementation However, the absence of interconnection arrangements of the new telecom regulatory framework should permit between domestic operators and the refusal of HTG and formal taxation of Somalia’s telecom sector,473 but this others to interconnect leveraged the demand-side network did not occur before the end of 2020. The International effect to make service offerings by operators with more Monetary Fund (IMF) noted in 2020 that although the customers also more attractive to consumers, causing telecom regulatory framework that is necessary for market imbalance to grow over time. Smaller operators effective fiscal regulation of the sector was still not in have no bargaining power under such circumstances to place, nevertheless the level of negotiated “voluntary” persuade larger operators to interconnect, and as the contributions had risen to a sufficient level to allow the gap in market shares grows, smaller operators have been country to meet its international commitments.474 In driven out of the market or marginalized to niche markets. August 2021, the NCA was still calling for operators to Passage of the National Communications Act in 2017 and apply for licenses, pay license fees, and demonstrate tax establishment of the NCA in 2018 had not yet leveled the compliance.475 Despite laws in place and international playing field on interconnection by the end of 2020. reports of progress on improving tax receipts, the actual amounts collected by the government from the telecom Somalia was rated as unfavorable on having a level playing sector were relatively low, including due to allegations of field in its mobile market during 2000–20, reflecting the corruption.476 combined impact of years without interconnection and the resulting emergence of an imbalanced market and HTG Somalia’s operators have long paid unofficial “protection market dominance. money” to local militias and other official or non-state sources of control and authority, to stay in business (as detailed below). Although not embedded in a law, these Somalia: Fiscal reasonableness? payments have been compelled by threats of force and During 2000–20, mobile operators in Somalia were not equated to buying “protection.” Al-Shabaab has reportedly subject to any effective official taxation and, until 2018, extorted Somali telecom companies into paying support were also not required to pay spectrum or regulatory fees and has bombed or otherwise closed telecom branches (other than fees they voluntarily agreed to pay since 2015 and cell sites when payments were not received.477 These to support the establishment of a national regulator). The unofficial payments have not been transparent and cannot telecom sector has not contributed a fair and balanced be quantified, but they have reportedly been significant in amount to public finances. A 2015 World Bank study found cumulative value. that under a peaceful and fair fiscal framework, the telecom sector would have contributed between USD 81 million 471 Peter Lange, Telecommunications Contribution to Public Finance in Somalia (World Bank, Washington, DC, January 30, 2015). 472 See Federal Government of Somalia Ministry of Planning, Investment & Economic Development's Sominvest webpage Taxation in Somalia, http://somin- vest.mop.gov.so/procedures/tax-regime/. See also Somalia Appropriation Acts for the 2018 Budget, Act No. 000011, https://mof.gov.so/sites/default/ files/2018-10/Budget%20Appropriation%20Act%202018.pdf. 473 See World Bank, Somalia Economic Update 8 (World Bank, Washington, DC, July 2017), https://documents1.worldbank.org/curated/ en/552691501679650925/pdf/117729-WP-P159934-PUBLIC-2-8-2017-15-34-47-SomaliaEconomicUpdateNoFINALJuly.pdf. 474 See International Monetary Fund (IMF), Somalia Country Report No. 20/310 44-50 (IMF , Washington, DC, November 2020), https://www.imf.org/en/Publi- cations/CR/Issues/2020/11/30/Somalia-First-Review-Under-the-Extended-Credit-Facility-Press-Release-Staff-Report-and-49924. 475 See Alan Burkitt-Gray, “Somalia Sets 31 August Deadline for Operators to Register, or Close Down” (Capacity Media, London, August 18, 2021), https:// www.capacitymedia.com/articles/3829386/somalia-sets-31-august-deadline-for-operators-to-register-or-close-down. 476 See Jos Meester, Ana Uzelac, and Claire Elder, Transnational Capital in Somalia (Netherlands Institute of International Relations, Wassenaar, Netherlands, June 2019), 56–57, https://www.clingendael.org/sites/default/files/2020-02/transnational-capital-in-somalia.pdf. 477 See, for example, Center on Sanctions and Illicit Finance, Al-Shabaab Financial Assessment (Center on Sanctions and Illicit Finance, Washington, DC, June 2017), https://s3.us-east-2.amazonaws.com/defenddemocracy/uploads/documents/CSIF_TFBB_Al-Shabaab_v05_web.pdf. See also Action on Armed Violence, “Sources of Funding (Including Self-Funding) for the Major Groupings That Perpetrate IED Incidents – Al Shabaab” (Action on Armed Violence, Longon, May 25, 2017), https://aoav.org.uk/2017/sources-funding-including-self-funding-major-groupings-perpetrate-ied-incidents-al-shabaab/. Other groups have also extorted money from the telecom industry, including the Islamic State in Iraq and the Levant. See UN Security Council Expert Panel, Final Report S/2019/858 concerning Somalia (United Nations, New York, November 1, 2019), 84–85, https://www.securitycouncilreport.org/atf/cf/%7B65BF- CF9B-6D27-4E9C-8CD3-CF6E4FF96FF9%7D/S_2019_858_E.pdf. 83 According to Transparency International, Somalia is tied with South Sudan for the worst perceived corruption in the world.478 The fiscal treatment of operators in Somalia is not transparent and the regulator is unable to ensure universal services or a level playing field for all operators. As summarized in table 14, based on the overall circumstances, Somalia was assigned a favorable score for fiscal reasonableness. Despite the nominal sector-specific sales tax on telecommunications services, the actual effective fiscal burden imposed on operators in Somalia has been low for almost the entire 2000–20 period. Lack of transparency and predictability has undermined sector investment, but this factor appears to be substantially outweighed by the low level of formal taxation and almost complete absence of regulation until the end of the period. Table 14: Somalia: Fiscal reasonableness determination Somalia: fiscal reasonableness, 2001–20 General taxes Sector-specific taxes Nontax impositions Predictability No effective taxation Nominal 15% None during most of the Lack of transparency during most of during period telecommunications period the period Nominal 30% sales tax; negotiated Voluntary license and Ad hoc payments to non-state actors corporate income tax settlement with telecom spectrum fees after introduced in 2017 companies retroactive to 2017 October 2017 No effective compulsory government taxes Somalia overall rating: Favorable Source: World Bank. Somalia: Summary of key findings across all the internal factors Table 15 summarizes the internal investment climate factor assessments and sets out the key relevant facts leading to each score. Table 15: Somalia: Assessment of internal factors impacting the telecom investment climate Score Internal factor assessed Key relevant facts No legal barriers to entry Market open to entry 2 As many as 10 unlicensed private mobile operators entered market No licensing or investment framework during 2000–20 Ease of private investment 1 Institutional framework still weak after post-2017 reforms No sector restrictions on innovation or new technology Spectrum needs met 2 Voluntary/negotiated licensing of spectrum by different authorities Lack of interconnection gave rise to dominant operators Level playing field 0 No effective regulation of anticompetitive behavior Post-2017 reforms not effective by end of 2020 Low overall tax burden including voluntary license and spectrum fees paid to Fiscal reasonableness 2 internationally recognized government and unofficial taxes paid to Al-Shabaab and other militia groups All 7 Source: MacMillan Keck. 478 Somalia scored 12 points of a total possible 100, coming in at 179th of 179 countries, https://www.transparency.org/en/cpi/2020/index/nzl. 84 5.3 Assessment of external Somali at the end of the year, claiming that the service was a threat to Somalia’s economy.482 telecom investment climate factors • In October 2011, Al-Shabaab closed the offices in central and southern Somalia of NationLink and Five external factors during 2000–20 that impacted the Telecom Somalia and money transfer agency Dahabshiil climate for telecom investment in Somalia were assessed: for their refusal to meet demands to pay around USD (1) military or paramilitary interference, (2) international 130,000 to the militant group.483 sanctions, (3) travel restrictions, (4) international aid • In early January 2014, Al-Shabaab banned internet for telecommunications, and (5) international security access in the areas it controlled, threatening to attack intervention. Each factor is discussed in turn below, operators that did not comply.484 followed by a summary of key findings across all the • Two weeks later, notwithstanding the government’s external factors. call for operators to resist the coercion, the operators complied after militants entered their buildings and Somalia: Military or paramilitary interference? forced them to shut down internet services in the From 2006 through 2015, non-state militant groups central and southern regions of Somalia.485 operating within Somalia repeatedly interfered with the • In February 2014, Al-Shabaab ordered the shutdown infrastructure and activities of mobile network operators, of Hormuud facilities in areas it controlled for failure particularly in the central and southern regions of the to meet its financial demands.486 country: • In December 2014, Al-Shabaab shut down Hormuud’s • After the ICU seized effective control over Mogadishu services in the Dinsoor and Ufurow districts of the Bay from the TFG in 2006, the unrecognized authority region, as Somali government forces aided by African banned operators Hormuud, NationLink, and Telcom Union peacekeepers pressed ahead with their military Somalia from using pick-up trucks mounted with campaign in central and southern Somalia.487 artillery guns to protect their assets and required them The shipping lanes off the coast of Somalia have been to hand over their armored vehicles.479 impacted by multiple military blockades before and during • In July 2007, the mayor of Mogadishu ordered the the conflict, as well as by the activities of pirates. Although closure of the Heliwa district branches of Hormuud not directly targeted at telecom supplies, these standing Telecom and Telcom Somalia, accusing them of assisting embargoes have complicated shipments into Somalia. insurgents battling the transitional government and The UN Security Council had adopted an embargo on the Ethiopian troops based in Mogadishu. The mayor also shipment of arms to Somalia in January 1992. claimed that Hormuud had harbored insurgents in its facilities and that Telecom Somalia had retained a large The arms embargo was still in effect when the current cache of arms in defiance of the December 2006 order conflict began in 2005 and remains in effect today, with to hand them over.480 certain exceptions passed in 2006 and 2007, to exempt the • In June 2008, Hormuud’s mobile network in Mogadishu officially recognized government and limit the embargo to lost service after Somali-Ethiopian forces destroyed non-state actors.488 In 2010, the African Union requested Hormuud Telecom’s headquarters building at the UN support for an air and naval blockade of Somalia to Bakara market.481 cut off supplies to Al-Shabaab.489 The UN Security Council • In October 2010, Al-Shabaab imposed a ban on all declined to act on this request, limiting its intervention to mobile money transfers, known as ZAAD, to take effect the standing arms and anti-piracy embargoes.490 479 “Telcos Hand Their Weapons to Islamists,” CommsUpdate (TeleGeography, Washington, DC, December 11, 2006), https://www.commsupdate.com/arti- cles/2006/12/11/telcos-hand-their-weapons-to-islamists/. 480 “Mogadishu Mayor Orders Telcos’ Branches Shut,” CommsUpdate (TeleGeography, Washington, DC, July 9, 2007), https://www.commsupdate.com/arti- cles/2007/07/09/mogadishu-mayor-orders-telcos-branches-shut/. 481 “Hormuud Telecom Network out of Action,” CommsUpdate (TeleGeography, Washington, DC, June 9, 2008), https://www.commsupdate.com/arti- cles/2008/06/09/hormuud-telecom-network-out-of-action/. 482 “Mobile Money Transfer Banned in Somalia,” CommsUpdate (TeleGeography, Washington, DC, October 19, 2010), https://www.commsupdate.com/arti- cles/2010/10/19/mobile-money-transfer-banned-in-somalia/. 483 “Operations of Nationlink, Telcom Somalia Suspended, Report Says,” CommsUpdate (TeleGeography, Washington, DC, October 3, 2011), https://www. commsupdate.com/articles/2011/10/03/operations-of-nationlink-telcom-somalia-suspended-report-says/. 484 See “Somali Govt Condemns Al Shabaab Internet Ban,” CommsUpdate (TeleGeography, Washington, DC, January 13, 2014), https://www.commsupdate. com/articles/2014/01/13/somali-govt-condemns-al-shabaab-internet-ban/. 485 “Internet Cut in Al Shabaab-Controlled Areas, Report Says,” CommsUpdate (TeleGeography, Washington, DC, January 27, 2014), https://www.commsup- date.com/articles/2014/01/27/internet-cut-in-al-shabaab-controlled-areas-report-says/. 486 “Hormuud Telecom Services Disrupted by Militant Group,” CommsUpdate (TeleGeography, Washington, DC, February 4, 2014), https://www.commsup- date.com/articles/2014/02/04/hormuud-telecom-services-disrupted-by-militant-group/. 487 “Hormuud Services Disrupted in Bay Region,” CommsUpdate (TeleGeography, Washington, DC, December 9, 2014), https://www.commsupdate.com/ articles/2014/12/09/hormuud-services-disrupted-in-bay-region/. 488 See Stockholm International Peace Research Institute, UN Arms Embargo on Somalia (updated December 20, 2019), https://www.sipri.org/databases/em- bargoes/un_arms_embargoes/somalia. 489 Zachary Fillingham, “AU Seeking Naval Blockade for Somalia,” Geopolitical Monitor (October 21, 2010), https://www.geopoliticalmonitor.com/analy- sis-au-seeking-naval-blockade-for-somalia-4195/. 490 See UN Security Council Resolution S/Res/1964 (United Nations, New York, December 22, 2010), https://undocs.org/S/RES/1964(2010). 85 Piracy has also adversely impacted imports to Somalia. the return of full throttle activity within a year, a relatively Commercial ships have often faced difficulty reaching small part of the 21-year period studied. Somalia due to piracy off its coast.491 In 2008, following numerous incidents by Somali pirates operating in the In 2019, the UN imposed a broad ban on the export of shipping lanes leading to and from the Suez Canal, shippers components of improvised explosive devices into Somalia. from around the globe requested a blockade to protect cargo Within this scope, exports of power sources and switches vessels. The UN Security Council issued four resolutions were also banned, which may have adversely impacted the (1816, 1838, 1846, and 1851) in 2008 to facilitate an development of the telecom sector due to their widespread international response to piracy off the Horn of Africa. use in telecom equipment.494 Similarly, both the European Resolution 1851 authorized international naval forces to Union and the UN imposed a ban on exporting technology carry out anti-piracy operations in Somali territorial waters and technical advice to Somalia that might be used in and ashore, with the consent of Somalia’s TFG. Resolution military activities or in relation to the banned components. 1872, adopted on May 26, 2009, authorized UN member The US executive orders primarily provided for targeted states to participate in training and equipping the TFG sanctions on certain designated individuals and entities.495 security forces in accordance with Resolution 1772 (2007). However, the multiple networks built by rival operators In January 2009, the multilateral Contact Group on Piracy during the 21-year period and the relatively early off the Coast of Somalia was established to coordinate anti- introduction of technology upgrades such as 3G and piracy efforts. US, North Atlantic Treaty Organization, and 4G suggest that the combined impact of international EU regional and other naval forces began patrolling near sanctions on Somalia’s telecom sector, other than the Somalia in coordination with a US-led task force.492 Barakaat closure, was insufficient to stop investment and development. The anti-piracy blockades continue today, with the UN most recently renewing its authorizing resolution in Somalia was assigned an uncertain rating on international December 2020.493 The laying of the branch of the East sanctions, reflecting the balance of the sanctions that were Africa Submarine System submarine cable into Mogadishu, adopted with the level of investment that occurred. in 2013, could only be carried out with support from the French navy and under circumstances of extreme secrecy. Somalia: Travel restrictions? Based on these circumstances, Somalia was assigned an After the 1991 civil war, Somalia (excluding Somaliland) uncertain score on military interference. became a “no-go” area for major world air carriers.496 Somali Airlines, the country’s national air carrier, also Somalia: International sanctions? ceased operations in 1991. A few entrepreneurial regional In tandem with arms and anti-piracy embargoes, Somalia carriers sprang up to fill the gap. Daallo Airlines began has been subject to a series of international sanctions by the operations in 1991 using a single wet-leased Cessna UN, the European Union, and the United States. The most Caravan operating from Djibouti to Hargeisa, Somaliland, noteworthy sanctions, in terms of impact on the telecom after the demise of Somali Airlines following the civil war sector, were the actions led by the United States, its allies, in Somalia. It eventually expanded to destinations in the and the UN, which shut down Barakaat worldwide in 2001, Middle East, Europe, and other points in Central and East caused significant disruption to Somalia’s remittances and Africa.497 Jubba Airways also began offering service within telecommunications markets, and later brought Hormuud Somalia and the region.498 Kenya-based African Express under periodic scrutiny but was ultimately discredited as started serving Mogadishu. In 2012, Turkish Airlines ill-founded. Still, the resiliency of Somalia’s telecom sector reentered the market, offering the first regularly scheduled enabled the resumption of services within two months and transcontinental flights serving Mogadishu since 1991 (to Istanbul with connecting flights to onward destinations).499 491 David Axe, “10 Things You Didn’t Know about Somali Pirates,” Wall Street Journal (October 5, 2020), www.wsj.com/articles/10-things-you-didn-t-know- about-somali-pirates-11601915298. 492 See Congressional Research Service Report for Congress, “Piracy off the Horn of Africa,” reprinted in Naval History and Heritage Command (2009), https://www.history.navy.mil/research/library/online-reading-room/title-list-alphabetically/p/piracy-off-horn-africa-crs.html. 493 UN Security Council Resolution 2554 (United Nations, New York, 2020). 494 UN Security Council Resolution 2498 (United Nations, New York, 2019). 495 United States, Executive Office of the President Barack Obama, “Executive Order 13536: Blocking Property of Certain Persons Contributing to the Conflict in Somalia” (US Executive Office of the President, Washington, DC, April 12, 2010), https://www.federalregister.gov/documents/2010/04/15/2010-8878/ blocking-property-of-certain-persons-contributing-to-the-conflict-in-somalia. United States, Executive Office of the President Barack Obama, “Executive Order 13620: Taking Additional Steps to Address the National Emergency with Respect to Somalia” (US Executive Office of the President, Washington, DC, July 20, 2012), https://www.hsdl.org/?abstract&did=717902. 496 See Sulaiman Momodu, “Somalia Rising from the Ashes,” Africa Renewal (United Nations, April 2016), https://www.un.org/africarenewal/magazine/ april-2016/somalia-rising-ashes. 497 Daallo > About > Company Profile (2021), https://www.daallo.com/About.aspx. 498 See Edmund Blair, “Regional Airlines Merge as Somali Airspace Draws Competition,” Reuters (February 17, 2015), https://www.reuters.com/article/soma- lia-airlines/regional-airlines-merge-as-somali-airspace-draws-competition-idUSL5N0VN2ZF20150217. 499 David Smith, “Turkish Airlines Starts Commercial Flights to Somalia,” The Guardian (March 6, 2012), https://www.theguardian.com/world/2012/mar/06/ turkish-airlines-flights-somalia-mogadishu. 86 Thereafter, Ethiopian Airlines and Fly Dubai also began disqualified by the international community as a recipient serving Hargeisa in Somaliland.500 of certain types of international financial assistance due to its default on outstanding facilities and commitments Travel to Somalia has remained perilous. On February 2, to various sovereign creditors and international agencies. 2016, a suicide bomb went off on Daallo Airlines Flight 159, In March 2020, the IMF and the World Bank reached the which was headed from Mogadishu to Djibouti City, about Decision Point of the Heavily Indebted Poor Countries 20 minutes after it took off. The bomb killed the bomber, initiative for Somalia, putting the country on a pathway but the aircraft was able to return to the airport safely. Al- for the restoration of regular concessional financing and Shabaab later claimed responsibility for the bombing. launching the process toward debt relief.502 Somalia cleared Somalia was not subject to any broad-based travel bans its arrears to the African Development Bank, the IMF, and during 2000–20. Somalia has faced periodic bans on travel the World Bank, and reduced its external debt to USD 3.9 from certain countries, such as a brief ban on US travel to billion. About a week later, the Paris Club of sovereign Somalia during the Trump administration. creditors followed suit, enabling the country to reduce its sovereign debt from USD 5.2 billion at end of 2018 to USD This factor was assigned an uncertain rating on travel 557 million by early 2023.503 restrictions, primarily reflecting the lack of intercontinental scheduled flights from 2000 through 2012 and intermittent With these actions, Somalia fully reestablished its access travel bans throughout the remainder of 2000–20. to new resources from the World Bank, the African Development Bank, and other donor organizations.504 To Somalia: International aid for receive irrevocable debt relief at the end of three years, Somalia must maintain sound macroeconomic policies, telecommunications? implement its poverty reduction strategy for at least one Somalia was largely cut off from participation in the year, and complete a set of policy measures known as international community from 1991 through 2013/2014. Completion Point triggers that are intended to promote The World Bank Group resumed relations with Somalia in inclusive growth and poverty reduction. 2013. The World Bank technical assistance to Somalia in support Somalia received significant humanitarian aid from of implementation of communication sector reforms international organizations, bilateral donors, and ran from 2014 to 2020, and the passage of the 2017 nongovernmental organizations since 2014, notably from Communications Act and the greatly increased financial the State and Peacebuilding Fund and the Somalia Multi- contribution by operators to the Treasury were among the partner Fund.501 Somalia has also received significant highlights of this program. Some support continues under telecom-related technical assistance with support from the the Sustainable Communities Accessing  Lending  and ITU, United Nations Development Business, World Bank, Expertise Upon Performance lending program (P168115), and United States Agency for International Development. which has a particular focus on digital ID and financial However, no significant international aid was targeted for services. telecom or other infrastructure investment for most of the duration of the current conflict, until 2014 when the Somalia was assigned an uncertain rating for international World Bank’s ICT sector Support for Somalia program aid for telecommunications, balancing the significant began (P152358). Promised African Development Bank technical assistance received in support of its telecom assistance never materialized. A key reason for the lack sector with the lack of international telecom investment of financial investment was that Somalia had since 1991 aid availability until early 2020, and the lack of technical existed outside the international financial system. It had assistance before 2014. been 500 See Edmund Blair, “Regional Airlines Merge as Somali Airspace Draws Competition,” Reuters (February 17, 2015), https://www.reuters.com/article/soma- lia-airlines/regional-airlines-merge-as-somali-airspace-draws-competition-idUSL5N0VN2ZF20150217. 501 The UN Peacebuilding Fund had invested USD 46 million in Somalia by 2019. See “UN Peacebuilding Fund at a Glance” (January 19, 2020), https://so- malia.un.org/en/31539-un-peacebuilding-fund. The Multi-partner Fund for Somalia had expended more than USD 322 million as of December 31, 2020. See Consolidated Annual Financial Report of the Administrative Agent for the Somalia Multi Window Trust Fund for the period 1 January to 31 December 2021 (United Nations Development Programme, New York, May 2021), 17, https://mptf.undp.org/factsheet/fund/4SO00. 502 See Andrea Shalal, “IMF, World Bank Clear Somalia for Debt Relief, Normal Ties to World,” Reuters (March 25, 2020), https://www.reuters.com/article/ us-somalia-debt/imf-world-bank-clear-somalia-for-debt-relief-normal-ties-to-world-idUSKBN21D05Q. 503 See “Paris Club Creditors Agree to Cancel $1.4 Billion of Somali Debt,” Reuters (March 31, 2020), https://www.reuters.com/article/us-somalia-debt-paris- club/paris-club-creditors-agree-to-cancel-1-4-billion-of-somali-debt-idUSKBN21I3MO. 504 See World Bank, “Somalia Clears Arrears to World Bank Group,” Press Release (World Bank, Washington, DC, March 5, 2020), https://www.worldbank. org/en/news/press-release/2020/03/05/somalia-clears-arrears-to-world-bank-group. 87 Somalia: International security intervention? The UN Security Council approved an African Union peacekeeping mission in Somalia in 2007,505 and the mandate was extended until the end of 2021.506 Various African Union member states have contributed forces to peacekeeping in Somalia for a number of years. Military advisers from the United States and other members of the international community have also provided support. However, the international community’s security interventions in Somalia have had mixed results and have not eliminated security issues or violence. As a result, Somalia was assigned an uncertain rating for international security intervention. Somalia: Summary of key findings across all the external factors Table 16 summarizes the scoring of external factors likely to have had an impact on the development of the telecom sector in Somalia and the key relevant facts that form the basis for each score. Table 16: Somalia: Assessment of external factors impacting the telecom investment climate Score External factor assessed Key relevant facts Interference with inbound shipments by pirates and militants Military interference 1 International blockades of arms imports and pirates Al-Shabaab paramilitary activities Broad United Nations and European Union bans on technology transfers and International sanctions 1 technical assistance No restrictions on inbound travel Travel restrictions 1 Difficulties in reaching Somalia International aid for Somalia only recently reentered the world financial system 1 telecommunications Technical assistance and financial support by the World Bank International assistance in 1 African Union military support peacekeeping All 5 Source: MacMillan Keck. 505 UN Security Council resolution 1744 (United Nations, New York, 2007). 506 UN Security Council resolution 2568 (United Nations, New York, 2021). 88 5.4 Somalia’s projected and actual teledensity evolution The following passages discuss Somalia’s teledensity evolution and the impact of the conflict. Somalia’s unique subscriber mobile penetration Somalia’s mobile penetration was considered from 2000 through 2020. Mobile penetration in Djibouti, Ethiopia, and Kenya was considered as the benchmark. Somalia’s adult-age (15+) population was considered as an invisible upper bound on potential unique customer mobile penetration. Among the seven countries studied, Somalia presented a unique challenge in projecting mobile subscriber growth under the but-for-the-conflict scenario. At the inception of its civil war in 1991, Somalia had no mobile networks. All subsequent development of network infrastructure and subscriber adoption occurred during the conflict. The lack of any pre-conflict mobile subscriber evolution precluded making intra-conflict projections based on pre-conflict data. Thus, for Somalia, but- for-the-conflict growth rate projections were based entirely on other countries. This too was challenging because Kenya, with its relatively strong economy, presented a high-growth scenario; Djibouti, with its relatively weak economy, presented a low-growth scenario; and Ethiopia’s state-owned monopoly did not offer a reliable benchmark for a competitive market. Subject to these caveats, the projected growth in the but-for-the-conflict scenario was modeled so as not to be overly aggressive or conservative but instead to represent a reasonable basis for what could have transpired absent the conflict. Considering Somalia’s profile, the projection presents a reasonable but-for-the-conflict estimate of the potential penetration level that exceeds Ethiopia and Djibouti but is significantly less than in Kenya. The gap in Somalia’s mobile penetration between the actual and but-for-the-conflict scenarios grew from zero at the resurgence of conflict in 2005 to 4.7 percentage points by 2020. Somalia could have fared much worse during 2000–20, but it essentially remained open for investment during this period, with as many as 10 unlicensed mobile operators at one time. In 2009, the civil war escalated into a fierce battle for control of Mogadishu, and the impact is evidenced as a dip in subscriber growth from 2009. Violence escalated again in 2016 with the resurgence of Al-Shabaab, and this appears to explain the slowdown in subscriber growth starting in 2017. Figure 17 depicts the results. Figure 17: Somalia’s unique subscriber mobile penetration, 2000–20 Source: MacMillan Keck. 89 Somalia’s mobile teledensity was low before 2000. Mobile penetration continued to grow during 2000–20, but at a slower rate than the but-for-the-conflict projections (which indicate that Somalia would otherwise have caught up with the peer group of Ethiopia, Kenya, and Djibouti), and growth has slowed to a crawl since about 2017. In the but-for-the-conflict scenario, Somalia’s mobile penetration (the orange curve in figure 17) is generally projected to have followed a similar growth pattern to the actual mobile penetration (the blue curve in figure 17) but at a faster rate, resulting in a widening gap over time. Djibouti’s mobile penetration overtook Somalia’s in 2010, but it would have remained below Somalia’s in the but-for-the-conflict scenario. Unique subscriber penetration in 2020 was 32.8 percent against a total SIM penetration of 48.5 percent (based on ITU data, which are not depicted on figure 17), an almost 50 percent differential. This reflects the prevalence of customers with multiple SIMs due to the failed interconnection arrangements among Somalia’s operators. The actual growth profile shows an increased growth rate between 2011 and 2016, partially due to the fragmented nature of the market, as the overall SIM penetration tripled between 2011 and 2016, while unique subscriber penetration increased by only 55 percent over the same period. Despite fragmentation and a lack of regulatory or fiscal certainty, Somalia’s actual growth trajectory exceeded the rates in Djibouti over the conflict period and is similar to Ethiopia’s although less erratic. Kenya shows greater growth, due to a more robust, competitive market and the presence of 4G services over the last five years. Somnet introduced 4G services in Mogadishu in March 2017 without a license, after 3G had been introduced by Hormuud in 2012, despite enforced closure in parts of the country by Al-Shabaab. In July 2014, Hormuud, Nationlink, and Somtel signed an interconnection agreement that would have slowed SIM penetration growth (as revealed by ITU data) if it had lasted for more than a few months. Despite market improvement, Somalia’s actual penetration of 32.8 percent remains well below the total adult population of 53 percent. This would indicate that although it is a functioning market, it is neither extensive nor efficient. Somalia’s peers show similar relationships between unique user mobile penetration and adult population (ages 15+), with Djibouti at 29.7 percent versus 71 percent, Ethiopia at 32.6 percent versus 60 percent, and Kenya at 52.8 percent versus 61 percent. The introduction of the National Communications Act in 2017 and the NCA in 2018 bode well for increased stability and growth in the mobile sector. Somalia’s mobile penetration growth rate Somalia’s mobile penetration growth rate (the year-on-year rate of change in penetration) is also considered over 2000–20. The results are depicted in figure 18. Figure 18: Somalia’s mobile penetration growth rate, 2000–20 Source: MaMillan Keck. Note: Penetration rates below 1 percent are disregarded due to the unreliability of data in this nascent stage of development. RoC = Rate of Change. 90 Somalia performed much better during 2000–20 than 5.5 Correlating Somalia’s supply-side some other countries in conflict. Subscriber growth rates were already increasing year-on-year in 2005 at the onset investment climate and teledensity of this period and continued to increase through 2009. Growth rates declined from 2009 through 2010, most The assessment of Somalia can inform an overall view of the likely reflecting the increased violence around the battle relationship between the supply-side telecom investment for Mogadishu. Growth rates again increased from 2011 climate and mobile teledensity evolution during the through 2013 but have steadily declined since 2013 as the conflict. penetration among the part of the population that could afford service approached saturation. Somalia was assessed as having an internal factor investment climate rating of 6 and an external factor The yellow line in figure 18 represents the average annual investment climate rating of 4. Key internal factors mobile penetration growth rate during two periods – the included (1) absence of an active government enabling pre-conflict period from 2000 through 2004 and the market entry and investment, (2) spectrum needs being conflict period from 2005 through 2020. The grey line met, and (3) the absence of an unfavorable environment on in figure 18 represents the average but-for-the-conflict level playing field and fiscal reasonableness. These factors annual penetration growth rate during the conflict period. were capitalized on by a vibrant and entrepreneurial The difference between the grey and yellow lines during private sector, but predatory behavior by the increasingly the conflict period is the average annual growth rate deficit. dominant operator group (HTG) suppressed the potential With an actual annual growth rate of 2.01 percent and a benefits to some degree. The key external factors were but-for-the-conflict annual growth rate of 2.30 percent, (1) broad arms embargoes on technology and technical Somalia thus experienced a 13 percent deficit in its average assistance, (2) lack of international aid to the telecom annual growth rate during the conflict. sector, and (3) mitigation of the impact of the conflict by African Union military support for peacekeeping. Somalia’s recent requalification for investment aid portends the potential for strengthening the sector, but only if continued violence by Al-Shabaab can be brought under control. Somalia’s actual average annual teledensity growth rate suffered a 13 percent decline compared with its projected but-for-the-conflict teledensity growth rate. Nonetheless, teledensity continued to grow (albeit at a reduced rate) during the conflict. Significantly, Somalia’s teledensity growth rate deficit was lower than that of all the countries studied except Afghanistan and Iraq (both of which experienced unique circumstances in terms of investment climate due to the pro-development impetus of the US- led international coalitions leading the post-invasion occupations of those countries). 91 6 Republic of South Sudan This case study assesses the impact on the telecom sector of the civil war in South Sudan from December 2013 through February 2020. 6.1 South Sudanese context The following passages provide information on South Sudan’s geography, demographics, and economy; the 2013–20 civil war; and the telecom sector. South Sudan’s geography, demographics, and economy South Sudan is located in the eastern part of Central Africa, south of Sudan, north of Uganda and Kenya, and west of Ethiopia (map 5). It is also bordered by the Central African Republic to the west and the Democratic Republic of Congo to the southwest. South Sudan is landlocked. Map 5: South Sudan 25°E 30°E 35°E Nyala Ed Renk Damazin Al-Fula Ed Da'ein o Kadugli S U D A N Umm Barbit Kaka Paloich o 10°N Ba Junguls 10°N Kodok Āsosa hr o Radom -A Riangnom UPPER NILE Boing al rab Abyei Fagwir Malakal o Mayom o Bentiu o Abwong Daga Post Malek War-Awar Wang Kan Wun Rog Fangak ba So t Gossinga NORTHERN Aweil Kai Kigille o o Raga BAHR-EL-GHAZAL Gogrial WARRAP Nasser o Gumbiel o f r ez Zara Leer Waat o o Kuacjok Akop Fathai Adok Gambēla Madeir UNITY Bah ETHIOPIA Duk Fadiat Akobo o Deim Zubeir Bisellia Bir Di WESTERN Wau BAHR-EL-GHAZAL Wakela Tonj Atum JONGLEI o Wh CENTRAL LAKES Ni Kongor it e Bo River Post Rafili le Peper Jonglei Pibor Akelo AFRICAN Rumbek o o Akot Yirol Ukwaa Om o Lol REPUBLIC Pibo Khogali Bor Towot Pap r o Boli Malek Mvolo Lowelli Jerbar ! ^ National capital Obo Tambura Amadi o Administrative capital Li Yubu WESTERN Terakeka Town, village EQUATORIA Madreggi Lanya EASTERN Airport Ezo EQUATORIA 5°N Maridi o 5°N International boundary ! ^ Juba Lafon Kapoeta o CENTRAL o Undetermined boundary o Yambio o State (wilayah) boundary EQUATORIA Torit Abyei region Nagishot DEMOCRATIC L. Turkana o Main road Roue (L. Rudolf) REPUBLIC OF THE Kajo o Railway Opari KENYA Yei Lofusa 0 100 200 km CONGO Keji o 0 50 100mi o The boundaries and names shown and the designations used on this map do not imply o f ficial endorsement or acceptance by the United Nations . UGANDA e Nil Final boundary between the Republic of Sudan and the Republic of South Sudan has not yet been determined . Map No. 4450 Rev. 2 ert Final status of the Abyei area is not yet determined . Jul 2020 Alb 25°E 30°E 35°E Source: UN Geospatial > South Sudan (July 1, 2020), https://www.un.org/geospatial/content/south-sudan-1. 92 South Sudan has a population of about 11.2 million507 by the annual shift of the Inter-Tropical Convergence Zone. and a land area of 631,928 square kilometers508 (about Rainfall is heaviest in the upland areas of the south and 243,989 square miles). The country’s population is widely diminishes to the north.518 distributed, with denser clusters found in urban areas in the western interior and around the White Nile.509Just Gross domestic product (GDP) per capita, based on over 20 percent of the population lives in urban areas.510 purchasing power parity, was an estimated USD 791 in South Sudan is currently divided into 10 states and three 2020 (having steadily declined from USD 3,101 in 2011).519 administrative areas.511 Juba, the capital of South Sudan GDP composition by sector of origin in 2016 was about 68 and the Central Equatoria state, has a population of about percent services, 11.4 percent agriculture, and 20 percent 403,000.512 Life expectancy at birth is currently 57 years industry.520 South Sudan’s primary natural resources are the for males and 60 years for females.513 Nile (which can support navigation, hydropower, and water supply), petroleum, fertile agricultural land, gold, silver, South Sudan’s terrain comprises plains in the north and iron ore, copper, and other minerals.521 Crude petroleum center, which rise to southern highlands along the border and gold together accounted for 98.8 percent of all exports with Uganda and Kenya.514 The White Nile, flowing north in 2020.522 The labor force was about 4.6 million in 2020,523 out of the uplands of Central Africa, and its tributaries are but a large percentage of the working population is engaged the country’s major geographic feature.515 The Sudd is a in nonwage work, chiefly in subsistence agriculture and large, swampy area of more than 100,000 square kilometers livestock rearing.524 Unemployment was about 12.7 (about 38,610 square miles) fed by the waters of the White percent in 2020.525 About 82 percent of the population Nile, dominating the center of the country and hindering lives below the poverty line.526 navigation. The size of the Sudd varies throughout the year, but it can reach 15 percent of the country’s total land area Today, only about 1 percent of the population has access to during the rainy season and is one of the world’s largest the electricity grid,527 while about 5.7 percent have access wetlands.516 to solar and on-site power generation.528 About 10 percent of the population has access to sanitary facilities and 40 About 75 percent of South Sudan’s lands are suitable percent has access to safe drinking water.529 The literacy for agricultural production, but the country is unable to rate in 2018 was 34.5 percent, including 40.3 percent of meet its food security needs due to years of conflict and males and 28.9 percent of females.530 structural constraints on agricultural production.517 The climate is tropical, hot with seasonal rainfall, and influenced 507 World Bank > Data > Population, total – South Sudan (2020). 508 World Bank > Data > Land area (sq. km) – South Sudan (2020). 509 See ReliefWeb, United Nations Office for the Coordination of Humanitarian Affairs (OCHA) > South Sudan > South Sudan: Population Density by State (November 16, 2020), https://reliefweb.int/map/south-sudan/south-sudan-population-density-state-november-2020. 510 World Bank > Data > Urban Population (% of total population) – South Sudan (2020). 511 See Denis Dumo, “South Sudan Cuts Number of States from 32 to 10, Unlocking Peace Process,” Reuters (February 15, 2020), https://www.reuters.com/ article/us-southsudan-politics/south-sudan-cuts-number-of-states-from-32-to-10-unlocking-peace-process-idUSKBN2090AM. See also Daniel Ake- ch Thong, “10, 21, 28, 32, ? Why South Sudan’s Peace Might Rest on a Number” (African Arguments, February 18, 2020), https://africanarguments. org/2020/02/10-21-28-32-south-sudan-peace-number-states/. 512 United Nations Department of Economics and Social Affairs > World Urbanization Prospects > Annual Population of Urban Agglomerations with 300,000 or More > Juba (2020 est. based on 2018 data), https://population.un.org/wup/DataQuery/. 513 United Nations Population Fund > World Population Dashboard > South Sudan (2021), https://www.unfpa.org/data/world-population/SS. 514 IndexMundi > Factbook > Countries > South Sudan > Geography > South Sudan Terrain (2021), https://www.indexmundi.com/south_sudan/terrain.html. 515 Mohy el Din Sabr, “South Sudan,” Britannica (2021), https://www.britannica.com/place/South-Sudan. 516 See UN Environment Program, “Are South Sudan’s Wetlands in Danger of Drying Up?” (August 7, 2017), https://www.unep.org/news-and-stories/story/ are-south-sudans-wetlands-danger-drying-0. 517 See "South Sudan: Conflict and Food Insecurity" (Global Agricultural Monitoring, College Park, MD, April 16, 2020), https://cropmonitor.org/documents/ CONFLICT/reports/Conflict_Report_20200401_South_Sudan.pdf. 518 World Bank Group > Climate Change Knowledge Portal > Country > South Sudan > Current Climate > Climatology (2021), https://climateknowledge- portal.worldbank.org/country/south-sudan/climate-data-historical. 519 Knoema > World Data Atlas > South Sudan > Economy > South Sudan – Gross Domestic Product per Capita Based on Purchasing-Power-Parity in Current Prices (2020), https://knoema.com/atlas/South-Sudan/GDP-per-capita-based-on-PPP . 520 See globalEDGE > Countries > South Sudan > Economy > GDP Composition % (Michigan State University Broad College of Business, 2016) (based on World Bank data), https://globaledge.msu.edu/countries/south-sudan/economy. 521 United Nations Development Programme > South Sudan (2021), https://www.ss.undp.org/content/south_sudan/en/home/countryinfo.html. 522 Daniel Workman, “South Sudan’s Top 10 Exports” (World’s Top Exports, 2020), https://www.worldstopexports.com/south-sudans-top-10-exports/. 523 World Bank > Data > Labor Force, Total – South Sudan (2020). 524 United Nations Development Programme > South Sudan (2021), https://www.ss.undp.org/content/south_sudan/en/home/countryinfo.html. 525 Knoema > World Data Atlas > South Sudan > Economy > South Sudan – Unemployment Rate (2020), https://knoema.com/atlas/South-Sudan/Unem- ployment-rate. 526 World Bank > Where We Work > South Sudan > Overview (2021), https://www.worldbank.org/en/country/southsudan/overview#1. 527 Maria Gallucci, “South Sudan Is Building Its Electric Grid Virtually From Scratch,” IEEE Spectrum (March 13, 2020), https://spectrum.ieee.org/south-sudan- rebuilding-grid-from-scratch. 528 World Bank > Data > Access to Electricity (% of population) – South Sudan (2019). 529 United Nations Children’s Fund (UNICEF), “Water, Sanitation and Hygiene (WASH) Briefing Note” (UNICEF, New York, April-June 2021), https://www. unicef.org/southsudan/documents/wash-briefing-note. 530 UNESCO Institute for Statistics > Country > South Sudan > Education and Literacy (2021), http://uis.unesco.org/en/country/ss. 93 The 2013–20 conflict in South Sudan inhibited livelihoods and coping capacities, and climatic The South Sudan civil war began in 2013. It involved events affecting pasture, water, and crops.538 In 2019, fighting between the officially recognized Government of the International Monetary Fund estimated that real South Sudan and a variety of opposition groups, including disposable income in South Sudan had declined 70 percent the Sudan People’s Liberation Army-in-Opposition since independence in 2011.539 (SPLA-IO).531 A formal peace agreement was concluded in September 2018532 and a compromise unity government, After February 2020, since the new government includes the Revitalized Transitional Government of National Unity, members of previously warring parties, related violence was formed in February 2020, although localized inter- and has declined. However, the peace deal is tenuous as its intra-communal violence continues.533 implementation has been delayed. It is also deemed not to have addressed the root causes of the war, including The civil war broke out almost immediately upon grudges between the country’s leaders. According to the commencement of self-government by newly independent UN, political gridlock has continued, and the population South Sudan. In 2013, after a political struggle, South Sudan is becoming disenchanted with the leadership on both President Salva Kiir dismissed Vice President Riek Machar. sides.540 Safety and security continue to present dire This led to violence between supporters of Kiir and Machar, threats, including not only violence, but also a food who were inflamed by tribal loyalties. Machar, leader of the crisis, with relief organizations being unable to deliver SPLA-IO, has fled the country twice during the conflict, humanitarian relief effectively.541 which has also included multiple broken peace agreements and deployment of United Nations (UN) peacekeeping South Sudan’s telecom sector forces to protect civilians.534 The conflict in South Sudan Juba was once a communications hub in the territory that has seen horrific violence, including the Bentiu massacre in became South Sudan. Before the civil wars of 1955–72 2014.535 Violence re-escalated again in 2016.536 According and 1983–2005, Juba was an important link between to a 2018 report from the London School of Hygiene & northern and southern Sudan. Infrastructure and services Tropical Medicine, South Sudan suffered from an excess were extremely basic: gravel roads, a bridge over the death toll between 2013 and 2018 of 382,900 people. In Nile, river transport, telegraph lines (reaching Suakin), addition to those who died, 2 million people within South and mail service. Juba served as an international trading Sudan were displaced, and 2.5 million people became and transport center and was connected by gravel roads refugees in neighboring countries.537 with Kenya, Uganda, and Zaire/Congo. The long cycle of violence and conflict in South Sudan devastated Juba’s Nine opposition groups formed the South Sudan Opposition physical infrastructure. As a population center controlled Alliance in 2018 to negotiate with the government by the central government in the north, Juba and its as a united front, leading to the February 2020 unity physical infrastructure were frequently targeted by SPLA- government. However, fighting between communities and aligned rebels. The roads were mined, the port in Juba government human rights abuses have continued. The (on the White Nile) could only be used by the central drivers of communal violence include resource stress due government army, and transportation and communications to the interplay of a continued perception of insecurity infrastructure could not be maintained or repaired. affecting the ability to access natural resources and food, 531 Paul Aufiero, interview with Nyagoah Tut Pur, “South Sudan at a Crossroads” (Human Rights Watch, New York, July 9, 2021), https://www.hrw.org/ news/2021/07/09/south-sudan-crossroads#. 532 Aaron Maasho, “South Sudan's President, Rebel Leader Sign Peace Deal,” Reuters (September 12, 2018), https://www.reuters.com/article/us-southsu- dan-unrest/south-sudans-president-rebel-leader-sign-peace-deal-idUSKCN1LS2PW. 533 See Nick Cumming-Bruce, “South Sudan’s Feuding Leaders Announce Unity Deal, Amid War Crimes Report,” The New York Times (February 20, 2020), https://www.nytimes.com/2020/02/20/world/africa/south-sudan-peace-deal.html. 534 Council on Foreign Relations Global Conflict Tracker, “Civil War in South Sudan” (Council on Foreign Relations, New York, last updated May 19, 2021), https://www.cfr.org/global-conflict-tracker/conflict/civil-war-south-sudan. 535 See Jason Patinkin, "Report: U.N. Gave Arms to South Sudan Rebels Later Implicated in Massacre" The Washington Post (December 17, 2016), https:// www.washingtonpost.com/world/africa/report-un-gave-arms-to-south-sudan-rebels-later-implicated-in-massacre/2016/12/15/d6910498-c23c-11e6- 92e8-c07f4f671da4_story.html. “South Sudan Rivals Sign New Cease-Fire Deal,” Al Jazeera America (August 25, 2014), http://america.aljazeera.com/ articles/2014/8/25/south-sudan-peace.html. 536 UN Security Council Report S/2018/143 (United Nations, New York, February 20, 2018), 2–14, http://www.securitycouncilreport.org/atf/cf/%7B65BFCF9B- 6D27-4E9C-8CD3-CF6E4FF96FF9%7D/s_2018_143.pdf. 537 See Francesco Checchi, Adrienne Testa, Abdihamid Warsame, Le Quach, and Rachel Burns, “Estimates of Crisis-Attributable Mortality in South Sudan, December 2013–April 2018 7 (London School of Hygiene & Tropical Medicine, September 2018), 19, https://www.lshtm.ac.uk/south-sudan-full-report. 538 See World Bank, “South Sudan Resilient Agricultural Livelihoods Project” (P169120), Concept Stage, Project Information Document, Report No: PIDISD- SC25688 (World Bank, Washington, DC, September 24, 2018), 3, https://documents1.worldbank.org/curated/en/504951593500670358/pdf/Con- cept-Project-Information-Document-PID-South-Sudan-Resilient-Agricultural-Livelihoods-Project-P169120.pdf. 539 See International Monetary Fund (IMF), “South Sudan,” Country Report No. 19/153 (IMF , Washington, DC, June 2019), 4, https://www.imf.org/en/Publica- tions/CR/Issues/2019/06/04/South-Sudan-2019-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-46965. 540 See UN Security Council Report S/2021/365 (United Nations, New York, April 15, 2021), 8–9, https://www.undocs.org/S/2021/365. 541 See UN Security Council Report S/2021/365 (United Nations, New York, April 15, 2021), 15–16, https://www.undocs.org/S/2021/365. 94 The bridge fell into disrepair due to damage, overloading, Mobitel in 2006, Zain planned an expansion into the south and neglect. Many civilians fled, families became separated, – where suspicions of northern-owned mobile companies and civilians could not communicate with each other. undermined investment opportunities – because Mobitel Access to and use of communications and transportation was now wholly owned by Kuwaiti investors.548 In 2007, infrastructure was mainly by the military.542 Mobitel obtained debt financing from the OPEC Fund for International Development (USD 11.59 million) and Byblos The groundwork for South Sudan’s telecom sector was Bank.549 laid while it was still part of the larger Sudan. On January 16, 1987, a decree was issued to establish the General In 2002, a second GSM was issued to the Lebanese Corporation for Wired and Wireless Communication, company Areeba, which would compete with Mobitel. In which initially owned 85 manual telephone exchanges 2006, Areeba was sold to the MTN Group. Also in 2006, with a capacity of 10 to 100 lines, the majority of which Sudatel launched the Sudani network for mobile telephone had been in use since 1965, and a capacity of 2,240 lines. services, to become the third mobile phone services In September 1993, the Sudanese Telecommunications provider in Sudan, and the first to provide 3G service.550 Company (Sudatel) was established as a joint-stock The 2005 peace accord had a substantial impact on the company to replace the General Corporation for Wired sector in South Sudan. As part of the 2005 agreement, and Wireless Communication. In 1996, the National semi-autonomous South Sudan was given the authority to Telecommunication Corporation (NTC) was established as award two separate mobile licenses. In addition, the accord sector regulator, with the intention of fostering free and fair permitted the national Government of Sudan to issue four competition.543 In 1997, Sudatel introduced Global System nationwide mobile licenses, three of which (Zain, MTN, for Mobile Communications (GSM) mobile phone service in and Sudani) were already (or soon would be) operating in Sudan and soon structurally separated the mobile business the south. South Sudan awarded its licenses to Network under the name Mobitel. 544 of the World (NOW) and local company Gemtel.551 NOW launched mobile Rumbek, South Sudan, in January 2005,552 Celtel acquired a 39 percent interest in Mobitel in 2001.545 but it never fully completed its network before selling a 75 During the remaining war years, Mobitel’s main customers percent stake to Lebanese-owned Vivacell in 2007, while in South Sudan were the central government and the army. the SPLA retained an indirect interest in the remaining 25 Civilians using mobile phones were suspected of being SPLA percent.553 supporters. Mobile phone usage become more widespread only after the peace agreement of 2005.546 Zain (formerly MTC) acquired Celtel and, in 2006, acquired the remaining 61 percent in a transaction valued at USD 1,332 million.547 After completion of its purchase of 542 See Mirjam de Bruijn and Inge Brinkman, “ICT and Society in Sudan: A Critical Historical-Anthropological Approach” (International Conference of the Euro-African Association for the Anthropology of Social Change and Development Catholic University of Leuven, Louvain-la-Neuve, Belgium, December 13–15, 2007), 2, https://www.ascleiden.nl/Pdf/ApadQuestionsandIssues.pdf. 543 See Sudatel Telecom Group > Sudatel Telecommunication Museum. 544 Initially, Mobitel was 40 percent owned by Sudatel and 60 percent owned by local investors associated with the National Congress Party. However, Sudatel had substantial investment from Gulf Cooperation Council investors, including Etisalat from the United Arab Emirates, and Etisalat was instrumental in expanding Mobitel’s GSM network. See Osman Suliman, “Current Privatization Policy in Sudan” (2007), 3, https://www.researchgate.net/publica- tion/255669186_CURRENT_PRIVATIZATION_POLICY_IN_SUDAN; Economist Intelligence Unit, “Sudan Country Profile” (Economist Intelligence Unit, London 1999), 17, https://www.iuj.ac.jp/mlic/EIU/Profile/Sudan/1999_Main_report.pdf. 545 See Mobile Telecommunications Company 2006 Earnings Release 15 (2006), https://researchictafrica.net/policy/africa_wide_operators/ZAIN%20 Group%20Annual%20Reports/2006_MTC_Annual_Report.pdf. 546 See Mirjam de Bruijn and Inge Brinkman, “ICT and Society in Sudan: A Critical Historical-Anthropological Approach” (International Conference of the Euro-African Association for the Anthropology of Social Change and Development Catholic University of Leuven, Louvain-la-Neuve, Belgium, December 13–15, 2007), 2, https://www.ascleiden.nl/Pdf/ApadQuestionsandIssues.pdf. 547 See “MTC Acquires African Mobile Operator Mobitel in Sudan,” Press Release (Zain, Kuwait City, Kuwait, February 7, 2006), https://www.zain.com/en/ press/mtc-acquires-african-mobile-operator-mobitel-in-su/. See also Haitham Haddadin, “MTC Buys Mobitel For $1.33 Billion,” Arab News (February 7, 2006), https://www.arabnews.com/node/280044. 548 See Skye Wheeler, “Zain Launches $100-150 Mln South Sudan Expansion,” Reuters (April 27, 2008), https://www.reuters.com/article/sudan-zain- idUSMCD75138020080427. 549 See OPEC Fund > Operations > Sudanese Mobile Telephone Company (Mobitel) (2021), https://opecfund.org/operations/list/sudanese-mobile-tele- phone-company-mobitel. 550 International Telecommunication Union (ITU), “Sudan Key Indicators of the Telecommunications/ICT Sector” (ITU, Geneva, September 2006), 3, https:// www.itu.int/md/dologin_md.asp?id=D02-ISAP2B.1.1.1-INF-0007!!PDF-E. 551 See “Mobile Phone Network Launched in South Sudan” Reuters (February 23, 2009), https://www.reuters.com/article/oukin-uk-sudan-south-telecoms-idUK- TRE51M5YL20090223. 552 “Rumbek Gets First Mobile Phone,” CommsUpdate (TeleGeography, Washington, DC, January 17, 2005), https://www.commsupdate.com/arti- cles/2005/01/17/rumbek-gets-first-mobile-phone/. 553 “Vivacell Launches in South Sudan,” CommsUpdate (TeleGeography, Washington, DC, February 24, 2009), https://www.commsupdate.com/arti- cles/2009/02/24/vivacell-launches-in-south-sudan/. 95 In addition to its ownership interest in NOW, Gemtel was Negotiations between the Government of Southern also apparently founded by leading SPLA commanders, Sudan, the NTC (the regulator in Sudan), and the central with support from a Ugandan investor, to avoid surveillance government stagnated in 2007. There was continuing of SPLA activities by the Sudan government.554 In 2006, disagreement between the parties about the precise the South Sudan government asked Uganda to permit conditions of network licensing and gateway usage. Gemtel to use Uganda’s international telephone country Representatives of the southern government argued that code (+256) to interconnect with Uganda Telecom Gemtel (and NOW) should be allowed to operate in the Limited.555 This enabled Gemtel to provide international north, just as the northern operators were entitled to roll calling services without transiting through the Sudanese out their networks in the south. government’s international gateway controlled from the north. The Libyan government’s investment arm, LAP The NTC opposed Gemtel’s use of the Ugandan dialing code, GreenN, which at the time was investing heavily in African while southern representatives pointed out that they were mobile operators, purchased Gemtel in 2010.556 entitled to a separate gateway. Because of these political controversies, both the Sudani and Mobitel networks only A memorandum of understanding (MoU) between Sudan functioned intermittently in Juba and their rollout plans and South Sudan in 2008 was designed to facilitate were stalled by the South Sudanese government.559 mobile development in South Sudan after the 2005 peace agreement. The MOU provided for NTC, the In 2011, when South Sudan attained independence, five sector regulator for Sudan’s national government, to be mobile operators already had networks in its territory: responsible for overall regulation, and about one-third of Gemtel, MTN Sudan, Sudani, Vivacell, and Zain. Zain and the NTC board members were to be representatives from MTN Sudan announced plans for major new infrastructure South Sudan. According to the MoU, Sudatel, Canar (the investments. State-owned Niletel was also issued a mobile second fixed operator), Zain, and MTN were to continue license in 2017 but never commenced service.560 The to provide nationwide services under their NTC licenses, new government wanted to develop its communications including in South Sudan, while Vivacell and Gemtel were infrastructure with a focus on competitive private permitted to operate with their licenses issued by South investment. As a landlocked country, South Sudan did not Sudan. As of 2010, there were 317 mobile base stations have any direct connections to international submarine and relatively competitive prices in South Sudan. cables and had no terrestrial fiber network. Fiber-based international connectivity would require cross-border Gemtel had been using Uganda’s gateway since 2006, terrestrial links through Kenya, Ethiopia, or Sudan, and which meant that to call a Gemtel customer from another metropolitan ring fiber would need to be put in place. Sudanese network, the calls had to transit through Hong Combined with low per capita income, South Sudan’s Kong SAR, China, and Uganda, making Gemtel subscriptions expensive international and backhaul connectivity made expensive (but avoiding transit through Khartoum). The for a challenging mobile market. MOU provided for a separate international gateway and a contract was issued to Ericsson for its construction to be The 2012 National Communication Act established the completed in 2012, but the gateway was not established National Communications Authority as an independent until 2019.557 Despite the terms of the MoU, the fact sector regulator and set out the basic framework for that neither Gemtel nor Vivacel had a license from the licensing and regulation of a competitive mobile market, National Telecommunications Authority (the regulatory including provisions for establishment of a universal service body in South Sudan) made it difficult for them to obtain fund. However, the licensing provisions did not set out a financing.558 clear framework for the transition of previously issued licenses (whether issued by the NTC or the Government of South Sudan).561 554 See Hilde F. Johnson, “South Sudan: The Untold Story from Independence to Civil War” 34 (I.B. Tauris, London, 2016). 555 See “UTL Loses Court Case, to Pay Billions in Interconnection Fees,” Uganda Monitor (September 14, 2017), https://www.monitor.co.ug/uganda/business/ technology/utl-loses-court-case-to-pay-billions-in-interconnection-fees-1718182. 556 See “LAP Green Flags Launches in Sierra Leone, Togo, South Sudan; Pursuing Acquisitions in Burundi, DRC, Ethiopia, Tanzania, Equatorial Guinea,” Com- msUpdate (TeleGeography, Washington, DC, December 12, 2011), https://www.commsupdate.com/articles/2011/12/12/lap-green-flags-launches-in-sier- ra-leone-togo-south-sudan-pursuing-acquisitions-in-burundi-drc-ethiopia-tanzania-equatorial-guinea/. 557 “South Sudan Launches International Voice Gateway” CommsUpdate (TeleGeography, Washington, DC, May 24, 2019), https://www.commsupdate.com/ articles/2019/05/24/south-sudan-launches-international-voice-gateway/. 558 Rupa Ranganathan and Cecilia M. Briceño-Garmendia, South Sudan’s Infrastructure: A Continental Perspective 34 (World Bank, Washington, DC, June 2011), https://ppiaf.org/documents/3157/download. 559 See Mirjam de Bruijn and Inge Brinkman, “ICT and Society in Sudan: A Critical Historical-Anthropological Approach” (International Conference of the Euro-African Association for the Anthropology of Social Change and Development Catholic University of Leuven, Louvain-la-Neuve, Belgium, December 13–15, 2007), 5 6, https://www.ascleiden.nl/Pdf/ApadQuestionsandIssues.pdf. 560 World Bank and Altai Consulting, “Mobile Money Ecosystem in South Sudan” (World Banka and Altai Consulting, Washington, DC, 2019), https://docu- ments1.worldbank.org/curated/en/460341563539588094/pdf/Mobile-Money-Ecosystem-Survey-in-South-Sudan-Exploring-the-Current-and-Future-Poten- tial-of-Using-Mobile-Money-for-Effective-Humanitarian-and-Development-Cash-Programming-Executive-Summary.pdf. 561 See South Sudan National Communication Act 2012, https://ictpolicyafrica.org/en/document/bfc7dffmhxj. 96 Beginning in 2013, the prospects for increased private allegedly for failure to pay USD 66 million in license fees and sector investment began to turn negative, although MTN taxes, although the terms of its license gave it a 25-year tax continued its investment program. In March 2013, Sudatel holiday. Vivacell’s closure left 900,000 subscribers without Telecom Group announced its intention to divest its service overnight and sent a chill through the market.570 African mobile holdings, including Sudatel in South Sudan (Sudani).562 South Sudan had not yet established a proper As of June 2019, the National Communications regulatory framework when the conflict erupted in 2013. Authority still had not issued licenses to Zain or to MTN. Existing operators expressed concern over potential While the 2012 Communications Act also provides for requirements for open access and infrastructure sharing interconnection, in practice interconnection in South requirements due to the high costs of network build-out, Sudan had not yet been achieved. 571 In addition to the and it was generally recognized that regulatory capacity and delayed launch of its international gateway, 2019 saw the experience were low.563 In January 2014, the Government first fiber construction in South Sudan, with Liquid Telecom of South Sudan shut down the mobile network in Upper seeking to add a direct fiber link to Uganda,572 and the Nile for security reasons due to increased fighting between launch of mobile money services. The first mobile money government and rebel troops.564 MTN announced plans for platform was M-Gurush, which offered its services through a USD 76 million investment in its mobile network in South a partnership with Zain, followed quickly by Nilepay, Sudan in 2014.565 which also partnered with Zain. While mobile money has generally been a success, the high illiteracy rate and lack of However, by 2016, MTN was reporting that it was cutting ID cards within the population, added to the fact that MTN its workforce and canceling its expansion plans due to the was effectively excluded from the market, have slowed poor financial outlook, noting that its customers were faced growth.573 with a choice of buying a phone, buying airtime, or buying bread.566 Zain similarly scaled back operations in 2016, In 2021, Zain launched 4G service in Juba,574 and in July noting that it was going into survival mode.567 In 2017, as the 2021, the government announced the launch of a third crisis in South Sudan continued, the government launched mobile operator, Digitel.575 In October, MTN announced a a new operator, Niletel, with 25 percent government new USD 120 million investment program for its operations ownership. The government claimed that MTN and Zain in South Sudan, and MTN announced that it had received were on the “verge of collapsing.”568 The year 2017 also regulatory approval to offer mobile money services, saw increases in taxes on telecom services.569 Since its although the situation remains unclear as to whether this auspicious beginning with five networks, the number of is under its existing NTC-issued license or a new license.576 competing operators has contracted to only two: Zain and MTN. Vivacell was shut down by the government in 2018, 562 “Sudatel Plots Mass Exodus: African Subsidiaries Up for Grabs,” CommsUpdate (TeleGeography, Washington, DC, March 22, 2013), https://www.comm- supdate.com/articles/2013/03/22/sudatel-plots-mass-exodus-african-subsidiaries-up-for-grabs/. 563 African Development Bank, “Infrastructure Action Plan in South Sudan” (African Development Bank, Abidjan, Côte d’Ivoire, 2013), 278–82, https://www. afdb.org/en/countries/east-africa/south-sudan/infrastructure-action-plan-in-south-sudan-a-program-for-sustained-strong-economic-growth. 564 “Mobile Network Shut Down as Fighting Intensifies,” CommsUpdate (TeleGeography, Washington, DC, January 20, 2014), https://www.commsupdate. com/articles/2014/01/20/mobile-network-shut-down-as-fighting-intensifies/. 565 “MTN Embarks on Network Expansion Project” CommsUpdate (TeleGeography, Washington, DC, May 13, 2014), https://www.commsupdate.com/arti- cles/2014/05/13/mtn-embarks-on-network-expansion-project/. 566 “Future Looks Bleak for MTN in South Sudan: Expansion Plans Scrapped,” CommsUpdate (TeleGeography, Washington, DC, March 31, 2016), https:// www.commsupdate.com/articles/2016/03/31/future-looks-bleak-for-mtn-in-south-sudan-expansion-plans-scrapped/. 567 “Zain Scales Back Operations to Survive South Sudan Crisis,” CommsUpdate (TeleGeography, Washington, DC, August 30, 2016), https://www.commsup- date.com/articles/2016/08/30/zain-scales-back-operations-to-survive-south-sudan-crisis/. 568 “South Sudan Launches New Operator Niletel amid Economic Crisis and Civil War,” CommsUpdate (TeleGeography, Washington, DC, July 21, 2017), https://www.commsupdate.com/articles/2017/07/21/south-sudan-launches-new-operator-niletel-amid-economic-crisis-and-civil-war/. 569 “South Sudan Approves Increase in Telecoms Service Tax,” CommsUpdate (TeleGeography, Washington, DC, 8September 8, 2017), https://www.commsup- date.com/articles/2017/09/08/south-sudan-approves-increase-in-telecoms-service-tax/. 570 See Denis Dumo, “South Sudan Suspends Vivacell's Mobile Network over Unpaid Licence Fee,” Reuters (March 28, 2018), https://www.reuters.com/article/ southsudan-telecoms/update-1-south-sudan-suspends-vivacells-mobile-network-over-unpaid-licence-fee-idUSL8N1RA2X0. See also “Vivacell Shut Down for Failing to Pay Taxes,” CommsUpdate (TeleGeography, Washington, DC, March 28, 2018), https://www.commsupdate.com/articles/2018/03/28/vivacell- shut-down-for-failing-to-pay-taxes/. 571 World Bank, “Mobile Money Ecosystem in South Sudan” (World Bank, Washington, DC, June 2019), 17, https://documents1.worldbank.org/curated/ en/460341563539588094/pdf/Mobile-Money-Ecosystem-Survey-in-South-Sudan-Exploring-the-Current-and-Future-Potential-of-Using-Mobile-Mon- ey-for-Effective-Humanitarian-and-Development-Cash-Programming-Executive-Summary.pdf. 572 “Cable Compendium: A Guide to the Week’s Submarine and Terrestrial Developments,” CommsUpdate (TeleGeography, Washington, DC, July 5, 2019), https://www.commsupdate.com/articles/2019/07/05/cable-compendium-a-guide-to-the-weeks-submarine-and-terrestrial-developments/. 573 Sam Mednick, “South Sudan Launches Mobile Money to Boost Recovery from War,” AP News (September 26, 2019), https://apnews.com/article/492f- 79bcc3c8424d8421665caaef7b1c; Sheila Ponnie, “South Sudan Gets Mobile Money Service,” ReliefWeb (United Nations Office for the Coordination of Humanitarian Affairs, New York, July 25, 2019), https://reliefweb.int/report/south-sudan/south-sudan-gets-mobile-money-service. 574 “Zain Launches 4G in South Sudan,” CommsUpdate (TeleGeography, Washington, DC, March 8, 2021), https://www.commsupdate.com/arti- cles/2021/03/08/zain-launches-4g-in-south-sudan/. 575 “New Mobile Operator Digitel Launches in South Sudan,” CommsUpdate (TeleGeography, Washington, DC, July 14, 2021), https://www.commsupdate. com/articles/2021/07/14/new-mobile-operator-digitel-launches-in-south-sudan/. 576 “MTN Plans to Invest USD120m in South Sudan,” CommsUpdate (TeleGeography, Washington, DC, October 12, 2021), https://www.commsupdate.com/ articles/2021/10/12/mtn-plans-to-invest-usd120m-in-south-sudan/. 97 6.2 Assessment of internal South The conflict hit telecom investment hard, causing substantial damage to networks and ending progress Sudanese telecom investment climate toward establishing a proper legal framework. Barriers factors to investment included network shutdowns by the Five internal factors during the conflict that impacted government; a weak investment climate, including weak the climate for telecom investment in South Sudan were infrastructure and high input prices; lack of political assessed: (1) market open to entry, (2) ease of private stability; and deteriorating economic conditions. Zain’s investment, (3) spectrum needs met, (4) level playing field, subscriber base fell by almost half between 2013 and and (5) fiscal reasonableness. Each factor is discussed in 2017.580 turn below, followed by a summary of key findings across all the internal factors. Private investment appears to have picked up since the resolution of the conflict. In March 2019, MTN Group announced plans to invest up to USD 35 million South Sudan: Market open to entry? in modernizing and expanding its operations in South When it attained independence in 2011, South Sudan had Sudan following a period of cutbacks. In February 2020, five active mobile operators, three of which were also Liquid Telecom completed an international fiber link to embarking on major investment initiatives. Subsequently, South Sudan, its first, connecting Juba directly to Liquid’s the number of competing operators has contracted to submarine landing station at Mombasa, Kenya.581 only two, Zain and MTN. Vivacell was shut down in 2018, allegedly for failure to pay USD 66 million in license fees In October 2021 (which was after the end of the time- and taxes, leaving 900,000 subscribers without service,577 bound study period), MTN Group announced plans to and the regulator forced it to halt service.578 State-owned invest USD 120 million in its operations in South Sudan, Niletel was issued a mobile license in 2017 but has not including rolling out a mobile money service, over the next commenced service. Thus, multiple voluntary and forced three years.582 exits during the conflict period reduced the market to two South Sudan was assigned an unfavorable rating for ease of active operators. Neither of these has clarity on its license private investment during 2013–20. status, and both operators are still operating under the 2008 intergovernmental arrangement. South Sudan: Spectrum needs met? South Sudan was assigned an unfavorable score for market South Sudan’s regulatory framework is still not secure, openness to entry during 2013–20. and this resulted in regulatory uncertainty during the conflict period over the scope and duration of spectrum assignments. These uncertainties included different South Sudan: Ease of private investment? spectrum fees associated with the rival licensing Although initial prospects for investment were positive, frameworks, even after independence.583 The South with Gemtel, Zain, and MTN all announcing new sector Sudanese government appears to have resolved these infrastructure rollouts, during the conflict period, private issues sufficiently that MTN launched 4G in Juba in investment in the mobile market was dramatically curtailed. December 2020584 and Zain launched 4G service in March Sudatel appears never to have made a major push in South 2021,585 but these developments were too late to impact Sudan, Gemtel stopped operating in 2016, and Vivacell market performance during the 2013–20 conflict period. was shut down by the government in 2018. South Sudan’s South Sudan was assigned an uncertain rating for meeting perceived corruption levels are among the worst in the mobile spectrum needs. world, ranked 179 of 180 by Transparency International in 2020.579 577 See Denis Dumo, “South Sudan Suspends Vivacell's Mobile Network over Unpaid Licence Fee,” Reuters (March 28, 2018), https://www.reuters.com/article/ southsudan-telecoms/update-1-south-sudan-suspends-vivacells-mobile-network-over-unpaid-licence-fee-idUSL8N1RA2X0. 578 “Vivacell Shut Down for Failing to Pay Taxes,” CommsUpdate (TeleGeography, Washington, DC, March 28, 2018), https://www.commsupdate.com/arti- cles/2018/03/28/vivacell-shut-down-for-failing-to-pay-taxes/. 579 See Transparency International > Corruption Perceptions Index > South Sudan (2020), https://www.transparency.org/en/cpi/2020/index/ssd#. 580 World Bank and Altai Consulting, “Mobile Money Ecosystem in South Sudan” (World Banka and Altai Consulting, Washington, DC, 2019), 17, https://docu- ments1.worldbank.org/curated/en/460341563539588094/pdf/Mobile-Money-Ecosystem-Survey-in-South-Sudan-Exploring-the-Current-and-Future-Poten- tial-of-Using-Mobile-Money-for-Effective-Humanitarian-and-Development-Cash-Programming-Executive-Summary.pdf. 581 See James Barton, “South Sudan Gains Its First International Fibre Cable Link,” Developing Telecoms (October 19, 2020), https://developingtelecoms.com/ telecom-business/market-reports-with-buddecom/10144-south-sudan-gains-its-first-international-fibre-cable-link.html. 582 See “MTN Plans to Invest USD120m in South Sudan,” CommsUpdate (TeleGeography, Washington, DC, October 12, 2021), https://www.commsupdate. com/articles/2021/10/12/mtn-plans-to-invest-usd120m-in-south-sudan/. 583 World Bank and Altai Consulting, “Mobile Money Ecosystem in South Sudan” (World Banka and Altai Consulting, Washington, DC, 2019), 16, https://docu- ments1.worldbank.org/curated/en/460341563539588094/pdf/Mobile-Money-Ecosystem-Survey-in-South-Sudan-Exploring-the-Current-and-Future-Poten- tial-of-Using-Mobile-Money-for-Effective-Humanitarian-and-Development-Cash-Programming-Executive-Summary.pdf. 584 See “Latest: MTN Finally Launches 4G Generation in the Capital, Juba,” The South Sudan Herald (December 3, 2020), https://thessherald. com/2020/12/03/latest-mtn-finally-launches-4g-generation-in-the-capital-juba/. 585 “Zain Launches 4G to Improve Connectivity in South Sudan” Telecom Review Africa (March 10, 2021), https://www.telecomreviewafrica.com/index.php/en/ articles/telecom-operators/2190-zain-launches-4g-to-improve-connectivity-in-south-sudan. 98 South Sudan: Level playing field? The playing field in South Sudan is uneven and this has resulted in an imbalanced market structure. MTN and Zain were operating under licensing regimes and with licensing conditions that differed from the regional licenses awarded to Gemtel and Vivacell, and this imbalance appears to have been a major contributing factor in driving the latter two companies out of the market. There is no functioning interconnection obligation or competition regulation, and the government has now licensed state-owned Niletel while leaving the investor-owned incumbents with their old licenses in place.586 Even with only two operators, the market has become increasingly imbalanced, especially after the closure of Vivacell. As of December 31, 2018, MTN had a 53.1 percent subscriber share to Zain’s 46.9 percent share.587 By June 30, 2021, MTN’s subscriber share had risen to 63.8 percent.588 South Sudan was assigned an unfavorable score for level playing field. South Sudan: Fiscal reasonableness? South Sudan enacted a tax law under its interim Constitution in 2009, providing for a 20 percent income tax on large companies and a 10 percent excise tax on telecommunications services.589 Since the global decline in oil prices and the onset of civil war, the government has struggled to meet its financial commitments and has sought to increase taxes. The tax law was amended in 2017 to increase the corporate income tax to 25 percent, and an 18 percent sales tax was applied to imported goods.590 As one of the few formal sectors other than oil, the telecom sector has been targeted for increased fiscal contributions. The telecom sales tax rate was increased to 15 percent in 2018591 and to 18 percent in the 2019–20 Finance Act.592 Vivacell was shut down in 2018 for its alleged failure to pay USD 66 million in taxes, and the regulator forced it to halt service.593 A study for the World Bank of the mobile money ecosystem in South Sudan identifies high sector-specific taxes in South Sudan that compare unfavorably with the tax frameworks affecting mobile uptake in neighboring countries. In addition to the telecom excise tax, the study identifies import taxes on mobile phones that are as high as 20 percent as being a key reason for the unaffordability of phones in South Sudan.594 As summarized in table 17, South Sudan was assigned an unfavorable score for fiscal reasonableness due to its telecom- specific taxes and the uncertainty associated with the imposition, administration, and enforcement of taxes and nontax fiscal impositions. Table 17: South Sudan: Fiscal reasonableness determination South Sudan: fiscal reasonableness, 2001–20 General taxes Sector-specific taxes Nontax impositions Predictability 20% increasing 10% telecom service tax Limited transparency but Lack of transparency and unequal to 25% corporate increasing to 15% in 2018 apparently low due to carry- enforcement income tax in 2018 and 18% in 2019 over of licenses Conflicting tax treatment 20% import duty on Suspension of largest operator for phones nonpayment South Sudan overall rating: Unfavorable Source: World Bank. 586 Niletel’s homepage domain name has expired, leading to questions about its seriousness as a market participant. See http://www.niletel-ss.com/. 587 See “MTN invests in reviving South Sudanese unit,” CommsUpdate. https://www.commsupdate.com/lists/country/south-sudan/ 588 See “MTN Plans to Invest USD120m in South Sudan,” CommsUpdate (TeleGeography, Washington, DC, October 12, 2021), https://www.commsupdate. com/articles/2021/10/12/mtn-plans-to-invest-usd120m-in-south-sudan/. 589 See Republic of South Sudan Taxation Act 2009, Schedules II & III, http://www.mofep-grss.org/wp-content/uploads/2009/08/South-Sudan-Taxa- tion-Act-2009.pdf. 590 See Taxation Amendment Act, 2016, http://www.mofep-grss.org/wp-content/uploads/2017/02/Taxation-Act_2016.pdf. 591 “South Sudan Raises Tax on Telecoms Services” CommsUpdate (TeleGeography, Washington, DC, February 1, 2018), https://www.commsupdate.com/ articles/2018/02/01/south-sudan-raises-tax-on-telecoms-services/. 592 See Schedule 1 of the 2019-2020 Financial Act, https://nra.gov.ss/docs/FY-2019-2020-Financial-Act_2.pdf. 593 “Vivacell Shut Down for Failing to Pay Taxes,” CommsUpdate (TeleGeography, Washington, DC, March 28, 2018), https://www.commsupdate.com/arti- cles/2018/03/28/vivacell-shut-down-for-failing-to-pay-taxes/. 594 See World Bank and Altai consulting, “Mobile Money Ecosystem Survey in South Sudan” (World Banka and Altai Consulting, Washington, DC, 2019), 6, https://documents1.worldbank.org/curated/en/460341563539588094/pdf/Mobile-Money-Ecosystem-Survey-in-South-Sudan-Exploring-the-Cur- rent-and-Future-Potential-of-Using-Mobile-Money-for-Effective-Humanitarian-and-Development-Cash-Programming-Executive-Summary.pdf. 99 South Sudan: Summary of key findings across all the internal factors Table 18 summarizes the internal investment climate factor assessments and sets out the key relevant facts leading to each score. Table 18: South Sudan: Assessment of internal factors impacting the telecom investment climate Score Internal factor assessed Key relevant facts Multiple market exits Market open to entry 0 Two remaining incumbents have no license certainty 2016 and 2018, state shut down mobile operators Ease of private investment 0 Zain and MTN curtailed investment for several years Spectrum needs met 1  Uncertainty in spectrum use scope and duration Dual licensing structure prejudicial, drove two operators from the market Level playing field 0 Market imbalance between remaining two operators is growing High level of sector-specific taxes Fiscal reasonableness 0 Uncertain and uneven handling of taxation Suspension of largest operator for nonpayment of taxes All 1 Source: MacMillan Keck. 6.3 Assessment of external South Sudanese telecom investment climate factors Five external factors during the conflict that impacted the climate for telecom investment in South Sudan were assessed: (1) military or paramilitary interference, (2) international sanctions, (3) travel restrictions, (4) international aid for telecommunications, and (5) international security intervention. Each factor is discussed in turn below, followed by a summary of key findings for all the external factors. South Sudan: Military or paramilitary interference? South Sudan has a unique position on inward shipping. As a landlocked country, heavy shipments of goods must pass overland through multiple countries and border crossings. Once reaching South Sudan, they must be carried over a poor, mostly unpaved road system and with road transport through the center of the country seasonally blocked (forcing transport by boat) by the flooding of the Nile. Reports have indicated that telecommunications infrastructure has been severely impacted. When the International Red Cross brought satellite phones to a town in South Sudan in 2014 and permitted residents to make three-minute phone calls, it was the first time they had been able to speak with relatives in two years.595 In 2018, a medical aid group in South Sudan was forced to suspend its mission when unidentified armed men stormed its compound and destroyed its vehicles and communications equipment.596 Logistics difficulties have included the downing of UN mission helicopters and the need to obtain prior government approval to transport goods.597 South Sudan was assigned an unfavorable rating for military or paramilitary interference. 595 "South Sudan – Three Minutes, One Call" (Legacy of War Project, Chester, VT, September 2015), http://legacyofwar.com/south-sudan-three-minutes-one- call/. 596 “Medical Aid Group MSF Suspends Work in Part of South Sudan after Office Overrun,” Reuters (July 24, 2018), https://www.reuters.com/article/uk-southsu- dan-unrest-idUKKBN1KE1Y0. 597 "The Crisis in South Sudan," Humanitarian Exchange No. 68 (Overseas Development Institute, London, January 2017), 14, https://odihpn.org/wp-content/ uploads/2017/01/HE-68-web.pdf. 100 South Sudan: International sanctions? air travel to South Sudan remains volatile. In the event of As equipment shipments travel through multiple countries a serious deterioration, similar to those in July 2016 and over land from the port on the east coast of Africa, the December 2013, the Juba airport may be closed on short carrier must pass through multiple border checkpoints notice. France, Germany, and the United Kingdom still with the potential to stop the shipment at any point due to advise their air carriers against flying over South Sudan the embargoes against South Sudan as a final destination. below certain altitudes due to the risk posed by anti- The country has been subject to various US, EU, and UN aircraft weaponry. The United States rescinded a similar sanctions against arms imports, although none have been warning in August 2019. directed at telecommunications equipment or South Sudan’s operators. In addition, non-state actors within The primary current risk faced by air carriers and their South Sudan’s territory effectively set up blockades passengers is the poor quality of air traffic control provision requiring payment to allow goods to pass.598 There are for overflights below certain altitudes or for aircraft widespread reports that both government and opposition operating to or from the Juba airport. In January 2021, the troops set up checkpoints to extort money from aid International Civil Aviation Organization warned of service agencies seeking to provide humanitarian assistance.599 In disruptions and lack of qualified air traffic control personnel, 2017, more than 70 checkpoints were established along the lack of contingencies in place, communication issues, the 400-mile road between Juba and the northern city the number of withdrawn navigation aids, and the lack of of Bentiu, with soldiers or opposition forces demanding information being supplied to operators on these issues.603 money or food, and the South Sudan government was Although there were no travel restrictions on South Sudan denying 80 permits per month for transport flights for during the conflict, most major world air carriers do not humanitarian assistance.600 serve South Sudan and the regional carriers that fly into Juba face less than ideal security and safety. 604 Many South Sudan was assigned an uncertain rating for foreign governments have cautioned against traveling to international sanctions during 2013–20. South Sudan due to security reasons, including Canada,605 the United Kingdom,606 and the United States.607 South Sudan was assigned an uncertain rating for travel South Sudan: Travel restrictions? restrictions. South Sudan’s air space remained relatively dangerous throughout the 2013–20 conflict period, although regional air carriers served the Juba airport with scheduled flights South Sudan: International aid for for most of that period. telecommunications? South Sudan has received significant humanitarian aid from All commercial air traffic was suspended during and for a the international community for basic and urgent needs of time after the December 2013 events at the outset of the the population, food assistance, and health care,608 but it conflict. Commercial flights were also suspended in June received only negligible international aid for its telecom 2016 when the South Sudanese army declared its intention sector during the conflict. to shoot down aircraft without permits and/or not following proper procedures.601 South Sudan became a member of the World Bank Group in early 2012. The World Bank provided financial and Although the September 2018 ceasefire in South Sudan technical support for regulatory support and development has largely held, South Sudan’s airspace was temporarily of a mobile payments and trade integration policy that closed in April 2019 during and following the military coup led to the adoption of mobile money regulations by the in Sudan.602 Overall, the political and security situation for 598 Øystein H. Rolandsen, “Trade, Peace-Building and Hybrid Governance in the Sudan-South Sudan Borderlands,” Conflict, Security & Development 19, no. 1 (2019), https://www.tandfonline.com/doi/full/10.1080/14678802.2019.1561628?scroll=top&needAccess=true. 599 See “South Sudan Investment Climate Statement: South Sudan” (US Department of State, Washington, DC, 2021), https://www.state.gov/reports/2021-in- vestment-climate-statements/south-sudan. 600 Kevin Sieff, “South Sudan’s People Are Starving, and Fighters Are Blocking Aid,” The Washington Post (March 31, 2017), https://www.washingtonpost.com/ world/africa/south-sudans-people-are-starving-and-fighters-are-blocking-aid/2017/03/31/69ef31c2-0f60-11e7-aa57-2ca1b05c41b8_story.html. 601 "South Sudan: Security Forces Deliberately Preventing People from Leaving the Country," Press Release (Amnesty International, London, July 14, 2016), https://www.amnesty.org/en/latest/press-release/2016/07/south-sudan-security-forces-deliberately-preventing-people-from-leaving-the-country/. 602 “South Sudan,” Safe Airspace Conflict Zone & Risk Database (2021), https://safeairspace.net/south-sudan/. 603 “South Sudan,” Safe Airspace Conflict Zone & Risk Database (2021), https://safeairspace.net/south-sudan/. 604 See South Sudan Civil Aviation Authority website (last visited November 11, 2021), https://www.ssdcaa.com/; https://www.sleepinginairports.net/sur- vey/2017-worst-airports-overall-experience.htm. Juba airport was ranked as the worst airport in the world in 2017 by the Sleeping in Airports website, but travelers considered the opening of a new terminal in 2018 a major improvement. See https://www.sleepinginairports.net/survey/worst-airports-2019.htm. 605 Travel Advice and Advisories for South Sudan (Government of Canada, May 4, 2021), https://travel.gc.ca/destinations/south-sudan. 606 GOV.UK > Passports, Travel and Living Abroad > Travel Abroad > Foreign Travel Advice > South Sudan (2021), https://www.gov.uk/foreign-travel-advice/ south-sudan/safety-and-security. 607 Travel.State.Gov > Travel Advisories > Sudan Travel Advisory (2021), https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/sudan-trav- el-advisory.html. 608 Erol Yayboke, “Accessing South Sudan: Humanitarian Aid in a Time of Crisis” (Center for Strategic and International Studies, Washington, DC, November 27, 2018), https://www.csis.org/analysis/accessing-south-sudan-humanitarian-aid-time-crisis. 101 Central Bank of South Sudan in December 2015.609 However, although the World Bank Group has provided substantial technical assistance and financial support to South Sudan, the planned financial support to the telecom sector, which was combined with a transport sector project (P131426), was canceled in 2018. In 2013, the African Development Bank provided technical assistance to the Government of South Sudan for telecommunications reform and development as part of a broader infrastructure action plan,610 but again, the promised investment failed to materialize. South Sudan was assigned an unfavorable rating for international aid for telecommunications. South Sudan: International security intervention? South Sudan has received security support from the international community through the UN, but prior deployments of UN peacekeeping forces were unable to stop the fighting or casualties prior to the 2017 ceasefire.611 In December 2013, the UN authorized an increase in the peacekeeping force deployment in South Sudan from 7,600 to 13,600, and the Security Council voted to shift the mandate from nation-building to protection of civilians. An additional 4,000 troops were deployed in 2017.612 The UN Secretary-General’s Special Representative has said that the United Nations was unprepared for the conflict in South Sudan, and the international community’s interventions have not had a meaningful impact on the security situation.613 South Sudan received an unfavorable rating for international security intervention. South Sudan: Summary of key findings across all the external factors Table 19 summarizes the scoring of external factors likely to have had an impact on the development of the telecom sector in South Sudan and the key relevant facts that form the basis for each score. Table 19: South Sudan: Assessment of external factors impacting the telecom investment climate Score Internal factor assessed Key relevant facts Military interference 0 Armed militias disrupt supply routes and damage infrastructure Non-state actors set up hundreds of checkpoints requiring payment for goods to International sanctions 1 move Poor airspace and air traffic safety Travel restrictions 1 No major air carriers serve Juba International aid for 0 De minimis telecom-related aid telecommunications International security 0 No effective security support intervention All 2 Source: MacMillan Keck. 609 See World Bank Group, “Country Engagement Note for the Republic of South Sudan for the Period FY18–19,” Report No. 120369‐SS (World Bank, Wash- ington, DC, November 7, 2017), 36, https://documents1.worldbank.org/curated/en/112071516734556800/pdf/IDA-R2017-0340-11172017.pdf. 610 See African Development Bank, “Chapter 10 – Creation of a Communications Network,” Infrastructure Action Plan in South Sudan: A Program for Sus- tained Strong Economic Growth (African Development Bank, Abidjan, Côte d’Ivoire, 2013), https://www.afdb.org/en/countries/east-africa/south-sudan/ infrastructure-action-plan-in-south-sudan-a-program-for-sustained-strong-economic-growth. 611 Rick Gladstone, “U.N. Peacekeeping Chief Issues Warning on South Sudan,” The New York Times (October 18, 2017), https://www.nytimes. com/2017/10/17/world/africa/south-sudan-war.html. 612 “Civil War in South Sudan,” Global Conflict Tracker (Council on Foreign Relations, New York, November 10, 2021), https://www.cfr.org/global-con- flict-tracker/conflict/civil-war-south-sudan. 613 Keiichi Tanabe, "Analysis of External Factors of Civil War in South Sudan: From Bilateral, Regional, and International Aspects" (2018), 12–19, https://ww- w.u-tokai.ac.jp/uploads/sites/5/2021/03/04.pdf. 102 6.4 South Sudan’s projected and actual teledensity evolution The following passages discuss South Sudan’s mobile teledensity evolution and the impact of the conflict. South Sudan’s unique subscriber mobile penetration South Sudan’s mobile penetration is considered from 2011 (when it became a separate country from Sudan) through 2020, including the South Sudan civil war from 2013 through 2020 (during half of which the war still continued). Figure 19 shows the results. The adult-age (15+) population (green dashed line in the graph) serves as an invisible upper bound on potential unique customer mobile penetration. Mobile penetration in Ethiopia, Sudan, and Uganda (the peer group) is also shown. Figure 19: South Sudan’s unique subscriber mobile penetration, 2011–20 Source: MacMillan Keck. When it achieved independence in 2011, South Sudan’s mobile penetration was less than half the mobile penetration in Sudan and Uganda, but it was almost the same as in Ethiopia. South Sudan’s actual mobile penetration remained relatively flat from 2012 until 2015, then began to decline, experiencing a steep decline in 2018, and by 2020 had not recovered to 2012 levels. Under the but-for-the-conflict projections, South Sudan would still be behind all three countries in the peer group in mobile penetration, but it would have achieved about double its current level by 2020 – and would still be near the level in Ethiopia. Although the demand side of South Sudan’s market is severely challenged, supply-side impacts have contributed significantly to its teledensity underperformance. South Sudan’s mobile operators have faced a relatively hostile domestic operating environment, with disputes over the validity of concessions previously issued by Sudan’s government and network shutdowns by South Sudanese tax authorities. They also faced significant destruction of infrastructure during the conflict and declining demand due to austere macroeconomic conditions. All these factors have led to some market exits and discouraged investment by the remaining operators. Unique subscriber penetration is at 14.7 percent against total subscriber identity module (SIM) penetration of 22.6 percent (a 53.7 percent differential). The actual growth profile shows no growth for two years and then a steady decline to 2018 before a mild recovery to 2020. The lack of any regulatory certainty with regard to spectrum, licensing, and general market conditions meant that only two mobile operators (of four that were licensed in 2013) remained in 2020, and both appear to be stagnating. South Sudan’s actual mobile penetration trend follows a similar profile (although significantly lower) to that of Ethiopia, but this is because the latter downgraded its estimates for mobile subscribers ahead of a planned partial privatization of the incumbent; in South Sudan, it was likely due to the ejection of Vivacell from the market. 103 South Sudan’s penetration in 2011 was almost 70 percent lower than that of Sudan, indicating that South Sudan suffered from a measure of neglect while it was part of Sudan. The situation improved during the period when two licenses (Vivacell and Gemtel – granted in 2006) and two concessions (MTN and Zain) were active – in 2011–13. However, after the conflict started, the situation held steady for a short while before declining. The projected penetration (the orange line in figure 19) presents a reasonably conservative growth path for a but-for-the-conflict scenario, behind the state-owned telco in Ethiopia and on a similar trend to Uganda and Sudan (in 2014–20). South Sudan (MTN) introduced 4G services in December 2020, after 3G had been introduced in 2013. That by March 2021 both Zain and MTN had live 4G networks provides an indication that perhaps there is some commitment to grow the market, despite the difficult conditions prevailing. In comparison, Uganda and Sudan launched 4G service in 2015 and 2016, respectively, and Ethiopia only launched 4G via Etisalat in 2020. South Sudan (actual penetration 14.7 percent) is well below the notional limit of adult population (58 percent). This would indicate that the market is far behind where it should be with a projected penetration of 28.4 percent in a but-for-the- conflict scenario, still far behind the notional limit. The civil conflict has been devastating to the mobile telecom market, with Vivacell and Gemtel closing and Zain and MTN only now rebuilding their network capacity and technology. South Sudan’s peers show that they also are well below their notional adult population limit – Sudan at 48.7 percent penetration versus 60 percent adult population, Uganda at 45.4 percent penetration versus 53 percent adult population, and Ethiopia at 32.6 percent penetration versus 60 percent adult population. With a 2020 deficit of 13.7 percentage points between the projected and actual penetration, the projection remains conservative in its view of potential market development in South Sudan. It is a very poor country with little infrastructure and is not likely to grow rapidly to catch up with its neighbors, especially with the competitive changes due in the Ethiopian market likely to cause a rapid jump in penetration there. South Sudan’s mobile penetration growth rate South Sudan’s mobile penetration growth rate is also considered during 2011–2020. The results are shown in figure 20. Figure 20: South Sudan’s mobile penetration growth rate, 2011–20 Civil War Source: MacMillan Keck. Note: RoC = Rate of Change 104 South Sudan’s mobile penetration experienced poor 6.5 Correlating South Sudan’s supply- growth levels from the inception of the conflict in 2013 through 2020. It experienced zero or negative growth side investment climate and teledensity virtually every year through 2018. Although South Sudan saw a return of positive growth in 2019 and 2020, the These assessments were brought together to form an growth rates are still very low, especially when applied to overall view of the relationship between the supply- such a low subscriber base. side telecom investment climate and the evolution of teledensity in South Sudan during the conflict. The yellow line in figure 20 represents the average annual mobile penetration growth rate during two periods – the South Sudan was assessed as having an internal factor pre-conflict period from 2011 through 2013 and the investment climate rating of 1 and an external factor conflict period from 2013 through 2020. The grey line in investment climate rating of 1. Key internal factors the figure represents the average but-for-the-conflict included (1) competing regulatory frameworks (legacy annual penetration growth rate during the conflict from Sudan and new in South Sudan) that undermined the period.614 The difference between the grey and yellow lines network operator confidence that is necessary to attract during the conflict period is the average annual growth investment; and (2) heavy reliance by the South Sudanese rate deficit. The difference, as graphed in figure 20, is the government on the telecom sector for fiscal revenues, which most significant of any of the conflict countries considered. led to oppressive fiscal impositions and the shuttering of South Sudan is the only country with a negative growth the country’s largest mobile operator. The key external rate over the conflict, despite some improvement in 2019 factors were (1) a broad arms embargo on equipment and 2020. However, with an actual annual growth rate of imports, technology transfer, and technical assistance; (2) -0.4 percent and a but-for-the-conflict annual growth rate lack of international aid to the telecom sector; and (3) the of 1.34 percent, South Sudan experienced a mammoth 129 absence of any effective international conflict intervention percent deficit in annual growth during the conflict. to mitigate the impact of the conflict. The steep decline in 2018 appears to be a direct result of South Sudan’s actual average annual teledensity growth the government’s shutdown of Vivacel, which was then the rate fell as a result of the conflict, from +1.34 percent country’s largest mobile operator. The uptick in the two (projected) to -0.39 percent. This represents a decrease subsequent years may reflect the impact of the signing of a in the nominal growth rate of 1.73 percentage points. peace agreement in 2018. Nominally, this would appear to represent a 129 percent growth rate deficit compared with the 1.34 percent South Sudan is the only conflict country studied which has projected but-for-the-conflict teledensity growth rate. a net negative growth rate over the conflict period. This South Sudan had the lowest telecom investment climate appears to be due to existing instability and regulatory rating and the only negative average teledensity growth uncertainty in the new country, which continued for the rate over its conflict period. duration of the conflict. 614 The differences between the actual and but-for-the-conflict average growth rates up to 2013 are different in this case only because the deterioration was considered to have begun during the tense and challenging year of 2013, during which the level of market uncertainty and consequent restrained infra- structure investment impacted growth. 105 7 Syrian Arab Republic This case study assesses the impact on the telecom sector of the civil war in the Syrian Arab Republic (and related foreign incursions) from 2011 to 2020 (at which time the conflict was still ongoing). 7.1 Syrian context The following passages provide information on Syria’s geography, demographics, and economy; the conflict; and the telecom sector. Syria’s geography, demographics, and economy Syria is located in the Middle East, bordering the Mediterranean Sea between Lebanon to the southeast and Turkiye to the north (map 6). It is also bordered by Iraq to the southeast, Jordan to the south, and Israel to the southwest. Map 6: The Syrian Arab Republic Silopi 38°E 39°E 40°E Mardin 41°E 42°E ¸ Viransehir SYRIAN ARAB REPUBLIC Gaziantep Sanliurfa Kiziltepe Nusaybin Al Malika 37°N Adana TÜRKİYE Al Qāmīshli Barak Ceylanpinar Tarsus Maydān Ikbiz Tall Abu Yumurtalik Ra's al 'Ayn Zahir ¸ Icel Gulf of Jarāblus Akçakale Iskenderun Kilis Eu Na Tall Tamr hr A  Tall al Abyad lK ph Iskenderun Afrin Manbij h āb ū Hasakah Al ¸ Karatas r rates A'zaz Tall ‘Afar Kirikhan Al Bāb Sinjar Uluçinar Reyhanli ¸ Halab (Aleppo) AL HASAKAH ¸ Antakya AR R AQQA H Na h r Harim As Safira Buhayrat 36°N 36°N Idlib Sabkhat Al al Asad Ar Raqqah Jisr-Ash- Jabbul AL Shugur ALEPPO CYPRUS L ĀDHIQĪ YA Arīhā  Madīnat ath SYRIAN IDLIB Thawrah ARAB REP. At Tibni Al Lādhiqīya DAYR AZ ZAWR (Latakia) ¸ HAMĀ H Dayr az Zawr Rawdah Bānyās As Sa'an MEDITERRANEAN TARTUS ¸ ¸ Masyaf Hamāh (Hamath) 35°N 35°N Al Mayādīn Eu IRAQ ph r SEA ¸ ¸ Tartus Ar Rastan As Sukhnah es at Safita Himş ¸ (Homs) HIM ¸ Ş Buhayrat Tiyas - lus Tarabu Qattinah Tadmor (Tripoli) Al Quşayr (Palmyra) Abū Kamāl Al Qa'im Jubayl LEBANON Al Qaryatayn National capital 34°N 34°N Baalbek An Nabk Provincial capital Bayrūt (Beirut) Zahle Yabrud Town, village Sab' Ābār Az Zabadānī Al Airport At Tall Qutayfah Saida International boundary Nabatiye Dimashq (Damascus) Provincial boundary et Tahta Qatana Darayya ¸ ¸ Tanf At DIMASH Q Expressway ¸ (Tyre) Sūr Main road Al Qunaytirah AL As Sanamayn Ar Rutbah Secondary road 33°N 33°N QUN AYTIRAH DAR' Ā Shahba Railroad Lake Izra' Oil pipeline Haifa Tiberias As Suwaydā' JORDAN Trebil Nazareth Dar'ā AS ISRAEL Irbid SUWAYDĀ ' The boundaries and names shown and the designations used on this map do not imply official endorsement or 0 20 40 60 80 100 km acceptance by the United Nations. 0 20 40 60 mi Netanya Salkhad 35°E 36°E Al Mafraq 37°E 38°E 39°E 40°E 41°E 42°E Map No. 4204 Rev. 4 UNITED NATIONS Office of Information and Communications Technology Source: UN Geospatial > Syrian Arab Republic (April 1, 2012), https://www.un.org/geospatial/content/syrian-arab-republic. August 2022 Geospatial Information Section 106 Syria has a population of over 19.4 million and a land area The conflict in Syria of 185,180 square kilometers (about 71,498 square miles). Syria’s conflict has undergone complex transformations The ongoing civil war has altered the distribution of the over time. What began with country-wide protests in 2011 population, with an estimated over 6 million Syrian refugees has transformed into a complex and devastating armed living abroad according to UN data. Over 56 percent of conflict involving dozens of national and international the population lives in urban areas. Damascus, the capital actors. The dynamics of violence and modes of warfare city, with a population of about 2.4 million, is located at an similarly changed, ranging from protests and riots to active hostilities, sieges and aerial bombardments, leaving oasis fed by the Barada River and is considered one of the a differential mark on cities, their social make up, their world’s oldest continuously inhabited cities. Aleppo has a infrastructure and service delivery. And while the war has population of about 2 million. The country’s life expectancy affected virtually all of Syria’s landscape and population at birth is about 73 years.615 in one way or another, the intensity of conflict varied across regions and over time with the center of Damascus Syria’s terrain is primarily semiarid and desert plateau as well as the coastal areas of Tartous and Latakia having between a narrow coastal plain and mountains in the been largely spared, while other regions experienced west. About 75.8 percent of the land area is used for large scale destruction of physical infrastructure and agriculture. The desert climate that prevails in much of massive displacements of the population. Apart from Syria is characterized by hot, dry, sunny summers from physical damage, the conflict had a significant fallout on June to August and mild, rainy winters from December to social and economic life. By end 2020, the conflict was estimated to have claimed more than 600,000 lives and February along the coast. Syria periodically experiences led many millions to flee the country, reducing the prewar cold weather, with snow or sleet in Damascus, which population by almost 18 percent to 17.5 million.619 Millions generally has mild-to-cool winters and dry, hot, cloudless of others were displaced internally, 6.7 million of which by summers.616 Syria is subject to adverse drought conditions end 2020.620 Forced displacement and loss of life severely and in 2021 the country saw the worst drought in more disrupted economic organization and activities, causing than 70 years, affecting access to drinking water, electricity significant losses in virtually all economic sectors of about generation and irrigation water for millions. 60 percent relative to the pre-war GDP.621 Meanwhile, economic decline and high inflation pushed the number of Real gross domestic product (GDP) per capita was USD food-insecure people to 12.4 million, nearly 60 percent of 2,900 in 2015. GDP composition by sector of origin in 2017 the population.622 was 20 percent agriculture, 19.5 percent industry, and 60.8 percent services. Syria’s primary natural resources Phases of Conflict in Syria are petroleum, phosphates, chrome and manganese Early 2011 - late 2011 ores, asphalt, iron ore, rock salt, marble, gypsum, and The initial phase was determined by a cycle of protests and hydropower. Its primary commodity exports in 2019 were retaliation among activists, protesters, and the government security forces. A range of socio-economic grievances olive oil, cumin seeds, pistachios, tomatoes, apples, pears, triggered by the events of the uprisings in large parts of spices, and pitted fruits. Syria also exports electricity, the Arab world – widely known as the Arab Spring - were finished goods, and services. The labor force was about 3.8 the initial drivers of mass-protests all over the country. The million in 2017, with an estimated 6.8 million refugees living protests quickly escalated as disproportionate use of force abroad during the Conflict period. Unemployment was in to repress protests triggered opposition groups to organize the region of 50 percent in 2017. Today, 59.3 percent of the and arm, causing casualties among both protesters and population has access to electricity, over 89.7 percent has security forces. access to sanitary facilities, and 93.9 percent has access to treated drinking water.617 The literacy rate in 2015 was 86.4 percent, including 91.7 percent of males and 81 percent of females.618 615 World Bank > DataBank > World Development Indicators > Syria (2020), https://data.worldbank.org/indicator/SP .DYN.LE00.IN?locations=SY. 616 World Bank > DataBank > World Development Indicators > Syria (2020), https://data.worldbank.org/indicator/SP .DYN.LE00.IN?locations=SY. 617 World Bank > DataBank > World Development Indicators > Syria (2020), https://databank.worldbank.org/source/world-development-indicators/Type/ TABLE/preview/on. 618 IndexMundi > Historical Data Graphs per Year > Demographics: Literacy > Syria (2015), https://www.indexmundi.com/g/g.aspx?c=sy&v=39. 619 United Nations (2019) “World population prospects 2019” UN Department of Economic and Social Affairs Population Division, available at: https://popu- lation.un.org/wpp/ 620 UNICEF (2021) “Whole of Syria Humanitarian Situation Report: May 2021” Available at: https://reliefweb.int/report/syrian-arab-republic/unicef-whole-syr- ia-humanitarian-situation-report-may-2021 621 World Bank (2017) “The Toll of War – The Economic and Social Consequences of the Conflict in Syria”, Washington DC 622 World Food Programme (2021) “Twelve million Syrians now in the grip of hunger, worn down by conflict and soaring food prices”, Press Release, Available at: https://www.wfp.org/news/twelve-million-syrians-now-grip-hunger-worn-down-conflict-and-soaring-food-prices 107 2012 up to early 2014 2015 to mid- 2018 Phase two marked the transition into a full-scale  armed Phase four marked the consolidation of the government’s conflict.  The protest movements turned into an armed position amid increased Russian and Iranian involvement. insurgency, fueled by a series of defections of soldiers and In this phase, Russia significantly increased its deployment officers from the Syrian armed forces that helped the Free of sophisticated weapons and air defense systems as well Syrian Army and other militias to organize and grow in as airpower. The government stopped its losses of territory members and military power. and slowly advanced on key rebel strongholds. Opposition groups, lacking the supply and technology to defend aerial These armed groups gained control over parts of major cities, attacks, resorted themselves to indiscriminate shelling including Aleppo, Hama, Dara’ and outskirts of Damascus of government-held areas with mortars and grenades, (Douma), inflicting serious harm to pro-government forces causing destruction and many civilian casualties, such which responded with aerial bombardments and shelling. as in west Aleppo. By the end of 2016, the government had taken over major cities and strategic positions, most In this phase, each battleground developed its own notably east Aleppo and other strategic towns in the west characteristics in terms of military organization, of the country, as well as the outskirts of Damascus by international and social support for either party.623 In 2018. These advances were accompanied by widespread the North, many different armed groups emerged from shelling and aerial bombardment that left large swaths of conservative and largely impoverished citizens that formerly rebel held areas destroyed. benefitted from organizational and financial support networks from Turkiye with funding mainly from some Gulf Mid-2018 to end of 2020 countries. Resources including weapons, ammunition, and The sixth phase was marked by a stalemate of force money were sporadic and fluctuating, facilitating a messy in the Idlib region while other parts of the country array of actors and groups that would frequently reshuffle experienced relative stability. While shying away from alliances, while growing radicalization and Islamization led direct involvement during much of the conflict, Turkiye to infighting among rebel groups. entered the scene in 2018/2019 when Syrian government forces prepared for advancing on Idlib, the last remaining Mid-2014 until the beginning of 2015 larger rebel-held area. A buffer zone agreement between Phase three witnessed the public establishment of the Turkiye and Russia in the fall of 2018 helped to avoid an Islamic State group (ISg) as well as gains in influence of other all-out attack of Syrian government forces based on a Islamist groups. This growing influence of Islamist forces Turkish commitment to prevent the most radical forces in lastingly transformed the conflict. ISg and other hardline Idlib to gain the upper hand. However, by January 2019, Islamist groups tapped on a large faction of foreign fighters radical Islamist groups became the dominating force in that helped to establish a self -proclaimed ‘caliphate’ that Idlib, which once again changed the course of the conflict. expanded from Iraq and claimed roughly a third of Syrian Offensives and counter-offensives left border areas of territory by 2014. More moderate rebel groups had to Idlib with significant damage from aerial bombardment forego influence. This changed the conflict as it gave rise by government forces and its allies but without significant to direct US-led military intervention in the North and advancements from either side. Turkiye prevented further provided opportunities for the government to close ranks Syrian government territorial gains by resorting to modern and concentrate political and military resources on the fight technology, notably weaponized drones, while the presence against ISg and whatever other groups it called terrorists. of US troops in Kurdish areas of the north-east prevented Raqqa, the capital of the self -proclaimed ‘caliphate’, and the resumption of open warfare in Hasakah, Raqqah, and Deir Azzour came to be the centers of conflict, with aerial Deir Azzour. Following a redeployment of US troops, bombardments by the US-led coalition, as well as rocket and Turkiye subsequently advanced to the Kurdish-held areas mortar shelling from all sides inflicting significant damage of Afrin, east of Idlib, effectively opening a new frontline to public infrastructure. This period equally was the most between Kurdish armed groups and Turkish forces that violent and claimed the record of more than 75,000 lives, triggered new alliances between the Syrian government more than 18,000 of which civilians. and Kurdish groups. 623 International Crisis Group (2013) “Syria’s Metastasising Conflicts” Middle East Report No 143 108 Syria’s telecom sector At the outset of the conflict, the two mobile operators From its independence in 1946 until 2001, the competed on a relatively even footing, Syriatel with a 55 telecommunications sector was controlled by percent market share and MTN Syria with a 45 percent the government.624 State-owned operator Syrian share. Coverage at the time was approximately 98 percent Telecommunications Establishment was incorporated in of the population. Both operators provided 2G and 3G 1985 as a monopoly. In 2001, the government awarded service.629 MTN Syria and Syriatel were operating at the two 15-year build-operate-transfer (BOT) concessions for time under BOT concessions that provided for significant Global System for Mobile Communications services, one revenue sharing and would eventually require them to turn to Syriatel, owned by Orascom of Egypt, and one (initially over their networks to the government.630 branded Spacetel and then Areeba) owned by the Lebanese company Investcom.625 The conflict affected the telecom market almost immediately in 2011. The auction for the third mobile Orascom pulled out of its Syriatel investment in 2003, license was quickly suspended due to growing violence.631 leaving ownership in the hands of Rami Makhlouf, President Telecommunications infrastructure and services were Assad’s cousin.626 MTN purchased Areeba in 2007.627 severely affected. The government has engaged in frequent network shutdowns during the conflict, certain Syria was undertaking a substantial telecommunications rebel factions have also shut down networks in areas under reform effort when the conflict started in 2011. The their control, and telecom infrastructure has been badly reform included passage of a new telecom law in 2011 and damaged.632 The US government-imposed sanctions on a competitive international tender to issue a third mobile Syriatel due to Rami Makhlouf’s ownership,633 followed license. The new law established a regulator and created quickly by the European Union.634 Syrian Telecom (previously the Syrian Telecommunications Establishment) as an exclusive fixed and international The imposition of sanctions hurt Syriatel in the market operator (and future inheritor of the BOT networks).628 in that it impacted Syria’s ability to import technological products, however, the country’s 2012 profits increased Since 2011, there have been two continuously competing by 29 percent over the prior year.635 However, MTN Syria’s mobile operators in Syria. Syriatel is majority-owned by market share dropped dramatically during the crisis, with Rami Makhouf, a cousin of President Bashar al-Assad. estimates now suggesting that Syriatel had a 64 percent MTN Syria is the local subsidiary of MTN Group, but MTN subscriber share and a 75-80 percent revenue share in Group has been looking to exit the market, in line with its 2020. In 2013, MTN Syria reported that 25 percent of its c orporate strategy. Following several efforts to license cell sites were not operational.636 a third operator, a third license was awarded in 2022 to Syrian company (Wafa Telecom), which multiple news reports say is owned by, or linked to, Asma al-Assad . 624 Country Profile: Syria (Federal Research Division, US Library of Congress, Washington, DC, April 2005), 15, https://www.loc.gov/rr/frd/cs/profiles/Syr- ia-new.pdf. 625 See Rory Macmillan, “Telecommunications Reform in the Eastern Mediterranean: Jordan, Egypt, Lebanon and Syria” (The Middle East and North Africa Legal Yearbook, 2001), 11, http://www.macmillankeck.pro/media/pdf/10.%20Telecom%20Reform%20in%20Eastern%20Mediterranean.pdf. 626 Zina Moukheiber, “Target of Deadly Protests In Syria Has US Investments,” Forbes (March 22, 2011), https://www.forbes.com/sites/zinamoukhei- ber/2011/03/22/target-of-deadly-protests-in-syria-has-us-investments/?sh=7edd85e50ad8. 627 “MTN Absorbs Syria’s Areeba,” CommsUpdate (TeleGeography, Washington, DC, July 2, 2007), https://www.commsupdate.com/articles/2007/07/02/ mtn-absorbs-syrias-areeba/. 628 World Bank, "Mashreq 2.0: Digital Transformation for Inclusive Growth and Jobs" (World Bank, Washington, DC, 2018), 31, http://documents1.worldbank. org/curated/en/246561561495359944/pdf/Mashreq-2-0-Digital-Transformation-for-Inclusive-Growth-and-Jobs.pdf. 629 Telephone interview by Andrew Johnson with former MTN Syria Chief Operating Officer Abdallah Homsi (February 5, 2021). 630 “SyriaTel, MTN Secure 20-year Operating Licences in Syria” CommsUpdate (TeleGeography, Washington, DC, January 9, 2015), https://www.commsup- date.com/articles/2015/01/09/syriatel-mtn-secure-20-year-operating-licences-in-syria/. 631 “Government Postpones Third Licence Auction amid Continuing Unrest,” CommsUpdate (TeleGeography, Washington, DC, April 26, 2011), https://www. commsupdate.com/articles/2011/04/26/government-postpones-third-licence-auction-amid-continuing-unrest/. 632 Freedom House, “Freedom on the Net 2020: Syria” (Freedom House, Washington, DC, 2020), https://freedomhouse.org/country/syria/freedom-net/2020. 633 “US Imposes Sanctions on SyriaTel,” CommsUpdate (TeleGeography, Washington, DC, August 11, 2011), https://www.commsupdate.com/arti- cles/2011/08/11/us-imposes-sanctions-on-syriatel/. 634 “EU Sanctions Hit SyriaTel,” CommsUpdate (TeleGeography, Washington, DC, September 26, 2011), https://www.commsupdate.com/articles/2011/09/26/ eu-sanctions-hit-syriatel/. 635 “SyriaTel Announces Its Consolidated Financial Results for 9M12,” CommsUpdate (TeleGeography, Washington, DC, February 22, 2013), https://www. commsupdate.com/articles/2013/02/22/syriatel-announces-its-consolidated-financial-results-for-9m12/. 636 “MTN Syria: Data Drives FY12 Revenues, but 25% of Cell Sites Non-Operational,” CommsUpdate (TeleGeography, Washington, DC, March 7, 2013), https://www.commsupdate.com/articles/2013/03/07/mtn-syria-data-drives-fy12-revenues-but-25-of-cell-sites-non-operational/. 109 In 2015, the BOT concessions awarded to MTN and Syriatel 7.2 Assessment of internal Syrian were both converted into 20-year freehold licenses. While the licenses generated substantial fees for the Syrian telecom investment climate factors government, they also reduced the revenue sharing obligations required under the concession arrangement.637 Five internal factors during the conflict that impacted Syriatel’s revenues increased 37 percent in 2016, with the climate for telecom investment were assessed: (1) earnings per share almost doubling.638 market open to entry, (2) ease of private investment, (3) spectrum needs met, (4) level playing field, and (5) fiscal The sector has come under increasing fiscal and regulatory reasonableness. Each factor is discussed in turn below, pressure. This fiscal pressure has coincided with the followed by a summary of key findings across all the internal loss of government revenue shares due to the transition factors. of the BOT concessions into licenses. In 2020, a Syrian Court placed Syriatel under judicial custody for failure to Syria: Market open to entry? pay back taxes. Syriatel’s controlling shareholder, Rami Syria has competing private sector operators and has Makhlouf, publicly disputed the decision.639 On February intermittently sought to introduce a third operator. 25, 2021, a Syrian court placed MTN Syria under a “judicial However, attempts to attract a third operator have been guardianship” and awarded the guardianship to Saudi- unsuccessful, and in 2017, as part of an effort to improve owned minority MTN Syria shareholder Teleinvest. At the economic ties with the Islamic Republic of Iran, it was time of the guardianship, Teleinvest was negotiating with announced that an Iranian consortium would be awarded a MTN Group to purchase MTN’s majority share of MTN third mobile license in Syria, with a minority stake to be held Syria. MTN Group has formally appealed the decision and by the state-owned enterprise (SOE) Syrian Telecom.643 disputes the government’s action.640 Syria was assigned an uncertain score for openness to market entry. Syriatel exited its judicial guardianship in July 2021 under an arrangement providing for financial guarantees with respect to alleged back tax payments and appointment of Syria: Ease of private investment? Although Syria adopted a modern telecom law in 2011 that a new board.641 MTN has confirmed its intention to exit provides a legal basis for private investment, the sector the Syrian market, describing the operating conditions in faces serious challenges due to the damage to telecom Syria as “intolerable” and indicating an intention to seek infrastructure, political instability, and Syrian Telecom’s international legal redress.642 With the two recent judicial monopoly on fixed networks and the international guardianships over both private mobile operators and gateway.644 Although private internet service providers MTN’s desire to exit the market, the future of the telecom can legally be licensed, the government exercises heavy sector in Syria is in jeopardy. security-related controls over communications network ownership and access. “SyriaTel, MTN Secure 20-Year Operating Licences in Syria,” CommsUpdate (TeleGeography, Washington, DC, January 9, 2015), https://www.commsup- date.com/articles/2015/01/09/syriatel-mtn-secure-20-year-operating-licences-in-syria/. 638 “SyriaTel Reports 37% Increase in Revenues in FY2016,” CommsUpdate (TeleGeography, Washington, DC, May 2, 2017), https://www.commsupdate. com/articles/2017/05/02/syriatel-reports-37-increase-in-revenues-in-fy2016/. 639 “Court Orders SyriaTel to Be Placed under Judicial Custody” CommsUpdate (TeleGeography, Washington, DC, June 9, 2020), https://www.commsupdate. com/articles/2020/06/09/court-orders-syriatel-to-be-placed-under-judicial-custody/. 640 “MTN Group Responds to Syrian Court’s MTN Syria Ruling” CommsUpdate (TeleGeography, Washington, DC, March 1, 2021), https://www.commsup- date.com/articles/2021/03/01/mtn-group-responds-to-syrian-courts-mtn-syria-ruling/; “South African Mobile Operator MTN Eyes $65 Million Deal for Syrian Business,” Reuters (February 28, 2021), https://www.reuters.com/article/uk-mtn-group-syria/south-african-mobile-operator-mtn-eyes-65-mil- lion-deal-for-syrian-business-idUSKCN2AS0BJ. 641 “SyriaTel Exits Judicial Custody under New Management,” CommsUpdate (TeleGeography, Washington, DC, July 27, 2021), https://www.commsupdate. com/articles/2021/07/27/syriatel-exits-judicial-custody-under-new-management/. 642 “MTN Confirms Plans to Exit Syria after Losing Control of Unit,” CommsUpdate (TeleGeography, Washington, DC, August 13, 2021), https://www.comm- supdate.com/articles/2021/08/13/mtn-confirms-plans-to-exit-syria-after-losing-control-of-unit/. 643 “Iranian Consortium to Be Awarded a Mobile Licence in Syria” CommsUpdate (TeleGeography, Washington, DC, January 18, 2017), https://www.comm- supdate.com/articles/2017/01/18/iranian-consortium-to-be-awarded-a-mobile-licence-in-syria/. 644 World Bank, "Mashreq 2.0: Digital Transformation for Inclusive Growth and Jobs" (World Bank, Washington, DC, 2018), 31, https://documents1.world- bank.org/curated/en/246561561495359944/pdf/Mashreq-2-0-Digital-Transformation-for-Inclusive-Growth-and-Jobs.pdf. 110 In 2015, the BOT concessions held by MTN Syria and Syria: Fiscal reasonableness? Syriatel were converted into 20-year freehold licenses.645 The nominal tax rate for corporate income tax in Syria has However, in 2017, as part of an effort to improve economic been 22 percent since the passage of the Income Tax Law ties with the Islamic Republic of Iran, it appeared that an of 2003, Law No. 24/2003.649 Syria also imposes a relatively Iranian consortium would be awarded a third mobile license high 10 percent import duty applicable to handsets, in Syria, with a minority stake to be held by the SOE Syrian although this tax was not targeted specifically to mobile Telecom.646 Nothing appears to have come of this proposal. phones.650 Beginning in 2016, Syria began imposing mobile- It is also not clear whether the judicial guardianships of specific taxes, including a fee for registering a phone on a MTN Syria and Syriatel are justified. mobile network and a fee for mobile operators to authorize a mobile phone.651 In addition to being regressive, these Syria was given an uncertain score for ease of private taxes are apparently designed to be revenue positive and investment. have led to an increase in smuggling, indicating a negative fiscal sector impact.652 Syria: Spectrum needs met? There do not appear to be any restrictions on technology, However, the heart of fiscal impositions on telecom and MTN Syria reported satisfaction with its ability to operators in Syria has come in the form of revenue shares obtain spectrum.647 Both mobile operators announced 4G in exchange for operating concessions. When the sector networks in 2017. Syriatel launched 4G in 2017 and MTN was opened to private investment, Syria issued 15-year Syria launched 4G in 2018.648 BOT concessions to Syriatel and MTN Syria in 2001 instead of issuing typical mobile licenses. The concessions provided Syria was assigned a favorable score for spectrum needs. for revenue shares of 30 percent for the first three years, 40 percent for years four and five, and then 50-60 percent for the remaining 10 years. In 2010, the concessions were Syria: Level playing field? converted to licenses and the revenue share was decreased The largest mobile operator, Syriatel, is majority-owned to 50 percent in 2015, 30 percent in 2016 and 2017, and 20 by President Assad’s cousin. Prior to the dispute between percent from 2018 through 2034. The reduction in revenue Syriatel and the government earlier in 2021, there was share resulted in a substantial loss for the Syrian Treasury. always a perception that Syriatel was favored. In 2017, it As a result, in 2018, the government began pressuring MTN appeared possible that a third license would be awarded for Syria and Syriatel to pay large amounts of “back taxes” that diplomatic purposes with minority government ownership. the operators interpreted as an after-the-fact attempt to Both operators are currently functioning under judicial claw back fiscal revenues.653 guardianships. Syria was assigned an unfavorable rating for level playing field. 645 “SyriaTel, MTN Secure 20-Year Operating Licences in Syria,” CommsUpdate (TeleGeography, Washington, DC, January 9, 2015), https://www.commsup- date.com/articles/2015/01/09/syriatel-mtn-secure-20-year-operating-licences-in-syria/. 646 “Iranian Consortium to Be Awarded a Mobile Licence in Syria,” CommsUpdate (TeleGeography, Washington, DC, January 18, 2017), https://www.comm- supdate.com/articles/2017/01/18/iranian-consortium-to-be-awarded-a-mobile-licence-in-syria/. 647 Telephone interview by Andrew Johnson with former MTN Syria Chief Operating Officer Abdallah Homsi (February 5, 2021). 648 “MTN Launches LTE in Syria,” CommsUpdate (TeleGeography, Washington, DC, December 3, 2018), https://www.commsupdate.com/arti- cles/2018/12/03/mtn-launches-lte-in-syria/. 649 See Syrian Law Journal > Taxation Law > Income Tax Law (2021), http://www.syria.law/index.php/main-legislation/taxation-law/. Deloitte, Internation- al Tax Syria Highlights (Deloitte, London, January 2019), https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-syriahigh- lights-2019.pdf?nc=1. 650 Deloitte, Global Mobile Tax Review 2011 at 33 (GSMA, London, 2011),https://www.gsma.com/publicpolicy/wp-content/uploads/2012/03/gsmaglobaltax- reviewnovember2011.pdf. 651 See Murad Abduljalil, Authorization of Mobile Devices in Syria Increases Government and Company Profits (Enab Baladi, Daraya, Syria, November 13, 2016), https://english.enabbaladi.net/archives/2016/11/authorization-mobile-devices-syria-increases-government-company-profits/. 652 See, for example, “Syria Bans Import of Mobile Phones,” Middle East Monitor (March 24, 2021), https://www.middleeastmonitor.com/20210324-syria- bans-import-of-mobile-phones/; “Syria Halts Cellphone Imports to Shore Up Forex Reserves amid US Sanctions,” Alarabia News (March 24, 2021), https:// english.alarabiya.net/business/technology/2021/03/24/Syria-crisis-Syria-halts-cellphone-imports-to-shore-up-forex-reserves-amid-US-sanctions. 653 See Rohan Advani, “As Spotlight Stays on Makhlouf, Syrian Telecoms Industry Undergoes Significant Changes” (Syria Direct, June 1, 2020), https://syriadi- rect.org/as-spotlight-stays-on-makhlouf-syrian-telecoms-industry-undergoes-significant-changes/. 111 In June 2020, a Syrian court placed Syriatel under judicial custody for failure to pay USD 1 billion in taxes.654 In February 2021, MTN Syria was similarly placed under judicial guardianship.655 After Syriatel was shut down by the tax authorities, the government increased penalties on illegal telecom services, a move intended to ensure that the government could collect sector revenues.656 Syria was assigned an unfavorable score for fiscal reasonableness due to the high revenue shares during much of the conflict period and apparently arbitrary and punitive enforcement of fiscal policies, as summarized in table 20. Table 20: Syrian Arab Republic: Fiscal reasonableness determination Syrian Arab Republic: fiscal reasonableness, 2001-2020 General taxes Sector-specific taxes Nontax impositions Predictability 22% corporate Separate charge to Price regulation Recent seizure of mobile income tax register mobile phone High revenue share – 60% companies for tax reasons after 10% import duty on network and 2011–14, 50% 2015, 30% the government lost money from authorize; revenue 2016–17, and 20% 2018 revenue sharing raising Surprise tax assessments Syrian Arab Republic overall rating: Unfavorable Source: World Bank. Syria: Summary of key findings across all the internal factors Table 21 summarizes the scoring of internal factors likely to have had an impact on the development of the telecom sector in Syria and the key relevant facts that form the basis for each score. Table 21: Syrian Arab Republic: Assessment of internal factors impacting the telecom investment climate Score Internal factor assessed Key relevant facts 2011, licensing of third mobile operator abandoned Market open to entry 1 2021, third mobile license awarded to Iranian firm with minority Syrian Arab Republic state ownership 2011, modern telecom law adopted Ease of private investment 1 Difficult security situation No apparent restrictions on technology Spectrum needs met 2 Both mobile operators announced 4G networks in 2017 2020, MTN announced plans to exit the Syrian Arab Republic Level playing field 0 2021, control of MTN awarded to state shareholder 2020, control of Syriatel awarded to state shareholder Telecom law awarded Syrian Telecom 20-year concession as fixed and international operator Fiscal reasonableness 0 Build-operate-transfer concessions required large revenue shares State seized control of both mobile operators All 4 Source: MacMillan Keck. 654 “Court Orders SyriaTel to Be Placed under Judicial Custody,” CommsUpdate (TeleGeography, Washington, DC, June 1, 2020), https://www.commsupdate. com/articles/2020/06/09/court-orders-syriatel-to-be-placed-under-judicial-custody/. 655 “MTN Group Responds to Syrian Court’s MTN Syria Ruling,” CommsUpdate (TeleGeography, Washington, DC, March 1, 2021), https://www.commsup- date.com/articles/2021/03/01/mtn-group-responds-to-syrian-courts-mtn-syria-ruling/. 656 “Govt Increases Penalties for Evading Fees for Telecom Services,” CommsUpdate (TeleGeography, Washington, DC, April 30, 2021), https://www.comm- supdate.com/articles/2021/04/30/govt-increases-penalties-for-evading-fees-for-telecom-services/. 112 7.3 Assessment of external Syrian The export controls also extended to export of services to Syria, such as information technology services, and telecom investment climate factors providing technological support or engineering services to the Syrian government.661 Similarly, the European Five external factors during the conflict that impacted the Union banned the export of certain goods to Syria, climate for telecom investment in Syria were assessed: including equipment and software used to monitor (1) military or paramilitary interference, (2) international telecommunications networks.662 Syria has been subject sanctions, (3) travel restrictions, (4) international aid to an added layer of sanctions compared with the other for telecommunications, and (5) international security countries in this study. The Arab League cut off transactions intervention. Each factor is discussed in turn below, with the Syrian Central Bank and stopped Arab funding of followed by a summary of key findings across all the projects in Syria.663 external factors. Trade with China has continued during the conflict, Syria: Military or paramilitary interference? however. After US sanctions were placed on Syriatel and Although a significant part of the Syrian territory has it was blocked from using US data centers, the majority of remained under the control of the Assad regime, large parts Syria’s data traffic was rerouted through a provider based of the territory have been active conflict zones for lengthy in Hong Kong SAR, China.664 periods since 2011. Non-state actors and foreign military actors have been accused of blocking access to food, water, Syria was assigned an uncertain rating for international and health services as a method of war.657 Civilian supply sanctions, balancing the existence of broad sanctions with chains that are essential to the telecom sector have faced Syria’s apparent ability to bypass those sanctions. de facto blockades of land and air travel.658 Non-state rebel groups have shut down networks in areas under Syria: Travel restrictions? their control, and telecom infrastructure has been badly Syria’s airspace was a no-fly zone for commercial aircraft damaged or destroyed.659 Areas of Syria under Islamic State and international air carriers suspended scheduled flights control often did not have any access to commercial mobile into Syria for a substantial part for the 2011–20 conflict networks. The Islamic State would block access to mobile period. Most airlines halted flights to Damascus and networks due to its concerns about communications with Aleppo in 2012. Flights were able to resume in 2019 as coalition forces.660 military operations receded, but many carriers delayed the resumption of flights. Syria was assigned an uncertain rating for foreign military or paramilitary interference. Although Syria was not subject to any broad security- related travel restrictions during the conflict, except a Syria: International sanctions? travel ban imposed on certain individuals associated with Syria has been subject to various broad international the Assad regime, the Islamic State in Iraq and the Levant sanctions and export controls during the conflict. (ISIL), and al-Qaeda, Syria became a crossroads for conflict The United States imposed a ban on the export of US-origin between and among foreign states and other foreign state goods (including through other countries) and equipment actors and combatants. Syria was regarded as dangerous that use more than de minimis US-origin parts. This is such and most governments strongly advised their citizens a high bar that even telecom equipment manufactured against nonessential travel to Syria. elsewhere and sold through a third country could potentially be subject to US export controls if it uses a small Syria received an unfavorable rating for travel restrictions. spare part manufactured in the United States. 657 “Syria: The Story of the Conflict.” BBC News (March 11, 2016), www.bbc.com/news/world-middle-east-26116868. 658 Ibid. 659 Freedom House, “Freedom on the Net 2020: Syria” (Freedom House, Washington, DC, 2020), https://freedomhouse.org/country/syria/freedom-net/2020. 660 “Cell Phone Networks: Control Towers Engulfing Syrians” Enab Baladi (December 14, 2018), https://english.enabbaladi.net/archives/2018/12/ cell-phone-networks-control-towers-engulfing-syrians/. See also “ISIS Blocks Cell Phone Networks in Mosul, Residents Say,” Haaretz (November 27, 2014), https://www.haaretz.com/isis-blocks-mosul-phone-networks-1.5336885. 661 “U.S. and European Sanctions on Syria” (Carter Center, Atlanta, GA, September 2020), 7–9, https://www.cartercenter.org/resources/pdfs/peace/conflict_ resolution/syria-conflict/us-and-european-sanctions-on-syria-091620.pdf. 662 See “U.S. and European Sanctions on Syria” (Carter Center, Atlanta, GA, September 2020), 10–12, https://www.cartercenter.org/resources/pdfs/peace/ conflict_resolution/syria-conflict/us-and-european-sanctions-on-syria-091620.pdf. 663 “Arab League: Carry Out, Monitor Syria Sanctions,” Human Rights Watch Blog (March 29, 2012), https://www.hrw.org/news/2012/03/29/ar- ab-league-carry-out-monitor-syria-sanctions. 664 Sean Gallagher, "Syria Sidesteps Sanctions by Turning to China for Internet Bandwidth," Ars Technica (August 21, 2012), https://arstechnica.com/tech-poli- cy/2012/08/us-sanctions-give-china-an-opportunity-to-supply-bandwidth-to-syrian-isps/. 113 Syria: International aid for telecommunications? With the exception of assistance to ensure connectivity for aid organizations, there has been little official donor assistance for the telecommunications sector in Syria, and the assistance has targeted security concerns and humanitarian relief. Syria was assigned an unfavorable rating for international aid for telecommunications. Syria: International security intervention? Security interventions from the international community in Syria during the conflict have primarily involved different countries providing support to rival groups. These interventions have therefore intended to reinforce the hostilities rather than create a more secure environment in the country. Syria was assigned an unfavorable rating for international security interventions. Syria: Summary of key findings across all the external factors Table 22 summarizes the scoring of external factors that are likely to have had an impact on the development of the telecom sector in Syria and the key relevant facts that form the basis for each score. Table 22: Syrian Arab Republic: Assessment of external factors impacting the telecom investment climate Score External factor assessed Key relevant facts Non-state paramilitary and foreign military actors have blocked movements of goods, destroyed infrastructure, and blocked service in some areas of the Syrian Military interference 1 Arab Republic Assad regime has protected operators and their infrastructure in other areas of Syria International sanctions 1 Broad international bans on goods, services, and technology Commercial air travel suspended from 2012 through 2019 Travel restrictions 0 Serious caution in entering Syria International aid for 0 No telecom-related aid telecommunications International security 0 Competing security interventions counterproductive intervention All 2 Source: MacMillan Keck. 114 7.4 Syria’s projected and actual teledensity evolution The following passages discuss Syria’s teledensity evolution and the impact of the conflict. Syria’s unique subscriber mobile penetration Syria’s mobile penetration is considered from 2000 through 2020, including the Syrian civil war from 2011 through 2020 (when it was still ongoing). The results are shown in figure 21. The adult-age (15+) population (green dashed line in the figure) serves as an invisible upper bound on potential unique customer mobile penetration. The levels of mobile penetration for Jordan, Lebanon, and Turkiye are also shown as benchmarks as a regional peer group. Figure 21: Syrian Arab Republic’s unique subscriber mobile penetration, 2000–20 Source: MacMillan Keck. Syria’s mobile penetration was de minimis in 2000, whereas neighboring countries Turkiye and Lebanon had penetration levels nearing 20 percent and Jordan had a penetration of about 5 percent. Syria’s mobile penetration began growing in 2002 and until 2011 Syria added subscribers at an average growth rate similar to Jordan, Lebanon, and Turkiye (average peer group growth), but on a more consistent basis. Since the Syrian conflict began in 2011, subscriber growth in the peer countries has slowed, while Syria’s actual mobile penetration continued to grow at a faster pace, closing the gap to some degree by 2020. Under the but-for-the-conflict projections, Syria’s mobile penetration would have grown even faster. Although it would have still been behind the peer group, its mobile penetration would have significantly closed the gap, nearly catching up with Jordan by 2020. Syria’s mobile operators appear to have performed much better during the conflict than may have otherwise been the case. Syria had adopted a modern telecom law in 2011, just prior to conflict, with a promise to the European Union to liberalize the market. However, the licensing of a third mobile operator was abandoned in 2011 after the onset of the conflict. The government, which held a minority stake in both Syriatel and MTN Syria, has seized control of both companies over the last year, and the impact of these moves on market performance is not yet clear. Reports indicate that a third mobile license may recently have been issued to an Iranian firm with minority Syrian state ownership. 115 Unique subscriber penetration is at 57.4 percent against a total subscriber identity module penetration of 115 percent (a 50 percent differential, likely indicative of high off-net premiums). The actual growth profile shows a retarded growth rate between 2011 and 2020, although a similar penetration trend existed in the three peer countries from 2011. Syria had a fairly stable regulatory foundation in 2011, with competition in the market of two fairly strong operators. MTN Syria introduced 3G services in 2010, in a similar timeframe to its neighbors (Turkiye, 2009; Jordan, 2010; and Lebanon, 2011) but only introduced 4G in 2017, generally two or three years after its regional peers, illustrating the impact of the conflict in Syria. Despite steady growth in penetration, Syria (actual penetration at 57.4 percent) remains well below the notional limit of the adult population (69 percent). Syria’s peers show similar relationships between unique user mobile penetration and adult population (15+): Lebanon (66.5 percent versus 74 percent) and Turkiye (66.9 percent versus 76 percent), with Jordan (64 percent versus 66 percent) seemingly approaching this asymptote. The projected penetration presents a reasonable but-for-the-conflict estimate of potential penetration levels, which reaches 61.7 percent in 2020 (still 5 percent behind its peer average but this was 30 percent below in 2011). With a 2020 deficit of 7 percent between the projected and actual levels of penetration, the projection remains conservative in its view of potential market development in Syria. If the conflict had not occurred, it is probable that a third mobile operator would have been introduced by 2013, which would have spurred growth and competition in the market – and likely mobile broadband adoption would have been accelerated, including the earlier adoption of 4G service. Syria’s mobile penetration growth rate Syria’s mobile penetration growth rate (which is the rate of change in penetration from one year to the next) is also considered for 2000–20. The results are shown in figure 22. Figure 22: Syrian Arab Republic’s mobile penetration growth rate, 2000–20 Source: MacMillan Keck. Note: RoC = Rate of Change. 116 The yellow line in figure 22 represents the average annual 7.5 Correlating Syria’s supply-side mobile penetration growth rate during two periods – the pre-conflict period from 2001 through 2011 and the investment climate and teledensity conflict period from 2011 through 2020. The grey line in the figure represents the average but-for-the-conflict The assessment of Syria can inform an overall view of the annual penetration growth rate during the conflict period. relationship between the supply-side telecom investment The difference between the grey and yellow lines during climate and the evolution of teledensity in Syria during the the conflict period is the average annual growth rate deficit. conflict. The difference, as graphed in figure 22, is significant in its profile; that is, growth would have most likely occurred Syria was assessed as having an internal factor investment earlier and been sustained longer, as the red deficit bars in climate rating of 5 and an external factor investment figure 22 show. Syria has been less affected by the conflict climate rating of 3. Key internal factors included (1) state than would have been expected, considering the extremely interference with investor ownership and control of difficult operating environment, which is perhaps an network operators, and (2) heavy state reliance on the indication of the persistence of the two operators in telecom sector for fiscal revenues. The key external factors maintaining networks and finding some, albeit reduced, were (1) heavy military operations that from time to time growth. However, with an actual average annual growth had the practical impact of a blockade and paramilitary rate of 2.15 percent and a but-for-the-conflict average operations by the Islamic State and other armed groups annual growth rate of 2.58 percent, Syria experienced a and foreign combatants, (2) strict economic sanctions, (3) 16.5 percent deficit in annual growth during the conflict. lack of international aid to the telecom sector, and (4) the absence of any effective international conflict intervention Syria experienced positive subscriber growth rates to mitigate the impact of the conflict (with competing throughout the civil war from 2011 through 2020, although international interventions raising risk levels rather than the year-on-year growth rate gradually declined from mitigating them). about 3 percent in 2011 to less than 1 percent in 2020. In light of the government’s recent takeover of Syriatel and Syria’s actual annual teledensity growth rate deficit during MTN Syria, and the reported licensing of a mobile operator the conflict period was 16.5 percent, which is the worst controlled by the Islamic Republic of Iran, it remains to deficit among the conflict countries studied except South be seen whether this will have a positive effect on mobile Sudan and the Republic of Yemen. teledensity growth. 117 8 Republic of Yemen This case study assesses the impact on the telecom sector of the civil war in the Republic of Yemen from 2014 to 2020 (at which time, it was still continuing). 8.1 Republic of Yemen context The following passages provide information on the Republic of Yemen’s geography, demographics, and economy; the conflict; and the telecom sector. The Republic of Yemen’s geography, demographics, and economy The Republic of Yemen is located at the southern tip of the Arabian Peninsula (map 7). The country has 1,906 kilometers of shoreline to the west along the Red Sea and to the south along the Gulf of Aden and the Arabian Sea. The Republic of Yemen is bordered by Oman on the east and Saudi Arabia on the north, with Eritrea, Djibouti, and Somalia in close proximity across the Red Sea and the Gulf of Aden. Map 7: Republic of Yemen 45° 48° 51° 54° YEMEN - L - I OMAN SAUDI ARAB I A H A K A L U B ' R Rakhaw - i A R - Mushayt Khamis ¸ - Abha t an 18° -d - YEMEN i i Mi- Wa - Sanaw Wa d - - Najran Sharurah Alwud - Thamud - ai' ¸ Habarut Ra J a b a ah Sa'dah m ah ¸ - - la ¸- Sarif hy Jizan - tD ak Hayjan a hm - M - di Qunfudh Wa 'Ali- R - ¸ Ra's Darbat Zamakh Salasil Jabal W. - Dhah ¸ awn -i al J Maydi -d iz' ¸- Huth Wa Al Hazm ¸ Faghmah - Ariqim Al Ghaydah ¸ E - Tarim Khamr - - Sana' Ghubbat Al Hisn ¸ ¸ al ¸ Al Hajar 'Aynat Luhayyah ¸ d 'Abr - - al Qamar - 'Amran S ud Haynin Saywun - - d- Wa i al Nishtun as 'atayn D - Marakhayy ¸ Hajjah - di Sab Hawra' ¸ Ra's Fartak a - M - Sanaa a s Al Huraydah ¸ ¸ asi l at W Az Zaydiyah - T Qishn Ja K a (San'a') Ra's ad Darjah ¸ la h a Ma'rib Ram Shabwah W zir mt A Tamnum Ra's Sharwayn a ra- M n - - Nuqub R A ¸- Sayhut 15° Manakhah ¸ - Harib A D ¸ Al Ghaydah ¸ 15° Ma'bar H ¸ Ghayl ¸ ¸- Hasanah Al Al Fardah ¸ - - Wazir - Ba Hudaydah ¸ - Dhamar ¸ - al Qisab Bayhan ¸- - ¸ Ash Shihr Bayt al Faqih - 'Ataq Rida' ¸- Nisab - Masna'ah ¸ - Al Mukalla - - Yarim 'Azzan - S - Zabid Burum Jazirat Yashbum Mayfa'ah National capital Jabal Zuqar ¸- Al Bayda' - ¸ - Balhaf Town, village Al Huwaymi ¸ Mawshij Ibb ¸ Ra's Mijdahah Airport E Ad ¸ -- ¸ Dali' Lawdar ¸ Surrah As ¸ Ghubbat - al Ta'izz Al 'Irqah al 'Ayn International boundary Jazirat - ¸ - al Kabir Hanish Ahwar ¸ Main road - A Al Mukha - Shaqra' Secondary road Lahij ¸ - Zinjibar Track R - ash Sha'b Madinat - E IT Shaykh 'Uthman REA N -¸ Ba Aden (Adan) E Qadub - b 'A - Barim d A D an M Is. as Suqutrá al ¸ S ¸ ug - hra (Socotra) an - - O F da 'Abd al Kuri DJIBOUTI b Samhah ¸ G U L F Darsah 12° The Brothers 12° 0 50 100 150 200 km Djibouti The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance 0 50 100 mi 45° by the United Nations. 48° SOMALIA 51° 54° Map No. 3847 Rev. 3 UNITED NATIONS Department of Peacekeeping Operations January 2004 Cartographic Section Source: UN Geospatial > Republic of Yemen (January 1, 2004), https://www.un.org/geospatial/content/Republic of Yemen. 118 The Republic of Yemen has a population of more than 30 Real gross domestic product (GDP) per capita was USD million and a land area of 527,970 square kilometers (about 2,500 in 2017. GDP composition by sector of origin in 2017 203,850 square miles). The vast majority of the Republic was 20.3 percent agriculture, 11.8 percent industry, and of Yemen’s population lives in the Sarawat Mountains, a 67.9 percent services.667 The Republic of Yemen’s primary mountain range along the western coast of the Arabian natural resources are petroleum, fish, rock salt, marble, Peninsula that runs parallel to the Red Sea from northwest small deposits of coal, gold, lead, nickel, copper, and fertile Saudi Arabia down to the Gulf of Aden in the Republic soil in the west. Its primary commodity exports in 2019 were of Yemen. About 37.9 percent of the population lives in crude petroleum, gold, fish, industrial chemical liquids, and urban areas. Sana’a, the official capital, which is controlled scrap iron. The labor force was about 6.95 million in 2020.668 by the de facto government (DFG) and has a population Unemployment was in the region of 27 percent in 2014. In of more than 3 million, is located in the northern part of 2020, about 54 percent of the population lived below the the Asir Mountains. Aden, a port city on the Gulf of Aden poverty line.669 In 2019, 72.8 percent of the population had that currently serves as the seat for the internationally access to electricity, 53.6 percent had access to sanitary recognized government (IRG), has a population of more facilities, and 59.7 percent had access to treated drinking than 1 million. Life expectancy at birth is about 66 years.665 water.670 The literacy rate is 70.1 percent, including 85.1 The Republic of Yemen’s ethnicity is predominantly Arab. percent of males and 55 percent of females.671 Tribalism still embraces 70-80 percent of the population through a multi-layered structure of tribes, tribal The conflict in the Republic of Yemen traditions, and tribal law that dominate political, economic, Yemen’s current conflict is the result of complex layers of and cultural activity. Tribal leaders serve as intermediaries competing tensions that have been simmering for decades. between local communities and the state, and tribesmen In the far North of the country, a revivalist movement serve in common defense of their tribe.666 The main of Zaydism (branch of Shia Islam) emerged in the 1990s, languages are Arabic (official, near universal), English (wide giving birth to the current Houthi movement. The Houthis’ use in the south), and Mahri (in the east near Oman). increasing opposition toward the government led to six waves of armed conflict (the Sa’ada Wars) from 2004 to The Republic of Yemen’s terrain is varied. The area in the 2010, which ended with a ceasefire agreement. The 2011 west along the Red Sea comprises a narrow coastal plain Arab Spring in Yemen was driven chiefly by high youth backed by flat-topped hills and rugged mountains (where unemployment, the marked deterioration of socioeconomic a significant majority of the population lives). To the east conditions, and the autocratic and kleptocratic nature of the of the mountains are dissected upland desert plains, which aging Saleh regime.672 Following a mediation process, under in the center of the country slope into the desert interior the auspices of the Gulf Cooperation Council, President Ali of the Arabian Peninsula. About 44.3 percent of the land Abdullah Saleh resigned and his vice president, Abdrabbuh area is used for agriculture. The remainder of the land Hadi, took over in March 2012. However, this political area comprises urbanized areas in the west and largely transition failed to address grievances. The ensuing uninhabited desert in the east. The Republic of Yemen’s National Dialogue Conference led to strong opposition, climate varies with its terrain. The western coastal plain particularly in the form of a federal state, prompting the is mostly hot and humid desert. The western mountains Houthis to collaborate with the former president and the are temperate most of the year but affected by seasonal largest faction of his General People’s Congress party. monsoons. The desert to the east is extraordinarily hot, dry, and harsh. 665 World Bank > DataBank > World Development Indicators > Yemen (2020), https://databank.worldbank.org/source/world-development-indicators/Type/ TABLE/preview/on. 666 ACAPS, Tribes in Yemen: An Introduction to the Tribal System (ACAPS, Geneva, August 2020), https://www.acaps.org/sites/acaps/files/products/ files/20200813_acaps_thematic_report_tribes_in_yemen0.pdf. 667 IndexMundi > Factbook > Countries > Republic of Yemen > Economy > Yemen GDP – Composition by Sector (2017), https://www.indexmundi.com/ye- men/gdp_composition_by_sector.html. 668 World Bank > DataBank > World Development Indicators > Yemen (2020), https://databank.worldbank.org/source/world-development-indicators/Type/ TABLE/preview/on. 669 IndexMundi > Historical Data Graphs per Year > Economy: Population below Poverty Line > Yemen (2020), https://www.indexmundi.com/g/g.aspx- ?v=69&c=ym&l=en. 670 World Bank > DataBank > World Development Indicators > Yemen (2020), https://databank.worldbank.org/source/world-development-indicators/Type/ TABLE/preview/on. 671 IndexMundi > Factbook > Countries > Yemen > Demographics > Literacy (2015), https://www.indexmundi.com/yemen/literacy.html. 672 Lackner, Helen. 2016. Yemen's ‘Peaceful’ Transition from Autocracy: Could It Have Succeeded? Stockholm: International Institute for Democracy and Elec- toral Assistance. 119 In September 2014, they took control of the capital as well Before the conflict, the Republic of Yemen had two retail as government institutions, and in February 2015 they fixed operators: YemenNet, which is based in Sana’a and advanced from the North into the center and southern wholly state-owned and provides wired and wireless fixed provinces, including Aden. A Saudi-led coalition launched services, and Yemen Mobile, which is based in Sana’a and Operation Decisive Storm and intervened to bolster the majority state-owned and provides wireless fixed services. IRG against the Houthi forces, which was successful in the Their coverage was largely limited to the major cities. Since central and southern provinces. This was the prelude to the conflict, the IRG established AdenNet, which acts as an what is now a long-standing armed conflict over territorial alternative retail fixed operator in the south. control, with multiple active front lines. Today, the Republic of Yemen has virtually no fixed service Since late 2015, Yemen has been divided into two and limited mobile coverage in rural areas. Much of the separately ruled territories, with the Houthis in control infrastructure in the areas and cities that have been at the of Sanaa and most of the heavily populated North Yemen. center of the conflict have been damaged or destroyed. The IRG recreated national-level state institutions under Before the conflict, satellite facilities using very small its authority but has a weak foundation; it has limited aperture terminal (VSATs) earth stations were used by legitimacy and has lost further popular support due to enterprise customers for last-mile connectivity in remote increased fragmentation and separatist aspirations in the areas. These facilities directly linked the first mile and South. The IRG shares power based on a fragile agreement last mile without any middle mile. Many existing satellite signed in Riyadh in late 2019 with a UAE-backed facilities are also reported to have been damaged or secessionist movement, the Southern Transitional Council destroyed. (STC), and has been composed of several political parties with conflicting interests. The STC took control of Aden At the onset of the conflict, the Republic of Yemen and a significant part of the South while the IRG continues benefitted from a national terrestrial middle-mile fiber to control or at least have support in the east of the country, network, owned and operated by the state-owned Public three central Yemen governorates, and along the Red Sea Telecommunication Corporation (PTC). The terrestrial Coast up to Hays and the city of Taiz. In addition, sectarian network comprised 6,850 kilometers of fiber segments and tribal divisions affect local power dynamics and tend to (excluding terrestrial links to Oman and Saudi Arabia) side with either the Houthis or the IRG, depending on the connecting all major cities and cable landing stations. positioning of their leaders. Local conflicts occur with little warning and can quickly escalate to subnational or even Destruction and disrepair of infrastructure has reduced national levels. service coverage, reliability, and availability. Over 25 percent of the Republic of Yemen’s last-mile mobile Fighting has devastated the Republic of Yemen’s economy, infrastructure has already been rendered unusable by destroyed critical infrastructure, and led to food insecurity conflict damage.675 Network operators report that they verging on famine. In early 2021, the United Nations (UN) cannot safely or economically service, repair, or replace estimated that 20.7 million people – 66% of the population damaged infrastructure. It is extremely difficult to import – needed humanitarian assistance, with 12.1 million replacement equipment, upgrade equipment, or bring in estimated to be in acute need.673 qualified crews to repair or replace equipment that has been damaged or destroyed, much less to maintain the Republic of Yemen’s telecom sector equipment that is still operational. Before the conflict, the Republic of Yemen had four licensed mobile operators: Yemen Mobile, MTN Yemen,674 Recurring electricity disruption and fuel shortages also SabaFon, and Y-Telecom. The Republic of Yemen now only result in intermittent loss of service of equipment that is has three active mobile operators, after Y-Telecom, which still operating. The blocking of interconnection between only served the Sana’a metropolitan area and was already networks in DFG-controlled and IFR-controlled areas also struggling before the conflict, went bankrupt in 2020 and limits the usefulness of last-mile connectivity, where it is abandoned its equipment. The largest, Yemen Mobile, is available, for internal communications within the Republic majority state-owned. Sabafone is a local provider while of Yemen. MTN is a South Africa based operator. MTN exited the market late 2021 due to the hardships brought on by the conflict. MTN’s exit was a significant event in that it was the largest foreign investor in Yemen. 673 United Nations Population Fund (UNFPA), “Humanitarian Response in Yemen” (UNFPA, New York, 2021). 674 MTN Yemen has indicated its intention to exit the market. 675 World Bank Group, “Yemen Dynamic Needs Assessment: Phase 3 - 2020 Update” (World Bank, Washington, DC, 2020), 87–88. 120 Unsurprisingly, the Republic of Yemen’s retail network 8.2 Assessment of internal Republic of Yemen operators have experienced significant financial disruption telecom investment climate factors from the conflict. They have collectively lost in the region of USD 4.3 billion in revenue and in the region of USD Five internal factors during the conflict that impacted the 2.5 billion to USD 3.0 billion in shareholder value since climate for telecom investment in the Republic of Yemen 2014.676 These losses have been caused by destruction were assessed: (1) market open to entry, (2) ease of private of infrastructure; rapid decline in revenues and earnings investment, (3) spectrum needs met, (4) level playing field, before interest, taxes, depreciation, and amortization and (5) fiscal reasonableness. Each factor is discussed in (EBITDA)677; and steep increases in taxation by both the turn below, followed by a summary of key findings across DFG and IRG, although it is unclear whether these taxes all the internal factors. have been paid. Private investment in last-mile access networks has thus come to a standstill. Republic of Yemen: Market open to entry? Assessing the impact of the conflict on network operator Infrastructure and service licensing in the Republic of financial performance is difficult because verified or Yemen, in areas controlled by both the DFG and the IRG, verifiable data are limited. One mobile operator, MTN remain outdated, fragmented, and administered sub- Yemen, had been publishing financial and other performance optimaly. data (as part of its listed parent company MTN Group’s financial reporting). MTN Yemen’s reported results enable Since the inception of the conflict, the country’s private estimating the performance of other network operators in operators have faced nonrecognition of existing licenses, the Republic of Yemen. MTN’s operating revenues showed unreasonable financial demands for new or renewed steady growth from 2008 to 2014, then declined by 40-55 operating and spectrum licenses, and disruption of national percent from 2015 to 2018 to pre-2008 levels, and rose networks based in Sana’a. As a result, Y-Telecom exited the slightly in 2019. MTN Yemen’s EBITDA, a rough measure of market through bankruptcy in 2020 and MTN has also exited net operating cash flow from which operators fund capital the market (MTN has subsequently transferred its majority expenditures, debt service, taxes, and return on equity, stake in MTN Yemen to Emerald International Investment, reached a very healthy 52 percent of revenue in 2014 but affiliate of Omani conglomerate Zubair Corporation). declined to 30 percent of revenue in 2020.678 Sabafon recently bifurcated its network between the north and south in an effort to remain functional in the divided The principal telecom state-owned enterprises (SOEs) – state although interoperability between its networks in the PTC, TeleYemen, and Yemen Mobile – that own and operate north and south is uncertan. much of the country’s shared telecom infrastructure are closest to the oversight of the Sana’a-based Ministry of The internal territorial divide has also adversely impacted Telecommunications and Information Technology, which the state-owned operators. Existing SOEs – PTC, the DFG controls. TeleYemen, and Yemen Mobile679 – are based in Sana’a and therefore closest to the DFG’s ministry. Completion The IRG reportedly has limited contact with the SOEs that of the Sea-Me-We 5 cable meant to land in Al Hudaydah are located in Sana’a, but it controls access to Aden, which was haulted due to security concerns raised by one of the is the Republic of Yemen’s main port and an important suppliers. A new SOE – AdenNet – was recently established submarine cable landing point. by the IRG in Aden as an alternative to the DFG-influenced SOEs. The Republic of Yemen was assigned an unfavorable score on openness to market entry. 676 Macmillan Keck estimates. 677 EITDA is an accounting term and a commonly used indicator in the telecom industry as a rough approximation of operating cash flow. 678 Sources: MTN Group annual results; Xalam Analytics (2020) for mobile market revenue estimates. 679 Yemen Mobile is majority government owned. 121 Republic of Yemen: Ease of private investment? The same ministries responsible for licensing and regulating Even prior to the conflict, the Republic of Yemen’s legal private network operators control the state-owned and regulatory framework for the telecom sector was operators that dominate large portions of the market in suboptimal and not in-line with international best practices both DFG-controlled and IRG-controlled regions. t. Today the network operators face intractable political challenges within a uncertain regulatory framework. Most An example of the uneven playing field was the award network operators have a single national network but of the only mobile broadband spectrum license (3G) to now have difficulty operating country-wide – leading to majority-state-owned Yemen Mobile, while none of the a situation whereby people in one part of the country is three private-investor-owned mobile operators has been unable to communicate to people in another part of the awarded a broadband spectrum license. country. The Republic of Yemen was assigned an uncertain score on level playing field. Other internal factors suppress investment. Fragmentation of SOE ownership and governance has to some degree Republic of Yemen: Fiscal reasonableness? begun to undermine operation, maintenance, and use of The Republic of Yemen’s IRG standard corporate income tax existing shared infrastructure. Internal restrictions on rate is 20 percent, but it applies a special rate of 50 percent movement of goods, people, and communications between on mobile operators and 35 percent on international areas controlled by the DFG and IRG, coupled with damage telecom service providers.680 The Republic of Yemen also to infrastructure, censorship, and other aspects of the taxes mobile phone services at a 10 percent rate, which is conflict, undermine both supply-side and demand-side double the normal rate.681 activities. The prevalence of cyberattacks and unregulated digital surveillance puts both operators and users at risk. The DFG’s fiscal policies are unknown, but there are The Republic of Yemen was assigned an unfavorable score widespread reports that the DFG generates substantial tax for ease of private investment. revenues from the telecom sector. The UN has reported that the DFG generated approximately USD 159 million Republic of Yemen: Spectrum needs met? per year from telecom companies.682 Spectrum unavailability has been a major constraint on supply-side telecom sector performance in the Republic of Fiscal policies toward the sector are adversely impacting Yemen. Although Yemen Mobile was authorized to deploy a investment and sector functioning. Government efforts Code Division Multiple Access (CDMA) 3G network prior to to extract long-term license fees are unreasonable for the conflict, its competitors were never issued 3G licenses. operators especially in circumstances of conflict and Mobile operators have subsequently been authorized to uncertainty. The oppressive fiscal burden on retail network provide 4G services by the DFG, but the situation over operators hampers investment and innovation. Declining spectrum allocation remains unclear. EBITDA, coupled with fiscal impositions that consume a The Republic of Yemen was assigned an unfavorable score growing share of EBITDA, have rendered mobile network on spectrum needs being met. operators with insufficient net cash flow to invest directly in capital expenditures or to borrow or attract shareholder equity to fund capital expenditures. As a result, new Republic of Yemen: Level playing field? infrastructure investment seem to be stalled in much of the The Republic of Yemen’s telecom sector enjoys some country. elements of fairness among rival operators, particularly in DFG and IRG treatment of competing privately owned The Republic of Yemen was assigned an unfavorable score mobile operators. for fiscal reasonableness for the reasons summarized in table 23. However, an outdated telecom law (from 1991) and absence of an independent regulator has undermined the extent of a level playing field. Prior to the conflict, a new telecom law (2008) had been submitted to parliament which would have established an independent regulator that would set and enforce fair and consistent rules to govern the sector. 680 Deloitte, International Tax Yemen Highlights 2017 (Deloitte, London, 2017), https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/internation- al-business-support/deloitte-cn-ibs-yemen-int-tax-en-2017.pdf. 681 World Bank, “The Republic of Yemen: Unlocking the Potential for Economic Growth,” Report No. 102151-YE (World Bank, Washington, DC, October 2015), 37, https://openknowledge.worldbank.org/bitstream/handle/10986/23660/Yemen00Republi00for0economic0growth.pdf. 682 “UN Security Council Expert Panel on Yemen,” Report No. S/2018/594 38 (United Nations, New York, January 26, 2018), https://undocs.org/ en/S/2018/594. 122 Table 23: Republic of Yemen: Fiscal reasonableness determination Republic of Yemen: fiscal reasonableness, 2001–20 General taxes Sector-specific taxes Nontax impositions Predictability 20% corporate Special 50% rate for mobile High and arbitrary Not transparent income tax service providers and 35% for fees Double taxation of companies 5% sales tax international service providers due to competing governments 10% goods and services tax for Perception of ad-hoc fee telecom and mobile services imposition Republic of Yemen overall rating: Unfavorable Source: World Bank. Republic of Yemen: Summary of key findings across all the internal factors Table 24 summarizes the scores assigned to the Republic of Yemen for its internal telecom investment climate factors and its overall internal factor score. Table 24: Republic of Yemen: Assessment of internal factors impacting the telecom investment climate Score Internal factor assessed Key relevant facts Mobile market still has three operators (after fourth went bankrupt) Market open to entry 1 Monopoly on mobile broadband held by majority state-owned operator No modern telecom law Ease of private investment 0 Competing and inconsistent regulatory requirements Security situation deters investment Only 3G spectrum licensed to majority state-owned operator Spectrum needs met 0 No 4G spectrum licensed No comprehensive telecom law and operating licenses not harmonized Level playing field 1 Majority state-owned mobile operator favored by state Heavy reliance by de facto and internationally recognized state actors on telecom Fiscal reasonableness 0 operators for fiscal revenue All 2 Source: MacMillan Keck. 123 8.3 Assessment of external Republic Republic of Yemen: International sanctions? The United States has in force a Republic of Yemen– of Yemen telecom investment climate related financial sanctions program established by law and factors executive order that generally restricts transactions with persons identified by the Office of Foreign Assets Control Five external factors during the conflict that impacted the of the US Treasury as threatening the peace, security, climate for telecom investment in the Republic of Yemen or stability of the Republic of Yemen.685 These sanctions were assessed: (1) military or paramilitary interference, generally allow telecom investment and equipment and (2) international sanctions, (3) travel restrictions, (4) technology sales into the Republic of Yemen, provided the international aid for telecommunications, and (5) recipient is not on the restricted persons list. The sanctions international security intervention. Each factor is discussed have not generally impacted the Republic of Yemen during in turn below, followed by a summary of key findings across the conflict, except for a brief period following the Trump all the external factors. Administration’s designation of the Houthis as a terrorist organization in January 2021. This designation was Republic of Yemen: Military or paramilitary removed by the Biden Administration in February 2021. Except the US export controls in the Republic of Yemen, interferences? there are no other broad trade restrictions or sanctions Supply lines into and out of the Republic of Yemen have against the Republic of Yemen. The European Union and the been disrupted by a tight naval control and restrictions to UN have not imposed any broad sanctions. The sanctions import through ports controlled by the Houthis imposed have been targeted and limited in scope. For example, the by the Saudi-led coalition and through checkpoints along UN imposed an asset freeze on five designated individuals all land routes into the Republic of Yemen through Saudi in 2014.686 Arms embargo was first declared in 2015 on Arabia and Oman. some of the Houthi leaders. The planned Sea-Me-We 5 submarine cable system landing The Republic of Yemen was assigned a favorable rating on in Al Hudaydah has been difficult to access since the international sanctions. start of the conflict. At the inception of the conflict, the Republic of Yemen had several active cross-border fiber links into Oman and Saudi Arabia. Most of these links are Republic of Yemen: Travel restrictions? now inoperable. Cross-border links into Oman have been The Republic of Yemen has been subject to heavy travel inoperable since 2018.683 The cross-border links into Saudi restrictions imposed by the international coalition during Arabia at the Haradh and Alab land ports along the Republic the conflict, particularly to and from areas controlled by the of Yemen’s northwestern border were destroyed during DFG, which is where most of the state-owned and investor- the conflict.684 The Republic of Yemen’s network operators owned network operators have their network operation have also had their infrastructure and activities targeted. centers and where 80 percent of the Yemeni population During the conflict, satellite connectivity has not been a served by these operators lives. good option for replacing lost fiber-based international connectivity because importing and operating VSAT As a result, network operator executives and other terminals and larger earth stations is currently heavily personnel have been unable to enter or exit the Republic restricted by the international coalition blockade as well as of Yemen. MTN, Yemen Mobile, and other operators have border checkpoints maintained by the DFG and IRG. reported difficulty managing their networks in the IRG- controlled areas of the Republic of Yemen from network The Republic of Yemen was assigned an unfavorable score operation centers in Sana’a due to safety concerns and on military or paramilitary interference. travel restrictions. Equipment vendors are also unable or less willing to provide in-country support. Finally, the UN imposed a travel ban on designated Yemeni individuals to prevent the entry into or transit through UN member territories.687 The Republic of Yemen was assigned an unfavorable rating on travel restrictions. 683 Yemen-Oman cross-border fiber links were damaged by a tropical cyclone in 2018 and have not been restored. See Mansoor al-Bashiri, “Impacts of the War on the Telecommunications Sector in Yemen,” Rethinking Yemen’s Economy Policy Brief No. 21 at 7 (Rethinking Yemen’s Economy, Sana’a, Yemen, January 2021), https://devchampions.org/publications/policy-brief/. 684 Mansoor al-Bashiri, “Impacts of the War on the Telecommunications Sector in Yemen,” Rethinking Yemen’s Economy Policy Brief No. 21 at 7 (Rethinking Yemen’s Economy, Sana’a, Yemen, January 2021), https://devchampions.org/publications/policy-brief/. 685 See Executive Order 13611 (May 16, 2012), https://home.treasury.gov/system/files/126/yemen_eo.pdf. 686 UN Security Council Resolution 2140 (United Nations, New York, 2014), http://unscr.com/en/resolutions/2140. 687 UN Security Council Resolution 2140 (United Nations, New York, 2014), http://unscr.com/en/resolutions/2140. 124 Republic of Yemen: International aid for telecommunications? The Republic of Yemen had been a recipient of World Bank technical assistance for its telecom sector before the conflict arose in 2011. The World Bank had been providing technical assistance to the responsible ministry to develop and implement sector reforms. These activities were suspended following the Houthi takeover of the government in 2014/15. The IRG has also received some international aid for telecom-related technical assistance activities. For example, USAID is providing technical support for the development by the IRG of a legal framework for mobile money and other digital financial services. On the whole, however, the level of telecom-related aid for the Republic of Yemen during most of the conflict period has been minimal and recent efforts do not include any financing for infrastructure investment. The Republic of Yemen was assigned an unfavorable rating for international aid for telecommunications. Republic of Yemen: International security intervention? Due to the duration of the conflict and geographic reach, the Republic of Yemen was assigned an unfavorable rating on international security intervention. Republic of Yemen: Summary of key findings across all the external factors Table 25 summarizes the scores assigned to the Republic of Yemen for its external telecom investment climate factors and its overall internal factor score. Table 25: Yemen: Assessment of external factors impacting the telecom investment climate Score Internal factor assessed Key relevant facts Saudi-led coalition has imposed naval and air blockade Military interference 0 Telecom equipment imports restricted by coalition al-Qaeda paramilitary activities US export controls effectively block transfers of US-origin telecom equipment, International sanctions 2 technology, or software Travel restrictions 0 Inbound and outbound travel heavily restricted International aid for 0 Minimal technical assistance telecommunications International assistance in 0 No international peacekeeping assistance peacekeeping All 2 Source: MacMillan Tax. 125 8.4 Republic of Yemen’s projected and actual teledensity evolution The following passages discuss the Republic of Yemen’s teledensity evolution and the impact of the conflict. Republic of Yemen’s unique subscriber mobile penetration The Republic of Yemen’s mobile penetration is considered from 2000 through 2020, including the Yemeni Civil War from 2014 through 2020 (ongoing). The results are shown in figure 23. The adult-age (15+) population (green dashed line in figure 23) serves as an invisible upper bound on potential unique customer mobile penetration. Mobile penetration rates for Djibouti, Oman, and Saudi Arabia are also shown as benchmarks. The projected growth in the but-for-the-conflict scenario was modeled to represent a reasonable basis for what could have transpired absent the conflict, with realistic improvements in the investment environment and earlier stimulation of market growth. The gap in the Republic of Yemen’s mobile penetration between the actual and but-for-the-conflict scenarios grew from zero in the year prior to the conflict (2013) to 6.8 percentage points by 2020. Figure 23: Republic of Yemen’s unique subscriber mobile penetration, 2000–20 Source: MacMillan Keck. 126 The Republic of Yemen was already well behind Oman Only Yemen Mobile, the majority state-owned mobile and Saudi Arabia in 2013, but it is projected to have begun operator, was licensed to use 3G spectrum (which is still closing the gap had it remained on the but-for-the-conflict the case) and 4G spectrum licenses have only been issued trajectory through 2020. On the other hand, the Republic recently. Yemen Mobile’s 3G service is provided using of Yemen was ahead of Djibouti in 2013 and remains ahead substandard CDMA2000 1x Evolution, Data-Optimized notwithstanding the conflict, albeit by a smaller margin (EVDO) technology, and may also have restricted demand than would have been realized but-for-the-conflict. for a service that provides relatively slow download and upload speeds to customers. In contrast, the Republic of In the but-for-the-conflict scenario, the Republic of Yemen’s Yemen’s neighbors introduced 3G and 4G service (Saudi mobile penetration (the orange curve in figure 23) is Arabia in 2007 and 2012, Oman in 2008 and 2013, and projected to have grown at a slightly faster rate since 2014 even Djibouti in 2013 and 2017) to meet market demand. than actual mobile penetration (the blue curve in figure 23). Actual penetration remained static between 2014 The Yemen market continued to offer basic voice services and 2016, but it recovered moderately (an average of 0.8 with limited CDMA EVDO and Global System for Mobile percent per year) thereafter. Communications (GSM) EDGE on the service offered by the two remaining private operators. Mobile penetration in the Republic of Yemen has grown only 4.9 percentage points over seven years since the Despite the more recent growth in penetration, the Republic beginning of 2014, with a decline in the growth rate of Yemen’s actual penetration of 44.9 percent remains well evident even before the civil war began. The Republic of below the notional 61 percent threshold of total adult Yemen’s mobile market had four operators at the onset of population penetration. The Republic of Yemen’s peers the conflict, three privately owned and one majority state- show different relationships between unique user mobile owned. The country now has only three. penetration and adult population, with Oman reaching 66 percent against 78 percent, the depressed Djibouti market The commencement of the conflict in March 2015 severely reaching 29.7 percent against 71 percent, and Saudi Arabia damaged telecom infrastructure, and the resulting impact reaching 76.7 percent against 75 percent. on teledensity can be seen. In addition to damage from the conflict, mobile operators must now deal with competing The penetration projection presents a reasonable but- sources of state authority, despite operating single for-the-conflict estimate of potential penetration levels, nationwide networks, inability to import equipment, and reaching 51.7 percent in 2020, still 10 percentage points a growing fiscal burden. Mobile operator Y-Telecom went below the peer average (but this gap was 26 percentage bankrupt in 2020. And a major foreign investor in Yemen, points in 2014). If Djibouti is excluded as an outlier, the MTN has exited the market. Republic of Yemen remains 27 percentage points behind the Oman/Saudi average in 2020. By 2020, unique subscriber penetration had reached 44.9 percent against a total SIM penetration of 54.1 percent With a 2020 deficit of 13 percent between projected and (based on ITU data not shown in figure 23). This 17 percent actual penetration, the projection remains conservative in differential between unique subscriber and total subscriber its view of potential market development in the Republic identity module (SIM) penetration levels is generally lower of Yemen. If the conflict had not occurred, it is likely that at than in Djibouti (30 percent), Oman (107 percent), and Saudi least three mobile operators would have been active and Arabia (36 percent). The Republic of Yemen’s actual unique would have moved to adopt 4G service, which would have subscriber penetration profile shows minimal growth from spurred growth and competition in the market. 2014 through 2017, but reveals a slow recovery from 2018, similar in penetration trend to two of its peers. 127 Republic of Yemen’s mobile penetration growth rates The Republic of Yemen’s mobile penetration growth rate is also considered for the period from 2000 through 2020. The Republic of Yemen experienced significant annual growth rate deficits each year from 2014 through 2018, while experiencing a slight growth rate surplus in 2019 and 2020. The conflict has undeniably suppressed growth significantly, due to inability to restore and expand networks, low network availability, and inability of operators to upgrade networks technologically (2G compared with 4G in all neighboring countries). The results are shown in figure 24. Figure 24: Republic of Yemen’s mobile penetration growth rate, 2000–20 Source: MacMillan Keck. Note: ROC – Rate of Change. The yellow line in figure 24 represents the average annual mobile penetration growth rate during two periods – the pre- conflict period from 2000 through 2013 and the conflict period from 2014 through 2020. The grey line in the figure represents the average but-for-the-conflict annual penetration growth rate during the conflict period. The difference between the grey and yellow lines during the conflict period is the average annual growth rate deficit. The difference, as graphed in figure 24, is not insignificant, especially in its cumulative effect on the penetration level. However, with an actual annual growth rate of 0.70 percent and a but-for-the-conflict annual growth rate of 1.67 percent, the Republic of Yemen experienced a significant 58 percent deficit in annual growth during the conflict. 128 8.5 Correlating Republic of Yemen’s Key external factors were (1) the naval blockade on all ports and closure of land borders to shut off supply lines to supply-side investment climate and the north, (2) al-Qaeda paramilitary activities targeted at teledensity telecom infrastructure, (3) international travel restrictions, The assessment of the Republic of Yemen can inform (4) only minimal technical assistance and no financial aid to an overall view of the relationship between supply-side the telecom sector, and (5) no international peacekeeping telecom investment climate and teledensity evolution in assistance (with international interventions tending to be the Republic of Yemen during the conflict. in support of military operations). The Republic of Yemen was assessed as having an internal The Republic of Yemen’s actual annual teledensity growth factor investment climate rating of 2 and an external factor rate deficit during the conflict period was 58 percent, which investment climate rating of 2. Key internal factors included is the worst deficit among the conflict countries studied (1) uncertainty about renewal of existing mobile operating except for South Sudan. licenses, (2) late issuance of 4G spectrum licenses and the only 3G spectrum license issued to a majority state-owned operator, (3) legal uncertainty due to bifurcated territorial control, and (4) heavy state reliance on the sector for fiscal revenues. 129 Annex 130 Annex 1: FY22 list of fragile and conflict-affected situations 131