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The next telecommunications revolution will take place in the Middle East and North Africa , a region that bas an abundance of natural resources (oil) and human resources. Member countries of the ARABSAT satellite system also enjoy the technological independence they need to undertake a growing list of ambitious projects. In addition, the number of fibre-optic links to Western Europe and the Pacific Rim is constantly increasing. The Middle East and North Africa -the cradle of civilization-are poised to become a major telecom hub.

Telecommunications in the Middle East and North Africa are characterized by great disparity. A few countries – Turkey and the Persian Gulf emirates – have a telephone penetration rate of 20 percent or higher, placing them ahead of Eastern Europe but behind Western Europe and North America. In the others countries, however, the rate plummets to between four and 10 percent, which is more in line with the Third World. But in all the countries, whether leading or trailing the pack, there is a burning desire to catch up with – and even surpass, through "leapfrogging" policies – the rest of the world.

To the list must be added Israel, whose penetration rate of about 40 percent is comparable to that of Spain and Portugal. But Israel is atypical in every respect: privatization and competition are already appearing (albeit slowly) in this Western enclave within the Muslim world, where telecommunications remain entirely state-run and monopolistic… for now.

Two giant construction sites

Two countries clearly dominate communications in the Middle East and North Africa: Iran and Saudi Arabia. In Iran, the end of the eight-year war with Iraq in 1988 marked the beginning of a forced march toward modernization. The number of telephone lines is expected to reach at least 10 million by 1999, up from a mere 500,000 in 1989.

The symbol of Iran's telecommunications boom is the highly publicized June 1995 announcement of the "Silk Route" project: a 17,000 km fibre-optic network that will link Tehran to Germany and China. Telecom-related factories are sprouting up everywhere, providing Iran with a powerful industrial base despite the American trade embargo.

Saudi Arabian telecommunications are also undergoing a major transformation. The country's growth program began in the 1970s with significant participation by Bell Canada (which provided training from 1978 to 1988). Today, the American giant AT&T is in charge of modernizing the Saudi network, while Canadian firms such as Glenayre Electronics, SR Telecom and Leblanc are also present.

Saudi Arabia is home to the ARABSAT head office and was the promoter for the SEA-ME- WE2 system, which has linked Singapore to Marseille by undersea fibre-optic cable since 1994. The kingdom is also participating in the Fibre Optic Link Around the Globe (FLAG) project, which will link Great Britain to Japan beginning in 1997 (the Canadian bank CIBC has also invested in this project). Nearly 28,000 km in length, FLAG will be the longest fibre-optic link in the world.

Forty centuries of bureaucracy

Despite such progress, all the countries of the Middle East and North Africa suffer from the same affliction: state hypertrophy. This is nothing new, since the Egyptian Pharaohs invented the notion of the state 40 centuries ago. The consequence of this bureaucratic tradition is a paradoxical shortage of capital in such a rich region.

The World Bank estimates that Egyptian investors alone hold $82 billion worth of assets abroad. If they seem to lack confidence in their own country, they can hardly be blamed: alter all, where can they be expected to invest when the state controls most of the economy? For that reason, the current government has announced a five-year privatization plan involving 300 companies (though none in the telecom sector).

Few countries in the Middle East and North Africa have shown any desire to privatize their telecommunications, and even fewer have gone beyond the stage of good intentions. Last year, for instance, Turkey's parliamentary religious right and socialist left joined forces to contest the country's privatization law in court.

Two countries are the exception to the rue: Bahrain and Yemen. The former intends to become the telecommunications hub of the Middle East, much like Singapore in the Far East. To that end, the government has sold off 63 percent of the Bahrain Telecommunications Company (BATELCO), including 20 percent to the British firm Cable & Wireless. The result: BATELCO rates are among the lowest in the world. As for Yemen, the government launched a joint venture in 1990 with Cable & Wireless to manage the country's international communications.

In Israel, 2S percent of the shares of the national monopoly Bezeq Telecommunications were sold off to the public. But when Cable & Wireless bought up seven percent of those shares from small investors, the government began to have second thoughts. The government is considering an amendment to the Bezeq bill that would require government authorization for the purchase of any block exceeding five percent of the shares.

Competition: coming in the back door

In the Middle East and North Africa – as in the rest of the world – the telecom sector is opening to competition only very slowly. In this region, however, the obstacles are compounded by religious issues. Iran's telecommunications minister, Sayed Gharazi, voiced a major Muslim concern in Geneva at the Telecom 95 trade fair: "Competition is not possible in Iran. Industries don't have the same obligation to the people as does an Islamic government."

However, in country after country throughout the region, competition is filtering in through the invisible back door of cellular telephony. All governments, without exception, have opted for the European GSM digital technology. In many cases, one or more foreign operators have also been invited to compete with national carriers.

Only Israel has decided to introduce competition in its basic network. In November 1995, the government launched a call for tenders with the aim of granting two additional international communications licenses. Six consortiums are currently in the running, including Teleglobe International. A decision is expected by December 1, 1996, and commercial operations should begin in 1997.

Statistics at a glance *

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* Taken from Siemens' International Telecom Statistics - 1995

BCE Presence in the Middle East

Bell Canada and its affiliates have always been very active in the Middle East and North Africa. The first major investment the group made outside Canada was not in the United States, but in Turkey: in 1967, Northern Telecom created a subsidiary in that country to produce Crossbar switches. Since then, Northern Electric Telekomünikasyon (NETAS) has been producing DMSs. Bell's contract in Saudi Arabia was worth nearly $3 billion over 10 years; at the time, it was the world's largest contract for the export of telecommunications expertise ever signed. Today, Nortel is present in Israel as well as in Turkey, and Tele-Direct has a subsidiary in the United Arab Emirates. The BCE group is a major player in this rapidly expanding Middle Eastern market.