IMPACT OF FOREIGN DIRECT INVESTMENTS ON THE SENEGALESE DIGITAL ECONOMY: LITERATURE REVIEW AND ANALYSIS OF STYLING FACTS

 

Author: Baye Alioune SAMB, economist, PHD

 

 

 

 

INTRODUCTION

 

This essay presents a meso-economic approach to analyzing the impacts of foreign direct investment in Senegal.

The analysis of the results of the macroeconomic impact study, a priori raises reservations about the precision of the results of the impacts of FDI. They deserve to be refined within the framework of a mesoeconomic analysis relating to an economic sector, in particular the telecommunications sector, where there is a strong representation of FDI theoretically carrying technology transfer and one of the main contributors to growth in Senegal.

“The term mesoeconomics comes from the Greek word for median. It is an economic analysis that appeared recently. It is considered to be an intermediate analysis between macroeconomic analysis relating to the overall economy and microeconomic analysis focusing on firms. It is therefore a median approach centered on the analysis of economic activity sectors and on that of the behavior of groups holding sufficient power to influence a national economy such as multinational firms. It thus studies the characteristics and performances of these groups and sectors of activity "According to (S. Dieng et al. 2012)

 

It is also important to underline at the outset the difficulty of delimiting the perimeter of the ICT sector, which has indeed been the subject of several attempts to define it. According to Loukou, (2002) "information and communication technologies or more commonly known as ICT or NICT bring together all the information transmission techniques, in particular the Internet, computers and telecommunications".

 

However, there are more and more definitions that present an extension of the scope of ICT, resulting from the increasingly important place of digital in the economy or the development of the digital economy itself. According to "the OECD and INSEE, the ICT sector brings together companies that produce goods and services supporting the process of digitization of the economy, that is to say the transformation of information used or provided in digital information. The digital economy is therefore not limited to one particular industry. We should rather speak of "digital in the economy" to describe all the sectors that rely on ICT, producers and users ... The ICT sector includes companies in industry, services and trade wholesale companies operating in the fields of IT, telecommunications and electronics . (Lemoine, 2011). This author represents the economy by distinguishing three categories of actors:

 

-             The ICT sector within the meaning of the OECD is (electronic equipment and components, telecommunications, IT services and software, etc.). These may be ICT producing sectors for which there is no digital without infrastructure as well as those with digital content without which they do not exist without ICT, in particular: e-commerce, video games, music in line ; line services.

-          Sectors using ICTs, which use these technologies and gain in productivity thanks to them but whose activity predates the emergence of ICT (banking, tourism, automobile, etc.) ". These are the sectors for which there is no growth without ICT in particular: the sectors of Agriculture, transport, distribution, health, tourism, banking, automobile.

 

From the preliminary developments on the delimitation of the perimeter of the ICT sector, the analysis of the economic potential of the ICT sector could be considered from a double point of view, namely the sectors producing or using ICT.

 

According to the (World Bank, 2015) "Information and communication technology goods include telecommunications, audio and video, computers and related equipment; electronic components; and other information and communication technology goods. Software is excluded. While information and     communications     technology     services     include     computer     and communications   services   (telecommunications   as   well   as   postal   and messaging services) and information services (computer data and service transactions, etc.) ”.

 

According to Guilhon, (2003) "among sectors of the economy we note that services account for a good part of economic growth". A performance that Pliat (2000) explains the dynamism of the service sector by the contribution of ICTs by asserting that “services do not exploit all the knowledge resulting from research activities in developed countries but rather the related technologies. to information ”.

 

In Senegal "the contribution of the different economic sectors to the GDP shows that the economic growth originates from the tertiary sector which represents on average 61% of the GDP" (M. Kassé, 2012).

An OECD study (2000) also precises that "services are the main users of new information technologies. Their role is explained by the fact that many services process and disseminate information ". (Guilhon, 2003) provides a list of the main areas of ICT user services including "telecommunications, business services, finance, and insurance are the most intensive sectors in information and communication technology". Thus we see that a significant fraction of the service sector also uses ICT in their production processes.

 

Jorgensen, (2001) particularly shows the economic potential of the sector producing ICT, especially telecommunications, to promote economic growth.  In this regard he asserts that “for several countries, the ICT-producing sector is of particular interest due to high rates of productivity growth, which have powerfully contributed to overall performance. It is distinguished by rapid progress”.

 

In this regard (Vicente) also asserts that "a greater part of economic growth is attributable to the ICT sector. NICTs, by promoting a better circulation of knowledge, promote the speed of change in all sectors of the economy ".

According to Taouti «the commerce sector is one of the main sectors benefiting from the advantages provided by ICT. From the point of view of international trade or international trade in goods and services "the facts suggest that information and communication technologies (ICT) constitute an important force favoring a closer integration of the world economy».

According to the OECD, “small and medium-sized enterprises experience a 10% increase in their productivity due to Internet use and those which make significant use of network technologies are growing and exporting twice as much as those who do not take advantage of these technologies”. (Trade, 2012)

We will specifically attempt to provide an answer to the following research question: What is the mesoeconomic impact of FDI in the telecommunications sector on the national community, particularly on economic growth, external balance and employment.

The research objective is to determine the effects of foreign direct investment in the telecommunications sector on the national community, in particular on gross domestic product (GDP), job creation and the balance of payments through a meso-economic approach.

 

Given the economic performance of Senegal's telecommunications sector; we will try to test the following hypothesis: foreign direct investments in the telecommunications sector in Senegal have little impact on economic growth, external balance and on job creation.

In this essay, therefore, it is a question of analyzing, through a review of the theoretical and empirical literature, the impact of FDI in the telecommunications sector from the point of view of the national community with a view to particularly providing additional information likely to '' refine the overall results of the previous test.

The analysis will also be carried out through an approach capable of specifically capturing the effect of theoretically technology-intensive FDI in this sector, simultaneously on economic growth and the external balance; and employment.

Thus, the telecommunications sector constitutes the relevant experimental field for three main reasons; already briefly mentioned in the conclusion of the previous test:

 

-             The telecommunications sector contributes to the dynamics of the tertiary sector which drives Senegal's economic growth.

-             It is also one of the economic branches that receives the most capital- intensive foreign direct investment. It is also marked by investments which theoretically incorporate a strong technological value.

-             In addition, the availability of economic information on the telecommunications sector in general and the Sonatel Group in particular compared to other sectors receiving FDI makes it a favorable field for meso-economic analysis.

The analysis of the behavior of the Sonatel Group will be privileged given the fact that it polarizes a considerable part of the activities of the telecommunications sector in Senegal; because of its weight on the national economy and also for reasons related to the availability of information about this group.

This essay is made up of two chapters:

The first chapter presents a presentation of the economic and social situation and the performance of Senegal's telecommunications sector.

The second chapter presents an analysis of stylized facts on the mesoeconomic impact of FDI in the telecommunications sector.

 

1:FDI OF THE TELECOMMUNICATIONS SECTOR AND ECONOMIC GROWTH

 

1-1 : SECTION 1: REVIEW OF THEORETICAL AND EMPIRICAL LITERATURE

 

 

According to the OECD “the contribution of ICT manufacturing to overall labor productivity growth experienced during the 1990s, an increase partly attributable in fact to the acceleration of technological progress in the production of certain ICT goods such as semiconductors. Part of the growth in ICT-producing services is attributable to the emergence of the IT sector, which has accompanied the diffusion of ICTs in OECD member countries ".

 

However, research shows that the ICT sector is a growth engine for a group of countries with comparative advantages in the field of computing and in a few countries using imported technology. According to Bayoumi and Haacker, (2002) “the ICT sector is therefore only an important engine for accelerating productivity growth in a limited number of OECD countries, notably Korea, the United States, Finland, Ireland, Japan and Sweden. This situation is due to the fact that only a few OECD countries specialize in those branches of the ICT sector which are characterized by very rapid technological progress ".

 

Regarding host countries "a large part of the beneficial effects of ICT production has shifted to importing countries and other users due to terms of trade effects and increased rent." Bayoumi and Haacker, (2002) .The analysis of the impact of ICTs on economic growth has been the subject of several empirical works. According to the World Bank report (2009), access to telecommunications and the Internet drives global economic growth and, for developing countries, every 10% increase in high-speed Internet connections corresponds a 1.38% increase in economic growth. (Trade, 2012)

McKinsey & Co. estimate that "a 10% increase in the penetration rate of broadband connection in households corresponds to an increase in a country's GDP of between 0.1 and 1.4%". Booz & Co. also found that “a 10% increase in the penetration rate of broadband connection, in any given year, correlates with a 1.5% increase in labor productivity growth over the following five years  ”. Furthermore, the comparative examination of the performance of sectors using ICT intensively with that of economic sectors which do not use ICT can also help to highlight the role of ICT in overall performance.

 

Through a study carried out by the OECD on the contribution of ICT user services to economic performance, we note slight improvements in the contribution of ICT user services in Finland, Norway, the Netherlands, and Sweden and substantial increases in Australia, Canada, United States,  Ireland, Mexico and United Kingdom. The strong increase noticed in the  United States is due to faster productivity growth in wholesale trade, retail trade, and financial services (securities services); it is confirmed by several other studies, for example Mc Kinsey 2001; Triplett and Bosworth; 2002). The marked increase in productivity in Australia has also been confirmed by other studies. (Parham, 2001; Gretton et al. 2002)

 

According to the OECD (2000), advances in information technology make information more codified and have made it possible to increase the efficiency of certain tertiary services (banks and insurance). A skilled workforce optimized by the use of new techniques (microcomputers and software) are likely to increase the productivity gains of services.

 

Rapid advances in computer power, software and communication capabilities form a group of "complementary innovations" whose effects on productivity are significant. However, in some countries, ICT-using services have contributed negatively to productivity growth. This is the particular case of Switzerland, in the first half of the 1990s, which experienced low productivity growth in the

banking sector (Baily and Lawrence, 2001).

Through the economic literature we can identify five (5) channels of transmission of ICT on economic growth, namely the multiplier effect, the "deepening capital effect, the" deflator "effect on inflation, the" effect " quality ", the" total factor productivity "effect.

According to the OECD (2015) "the strong growth in equipment by businesses and consumers in ICT-derived goods has resulted in an increase in overall economic growth". This is the multiplier effect due to investment in ICT.

The "capital deepening" effect refers to the relative increase in the share of capital compared to labor. This is precisely according to (David, 2001; Jorgenson, 2001; Quah, 2001) "to favor capital over labor and skilled labor over unskilled labor". The "deflator" effect on inflation reflects the impact of falling prices in the ICT sector and their spillover to the rest of the economy. The "quality" effect is the impact of improving the characteristics of ICTs on improving the quality of many goods and services and on product differentiation. The "aggregate factor productivity" effect is the acceleration of productivity following investment in ICT.

 

However, certain studies condition the extent of the impact of ICTs on economic growth on several parameters. In this regard, Dirk and Lee (2001) distinguish the following parameters: the position of the country (producer vs importer of ICT); its size (large country vs. small country), its international specialization, its initial factor endowments and the presence or absence of additional assets (organizational innovations, institutions, human capital, incentives, etc.).

 

In fact, there are significant differences in economic performance between countries linked to disparities between countries in terms of access to information and communication technologies (ICT). In other words, it is about  a difference in the productivity of the factors of production induced by a digital or technological divide in general. By way of illustration, we can cite a few examples.

 

According to the OECD (2001) "the digital divide refers to an inequality in access to ICTs, between those who have this access and those who do not". A study by ITU (2014) shows that "major digital divides remain: 4.3 billion people on the planet, 90% of whom live in developing countries, are still not connected. In developed countries, 78% of households have internet access, compared to 31% of households in developing countries and 5% in LDCs. In the least connected countries, a large part of the inhabitants often live in rural areas, which further aggravates the digital divide between urban and rural areas”.

 

Indeed, studies also show that these disparities in terms of access to ICT considerably reduce the capacity of developing countries to benefit from technological innovation and to promote the productivity of their economies. According to a study by (UNCTAD, 2013) “the gap between countries in terms of access to information and communication technologies (ICT), due to the inequality of capacities and quality of Broadband across countries, in turn, between these countries and between regions, causes a strong inequality in the capacities that individuals, businesses, economic sectors and societies have to benefit from innovations and new applications of ICT”.

 

Helpman et al. (1995) attempts to explain the disparity between developed and developing countries concerning access to technology based on the efforts made by the countries at the R&D level, by specifying that “research and development is integrated into the model productivity of developed countries ”. According to Guilhon, (2003) "technological innovation is fostered by Research and Development (R and D) activity which in turn is strongly influenced by the development of ICT".

The impact of technological innovation on the productivity of factors of production and economic growth has been shown by several authors, in particular Romer explains the process through the following mechanism “to innovate, a researcher uses the knowledge that is available in his time ; by innovating, it increases the knowledge available to other researchers, especially those of future generations. Consequently, the research and development expenses made by a company allow it to increase its productivity and innovate; thanks to externalities, they also benefit other companies. So a virtuous circle is at work: by innovating, a company allows other companies to innovate ".

 

The integration of the technological innovation dimension into the productivity and development model naturally implies a significant effort to fund research and development. However, the levels of funding for research and development in most developing countries do not exceed the 1% of their GDP while the minimum acceptable investment to hope for a return on investment is set by the OECD at 1% ”.

 

Faced with these various types of constraints, particularly related to funding for research and development, infrastructure, the availability of quality local human resources, etc. to develop an endogenous research and development activity and a national technological innovation system, developing countries can only benefit, or at least in the short term, from the knowledge externality of developed countries.

 

Trade openness naturally becomes the main avenue of recourse for developing countries, to correct technological backwardness or the digital divide, in particular between countries. It allows developing countries to promote the international transfer of technology, innovation that improves the productivity of factors of production and economic growth.

According to Guilhon (2003), within the framework of trade opening, the following vectors of international technology transfer can be retained: foreign direct investment, imports of computer and communications equipment, publication of scientific and technical papers, mobility of skilled labor, foreign technological payments (patents, licenses, etc.).

 

Through an empirical analysis, Coe, Helpman and Hoffmaister (1997) show the positive combined effect of trade openness favoring the international transfer of technology on economic growth by regressing total productivity, factors on research and development and the human capital of 77 developing countries. By integrating the IDE variable into the model of Helpman and al. (1997), Hijazi and Safarian (1996) highlight the positive effect of trade openness and technology on economic growth.

 

According to Grossman and Helpman, (1991) "the conception of imports and foreign direct investment (FDI) as channels for the transmission of technology has only recently emerged with the work of Rivera Batiz and Romer (1991)". Indeed, according to Romer (1990), "in open economy growth models, R&D investments make it possible to innovate in the intermediate goods sector. These products once exported benefit the importing countries ”.

 

However, the profitability of the international transfer of technology through the channel of foreign direct investment is most often not effective under certain conditions, including the quality of local human resources in the host country. Indeed, Borensztein, de Gegorio and Lee (1995) demonstrate through an econometric study carried out on 69 developing countries, that the manifestation of the effect of FDI on technology is closely linked to the human capital held by the economy of Home. The effect of FDI on economic growth is most evident when the education system is performing well. (Guilhon, 2003).

Theories on economic growth have long given human capital an important place in the process of wealth creation. According to Robert Lucas (Nobel Prize in 1995) "a worker becomes more productive when he accumulates knowledge and skills, and these do not wear out".

We thus retain that trade openness, characterized by significant flows of current transactions in high technology-intensive goods and FDI is likely to promote the productivity of all sectors of the host economy with an education system. efficient and quality human resources. Thus the combination of the intrinsic effects of technology-intensive FDI on economic growth and those of ICT on the productivity of production factors should theoretically have a considerable impact on economic growth in host countries.

 

1-2     : ANALYSIS OF STYLIZED FACTS ON TELECOMMUNICATIONS SECTOR FDI AND GDP

 

In Senegal, the telecommunications producing sector is controlled by three private operators, subsidiaries of multinational companies. This is the Sonatel group; of the Tigo Company and the Expresso Company.

- The Sonatel Group

Sonatel is the historic telecommunications operator in Senegal. It became a public limited company in 1997: its capital was opened to France Telecom, which became the majority shareholder. The Sonatel group includes the entities "Sonatel SA" and its various subsidiaries: "Sonatel Mobile", "Orange Mali", "Sonatel Multimedia", "Sonatel Business Solutions", "Orange Guinea" and "Orange Bissau".

Today the capital of Sonatel is distributed as follows:

§         France Telecom: 42%

§         State of Senegal: 27%

§         Free float (institutions and general public): 26%

§         Employees and former employees: 5%

-          Tigo (SENTEL GSM)

Tigo is a subsidiary of the Millicom International Cellular (MIC) group, a multinational mobile telephone company present in 16 countries of the continents (Africa, America and Asia) and present in Senegal under the Sentel label since 1999.

-          Espresso

Expresso is a subsidiary of the Sudanese group SUDATEL, holder of a global license since September 2007, and which started its activities on January 12, 2009.

-          Other actors

There are also many small and medium-sized dynamic SMEs that play a secondary role in the telecommunications sector: these are data service providers, tele-service companies (call centers), distributors of mobile products. and fixed prepaid cards etc. In Senegal, the performance of the postal and telecommunications sector in Senegal is of the order of 10 to 11% of Senegal's GDP during the period from 2008 to 2012. The contribution of the postal and telecommunications sector to economic growth is around 0.68% for an average economic growth of 3.71% in 2012.

Table 1: contribution of telecommunications to economic growth

 

	Year
Size at constant   price	2008	2009	2010	2011	2012
GDP	4024	4163	4342	4391	4554
Added value (VA)   tent sector	2526	2555	2660	2757	2849
Post and   telecommunication value added (VA)	424	453	487	496	526
VAST / GDP	62,77%	61,37%	61,26%	62,79%	62,56%

Vatel /   VAST	16,79%	17,73%	18,31%	17,99%	18,46%
Vatel / GDP	10,54%	10,88%	11,22%	11,30%	11,55%
GDP   growth		3,45%	4,30%	1,13%	3,71%
Tertiary sector   growth		1,15%	4,11%	3,65%	3,34%
Tertiary sector   contribution		0,72%	2,52%	2,23%	2,10%
Telecom branch and   post contribution		0,72%	0,82%	0,21%	0,68%

Source: author's calculations based on ANSD data VAST: added value of the tertiary sector (VAST)  Vatel: added value of the telecommunications sector

Contribution rate: (VASTt + 1-VASTt / VASTt) * (VASTt / PIBt + 1)

 

From the point of view of economic performance, in recent years we have noticed that mobile telephony is the locomotive of the telecommunications sector in Senegal. According to statistics published by the Telecommunications and Post Regulatory Agency (ARTP-2009), Orange, a subsidiary of the historical operator Sonatel holds 66.7% of the mobile telephony market share, followed by Tigo which has 30.3% of the market share and finally Expresso, whose mobile offer was launched in January 2009, holds nearly 3% of the market share. These scores prove that Orange maintains its leadership in the field of mobile telephony.

figure 1: structure of the mobile telephony market from 2004 to 2008

 

 

Source: ARTP-2008 activity report

The park of fixed telephony recorded a downward trend from 2007.

figure 2: evolution of the fixed-line park from 2004 to 2008

 

 

 

Source: ARTP-2008 activity report

 

The dominant offerings in the internet market are those of Orange and Espresso. The number of Internet subscribers amounted to 48,110 in 2008 against 39,113 subscribers in 2007. In 2008, it was noted that “ADSL is the preferred way of accessing the Internet in Senegal, since it concerns nearly 95% subscribers. Access by wireless 3G key allows nearly 4% of subscribers to use internet services. "(ARTP 2008)

figure 3: evolution of the internet subscriber base from 2004 to 2008

 

Source: ARTP-2008 activity report

 

Telecommunications are one of the most dynamic and productive sectors of national economic life. Considering the statistics of the sector for the year 2008; we note a turnover of nearly 598 billion FCFA generated by the activities of fixed telephony, mobile telephony and internet services during 2008.

The SONATEL Group occupies an important place in the telecommunications sector, in fact the turnover achieved by this group in 2008 represents 89% of the total turnover of the telecommunications sector in Senegal. The significant financial performances of the Sonatel group are naturally obtained thanks to the fast growing mobile telephony.

Indeed, mobile telephony is experiencing growth in value and a predominance over other telecommunications services. Despite the downward trend in the number of fixed lines, we can see that fixed telephony activities generate substantial financial resources at an increasing rate.

figure 4: trend in fixed telephony turnover (in billions of fcfa)

 

 

Source: ARTP-2008 activity report

 

The Sonatel group generated an added value of 413.382 billion FCFA in 2012 against 176.952 billion FCFA in 2004, i.e. an increase of 129.72% in relative value and 233.43 billion in absolute value over a period of nine years.

Table 2: characteristic balances of management of the sonatel group

 

	Year
	2004	2005	2006	2007	2008	2009	2010	2011	2012
Added   value	179,952	230,416	281,8	322,493	343,592	376,622	382,751	397,246	413,382

 

Source: table drawn up by the author using data from Sonatel

 

Senegal's telecommunications sector is characterized by significant investments. In 2013 Senegal is one of the ECOWAS countries, which recorded one of the most significant investment volumes in the telecommunications sector, behind Côte d'Ivoire, Ghana, Guinea etc.

Table3: Investments in telecommunications with private participation (current US $) ECOWAS

Pays	2009	2010	2011	2012	An2013
Cabo Verde	23 000 000	16 000 000	23 200 000	5 300 000	-
Gambie	-	-	-	-	-
Libéria	24 000   000	15 000   000	14 900   000	-	-
Mauritanie	43 000   000	133 000   000	-	-	-
Guinée	87 000   000	71 000   000	76 400   000	250 000   000	295 900   000
Côte d'Ivoire	339 900   000	319 000   000	376 200   000	237 400   000	237 800   000
Ghana	847 000 000	290 000 000	305 500 000	226 700 000	197 800 000
Sénégal	256 000   000	236 000   000	174 000   000	265 500   000	105 600   000
Mali	429 000   000	254 000   000	228 500   000	88 500   000	78 700   000
Burkina Faso	193 000   000	299 000   000	60 300   000	61 800   000	39 600   000
Bénin	130 300   000	401 900   000	87 700   000	25 100   000	38 400 000
Niger	87 000   000	107 000   000	102 600   000	86 300   000	24 000   000
Togo	44 000 000	23 000 000	23 600 000	12 600 000	20 600 000
Sierra Leone	23 000   000	38 000   000	15 900   000	9 700 000	8 900 000
Guinée-Bissau	28 000   000	19 000   000	12 800   000	7 800 000	8 300 000

Source: compiled by the author using data from the World Bank for 2015

 

 

The investment expenditure of the Sonatel Group fell from 117.223 billion FCFA in 2010 to 118.124 billion FCFA in 2012. But the share of investment expenditure in 2012 of the subsidiaries of the Sonatel Group residing in Senegal has dropped slightly compared to 2011. It went from 54.52% in relative value in 2010, or 63.913 billion FCFA in absolute value, to 40.78% in relative value in 2012, or 48.169 billion in absolute value. These investments naturally had an impact on the added value of the Group.

Table 4: investments of the sonatel group from 2010 to 2012

Année	2010		2011		2012
	Amount (millions)	rate	Amount (millions)	rate	Amount (millions)	rate
Sénégal	63 913	54,52%	58 979	49,13%	48 169	40,78%
Mali	41 668	35,55%	44 483	37,06%	44 487	37,66%
Guinée	8 890	7,58%	14 710	12,25%	21 484	18,19%
Bissau	2 752	2,35%	1 866	1,55%	3 984	3,37%
	117 223		120 038		118 124

 

Source: author's calculations based on data from Sonatel

 

In Senegal, the evolution of net FDI flows seems to be similar to that of investments in telecommunications. The year 2008 coinciding with the subprime financial crisis was marked by the strongest flow of FDI in Senegal, followed by a decline during the years 2009 and 2010 and a resumption from the year 2011.

figure 5: investments in telecommunications with private participation in senegal (current us $)

 

 

 

Source: compiled by the author using data from the World Bank for 2015

 

2: FDI OF THE TELECOMMUNICATIONS AND INTERNATIONAL TRADE SECTOR OF SENEGAL

 

2-1                        : LITERATURE REVIEW OF THEORETICAL AND EMPIRICAL LITERATURE

 

 

According to (S. A. Dieng) "Competitiveness reflects the ability to maintain or increase positions in domestic or export markets. At the microeconomic level, it refers to the ability of a company to face competition from other companies  in the same country or abroad and therefore to maintain and even increase its share of the national and international market. On the macroeconomic level, the competitiveness of the national economy, as a whole or in a given sector, is expressed by the ability to generate trade surpluses for the corresponding goods ". According to Candou, (2010) “the competitiveness of a country can be defined as the capacity of this country to sell its products in the face of international competition, that is to say its capacity to fight against imports on its domestic market. but also its ability to export its goods and / or services to foreign markets”.

Competitiveness has two dimensions: price competitiveness and non-price competitiveness. A country's price competitiveness is based on its ability to produce goods and services at lower prices than its competitors. The main determinants of price competitiveness are:

-          production costs: the cost of financial capital (interest rates), the cost of human or labor capital (wages), the cost of intermediate consumption (raw materials, energy, components and equipment purchased);

-          productivity (efficiency of labor or capital);

-          transport costs ;

-          the exchange rate;

Non-price competitiveness is based on the ability to offer differentiated products. It results

-          the services they integrate;

-          innovation;

-          Branding ;

-          adaptation to customer requests;

The economic literature establishes that ICTs act directly on the main determinants of competitiveness, particularly technological innovation which is more precisely a determinant of non-price competitiveness.

The development of organizational models and the production of knowledge (R&D) through ICT is at the heart of technological innovation. Indeed, the relationship between ICT and intangible capital has considerably altered the sources and speed of technological change and innovation ". The linking of "intangible capital and the dissemination of NICTs cause a particularly sustained pace of innovation. Thus the acceleration of the pace of innovation is characteristic of a knowledge-based economy, that is to say of an economy where product differentiation, source of monopolistic behavior is the most effective competitive strategy for firms ”. (Vicente).

Innovation can take place at several levels of economic activity, including organization, production, marketing, external relations. The Oslo Manual defines innovation as “the implementation of a new or significantly improved product (good or service) or process, of a new method of marketing or of a new organizational method in company practices, workplace organization or external relations ”. According to (DAHMANI) “with the new information and communication technologies, the knowledge-based economy has therefore encountered an appropriate technological base leading to mutual consolidation between the development of knowledge-intensive activities and production and dissemination of new technologies. They will accelerate and extend the development of knowledge intensive activities (education, training, advice and

expertise, .. traditional activities regenerated by the computer).

 

In addition, ICTs play an important role in the process of strengthening the control of information and the economic power of the company. According to (J.l. Monino), information literacy is a key success factor for companies that are subject to a constantly changing competitive environment. A company will be better - more competitive - than its competitors if it has the right information before others at the right time, be it market knowledge, legal, technological, normative and other information. To deepen its competitive advantage, the company must be able to create information asymmetry to its advantage. Information and Communication Technologies (ICT) perform an essential function in the information society or knowledge-based economies. They allow better organization and management of information.

Through intensive use of computers, new generation software, as well as new communication techniques (internet, database management system, etc.), ICTs promote advanced information processing, storage and the transmission of information which is a fundamental area of the knowledge economy where changes (technological innovations), an important source of an economy's competitiveness are permanent.

The information society is characterized by the reorganization of society around the production, processing, dissemination and intensive consumption of information in virtually all human activities. (Loukou, 2002). "The ICT Development Index is an information society measurement indicator that ranks countries according to their performance in terms of infrastructure and ICT use and skills." Competitive intelligence also aims at better control of information. It constitutes "a decision-making aid tool and therefore puts into perspective all the information useful to an organization, whether scientific, technical, or relating to markets, products, competitors, regulations and behaviors. As for the information economy (sometimes referred to as the “new economy” or even “net economy”), it is defined as a new global economic structure in which the production of information goods and services is predominant in the creation of wealth and jobs. (Loukou, 2002)

 

 

 

According to Kodratoff, (1999) "information and knowledge are two concepts often confused ..., knowledge is a cognitive capacity, which clearly distinguishes it from information which is an element of knowledge susceptible to be coded, memorized and processed" (Vicente). According to (Malhotra, 2000), "knowledge is the result of an assembly of processed information to which the human mind has been able to assign a meaning". According to (S. A. Dieng) "For others, knowledge is just information in a context." (Grover and Davenport, 2001).

In fact, during the last three decades the economy of the intangible has undergone significant development. (DAHMANI). According to (Loukou, 2002) “the reorganization of society around the intangible - information, knowledge - requires the use of information and communication technology networks and services ( TIC). According to (Vicente) "there are obviously causal links between the advent of technology and the development of knowledge-based economies." According to Amable () "the increase in knowledge intensity also concerns associated information and communication technologies (ICT).

The development of a knowledge-based economy therefore results from a shock or a close relationship between a tendency to increase the share of intangible capital (education, training, human capital, research and development) and the diffusion of new information and communication technologies (internet and broadband infrastructure). Through previous developments, it has been shown that ICT promotes competitiveness through the channel of innovation and mastery of information. Thus, stimulating the vectors of information technology transfers, in particular the export of ICT- intensive goods and services, as well as FDI, should naturally amplify the impact of the development of the digital economy on the external balance.

 

2.2: ANALYSIS OF FACTS STYLIZED ON FDI OF THE TELECOMMUNICATIONS SECTOR AND THE EXTERNAL BALANCE

 

 

 

The share of ICT goods exports in the total exports of ECOWAS countries is generally very low. However, within the Economic Zone, Senegal is one of the countries with the best scores.

Table 5: exports of ict goods (% of total goods exports) of ecowas member

countries,
		Year
Pays		2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013
Bénin		0,01	0,01	0,12	0,04	0,01	0,01	0,08	0,07	0	0,09	0,03	0,01	0,01	0,03
Burkina Faso		0,3	0,86	0,13	0,16	0,38	0,18		0,05	0,03	0,03	0,01	0,04		0,04
Côte d'Ivoire		0,04	0,06	0,05	0,34	0,79	0,63	0,58	0,42	0,29	0,42	0,21	0,05	0,06	0,08
Cabo Verde		1,69					0,55	1,36	0,33
Ghana		0,14	0,04		0,02		0,02	0	0,02	0,04	0,03	0,02	0,05	0,06	0,19
Guinée		0,05	0,01			0,03	0,02	0	0,02	0,03
Gambie		0,49	1,82	0,11	0,72	0,07	0,34	0,21	0,17	0,67	0,37	0,12	0,11	0,07	0,1
Guinée-Bissau
Libéria
Mali		0,1	0,03	0,06	0,08	0,12	0,18	0,15	0,17	0,15		0,1	0,09	0,05
Mauritanie
Niger		0,1	0,05	0,16	0,17	0,13	0,18	0,23	0,21	0,07	0,15	0,33	0,27	0,19	0,45
Nigeria		0	0	0	0			0	0	0	0,01	0	0,02	0	0,01
Senegal		0,2	0,2	0,25	0,23	0,42	0,39	1,55	0,47	0,47	0,26	0,38	0,44	0,31
Sierra Leone		2,49		1,94
Togo		0,04	0,05	0,02	0,02	0,03	0,07		0,09	0,12	0,18	0,21	0,07	0,04	0,03

 

Source: compiled by the author using data from the World Bank for 2015

 

 

We also note that the share of ICT services exports on the total service exports of ECOWAS member countries is significant. But given the relatively low weight of trade in services over international trade, correcting Senegal's chronic trade deficit that could result from this boost cannot be significant.

Table 6: exports of ict services (% of exports of services, bdp) from ecowas member countries

	Year
pays	2005	2006	2007	2008	2009	2010	2011	2012	2013
Bénin	20,1	21,2	18,4	20,7	22	23	21,15	17,2
Burkina Faso	8,93	4,56	4,06	21	22,2	21,1
Côte d'Ivoire	33,7	30,7	31,1	30,9	29,7	28,5	30,1	27,8	30
Cabo Verde	7,76	6,11	5,94	5,6	6,01	4,8	5,373	5,22	6,1
Ghana
Guinée	1,1		46,8	37,2	32,8	53,7	49,29	64,9	69
Gambie
Guinée-Bissau			10,5	11,9	51,2	55,4	64,32	62,8
Mali	21,9	21,2	27,9	28,3	31,2	33,9	35,94	43,2	43
Mauritanie								46,8	50
Niger	34,3	37,9	24,6	19,7	23,1	5,44	14,78	18,3
Nigeria	1,63	1,43	2,54	1,78	2,29	2,13	2,531	4,39
Senegal	28	35	28,8	31,5	31,2	33,6	32,27
Sierra Leone	0,22	2,45	9,56	4,65	48,3	5,84	49,81	57,2	49
Togo	23,8	22,9	19,8	31,4	30,7	23,2	20,29	13,5

Source: compiled by the author using data from the World Bank for 2015

 

The flows of investment in ICT and FDI in Senegal follow roughly synchronous trajectories over the period from 2005 to 2011. Developments which do not seem to significantly affect the evolution of exports of ICT goods.

figure 6: comparative analysis of the trajectories of ict investment flows and fdi flows

Source : élaboré par l’auteur à partir des données de la Banque mondiale année 2015

 

Table 7: ict services goods exports (% of goods and services exports, bdp); investments in telecommunications with a private participation (current us $) and foreign direct investments, net in (bdp, current us $)

 

 

	Year
Senegal	2005	2006	2007	2008	2009	2010	2011
ICT product (% of total goods exports)	0,39	1,55	0,47	0,47	0,26	0,38	0,44
ICT service (% of service exports, BDP	28	35	28,8	31,5	31,2	33,6	32,27
Invest. ICT in thousands of US dollars	157 000	212 000	567 000	298 000	256 000	236 000	174 000
FDI in thousands of US dollars	167 877, 4	289 582, 8	350 994, 4	453 902, 6	330 145, 1	266 107, 6	338 218, 8

 

Source: compiled by the author using data from the World Bank for 2015

figure7: trends in exports of ict goods and services (% of goods and services exports, bdp) from senegal.

 

Source: compiled by the author using data from the World Bank for 2015

3: FDI OF TELECOMMUNICATIONS AND EMPLOYMENT

 

    3-1: REVIEW OF THEORETICAL AND EMPIRICAL LITERATURE

 

The future of employment in the information society of increasingly knowledge- based economies has been the subject of much debate in recent years. In the extreme, we evoke the fears of an end to work. Rifkin, (1995). Some argue that the information society is marked by jobs that no longer require direct human intervention. Note jobs that involve repetitive and predictable  processes that can be routinized and codified reliably. It is rather the indirect professional work of knowledge which is otherwise easily delocalised.

 

However, most jobs involve a significant number of tasks that are difficult to codify and automate and therefore require the human interface, and which exhibit the most resistance to offshoring which will most likely be concentrated in space. These are complex jobs for machines without being for humans and therefore with a human interface. These are jobs with a high accumulation of knowledge; requiring multiple knowledge (scientific and technical jobs in the fields of research and development).

 

According to Bravo, (2005) "ICT is proving to be one of the few sources of job creation likely to counterbalance the decrease in jobs in more traditional industrial sectors". In addition, "several authoritative studies have concluded that although ICT is supplanting many fields of activity. The strongest employment growth is to be found precisely in sectors and regions at the forefront of the integration of these technologies. " (Beaujoln, 1998, ILO, 1997a; OECD, 1996).

Bravo, (2005) also states that "ICTs affect some forms of work more than others". Indeed the ICT sector represents a powerful factor of attractiveness for jobs with high added value - scientific and technical jobs in the fields of research and development. The production of knowledge increasingly requires the use of ICTs. They therefore represent an important input in the sector of knowledge production, research & development and therefore technological innovation. This dynamic process therefore causes the creation of jobs linked to information and communication technologies (ICT) in the knowledge-intensive field ".

In other words, direct professional knowledge work is therefore the area of employment growth in the information society or knowledge-based economies marked by the use of ICT. These include R&D researchers, senior business executives, analysts, medical professions, etc. Indeed, these job categories naturally attract and integrate a large number of ICT-related professions, such as system analyst, programmer, computer engineer or network engineer, multimedia designer.

 

An American study published in January 2012 shows that “investments and innovation in the transition from 2G to 3G wireless technologies and in Internet infrastructure have prompted the creation of around 1,585,000 new jobs between April 2007 and June 2011 and estimates that, during the current transition, each 10% increase in the adoption of 3G and 4G wireless technologies could create more than 231,000 new jobs in the US economy in less than a year”. (Commerce, 2012)

 

“7 Internet-using SMEs also report twice as many jobs created compared to non-Internet SMEs. "(Commerce, 2012). In 2010, Ericsson and Arthur D. Little reviewed 124 socio-economic studies on the impact of broadband and found that" for every thousand broadband connections, 80 jobs were created ”4. (Trade, 2012)

 

3- 2: SECTION 2: ANALYSIS OF STYLIZED FACTS ON TELECOMMUNICATIONS SECTOR IDEAS AND EMPLOYMENT

 

 

In Senegal, through the study of the performances of the leader Sonatel Group shows "the number of personnel of the Sonatel group - is almost stationary, which ensures" more than 100,000 indirect jobs thanks to an extensive commercial distribution and dynamic partners, + of 3,000 direct jobs ”(Sonatel Group annual report. 2011Page 59).

table 8: evolution of the sonatel group staff workforce (2009 a2011)

 

	Number of staff /   year
Pays	2 009	2 010	2 011
Senegal	1 931	1 930	1 919
Mali	375	420	439
Guinée	140	145	177
Bissau	40	43	58
Total	2 486	2 538	2 593

 

Source: table established by the author using data from Sonatel 2011

 

With regard to the structure of charges, we note that the SONATEL group's

policy favors the development of contractualization and technology to the detriment of staff recruitment. The external services occupy the first place in terms of size of budget item and expenditure. This situation can be explained by the fact that the Sonatel Group establishes intra-group agreements between the subsidiaries and with the parent company France Telecom. These conventions, of various types; relate in particular to the transfer of knowledge in the field of management or in the field of technical operation.  The costs of these services are very expensive. They represent on average 33% of turnover. This operation also promotes the repatriation of capital.

 

Depreciation and amortization takes second place in terms of importance. With the development of increasingly sophisticated technology, telecommunications companies are making massive investments in physical capital. In the case of the Sonatel group, the allocation to depreciation and provisions represents on average 23% of the added value. From a financial point of view, depreciation is a non-disbursable charge, so it acts positively on the cash flow (the liquidity of the company), but negatively on the pre-tax profit for the year and therefore on the base of the Corporation tax. In other words, the depreciation and provisions decrease the profit before taxes. In other words, the amount of corporate tax within the company is a decreasing function of depreciation and provisions. In addition, accelerated depreciation is applied for most of the fixed assets. This method accentuates the reduction of the tax base of the corporation tax; therefore a reduction in state revenue.

Table 9 : operating expense ratios on group turnover from 2005 to 2012

	Year
	2005	2006	2007	2008	2009	2010	2011	2012
External services	28,55%	26,24%	33,01%	31,85%	32,68%	32,88%	35,36%	33,71%
Depreciation	16,54%	15,70%	16,66%	20,19%	17,33%	16,75%	16,75%	15,82%
Staff expenses	11,63%	9,59%	9,70%	9,54%	10,15%	9,39%	9,59%	9,36%
Purchase	4,51%	5,67%	5,70%	6,49%	5,74%	6,75%	7,13%	7,11%
Financial expenses	0,85%	1,37%	2,15%	1,41%	1,49%	1,78%	1,37%	1,13%

 

Source: author's calculations based on statistics from Sonatel- 2011

figure 8: graphic representation of the structure of operating costs of the sonatel group

Staff costs as an essential counterpart of added value represent on average a very low part of the latter. Staff costs represent on average 14.5% of added value. The telecommunications sector being structurally characterized by capital intensive companies (technology) does not favor the recruitment of personnel.

Table 10: operating expense ratios on added value from 2005 to 2012

 

 

	Year
	2005	2006	2007	2008	2009	2010	2011	2012
personal expenses	16,13%	13,57%	14,15%	14,70%	15,16%	14,69%	15,33%	15,00%
Depreciation	22,95%	22,21%	24,32%	31,11%	25,89%	26,22%	26,79%	25,37%

Source: Author's calculations based on Sonatel statistics

CONCLUSION

 

This essay attempts to provide the second attempt to answer the following research question: do FDI have a significant impact on the three final objectives of economic policy in Kaldor's sense, namely: economic growth, external balance , and employment? It focuses on a meso-economic analysis of the impact of FDI on the national community. It attempts to implicitly dispel the circumspection on a positive correlation between FDI and economic  growth in particular already established at the level of test 1; and attempt to quantify the contribution of telecommunications FDI to economic growth; the external balance and on employment.

Thus the research objective pursued through this test is to quantify the effects of foreign direct investments in the telecommunications sector from the point of view of the investor and on the national community, in particular on job creation, gross domestic product (GDP ), the balance of payments (export earnings), the state budget, etc. This essay attempts to specifically test, also through a review of the literature and analysis of stylized facts, the following hypothesis: foreign direct investments (FDI) in the telecommunications sector in Senegal have little impact on economic growth, external balance. and job creation. There has been a synchronous development of inflows of foreign direct investment and those of ICT investments from 2005 to 2008. In Senegal, the telecommunications producing sector is controlled by three private operators, subsidiaries of multinational companies. This is the Sonatel group; of the Tigo Company and the Expresso Company. What could say the main part of the investments in ICT is done by the telecom FMNs.

Regarding the effect of FDI in the telecommunications sector and economic growth, the analysis of stylized facts shows the added value of the post and telecommunications branch represents on average 10 to 11% of Senegal's GDP during the period from 2008 to 2012; a significant contribution of the telecommunications sector to wealth creation, which is 0.72%; 0.82%; 0.21%; 0.68% for growth rates of 3.45%; 4.30%; 1.13%; 3.71%.

Regarding the effect of telecommunications post FDI on Senegal's foreign trade, it was noted that exports of ICT goods to Senegal did not reach the threshold of 0.5% of Senegal's total exports during the 2008 period. -20012. While exports of ICT goods represent on average 31% of Senegal's total exports during the same period. We can estimate that it is of the order of a little less than 100 billion FCFA in absolute value during the period from 2008 to 2012. In 2011 the Sonatel group individually contributed to Senegal's exports for 97 billion FCFA per compared to an overall level of exports of the post and telecommunications branch stopped at CFAF 99.8 billion in 2011.

Regarding the effect of telecom FDI on employment in Senegal, we see particularly at the level of the Sonatel Group management options, which attest to a tendency to strengthen the capital factor and the contractualization of the expertise necessary for management and operation. to the detriment of staff recruitment. The share of personnel costs in the Group's turnover recorded a slight decrease in relative value. It went from 11.63% in 2005 to 9.36% in 2012, i.e. a drop of 1.97%. This attests to some extent that the dynamism of the Group has not given rise to an option of significant recruitment of additional staff to support the growth of the company.

This growth has been mainly supported by technology. We note that the share of external services, characterized above all by intra-group contracts with the parent company, in particular with France Telecom or between Group subsidiaries, has changed substantially. The share of external services in the group’s turnover rose from 28.55% in 2005 to 33.71% in 2012, an increase of 5.16%. Depreciation, as the consideration of the economic contribution of equipment mobilized for the performance of activities is experiencing a positive development. The share of depreciation in turnover fell from 16.54% in 2005 to 16.75% in 2011, followed by a slight decline of 15.82 in 2012. A decline which has the advantage of strengthening dividends paid and group reserves. With an almost constant workforce varying between 2009 and 2011, the group's growth is not yet favorable to job creation.

At the end of the review of the literature and stylized facts on the telecommunications sector, we note that the profitability of foreign direct investments in the telecommunications sector is very mixed from the point of view of the national community against a very obvious financial profitability from the point of view of investors. In other words, there is an imbalance in terms of net gains provided by FDI in the telecommunications sector in Senegal between foreign investors and the national community. The imbalance in the distribution of net gains generated by FDI in the telecommunications sector in Senegal between foreign investors and the national community calls into question the regulation of the sector or the quality of regulatory institutions of the telecommunications sector in Senegal.

 

 

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