The cuckoo’s egg

[Originally published with a slightly longer title in the Vanuatu Daily Post]

It’s fairly natural in business to want a return on one’s investment. That’s pretty much the point of capitalism, after all. But investment implies risk, too; if you put your money into play, you are accepting at least a small likelihood that it will be lost. Normally, the riskier the venture, the higher the expected return if things go right.

In some endeavours, however, the risk is unavoidable and the reward is slow in coming – if it comes at all. Telecommunications infrastructure is one such area. Especially here in the Pacific, capitalisation can require investment levels that –rightly– make the average investor blanch. It’s no accident, therefore, that private sector players often seek institutional backing before embarking on large-scale projects.

The plain fact is that in this global marketplace, some sort of inducement is needed in order to make investment in the comparatively tiny Pacific market attractive. Pretend for a moment you’re an investor. Given the choice between backing a fibre-optic cable landing in Port Vila or one that lands in Jakarta, which would you choose?  All other things being equal, you’d be a fool to choose the former.

Competitors have cried foul in the past when concessionary financing was used to induce increased private sector participation in various Pacific telecoms markets, but experience shows that healthy competition has raised revenue levels across the board. Competition, even with its attendant risks, is better for all concerned.

The challenge, then, is how to make the capitalisation phase, with its necessary reduction in risk, lead seamlessly into a competition phase, with a level of risk characteristic of a healthy marketplace?

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