<html><head><meta http-equiv="content-type" content="text/html; charset=utf-8"></head><body dir="auto"><div style="-webkit-text-size-adjust: auto;">Listers</div><div style="-webkit-text-size-adjust: auto;"><br></div><div style="-webkit-text-size-adjust: auto;">Jaindi Kisero's article on the imminent departure (demise?) of two telcos in Kenya make compelling reading.</div><div style="-webkit-text-size-adjust: auto;"><br></div><div><span style="-webkit-text-size-adjust: auto;"><a href="http://www.nation.co.ke/oped/Opinion/mobile-phone-firm-pullout-market-failure/-/440808/2257472/-/2crh39/-/index.html">http://www.nation.co.ke/oped/Opinion/mobile-phone-firm-pullout-market-failure/-/440808/2257472/-/2crh39/-/index.html</a></span></div><div><span style="-webkit-text-size-adjust: auto;"><br></span></div><div><span style="-webkit-text-size-adjust: auto;">The article basically explores the possibility that market failure is what we are experiencing in Kenya. </span></div><div><span style="-webkit-text-size-adjust: auto;"><br></span></div><div><span style="-webkit-text-size-adjust: auto;">According to Wikipedia Market Failure</span><span style="background-color: rgba(255, 255, 255, 0);"> </span><span style="background-color: rgba(255, 255, 255, 0);">is a concept within economic theory describing when the allocation of goods and services by a</span><span style="background-color: rgba(255, 255, 255, 0);"> </span><a href="http://en.wikipedia.org/wiki/Free_market" title="Free market" style="text-decoration: none; background-image: none;">free market</a><span style="background-color: rgba(255, 255, 255, 0);"> </span><span style="background-color: rgba(255, 255, 255, 0);">is not</span><span style="background-color: rgba(255, 255, 255, 0);"> </span><a href="http://en.wikipedia.org/wiki/Economic_efficiency" title="Economic efficiency" style="text-decoration: none; background-image: none;">efficient</a><span style="background-color: rgba(255, 255, 255, 0);">. That is, there exists another conceivable outcome where a market participant may be made better-off without making someone else worse-off. (The outcome is not</span><span style="background-color: rgba(255, 255, 255, 0);"> </span><a href="http://en.wikipedia.org/wiki/Pareto_efficiency" title="Pareto efficiency" style="text-decoration: none; background-image: none;">Pareto optimal</a><span style="background-color: rgba(255, 255, 255, 0);">.) Market failures can be viewed as scenarios where individuals' pursuit of pure self-interest leads to results that are not efficient – that can be improved upon from the societal point-of-view.</span><sup id="cite_ref-1" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-1" style="text-decoration: none; background-image: none;">[1]</a></sup><sup id="cite_ref-krugman_2-0" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-krugman-2" style="text-decoration: none; background-image: none;">[2]</a></sup><span style="background-color: rgba(255, 255, 255, 0);"> </span><span style="background-color: rgba(255, 255, 255, 0);">The first known use of the term by economists was in 1958,</span><sup id="cite_ref-Bator_3-0" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-Bator-3" style="text-decoration: none; background-image: none;">[3]</a></sup><span style="background-color: rgba(255, 255, 255, 0);"> </span><span style="background-color: rgba(255, 255, 255, 0);">but the concept has been traced back to the Victorian philosopher</span><span style="background-color: rgba(255, 255, 255, 0);"> </span><a href="http://en.wikipedia.org/wiki/Henry_Sidgwick" title="Henry Sidgwick" style="text-decoration: none; background-image: none;">Henry Sidgwick</a><span style="background-color: rgba(255, 255, 255, 0);">.</span><sup id="cite_ref-Medema_4-0" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-Medema-4" style="text-decoration: none; background-image: none;">[4]</a></sup><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);">Market failures are often associated with <a href="http://en.wikipedia.org/w/index.php?title=Time-inconsistent_preferences&action=edit&redlink=1" class="new" title="Time-inconsistent preferences (page does not exist)" style="text-decoration: none; background-image: none;">time-inconsistent preferences</a>,<sup id="cite_ref-5" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-5" style="text-decoration: none; background-image: none;">[5]</a></sup> <a href="http://en.wikipedia.org/wiki/Information_asymmetry" title="Information asymmetry" style="text-decoration: none; background-image: none;">information asymmetries</a>,<sup id="cite_ref-6" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-6" style="text-decoration: none; background-image: none;">[6]</a></sup> <a href="http://en.wikipedia.org/wiki/Market_structure" title="Market structure" style="text-decoration: none; background-image: none;">non-competitive markets</a>,<a href="http://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem" title="Principal–agent problem" style="text-decoration: none; background-image: none;">principal–agent problems</a>, <a href="http://en.wikipedia.org/wiki/Externalities" title="Externalities" class="mw-redirect" style="text-decoration: none; background-image: none;">externalities</a>,<sup id="cite_ref-Laffont_7-0" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-Laffont-7" style="text-decoration: none; background-image: none;">[7]</a></sup> or <a href="http://en.wikipedia.org/wiki/Public_goods" title="Public goods" class="mw-redirect" style="text-decoration: none; background-image: none;">public goods</a>.<sup id="cite_ref-8" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-8" style="text-decoration: none; background-image: none;">[8]</a></sup> The existence of a market failure is often the reason for government intervention in a particular <a href="http://en.wikipedia.org/wiki/Market" title="Market" style="text-decoration: none; background-image: none;">market</a>.<sup id="cite_ref-9" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-9" style="text-decoration: none; background-image: none;">[9]</a></sup><sup id="cite_ref-rees_10-0" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-rees-10" style="text-decoration: none; background-image: none;">[10]</a></sup> Economists, especially <a href="http://en.wikipedia.org/wiki/Microeconomics" title="Microeconomics" style="text-decoration: none; background-image: none;">microeconomists</a>, are often concerned with the causes of market failure and possible means of correction.<sup id="cite_ref-mankiw_11-0" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-mankiw-11" style="text-decoration: none; background-image: none;">[11]</a></sup> Such analysis plays an important role in many types of <a href="http://en.wikipedia.org/wiki/Public_policy_(law)" title="Public policy (law)" class="mw-redirect" style="text-decoration: none; background-image: none;">public policy</a> decisions and studies. However, some types of government policy interventions, such as taxes, subsidies, <a href="http://en.wikipedia.org/wiki/Bailout" title="Bailout" style="text-decoration: none; background-image: none;">bailouts</a>, wage and price controls, and regulations, including attempts to correct market failure, may also lead to an inefficient allocation of resources, sometimes called <a href="http://en.wikipedia.org/wiki/Government_failure" title="Government failure" style="text-decoration: none; background-image: none;">government failure</a>.<sup id="cite_ref-weimervining_12-0" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-weimervining-12" style="text-decoration: none; background-image: none;">[12]</a></sup> Thus, there is sometimes a choice between imperfect outcomes, i.e. imperfect market outcomes with or without government interventions. But either way, if a market failure exists the outcome is not <a href="http://en.wikipedia.org/wiki/Pareto_efficiency" title="Pareto efficiency" style="text-decoration: none; background-image: none;">Pareto efficient</a>. Mainstream neoclassical and Keynesian economists believe that it may be possible for a government to improve the inefficient market outcome, while several <a href="http://en.wikipedia.org/wiki/Heterodox_economics" title="Heterodox economics" style="text-decoration: none; background-image: none;">heterodox</a> schools of thought disagree with this.<sup id="cite_ref-n._gregory_mankiw_13-0" class="reference" style="unicode-bidi: -webkit-isolate;"><a href="http://en.wikipedia.org/wiki/Market_failure#cite_note-n._gregory_mankiw-13" style="text-decoration: none; background-image: none;">[13]</a></sup></span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);"><br></span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);">While Creative Destruction alludes to free-market economics as a description of processes such as downsizing in order to increase the efficiency and dynamism of a company or economy.<sup id="cite_ref-isbn0-86091-785-1_8-0" class="reference" style="unicode-bidi: -webkit-isolate;"></sup></span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);"><br></span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);">The case of Orange and yu in my humble opinion is the stuff of Business School studies at Strathmore and others for years to come.</span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);"><br></span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);">The questions that the country now needs to ask include:-</span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);"><br></span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);">1. How will the demise of two major multinationals in Kenya going to affect the country's FDI outlook? Kenya is quickly gaining a reputation as a graveyard for MNCs who come here without appreciating the GLOCAL Principle.</span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);">2. What are the market dynamics that are going to be unleashed by a a defacto duopoly that now exists?</span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);">3. What impact will it have going forward on the attractiveness of Kenya as a destination for tech giants and Startups alike?</span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);">4. Is the regulatory environment being optimally executed to protect both investors and consumers alike? </span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);">5. Lastly - the more things change the more they remain the same? Seriously. The way this is going I won't be surprised if Airtel also throws in the towel seeing as they haven't turned a profit since their entry into the country.</span></p><p style="margin: 0.4em 0px 0.5em;"><span style="background-color: rgba(255, 255, 255, 0);"><br></span></p><div style="-webkit-text-size-adjust: auto;"><span style="-webkit-tap-highlight-color: rgba(26, 26, 26, 0.294118); -webkit-composition-fill-color: rgba(175, 192, 227, 0.231373);"><b>Ali Hussein</b></span></div><div style="-webkit-text-size-adjust: auto;"><br></div><div style="-webkit-text-size-adjust: auto; font-family: Helvetica; font-size: medium; -webkit-tap-highlight-color: rgba(26, 26, 26, 0.294118); -webkit-composition-fill-color: rgba(175, 192, 227, 0.231373);">+254 0770 906375 / 0713 601113</div><div style="-webkit-text-size-adjust: auto; font-family: Helvetica; font-size: medium; -webkit-tap-highlight-color: rgba(26, 26, 26, 0.294118); -webkit-composition-fill-color: rgba(175, 192, 227, 0.231373);"><br></div><div style="-webkit-text-size-adjust: auto;"><p style="margin: 0in 0in 0pt;"><span style="background-color: rgba(255, 255, 255, 0);">Twitter: @AliHKassim</span></p><span style="background-color: rgba(255, 255, 255, 0);"><font></font></span><p style="margin: 0in 0in 0pt;"><span style="background-color: rgba(255, 255, 255, 0);">Skype: abu-jomo</span></p><p style="margin: 0in 0in 0pt;"><span style="background-color: rgba(255, 255, 255, 0);">LinkedIn: <a href="http://ke.linkedin.com/in/alihkassim" target="_blank">http://ke.linkedin.com/in/alihkassim</a><a href="http://ke.linkedin.com/in/alihkassim" target="_blank"><span style="text-decoration: none;"></span></a></span></p><span style="background-color: rgba(255, 255, 255, 0);"><font></font></span><p style="margin: 0in 0in 0pt;"></p><font><span style="background-color: rgba(255, 255, 255, 0);">Blog: <a href="http://www.alyhussein.com/" target="_blank">www.alyhussein.com</a></span><br></font></div><div style="-webkit-text-size-adjust: auto;"><span style="-webkit-tap-highlight-color: rgba(26, 26, 26, 0.292969); -webkit-composition-fill-color: rgba(175, 192, 227, 0.230469); -webkit-composition-frame-color: rgba(77, 128, 180, 0.230469); "><br></span></div><div style="-webkit-text-size-adjust: auto;">"I fear the day technology will surpass human interaction. The world will have a generation of idiots". ~ Albert Einstein</div><div style="-webkit-text-size-adjust: auto;"><span style="-webkit-tap-highlight-color: rgba(26, 26, 26, 0.294118); -webkit-composition-fill-color: rgba(175, 192, 227, 0.231373);"><br></span></div><span style="-webkit-text-size-adjust: auto;">Sent from my iPad</span></div></body></html>