Clientelism, competition and corruption: Informal institutions and telecommunications reform in Kenya

Kenya's composite profile in the 1990s--a head start in telecommunications indicators, a relatively broad economic base, a strong market orientation, public frustration with poor service, a macro-economic crisis with high donor involvement, enthusiastic international investors and an autonomous and centralized government--made it a classic case for success in telecommunications reform. However, attempts to effect meaningful change failed and by the turn of the millennium, the sector's performance lagged that of its African peers and of less developed countries on the continent.;This study focuses on the role played by informal institutions--namely clientelism and corruption--factors that have hitherto received inadequate attention in the literature on economic reform. It argues that while reform was ostensibly advancing through formal government commitments to international financial institutions, a parallel, less explicit, narrative was unfolding in the larger political arena in Kenya during the reform period. Widespread evidence shows that, facing increasing competitive pressure from democratization, political elites relied increasingly on misappropriated public resources to finance and consolidate their base and to fend off the encroaching opposition. Thus, the supposed change agents, key elites in the telecommunications sector and beyond, were reluctant reformers as they stood to lose influence and access to monopoly rents and illicit wealth if the sector was privatized and liberalized. The existence of these vested interests offers a compelling explanation for the gaps between espoused commitment to reform and actual implementation.;The study concludes that telecommunications reformers in Kenya and elsewhere should pay more attention to informal institutions as they re-engineer formal laws and regulation. Further, greater recognition is needed that failures in performance and reform may be rooted in political factors. Often reformers will be unable to successfully achieve sectoral reform unless it is in a context of larger efforts to improve both economic and political governance.