Old mindsets are hard to die.
Look at the policies for national TLDs; most of the time, you will not be able to register a domain with a TLD belonging to a foreign country, because "you need a contact based in the country". This old, national-State mindset is typical of the 20th century, and the soon it goes away, the better. For example, Italy had a fantastic opportunity to monetize its TLD: how many "Information Technology" companies would love to have a domain ".IT" rather than a bland ".com"? But no, can't have that, it would be way too profitable for a country that, as everyone knows, never had economic problems in the last 20 years </snark>.
Now look at Paraguay; its ".py" is perfect for python-related websites, but I can't register it either, because clearly Paraguay doesn't need my money.
Meanwhile, little Tuvalu makes loads of money from television producers desperate to get their own ".tv" corner of the Internet, and ICANN is pushing for "themed" TLD anyway (.biz, .aero etc)...
Partitioning cyberspace on geographical terms makes sense only from an administrative perspective (to make clear who is responsible for maintaining what); once that is established, every country should try to maximize the potential of its little corner of the Internet.