The country’s IT segment continues to attract investors from around the globe. Driven by the rapid success achieved by international operators in the telecoms sector, foreign sponsors are eager to take part in the country’s evolving tech industry. In a matter of only a few years, the majority of Myanmar’s young population has gone from little or no access to internet services to a breeding ground for tech start-ups.
Young people still face significant hurdles in the form of limited access to modern equipment, with the majority of the population accessing the internet for the first time through their mobile phones. However, increased government support and an enhanced connectivity backbone is helping to swiftly end the nation’s digital divide.
While affordable SIM cards and data packages have enabled a good portion of the population to connect to the internet for the first time via their mobile devices, very few homes can afford broadband internet access. There is less than one broadband connection per 1000 people in urban areas and less than one connection for every 10,000 people in rural areas, where 70% of the population lives, according to a 2015 study by MMRD Research Services. Furthermore, fixed lines start at $50 per month, not including installation fees, and are only available in a select few areas. With minimum wage of MMK3600 ($2.92) per day, a fixed connection to the internet is out of reach for the vast majority of local people. While there has been an increase in internet service providers (ISPs) offering a mixture of solutions, for the time being telecoms operators are the most affordable route to the web, offering 10 MB of data for MMK60 ($0.05). With four ISPs picking up between 20 MHz and 40 MHz within the 2600-MHz band in late 2016, competition will lead to a decrease in prices, but whether those prices will be tailored to the average household is a question of feasibility, given income levels. There is, however, an emerging middle class that ISPs are competing for.
To compliment efforts undertaken by the telecoms sector, the Ministry of Transport and Communication (MTC) is making an effort to bolster broadband connectivity by leveraging solutions provided by international satellite firms. In mid-2016 the MTC signed an agreement with Intelsat to use two of its satellites to broaden the country’s wireless network and provide more affordable connectivity for local communities. Under the deal, the MTC will gain access to C-band and Ku-band satellite services on the firm’s Intelsat 902 and 906 satellites, which are to be used for VSAT and cellular backhaul services. U Khin Maung Thet, permanent secretary at the MTC, told telecoms market research firm TeleGeography in June 2016 that the initiative will strengthen coverage across rural areas of the country. U Khin Maung Thet added, “With the help of Intelsat’s globalised network, we will leverage their satellite solutions to extend 2G and 3G communication services beyond urban centres and ensure that all of our citizens have access to higher bandwidth, superior quality and more affordable mobile broadband connectivity.”
The private sector is also taking part in satellite connectivity measures. Myanmar VSAT service operator KBZ Gateway, a subsidiary of KBZ Group, has entered into an agreement with Asia Satellite Telecommunications (AsiaSat) and Hughes Network Systems to provide high-speed broadband services, which will start at 100 Mbps. With the first phase launched in May 2016, AsiaSat will be responsible for satellite connectivity via three orbiters, with KBZ using C-band and Ku-band capacity on AsiaSat 4 and AsiaSat 7, and later AsiaSat 9, which is expected in the first quarter of 2017. For their part, Hughes Network Systems has assembled the terrestrial network and earth station in Bago, which lies 70 km outside the business capital of Yangon. In the first of its kind arrangement for Myanmar, the initial phase will be targeted to strengthen KBZ Group’s banking division. Thereafter, the service will be available to telecoms operators and businesses.
Hughes has also signed another agreement with local firm Southeastasianet Technologies Myanmar (SEANET). The two firms reached an agreement whereby Hughes will provide its Jupiter System satellite solution for VSAT broadband services to businesses, mainly in rural areas. According to report in weekly magazine Frontier Myanmar, SEANET packages cost between $1 and $99, with download speeds ranging from 512 Kbps to 10 Mbps. Given Myanmar’s diverse terrain, the deployment of satellite services will also improve network coverage for telecoms operators in hard-to-reach rural areas. According to a 2015 study by SATC onsult, satellite usage stood at 1418 MHz, with demand expected to increase to 1930 MHz by 2020.
Connections are not only being made in the sky above Myanmar, measures are also being taken to diversify the country’s underlying international links by strengthening the national fibre backbone. Historically, Myanmar has relied on a network of terrestrial cables to China and Thailand and one sub-sea connection known as South-east Asia-Middle East-Western Europe 3 (SEA-ME-WE 3), all of which have been subject to monsoon interruptions that cause major delays to download speeds. SEA-ME-WE 3 is the largest at 10 Gbps. Controlled by state-owned Myanma Posts and Telecommunications (MPT), data prices are almost 10 times higher than in Singapore and double that of neighbouring Thailand. However, according to the MTC, availability and the price of data are set to drop, with Myanmar expanding its fibre-optic cables to 31,000 km in 2016, with linkages to the Asia-Africa-Europe 1 (AAE-1) and SEAME-WE 5 sub-sea cables landing at Ngwe Saung beach. With a total length measuring 20,000 km the SEA-ME-WE 5 cable has a design capacity of 24 Tbps and a bandwidth of 100 Gbps – 10 times that of SEA-ME-WE 3. Once fully operational the AAE-1 will connect Myanmar to 19 landing spots with France at the western end and Hong Kong on the eastern end. However, until these links are live and fully active, capacity will be pushed to the brink as more of Myanmar’s population gets connected to the web through mobile devices.
The private sector is also taking part in subsea initiatives. In late 2015 the Singapore-headquartered Campana Group signed a turnkey contract with Alcatel-Lucent Submarine Networks, a subsidiary of Nokia, to bring the first ever private subsea internet cable to Myanmar. The Myanmar-Malaysia-Thailand International Connection (MYTHIC) cable will be 1600 km in length and will link Myanmar to Malaysia and Thailand, with onward connectivity to Singapore and, later, to the landing stations of other international submarine cables. To start with, the system will use 100-Gbps technology for an initial design capacity of 20 Tbps, and it is scheduled to be completed by the end of the first quarter of 2017. Once fully operational, the cable will provide Myanmar with an additional 300 Gbps of bandwidth. According to figures from the MTC, Myanmar surpassed the 200-Mbps bandwidth mark in early 2016, a fifth of neighbouring Thailand, which reached 4 Tbps in November 2016.
Campana is also deploying TARO, another terrestrial cable between Thailand and Myanmar, which is expected to be completed in mid-2017 and will provide for 2.5 Tbps capacity. While Campana has not officially mentioned how much it will charge, it has stated that it will be Myanmar’s first carrier-neutral cable and would undercut existing rates. The cable will land at the Thilawa Special Economic Zone (SEZ), where it will connect with Myanmar’s first ever Tier IV data centre.
Telenor has also built three separate international long-haul connections out of the country with a maximum bandwidth of 30 Gbps, with two connecting to Thailand, one to China and a fourth connection to India expected in the near future. Similarly, Ooredoo also has fibre connections to China and Thailand that it leases from MPT.
Looking To Data
Another example of Myanmar’s network evolution is within the data protection space. Burst Myanmar, a broadband and data centre services provider, has received approval to build Myanmar’s first ever Tier IV data centre in the Thilawa SEZ, which is only the fifth such design certification in all of South-east Asia. Flexenclosure is providing the prefabricated data centre. Burst Myanmar has also entered into several strategic partnerships for its inaugural commercial roll-out, which is set for the second quarter of 2017. Singapore’s 1-Net will act as the data centre management partner, TS Global Networks will serve as the satellite management partner and Campana Networks will be the fibre capacity partner through its MYTHIC cable. In order to guarantee the delivery of service level agreements all equipment is wholly fault tolerant, including cooling equipment, all heating, ventilation and air-conditioning systems, storage gear, switches and uplinks, and all servers. In short, the development of such a facility is a major milestone for Myanmar and is testament to the investment climate there.
With an emphasis on providing the highest level of data security and network reliability, finding the right location for the data centre took time, given Myanmar’s infrastructure shortages, particularly access to uninterrupted power supply. “The Thilawa SEZ presented the perfect opportunity to set up operations,” Daniel R Michener, CEO of Burst Myanmar, told OBG. “Access to the port and investment incentives made it an obvious choice. In addition, it has been built to Japanese standards.”
The firm holds a 50-year lease on 5007 sq metres of land within the Thilawa SEZ, which will host 68 commercial racks, with O3b Networks providing a Ka-band satellite, as well as two 9-metre antennas, one of which will be commissioned for C-Band capacity and the other to be leased to a third party.
The supply of IT engineers has not been able to match the demand for tech professionals in recent years. This stems from the inability of the education sector to produce well-equipped graduates that can easily transition into the workplace. Training institutes have lacked the ability to teach practical computer courses due to a limited number of computers, a lack of electricity and severely restricted funding. To date, the lack of human capital remains the largest constraint for IT companies entering the market, with skill sets even at mid-management level below international norms. During the military junta, the education sector received on average 1.3% of the national budget, which led to the rapid decline of the sector that was once regarded the best in the region. Under the management of the National League for Democracy political party, the education system is set for a major overhaul with the introduction of the National Education Sector Plan, which aims to meet the needs of an evolving job market driven by advancements in IT. While education reform is well under way (see Education chapter) it will take considerable time for a new wave of well-trained graduates to supplement the market.
As of late 2016, there was a total of 27 universities under the Ministry of Science and Technology offering IT courses, with the majority of instructors often graduates from the same institute. In addition, students with sufficient financial backing have historically gone abroad to seek better education, and in most cases remained there, while others have left Myanmar in search of better remuneration. This had led to a further shrinking of the talent pool. However, with the entrance of international companies, salaries have risen dramatically and former residents are returning home to capitalise on the expanding economy, which has to some degree filled the talent gap.
Similarly, bridging the skills gap provides business opportunities for international educators that continue to enter the market, particularly in Myanmar’s vocational and technical training segment, which continues to play a vital role in closing the country’s immediate skills gap.
Despite the skills gap, Myanmar has quickly become a competitive playground for tech start-ups. Nevertheless, while there is no shortage of eager app developers emerging in the country, they often lack the necessary tools to bring their products successfully to the marketplace. Limited access to financial and human capital has long held back the development of local companies, according to Daw Amy Nyunt, managing director of IT solutions firm Netsmart Myanmar. She told OBG, “Access to finance remains a major challenge for small and medium-sized enterprises (SMEs), particularly for IT companies that are trying to get new product ideas off the ground and into the market.”
Despite drawbacks, recently there have been numerous initiatives to foster Myanmar’s tech ecosystem. The government has taken strides to simplify the registration process for SMEs; however, loans remain expensive under tightly managed interest rates (13%) and more channels to finance are gradually opening with the growing entrance of venture capitalists. Accelerator programmes are also bolstering the tech community by equipping start-ups with essential skills. One such programme is Phandeeyar, Myanmar for “creation place”. The innovation lab provides $25,000 in seed money to start-ups that are accepted to a six-month training programme. In addition, the qualifying businesses receive $200,000 equivalent in services provided by the likes of Facebook’s FBS tart, Microsoft’s BizSpark cloud services, Amazon AWS, Ogilvy PR and Telenor Myanmar. Phandeeyar receives 12% equity in exchange for the firm being admitted.
According to an August 2016 report by Forbes, Phandeeyar received $2m in funding from the Omidyar Network, a philanthropic investment fund established by Ebay found Pierre Morad Omidyar. The innovation lab has also received investments from the Schmidt Family Foundation, founded by Eric Schmidt, the former executive chairman of Google, and George Soros’ Open Society Foundation. Other programmes run by the likes of Microsoft, Google, Samsung and HP, coupled with the explosive rate of mobile adoption and internet penetration, have spawned the birth of innovative ventures that are emerging to answer the growing demands of the local consumer base.
Since the arrival of Phandeeyar, a bundle of other firms have started their own accelerator and incubation programmes, with Telenor investing $100,000 – or $50,000 each – in two start-ups in early 2016, and the Norwegian firm receiving a 10% stake in equity. Likewise, the Myanmar Computer Federation (MCF), a non-profit organisation, is assisting tech start-ups in launching by helping them secure deals from international investors and providing them with workspace at MICT park, a leading IT park in Yangon.
Thus far, the MCF has helped local creative digital agency Revo Tech to secure a six-digit investment from Anthem Asia, digital agency NEX to receive $150,000 in funding and entertainment app provider MoMoLay to obtain $200,000 in funding in late 2015. In similar events, Silicon Valley-based venture capitalists 500 Startups has invested an undisclosed amount in Bindez, a local news application, and are positioning themselves to partner with up and coming tech companies.
While Myanmar is not known for technological breakthroughs, tech innovations are occurring on the finance side, with blockchain technology set to energise the micro-loan segment. The Myanmar Times reported in mid-2016 that BC Finance, a local microfinance institute under the umbrella of Bagan Capital, is working with Japanese software company Infoteria to test the use of blockchain technology to support their core banking system. Invented in 2008, blockchain technology was the original creator of Bitcoin. BC Finance aims to use the technology in place of a generic ledger system. To use conventional banking terminology, the blockchain in essence is a full history of banking transactions. This will enable BC Finance to use cryptography which makes blockchain safer because it is instantly updated and stored to different servers.
Another benefit, if successfully implemented, is that microfinance banks will not have to rely on backup systems, which will lead to a reduction in operating costs. Jeremy Kloiser-Jones, CEO of Bagan Capital, told The Myanmar Times that the lack of banking technology in Myanmar could ease the transition onto a blockchain framework, which would save local financial institutions large sums of capital. The report also stated that during early testing Infoteria was able to record microfinance transactions in a blockchain, but experienced some issues with internet connection when converting a backlog of older transactions into a blockchain in bulk. Kloiser-Jones added, “I think blockchain technology is going to be quite revolutionary. As soon as it gets to a format where it’s usable by an average company, we’ll be adopting it.”
Mobile money is another development that is set to have a significant impact on the fabric of society. Brad Jones, CEO of Wave Money – a joint venture between Yoma Bank and Telenor – told OBG, “Digital money will assist government development goals and economic initiatives in various ways. One impact will be the reduction of dollar demand, as all transactions will be in local currency. This will ease the prospects of dollarisation that we saw in 2015.”
While the launch of mobile money facilities was a major milestone for the IT and finance industry, significant challenges must be overcome to make it a reality. Jones also told OBG, “One major hurdle that we still need to address is that of identification. According to a recent survey, only around 30% of the population have valid identification, without which it will be difficult to acquire our services.”
Mobile banking and mobile money operators are entering the market in an effort to tap into Myanmar’s urbanising population. Numerous local banks have teamed up with solutions providers to offer digital wallet services. While mobile banking is aimed at those with a bank account, mobile money is targeted at the unbanked population. As of late 2015, 94% of citizens remained unbanked. If success in other emerging markets is anything to go by, the potential for e-money growth is substantial.
Since the dramatic expansion in internet users fuelled by the arrival of international operators in the telecoms sector, social media accounts have soared in numbers. In the absence of a developed e-commerce market, the majority of small businesses turn to Facebook to market their products. According to study conducted by Amara Digital Marketing Agency, 19% of Myanmar’s population had a Facebook account by May 2016. Out of a total of 9.7m, 90% of users are in Yangon or Mandalay, 6.2m are men and 3.5m are woman. The lower figure for female users is likely due to the fact that woman are 30% less likely to have a phone than men, according to study produced by GSMA.
Myanmar is in the midst of a connectivity revolution and will remain one of the key ICT growth markets in South-east Asia for the foreseeable future. While the private sector is beginning to take full advantage of advances in communications infrastructure, the government is yet to leverage developments in the tech space to its benefit. However, with connectivity initiatives bridging the digital divide, the government is in a position to use IT solutions to foster long-term development goals.