The liberalisation of the telecoms sector has seen the IT industry expand at a considerable pace. While it still has a lot of catching up to do with regional peers, local businesses and communities are rapidly adopting new technologies, and the potential for expansion into to new economic segments is clear.
A lack of initiative was a major impediment to the development of the domestic IT ecosystem, while inadequate infrastructure kept prices high and service slow. Since the entrance of international telecoms operators in 2014, vast sums of capital have been channelled into technology development. As a result, the country is quickly closing the digital divide, with a number of tech start-ups and financial technology providers entering the market, thus increasing both affordability and quality.
As with most newly established industries, a number of hurdles persist, including unreliable sources of power – which can lead to intermittent outages – and limited access to modern equipment and finance. While measures have been taken by the government to promote IT advancement, private investors remain the main drivers of change. “Building infrastructure and improving access to utilities are key governmental priorities,” Jes Kaliebe Petersen, CEO of local tech centre and start-up accelerator Phandeeyar, told OBG. “However, it is critical that investors with the relevant know-how and sufficient financial muscle collaborate with the government to efficiently promote the sector.”
Broadband
There have been sizeable improvements in telecoms coverage; however, the fixed broadband market remains underdeveloped, partly due to the dominance of mobile broadband and limited access to PCs, with only 13.2% of households having direct access to a computer. According to Myanmar Marketing Research & Development, urban areas had less than one fixed broadband connection for every 1000 people in 2015, while in rural areas, that number was less than one for every 10,000 people. Access to broadband services is still prohibitively expensive for the majority of the country’s price-conscious customers, with the average tariff rate hovering around $30 per month, equivalent to one-fifth of monthly household disposable income.
Despite these limitations, however, investments to strengthen the terrestrial and undersea cable network have continued. In January 2017 the Multilateral Investment Guarantee Agency – a World Bank Group member – guaranteed a $105.7m loan from the Bank of China (Hong Kong) to the Myanmar Fibre Optic Communication Network Company for a 4500-km, fibre-optic cable rollout linking 66 underserved cities and towns in 10 states and regions in central and southern Myanmar. According to an official press release, the Multilateral Investment Guarantee Agency will provide coverage for a maximum of five years, with protection against currency inconvertibility, transfer restrictions, expropriation and acts of war or civil disturbance. In addition, $18.6m in financing was raised from an equity agreement with Singaporean communications network infrastructure company HyalRoute, which also owns and operates fibre-optic cables in Cambodia.
Under the Sea
Broadband infrastructure is set to benefit from the Myanmar-Malaysia-Thailand International Connection (MYTHIC), an additional undersea cable that will widen existing national bandwidth. As the nation’s first-ever underwater private sector internet venture, the MYTHIC cable will stretch 1600 km, linking Myanmar to Malaysia, Thailand and Singapore, eventually hooking up to other international landing points. Initiated through a turnkey contract between Campana Group of Singapore and Alcatel-Lucent Submarine Networks, the carrier-neutral cable will provide the country with an additional 300 Gbps of bandwidth, a significant increase from the total national bandwidth capacity of 200 Gbps in mid-2016. The project was initially expected to come on-line in the first quarter of 2017; however, in March 2017 local media reported that the Thai government had rejected a request to land the cable in a forested area in Satun Province for fear of environmental impact. The expected completion date has since been moved to early 2018.
Building Capacity
Campana is also deploying TARO, a terrestrial cable between Satun in Thailand and Yangon in Myanmar, which was completed at the end of 2017 and provides 2.5 TB of additional capacity. In addition, computer security service firm 1-Net Singapore announced in early 2017 that it had signed an agreement with Burst Networks to provide operational support for a Tier-4 data centre in the Thilawa Special Economic Zone, located on the outskirts of Yangon. The data centre will be the first of its kind to be Uptime Institute-certified and will yield service availability of 99.9%.
Both 1-Net and Burst Networks are in the process of connecting their individual data centres in Singapore and Myanmar through Campana’s undersea and terrestrial cables, which will provide a low-latency, high-quality link for its customers. The Burst Connectivity Hub will be the country’s first internet exchange point, bringing international networks together with local internet providers. This centre will be home to a transmission facility hosting satellite and cable termination points, including both C-band and Ka-band satellites.
Previously the network comprised two terrestrial cables to China and Thailand, and the 10-Gbps South-east Asia-Middle East-Western Europe 3 (SEA-ME-WE 3) undersea cable. Under state-run Myanma Posts and Telecommunications, access to SEA-ME-WE 3 cost almost 10 times more than in Singapore and over twice that of Thailand. However, as the network is being linked to the Asia-Africa-Europe 1 and SEA-ME-WE 5 undersea cables landing at Ngwe Saung beach, prices are falling.
Official statistics from the Ministry of Transport and Communication show that the country had 35,362 km of fibre-optic cable installed as of April 2017, with an additional 10,730 km under construction. Despite these substantial numbers, there is still a lot of catching up to do. According to the Huawei Global Connectivity Index 2017, Singapore leads South-east Asia’s fixed broadband internet rankings with 98% penetration, followed by Malaysia with 67%, Indonesia (8%), India (7%), Bangladesh (4%) and Myanmar and Cambodia (1%). Myanmar’s fixed-line broadband internet runs at 1.5 Mbps, compared to the ASEAN average speed of 19 Mbps.
Satellite Operations
A number of international satellite operators have engaged with the government and local private sector players. With fixed-line connections well below international norms, satellite connectivity via very-small-aperture terminal networks presents a promising opportunity. As such, the government has committed to achieving digital inclusion goals by using satellite technology.
SES Asia-Pacific plans to launch SES 12, a hybrid geo-satellite, in April 2018, bringing additional high-throughput capacity to the region, which should enhance the price competitiveness of telecoms operators and reduce costs for end users.
Meanwhile, local very-small-aperture terminal 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 using C-band and Ku-band capacity, which will start at 100 Mbps. While very-small-aperture terminal connections can be costly, the Jupiter system has gained a global reputation for enabling networks to operate at reasonable margins and high volumes. AsiaSat will be responsible for satellite connectivity via three orbiters on AsiaSat 4, AsiaSat 7 and AsiaSat 9, which was launched in September 2017.
E-Commerce
The digital revolution is changing consumer patterns as a highly cash-dependent society is being exposed to a wide range of e-commerce products. According to figures released by the Ministry of Transport and Communications in March 2017, 46m people had access to the internet – up from 36m the previous year – with the majority accessing internet sites through their mobile phones.
According to a survey conducted by LIRNE asia and the Myanmar IT Development Organisation, an estimated 60% of internet users go online to access social media sites, with 45% using messaging services and 40% using their mobile devices to watch videos. Around 36% use Facebook messenger and Viber, while 7% use BeeTalk and 6% use YouTube. An estimated 14m people aged 18 to 64 use Facebook, which also serves as a marketing tool for many local companies who opt to use the site to set up commercial pages rather than having a standalone website. The once-banned social media site has since become a common marketplace for online shoppers.
Market Leader
Shop.com is the largest e-commerce platform with reportedly more than 500,000 monthly visits. By the first quarter of 2017 the platform had more than 500 local partners selling more than 20,000 different products, and the firm has announced plans to bring in international partners to improve offerings. According to local reports, the fastest-selling items are mobile phones, with Samsung, Huawei and Lenovo leading sales. Philips is the most-popular choice for electronic devices. While Springfield, Kipling, Skechers and Timberland make up the most popular fashion choices.
While the majority of Myanmar’s population still prefers to go to physical shops, people are increasingly trusting online purchasing. “Myanmar offers good prospects for the development of e-commerce,” Rita Nguyen, founder of jzoo, a digital consumer loyalty programme, told OBG. “However, the country’s poor logistics infrastructure and the absence of efficient supply chains are the two of the primary factors holding back the arrival of major international e-commerce players.”
To raise awareness of online shopping, Shop.com has held offline sales events at some newly established malls to build the trust of potential buyers. As it stands, consumers use a variety of payment options, including Wave Money and OK Dollar, although cash-on-delivery is still most common through the company’s network of delivery partners. In early 2018 the firm was in talks with various local banks to provide more payment options.
Catching A Ride
A number of tech entrepreneurs have ventured into the market, with ride-hailing apps such as Grab, Uber and Oway Ride gaining popularity on the back of increased smartphone adoption. Oway Ride, a locally founded taxi app, was granted a $3m loan from the World Bank, and, according to Nay Aung, the CEO of Oway, it aims to have 25,000 drivers under its brand before 2019.
Meanwhile, Grab – a Malaysian firm – announced a $100m investment in an attempt to capture market share from Uber and Oway. According to Bloomberg, through its partnership with CB Bank and Wave Money, Grab grew to 25,000 daily bookings and employed more than 6000 drivers by mid-2017.
Start-Ups
While the segment faces some challenges, including limited skilled labour and power shortages, investors continue responding to demand from the emerging middle class. Myanmar’s young population has bypassed the public switched-telephone network, moving straight to wireless connections, mainly through mobile phones, creating fertile ground for tech start-ups. “The quality of pitches, of ideas and of the local people entering the sector has improved dramatically,” Nguyen told OBG. “A growing number of venture capital institutions seems to be willing to fund start-ups. Young entrepreneurs are also more conscientious about the importance of developing good business models and creating something that generates revenue.”
Recognising the potential of the segment, the government is drafting legislative barriers to protect start-ups. The adoption of intellectual property (IP) laws should channel more foreign investment into the area. As of early 2018 draft IP laws pertaining to trademark, patent, copyright and design were awaiting approval from Parliament.
Financial Access
The influx of investment has improved matters, but attaining finance remains an obstacle for tech start-ups. As it stands, Myanmar’s banking system is unable to fund most entrepreneurs due to collateral-based lending restrictions and tightly managed interest rates. While some tech entrepreneurs have obtained funding through informal personal channels, accessing formal finance through the current system remains challenging. “Difficulty accessing credit makes the development of digital services and financial technology an excellent area for investment,” Petersen told OBG. “It is perhaps the most efficient way to get the country’s population banked. However, barriers to entry, bad regulation, and poor infrastructure and internet connectivity will be tough hurdles to overcome.”
Furthermore, the overall tech ecosystem is restricted by a limited number of incubators and accelerators. One of the more prominent players is Phandeeyar – Myanmar for “creation place” – an innovation lab supporting the development of the local tech landscape. Phandeeyar provides seed funding of up to $25,000 to get start-ups off the ground for a 12% equity share. In efforts to expand the reach of Phandeeyar, the Omidyar Network, under the management of Pierre Omidyar, the founder of e-commerce platform eBay, granted $2m in funding to the innovation lab in early 2017.
In addition to logistical and financial constraints, tech start-ups have to educate potential users and local businesses about how technology can increase efficiency. While this may seem straightforward, making arguments about the cost advantages of technology can be somewhat challenging in a nation with a relatively inexpensive labour market.
E-Government
Enhanced connectivity also holds potential to expand public administration. With the support of development agencies, the government is working to advance an e-government platform. The Myanmar e-Governance ICT Master Plan was published in 2015 and aims to make public institutions more inclusive, effective, accountable and transparent through technological advancement.
Preparation for the plan began in 2014, with financial and technological assistance from the Asian Development Bank and Infosys, an international technology services and consulting firm. Several government agencies, in addition to local and international e-government specialists, helped develop the plan. As a result of these efforts, the number of computers in ministerial buildings is increasing, gradually improving operations.
In 2016 Myanmar ranked 169th out of 193 countries in the UN’s E-Government Development Index (EGDI), a six-place improvement from its 2014 ranking. The EGDI calculates a weighted average of normalised scores on the three most important dimensions of e-government: the online services index (OSI), telecommunications infrastructure index (TII) and human capital index (HCI). Myanmar recorded an EGDI score of 0.24, with an OSI of 0.16, TII of 0.065 and HCI of 0.48. By comparison, the regional leader Singapore ranked fourth overall, with an EGDI score of 0.88, an OSI of 0.97, a TII of 0.84 and an HCI of 0.84. Neighbouring Thailand placed 77th, receiving an EGDI score of 0.55, an OSI of 0.55, a TTI of 0.41 and an HCI of 0.69.
The World Bank is also helping oversee and support digital socio-economic strategies and initiatives for Myanmar. “These ongoing engagements provide a widespread view of how to strategise, design and deliver visible outcomes under challenging circumstances through creative use of technology,” Sebastian Foo, e-government advisor and senior consultant for the World Bank, told the press at the OpenGov Leadership Forum in Indonesia in 2017.
Talent Pool
The country has long grappled with its best IT graduates emigrating to neighbouring countries in search of higher incomes. While an increasing number of citizens have returned since the nation began opening up its economy, the IT industry still struggles to fill highly skilled positions.
The first domestic computer science programme started in the 1970s, catering only to an elite group of students. Since then the presence of numerous institutions offering IT-related certificates has grown, although the curricula often struggle to stay up to date or equip graduates with the necessary skills to transition easily into the workplace. As a result, IT graduates routinely do not meet the needs of international employers, who are then forced to rely on expatriate workers or locals returning from education abroad for highly skilled positions.
Recognising this problem, the government has placed education among its key pillars for development, with the establishment of the National Education Sector Plan 2016-20 to better prepare graduates for the evolving labour market (see Education chapter). As far as public education is concerned, 27 universities under the Ministry of Science and Technology offer IT courses, while 360 companies are listed in the yellow pages offering computer training courses. Likewise, mobile phones have become an indispensable gateway to online libraries and educational videos for many students.
On top of these efforts, an increasing number of international institutions and technical training centres have invested in the country to help bridge the skills gap. Partnerships are being formed between international universities and local vocational schools and colleges, resulting in an upward trend of human capital development.
Outlook
Myanmar’s IT industry is in the midst of a growth spurt. While the rejuvenation of the education sector is a step in the right direction, employers will need to be patient before a new wave of well-trained professionals can fully supplement the market. For the foreseeable future, management positions are likely to continue to be filled by experienced repatriates and foreign workers. However, with an upward trend in technology adoption and a gradually growing e-commerce market, the industry looks set to offer promising opportunities for graduates. Boosting bandwidth and broadband accessibility will be key to the long-term success of the industry. With more online users, current capacities are being stretched, although a number of planned fibre and satellite connections are set to strengthen the network.
As the public and private sectors continue to invest in infrastructure and e-government, local people and businesses will benefit from simplified public services and enhanced accountability and transparency. While the government has yet to fully leverage technology to achieve its development goals, the use of better IT infrastructure at all levels of public and private enterprises is likely to increase.
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