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Slow connection: Myanmar test for IT crowd

A disabled Buddhist monk walks on the grounds of Shwedagon Pagoda during the 2,600th anniversary of the pagoda in Yangon
A disabled Buddhist monk walks on the grounds of Shwedagon Pagoda during the 2,600th anniversary of the pagoda in Yangon

By Jeremy Wagstaff, Asia technology correspondent

(Reuters) - Myanmar has fewer phones per capita than any other country and probably the fewest Internet connections, and that has regional telecoms and IT companies licking their lips.

But behind those statistics lies more than simply a virgin market waiting to be tapped. Myanmar has been run by generals for decades, leaving not only pent-up demand for connectivity, but also a complex web of interests and a unique ecosystem of technological make-do. All of which will require careful navigation by would-be investors.

A recent gathering of techies in Yangon's Myanmar Info-Tech complex illustrates the promise, changes and problems Myanmar presents as the next frontier for investors.

The meeting was organized by a loose triumvirate of business-oriented folk, bloggers and the country's IT diaspora. It was a so-called barcamp - an unstructured conference and chat-fest whose format was dreamed by up California techies tired of the exclusive, closed-door meets that are a regular feature of Silicon Valley.

The barcamp idea has taken Asia by storm, but nowhere more so than Myanmar. In October 2009, Emily Jacobi, founder of the first barcamp, traveled to Yangon in part to rustle up interest. Independent-minded bloggers and the business-oriented Myanmar Computer Professionals Association jumped at the idea, but overcoming mutual suspicions between the groups was less straightforward. Businessmen had long been used to building ties with government to win work.

"It was harder to convince my fellow independent co-founders of BarCamp Yangon that parking our activities under the umbrella of this legally standing computer association was a good idea," says Thaung Su Nyein, secretary of the association and managing director of IT and media company Inforithm-Maze.

The first BarCamp Yangon, in early 2010, had 3,000 people turn up - a barcamp record. This was all the more surprising as it took place before any public sign of a political thaw. Opposition leader Aung San Suu Kyi was then still under house arrest. By the time of the third gathering last month she was a free woman, about to contest a by-election - and the gathering's guest of honor.

BASIC UNDERSTANDING

The conference's popularity is a reflection of how much interest there is in technology, but also illustrates how deprived local people are of information and networking opportunities.

Thar Htet, a Singapore-based IT consultant who gave several talks at the first barcamp, said it was clear that most of those attending didn't understand even relatively basic topics. "You could see from their eyes that they didn't really understand," he recalls.

When he went back this year, however, he found things had changed - a little. "People are teaching themselves and now certainly understand the topics better. But I also made the presentations simpler."

This is perhaps unsurprising. Although Internet cafes have proliferated since 2003, helping spawn a generation of bloggers and self-taught programmers, there are limits to what they can do on slow Internet connections and without foreign training and expertise.

When Pyae Phyo Maung, for example, attended the University of Computer Studies, Yangon, he had to bring his own computer. To learn more, those who can head overseas. Pyae Phyo Maung left for Singapore in 2009 where he still works as a computer consultant. Of his class of 10, he says, only two have remained in Myanmar.

The barcamp highlights the challenges facing both local IT players and any future investors: how to address the tight grip on the country's IT and communications network by a coterie of government and business players.

The government has long been caught between the commercial possibilities of technology and an instinct for self-preservation. Until recently, that self-preservation meant severely restricting access to communications, whether it was a telephone or an Internet connection.

This became more acute after the 2007 Saffron Revolution, when activists posted photos, videos and reports of the anti-government protests to the outside world via cellphone and Internet. A crackdown on bloggers quickly followed.

"It's more worries about an Arab Spring," says Marc Einstein, Tokyo-based regional analyst at Frost & Sullivan. "It's not a lack of funds holding things back."

This is, after all, a country where the U.S. State Department warns visitors that it is illegal to own a modem, and where all network-ready computers must be registered with state-owned Myanmar Post and Telecommunications (MPT). Failure to do so could result in a fine and a 15-year jail term.

In 2000, according to a survey of the industry by Australia-based consultant Paul Budde, the MPT changed its terms of service to warn that online content would be subject to the same strict filtering the offline media was subject to, and that users must obtain permission before creating web pages.

The result is an IT industry rife with gaping holes, divides and bottlenecks. There is, for example, no standard Unicode font for Burmese text, meaning users must install special fonts to read web pages. Mobile penetration is anywhere between 1 percent and 3 percent. North Korea's penetration is about 4 percent.

GOOD CONNECTIONS

Those companies that do thrive tend to be well-connected or part-owned by the government. The country's first GSM network was built by a company with ties to the family of late Burmese strongman General Ne Win. When the family members were arrested for allegedly plotting a coup in 2002, their fall from grace may have had more to do with them selling handsets before the MPT had given permission.

Indeed, while the mobile sector has remained small, it has been extremely lucrative. Companies owned by businessman Tay Za produce and sell SIM cards, according to a July 2009 U.S. embassy cable leaked to WikiLeaks. While the disposable SIM cards are cheaper than the $1,400 cost of a CDMA mobile phone, they are valid for only two months and calls are relatively expensive. Tay Za is blacklisted by both the European Union and the United States.

Internet connectivity is also heavily circumscribed. The government allows only two private Internet service providers, one of which, Red Link Communications, is jointly owned by two sons of Thura Shwe Mann, formerly number three in the ruling military council and now speaker of the country's lower house. All three men have been included on a European Union visa blacklist.

Navigating these entrenched interests is vital for local businesses - and, unless regulations change, will be for any foreign investor. Folding BarCamp Yangon, for example, under an official organization ensured it had the permits to go ahead, as well as sponsorship from the main players in the local IT scene. Its two main partners were the Ministry of Communications, Posts and Telegraphs and one of the country's main banks, Asia Green Development Bank - itself owned by Tay Za. Another key sponsor was Red Link.

Foreign companies must either pursue the same strategy or wait for regulatory changes. "Until there is proper respect for regulations and laws within political and business circles - which are very much intertwined - not much will improve," says Jan Zalewski, a Burmese-speaking analyst for IHS.

But there are signs the government is responding to popular demand for better connections. More companies in Yangon, coping for years with brown-outs and intermittent power, now have 24-hour electricity. In the past month, says Inforithm-Maze's Thaung Su Nyein, a local company started offering a reasonably fast wireless-based WiMAX connection for $30 a month.

"In previous years it would have cost $1,500 and taken two weeks," he said. "Now it takes just a day."

Where once webmail, Facebook and Skype were blocked, now even exile websites critical of the regime are accessible. When exile Aung Zaw, founder and editor of the online Irrawaddy magazine, visited Myanmar for the first time in 24 years last month, he found even the immigration officers at the airport chatted knowledgably with him about his website.

And then there's Nay Myo Zin, a soldier-turned-activist released under a January amnesty who was last month found not guilty of receiving a t-shirt and key-ring carrying an image of Aung San Suu Kyi while in jail. As soon as he was free, he used his newfound fame to take his local service provider to task for limiting bandwidth to his small Internet caf in Yangon.

"I told them: if you cut off my connection, I will announce my case to the world," he said. "So they were afraid and gave me back my connection." He now plans to open a WiMAX service in his neighborhood providing wireless Internet connections to nearby houses.

But there are limits. When a local company earlier this year proposed selling cheap SIM cards it was rejected by the MPT, saying more infrastructure was needed. According to the Irrawaddy website, 11 people were briefly detained in Yangon this week after campaigning for cheaper mobile phones.

It's not that the government doesn't have an IT strategy. It just seems far from the real needs of most Burmese - or companies.

CHINA CALLING

A stark example sits 65 km east of the northern city of Mandalay. Called the Yatanarpon Cyber City, a 10,000-acre town carved out of the jungle in 2006 and designed to be the country's IT hub, it boasts city-wide ADSL connections, accommodation for 50,000 people and a university, but has so far lured only a handful of businesses - and none of the foreign investors it promised.

Says Yangon-based business consultant Zaw Min Htwe, who wrote a paper on the business park last year, the government has failed to offer incentives and facilities beyond space and telecommunications. It's too far from anywhere and not integrated into any existing network of business, he says. "Most companies don't want to go there because of the lack of infrastructure."

Those companies that do have a presence in Myanmar are mostly Chinese - Huawei and ZTE both sell infrastructure equipment and handsets, according to Frost & Sullivan's Einstein. Only a handful of Western companies have a presence. Alcatel-Lucent's China unit Alcatel-Lucent Shanghai Bell, for example, has been building the Myanmar arm of a China-financed GSM network.

Many hope the arrival of Western companies would provide jobs for the legions of unemployed and undertrained Burmese techies. For now, most run their own small shops or IT consultancies, designing websites or fixing computers. Some lucky ones go overseas or get hired by gaming software developers, which in at least one case then send them to work in Vietnam.

But local IT businesses are also ambivalent about the possible influx of Western investment.

In response to the government's changes, the West is relaxing its sanctions: the European Union last month suspended a travel ban on some of the country's top officials and government-connected or related businessmen.

This may be crucial to companies moving quickly by establishing local partnerships. But they may also smother the fragile local ecosystem. "There's a real worry among local companies that we won't be able to compete with multinationals when they come in," says Thaung Su Nyein of Inforithm-Maze.

"For the better part of a century, Myanmar has practically been closed off, and when it has opened the doors, due to sanctions, only Chinese and Asian companies have come in. So Myanmar companies have basically been operating in this protected environment."

(Reporting By Jeremy Wagstaff; Editing by Ian Geoghegan)

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