Questions and Opportunities for Myanmar’s Telecommunications Industry

ADB: Myanmar in Transition: Opportunities and Challenges
ADB: Asian Development Bank & Myanmar: Fact Sheet
Ash Center: Electricity in Myanmar: The Missing Prerequisite for Development
Economist: Triplicating Success
UNdata: Myanmar
The Nation: Myanmar: a Land of Opportunity and Inequality
Reuters: Insight: Disconnected for Decades, Myanmar Poised for Telecoms Boom
TrustLaw: Corruption and Unsophisticated Legal System Topped List of Risks in Myanmar, Experts Say
WSJ: Myanmar Considers Letting Outsiders into Telecom Market Amid Overhauls

Myanmar’s government recently began plans to liberalize and expand its underdeveloped telecommunications (telecom) industry. Historically, Myanmar’s government has largely controlled the telecom industry and foreign investors were unable to obtain operating licenses in the country. However, a new investment law will give investors the opportunity to participate in the growth and development of the telecom industry by making additional operating licenses available to both foreign and domestic investors. Nevertheless, questions remain about how exactly the expansion and development of the industry will proceed. Some analysts have expressed concern that urban areas will receive priority over rural ones in terms of investment, which will exacerbate existing disparities between the rural and urban populations.

Currently, only about 5.6% of Myanmar’s population has access to cell phones. The cost of SIM cards has gone down from about $1000 in 2011 to just $250 in some areas of the country, but this is still prohibitively expensive for a large percentage of the population—Myanmar’s average per capita income in 2009 was only about $379. SIM cards are expensive because Myanmar’s cell phone networks do not have enough capacity to handle many users. Yet, the head of Myanmar’s Post and Telecommunications Department aims for 50% of the population to have cell phone access by 2015.

Despite the prospect of a newly open telecom industry with a largely untapped market, investors continue to worry about the predictability of Myanmar’s legal system, as well as the adequacy of Myanmar’s infrastructure. Myanmar’s legal system is ill equipped to accommodate modern business practices because many of the country’s laws date back to the early 20th Century. Moreover, equal application of Myanmar’s laws is dubious because of corruption and a lack of judicial independence. Thus, investors cannot be sure that the judiciary will enforce their contracts. In terms of infrastructure, Myanmar has no major highways, no deep-sea ports as of yet (although, one is expected to be completed by the end of the year), and electricity is inadequate. Less than 25% of the population had access to electricity from Myanmar’s power grid in 2011, but demand still outstripped supply by about 100%. Moreover, plans to increase capacity will only do so by about 5% per year and the source of this new capacity, hydroelectricity, will not be available year round because of Myanmar’s dry season. The problems with the country’s infrastructure will make it more time consuming, expensive, and less profitable to invest in Myanmar’s telecom industry because the country is not immediately prepared to support new and improved telecom networks.

Moreover, although growth in the telecom industry will create new job opportunities for the Burmese people and give the rural population access to new services, such as mobile banking, some analysts worry that development will not occur evenly across the country. Already, there are large disparities between urban and rural populations. For example, about 84% of impoverished individuals live in rural areas. Moreover, only 34% of the rural population has access to electricity in some form compared with 89% of the urban population. If investment in telecoms is concentrated in urban areas, these disparities will only grow, which could hinder Myanmar’s social cohesion, political stability and human development.