US embassy cable - 04RANGOON1470

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 001470 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB/CIP 
COLOMBO FOR ECON MANLOWE 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 11/15/2014 
TAGS: ECPS, TSPL, PGOV, SCUL, ECON, BM 
SUBJECT: BURMA STRIVES TO BECOME A (CENSORED) HI-TECH HUB 
 
REF: A. BANGKOK 1595 
     B. 03 RANGOON 1000 
 
Classified By: CDA a.i. Ron McMullen for Reasons 1.4 (B,D) 
 
1. (C) Summary: Burma's generals are pushing to develop an IT 
and software sector well beyond the country's needs and 
abilities.  Though a side effect of this effort has been 
improved communications and expanded access of some Burmese 
to the Internet, too many basic problems remain for this 
campaign to result in the success envisioned by the SPDC.  We 
view the push for an IT sector as nothing more than a 
prestige project undertaken, with encouragement and support 
by Burma's Asian neighbors, at the expense of other more 
rational economic development priorities.  End summary. 
 
Burma's Long History of IT 
 
2. (U) Though Burma is a true technological backwater, it has 
a tradition of computer science that stretches back to 1970 
when the United Nations funded the Rangoon University 
Computer Center Project.  Burma's first IT development law, 
which formed the Computer Science Development Council (CSDC) 
chaired by the recently ousted Prime Minister General Khin 
Nyunt, was implemented in 1996.  In 1998, the Myanmar 
Computer Federation (MCF) and its four sub-groups were formed 
by the GOB to carry out the development directives formulated 
by the CSDC.  In 2000, the CSDC and MCF "agreed" on a 
six-part "Master Plan," which is ongoing. 
 
3. (SBU) Since 2000, the IT sector has benefited from 
generous overseas assistance and full-fledged SPDC support 
(though this may waver somewhat with the demise of the 
original IT champion Khin Nyunt).  Khin Nyunt's son Ye Naing 
Win formed Bagan Cybertech, the country's first data 
communication firm and only "private" sector ISP, in 2000. 
Ye Naing Win was removed from his position when his father 
went down in October and the military took over Bagan 
Cybertech, which continues to operate the country's only 
Internet Data Centers and teleports, located in Rangoon and 
Mandalay, and has the contract with Thai-based iPSTAR to 
offer satellite voice and data communications throughout the 
country.  We've heard rumors that with the removal of Ye 
Naing Win, children and close cronies of SPDC Senior General 
Than Shwe may soon get into the IT services business. 
 
The Infrastructure Expands 
 
4. (SBU) In contrast to many other GOB "master plans," the IT 
plan is in part being implemented.  Bagan Cybertech and 
state-owned Myanmar Post and Telecommunications (MPT) are 
building the country's Internet "backbone," linking Rangoon 
and Mandalay with fiber in 2003 and now working to link 
Rangoon and various provincial capitals as well.  The country 
is also linked to an international submarine cable, which is 
in turn linked by fiber to Rangoon.  The "last mile" 
infrastructure is also improving, with Bagan Cybertech now 
offering Broadband Wireless Local Loop and ADSL connections 
to the very tiny minority who can afford it.  These broadband 
services cost around 500,000 kyat (about $525 at market 
rates) for set up and from 30,000 to 120,000 kyat ($32 to 
$126) per month depending on bandwidth usage.  Bagan 
Cybertech also offers regular dial-up email and Internet 
services to anyone for between 8,000 kyat and 28,000 kyat 
($8.40 and $30) per month.  For reference, the break-even 
income point for a family of five is roughly 35,000 kyat ($37 
at market rates) per month. 
 
5. (SBU) Computer industry officials admit that this new 
"last mile" infrastructure often looks better on paper than 
in reality.  All of Burma's local telephone connections from 
exchanges to homes are made of ancient copper wiring which 
often makes it impossible to take full advantage of ADSL. 
However, one official claimed, MPT has linked exchanges with 
fiber, and would start linking the exchanges to homes "in 
time." 
 
6. (SBU) To circumvent these "last mile" problems, as well as 
the lack of any telephony infrastructure in most of the 
country, Bagan Cybertech and Thailand's Shin Satellite signed 
a $13 million contract in 2002 to provide wireless voice and 
data broadband communication services countrywide (ref A). 
Shin Satellite's iPSTAR system is being marketed through 
Bagan Cybertech, which charges users from 3 million to 4.9 
million kyat ($3,150 to $5,160 depending on antenna size) in 
set-up and activation fees, then 60,000 kyat ($63) per year, 
and from 30,000 kyat to 400,000 kyat ($32 to $420) per month 
depending on bandwidth usage, and the number of email and 
voice channels (all monitored by the GOB) required.  Though 
this is an outlandish sum by local standards, in remote towns 
populated by some wealthy individuals (such as near the Thai 
and Chinese borders or in mining regions) "public" iPSTAR 
phone and Internet outlets are a rather common site -- though 
international calls via iPSTAR phones are blocked.  A Bagan 
Cybertech official said there were around 1,000 iPSTAR 
customers with many multiples of that using the services. 
 
7. (SBU) Such rapid expansion of the IT infrastructure in 
Burma is due in large part to the largesse of its neighbors. 
According to one computer industry official, the governments 
of China, India, Korea, and Thailand have given the most 
assistance with China providing $200 million in grants and 
concessional loans while Korea and India have forked over 
about $10 million each.  The source said that Japanese 
investors regularly come to Burma seeking investment 
opportunities in the sector as well (though few if any have 
sunk any money). 
 
Challenging India? 
 
8. (SBU) Another part of Burma's IT plan is to develop IT 
education and software development sectors to compete with 
India's.  This is clearly pie in the sky at the moment 
considering Burma's gutted education system and a chronic 
lack of resources from foreign or domestic investors -- due 
to Burma's abysmal investment and political climate. 
Nonetheless, the GOB has spent significant resources, 
augmented by aid from a number of Asian countries and 
educational exchanges with Japan and Korea, to establish 27 
IT training schools and colleges across the country.  The GOB 
has set the arbitrary goal of graduating 5,000 IT 
professionals per year by 2006.  Likewise, private sector 
computer training programs are booming as the decrepit 
economy forces educated people to upgrade their skills for a 
chance at a job. 
 
9. (C) Computer industry sources mock the GOB's dream as 
typical of the SPDC's cart-before-horse mentality.  The GOB's 
IT education programs are shells, erected haphazardly by the 
GOB to "fulfill" its objectives, which churn out 
ill-qualified engineers and software developers with no 
practical experience.  However, the few engineers trained 
overseas in Japan return well-qualified to work for Bagan 
Cybertech or at private software firms.  Efforts to create an 
instant software sector are also stymied by poor quality 
standards (Burma has no ISO or CMMI certified firms) and 
blatant disregard and/or ignorance of IPR standards.  A top 
MCF official told us openly that few software firms in Burma 
use licensed software because of expense and poor 
understanding of the importance of protecting intellectual 
property. 
 
10. (SBU) Nonetheless, there are some minor success stories. 
A tiny handful of local firms have received small contracts 
or sub-contracts (worth no more than $3,000) to work on 
software programs for developers in India, Thailand, Japan, 
and Malaysia.  One software developer claimed as well that 
one or two Burmese firms could meet international quality 
assurance standards, though they lack the funds to go through 
the certification process. 
 
The Picture is Not So Bright 
 
11. (C) Despite some progress, particularly on Internet 
infrastructure and access, there are many structural and 
policy barriers that make a mockery to some degree of Burma's 
IT "revolution."  First is a sore lack of investment.  Bagan 
Cybertech and other members of the MCF constructed in 2002 
the Myanmar Information Communications Technology (MICT) park 
in Rangoon.  MICT park, which now has a branch in Mandalay, 
is heralded in the local media as Burma's IT "hub," the 
center of innovation and a magnet for domestic and 
international IT investment.  However, it has not worked out 
that way.  According to one senior MCF official MICT park is 
"being hollowed out" with four of five opening day foreign 
investors in 2002 already gone.  The park has also lost 20 
percent of its initial domestic occupants.  With the recent 
changes in leadership, we will see if MICT park (identified 
with Khin Nyunt and MI) survives or is squeezed out by a new 
competitor. 
 
12. (SBU) The lack of investment is due to the GOB's 
un-friendly economic policies and the complete destruction of 
local industries that would consume domestically produced IT 
products.  The software sector here initially got a boost in 
the late 1990s with the expansion of the private banking and 
export-oriented garment sectors.  With both of these sectors 
now defunct due to GOB policies and U.S. economic sanctions, 
the domestic market for software has dropped to nearly zero. 
 
13. (SBU) Another structural problem is the widespread lack 
of electricity, particularly outside Rangoon.  Irregular 
electricity supply makes it difficult to make any real 
progress in expanding access to computers and the Internet 
outside Rangoon.  We visited a gleaming new "E-Library" in a 
suburb of Rangoon to find several computers at the ready, but 
useless for lack of juice.  Despite this obvious hole, 
providing additional electricity is nowhere to be found in 
the IT master plan. 
 
14. (SBU) Ongoing government censorship of the Internet and 
email monitoring also contradict the GOB's alleged desire to 
educate the masses about IT and the Internet.  A Science and 
Technology Ministry official told us that the people would be 
given access to the Internet only after they'd learned to use 
it "responsibly."  The government blocks many Internet sites, 
including anti-SPDC sites as well as free mail sites like 
Yahoo! and Hotmail.  We've learned, however, from trusted 
industry sources that Bagan Cybertech (and thus the GOB) has 
loosened noticeably its screening of emails and scrutinizing 
of applications for Internet access.  In the former case, a 
huge increase in email volume has made it impossible for 
authorities to do much beyond screen for seditious words.  In 
the latter case, Bagan Cybertech is now offering pre-paid 
Internet cards for sale with no registration necessary, and 
Internet cafes (official and otherwise) are popping up all 
over town.  A Bagan Cybertech official said there are 30,000 
subscribers to the company's various services.  However, 
another industry source said that for each corporate 
subscription there were at least 10 users while for every 
private subscription there were at least three or four users. 
 
Comment: Does it Make Sense? 
 
15. (C) There have been positive steps in recent years toward 
more liberalized, though expensive and still censored, access 
to the Internet -- particularly in Rangoon.  However, it is 
difficult to justify the GOB's spending of vast sums on 
developing a "modern" IT sector in a country whose government 
practices censorship and is suspicious of its own peoples' 
contact with the outside world and that is so backward 
economically.  The IT campaign is primarily for prestige and 
the GOB has done nothing to develop other more rational 
industries.  It has in fact allowed some of Burma's most 
promising private sectors (banking, garments, agriculture) to 
languish or die.  It is unfortunate that Burma's neighbors 
"enable" Burma's ruling generals' grandiose vision instead of 
urging them to be more pragmatic in their economic and 
political development efforts.  End comment. 
MCMULLEN