US embassy cable - 05RANGOON518

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000518 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB/CIP 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 05/02/2015 
TAGS: ECPS, TSPL, PGOV, SCUL, ECON, BM 
SUBJECT: BURMESE GOVERNMENT ANGLING TO (RE-)MONOPOLIZE THE 
IT INDUSTRY 
 
REF: A. RANGOON 76 
     B. RANGOON 58 
     C. 04 RANGOON 1470 
     D. 04 BANGKOK 1595 
 
Classified By: COM CARMEN MARTINEZ FOR REASONS 1.4 (B,D) 
 
1. (C) Summary: There is mounting circumstantial evidence 
that the GOB is seeking to assert full control over Burma's 
still developing Internet and IT sectors.  Declining fortunes 
of the country's once high-flying private Internet service 
provider, rumors of expanded influence and aspirations of the 
state-run phone company, and a cut-off of regular 
communications between industry leaders and government 
policymakers are three main developments.  If the assertion 
is true, the GOB may be responding to the IT sector's 
previously close ties with disgraced ex-PM Khin Nyunt. 
However, it may also be part of a campaign to keep tighter 
control of the economy by reining in private entrepreneurs 
who had gotten too independent too fast.  End summary. 
 
MPT Comes Creeping Back 
 
2. (C) After a five year experiment with semi-private 
provision of Internet services, the Burmese government may be 
angling to resume its monopoly.  The current largest ISP in 
Burma, Bagan Cybertech, has been in purgatory ever since its 
chairman, the son of ousted and imprisoned former Prime 
Minister Khin Nyunt, was summarily locked up just after his 
father in October 2004 (ref C).  Other members of Bagan's 
board fled the country and the firm now is in the hands of 
more junior staff and a few remaining initial investors, some 
of them foreigners.  The GOB, through the army and the 
parastatal Myanmar Posts and Telecommunications (MPT), is 
providing "oversight" in the short term.  Under Burmese law, 
a person cannot be removed from a corporate board even if he 
or she is imprisoned.  Thus, the regime cannot (legally) oust 
the beleaguered former chairman and give or sell the firm to 
someone more politically reliable.  According to one Bagan 
investor, the remaining board members are seeking a way to 
resolve the situation without giving in to the suspected GOB 
wish of nationalization or giving control to a top regime 
crony. 
 
3. (C) In the midst of this confusion, Internet service in 
Burma has declined precipitously.  According to an IT sector 
leader in Rangoon, the GOB is providing only 8 MBs of 
bandwidth via MPT's gateway (satellite and submarine cable), 
down from 16 MBs in January.  As noted in ref A, the Myanmar 
Computer Federation (MCF) tells us it needs at least 45 MBs 
to offer T-1 access.  The GOB has cut off access to non-MPT 
satellite gateways.  With such technical problems, along with 
GOB barriers to importing needed spare parts, Bagan Cybertech 
is attracting few if any new customers, and existing 
customers are very frustrated with their slow Internet 
access.  We have not heard how many of Bagan Cybertech's 
estimated 30,000 customers have dropped Bagan's expensive 
service since the bandwidth crunch began. 
 
4. (C) In the meantime, IT sector sources tell us, MPT is 
trying to creep back into relevance as an ISP.  MPT was among 
the first email and ISP in Burma in the late 1990s, but was 
easily scooped by the more efficient, modern, and politically 
powerful Bagan Cybertech in 2000.  According to the sources, 
MPT has announced it will start offering ADSL Internet and 
satellite (Ku and C bands) access starting in "May or June." 
Such services would directly compete with Bagan, the pioneer 
of broadband and wireless in Burma, and with Bagan's distant 
competitor, Thailand's IPstar, which allows satellite-based 
voice and data communications in remote regions of the 
country (ref D).  It's not clear if MPT has the technical 
capacity, or the funds, to legitimately carry off such an 
expansion of its now moribund Internet services.  However, if 
this is the GOB solution to the Bagan problem, it will likely 
be implemented whether it's efficient and popular or not. 
Likewise, if the regime decides to bury Bagan Cybertech, its 
customers will have little choice but to switch to MPT as it 
resumes its monopoly. 
 
Private Sector Frozen Out 
 
5. (C) The apparent squeezing of Bagan may be only one 
example of the GOB's broader loss of trust in private IT 
firms.  According to one senior MCF official, the Government 
is no longer asking many private sector actors to join in 
official delegations to ASEAN and other international IT 
meetings.  During Khin Nyunt's reign, such delegations were 
usually made up primarily of private IT champions.  Likewise 
firms previously closely involved with various GOB-supported 
IT projects reported that they have received no guidance or 
requests from the Computer Science Development Council (the 
steering committee chaired previously by Khin Nyunt and now 
by current Secretary One Lt. Gen. Thein Sein) since Khin 
Nyunt's departure. 
 
6. (C) The MCF official also complained that the private 
sector was apparently being frozen out of a multi-million 
dollar loan from the Korean government ostensibly for 
assistance in Burma's "e-government" efforts.  During 2003-04 
this loan was being negotiated with MPT and several private 
entrepreneurs involved in Khin Nyunt's e-government 
development campaign.  However, these tripartite talks ended 
after Khin Nyunt's removal, the source told us, and since 
then the original private sector participants (including our 
source) had heard nothing about the loan other than the rumor 
that MPT had received the funds and was using them without 
any private sector cooperation. 
 
Comment: SPDC Trimming Excesses of Khin Nyunt Era? 
 
7. (C) There is growing circumstantial evidence that the GOB 
wishes to squeeze out the private sector from serious 
participation in the IT sector.  Though the regime is not 
opposing the growth of companies providing software 
development, education, computer servicing, and network 
solutions, it seems to be excising private firms out of IT 
policymaking and out of more sensitive areas such as Internet 
service and e-government projects.  One reason is likely the 
industry's, particularly Bagan Cybertech's, undeniable 
association with the disgraced Khin Nyunt.  GOB policymakers 
may feel they need to cut out all previous private sector 
participants in these areas to ensure there is no remaining 
taint from the former PM.  Also, the regime may be concerned 
about a sophisticated industry, with an unavoidable 
international focus, growing unfettered (though censored) in 
the private sector's hands.  As the GOB did with private 
banks, who have had their sails severely trimmed after a 2003 
banking crisis (ref B), senior leaders may be attempting to 
tighten government control over this sensitive and 
potentially politically dangerous industry without actually 
destroying it.  End comment. 
Martinez