BURMESE GOVERNMENT ANGLING TO (RE-)MONOPOLIZE THE

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