Burma’s Tech Sector Not Yet Up to Speed for Foreign Investment: Intel
By Simon Roughneen 7 June 2013
NAYPYIDAW — Burma’s small but growing coterie of tech entrepreneurs will likely have to wait some time before attracting significant seed money from abroad, according to the head of Intel’s venture capital wing.
“Myanmar does not yet have a venture capital ecosystem,” said Intel Capital president Arvind Sodhani, after announcing US$16 million worth of investments in India and Singapore at the World Economic Forum (WEF) gathering of chief executives and regional political leaders, which finishes today in Burma’s grandiloquent capital, Naypyidaw.
Sodhani added that Burma’s legal framework was not up to speed with what investors required when considering putting money into promising local start-ups. Echoing concerns made elsewhere about the need to improve Burma’s energy and communications infrastructure, he said poor Internet connectivity in the country made it difficult for tech-based companies to function.
“We need to see fast Internet access,” he said.
Despite having some of Asia’s lowest labor costs, Burma’s winnowed-out education system and lack of skills and training are often cited as obstacles by prospective investors. Those are challenges for the country’s technology sector, as well, according to Intel Capital. “Companies need access to people who know programming, good system developers,” said Sodhani.
Companies also need customers, Sodhani said. However, Burma is one of Asia’s poorest countries, and only 4 percent of Burmese can currently be considered “consumers,” with money to spend on non-essential items on a regular basis, according to a recent report by consultancy McKinsey. The global management consultancy projected that Burma’s population could potentially have the same disposable income level by 2030 as the Philippines and Malaysia had in 2010.
And while money counts for a lot in the venture capital world, the benefits for companies that get Intel’s cash injection are not just financial. “We help them with technology, introduce them to customers and partners,” said Sodhani.
Intel Capital is the investment wing of US-based computer parts giant Intel, and has put $10.8 billion dollars into 1,258 such businesses since 1991. Of that total investment, $2 billion has been spent in Asia since 1998, and looking back over the history of tech start-ups in the region, Sodhani said Burma could, in time, hold promise for the tech sector.
“It usually takes several years to get to know the country,” said Sodhani, detailing that Intel Capital waited two years after opening an office in South Africa before funding a company in the country.
“When we started investing in India and China, this was to some extent the same, but things changed over time.”
Expressing confidence that Burma could emerge as place for potential Intel investment, Sodhani said, “We will be looking continually at developments in Myanmar over the coming years.”
Shane Thu Aung, founder of private Burmese broadband provider Redlink, told The Irrawaddy that though in its infancy, Burma’s tech sector is finding its feet.
“Though there are only maybe 40 to 50 mostly small tech companies here, things have changed dramatically in the last two years,” he said.
Pointing out that Burma now has about 10 mobile application makers, he said that “local tech people are awaiting the new telecoms system and are hoping otherwise that there will be big investment in backbone infrastructure, such as fiber-optics.”
One possible way to jumpstart Burma’s tech sector would be to “leapfrog” into high-speed Internet and mobile telephone communications, skipping the landline and dial-up travails that longer-established tech-reliant economies have faced, according to a scenario sketched out in the recent McKinsey report, “Myanmar’s moment: Unique opportunities, major challenges.”
Sodhani cautioned, however, that even in advanced economies, venture capital is generally precarious, with no guarantee of success.
Of the 1,285 start-ups funded by Intel Capital since its inception, 920 are still operating.
“Venture capital is high risk, with a high mortality rate,” Sodhani said.