Investors in Burma Telecom Sector Face ‘Corrupt, Crony Practices’: Report

By William Boot 18 September 2013

A tangled web of cronyism and corruption awaits foreign telecom companies investing in the development of Burma’s mobile telephone network, an international business risks report warns.

The state-controlled Myanmar Post and Telecommunications (MPT), which will oversee the development, “appears to have preferential arrangements” with a clutch of Burmese businesses linked either to current influential politicians or the former military regime, said Maplecroft, a UK-based research and strategic forecasting company.

It named Burmese firms Red Link Communications, owned by the two sons of Shwe Mann, speaker of the Union Parliament; Forever Group, whose chief executive Winn Maw is an adviser to the Information Ministry; and SkyNet, owned by Shwe Than Lwin Company, which had strong links with the former military regime and also has partnerships with the Information Ministry, notably in a broadcasting venture.

Red Link is a phone networking services business. SkyNet operates satellite television services, especially international football matches.

“Such vested interests preclude the existence of a level playing field, and, as a result, investors are forced to partner with local businesses heavily engaged in corrupt business practices,” said Maplecroft’s report “Risks Await Entrants into Myanmar’s Telecoms Market,” seen by The Irrawaddy this week.

It described the MPT as “one of the most corrupt institutions in Myanmar.”

The main licenses to develop Burma’s mobile telephone infrastructure were awarded in June to Ooredoo of Qatar and Norway’s Telenor from a bidding list of 11 shortlisted companies. Telenor is majority-owned by the Norwegian government.

They have been set a target date of 2016 to expand Burma’s mobile telephone network to reach 80 percent of the estimated 55 million population. At present only 5 percent of Burmese have access to a phone, mobile or fixed, MPT has said.

However, official figures do not include a “sizeable black market in SIM cards and internet services,” said the report.

“Investors working with business conglomerates owned or backed by the military in [Burma] are at particularly severe risk of association with illegal or unethical practices,” says the report.

“Companies may find that their vendors or sub-contractors in [Burma] are controlled by the military-owned Myanmar Economic Corporation (MEC) or the Union of Myanmar Economic Holdings Limited (UMEHL). Both conglomerates are notorious for corruption, unethical business practices, use of forced labour and other human rights abuses.”

“A parallel cause for concern is the announcement in late July 2013 that MPT would award a telecom license to MEC. The entry of MEC is likely to skew the telecoms market, given that [it] could benefit unduly in terms of access to infrastructure and speedy government approvals,” said Maplecroft.

Telenor Myanmar began an employee recruitment program in August, with some reports saying the company could provide jobs for up to 3,000 Burmese. However, two thirds of jobs would be for service and sales vendors who “will be employed by partner companies,” the firm said.

“Telenor Myanmar is adopting a multi-phased approach that is aligned with its business plan and that will enable the company to recruit resources in a way that matches its business milestones,” a company statement said in August.

The first phase of recruitment running until the end of September will “focus on the company’s immediate need for experienced, management-level candidates to build up a strong leadership team that will be responsible for developing strategies and managing the company’s commercial launch and roll-out”.

Many of the senior management now with Telenor Myanmar in Rangoon have been sent from the Norwegian firm’s subsidiary, DTAC, Thailand’s second-biggest mobile phone network provider based in Bangkok.

They include Prathet Tankuranun, appointed chief technology officer for Telenor Myanmar; Sharad Mehrotra appointed chief marketing officer; and Tipayarat Kaewsringarm as head of personnel, Bangkok’s The Nation newspaper reported.

Ooredoo said in mid-August it was still assembling a senior management team in Burma.

Both Telenor and MPT have signed equipment supply agreements with a controversial Chinese electronic equipment maker, Huawei Technologies.

“Huawei has repeatedly come under fire in Western countries over suspicions of links to the Chinese government and being involved in espionage,” the International Business Times reported in August.

“Last fall, the US House Intelligence Committee issued an extensive report discouraging American companies from buying Huawei equipment. Last year, Australia banned the Chinese company from bidding for its national broadband fiber network because of security concerns.”

There is no direct evidence of Huawei being controlled by the Chinese government, but it has periodically been given state financial support and has expanded enormously to become the world’s biggest telecommunications equipment maker after overtaking Ericsson of Sweden in 2012 in terms of turnover and production.

Huawei describes itself as a collective owned by its workforce of 140,000 worldwide.

There have been reports, though not confirmed, that Ooredoo is negotiating with Huawei.

Senior management at Telenor Myanmar and Ooredoo could not be reached to comment on the Maplecroft risks report.

In August, Ooredoo’s senior manager in Burma, Ross Cormack, said his company intended to work to demonstrate a “strong commitment to corporate responsibility.

“We will work hard to make a difference in all of the communities across [Burma] and to care for the wellbeing of our customers,” Cormack said.

Ooredoo has pledged US$60 million in “corporate responsible investment” in Burma over the next ten years in education and health care.