Google’s Schmidt to Visit Myanmar

By SHIBANI MAHTANI, The Wall Street Journal

Following a highly publicized visit to North Korea, Google Executive Chairman Eric Schmidt will travel to Myanmar. The WSJ’s Shibani Mahtani tells us why the U.S. technology giant hopes to gain access to this market of 60 million.

Google Inc. GOOG -0.75% Executive Chairman Eric Schmidt heads to Myanmar next week, a sign of the Southeast Asian country’s appeal to leading U.S. technology companies as it emerges from decades of secrecy and crippling western sanctions.

The visit on March 22 will be the first by a high-level executive from a U.S. technology giant, as many American companies have been held back by U.S. regulations that restrict their access to this market of 60 million people, giving international rivals an edge.

Mr. Schmidt’s visit follows a high-profile personal trip to North Korea, which has similarly low Internet penetration but remains far more isolated and closed off to U.S. companies than Myanmar, now widely seen as the region’s newest investment darling.

“Eric [Schmidt] is visiting several countries in Asia to connect with local partners… who are working to improve the lives of many millions of people across the region by helping them get online,” said Google spokesman Taj Meadows, confirming the visit. Mr. Meadows didn’t go into specifics of Mr. Schmidt’s agenda, but industry experts in Yangon said Mr. Schmidt plans to speak at a public event with local startups, entrepreneurs and students.

Myanmar’s information-technology sector is seen as a potential billion-dollar industry, soon to be boosted by planned advances in telecommunications. Two licenses will shortly be awarded to foreign operators, a step that is expected to improve Internet and mobile networks there.

President Thein Sein‘s nominally civilian government has pledged to open the once-sensitive sector, piquing the interest of companies world-wide. Under the previous military government, online communication was considered highly sensitive, and was heavily controlled. Even the word “Internet” was censored from all publications and cyber cafes were banned at the turn of the millennium, a time when Internet companies were booming in countries elsewhere.

The government hopes to increase mobile-phone ownership to 80% of the population by 2016, from 9% now, presenting huge opportunities for any company operating in the mobile-Internet space.

The change is getting attention by U.S. companies. The U.S. Agency for International Development (USAID) last month led a technology delegation with representatives from Google, Intel Corp., INTC -1.34% Hewlett-Packard Co., HPQ -0.68% MicrosoftCorp. MSFT -0.30% and Cisco Systems Inc. CSCO +0.51% to Myanmar to meet with government ministers and young entrepreneurs.

“Our companies are eager to partner with you and work with you,” said USAID Administrator Rajiv Shah, speaking in Yangon after the business mission.

Technology companies like Cisco have already started making small investments in the country, announcing earlier this month that they will be setting up training centers in Myanmar for locals to use their software.

But the sector is also one where American companies—though widely considered global leaders in the field—remain burdened by outstanding U.S. sanctions. Sites likeeBay EBAY -1.96% still bar users from signing onto their website from Myanmar, with pop-up notifications indicating that accounts cannot be accessed from a “sanctioned country.”

The U.S. and Europe had sanctions against Myanmar when it was run by the military. But they removed almost all economic sanctions over the past year, rewarding Mr. Thein Sein’s administration for its sweeping political reforms.

But U.S. Treasury Department regulations still prohibit American companies from dealing with a list of more than 100 individuals considered cronies of the former military regime, many of whom continue to hold powerful and influential business positions under Mr. Thein Sein’s administration.

American companies that can avoid working with these individuals wouldn’t face similar restrictions, but would still be required to comply with strict reporting regulations when making investments in the country, which they complain is unnecessary red tape.

“Some of the U.S. sanctions effectively shut out 60 million people from certain services to punish 100 people,” said Thaung Su Nyein, an entrepreneur who runs his own information-technology company and seven publications in Myanmar. “Our hope is that the U.S. will do their part [in lifting the remaining regulations], and we’ll do our part in improving this field, and everyone will be happy.”

American officials say that there are some “legacy issues” that frighten U.S. companies investing in Myanmar, admitting this is partly the fault of poor communication from the U.S. government.

“I’m not sure we’ve done a good-enough job communication to our companies that they are allowed to be working here freely,” said U.S. Ambassador to Myanmar Derek Mitchell, speaking to The Wall Street Journal at the sidelines of a USAID event. “We need to do a better job.”

U.S. officials have also promised to update the list, adding new names as their ties to the former regime become apparent and removing others who they believed have improved their behavior.

Still, U.S rivals continue to dominate the market there, having been the first movers to the country of 60 million people, many of whom are growing in affluence.

According to a report from the Open Technology Fund, a research division of Radio Free Asia, Chinese company Huawei Technology Co. 002502.SZ -1.20% leads the smartphone market. The report, which doesn’t break down smartphone makers’ market share in the country, says Huawei phones there cost between US$500 and US$600. Apple Inc.’s AAPL +1.89% iPhone 4, on the other hand, retails for US$1,120 in Yangon—far more than in the U.S. because of third-party restrictions. South Korea’s Samsung Electronics Co. 005930.SE -2.63% Galaxy smartphones retail between US$115 and US$500 in Myanmar, according to the report.

Many of the country’s tech entrepreneurs have been plugging away at the sector for decades despite the hurdles. They hope to modernize their country with new innovations. But partnerships with U.S. companies, they say, remain the bigger prize and could push their government to be more open and transparent.

“You will always have the risk takers, the entrepreneurs,” said Mr. Thaung Su Nyein, noting that these aren’t always long-term players—happy to cash in on millions and move on. “But without sanctions, the U.S. will let in a whole number of companies—like Google—which will hopefully come with e-government solutions, monitoring of Internet openness and other benefits.”

 

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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