OBG talks to Ren Geng, Managing Director, Huawei

Interview: Ren Geng

Recent reforms have focused on developing better ICT infrastructure. How do you foresee these changes having an impact on the wider economy?

REN GENG: The ICT sector is a driving engine behind the modern economy, which is why the Myanmar government has recently given more attention to developing ICT services. Ooredoo and Telenor have both been awarded telecoms licences, and the parliament has approved a new telecoms law. According to government statistics, the number of mobile subscribers is forecast to reach 30m within the next three years. This is a far cry from the current penetration rate, which is less than 10%. Indeed, studies have shown that for each increase of 10% in mobile penetration, GDP increases by 2%, and by up to 6% in more developed countries. Extending mobile and internet coverage across Myanmar will improve ordinary people’s lives, especially in rural areas, as well as assist the government. As the ICT industry evolves, we will see further development in areas such as e-agriculture, e-government, remote education and remote medical facilities. These steps will go a long way in advancing Myanmar’s economy.

What is the best strategy for companies wishing to penetrate low-income markets such as Myanmar?

REN GENG: Potential entrants should take into account the lack of spending power of the local people, and accordingly provide affordable, competitive prices for local customers, including offering deferred payment options. They also need to provide high quality service. People in emerging markets tend to lack the technological knowledge prevalent in the developed world, so services must be offered to keep customers up to speed with developments. This will also help build a sense of customer loyalty. Lastly, they must provide advanced technology. Myanmar is in the process of opening up its economy to the world, and local communities will not settle for out-of-date technology. Firms should therefore provide Myanmar with the same advanced technologies that are used in developed countries.

Compared to its neighbours, what advantages can Myanmar offer as a hub for higher value-added services such as knowledge process outsourcing?

REN GENG: Countries near Myanmar such as China, India and Vietnam have all helped their economies through their knowledge of outsourcing industries. For instance, software outsourcing has come to play an important role in India’s overall GDP. However, unlike Myanmar, these countries face the challenge of rising labour costs. For example, one engineer in Hanoi, Vietnam, may cost $500, but only $200 in a largely labour-intensive country such as Myanmar. Another advantage is the keen interest of many international companies in Myanmar. Once they enter the market, these companies will bring with them extensive experience. They can assist in knowledge transfer and training for local people, particularly in fields like software outsourcing.

What sort of steps does Myanmar need to take to become a manufacturer of ICT products?

REN GENG: Myanmar must comply with various conditions before it can establish itself as a manufacturing centre. The government also needs to establish a congenial environment in terms of taxation and policy, as it is doing through the telecoms law. Mechanisms must be put in place to keep the cost of labour as competitive as possible, while building a skilled workforce.

Nor can the importance of logistics be underestimated. After all, for manufacturers to be able to deliver their goods, they must have access to a good harbour, in addition to a safe and efficient domestic transport system.

At the same time, the industry chain needs to be developed. For example, seven years ago, Huawei tried to set up a factory for mobile phone manufacturing in Hanoi.

However, we found out that costs would be very high, as we had to purchase materials and chipsets from overseas. This led to the realisation that the industry chain still needed further development. However, if Myanmar can satisfy these conditions, I am confident that it can become a successful manufacturing centre.