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Financial Times talks with Thura Soe Paing, Managing Director of Frontier Technology Partners regarding their myKyat Mobile Banking Solution for Myanmar.

11 Sep, 2014

@Hez Holland Mobile banker: Thura Soe-Paing in his offices on the outskirts of Yangon Thura Soe-Paing is Myanmar’s accidental entrepreneur. Arriving back home in 2010 thanks to his Brazilian diplomat wife’s posting there, the former banker and consultant walked into three years of extraordinary political change – and a surprising new business developing mobile telephone-based banking. “We didn’t expect any of this,” he recalls, amid the clatter of construction around his office in a new industrial estate on the outskirts of Yangon, the commercial

Now the returnee has a veteran’s view of the opportunities and difficulties facing start-ups popping up across an economy that is opening up after decades of dictatorship. Since the military government handed power to a quasi-civilian successor in 2011, business people tempted by Myanmar’s estimated 60m consumers have had time for a few reality checks, as well as excitement about the possibilities in the many sectors that still barely exist. Obstacles ranging from international sanctions to soaring property prices make Myanmar a fast-moving test of entrepreneurial pedigree.

“Once you get here it’s very easy to get overwhelmed,” says Nay Aung, a fellow entrepreneur who describes the first months of setting up his online travel agency in Yangon as a “painful, painful” experience. “In a country like Myanmar, there’s a crowd going in 20 different directions.”
A half-century of dictatorship and internal conflicts that have not stopped since independence in 1948 have left Myanmar with much catching up to do economically. Its mobile phone penetration rate of 10 per cent is one of the world’s lowest, while its finance industry has been crippled by years of sanctions. When Thura Soe-Paing was asked at a conference late last year to summarise his business idea in fewer than 10 words, he offered: “Mobile banking in Myanmar: no banking, no mobile.”

But things are changing fast on both fronts, as in other areas of an economy that McKinsey says has the potential to grow from $45bn in 2010 to $200bn by 2030. The mobile phone companies Ooredoo of Qatar and Telenor of Norway are due to roll out networks later this year. Banks are expanding their businesses as sanctions are rolled back, while foreign financial institutions hope to be offered licences soon.

Thura Soe-Paing’s plan is for Myanmar to follow a path already trodden in countries from Tanzania to Bangladesh, where mobile phones are used to transfer money among people generally not in the formal banking system – an estimated 95 per cent of Myanmar. He hopes his company’s myKyat product – named for the Myanmar currency – can be expanded to cover other needs too.
Thura Soe-Paing, who was educated in England and went on to work for Boston Consulting Group and Citibank, already knew the world of finance well. He started a company called All Myanmar Investment Partners and co-founded Frontier Technology Partners, which is developing the mobile banking service and has now raised two rounds of money totalling a few million dollars from investors including local backers and Singapore hedge funds. He hopes to launch myKyat in May and he says he is glad he took the early decision to invest heavily in software and support provided by SAP of Germany. “The last thing we wanted to worry about was technology,” he says.

Thura Soe-Paing says many problems he encountered during the early days of his return to Myanmar have improved. Power cuts that used to last hours are down to minutes. The number of local banks through which international transactions can be processed has increased from two to half a dozen or more.But forbidding challenges remain, not least avoiding the US sanctions that still apply on more than 100 Myanmar individuals and institutions. Entrepreneurs seeking financing also have to grapple with local interest rates as high as 13 per cent.

Local expertise at middle management level is thin, while rents for business premises – payable as many as three years in advance – are spiralling ever higher as more people come to the country. Thura Soe-Paing says he is lucky to have a decent landlord, but he still had to pay for wiring, phone lines and a data connection that offers barely 5 per cent of the bandwidth he had in his flat in Brasília. “You are having to take a leap of faith in the landlord that he’s not going to kick you out or negotiate [rent] unfairly.”

Many of those points are echoed by other entrepreneurs including Nay Aung, who runs his Oway online travel agency from Yangon’s smart Junction Square shopping mall district. His offices buzz as staff wrestle with what can seem like a bygone age of air ticket and hotel room purchases. Nay Aung’s aim is to use algorithms and local nous to improve a booking process that in other Myanmar travel agencies typically requires consultations of printed flight schedules followed by a series of phone calls to confirm ticket availability.

Nay Aung, scion of a successful Myanmar business family, was out of the country for 16 years, during which he studied at US and UK universities, interned at Congress in Washington and worked in Silicon Valley, including a spell at Google. One of his big influences was a period at BlueLithium, an online advertising company that was sold to Yahoo for about $300m in 2007. It woke him up to the need to be in at the start of the communications revolution he foresaw in Myanmar. “I wanted to come here early and establish a presence so I’d be able to grow along with the industry when that happened,” he says.

Inspired also by companies such as Ctrip.com, the Chinese online travel agency, Nay Aung has raised money from investors he says include a Japanese fund and a rich Singaporean individual. The company has had to scale back a commitment to execute all booking requests within six hours – “I think the customers understand there will be certain gaps” – but Nay Aung is encouraged by revenues he says now run into millions of dollars. “The most important thing for us is not profitability,” he says. “It’s growth and market share.”

Entrepreneurs will have a significant part to play if Myanmar is to meet the economic hopes of its people. Thura Soe-Paing says political uncertainty will continue to cast a “long shadow” over business beyond elections that are due to be held at the end of next year. “We believe that in the long term things will happen for the good,” the entrepreneur reflects. “And we also believe there will be bumps in the road."

Myanmar: what has changed
  • Foreign direct investment is surging from a low base, more than doubling to $2.24bn in 2012, according to figures published by the World Bank.

  • Total approved foreign investment now stands at $36.2bn, more than half of that from mainland China and Hong Kong and much of the rest from elsewhere in Asia, according to government figures.

  • Business laws have been relaxed in areas such as company registrations and import-export licences.

  • Visa restrictions for overseas visitors have also been eased, a trend that has been reflected in the sharp growth in tourist and other foreign arrival numbers. The government says they doubled from 1m in 2012 to 2m last year – and are expected to reach 3m this year.

  • Many sectors still have restrictions on foreign investment.

  • The government continues to talk to armed regional militias in an effort to seal a first nationwide ceasefire since independence in 1948.

  • Elections due next year face the stumbling block of a contentious bar on the candidacy of Aung San Suu Kyi, the opposition leader.

  • Infrastructure in Myanmar needs heavy investment. Land rights remain both hugely contentious and a complication for many business groups in the wake of the forced purchases and confiscations carried out by the junta during its 50 years in power.

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