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Myanmar turmoil threatens digital economy, say experts

Written by KrASIA Writers Published on     4 mins read

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While many fear a setback, some investors also see opportunity.

As Myanmar’s military detained the country’s de-facto leader Aung San Suu Kyi, together with other senior officials, on Monday, seizing control of the government, the internet suddenly went dark for many. The gag, which commenced at 3:00 a.m. in the morning, also crippled businesses that rely on broadband connectivity. It paralyzed the banking system, shutting ATMs and branches for the day, while fintech services such as payment and microfinance apps stopped to work.

Leading mobile wallet Wave Money was among the tech startups that had to suspend its services. Although it was back online on Tuesday, the firm fears further disruptions that could “slow down if not undo” the country’s efforts in building up a digital economy. “Any sector that depends on connectivity would be severely impacted,” a spokesperson told KrASIA. “Businesses and societies face a lot of challenges when telecommunication services are impaired.”

Asked if users are cashing out, the spokesperson said that the firm saw “greater activity” on its platform, but that it was difficult to “peg exactly whether the spike was significant overall.”

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When the internet returned on Tuesday, panic buying in the streets also came to a halt and banks continued normal service. Just as everything seemed to calm down on Thursday, the junta told internet service providers to block the social network Facebook, along with WhatsApp and Instagram until Sunday, “to prevent users from troubling the country’s stability,” according to a statement posted by the government.

International telecom firms operating in Myanmar are trapped, meanwhile, having to comply with the shutdown orders. They can merely lament that the measures are violating human rights and warn that the febrile political atmosphere will be putting further strain on the country’s digital economy and transformation.

The startup community fears that reforms and efforts will slow once again. While VCs and local firms KrASIA spoke with remain wary of the next developments, some investors already announced that they will suspend operations. SET-listed Amata Corporation was prompt stopping its THB 140 million (USD 4.6 million) initial funding for the Yangon Amata Smart and Eco City (YASEC), until a new election is called, according to a report by Bangkok Post on Wednesday.

Yangon residents are banging pots to protest the military. Photo by Ben Small.

“It has only been three days since the coup unfolded on Monday, there will be more uncertainty than certainty. So far, I am very surprised about the development,” said an industry veteran with extensive experience in supporting local startups. The three vital things the ecosystem depends on—internet connectivity, demand for products, and services in the local market, and interest of international investors—seem no longer a guarantee.

“The big questions here will be how much the economy at large will suffer,” he added. “Even in the past five to six years, a time that many dubbed as the best time for the startup ecosystem, the local tech scene was no longer growing as fast as in neighboring countries.” He reckoned that international investors might not be able to invest under a military regime. “But again, it is still too early to judge. We seem to be going back to the pre-2014 era now,” he added. Recent efforts might be in vain.

Kiwi Aliwarga, founder and executive chairman of UMG Idealab, which invests in early-stage startups, however thinks that the political turmoil might not have a huge impact on the performance of local startups. He believes that companies should not “interfere with politics” and priority should be the focus on creating jobs and serving customers. “We [as entrepreneurs] need to adapt to any situation and keep focusing on progress,” he said. Funding might be affected though, he conceded.

Wait and see

The political situation could be further complicated by many other factors, as threats by US president Joe Biden to reimpose sanctions on the country are rising concerns among investors. U Maung Maung Lay, a vice chair with the Chamber of Commerce, told Myanmar Times that sanctions may arrive if the political turmoil continues. “Our country’s reputation has been tarnished and protests are occurring abroad,” he said.

Jeffrey Seah, partner at Singapore-based VC firm Quest Ventures, believes that the investment climate will be slowing down “temporarily.” But he also thinks that it provides an opportunistic window for more “capabilities building” for the startups. “We are watching the situation closely to return to participate in the Myanmar digital economy,” he said.

Seah remains optimistic on the country’s potential. “The digital literacy and connectivity of the Burmese people and its wider diaspora have risen exponentially in the past decade,” he said. “We believe the talent in the tech ecosystem will continue to tap on those trends and continue their development amidst the recent uncertainty.”

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