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Hybrid Myanmar: How A Quiet Market Could Leapfrog Traditional Data Centre Players

Political reforms, a growing economy and a speeding adoption of digital services are bringing the once isolated Myanmar out of the shadows. In the new decade, with the arrival of digital, the development of TMT infrastructure is starting to gain pace, but much work is still needed. João Marques Lima investigates.

In the heart of South East Asia lies a 54 million people nation rich in jade and gems, oil, natural gas and other mineral resources.

With a GDP of nearly $335bn, Myanmar is also home to the famous Nobel Peace Prize winner Aung San Suu Kyi, who also serves as 1st State Counsellor of Myanmar and became the country’s face during her major political breakthrough in 2010.

Myanmar is bordered by India and Bangladesh to its west, Thailand and Laos to its east and the People’s Republic of China to its north and northeast.

Despite its neighbors, which have in recent years upped their game on the telecoms and data centre front – especially in China, India and Thailand – Myanmar has remained relatively small, currently counting less than 500 colocation racks and only three purpose-built data centres.

Players in the market today include YTP (serving government and private companies), Myint & Associates (whose key tenants are oil and gas companies), True IDC (operating for Thai companies and securities companies), and Telenor, Ooredoo, Huawei, KBZ, MPT, Daewoo and Golden TMH, all of which with infrastructure for internal, private use or undisclosed end.

However, the number of facilities is about to grow with the entry to market of colocation provider Burst Myanmar.

Additionally, other IT hosting sites are being built or planned by the Ministry of Defence, GMTx, Elite, MITT, MCC, MTG and Yoma, which is reportedly planning a 50,000 sqf facility.

Nevertheless, based on publicly announced and confirmed projects, the country’s rack supply is forecasted to remain relatively small with less than 600 racks.

“Many of the larger data centre players are intrigued with the market but sitting on the side until the drivers of the market are more clearly defined,” says Daniel R. Michener, CEO of Burst Myanmar, who is currently building a Tier IV data centre and Tier III transmission facility in the Thilawa Special Economic Zone (SEZ).

Phase II of the project will be focused on the deployment of smart, wireless mesh networks and mini-data centre deployments to support the delivery of enterprise services in rural Myanmar.

Michener adds: “Cloud services are really non-existent at this point as the infrastructure to connect data centres and the lack of data centres precludes the deployment of cloud services on a meaningful basis. In fact, most cloud services are delivered from outside of the country.

“Demand for co-location services is still pretty small due primarily to connectivity issues.

However, it is clearly enterprise demand in financial services, oil & gas, etc that are driving the demand that is there and many of these organizations (especially domestic banks) are looking to keep data centre services in-house (thus, the proliferation of data rooms).”

Michener defends that demand for co-location will surge once the connectivity issues have been satisfactorily addressed, which is why Burst has focused “so much on connectivity” as an adjunct to its data centre business.

Demand drivers

Potentially still a tier below what many would consider a fully emerging market – more on the lines of a nascent market -, Myanmar’s technology adoption rates are growing at pace.

Smartphone penetration stands at more than 72% and over 14 million people are active social media users, a big driver for data centre businesses worldwide.

Fixed broadband penetration is currently closer to 30% adoption nationwide and Government initiatives expect to have at least 50% of the population connected to high speed internet and 90% able to use some sort of network coverage by 2020.

Enterprise IT spending amounted to $200m in 2016 and is currently growing at an historically CAGR of 12% to 13% with the Government continuously focusing on helping the country’s businesses digitise.

However, as Michener pinpoints, cloud services are “really non-existent at this point” as the infrastructure to connect data centres and the lack of data centres precludes the deployment of cloud services on a meaningful basis.

“In fact, most cloud services are delivered from outside of the country,” he says.

“Demand for co-location services is still pretty small due primarily to connectivity issues.

However, it is clearly enterprise demand in financial services, oil & gas, etc that are driving the demand that is there and many of these organizations (especially domestic banks) are looking to keep data centre services in-house (thus, the proliferation of data rooms).”

Additionally, as previously mentioned, issues around connectivity and also power are still hindering data centre market growth and even some trust issues are keeping outsourcing levels in data centres low.

Michener says: “Power is clearly the biggest issue holding back the country’s growth.

The grid is not stable, there are not enough power generation facilities, the distribution network is old and poorly developed.

“On top of this, there is an inability to attract foreign investment in large power plant projects due to the structure of the Power Purchase Agreements (PPAs) and the political issues that still cause many foreign investors to “perceive” sovereign risk that may be a bit overblown.

“For us [Burst Myanmar] in the Thilawa SEZ, power is allocated and the cost is marked up so it is lesscompetitive from a power perspective and until the power plant is expanded, power has to be allocated to tenants.

This will change in the future as the Thilawa SEZ is such a high-profile project in the country, but it is clearly our largest issue.”

Furthermore, the average price per rack per month on a Tier III facility in Myanmar stands currently at $2,500, in comparison to Singapore or Thailand, where prices average around $1,300 and $1,000 respectively.

Myanmar’s Tier II data centres average price per rack per month stands at $1,600. Costs are, however, expected to drop as more supply comes into the market.

A changing future

According to Oxford Economics and the World Bank, Myanmar is posed to experience the fastest economical growth in APAC, growing 7.9% between 2015 and 2018.

In comparison, countries like India, Vietnam or the Philippines are expected to grow 7.2%, 6.5% and 6.3% respectively.

An intrinsic part of the growth is the TMT sector, with telecommunications currently a major priority for the government post-2011, when the country entered a major political reform following decades of isolation.

Michener says: “The government has gone above and beyond to make the telecommunications industry transparent and fair as this is the key driver to FDI growth at present (given oil prices have dampened investment in the energy sector).

“They have been pretty hands-off in the IT and data centre markets as these markets are not regulated. Burst is regulated only because we have our NFS-I telecommunications license. Data centre providers that do not have licenses are not regulated.

“There are still things to be done in the telecommunications sector from a regulatory perspective. For example the internet exchange, lawful intercept policies are still under development. The government knows they need to properly structure these regulations to encourage competition and fair pricing, but are still working out the requirements with foreign consultants as the regulators have never really had to deal with these issues in the past.”

He adds: “Myanmar has great, untapped potential in my view. The country is strategically located and has abundant natural resources. The people are inherently smart and eager to learn.

“However, there is a long way to go to get IT skillsets to the same level as other ASEAN countries and the government still has some work to do on setting the laws and regulations required to promote Myanmar as a top level competitor in the region. They will get there in my opinion.

“Let’s not forget, Myanmar was once the place Singapore sent their students to become doctors.

They were a crown jewel in the region in the past and I believe they will be again.

“Myanmar has an opportunity to become a technology leader in the hybrid data centre/cloud market as they have the opportunity to leapfrog over the more traditional data centre players that focus on mega-data centres.”

Source : Data Economy

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