Southeast Asia's unpolished gems show promise

Cambodia, Myanmar and Laos all have inherent market opportunities for IT companies to capitalize on, but basic infrastructural- and workforce-related developments need to be overcome first.
Written by Ellyne Phneah, Contributor

Cambodia, Myanmar and Laos all have the potential to be the next growth engine for the Southeast Asia region and IT vendors see the market opportunities available in these markets. However, they need to improve their basic infrastructure, particularly Internet development, in order to realize this potential.

Pranabesh Nath, research manager of ICT practice at Frost & Sullivan, said of all the Southeast Asian nations, Singapore continues to lead as the most mature economy for ICT investments. It is followed by Philippines, Vietnam, Thailand, Malaysia and Indonesia as the next tier of promising countries, he noted.

Myanmar, Laos and Cambodia are the back of the pack for now as they face many challenges to boost their respective IT industries. There is a lack of basic infrastructure such as country-wide telecommunications network, high-speed broadband and global connectivity for businesses, Nath explained.

The analyst added: "IT growth can be possible only when there is a significant infrastructure in the country. Since these countries are unable to come up with the funds internally, they are inviting other countries to invest in the ICT sector to jumpstart [the development of] basic infrastructure."

This lack of a robust telecommunications infrastructure was also picked on by Paul Wilson, director general of Asia-Pacific Network Information Center (APNIC). He said having this set up is essential to the maintenance of a competitive, efficient and secure Internet infrastructure environment.

With regard to Myanmar, Laos and Cambodia, Wilson pointed to some signs of encouragement that development in these markets are afoot. While Web penetration is still relatively low, their economic growth appears to be strong and Internet development is "accelerating rapidly," he said.

Cambodia, for example, has widespread smartphone usage, he noted. In this, wireless communications is already the norm for most of its citizens and it is clear wireless broadband will be the primary means for people there to access broadband services, the director general said.

Foster a healthy Internet industry with numerous competing service providers, and this will help reduce access costs and spur rapid adoption among users, he predicted.

IT vendors see promise
IT vendors ZDNet Asia spoke to shared Wilson's optimism. EMC, for one, noted the lack of legacy IT systems in these emerging markets translate to a greater readiness to adopt the latest technologies.

"Enterprises in these markets are able to leapfrog into the current and through a smooth transition, gain fast-track access to compete in the ever-changing marketplace," said David Webster, Asia-Pacific and Japan president at EMC.

The recent opening of Myanmar's economy is also testament to the growth potential of these markets as there is an increase in investments across a broad range of sectors, he added.

NetApp, too, revealed it is getting more enquiries from its partners, which currently service Myanmar from Thailand. Companies in the telecommunications, government, and banking and financial services are the most interested in the market, noted Sujamto Prasetio, the company's channel director for Southeast Asia.

Cambodia was also identified by Jamie Harper, general manager of Southeast Asia new markets at Microsoft as one that has been progressing well. The willingness by both the private and public sectors in the country to invest and grow using IT bodes well for the development of the local tech sector, he noted.

Tackle the basics
However, for these three markets to achieve their potential, Nath said they would first need to improve their basic business environments to attract investments for the IT sector.

They must transform their economies from focusing on lower value-added and high labor-intensive industries such as agriculture and low-tech manufacturing to high-tech manufacturing and ICT services, said the analyst. To do so, they will have to nurture and build an educated and skilled workforce by setting up centers of higher technical learning, he advised.

A strong legal and regulatory framework needs to be established for balanced market growth and for fair play to flourish among competitors, he added. This will help reduce corruption and increase transparency and civil rights so as to attract foreign investors and for them to set up offices in these markets, he said.

Wilson added that in terms of Internet development, companies in these markets should focus on making the infrastructure robust and reliable. To aid in this, Internet service providers need to give their engineers opportunities to hone their expertise by participating in industry-related events and conferences, he urged.

"If a liberalized Internet industry environment can be developed and maintained, with minimal license fees and other barriers to entry, it is clear that a vibrant Internet industry can emerge in these countries," he said.

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