Over and over again, at each company we have visited, we hear the same story about the incredibly high penetration of smartphones in the Myanmar population. The figures shared with us have been astounding, all above the 90% mark. Thura Ko Ko, a senior adviser to TPG Capital and co-founder of YGA Capital, talked about the phenomenon. “Around 2014, the percentage of Myanmar citizens with cell phones was about 8%. From 2014 to 2018, that figure has risen to almost 100%. What is even more impressive is that over 85% of those who have a cell phone, own a smartphone,” Thura says as he leans against the podium at Myanmar Imperial University.
Thura Ko Ko, a Myanmar citizen, spent his early years as a telecommunications investment banker in London. After a successful career in private equity in the United Kingdom, he finally decided to move back home. Using his expertise, he has advised or individually invested in several projects in Myanmar over the last decade. He spoke about the smartphone penetration phenomenon as if it happened by accident. When the government realized they needed to catch-up to their neighboring countries, they passed a law allowing foreign companies to build and operate cell phone towers. This brought rapid investments with towers sprouting up all over Myanmar. Suddenly, there was 4G available wherever you went and citizens leapfrogged the normal progression of cell phone purchases of flip phones to smartphones. Furthermore, Facebook has become the go-to search engine or means for any internet use whatsoever. It has defined and molded the way citizens conduct modern business.
“It’s crazy. I walk out of the plane in Munich and pop in my SIM card and barely get 2G service if I’m lucky. I’ll fly back to Myanmar and literally everywhere I go, there is 4G service and you can download videos, movies, anything you want,” Alex Spitzy from JJ-PUN told our group.
This leapfrog effect that Myanmar has witnessed in smartphone technology is not isolated to just this industry. Thura Ko Ko believes it will also happen in healthcare, finance and retail as well. With regard to retail, he mentioned that only 30% of the population live in cities with malls and the current infrastructure issues deter those with access to traditional retail stores from shopping there.
“E-commerce and Fin Tech should do well because of the large population…the big guys are coming. Alibaba, Baidu, they’re all on the doorstep,” he says as he answers questions from MBA candidates from Columbia Business School and Myanmar Imperial University, “Financial access to banking is incredibly low. You will see us bypass the normal banking branches and head straight to Fin Tech.”
That’s exactly what Brad Jones, CEO at Wave Money, is doing in Myanmar. With an incredible story of Fin Tech penetrating Myanmar of mobile banking, Brad and his team have captured 95% of the market share. Wave Money has essentially become a cash transport system that can send money across the country in minutes. A customer goes to a Wave Money agent, pays in cash, the Wave Money agent sends this to a customer’s account, and that customer can go to one of any 38,000 active shops to receive the money. In an economy where there is only about 6% formal banking penetration and cash is king, Wave Money has become the go-to solution for Myanmar citizens who need to send money to families back home after earning wages in the major cities.
With all this rapid growth and the leapfrog effect coming soon, coupled with the high transparency in the country because of high-speed internet and high smartphone penetration, it is imperative for companies to also develop their social and sustainability programs. Large multinational corporations like Unilever, and smaller companies like Arao Company, are doing exactly that.
Trisha Mukherjee, the marketing director at Unilever for Myanmar, Cambodia and Laos, talked about the importance of building the next generation of Myanmar leaders through their “Leaders Grow Leaders” campaign. From 2014-2017 they sent 4 employees to different countries to work and learn better practices to bring back to Myanmar. In 2019, they plan to expand the program and send 6 more. Of the over 1,500 employees they currently employ, there are 30 managerial roles. 11 of those roles have been localized by Myanmar citizens and they have a goal to double that number to 22 in the next few years.
When asked about the 2018 Myanmar minimum wage increase to $3.60 per day (up from $2.50) and how they were paying their factory workers, Trisha said that the Unilever-only factory workers are paid substantially above minimum wage and the two joint venture factories are slightly above with monthly incentives and benefits.
Khaing Mie Mie Win, a Burmese businesswoman with an incredible story from rags to riches (see link for full story), has built Arao Company from the ground up to several large garment factories with over 3,200 employees. The factories have been modernized and the working conditions are well above expectations. Some workers are paid minimum wage, but most above the new Myanmar standard and all with compensation incentive packages.
Not only are the facilities being modernized, but the systems and operations are being optimized as well. “Last year we were producing 35 pieces of garment per hour. After our factory manager rearranged the floor with a new system, we are now producing around 55 pieces of garment per hour. Our goal for the next year is to get to 65,” Khaing Mie Mie Win tells us at her factory.
Both visits to Unilever and Arao Company opened the discussion about gender biases and what the companies are doing to correct them. Unilever has created ads that break down the cultural norms about patriarchy and empower women with the knowledge that they can compete with men on every level. Both companies employ majority women in their factories (Unilever over 60%; Arao Company almost 90%). Khaing Mie Mie Win told us as she finished her compelling story, “that [this] become my motivation, to help these women have better lives.”
Although it seems like operational efficiencies have developed in some factories, there is still substantial room for improvement. “There is a lot of hand holding that has to be done in Myanmar operations. A job that would usually be done by 1 [person] is done by 3. The level of skill needed is still far behind other countries,” says Trisha.
Operational inefficiencies don’t just occur on the individual level, but on the corporate level as well. When asked about the potential for good investments in the airline industry, Thura Ko Ko scoffed at the idea. “We had 8 airlines in the country. Last year, 5 of them went out of business. We have 23 private banks in Myanmar. Not all of them will survive. Consolidation is not easy and will be challenging going forward,” he says as he wraps up the optimistic discussion with a bitter reality.
There is much work needed for Myanmar to become a major player in Southeast Asia, but with each visit, we become more and more convinced of the potential for success.
Oliver Salman (’19) is an MBA Candidate at Columbia Business School