A scathing US congressional report issued on October 8 has added an unexpected wrinkle to Myanmar’s already chaotic telecoms race.
The 52-page report, published by the Intelligence Committee of America’s House of Representatives, states that China-based Huawei Technologies Ltd and ZTE Corp pose a credible security threat given both companies’ lack of transparency and possible ties to China’s Communist Party.
The report urged US consumers to look elsewhere to meet their telecoms needs.
“Private sector entities in the United States are strongly encouraged to consider the long-term security risks associated with doing business with either ZTE or Huawei,” the report said.
“Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems.”
Huawei, the world’s second largest provider of telecommunications gear and mobile phones, has emerged as one of the most aggressive competitors vying for a piece of Myanmar’s critically underdeveloped and highly coveted telecoms sector.
For every 100 people in Myanmar only 1.26 has access to a fixed telephone line, and 0.03 has broadband internet access, according to the Asian Development Bank. Estimates of mobile phone penetration are under 4 percent.
Days after the report’s release the ripple effect was being felt at Huawei’s operations outside the US. The Canadian government gave strong signals on October 9 that it would exclude Huawei from helping to construct a planned secure Canadian telecoms network, citing security concerns.
Sir Malcolm Rifkind of UK’s parliament’s intelligence and security committee confirmed on October 10 that the committee will be looking into Huawei’s dealings with BT Group PLC. They will deliver a report of their own findings to Prime Minister David Cameron in December.
Meanwhile, members of Myanmar’s Ministry of the Communications, Posts and Telegraphs refused to comment due to the sensitivity of the matter.
Huawei representatives remained confident that the company’s US troubles would not damage their attempts to win one of Myanmar’s two lucrative telecoms operating licenses that could be made available as soon as early 2013.
Huawei operates a total of five offices in Myanmar. The two main offices are located in Yangon and Nay Pyi Daw, while the remaining three are smaller branch offices. The company has a workforce of 260 employees in Myanmar, 70pc of whom are Myanmar nationals.
“I think in Myanmar, no, no impact,” said Chen Xiao Yong, the director of the public relations department for Huawei working in Yangon. He added that a “coloured opinion” of China in the US could be at least partially responsible for the allegations in the report, a feeling shared by many in the Chinese media.
“Huawei is committed to being a long-term investor in Myanmar, providing innovative products and service for our Myanmar people, and to being a responsible investor, tax payer and corporate citizen,” Mr Xiao Yong said in a post interview email.
Though Huawei has had a presence in Myanmar since 2003 the company has lacked the name recognition of its competitors, especially in the booming smart-phone sector. Their profile was bolstered on September 20 when President U Thein Sein visited company headquarters in Shenzhen during his trip to China.
U Thein Sein took part in a video conference with members of the Myanmar Chamber of Commerce and Industry, a Myanmar embassy and Myanmar students studying in China using Huawei technology. He toured company facilities alongside Huwaei’s secretive founder and president Ren Zhengfei before meeting with Huawei’s Southeast Asia president Yang Shu and Yangon managing director Ren Geng.
The visit, which the company has taken to marketing through press releases, photo brochures and visits to local media outlets, runs directly against Mr Xiao Yong’s insistence that the company is uninterested and divorced from politics in its pursuit of large-scale business in Myanmar.
In 2009, two years after launching a CDMA 450MHz network in Myanmar, the company entered into an agreement with Elite Tech, an offshoot of the Htoo Group of Companies run by billionaire tycoon U Tay Za.
Representatives for Huawei refused to comment on their agreement or relationship with the Htoo Group, Elite Tech or U Tay Za.
U Tay Za and the Htoo Group were added to a US blacklist in October 2007. With Huawei already in business with one US blacklisted company and possibly facing the same fate itself, reluctance from the Myanmar government to allow them to expand would be understandable.
Myanmar has made tremendous strides in building relations with the US in the past year. With President Barack Obama lifting lending sanctions last week, virtually all restrictions have now been eased. It seems unlikely that Myanmar would risk such an important infrastructure project on a company running afoul of an ally they are eager to please.
Additionally experts have cited Myanmar’s desire to distance itself from China as one of key reasons for democratic reform and economic opening. Unimpeded by sanctions and geographically advantaged, China is Myanmar’s largest investor accounting for roughly 35pc of foreign direct investment. An operating license for Huawei may be seen as a step back towards Beijing.
Even if the report does not bring action from the Myanmar government, terms like “spy” and “espionage” circulating through traditional and social media could be enough shake the already wavering consumer confidence that Myanmar customers have in Chinese businesses and products.
“Local Burmese see Chinese companies as wealthy and interested in the natural resources of their country, but have little concern for governance, transparency or accountability. Rumours of corruptions associated with Chinese projects are widespread,” said Yun Sun a visiting fellow with the East Asian program at the Stimson Center, a non-profit research group in Washington, DC.