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The Canadian Trade Commissioner Service (TCS) helps companies navigate the complexities of international markets and make better business decisions. The TCS is on the ground in more than 150 cities worldwide, gaining market intelligence, uncovering opportunities for Canadian companies and helping reduce business costs and risks. The TCS is a free service of the Government of Canada, helping companies prepare for international markets, assess market potential, find qualified contacts and resolve business problems. Our network of international contacts is unbeatable. As part of Foreign Affairs and International Trade Canada (DFAIT) and of Canada‘s network of embassies, the TCS has access to local governments and key business leaders and decision makers. We can help increase the credibility of Canadian companies in foreign markets, helping them gain access to local contacts not readily available to outside businesses. Learn more at www.tradecommissioner.gc.ca. Disclaimer: This report was researched and produced by Intercedent Asia, a Singapore based consulting and research firm, at the request of the Canadian Trade Commissioner Service through the Canadian High Commission in Singapore. The views and opinions expressed in this document are solely those of the authors.
ASEAN ICT Sector Team
Mr. Guy Belanger High Commission of Canada in Singapore
Mr. John Nojey High Commission of Canada in Malaysia
Ms. Veena Ngaocharoenchitr Embassy of Canada in Thailand [email protected]
Mr. Alex George
Embassy of Canada in the Philippines [email protected]
Ms. Paramita Nugraeni
Embassy of Canada in Indonesia [email protected]
Mr. Tuy Dinh
Consulate of Canada in Ho Chi Minh City, Vietnam [email protected]
Ms. Nurul Salwani
High Commission of Canada in Brunei [email protected]
Ms. Mia Yen
Embassy of Canada in Burma [email protected]
Markets Profiled: Brunei, Burma (Myanmar), Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, Vietnam
A. ASEAN ICT OVERVIEW
The Association of Southeast Asian Nations (ASEAN) has an estimated total population of 605 million people and an estimated total GDP of US $2.2 trillion. It is made up of 10 member states: Brunei Darussalam, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam. ASEAN is working toward the ASEAN Economic Community (AEC) by 2015 and one component of this is the ASEAN ICT Master Plan 2015. The Plan is an ambitious one that aims to leverage coordinated investment in ICT infrastructure to foster economic growth and bridge the digital divide across the region. The roll-out plan places an emphasis on information security, IPR (Intellectual Property Rights) and the use of ICT in education and government. While there is large variance across Southeast Asia‘s ICT infrastructure landscape, there are common factors driving new technology development, largely stemming from the region‘s increasing economic integration, which in turn has several important implications for ICT technology purchase. Intra-regional trade and investment and robust domestic demand has made ASEAN one of the fastest-growing economic regions (an average of over 6% GDP expansion annually for most of the last decade) in the world. The fact that carriers and enterprises largely avoided the Global Financial Crisis has meant it is easier for them to make investment decisions on next-generation technology, such as LTE (Long-term Evolution) roll-outs and other 4G mobile upgrades, or big data solutions. This economic robustness, and the virtuous cycle of regional integration that has supported it, has also facilitated cross-ownership in telecom and particularly mobile network operations (Singapore‘s SingTel and Malaysian operators, notably Axiata, hold stakes in operators in Thailand, Indonesia and elsewhere). Social media impact. While consumers in emerging economies around Asia and the world have rapidly taken up social media platforms as a tool to connect, communicate and in some cases conduct commerce, Southeast Asia is home to a uniquely and particularly enthusiastic collection of social media consumers. Many ASEAN hub cities have extremely large FaceBook populations; Bangkok and Jakarta are considered the world‘s top two cities in the world in terms of FaceBook ‗density‘ per 100 people. While this hasn‘t—yet—resulted in the development of many new technology companies, it has begun to put upward pressure on Internet and mobile network bandwidth requirements, and mobile data consumer expectations. The use of mobile social network applications will likely drive carrier adoption of more advanced cellular network transmission technology, and perhaps backhaul traffic management solutions to allow carriers to accommodate more data from demanding, but low revenue-generating, customers.
Canada-ASEAN Trade ASEAN receives less attention as a destination for Canadian goods and services than some of its neighbours, such as China and India, but it is an important – and growing - trading partner of Canada. ASEAN is Canada‘s seventh largest export market and the value of Canadian goods exported to ASEAN in 2012 was over $5 billion, more than twice the value of Canadian goods exported to India. Exports in 2012 grew just slightly over 2011 but have more than doubled over the past 10 years. Canadian imports from ASEAN totalled $10.8 billion in 2012.
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2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Canada's Exports to ASEAN (by Individual Country) in CAD$ Millions
Indonesia
Thailand
Singapore
Malaysia
Philippines
Vietnam
Cambodia
Laos
Brunei
Burma
Source: Trade Data Online, Industry Canada
As the charts above and below illustrate, not all markets within the ASEAN region are equal. The economies of ―the ASEAN-6‖ (Indonesia, Thailand, Singapore, Malaysia, Philippines and Vietnam) are larger, more developed and for the most part generally easier to do business in. Brunei‘s small size is what keeps it out of this group, while the others; Cambodia, Laos and Burma are in earlier stages of development. (Note: Vietnam is still sometimes grouped with these latter markets as it is just in the midst of a significant market transition.)
ASEAN’s Economies ASEAN‘s ICT market reflects the diversity of its members‘ stages of development. At one end of the spectrum, countries such as Burma are still building out their initial telecommunications infrastructure and offer opportunity in this area. (Burma just announced it is issuing two telecom licenses to help boost the country‘s mobile penetration rate from its current 9% to a target of 80% by 2016.) Countries such as Thailand are working to keep up with the evolving demands of their rapidly growing middle class; and Singapore has tech savvy consumers interested in the latest mobile apps and the disposable income to spend on them.
Source: ASEAN Finance and Macro-economic Surveillance Unit Database
ASEAN Population by Country, Millions,
2011
ASEAN GDP by Country, US$ millions,
2011
Per Capita GDP in US$, 2011
In addition to the opportunities within ASEAN itself, the region‘s location and access to the key markets of China and India – both geographically and through trade agreements – offer further advantages. ASEAN has FTAs with China, India, Japan, Korea, Australia and New Zealand.
Why ASEAN? • Combined market of 605 million people and an estimated total GDP of US $2.2 trillion
• Individual markets range from highly developed Singapore to “frontier markets” of
Burma, Laos and Cambodia
• Prime geographic location between China and India
• Free Trade Agreements (FTAs) with China, India, Japan, Korea, Australia & New Zealand
• The ASEAN Economic Community (AEC) promises a single market and production base
by 2015, furthering the region’s economic competitiveness
• Enter the Asia Pacific Region on a smaller scale via one market that best fits your
company and then build and expand from there (to ASEAN and the broader region)
•
Investment ASEAN Inbound FDI (Foreign Direct Investment) has rebounded very strongly from the 2009 Global Financial Crisis. ASEAN itself – primarily Singapore - is the leading source of investment. Canada was in the top ten until 2011 when it was edged out by new entrants and significant increases on the part of Japan, China and Hong Kong. The EU had been the top investor but intra ASEAN investment has shot to number one after almost doubling from 2010. Known FDI into Canada from ASEAN reached $508 million at the end of 2010. The recent $6 billion Petronas (Malaysia) acquisition of Canada‘s Progress Energy will see this number rise.
Top 10 Sources of FDI inflows into ASEAN, 2008-11
% share of total inflow
2009 2010 2011 2009 2010 2011
ASEAN 6,300 14,322 26,270 14 16 23
EU 8,063 17,012 18,241 17 18 16
Japan 3,790 10,756 15,015 8 12 13
China 1,853 2,785 6,034 4 3 5
USA 5,704 12,772 5,783 12 14 5
Hong Kong 5,667 344 4,096 12 0 4
Cayman Islands 1,403 5,602 2,425 3 6 2
Korea 1,794 3,764 2,138 4 4 2
UAE n.a. 154 1,728 n.a. 0 1.5
Taiwan 1,131 1,089 1,719 2 1 1.5
Total Top Ten 35,705 68,600 83,449 76 74 73
Canada 720 1,393 985 2 2 1
US$ Millions
Source: ASEAN FDI Database
Canadian Direct Investment Abroad (Stocks) • CDIA (Canadian Direct Investment Abroad) stocks in ASEAN in 2011 totaled C$ 7.7
billion, well over the C$ 5 billion invested in China and India combined
• 76% of this total is invested in Indonesia (47%) and Singapore (29%) Source: Statistics Canada, August 2012
Key Players Given the diversity of the region, ranging from low-cost production countries such as Cambodia to the advanced technologies available in Singapore, and ASEAN‘s important role in global supply chains, it should come as no surprise that most major multinationals have at least some presence in the region. Clusters within the ICT sector in the region include electronics in Malaysia, semi-conductors in Singapore and hard disk drives in Thailand. Significant players include: Celestica, Dell, HP, IBM, Alcatel, Cisco, Lucent, BlackBerry, OpenText, BSH, Electrolux, Karcher, LG Electronics, Panasonic and Samsung Electronics, Philips and Sennheiser. Canadian companies include: Celestica, Blackberry, Mitel, OpenText, Telus International, and many others. Several of the CSPs (Communications Services Providers) based in ASEAN countries are active regionally, and international players are investing in the ASEAN telecom space as well. For example:
SingTel, Singapore‘s leading carrier, has investments around the region; including in Thailand, the Philippines, Australia and India.
ST Telemedia controls StarHub Ltd., Singapore‘s second-biggest phone company, and holds stakes in wireless companies in Malaysia and Vietnam.
Malaysia‘s Axiata Group has controlling interests in mobile operators in Malaysia, Indonesia, Sri Lanka, Bangladesh and Cambodia, in addition to stakes in India, Singapore and Thailand.
Qtel out of the Middle East has invested in Indonesia‘s PT Indosat and Singapore‘s Starhub
Norway‘s Telenor has part ownership of Thailand‘s TAC and is reported to be looking at bidding for one of Burma‘s new licenses.
Viettel, a state-owned enterprise (SOE) under the Ministry of Defense in Vietnam, has operations in Burma, Cambodia (Metphone) and Laos (Unitel); as well as other parts of the world
The Canadian Trade Commissioner Service has identified the following four sub-sectors as areas of focus for Canadian companies within the ICT sector:
Within the ASEAN context, opportunities exist in each of these sub-sectors to varying degrees. Wireless Builds: Significant opportunity exists across the region, as CSPs are building out new infrastructure to keep pace with increased subscribers and bandwidth demand. Specific examples of areas of opportunity include Burma for new network build; Thailand, which finally completed its 3G licensing auctions late last year; and Indonesia, identified by both Ericsson and Nokia Siemens Networks as a top ten growth market due to the infrastructure investments being made by the operators there. Next Generation Networking: Opportunities here are concentrated in the more developed ASEAN economies. Specific opportunity exists in the Philippines for solutions targeted at the BPO sector; otherwise solutions captured under this broad sub-sector are of interest to governments and organizations across the region, specifically within the ASEAN 5. Singapore has been ranked number five globally by the Business Software Alliance in its listing of top markets to develop cloud-based services, for its privacy laws and government support of the industry.
Next Generation Networking
• Cloud, virtualization • Enterprise Solutions - Content
management • Business intelligence • IT services • Security / authentication • GreenIT solutions
• Smart Grid (utilities)
Connected Vehicle
• Machine-to-Machine (M2M) • Transportation (ITS)
Mobile Media
• Animation tools • 3D imaging • IPTV • Visual effects • Digital content enabling tools
Wireless Builds
• Cellular equipment (devices and electronics)
• WiMax • Mobile devices & customer
premise equipment • Software-defined Radio (SDR)
Mobile Media: Subscribers in ASEAN countries have been avid adopters of mobile internet access via smart phones and other mobile devices; for many, mobile devices are their primary means of access to the internet. Content and applications that address local tastes and needs are much in demand but companies should expect strong local and regional competition and price sensitivity. Solutions that address the need to get this content to mobile devices efficiently are much in demand. Connected Vehicle/M2M: The Connected Vehicle is the least immediate of the opportunities amongst the sub-sectors. While car-ownership is growing along with incomes in the region, it is still early days in many places and the transport infrastructure itself (roads and highways) is still in need of major development. M2M solutions targeted to industries such as Oil & Gas (i.e. remote monitoring) or Shipping & Logistics (tracking technologies) are certainly of interest; however, and the use of mobile phones to facilitate money transfers, bill payment services and other mobile commerce applications popular in the ‗unbanked‘ world is widespread and growing. The following chart outlines the relative maturity of the overall ICT sector in each market across the region and identifies where opportunity exists in each of the four sub-sectors identified above. Opportunities are ranked from High (H) to Medium (M) to Low (L).
The next section of this report takes a closer look at each of the markets within ASEAN, with an emphasis on those with more sub-sectors identified in the above chart as ―High Opportunity‖.
Maturity of ICT sector
Mobile Media
Connected Vehicle and M2M
Next Generation Networks
Wireless Builds
Brunei Well established M L M M
Burma Emerging L L L M
Cambodia Emerging M L L L
Indonesia
Established in city centres, emerging in rural areas
H M M H
Laos Emerging L L L L
Malaysia Well established H M H M
Philippines
Established in city centres, emerging in rural areas
H M M M
Singapore Leading Edge H M H M
Thailand Well established M M M H
Vietnam
Established in city centres, emerging in rural areas
M L L M
Sector Overview Table for ASEAN
Total Imports from Canada (2012) millions CAD$
Total Exports to Canada (2012) millions CAD$
Value of ICT goods in GDP (millions US$)*
ICT goods as % of GDP*
# of mobile subs, millions (2012)
Wireless penetration (2011) (%)
ICT Development Index Ranking – lower score is better - 2011 (2010)
World Economic Forum Network Readiness Index Ranking 2012
Brunei 4.3 1.8 101 6% (2006)
.44 (2011) 109 - 54
Burma** 3 1.8 70 (2010)
1.7% (2010)
.6 (2011) 3-9 131 (129) -
Cambodia** 7.6 598 130 2% 8.2 (2011) 70-96 121 (119) 108
Indonesia 1,680 1,313 13,140 7.4% 266 103 95 (97) 80
Laos** 9.5 10 - - 4 (2011) 65-87 120 (120) -
Malaysia 783 2,225 48,062 25.6% 38 127 58 (57) 29
Philippines 528 991 8,382 13.2% 104 99 94 (94) 86
Singapore 908 1,425 86,108 23.5% 8.2 150 12 (10) 2
Thailand 716 2,631 27,233 12% 80 112 92 (89) 77
Vietnam 370 1,617 7,129 (2010)
8.4% (2010)
167 143 81 (86) 83
Sources: Trade Data Online, Industry Canada, *UNCTAD, UNCTADstat – www.unctadstat.unctad.org, EIU, ITU (www.itu.int), IDI – ICT Development Access – ITU annual survey that measures countries’ ICT Access, ICT Use and ICT Skills; The Global Information Technology Report 2012, World Economic Forum **Data for Burma, Cambodia and Laos is often conflicting and difficult to confirm – consider these numbers as directional only
Internet Use and Broadband Penetration by Country, 2011
Source: The State of Broadband 2012 (broadbandcommission.org)
BRUNEI Brunei (population 420,000) offers limited opportunity due to its small market size. It is worth noting however that Brunei offers opportunity in many next generation infrastructure sectors, particularly fibre to the home (FTTH) solutions and mobile broadband. The oil-rich sultanate has long been an enthusiastic procurer of best-in-class telecoms solutions, for two reasons: it has the cash to do so, and developing a knowledge-based economy off of a strong ICT platform is a key component of the government‘s master plan to transition itself away from over-reliance on natural resource industries. Brunei hopes to increase the economic contribution of ICT industries from 2% today to 6% in 2015, as part of its National Broadband Blueprint. This calls for an ambitious FTTH roll-out over the next few years and further investments in LTE (the country will launch 4G services in the first half of 2013). The telecommunications industry is dominated by DataStream Technologies (DST) and Telkom Brunei Berhad (TelBru). DST, with approximately 87% of the mobile market, is the country's only provider of 2G, 3G and 3.5G, and it is currently working on 4G as part of its expansion program. Telbru on the other hand is the sole provider of fixed lines, with its subsidiary, BMobile, providing 3G services similar to DST. BURMA In March this year, Google‘s Executive Chairman Eric Schmidt visited Burma as part of a promotional and fact-finding tour, coinciding with the launch of the ―.mm‖ Burma version of Google‘s homepage. While no specific investment plans were announced, Schmidt‘s visit signals an interest in the country‘s slowly opening Internet sector, and Google‘s chairman was quoted as saying that telecoms will be the most profitable sector of the country‘s economy in the coming years.
Burma has generated extensive interest with its plan to issue two licenses for national mobile communications services. A fairly convoluted application process has already generated 91 expressions of interest from global carriers such as SingTel, Axiata, ST Telemedia, and Telenor, and formal applications are due in June 2013. The licenses are estimated to cost between $100m to $200m each.
This is a true greenfield opportunity, arguably the last one in the world today, in a market with a mobile penetration of less than ten percent in a population of over 60 million. Significant build out opportunities exist for towers, access, transmission and distribution, and will likely be sought out on a turnkey basis. But this major investment opportunity is not without risk. For one, there is significant country risk: with low per capita GDP of $875, low electrification and other infrastructure deficits, coupled with the high cost of phones and activating them, there are numerous hurdles for getting such a massive network development project off the ground. Added to this is a new government coming on-stream soon, bringing with it the risk of nationalization, or changes in regulations. Already, there have been concerns: Russia‘s Vimpelcom has recently pulled out of the running, citing regulatory opacity (and is, tangentially, looking to be selling off its stakes in operators in Cambodia and Laos). Those evaluating the opportunity express numerous concerns, chief among them the fact that the MPT has not provided sufficient details in the license requirements (the speculation being that the regulator is using the application process to educate itself on such issues as frequency allocations). There is also some confusion as to how many licenses Burma will issue: some believe that there are four licenses being planned with one or two being reserved for government-owned carriers. CAMBODIA and LAOS Cambodia and Laos rank near the bottom of the ITU‘s annual ICT Development Index and Cambodia is near the bottom of the World Economic Forum‘s Network Readiness Index Ranking (with Laos not included on the list at all). The two countries have experienced rapid growth in the mobile space over the past few years however, with mobile penetration rates rising from under 20% in 2008 to 70% and 87% today for Cambodia and Laos respectively. The playing fields in both countries are extremely competitive as a number of new players have entered the market in the past few years to take advantage of eased foreign ownership restrictions in the sector and the relative absence of a dominant incumbent in either market. In 2010 Cambodia‘s regulator was forced to introduce a price floor to attempt to encourage sustainable growth. Consolidation within the sector is expected as everyone finds their place and the market matures. Solutions that help operators differentiate their services and decrease their costs are certainly of interest in these markets.
INDONESIA Key players In wireless, four main players control over 90% of the market: Telkomsel (with over 50%), Indosat (20%), XL Axiata (14%) and Hutchison‘s CP Telecom with roughly ten percent. There are four other carriers actively competing for new customers in a market where new mobile subscriptions earn operators less than one dollar a month in revenue. Canada‘s BlackBerry has enjoyed great success in Indonesia, with Indonesia its 3rd largest market after the US and UK. According to ABI Research, BlackBerry devices made up almost 50% of smartphone shipments in Indonesia in 2012 and the company chose Indonesia to launch its mobile payment service, BBM Money, in February 2013. There are estimated to be over 3m BlackBerry devices in Jakarta alone, and the BlackBerry instant message platform BBM rivals SMS text messaging in total volume as a result. Despite the fierce competition for subscribers—or perhaps because of it—capex investments by mobile carriers is making Indonesia one of the world‘s leading infrastructure markets. Both Ericsson and Nokia Siemens Networks place Indonesia among their top ten country markets for revenue and growth, driven by the massive expansion plans of mobile operators. 3G cellular infrastructure is the primary market, as well as related traffic management equipment. Ericsson has also signalled an interest in the nascent M2M market with mobile-connected devices. Market Overview In 2012, SIM cards in service reached well over 100% of Indonesia‘s population, approximately 266m active accounts; by contrast, there are only 45m fixed line connections. Intense price competition for subscribers has driven Indonesian cellular carriers‘ profitability far, far down in the last two years; Indosat‘s profitably alone plunged from over $80m in 2011 to $43m last year, and Telkomsel was declared bankrupt in 2012 due to its failure to make good on payment of roughly $500,000 to its primary distributor of SIM cards. Most networks still have significant numbers of 2G subscribers as well as growing numbers of 3G connections, thanks to the wide promotion of mobile data plans. Only three of the four 3G frequency blocks have been utilized, and many complain that the slow roll-out schedule has constrained service operations. Mobile carriers in Indonesia, perhaps like no other ASEAN market, have benefitted from the near complete lack of fixed broadband infrastructure as a driver of their mobile broadband services. Consultancy GfK Asia estimates that 62% of Indonesian mobile subscribers use smartphones – one of the highest penetrations in the emerging world. XL Axiata reckons that data-only users comprise 25m, or 60% of their subscriber base, through its 3G services. Telkomsel estimates that it will have 4G LTE trials in four major markets later this year, although a great deal of uncertainty as to when, and with what frequencies, 4G will be licensed.
WiMAX (Worldwide Interoperability for Microwave Access)services are still in their infancy, despite massive investment in licenses auctioned off to eight operators in 2009 and the hunger for wireless broadband services. Four carriers had to surrender their licenses a year later for failing to pay licensing fees, and seven of the 15 regional zone licenses were rebid. One of the issues is that the country‘s regulator has been trying to segregate WiMAX as a ‗fixed‘ solution, and has limited the technologies that operators can deploy, in order to give 4G services (when they are launched) a fighting chance. Perhaps one-third of Jakarta‘s 9m inhabitants have a BlackBerry and Jakartans are also reportedly the world‘s leading city for mobile Facebook usage (largely because there is no fixed-line broadband). One new entrant, Axis, recently gained 100,000 new subscribers in three weeks with an offer that bundled a BlackBerry with a pay-as-you-go daily plan for messaging and social media. The BlackBerry device cost the equivalent of ~$210 and the daily plan was ~$0.50. Although mobile data services started as a temporary work-around to gain Internet access, it is fast evolving into a new innovative and creative space for social networking. Jakarta is seeing a small but growing number of mobile application development entrepreneurs that field outsourcing work from clients globally as a result. Government Policy and Market Access Issues While Indonesia‘s government has undergone a significant and largely successful transformation towards a participatory democracy and the current administration has made the eradication of business-hobbling inefficiency and corruption a priority, telecoms regulatory policy and licensing still suffer from a surfeit of both. Indonesia has not yet deployed 4G commercially—analysts reckon it will not get even close before 2014—in large part because of numerous delays in licensing off 3G spectrum. The delay of the final block of 3G spectrum licensing in September last year (the fourth delay in roughly as many months) was believed to be linked to Telkomsel‘s bankruptcy, sparking debate as to whether the government was unfairly favouring the country‘s (state-owned) dominate carrier. As mentioned above, regulatory vagueness around 4G licensing (in part because of the longstanding lack of clarity around the near-moribund WiMAX licenses) is a concern, and will likely continue to delay investment in next generation infrastructure. While Indonesia does not have much of a domestic ICT manufacturing industry to protect, rising nationalistic tendencies have led to an increasing number of protectionist regulations in a number of sectors. An attempt to use anti-monopoly laws to reduce the ownership levels of Singaporean companies in Indonesia‘s cellular networks put pressure on Singtel to lessen its 35% stake in Telkomsel, and in 2008 STT sold its stake in Indosat to Qatar‘s Qtel.
Opportunities by sub-sector Wireless Build: Wireless broadband infrastructure is the defining opportunity in Indonesia. Winners of the final round of 3G licensing were announced earlier this March, with Telkomsel and XL Axiata winning spectrum n the 1970-75 Mhz and 1975-80 Mhz bands respectively. There may still be some demand for WiMAX infrastructure in the 2.3Ghz frequency standard—although this has also been the assigned frequency for 4G LTE services, so it is equally likely that when the LTE licensing situation clears up, the WiMAX opportunity will instantly evaporate. Virtual traffic backhaul solutions are being explored by carriers, as growing mobile data subscribers and still-low ARPU (Average Revenue per User) force carriers to find traffic management efficiencies where they can. Despite profitability pressure in Indonesia‘s mobile space, carriers have ready access to financing to expand capex: XL Axiata recently secured a $110m loan in large part to finance network expansion, including the acquisition and installation of more than 6,000 base transceiver stations. Mobile Media: Indonesia has the 4th largest population of Facebook users globally and its citizens are heavy users of social media. Solutions that can efficiently connect mobile users with relevant content are much in demand. Note that competition in the content and applications space is fierce, including from a number of local, tech-savvy entrepreneurs. Connected Vehicle/M2M: Indonesia‘s auto sector is growing and most of the major Japanese players are in the market; Nissan recently moved its global production centre for mid-sized economy sedans to Indonesia, citing the large backyard market. This may be an opportunity for Connected Vehicle. Only 4% of Indonesians own a car, but over 1m automobiles were purchased last year in what is becoming one of the world‘s fastest-expanding auto markets. As mobile money projects get moving—and a large percentage of Indonesian consumers remain without bank accounts or credit cards—machine-to-machine solutions for consumer payment transactions may pick up. Unlike the Philippines, where mobile cash transfers are a staple service offering (an estimated $10bn annually), there is very little mobile commerce in Indonesia despite the mobile-centric nature of the market. Indonesian mobile operators have pilot projects with state-owned electricity company PT PLN to use SIM cards in specially designed power meters boxes so consumers can prepay electricity service.
MALAYSIA Key Players
Malaysia‘s telecom landscape has, like many ASEAN markets, been a relatively competitive service market, albeit with the outsized participation of the government, as a promoter of technology deployment, and an owner-operator in several carriers. Intense price competition has seen the number of mobile network operators whittled down from five to effectively three:
Celcom Axiata (owned largely by the state-owned incumbent Telekom Malaysia and Axiata, a regional mobile operator and investor controlled by Malaysia‘s sovereign wealth fund Khazanah), which has roughly 30% of the mobile subscriber market with some 12m subscribers (nearly 1m of which are mobile broadband accounts).
Maxis Communications, owned by Malaysian billionaire Ananda Krishnan and Saudi Telecom, is the market leader with over 14m accounts (though as of February 2013, only 12.7m were considered ‗revenue-generating‘)
Digi, 49% owned by Norway‘s Telenor, has 26% of the market, some 10.5m accounts.
Malaysia‘s mobile market is also somewhat unique in the region for having a fairly robust MVNO (Mobile Virtual Network Operator) market, which collectively serve an estimated 15% of the country‘s 38m mobile subscriptions. Elsewhere in Asia, low-ARPU customers and lack of business model sophistication have largely prevented virtual operators from maintaining a sustained presence, but Celcom alone claims five MVNO relationships, including TuneTalk, a division of (another) Malaysian billionaire Tony Fernandes‘ Tune Group, which owns successful low-cost airline AirAsia. Malaysia has over the years attempted to cultivate domestic champions to manufacture ICT devices and infrastructure; this has been an ongoing project of Malaysia‘s state body overseeing industry development, the Multimedia Development Corporation (MDeC). A few domestic industrial conglomerates such as Sapura Industries have interests in the ICT sector, but while indigenous technology development remains a focus, the market is effectively liberalised, and dominated by global vendors. More successful domestic firms in the global ICT supply chain are contract manufacturers and packaging firms for RF chipsets and semiconductors, several of whom, including Inari, a Penang-based RF maker with RM200m in annual revenue, are expanding regionally through acquisition. Ericsson has a long track record with leading celco Maxis, having supplied much of the carrier‘s HSDPA network and network management services. Ericsson is also an infrastructure and related service provider to Celcom, along with Huawei. Huawei itself is an active supplier of fibre optic systems, including a semi-national Fibre-to-the-Premises (FTTP) led by incumbent telco Telekom Malaysia. Canadian firms BlackBerry and Celestica are both active in Malaysia.
Market Overview
3G coverage is fairly robust throughout the country, even through the more remote Eastern Malaysian states on the island of Borneo. Both Maxis (with Extended 3G HSPA) and Celcom report effective 3G coverage of over 80% of Malaysia‘s population. LTE has been rolled out in trial locations, and Maxis conducted a soft launch of its 4G service offerings on the first day of January 2013, followed swiftly by Celcom‘s rollout of 4G LTE ―Experience Hubs‖ to showcase service capabilities in Kuala Lumpur. Despite a reasonably well-serviced fixed broadband market (65% of Malaysian households have a connection, many of those fibre—see below), intense service competition amongst celcos and a unique forerunning WiMAX investment environment have made Malaysia one of the most active wireless and mobile broadband service markets in ASEAN. Perhaps 20-30% of all subscribers in Malaysia are smartphone-connected, and Celcom reports over 140,000 tablets connected to its network in 2012. Maxis reports that non-voice revenue exceeds 45% of its total, and has nearly 700,000 wireless broadband accounts on its networks. However, even in Malaysia, WiMAX licenses have been sorely underutilized since their launch in 2007, forcing the regulator to fine carriers multiple times for lack of investment and usage.
As a result, in addition to a consolidated mobile voice space, there is speculation that further consolidation in the wireless broadband service industry should be expected, with some talk of smaller players PacketOne and Redtone being absorbed. As mentioned, China‘s Huawei is the primary supplier of a government-driven high-speed broadband (HSBB) rollout, driven by Telekom Malaysia (but with the infusion of some RM2.4bn in investment from the government, which Huawei estimates covers 35% of the capex in the project). Much of this FTTP initiative is to connect government-sponsored industry clusters, government buildings, schools and research facilities. This somewhat net-neutral investment has resulted in a dozen or so FTTH broadband companies, let by Telekom Malaysia itself, with perhaps 300,000 subscribers.
Goods exports make up approximately 80% of Malaysia‘s GDP and 40% of its exported goods are electronics; with China Malaysia‘s largest trading partner, its key role in the Global Supply Chain is evident. While Malaysia is still a relatively small labour force, and without a tremendous density of high-calibre research universities, there has been a significant ecosystem of electronics and semiconductor and related components manufacturing within the country, largely in and around Penang.
British Telecom (BT) recently announced plans to open an outsourcing hub in Malaysia in cooperation with MDeC. Data centre growth has been one of the many industries that MDeC has attempted to kick-start as one of the National Key Economic Areas (NKEA), either through direct investment or industry incubation—and it is one that has been a sustainable success, thanks to decent infrastructure, multilingual and skilled talent, and a fair amount of ‗platform‘ investment by
the government in creating ‗Cyberjaya‘ (see below). Data centre services as a NKEA was estimated by the Ministry of Human Resources to have generated RM400m (US$133m) in revenue in 2012, and the government is aiming for 20% revenue growth in the sector this year. Most major managed network service providers servicing global businesses in Asia, including NTT and AT&T, have significant data centre investments in Malaysia. Government Policy and Market Access Issues Malaysia‘s government has long attempted to build a knowledge-intensive industry cluster; largely centred on the fibre optic network installations that connect the Federal Territory of Kuala Lumpur with its new government site Putrajaya (an area of the greater Klang Valley coined, appropriately, Cyberjaya). While much of this is simply transmission infrastructure investment, as mentioned above it has turned into a catalyst for the low end of the BPO/KPO and data centre market. Malaysia‘s regulatory agency, the Malaysian Communication and Multimedia Commission (MCMC), is a key player which regulates and provides direction to the country‘s Communication Service Providers (CSPs). The MDeC, mentioned above, much like it‘s Singaporean counterpart the iDA, has multiple programs in place to help drive demand for ICT infrastructure; one such is the ICON Project (Integrated Content Development) to foster development of local mobile app content. Malaysia is sometimes criticized for a lack of focus in its approach to ICT industry investment, yet its sustained portfolio investment approach within MDeC has created some successful, if somewhat lower-value, ICT industry clusters.
Opportunities by sub-sector Wireless Build: Recent extensive investments in LTE mean that mobile carrier capex is estimated to taper off this year; sector analyst at UOB, Kay Hian, recently estimated that the ―tail-end‖ of their 4G investment plans meant industry capex would decline 7% in 2013. Both Maxis and Digi reported network capex of roughly 175m per quarter last year; mobile spend, predominantly on 4G, between the major networks, is estimated to be in the $800-$1bn range. Malaysian carriers have been enthusiastic adopters of shared network management services and network outsourcing arrangements. With blended ARPUs for mobile subscribers in the industry averaging not much more than RM50 per month (and wireless broadband not much higher) traffic efficiency solutions, increased attention on operational expenditure, and CRM solutions to improve subscriber profitability are all sorely needed by carriers. Telekom Malaysia spent nearly $1bn last year, largely in network upgrades to its FTTP network, and traffic management with broadband-hungry consumers and enterprise is likely to be an area of increased interest.
Next Generation Networking: Malaysia‘s successful cultivation of a data centre market is admirable, but it is a high-capex, thin-margin industry, and one which will likely be impacted by
trends in utility computing (cloud) adoption in the region. Malaysia‘s data centre service providers will likely need to look intensely at virtualization solutions as a result. Opportunity may also be found in growing sectors that utilize ICT in their operations: eHealth, financial services, oil & gas solutions, education (online learning), defense and cyber-security. Mobile Media: Malaysians are among the top purchasers of tablets in the region and a number of domestic initiatives, such as the ICON project mentioned above, encourage the development of mobile content and applications. Winners of the 2012 GoMobile Awards included applications for eLearning, eHealth and mobile payments, giving some sense of where opportunity can be found. PHILIPPINES Key Players & Market Overview
The telecom sector in the Philippines is effectively a duopoly consisting of PLDT-Smart (partially owned by Japan‘s NTT DoCoMo, which recently acquired Sun Cellular/Digi) and Globe Telecom. PLDT-Smart has about 70% market share and the majority of the pre-paid market, while Globe has about 30% market share with more of the post-paid and enterprise segments. Both rolled out fibre commercially late last year, and LTE is launched although it has been subject to service quality challenges so far. Competition between the two is intense with the latest promotions featuring bundled packages that include new devices from Apple and Samsung. Relatively new entrant Liberty Telecom (owned by Qatar Telecom and San Miguel) is gaining subscribers under the Wi-Tribe brand on its WiMAX network. BPO (Business Process Outsourcing) makes up a significant – and still growing - part of the Philippines economy and it enjoys strong government support. The industry generated over $11bn in 2011 and employed nearly 650,000 according to the Business Processing Association of the
Philippines (BPAP). Between call centres, transcription services and other back office industries, the BPAP reckons that it could reach $25bn in revenues by 2016—possibly 10% of the country‘s GDP—and employ 1.3m people. Call centre technologies, ACD and voice/data management solutions, and data centre investments have steadily risen in this market which now employs more call centre operators than India. One potential constraint on this booming sector lies in the future availability of qualified talent and efforts are being made on the educational side to address this. Ironically, this thriving outsourcing sector, which has revamped the Philippines‘ domestic economy, owes its success to an earlier form of ‗outsourcing‘: the 10m plus overseas workers that send nearly $2bn home monthly, much of it via SMS, and have spearheaded the country‘s mobile telecoms revolution. With over 100m active accounts—approximately 100% penetration—the ubiquity of mobile devices has allowed the Philippines carriers to act as wire transfer agents, banks and micro-lenders. Mobile money is a huge industry sector (some $10bn annually is spent via mobile-to-mobile cash transfers) and the facilitation of m-commerce, which got its start with the overseas remittance business, has allowed carriers to invest in building international bandwidth capacity and domestic Internet infrastructure—infrastructure that has been in turn been exploited by the BPO sector.
Government Policy and Market Access Issues The Government‘s National Broadband Network initiative was derailed by corruption scandal in 2008 and replaced with the new National Broadband Plan announced in 2012. Additionally, the Philippines Digital Strategy (2011-2016) sets specific targets for broadband and internet access and details other priorities such as eGovernment and the use of ICT in education. http://icto.dost.gov.ph/images/misc/philippine%20digital%20strategy%202011-2015.pdf Government regulations include restrictions that limit foreign ownership to 40%, which acts as a deterrent to many potential investors. An option that many take advantage of is establishing operations through the Philippine Economic Zone Authority (PEZA). This approach allows for 100% foreign ownership provided that operations are in a PEZA approved location and are for export - a minimum of 70% must be exported but 100% is preferred. Other incentives are available through PEZA as well and most BPO operations work out of PEZA locations. http://www.bpap.org/investor/peza Opportunities by sub-sector Wireless Build: Wireless broadband is a sector that‘s experiencing rapid growth. The Philippines has a population of approximately 100 million people with 12 million of them living in the National Capital Region and the rest spread across the many islands that make up the archipelago. Solutions that address the resulting capacity and coverage challenges are always of interest. Next Generation Networking: Solutions for the BPO sector are in demand. These include both the hardware equipment and the software required – i.e. CRM systems and increasingly industry specific solutions as the services provided become more specialized (i.e. financial services, health care). Mobile Media: Mobile data usage is increasing, as the Philippines is one of the world‘s most active markets for both SMS (some 2bn messages sent daily) and mobile social media. Google has been investing heavily in applications to streamline and manage mobile data content in the Philippines, which it considers not only a large market, but an ‗R&D lab‘ of sorts for content management applications globally. Digital media is considered a sub-sector of the BPO industry and Digital Content Creation and the Creative Industries in general is something the Philippines government is working to develop. Filipinos have a good reputation for creativity and they are often involved in the creation of video games and other projects that involve animation skills. Connected Vehicle and M2M: As mentioned, the technologies and processes surrounding mobile commerce have perhaps their greatest market opportunity globally in the Philippines; while smartphone penetration is still relatively low, both carriers and banks have been experimenting with
digital wallet and Near Field Communication (NFC) technology to develop point-to-point mobile cash services. Smart alone has been developing NFC-based services for its SmartMoney offering since 2008, and the Bank of the Philippines Islands launched an NFC-based Mobile Wallet service in November last year, compatible with BlackBerry and iPhones. Demand for NFC-enabled consumer devices, point of sale terminals and management systems is expected to grow. SINGAPORE Key Players Singapore’s iDA (InfoComm Development Authority) acts as Singapore‘s CIO and manages the city state‘s many ICT initiatives. Most major ICT vendors have a long-established presence in the Singapore market, as the country serves as a hub both for regional headquarters and for distribution and service centres. 80 of the top 100 software and services companies have operations in Singapore and many, including the top 15 software companies, have based their headquarters in Singapore. This wealthy, hyper-efficient economy has been a centre of ICT contract manufacturing business (although much of Singapore‘s contract manufacturing firms have since diversified the bulk of their production capacity abroad), and is a useful ‗showcase‘ market for technology deployments. Further, Singapore functions as a global data management hub with a total submarine cable capacity of 67 Tbps and more than 50% of the commercial carrier and carrier neutral data centre space in South East Asia. Notable firms with presence in Singapore include: Celestica, Dell, HP, IBM, Alcatel, Cisco, Lucent, BlackBerry, OpenText, BSH, Electrolux, Karcher, LG Electronics, Panasonic and Samsung Electronics, Philips and Sennheiser. Singapore Telecom (SingTel), with 45% of the market, is the leading integrated telecoms service provider in Singapore. SingTel is a state-owned publicly-listed company with S$18bn in revenue, investments in mobile and telecoms operations across South and Southeast Asia and Africa, and dominant shares in the fixed, broadband and mobile subscriber markets in its home market. The second player in Singapore‘s telecom market is Starhub, a similarly state-owned integrated carrier (via the government-linked technology investment group ST Telemedia) which has QTel and NTT as stakeholders. Telekom Malaysia-invested M1 is the third player in the mobile market. Market Overview Singapore‘s telecom industry is one of Asia‘s most advanced in terms of technology and application adoption. An emphasis on ICT innovation has helped it to become a hub for investment around data centre development, cloud computing, and the higher end of the shared services space.
Despite having several well-funded, government-linked carriers building leading-edge network infrastructure, Singapore has been an enthusiastic developer of ‗open‘ Next Generation neutral network platforms to further promote ICT industry development. The OpenNet Consortium, a group comprised of Singtel and major domestic investment partners from Singapore‘s other carriers, was awarded a $750m contract from the Singapore government in 2008 to construct a net neutral NGN fibre-to-the-home network. Even with government investment and massive promotional efforts to kick-start competitive services, and the network operating company for the NGN network Nucleus Connect beginning commercial services from the second half of 2010, take up has been slow, plagued by poor installation processes, and unclear pricing models, until recently: fiber-based broadband subscribers doubled in the first eight months of 2012, to 200,000. Additionally, the major fixed line carriers—Singtel and Starhub—have an effective wired broadband duopoly (mainly DSL and cable modem) which combined have subscribers in excess of households in Singapore. There are over 8m mobile accounts in Singapore, and more than 80% of these are serviced on 3G networks. LTE services are currently offered by all three major carriers, although recent months have seen some degree of consumer dissatisfaction with effective 4G coverage in the country. Singtel claims that by the end of March they will offer nationwide 4G coverage, while the LTE network of Starhub is estimated to cover 50% of the island. Government Policy and Market Access Issues Singapore has long prided itself on building a transparent business environment, free of bureaucracy and corruption. Favourable investment and taxation environments have placed Singapore at the top of lists measuring business operating environments. The Infocomm Development Authority (iDA) of Singapore, the government body which serves as both as the domestic ICT industry‘s promotion board and its regulator, has assiduously marshalled investment in specific technology and sub-industries to promote both the consumption of next generation telecoms services, and the development of content and applications. That said, the Singapore government‘s overarching interest in the ICT space can also be a limitation on effective levels of private participation and competition. Government interests are deeply engrained in the ownership structures of all major operators, and Singapore government statutory boards and research facilities are a primary force in much of the ‗indigenous‘ technology development in the country.
Opportunities by sub-sector
Wireless Build: LTE roll-outs by all three major mobile carriers have begun, and SingTel alone is estimated to have 100,000 4G subscribers to date. Full-fledged national coverage of 4G will be developed later this year; SGD360m (US$294m) worth of 4G spectrum is up for grabs later in 2013.
The iDA plans to sell-off a total of 270MHz of spectrum by June this year for S$360m: 150MHz of Singapore‘s 1800MHz band, and 120MHz of the 2.5GHz band.
Indoor coverage of 4G networks continues to be a concern; capex discussions will probably revolve around LTE picocell/femtocell deployments, and the backhaul solutions to support high-density indoor mobile data deployments.
Outsourcing network management services may begin to pick up traction in Singapore‘s high-volume mobile data markets as a business continuity measure. Traffic management and uninterruptible power solutions are likely to also come into the spotlight.
Next Generation Networking: The iDA has been promoting the development of cloud computing, data centres and ‗big data‘ service platforms, offering tax incentives and other grants. Government appetite for data is being fuelled by various sectors: e-medicine, e-education, and national security (including biometric screening). The Singapore government, through various initiatives, has been spending between S$1bn and $2bn annually on ICT equipment and services purchases. Singapore has been ranked number five globally by the Business Software Alliance in its listing of top markets to develop cloud-based services, for its privacy laws and government support of the industry. Mobile Media: Not surprisingly, with its advanced infrastructure, Singapore has had great take-up in this area. Mobile services available in Singapore include: MOH iHealth, NLB Library in Your Pocket, RazorTV, StarHub Mobile TV, and mBanking from a number of the banks. M-commerce sites abound and a participatory journalism site has launched called iToday. (mobilemonday.net) Strong local and regional competition exists but so too does opportunity; and if successful, Singapore offers the chance to gain exposure to the global players established in Singapore. Connected Vehicle/M2M: Despite significant iDA support for NFC technology and related ‗trust‘ infrastructure, Singapore has yet to have widespread pick-up of applications for M2M in ticketing or payment services. France‘s Gemalto was contracted in 2011 to develop NFC contactless payment platforms for a nationwide programme, and then joined with six other participants (including all three mobile operators, DBS Bank and Citibank) for developing a Trusted Third Party infrastructure platform as a component of the country‘s iN2015 e-payment programme. Reportedly 30,000 tap-and-pay terminals have been installed, and there are plans to integrate the programme with public transit systems this year. Key catalyst applications and stakeholders are still needed to tip the programme into effective usage among consumers.
THAILAND Key Players & Market Overview Thailand has two state owned enterprises, TOT and CAT Telecom, that are major players in the telecom space, as well as a number of private operators including AIS (largest), TAC, True
Corporation (and subsidiaries True Move and True Online), TT&T, and others. Many private carriers have foreign ownership—SingTel in AIS, for instance, and Telenor in DTAC—and the presence of foreign interests has been a complicating factor for Thai regulators (a vague, but controversial ―foreign dominance rule‖ was put into effect in mid-2012). Thailand has fallen behind in its telecom infrastructure roll-out recently due to prolonged delays in auctioning off its 3G licenses—a process complicated by a long-standing politicization of the telecom sector. The National Institute of Development Administration, a university in Bangkok, estimated that the two year delay had cost the country between $4.12 and $4.62 billion in economic losses. The licenses were finally awarded in October 2012 to AIS, True and TAC; just as discussions around 4G rollout have already begun, with AIS and TOT running a trial in central Bangkok. Investment in network infrastructure will be substantial over next few years as all players build out their networks and the country works towards meeting the targets of the National Broadband Policy. Chinese vendors Huawei and ZTE are particularly active in Thailand‘s mobile market, and are both significant suppliers to market leader AIS. Nokia Siemens Networks is also a major infrastructure vendor in Thailand. Government Policy and Market Access Issues Thailand‘s National Broadband Policy aims to ensure that 80% of the country‘s population will have broadband access by 2015, with 95% coverage by 2020. The government is providing support for the build-out of backbone and backhaul to ensure coverage for all ―tambons‖ (sub-districts in Thailand – there are over 7700) but there is no public support for ―last mile‖ provisioning which is expected to be driven by private sector investment. Six of the major operators have agreed to work together on network/infrastructure sharing and toward agreeing on fair network management and usage fees in support of the National Broadband Policy.
Thailand‘s ICT Policy Framework (2011-2021) maps out progress toward ―Smart Thailand 2020‖; priorities of the Framework (and areas of opportunity) are pictured below:
Source: Thailand Information and Communication Technology Policy Framework (2011-2020), ICT2020
Opportunities by sub-sector Wireless Build: Wireless broadband is supported through the government‘s National Broadband Policy and it is a sector that‘s experiencing rapid growth. As mentioned above, Thailand‘s 3G licenses have finally been awarded and at this point 4G is being considered as well. AIS, the country‘s leading mobile operator, announced a target of over $400m in 3G network spend in 2013. TAC—which, with 24m subscribers, holds a 30% market share in Thailand, recently received a new 3G network license, and immediately signalled intention to put $820m into network infrastructure beginning this year. Next Generation Networking: Industry specific enterprise solutions are in demand and areas of particular opportunity include: - eHealth – aim to connect 15,00 hospitals and healthcare centres; medical tourism is also a growth
sector in Thailand; - eGovernment – a delegation from Thailand visited GTech in Ottawa in 2012 to explore solutions
in this area - eLearning/ICT in education – aim to connect 30,000 schools, local libraries and community
education centres; in 2012 the government started its One Tablet Per Child (OTPC) program to
distribute tablets to primary schools across the country – solutions that address this would do well; also online learning solutions
- eAgriculture – rural farmers are a particular target group identified by the National Broadband Policy – solutions in this area are of interest
Mobile Media: Demand for mobile content is growing strongly and forecast to continue to do so. While the content itself will likely be generated locally (or need to be localized), solutions for content management and its distribution to mobile devices represent an area of opportunity for Canadian companies. Connected Vehicle and M2M: Thailand is ASEAN‘s automotive hub (as well as the world‘s second largest producer of motorcycles and pickups) and most of the world‘s leading automakers have a presence there. Regional competition from Indonesia, which is ramping up production and saw its own exports expand 40% last year to 250,000 units, may provide Thailand with the competitive impetus to move up the value chain. Industry Analysts Telematics Update sees telematics components developers already setting up shop in Thailand‘s auto cluster, but other infrastructure—notably 3G network speeds, and the challenges of software programming in Thai—remain hurdles. Local players include Turkish-Thai fleet management systems player Vektor and BSMART Telematics. Toyota and Microsoft chose Thailand as its showcase market for launching an emerging-market focused telematics offering last year. VIETNAM Key Players & Market Overview Two major state-owned players, VNPT and Viettel, control over 80% of the Vietnamese market between them, making it a difficult market in which to compete. Viettel comes under the Ministry of Defence and VNPT is the government-owned Vietnam Posts & Telecommunications Corporation, which controls both MobiFone (also known as Vietnam Mobile Telecom Services Company or VMS) and Vinaphone (Vietnam Telecom Services Company). VNPT has been directed to restructure and is expected to privatize MobiFone and possibly merge the two companies as a part of this process. Progress in this area has been very slow however and two of the few foreign players in the market – Korea‘s SK Telecom and Russia‘s VimpelCom - have recently chosen to exit the market. Recent challenges aside, Vietnam has a well-developed telecommunications infrastructure and an internet savvy populace - all schools have internet access, broadband penetration has increased rapidly, and the country has 3 submarine communications cable connections to the world (including the Asia America Gateway) with the Asia Pacific Gateway scheduled for completion next year. The country has also launched two satellites (VINASAT-1 and 2), with a third, the VNREDSat-1A set to be launched in Q2 2013.
IT Services is a growth area in Vietnam – a number of ―IT Parks‖ exist with incentives for companies to locate here. FPT Software is the largest player in IT Services and has operations in other ASEAN countries as well. The second largest, TMA Solutions, has international customers and offices, including one in Ottawa, Canada. TMA‘s Chairman, Dr. Nguyen Huu Le, is Vietnamese Canadian. Hardware and electronics is also important. Vietnam offers low-cost labour and has benefitted in recent years from the desire of many MNCs to diversify their manufacturing out of China (known as the China + 1 strategy). Intel built its largest plant to date in an industrial park outside Ho Chi Minh City (Saigon Hi-Tech Park or SHTP) in 2010 and other international companies such as Samsung, Foxconn and NEC have chosen to establish or expand operations in Vietnam. Government Policy and Market Access Issues
The Ministry of Information and Communications (MIC) has a new ICT plan for Vietnam. The ambitious 10-year ICT Master Plan calls for 20-30% of the country‘s GDP to be derived from ICT industries, and for the country to be among the world‘s top ten destinations for software development. There is a distinct focus on Cloud computing, wireless broadband, software outsourcing and digital content development. The IT industry in Vietnam has access to favourable investment incentives including lower corporate income tax and no export tax in many cases. Vietnam has a complex business environment that lacks transparency. Challenges to doing business in this sector include the dominance of State Owned Enterprises (SOEs), the absence of a truly independent telecoms regulator, weak IP protection and a limited pool of skilled IT workers struggling to keep up with demand. Opportunities by sub-sector Wireless Build: Wireless broadband is a sector that‘s experiencing rapid growth. Generally Vietnam has good network coverage and opportunities exist in network upgrades. It may also be worth exploring opportunities with Viettel regarding its properties in Cambodia, Laos and Burma. Next Generation Networking: Solutions for the IT Services sector are in demand. These include both the hardware equipment and the software required – i.e. CRM systems. Note that the opportunity here is not the size of the opportunity in this sector in the Philippines. Mobile Media: The Vietnamese are avid users of the internet and the country ranks 22nd globally for the number of Facebook users (Canada is 14th). Demand for mobile content is growing and forecast to continue to do so. While the content itself will likely be generated locally (or need to be localized) solutions for content management and its distribution represent an area of opportunity for Canadian companies. Mobile ad network InMobi estimates that it generated 6.2bn mobile ad impressions here in the first quarter of 2012 alone.
Case Study: BTI Systems
Founded in Ottawa in 2000, BTI Systems is the leading provider of intelligent networking software and systems that empower content and service providers to capitalize on the demand for bandwidth driven by long-term trends in cloud services, mobility and Internet video. Export oriented BTI Systems has looked beyond the Canadian market since its inception. After winning its first customer – Ontario‘s Hydro One – the company added both Canadian and US customers over the next few years as it developed its business from component manufacturer, to producer of the first managed optical amplifier system in the market, to the advanced solution provider it is today. Competing against the likes of Alcatel, Cisco, and (more recently) Huawei and ZTE, over the past 13 years the company has grown to 300+ employees, with over 350 customers in 30 countries around the world. BTI has grown its business in a few different ways:
• Working with its OEM partner, Fujitsu, BTI was able to expand its presence in the North American market and grow its customer base to include tier one service providers, as well as leading content providers through its direct sales efforts. BTI‘s open, standards-based system, together with its growing client list put it in a strong position to look to new markets for continued growth.
• Building on its success in North America, BTI has enjoyed success in Europe and although an initial foray into China was not successful on the sales front, it has, after a few growing pains, resulted in a strong manufacturing relationship with Flextronics in their Shanghai facility.
Next stop, ASEAN… Fahim Sheikh, BTI‘s VP of Sales, Asia Pacific, explains that the company first started exploring the region in 2008 with the assistance of an in-market agent with good connections in their industry. The ASEAN region was selected based on the opportunities identified and the perception that it offered a more straightforward entry point than some of the other alternatives considered in Asia. Sheikh himself travelled regularly (every 6 weeks) from Ottawa to the region to attend customer meetings coordinated by the agent. Within a year BTI had its first customer win (in Malaysia), a local Sales Engineer and a Malaysian partner. As is often the case, the partner was identified by the customer. Regional Expansion from a Singapore Base Having established a beachhead account, Sheikh moved to Singapore in 2009 and has worked with the team locally to build on BTI‘s success in Malaysia. Subsequent customer wins followed in Malaysia and Singapore over the next couple of years, and the BTI team in the region has grown to include support for local customers as well as a regional sales team. In addition to Singapore, BTI‘s regional footprint now includes Malaysia, Indonesia and Thailand.
Partners initially developed in Singapore have brought BTI in on some of the other regional deals as the partnership develops and their solution gains greater recognition within the ASEAN ICT community. Sheikh also mentions the support of Canada‘s Trade Commissioner Service in BTI‘s regional business development. Today, four years later, BTI counts over 20 ASEAN customers; including wins in Cambodia and Burma. BTI Systems‘ experience highlights the value of committing to the market and spending the time required to develop strong relationships with partners and customers across the region.
C. Key Sector Events in the region (Note: these are annual events; some dates for 2013 may occur in the past) CommunicAsia 2013 June 18 - 21, 2013 Singapore www.communicasia.com Management World Asia March 12 - 13, 2013 Singapore www.tmforum.org/ManagementWorldAsia Carriers World Asia March 27 - 28, 2013 Bangkok, Thailand www.terrapinn.com/conference/carriers-world-asia 7th Annual OSS BSS Asia Pacific Summit 2013 April 03 - 04, 2013 Singapore www.frost-apac.com/oss/asiapacific Mobile Backhaul Asia April 23 - 26, 2013 Bangkok, Thailand www.beaconevents.com/2013/MobileBackhaulAsia2013 TD-LTE Summit April 23 - 24, 2013 Singapore http://td-lte.lteconference.com/ GoMobile (Malaysia) www.gomobile.my Mobile Money Asia January 28-31, 2013 KL, Malaysia www.mobile-money-gateway.com/event/mobile-money-asia-2013
D. Key Contacts
Canadian Government Missions in ASEAN High Commission of Canada to Singapore Email: [email protected] www.singapore.gc.ca High Commission of Canada to Brunei Darussalam Email: [email protected] www.brunei.gc.ca Embassy of Canada in Indonesia E-mail: [email protected] www.indonesia.gc.ca High Commission of Canada to Malaysia Email: [email protected] www.malaysia.gc.ca Embassy of Canada in the Philippines Email: [email protected] www.philippines.gc.ca Embassy of Canada in Thailand Email: [email protected] www.thailand.gc.ca * The Embassy of Canada in Bangkok is accredited to the Kingdom of Thailand, the Kingdom of Cambodia, the Lao People's Democratic Republic and the Union of Myanmar (Burma). Embassy of Canada in Vietnam (Hanoi)/ Consulate General of Canada in Vietnam (Ho Chi Minh City) Email: [email protected] Export Development Canada (EDC) Regional Office in Singapore co-located with the Canadian High Commission www.edc.ca Regional Business Councils and Chambers Canada ASEAN Business Council (CABC) www.canasean.com Email: [email protected]
Canadian Chamber of Commerce in Singapore: http://www.cancham.org.sg/ Indonesia Canada Chamber of Commerce http://www.iccc.or.id/
Malaysia Canada Business Council http://www.malaysia-canada.com/ Canadian Chamber of Commerce of the Philippines http://cancham.com.ph/ Thai-Canada Chamber of Commerce http://www.tccc.or.th/ Canadian Chamber of Commerce in Vietnam http://www.canchamvietnam.org/ Regional Government & ICT Sector Sites Indonesia: www.kominfo.go.id – Ministry of Communications and Information Technology (MoCI) www.brti.or.id – Indonesian Telecommunication Regulatory Authority – most of site in Bahasa Malaysia: www.skmm.gov.my – Malaysian Communications & Multimedia Commission www.pikom.org.my – PIKOM – The National ICT Association of Malaysia Philippines www.ntc.gov.ph – National Telecommunications Commission www.bpap.org – Business Processing Association of the Philippines (BPAP) Singapore: www.ida.gov.sg - Infocomm Development Authority of Singapore) www.mci.gov.sg - Ministry of Communications and Information) www.edb.gov.sg - Economic Development Board) www.gebiz.gov.sg - Singapore government’s e-procurement portal) www.sitf.org.sg - Singapore Infocomm Technology Federation – SiTF) Thailand: www.eng.mict.go.th - Ministry of Information and Communications Technology) www.tct.or.th - Telecommunication Association of Thailand) – most of site in Thai
Vietnam: www.english.mic.gov.vn - Ministry of Information and Communications fia.mpi.gov.vn/ - Ministry of Planning and Investment of Vietnam www.hca.org.vn/?set_language=en&cl=en (Ho Chi Minh City Computer Association)
Investment Incentives Locator
Indonesia www2.bkpm.go.id Indonesia Investment Coordinating Board (BKPM)
Malaysia www.mida.gov.my www.mida.gov.my/env3/index.php?page=incentives-for-investment
Philippines www.boi.gov.ph www.investphilippines.gov.ph/boi.html www.bpap.org/investor/peza
Singapore
www.edb.gov.sg www.edb.gov.sg/content/edb/en/why-singapore/ready-to-invest/incentives-for-businesses.html www.enterpriseone.gov.sg/Government%20Assistance.aspx
Thailand www.thinkasiainvestthailand.com/about_boi_services_investment.htm - this site is specific to investors from North America
Vietnam
www.dpi.hochiminhcity.gov.vn/invest/html/law1.html - Department of Planning & Investment www.dpi.hochiminhcity.gov.vn/invest/html/law1-1.html#whatincentives – Specific Incentives fia.mpi.gov.vn/ - Ministry of Planning and Investment of Vietnam
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