The Hindu : Curbs on outsourcing not the only concern: official

Online edition of India's National Newspaper
Tuesday, Feb 17, 2004

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Curbs on outsourcing not the only concern: official

By Our Special Correspondent

NEW DELHI, FEB. 16. India today said that its concerns over non-tariff barriers (NTBs) were not restricted to the proposed American legislation seeking to clamp down on awarding of business process outsourcing (BPO) contracts to other countries. The legislation barring outsourcing of government contracts to other countries is one of the three NTBs that India wants to discuss with the developed world.

The other two are curbs on issuing visas and increasing social taxes being paid by Indian software professionals working temporarily in the developed world, said a senior official in the Department of Information Technology, S. Lakshminarayan.

Speaking at a World Bank seminar on information technology, he said the United States had reduced the annual number of H1-B visas from 1.95 lakhs to 65,000. A legislation to tighten L-1 visa norms has been introduced in the U.S. Congress. It includes provision for cracking down on intra-company transfers, making switching of jobs more difficult. Several European Union countries also create difficulties and delays in getting business visas and work permits.

In the area of taxes, Mr. Lakshminarayan said the software industry was paying $300 million in social taxes. This figure was likely to rise to $1 billion by 2008. In Japan, imposition of 20 per cent withholding tax on onsite and offshore services was creating problems.

Referring to the most well-known of the three NTBs — legislation — he said another more dissuading law, currently stalled, seeks to make call centre identification compulsory. It would force the employee attending the call to reveal his location. Many companies think that American customers would baulk at receiving information about a product from a person sitting thousands of kilometres away

The Government was not in a position to comment on the internal parliamentary processes in a foreign country but it hoped that the U.S. would not take steps that would affect IT trade between the U.S. and other countries. The Government was carefully monitoring the developments and bilateral government-to-government meetings had been intensified to persuade the other side to appreciate India's point of view. Mr. Lakshminarayan said that several Central Government ministries such as Commerce, IT, Finance and External Affairs were coordinating to counter the backlash due to the ban on outsourcing. The inter-ministerial working group formed for the purpose had also taken on board IT industry representatives.

Giving an overview of the BPO scene, he said there were several positive aspects. America had not enacted any law so far. In the U.K., the Tony Blair Government had not supported trade union concerns. Some governments were cooperating with New Delhi in carrying out sensitisation of the media to blunt the edge of anti-outsourcing stories.

BPO operating costs in India are five times less than the U.S. The advantage is not restricted to lower personnel costs. Companies operating in India improve their balance sheets in other ways.

Depreciation norms are more liberal and property rental costs too are much lower. Indian concern over the American backlash takes place in the context of reports predicting that the Americas (Canada, the U.S. and Latin America) would account for 60 per cent of total ITES-BPO spending for the next five years.

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