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Bangladesh and business process outsourcing

Bangladesh, like India has great potential in this sector of economic activity. We have several existing disadvantages -- poor infrastructure and an insufficient pool of English educated computer trained software specialists, but this can and should be overcome. We are probably where India was five to six years ago. We can however catch up. We need to systematically, in an organised manner, identify the required steps for resolving the existing problems.

Muhammad Zamir
OUTSOURCING in broad terms is a transfer of some business functions or components of business processes to an outside contractor. This is done to enable companies to remain competitive. Outsourcing helps to reduce costs, increase efficiency and refocus critical resources. It also assists in organisational restructuring.
Outsourcing within the US market (particularly IT outsourcing) has reached the unprecedented figure of nearly US $ 50 billion in 2003. Latest figures have indicated that the Business Process Outsourcing (BPO) segment has led the way with a 29 per cent annual growth rate. It has jumped from US$ 7.4 billion in 1998 to US $ 26.5 billion in 2003. It is now anticipated that the Internet/Intranet management portion of this segment will increase at around 76 per cent annually 2003 onwards mostly due to e-business and e-commerce spending. Recent surveys have also suggested that though banking, manufacturing and insurance have traditionally led US IT outsourcing, the future growth lies in the telecom and utility industries sector.
Many countries in the world -India, China, Thailand, Malaysia and several others from Eastern Europe, are trying to cash in on this economic activity. They are using their technically qualified human resources to gain a foothold in this market. Ban-
gladesh should also try to enter into this arena. It should be part of our non-traditional economic effort. It will not only help us to earn scarce foreign exchange but will also assist in generating thousands of jobs.
India is today a success story in this regard. We can learn a lot from them in this sector. It is one of the major providers in software outsourcing and other backend operations. Abundant skilled manpower has made that country a target destination for multinationals with regard to business process
outsourcing. A recent Newsweek survey has put India ahead of China, Thailand, Ireland, Malaysia, Canada and the Philippines in terms of qualifications, quality of work, linguistic capabilities and work ethics.
This dynamics is assisted by the fact that India not only has lower wages but also that Indian centres are recognised as having achieved higher productivity levels. This package is also being assisted by Indian State governments offering tempting incentives and requisite infrastructure for possible foreign investment and participation. It is this friendly approach that has persuaded companies like General Electric and Microsoft to expand their operations in India of everything from basic customer service to high-end research and development. This in turn has had a major spill-over beneficial effect. Their presence on the outsourcing end in India has led to India receiving free of cost uptodate
theoretical knowledge and improvement in their documentation standards.
As a consequence, India's leading information technology companies have reported increased profits in 2003 -- WIRPO, 19% INFOSYS, 28% and SATYAM, 25%. Indian companies now earn annual revenues of about US $ 3 billion.
Over 70 per cent of India's software export revenue comes from companies based in the US. Thousands of Indians are employed in
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customer call centres in Bangalore in the services sector, in long distance answering of phones for US firms and providing technical support for US firms selling credit cards for global banks. India's leadership feel that their software exports will eventually rise to US $ 30 billion by 2008. Such a figure will outpace China.
The software outsourcing firms in India have been successful because they have developed the capability of providing total solutions and complete application systems. This has helped them to enter the North American market. In addition, they are also meeting the qualifications on management and maintenance capabilities as well as international business and legal practices. This includes a sound grounding in English. This assumes crucial importance because English is recognised today as the most common business language.
Entering this sector will not be
easy for Bangladesh. We have to compete not only with established outsourcing destinations but also with the rising impact of outsourcing within US domestic politics in terms of perceived and anticipated unemployment among the available labour force. This is beginning to be a cause of serious concern within the US political establishment.
This anxiety has already crept into the upcoming US Presidential Elections. US Democratic presidential frontrunner, Senator J.F.Kerry, a traditional supporter of free trade has
now outlined a plan to reduce outsourcing. The Chairman of the US President's Council of Economic Advisers, Mr. Gregory Mankiw has however counteracted this growing concern by pointing out that such offshore outsourcing is 'a new way of doing international trade' and has termed it as a 'good thing'. It is however anticipated that outsourcing will continue as an economic factor within the US whatever be the election result. The powerful private sector and its driven need for profit will ensure that outsourcing business for the sake of competition persists.
This internal dynamics in US politics will probably eventually boil down to the question of how far the US should be liberal with regard to visas for foreign workers and whether there should be a capping mechanism as to the number of visas for them (H-1B and L-1). This reactive process might lead to drastic legislative curbs. This could seriously affect
outsourcing initiatives to developing and least developed countries. It is this possibility that has to be guarded against by the developing countries, including Bangladesh and India. In this context, we will have to take preemptive measures and lobby to safeguard our inherent right of "movement of natural persons" in their role as service-providers.
I have written on this subject today because I believe that Bangladesh, like India has great potential in this sector of economic activity. We have several existing disadvantages -- poor
infrastructure and an insufficient pool of English educated computer trained software specialists, but this can and should be overcome. We are probably where India was five to six years ago. We can however catch up. We need to systematically, in an organised manner, identify the required steps for resolving the existing problems. There is no reason why we cannot share the outsourcing market.
Our Ministry of Commerce in coordination with our Ministry of Science and Technology should prepare a composite plan in this regard. This might require some deregulation, but that should not bar our greater participation. As in the case of the RMG Sector, the private sector should become the engine for growth and the Government Agencies the facilitators.
Modalities for special treatment for LDCs, with regard to trade in services were identified during the
Special Session of the Council for Trade in Services in September, 2003. We should take advantage of these provisions.
Within this context, we should -(a) aim at increasing the participation of Bangladesh and other LDCs in trade in services; (b) promote the development of our infrastructure and services exports through training technology transfer, enterprise level actions and schemes and intergovernmental cooperation programmes; (c) improve the access of LDC's services and service suppliers to distribution channels and information networks; (d) target and coordinate technical assistance and capacity building programmes to be provided to LDCs in order to strengthen their domestic services capacity and to build their institutional and human capacity; (e) seek temporary entry rules on the basis of skills, education and other factors into the US and (f) identify special service sectors and exploit such opportunities (e.g. nursing) as is being done by the Philippines. This will require improved administrative procedures related to obtaining visas and work permits, together with published criteria and defined need tests. Such support should be sought through technical assistance, and through transparency, nondiscrimination and objectivity.
We should also encourage mutual recognition agreements of qualifications and certificates. Easier verification of professional competence will facilitate access into this sector. Standardisation of qualifications will also help Bangladesh to carefully plan in meeting US obligations pertaining to numerical limitation in the form of the annual quota of visas granted. It will also ensure wage parity and reduce the time required by visa applicants in gaining visa approval.
Muhammad Zamir is a former Secretary and Ambassador.