Financial Daily from THE HINDU group of publications
Tuesday, Apr 13, 2004
Corporate - Outsourcing
`Lack of outsourcing statistics hindering policy making'
Washington , April 12
THE lack of statistics on outsourcing is making it difficult to develop sound government policies and the focus on software and call centres is just "scratching the surface", a senior research fellow, Mr Dieter Ernst of the East-West Centre in Honolulu, Hawaii, has said. The economist has gone on to say that the more controversial the issue becomes the less willing American companies are in providing information.
"We get into a vicious circle of blaming the Chinese and the Indians and (threatening) protectionist measures. We are stumbling from one ad hoc debate and populist message to another. We need reliable, robust evidence as a base for policy formulation," Mr Ernst has said in a paper going on to stress that much of the debate in the media has focussed on software outsourcing and call centres moving to India and that this is just "scratching the surface" of a very complex issue.
According to the economist, what is much more important was the relocation of well-paid jobs in engineering, product and process development, system integration and standard setting. The globalisation of knowledge work is spread over a wide spectrum of industries such as computers, semi-conductors and telecommunications, chemical engineering, textiles and food processing.Mr Ernst has said, for instance, that a substantial amount of chip design has moved overseas primarily to Asia's top electronics-exporting countries such as Taiwan with South Korea following closely and with chip design rapidly growing in countries such as China, India, Singapore and Malaysia. The cost of a chip design engineer in East Asia is about 10 to 12 per cent of the cost in Silicon Valley and, hence, it is hardly surprising that chip design is being relocated says Mr Ernst.
But cost is not the only factor - speed in getting products to markets and time zones also have an impact as also in control of sensitive technology by the US.
"The US is still the dominant technology power, but not the only one. Japan, Europe, Korea, Taiwan and China have seen dramatically increased creative capabilities. They are now entering the global innovation race as serious contenders," Mr Ernst says.
What is also being pointed out is that access to skilled labour is key to competitive success and that while the US benefited from importing knowledge from China and India in the past, the present immigration regulations are making it increasingly difficult.
Further Mr Ernst has pointed out like many others that the American education must focus on more mid-level training of multiple skills at polytechnic institutes. "R&D is about tinkering, it's not just the Harvard and MIT guys," Mr Ernst has said.
The bottomline according to the economist is the need for more precise data to guide policy. With multiple actors and conflicting interests complicating policy formulation, there is the need for policy makers to be flexible, be aware of the trade-offs and in knowing that even the best policy could have "unwelcome" side effects.
"For instance, attempts to discourage overseas investment and to control technology exports may well threaten jobs in the US that depend on rising sales in the increasingly sophisticated growth markets of China," Mr Ernst said.
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