Financial Daily from THE HINDU group of publications
Thursday, Jun 17, 2004
Industry & Economy
Shifting of service operations abroad India, favourite spot for European cos
Brussels , June 16
ACCORDING to the latest survey published by the Geneva-based United Nations Conference on Trade and Development (UNCAD), more European companies are following their US counterparts in shifting service operations abroad.
The survey has been prepared after intervening half of the first 500 largest companies in Europe and it is revealed that more European companies are planning to move their services abroad. India is a favourite destination because of widespread use of English among the middle-level skilled workers.
The European companies like their US counterparts are using their services, mainly for communication, accounting and software assignments and above all for their general expertise in `western ways' of doing things.
With the current European and American skilled workers' hourly earnings ranging from a sum of $30 to $50 and in Europe the record high cost of social security payments and contributions both by workers and employees assigning jobs in India and Asia is considered both worthwhile and profitable for major European and American companies, which range from banks, insurance companies to airlines and manufacturers of consumer goods promoting their wares.
This is also fast becoming a divisive, emotive and above all political controversial issue, with centre right parties and xenophobic nationalist parties making wild claims of `saving domestic jobs' in the European Union countries.
What is not often realised is that European workers are becoming increasingly dependent on high salaries and social security payouts when either unemployed or under-employed. As some analysts put it they are "living beyond their means'' with simultaneous gains sorely lacking in their productivity skill levels.
According to UNCTAD report, nearly half of the companies questioned planned to move more services offshore in the next few years, essentially to cut costs to maintain competitiveness. Currently British companies account for 61 per cent of the service jobs moved abroad followed by Germany, Holland, Belgium and Luxembourg, accounting for 14 per cent each. India is rated among the top destination with Asia taking 37 per cent of the jobs moved abroad.
In India, Bangalore, Mumbai and New Delhi are favourite destinations with more sophisticated workforce and work base, although Hyderabad and Chennai are coming up fast, according to a European observer who specialises in `jobs abroad' trend.
The prime attraction in India is fluency in English language and sophisticated background of basic accounting, electronic and technical skills of Indian workers in "western ways and models''.
China for example is at a disadvantage in this sector, but the Chinese make up for their low cost and reliable manufacturing skills. Hence, top destinations are in Asia, mostly India with 37 per cent of the projects. This is followed by destinations in other parts of Europe Western Europe 29 per cent and former communist ruled Eastern Europe, which is now becoming part of the European Union 22 per cent.
In Western Europe, the favourite destinations are under developed parts of Britain, Spain and Portugal. In Eastern Europe, the common destinations are Poland, Hungary and Romania, where communication in English language is possible and the workers are fast graduating to ways of "western standards'' and skills.
UNCTAD report states that about 80 per cent of companies with their offshore projects have been successful and only three per cent dissatisfied. The Indian observers both in Europe and India have often pointed out that the Indian companies engaged in offshore job assignments must project their profile at more intimate level in the European and American market place. The potentials are "huge'' and like India's breakthrough in electronic software skills; the Indian companies providing "back room'' office services could also earn substantial revenue figures. All this has obviously become highly divisive and a controversial matter on domestic political fronts both in the US and the European Union, as every aspiring politician makes solemn commitments to "protect'' domestic jobs in the background of high unemployment in the European Union countries (average nine per cent) and "less secured'' employment atmosphere in the US.
Currently, in the European Union nearly nine per cent of the workforce remains unemployed and living off social security handouts. What is not often realised is that European skilled and manual workers are fast losing their competitive edge and tight labour laws do not allow companies to adjust their personnel levels to remain in profit and more competitive. Half of the European companies surveyed stated they have no plans to move jobs overseas.
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