The Telegraph
Since 1st March, 1999
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Jaitley blasts US views on outsourcing

New Delhi, May 26: Commerce minister Arun Jaitley today came down heavily on the move by four American states to ban outsourcing of data processing contracts to developing countries such as India.

The minister said, “The buzzword in trade negotiations is market access, but in reality it is market denial that developing countries have to face.”

He said that it was really strange to imagine “how back-offices in Gurgaon could pose a threat to the US”.

Jaitley was reacting to newspaper reports on the US states of New Jersey, Connecticut, Maryland and Washington planning to adopt legislation to ban the outsourcing of data processing contracts floated by the state governments.

He said that although the move was limited to government contracts, it would be a wrong signal in the context of multilateral trade negotiations aimed primarily at improving market access.

He said that the step was being taken at a time when dozens of household names spanning insurance, banking, technology and telecom were transferring their white-collar administrative and customer services work to Asia, particularly India, to cut costs.

The shifting of call centre business to India began a decade ago when General Electric, the giant US conglomerate, took a bold decision to shift thousands of back-office jobs to India.

What started as a risky innovation by an imaginative company has now become de rigueur for multinationals, especially in the financial sector.

Dozens of household names like British Airways, BT, HSBC and Standard Chartered Bank have shifted their white-collar administrative and customer-service work to Asia. GE is still in the forefront with 11,000 processing staff in India.

The latest planning to enter India are insurance giants like Prudential and Aviva, which are shifting their call centres here. Last October, Prudential said it would create 850 jobs in India by 2004, while Aviva is creating 1,000 jobs at a new call centre.

Like in the US, the shift of jobs to India has sent anger and a frisson of fear through the UK and the rest of Europe. BT faced a storm of protest in March over its plans to create 2,200 jobs at two new call centres in India.

The retaliation has already been swift. It manifested itself in the arrest and harassment of Indian software professionals in the US, the UK, Malaysia and the Netherlands. Some time ago, the German government decided to stop issuing green cards to Indian software professionals.

Professional bodies like Nasscom have been disconcerted by the attacks against Indian IT professionals and lobbied the government to intercede to resolve the cases of Polaris and i-flex Solutions in Indonesia and London respectively. Professionals from several software companies were rounded up and harassed in Malaysia some months ago sparking a diplomatic spat with that country.

However, Nasscom isn’t too worried by the legislation that the four US states are planning to adopt. “The four states in the US account for only 1 per cent of the BPO business in India. The law seeks to bar farming out of government contracts — which constitutes only 0.5 per cent of the overall BPO business,” says president Kiran Karnik.

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