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India is lauded for its call centres

Published by The Straits Times, Singapore on 2004-04-23

NEW DELHI--Whenever Thomas J. Donohue travels overseas, he's invariably perceived as an emissary of the powerful American business community. He's also seen, albeit implicitly, as an interlocutor for Washington's policies concerning trade and commerce. That's because Mr Donohue is president of the prestigious United States Chamber of Commerce, a role in which he typically acts as a cheerleader for the American economy.

But increasingly, Mr Donohue is being called on to act as an emollient because of concerns in emerging countries such as India that domestic political sentiments in the U.S. are becoming hostile to the idea of outsourcing computer-related jobs such as call-center manning.

"There's just a whole lot of uninformed political chatter in the U.S.," Mr. Donohue said yesterday during an interview here with The Straits Times. "There's a backlash against business process outsourcing (BPO) based not on facts but on emotions. This is an election year in the U.S., and so some people get carried away by their own rhetoric. The reality is that BPO is good for the American economy."

The outsourcing--and the high-technology exports invariably accompanying it--generates US$65 billion in annual revenues for American businesses, according to Mr. Donohue, some US$10 billion more than the traditional export leader, agriculture. American consumers benefit, too, because the outsourcing of computer hardware to countries where production costs are cheaper has resulted in lower prices in the U.S. The convergence of information technology and the computer industry has also meant that "millions of new jobs are being created" in the U.S., Mr Donohue said. The ratio of outsourcing jobs to "insourcing" jobs is 6 to 1, he said--for every job "exported" to countries such as India, six jobs are created in the U.S. itself. To put it another way, insourcing generates US$128 billion, or some US$60 billion more in revenues than outsourcing.

The impressive revenue figures notwithstanding, the actual numbers of jobs involved in BPO are still relatively modest. For example, U.S. companies accounted for the creation of 177,000 technology-related jobs in India in 2002, accounting for US2.4 billion in revenues for this country of 1.1 billion people whose gross national product is about US$550 billion. In 2004, according to, a Pennsylvania-based research organization, about 400,000 IT-related jobs are expected to be created in India as a result of outsourcing from the U.S., with revenues projected at US$6.1 billion. By 2008, however, the number of jobs created annually if the outsourcing trend continues will rise to 1.2 million, with projected revenues of US$23 billion each year.

And it isn't only the U.S. that's outsourcing jobs to India because of the ready availability of educated middle-class workers fluent in English. European countries are signing outsourcing deals, too. In the outsourcing field, India is considered to enjoy an advantage over neighboring giant China--its economic and political rival--because of the large cohort of English-speaking workers, estimated at more than 300 million people between the ages of 20 and 40.

"The U.S. politicians who play and loose with facts concerning outsourcing don't seem to understand that outsourcing is protected under the World Trade Organization's rules," Mr Donohue said. "Outsourcing creates jobs at both ends of the equation, it stimulates global trade, and it generates fresh revenues. It would be absolutely foolish to try and stop the phenomenon."

Nevertheless, legislation has been introduced 30 states in the U.S. to curb outsourcing. Mr Donohue contends that such efforts cater to domestic concerns about unemployment, even though the jobless rate among college graduates--the cohort most likely to enter the IT industry--is barely 2.9 percent, almost half of the national rate. The various anti-outsourcing bills would punish American companies that outsource jobs by imposing fines. It has been supported by leading Democrats in the U.S., who claim, among other things, that the export of jobs adds to the annual U.S. budget deficit, which this year is projected to be US$521 billion.

But such legislation is mostly doomed, Mr Donohue said, because the public sees the corollary benefits of outsourcing such as the creation of more jobs domestically. Too, the US Chamber of Commerce is leading the campaign against such legislation. Moreover, President George W. Bush has said that he favors outsourcing because it helps expand American trade.

During his time in this capital city, Mr. Donohue was feted by numerous business groups, including the Confederation of Indian Industries. At these events, he repeatedly heard concerns that, faced with political pressure, U.S. companies would start cutting back on outsourcing jobs.

"That's not going to happen," Mr Donohue said in response to such concerns. "The criticism about outsourcing is simply political posturing. We are very confident that outsourcing is here to stay. And why not? It benefits everybody."

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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