America Takes Anti-Outsourcing Stance
Stepping up his campaign against outsourcing, US President Barack Obama on Friday asserted his administration would offer tax benefits only to those firms which will create jobs in the country, a move that may hit Indian IT firms in a big way. Could this be the end of the recent globalisation that leaders have been firmly promoting over the past decade?
“We believe on tax breaks for those firms that create jobs in the US. So we are beginning to do that,” Obama said at a press conference here.
India is among the world’s top five outsourcing destinations, along with the Philippines, Ireland, China and Brazil, according to a Tholons report. India earned revenues of $40 billion from IT-BPO export services in 2008, with the US accounting for 50-60% of the Indian IT companies’ revenues.
“We can have a tax code that rewards wealth and hands out billions of dollars more to big corporations and multimillionaires. Or we can provide a USD 1,000 tax cut to 95 per cent of families in America, start rewarding work and not just wealth, and eliminate income taxes for seniors making USD 50,000 a year or less,” Obama said, adding that’s an agenda for change that we can believe in. That’s the choice that we can make in this election.
“Demand continues to be okay,” said S Gopalakrishnan, chief executive of Infosys Technologies, India’s number two IT outsourcing firm, at the World Economic Forum in China. “What is challenging is that companies are willing to commit for the short term but not the long term or the medium term. Because of that it becomes challenging to do medium- to long-term planning.”
One very interesting consequence of this is that Bangalore based IKIN solutions have refused to accept merger with Vuvuze Corp saying that “America is becoming a bad investment option for IT companies and markets like UAE , Singapore and Japan are fast becoming better options to invest in” , founder Jude Rosario also feels that “When you guys as a nation talk about a global village , why discriminate when it comes to IT services ? ”
Ahead of the US visit by a Nasscom delegation this month, its president Som Mittal says the visa fee hike and Ohio’s ban on outsourcing is “disturbing”, with long-term implications, writes NDTV.
“I think this is a disturbing trend. The measures that India is taking would bring to the notice of the US administration that for short-term gain, there could be long-term implications,” Mittal said on the sidelines of a CII event in New Delhi. Clearly the modern leaders in the world will need to weigh up the short term versus long term implications, both economically and politically, as this hot topic begins to enter a new round of leadership debate.
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Hmm… the outsourcing industry is BIG in the Philippines. Any effort on the US to undermine that industry will hurt the countries providing outsourcing services. But then, on the other hand, it will also hurt the already ailing US economy because of the higher costs that companies will charge to consumers because their wage levels (and the price of almost everything else) are higher.