India Calling

CBC’s Jacques Poitras recently spent a week in India studying the rise of call centres, business process and IT outsourcing in that country.

Most troubling is Peter Mesheau’s comments (Minister of BNB). He spends most of his time lately disclaiming economic development in New Brunswick. If Mesheau was smart, he would study the India example in detail and learn from what they have done. Further, he would get on a plane and fly over there and convince these outsourcers that New Brunswick is the place for their ‘nearshore’ operations. I find it absolutely incredible that these very large Indian IT firms are setting up their Canadian operations in Toronto – the highest cost location in Canada – right under our noses.

This is a sobering wake up call for places like New Brunswick. We need to strip away all the biases about ‘low wages’, ‘mundane work’, etc. This is about India defining a clear, competitive advantage in the world and then going and getting investment. Silicon Valley did the same thing around higher end jobs and other regions such as Ireland have also been very successful at growing clusters of industry just by being deliberate about the ‘product’ development and the sales and marketing of the region.

It’s a bit bizarre that it takes a CBC journalist to get BNB interested in India. Journalists traditionally report news – but in the economic development realm, I guess Jacques figures he has to go find/make the news out there because there’s not much happening here.

Listen to his documentary here.

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0 Responses to India Calling

  1. Anonymous says:

    Forget competing with India, here’s a quote:

    My sister is ten years old. Every morning at seven she goes to the bonded labor man, and every night at nine she comes home. I feel this is very difficult for her. All I want is to bring my sister home from the bonded labor man. For 600 rupees I can bring her home-that is our only chance to get her back. We don’t have 600 rupees . . . we will never have 600 rupees….

    With credible estimates ranging from 60 to 115 million, India has the largest number of working children in the world. Whether they are sweating in the heat of stone quarries, working in the fields sixteen hours a day, picking rags in city streets, or hidden away as domestic servants, these children endure miserable and difficult lives. They earn little and are abused much. They struggle to make enough to eat and perhaps to help feed their families as well. They do not go to school; more than half of them will never learn the barest skills of literacy. Many of them have been working since the age of four or five, and by the time they reach adulthood they may be irrevocably sick or deformed-they will certainly be exhausted, old men and women by the age of forty, likely to be dead by fifty.

    Most or all of these children are working under some form of compulsion, whether from their parents, from the expectations attached to their caste, or from simple economic necessity. At least fifteen million of them, however, are workingas virtual slaves.3 These are the bonded child laborers of India.”

    However, that’s interesting about Toronto, do you know where there is more information on that?

  2. David Campbell says:

    Again, I reiterate that I am not talking about reducing NB wages to very low levels (I think an experienced call centre agent in Bangalore makes around $6,000 US/year). That’s not my point. My point is that India looked at its assets and said we can position this country as an offshore location and they created 1.3 million jobs. Broader social issues like child labour are still a serious problem in Asia and much of the developing world. But billions in investment targeted at growing the middle and educated class is a good economic development strategy. Creating millions of taxpaying middle class workers should over time provide India with the economic base to provide better social programs. These things take decades and in some cases generations but I think things are moving in the right direction in India.

    As for the Toronto thing, here are a few examples:

    Cognizant Opens Canadian Development Center (Dec 2004)
    Cognizant has the majority of its operations in India but set up the Toronto centre to respond to Canadian and US demands to have a presence locally. Note that this is not call centre work – they are competing in Toronto for highly paid IT talent.

    IT companies such as Infosys, TCS and Wipro are taking advantage of Canada’s NAFTA access to the giant U.S. market as well as our competitive business environment. Well-known Indian conglomerates, such as Birla Group, and well-off individual investors have also invested millions in Canada over the last few years. The Canadian government sees India as an increasingly important new source of FDI.

    Now, it seems to me that if New Brunswick had crafted an ‘India strategy’ in 2003-2004, we could have convinced some of those firms to set up in New Brunswick. They chose Toronto because a) it’s the only region they really know in Canada and b)the Canadian consulate in India most likely passed on leads to the economic development folks in Toronto. Sure, these firms need a ‘sales office’ in Toronto but the back office/IT work should be done in a place like New Brunswick. Take Infosys for example. The company has a major outsourcing deal with Royal Bank. Now, as you know, Royal Bank already moved much of their own call centre work into New Brunswick in the 1990s. So to have Infosys IT development work in Toronto makes limited sense. My hunch is that they have a very small effort in Toronto just to show clients but the vast majority of the work is in India – just a hunch. But instead of being out in front of the curve, we wait until CBC’s Poitras comes back from India and asks the right questions. We should have been there in 2003. Opportunity lost.

  3. Anonymous says:

    As for the larger question of whether India is on the ‘right track’, that’s an argument for another day (and I seriously disagree).

    However, one would have expected New Brunswick to have SOME kind of connections in India. Isn’t it an Indian company now buying into Nackawic as well as Campbellton?

    I remember reading that as far as forestry companies go, they were quite a respected family company. So at least the connections do exist, however, once again there is simply no way to compete with Ontario, but no reason not to use the connections any way possible. In fact, some kind of concessions could be made to trade tax credits for leads that lead to deals, sort of the way internet hosting companies pay you a percentage for any leads you send their way.

    But India’s economy is growing, so there’s no reason that these are ‘opportunities lost’. Unfortunately, as usual, we have no idea what goes on inside legislative walls, let alone what mistakes may be being made.

    Too bad that the political system is shut to us outsiders, perhaps if economic development were a democratic issue where the people have a choice in it, like in Maine, we could actually build up New Brunswick. That’s the problem when those working in the forests talk about plans for the mill-the owners have ideas of their own, and they usually aren’t to benefit of the labourers.

  4. David Campbell says:

    I am curious. If India is not on the ‘right track’ – please indicate what the right track would be. There are no perfect or magic solutions to economic development but growing the middle class and becoming a hub for global investment seems to me to be a good strategy. I’d be curious to know why you think this is not such a good idea.

  5. Anonymous says:

    To not go on for hours, I’d summarize it easiest this way:

    is it right to foster an economy where a minority of one group will be taken out of poverty while the majority’s poverty is worsened?

    The idea is that ‘someday there will be enough wealth that it will lift others out of poverty’. However, ‘trickle down economics’ has long been proven to be a mirage. About the most successful (meaning, like ‘us’) asian economy would be Japan. Yet it got to where it is by keeping its borders closed to outside competition. It was built up by the americans when the americans did economic development far differently. Even today Japan’s borders remained closed to most of the largest industries.

    Back to India, the cost of this has been the complete loss of rights for indiginous populations as well as the worsening situation of the ‘untouchable’ caste, which was actually doing better under the british occupation.

    Just type in ‘india’ and ‘coca cola’ for an example of what I mean. Global investment in that case means a few people have jobs, while the environment is polluted which causes massive loss of land, income, employment and rights to the remaining village farmers. So ten people have a job, but at what cost?

    There was always a percentage of indians who did relatively well, even under british rule, all that ‘global investment’ means is that they now also have cell phones and motor scooters. It changes little of the societal problems, and adds the loss of property (forced relocation) and environmental degradation (already terminal) to the mix. Massive investment has not meant lessening societal inequalities, it has actually increased them, and the Ganges is even more polluted than before (one would think that one of the benefits of massive wealth would be at least the ability to clean up the main source of water, but that is yet to even be tackled).

    The mistaken assumption is that India didn’t already HAVE a middle class, which is completely wrong. In fact their middle ‘caste’ has been pretty much enshrined in their religion. All it means is that they are doing different jobs and their power is also guaranteed economically.

    That doesn’t mean that there are no benefits, but in India government controlled ones seem to work best. Forestry for example, in many cases is legislated to be done selectively, which also helps because it is labour intensive which provides work and an existence for elephants which are the only way to selectively cut right now (in other countries elephants are just wiped out). Had ‘global investment’ simply been invited, as it is in Canada, it would simply ravage the countryside.

    Of course in economics it always comes down to ‘yes its bad now, but it will get better’. Well, Canada is over a hundred years old and we’ve seen New Brunswick actually get WORSE. So there is no logical progression in economics. Economics is measured by GNP, which may grow, but as you’ve often pointed out with your stats about Irving, just because economic indicators go up doesn’t mean people are better off, in fact it doesn’t even necessarily mean that the economy is better off.

    So, for a positive example I’d again go to Scandinavia. Smaller countries are most successful the more they close off their borders. You can now invest in Norwegian companies, but its much harder to take a slice of norwegian economies and industries, and even harder to get enough of a foothold to dictate policy. The same is true in Switzerland. The Soviet Union threw its borders open to global investment, which quickly threw it back into being a third world country, erasing almost half a century of gains. Most polls in russia show that the majority now preferred the communist form of government.

    We know this is true even in New Brunswick. There is TONS of wealth in New Brunswick, unfortunately, it’s all sucked out by Irving, McCain, and ‘investors’. Just something as simple as apartments. A good majority of apartments and tenement houses are owned by albertans and british columbians. During the by-election this was a big issue. One house has thirty rooms rented to ‘boarding house tenants’ who have NO rights. They are on welfare, which means OUR tax money goes to pay them. They get $360 a month. Of that, $250-$300 goes to rent. In other words, we subsidize albertan homeowners to the tune of $9000 a month for a single house which they are too cheap to even do maintenance on. That’s all money that is fleeing New Brunswick.

    That could easily be changed with co-op housing. The industry is already there, but government gets its marching orders from investors. The government could quite easily simply guarantee the mortgage on a house (since they pay welfare then its a pretty secure bet), and to make it even better could even legislate that banks invest a certain amount locally. That means the above home is ‘owned’ by the co-op which now suddenly has about $7000 a month in now disposable income. That doesn’t happen simply because the poor don’t matter-the investors do.

    Take another example-insurance and banking. Every insurance policy , every private bank account has money leaving NB for southern ontarion with no guarantee a dime of it will ever be invested in NB. It’s all out west and in southern ontario and quebec. Of course CANADA, knows all this, which is why those two industries were exempt from NAFTA. The ‘big five’ toronto banks and insurance companies have a protected market (not as much as before, but still pretty solid).

    To more closely equate the example, I’d look at Bhutan, which is VERY slowly opening its borders to only specific industries. By protecting 60% of its timber in parks, and regulating the structure of its economy, it benefits from the limited tourism it allows. This makes the country even more desirable and increases its intake. The country could literally offer a ‘brand name’ to products and they would sell, because it has such a desirable identity.

    That doesn’t mean everything is wonderful, people are ‘poor’ but they are not ‘starving’. Moreover, in a temperate climate they do not have our housing and possession needs. In other words-they are happy. In fact, in polls done around the world it is often those in developed economies who are unhappiest. Face it, a lot that our economy provides us is pure crap: entertainment we’d be better off without, ‘stuff’ we don’t really need, while the most important things have the most precarious existence-namely water, now in bad shape, and food, now heavily toxic, genetically modified, and heavily pesticided, and air, also polluted.

    If somebody were to ask me what I’d give up to have wholesome food, clean air, clean water the answer would be ‘just about everything’. Of course we don’t NEED to give up anything, it all depends on the industries you foster and how much you are willing to capitulate to investors. In Bhutan they carefully screen all applicants, and let only a select few actually conduct business. Granted, you can say ‘yeah but they are small’. That is irrelevant. A large country has physical borders just like a small one, macroeconomic and monetary policy and trade negotiations work the same on small or large economies.