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Asia-Oceania Vision 2020:Enabling IT leadership through collaboration
An ASOCIO Report prepared with KPMG in India
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President's Message
Ashank Desai
President
ASOCIO
thOn the occasion of the 25 Anniversary of ASOCIO, I am proud to present the report “Asia-
Oceania Vision 2020 - Enabling IT leadership through collaboration”. KPMG has prepared this
report working closely with IT Associations of the 20 ASOCIO member economies.
Since its humble beginning in 1982, ASOCIO has grown to become an important regional IT
Association. Over 25 years, ASOCIO has brought IT Associations of 20 economies together to
discuss and act upon issues of importance. These, among many others, include creating
opportunities to increase the IT trade across the region through bilateral and multilateral
collaborations, working with regional governments, helping the IT associations of countries
with nascent or developing industries, and preparing position papers on important regional
issues.
stThe 21 Century is slated to be ‘Asia’s Century‘. The region is expected to become one of the
single largest economic regions of the world, with a growing population as well as progressive
economies.
In spite of the tremendous economic transformation, the region is likely to continue to be
diverse. In addition to economic diversity, social, political, religious and linguistic diversities
form the foundation of Asia. This diversity, manifested through deferring prosperity levels and
strengths and challenges facing the individual countries, is also reflected in the structure of IT
Industry around the region.
The march of technological advancements in ICT is expected to continue unabated in the
foreseeable future of the region. We are sure to see a showcase of ICT applications in the
Private, Government and NGO sectors impacting the socio-economic fibre of individual
economies. We also foresee an emergence of a diverse set of globally competitive IT
organizations in the region, who are likely to be key enablers of this IT-enabled transformation,
not only in the region but also globally .
This report looks at this IT Transformation over the next decade to chart out the vision for year
2020. It outlines the challenges faced by the region which present IT opportunities in the
region as well as globally. Above all, it outlines the urgent necessity of collaboration across the
region in all the areas of eco-system of IT, including industry, academia and governments.
Most importantly, it outlines an action agenda for ASOCIO to realize this vision. Moving
forward, this is indeed an exciting opprtunity for ASOCIO to make a difference to the IT
environment in the region. In short, it opens up new avenues for ASOCIO in its journey for the
next 25 years.
I take this opportunity to thank KPMG for preparing this report. My gratitude also goes out to
all ASOCIO member associations and others who provided their invaluable inputs to the report.
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Foreword
The world today is more focused on Asia-Oceania than never before, as it is capable of
sustaining high economic growth rates. The region is built on strong fundamentals, and has the
potential to hold a global leadership position in the coming years. Growth rates in the Asia-
Oceania region as a whole are expected to be higher than in any other region in the next
decade. This 'foresight' is attracting a lot of interest in the region.
Leaders of economies in Asia-Oceania are trying their best to make the most of the current
overdrive. Unfazed by the global financial crisis, Asian economies are making aggressive
economic as well as social development plans. Even developed economies in the region, such
as Australia, have demonstrated resilience and have marched through the recession with
strong performing financial markets. The big four Australian banks are now in the list of top
twenty banks globally despite the financial crisis.
The multiplier effect of a developed information, communications and technology (ICT) industry
is not unknown. History has shown that technology has the potential to change society.
Therefore leaders of Asian economies accord particular attention to this industry and have
added ICT development as a priority area in their agenda.
Our report looks at the current growth and future prospects for the IT industry in this region
over the years. The current trends influencing the industry have been examined and the growth
potential of the Asia-Oceania economies, up to the year 2020 has been estimated. Asia-
Oceania’s dominance seems evitable and the year 2020 is expected to be a turning point for
the region. Asia-Oceania is also expected to become the largest supplier of Information
Technology (IT) and Business Process Outsourcing (BPO) services to the world, with about 274.5 percent of global demand expected to be sourced from here by 2020 .
The focus of this publication is also on Collaboration through Diversity. The Asia-Oceania
canvas is painted with different strokes of development. The region witnesses remarkable
diversity ranging from cultural and linguistic dissimilarities to varying levels of economic growth
and development. Economies, such as Australia, Japan and Singapore are building an
ecosystem that is conducive for innovation, while others such as Laos, Nepal and Myanmar are
still trying to develop their economies for globalization. This diversity results in distinct
capabilities and challenges for each country, and therefore presents a unique opportunity for
mutual collaboration and co-operation.
Collaboration, especially within the ICT industry, can create opportunities for all economies in
the region. Collectively, the region can achieve growth rates that could transcend what
countries can hope to reach growing in isolation.
stAs Asia-Oceania moves into the second decade of the 21 century, the next 10 years would be
extremely important for the region to establish its leading position in the world economy. The
catch phrase 'For the first time, we have a nation for a continent, and a continent for a nation ' thby the first Prime Minister of Australia Sir Edmund Barton in the 19 century, is likely to hold
true for the entire Asia-Oceania region in this century.
Kumar Parakala
Global Head of Sourcing Advisory
COO, Advisory, KPMG in India
Chairman, Australian Computer Society (ACS)
1. Asia-Oceania has been defined as South Asia, Asia Pacific, and the Australian continent
2. KPMG Analysis based on aggregation of projections outlined in individual country profiles
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Setting the Context
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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All eyes on Asia-Oceania3Asia-Oceania is already the emerging regional economy in terms of population, production and trade. By
2020, this region is set to command a leading position in world economics not just due to its share in
world gross domestic product (GDP), but also because of an expected transformation in the social and
economic status of the region.
Asia-Oceania is poised to see a dramatic rise in domestic consumption, as nearly 90 percent of Asia-
Oceania's people are expected to live in countries that have achieved middle-income status by 2020.
The region is already moving towards greater integration. Going forward, it is expected to play a larger
role and participation in the global politico-economic debate, the size of the region, the growth of its
middle income population and a sizeable increase in the region's trade and investment profile being
contributing factors.
Asia Oceania Today Asia Oceania in 2020 (estimates)
Income status:
Share in world GDP: 35.7 percent in 2005
Income status:
Share in world GDP: 43.2 percent in 2020
Average per capita income:
USD 4,775 in 2005 (in PPP terms)
Trade and Investment:World exports share: 27 percent in 2006
Share in FDI stock: 11.4 percent in 2006
Trade and Investment:World exports share: 35 percent
Share in FDI stock: 20 percent
90 percent population expected to live in middle income status countries
Average per capita income:
USD 8,476 by 2020 (in PPP terms)
Moving towards a regional entity by 2020
Sources: KPMG analysis, EIUForesight 2020, Monetary Authority of Singapore
ICT-led growth: Asia-Oceania as a supplier and a consumerThe contribution of the ICT industry to the dynamics of the region in the next decade is expected to be
vital. Many countries are planning to take advantage of the demonstrated benefits of ICT-led growth –
such as low investment requirements, lower gestation, increase in jobs, export opportunities, and stricter
environmental standards, among many other factors. Poorer countries that pursue ICT-led growth may
have the added benefit of getting a much easier entry into mainstream globalization due to its many
benefits.
As the region recognizes the multifold benefits of ICT adoption, not only to the economy but also to
social development, ICT penetration is likely to increase, making the region a significant consumer of ICT.
Therefore the region’s role both as a consumer of ICT as well as a supplier of ICT is expected to grow.
There may be some constraints to this projected growth as the region faces several challenges –climate
change, an ageing population, poverty, political instability and industry-specific challenges such as piracy
and shortage of talent.
3. ADB, http://www.intracen.org/btp/regional_meetings/india/delhi_summary.pdf
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These challenges can hinder the current growth initiatives of countries that are exploring the new
opportunities that ICT-led growth may bring. Global opportunities such as e-governance, mobile
commerce or telecom assume much larger proportions in Asia-Oceania because of the relative under-
penetration and large population of the region.
The trends and prospects for the region today, set the tone for future expectations for ICT industry
growth by 2020. A collective vision for the IT-BPO services industry in the region has been
developed in the report to illustrate the potential for growth in the coming decade. The hardware
and communications segments under 'ICT' have not been included in the projections for 2020 in
this report.
The large diversity in political, social and development conditions in Asia-Oceania, if effectively leveraged
for collaborative growth, is likely to act as a facilitator for nations to address common challenges,
leverage each others’ competitive advantage and thereby aim for a much larger target market in the ICT
industry by 2020. The report examines this collaboration imperative, in light of the aspirations of individual
countries in the IT-BPO services industry by 2020.
Diversity leads to potential for effective collaboration
ASOCIO Member Economies
Emerging Supplier Countries
Sources: KPMG Analysis
Predominantly Demand Markets
Potential Supplier Countries
Bangladesh
India
Indonesia
Malaysia
Pakistan
Philippines
Sri Lanka
Thailand
Vietnam
Australia
Hong Kong
Japan
New Zealand
Singapore
South Korea
Taiwan
Cambodia, Laos, Mongolia, Myanmar, Nepal
Information technology and business process outsourcing (IT-BPO), a major component of the ICT
industry, has a large services element that significantly contributes to growth in the sector. The IT-BPO
vision for the region can be viewed in aggregate for both, the demand and supply, of IT-BPO services of
the constituent countries. While predominantly demand-side countries aim to move higher up in the value
chain in ICT, the supplier nations within Asia-Oceania are aiming to garner larger market share in the
global sourcing industry.
A Collaborative IT-BPO Vision for 2020 in Asia-Oceania
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4. ASOCIO Member economies currently does not include China
5. IT-BPO services demand and export has been estimated by KPMG for 16 ASOCIO member economies for 2008 and 2020. Estimates do not include data for
Cambodia, Lao PDR, Mongolia, Myanmar and Nepal. GDP estimates for 2008 and 2020 at market prices sourced from EIU
The contribution of IT-BPO services demand in GDP to Asia Oceania Computing Industry Association 4(ASOCIO) member economies is slated to go up from an average of 1.6 percent in 2008 to nearly 2
percent by 2020. For supplier countries, the contribution of IT-BPO services export to GDP is likely to be 5even higher, estimated to go up from an average of 2.5 percent in 2008 to 4.7 percent by 2020 .
Collaboration could be along four key elements – Investment, Trade, People Mobility and Knowledge
Sharing and Creation. The most obvious form of collaboration, where benefits are tangible, includes
those opportunities that lie in the trade and investment category. Collaboration for trade is likely to lead to
a larger regional marketplace, while at the highest level collaboration for innovation might have much a
wider effect, impacting individual countries, the region as a whole and perhaps even the world
Role of ICT in the growth of Asia-Oceania
Sources: KPMG Analysis
Role of ICT in regional growth
Very high diversity in the
region can drive bilateral as
well as regional ICT
collaboration
ICT-led growth has several
benefits such as low
investment, low gestation,
high employment potential
ICT growth drivers in the
region are strong, due to
large population and under-
penetrated markets
ICT in 2008 ICT in 2020
?
countries to leverage each
other’s strengths and aim for
higher growth for the region
?Leveraging opportunities
effectively can lead to
inclusive growth, especially
for developing countries
?ICT-led growth can help
alleviat challenges, bringing
large populations into the
consumption bracket
Collaboration can allow ?Each country is seeking to
move towards a knowledge
economy, and wants to
leverage ICT-led growth
?Several global as well as
regional opportunities, both
for demand markets as well
as supplier countries
?However, global, regional and
industry challenges could
constrain ICT-led growth if
not tackled effectively
Collaboration for GrowthCollaboration within the region could result in several wide-ranging benefits such as a larger regional
market, workforce rationalization, and a narrowing digital divide among countries. It can allow developing
countries, and more specifically poorer countries, to gain from the experiences of more developed
countries within the region and tap opportunities for sustainable development. Effective collaboration is
likely to create a win-win situation, with each individual member economy able to gain advantages,
whether by addressing a shortage of human resources, or accessing know-how to tap export markets, or
even through strategies to reduce piracy and Intellectual Property Rights (IPR) infringements.
Under the umbrella of ASOCIO, member economies have the opportunity to collaborate for growth and
may therefore be better equipped to achieve ‘Vision 2020’.
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The Rise of Asia-Oceania by 2020 10
Challenges for the rise of ICT industry in Asia-Oceania 18
Opportunities 36
42
Country Profiles 50
Collaboration Imperative 176
Collaboration Opportunities 182
The Role of ASOCIO 192
Methodology 197
Appendix 198
Rising Role of Asia-Oceania 11
Rise of Asia expected to drive ICT growth 14
Global Challenges 21
Regional Challenges 26
Industry Specific Challenges 33
Global Opportunities 37
Regional Opportunities
Glossary of Terms 220
Abbreviations 221
Contents
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The Rise of Asia-Oceania by 2020
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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11
Asia-Oceania’s ascent in the global economic and political landscape began with the rise of Japan in the
second half of the twentieth century. It continues today, with economies like Taiwan and Korea,
Singapore and Hong Kong, and more recently India and China demonstrating high economic growth
rates.
More importantly, the world at the current juncture relies heavily on the developmental dynamism of
Asia-Oceania given the remarkable growth that the region is witnessing. The consensus of opinion
among the World Economic Forum (WEF), International Monetary Fund (IMF) and United Nations
Conference on Trade and Development (UNCTAD) also indicates that Asia is better positioned to recover
more rapidly from the economic downturn. China and India are expected to lead the growth trajectory 1with growth rates in the range of 4.5-6.5 percent.
Large domestic consumption and a rising role in international trade and finance have led to a faster
recovery. The other key driver of Asia-Oceania’s quick rebound has been its rapid and comprehensive
policy response to the economic crisis.
Over the years, Asia-Oceania has grown in population, production and trade to become the world’s
biggest regional economy.
2?Dominance in world GDP: Asia has become a key part of the global economy, consisting of three of
the ten largest economies (China, Japan, and India) and accounting for more than 35.7 percent of the 3world’s GDP (in purchasing power parity (PPP) terms) in 2005 compared to 19 percent in 1980 . Major
economies in the region, especially India and China, are expected to continue their economic
advancement, helping Asia increase its contribution to the world economy to an estimated 43.2 4percent in 2020 .
?The region has led world economic growth in the last 10 years: Post the 1997-98 Asian financial
crisis, the region has contributed about 50 percent of global growth5. Even during the current
economic slowdown, the region is expected to post faster recovery than that of Europe and the
United States. Mature economies such as Australia too have remained relatively resilient to the crisis 6worldwide
Rising Role of Asia-Oceania
Asia’s Share in World GDP
1. Business Council of British Columbia Outlook 2020 project
2. The term Asia here includes some countries in addition to Asia-Oceania
countries, but excludes Middle-East and Central Asian countries
3. http://www.imf.org/external/pubs/ft/fandd/2006/06/picture.htm,
http://www.koreatimes.co.kr/www/news/opinon/2009/10/198_9874.html
4. EIU Foresight 2020 Report
5. Asia-Oceania has been defined as South Asia, Asia Pacific, and the
Australian continent
6. http://www.nytimes.com/2009/12/02/business/global/02iht-ozecon.html
13.9 10.1
8.68.6
19.1
39.5
19
2005 2010 2020
Latin America & Others
Middle East, Africa & Russia
EU
Asia
US
13.9 11 10.1
8.6 8.9 8.6
19.1
19
39.5 43.2
20.2
20.3
21
35.7
20.8
Units in percent (%)
Sources: EIU Foresight 2020 Report, KPMG Analysis
The ‘Asian Century’ is a term used stto describe the belief that the 21
century will be dominated by Asian
economies, culture, and politics. thThis is similar to how the 20
century is sometimes referred to as
the ‘American Century’.
Source:
http://www.cbe.berkeley.edu/research/pdf_fil
es/CBisel2007_AsianCentury.pdf
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12
?Expanding regional income and consumption: Asia is estimated to grow at a rapid pace, with an
annual average real GDP growth of 4.9 percent in 2006-20 compared to 2.9 percent for the US and
2.1 percent for the EU. This can also narrow the gap in wealth between Asia and the West, as the
average per capita income is expected to rise from around USD 4,775 in 2005 to about USD 8,476 (in 7PPP terms) in 2020. Moreover, nearly 90 percent of Asia’s people are expected to live in countries
8that have achieved middle-income status leading to domestic consumption. Asian economies are
expected to witness a high increase in their private domestic consumption, with China and India 9reaching 8.3 percent and 6.3 percent by 2020, respectively
GDP Per Capita Growth GDP Per Capita Growth in Developing Countries in Asia
4.9
2.1
3.5
2.9
Asia
EU25
World
US
6.0
5.9
5.2
5.0
4.9
China
India
Indonesia
Malaysia
Philippines
4.7
5.4
Thailand
Vietnam
Sources: EIU Foresight 2020 Report, KPMG Analysis
?Advancing share in world trade and investment: By 2020, Asia has the potential to account for one
third of world trade. Asia’s share in global exports is projected to rise from 14 percent in 1980 to 35 10percent in 2020. There is a similar outlook for Asia’s share of global outward foreign direct investment
(FDI) stock. From 5.9 percent in 1980 to 11.4 percent in 2006, the share is expected to grow to 20 11percent in 2020, signifying that Asia could become a major source of FDI for the rest of the world.
Asia's Share in World Exports
1980 2006 2020
Sources: Monetary Authority of Singapore, KPMG Analysis
Asia14%
Asia27%
Asia35%
7. EIU Foresight 2020 Report, KPMG Analysis
8. ADB Strategy 2020, April 2008
9. Deutsche Bank Research, http://www.business24-
7.ae/Articles/2009/8/Pages/23082009/08242009_37d9255e96a24cbf96e518
d5acca8932.aspx
10. ADB Strategy 2020 Report
11. Monetary Authority of Singapore
2006-2020 (annual average, %) 2006-2020 (annual average, %)
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13
?Demographic dividend: Asia has more than half the world’s population, of which nearly 59 percent
are between the age group of 15-64 years. Between 2005 and 2020, India and China are expected to
add about 120 million and 65 million respectively to their working age population (15 -64 years). By
comparison, in the same period, the US is expected to add about 20 million while the working age 12population of Europe might decline by 26 million.
Asia's Population Dynamics
Sources: UN, KPMG Analysis
2005
59%
59%
58%
2020
56%
58%
57%
Population aged 15-24
Population aged 15-64
Population
Share in World Population
?Emerging regionalism: The rise of Asia has also resulted in new ways of working together, within the
region. There are renewed efforts to deepen and expand regional and sub-regional economic
integration. This is reflected in the emergence of new regional groups, such as the 10 member
countries of the Association of South East Asian Nations (ASEAN), which has joined hands with five
large Asian nations, namely India, China, Japan, Australia and South Korea, to make a Regional Trade
Agreement (RTA). Apart from these regional economic cooperation initiatives, Asian countries are
actively engaged in making Free Trade Agreements (FTA) amongst themselves such as Japan-China-
Korea FTA; India-China FTA; India-Korea FTA; and India-Japan FTA. There have also been multilateral
arrangements such as ASEAN and South Asian Association for Regional Co-operation (SAARC), and
enhanced efforts to integrate in the direction of the formation of an Asian Economic Community by 132020.
Asia Economic Community in 2020
Thailand
Malaysia
Singapore
Brunei Darussalam
Indonesia
Viet Nam
Philippines ASEAN
Myanmar
Lao PDR
CambodiaASEAN+3
Japan
Republic of Korea
People’s Republic of China
ASEM
European Union
(27 member
countries)
Kyrgyz Republic
Tajikistan
CAREC
Kazakhstan
Uzbekistan
Azerbaijan
Mongolia India
Pakistan
Nepal
Bhutan
SAARC
Maldives
Sri Lanka
Bangladesh
Afghanistan
EAS
Australia
New Zealand
Russian Federation
Canada
United Sates
Mexico
Peru
Chile
Taipei,China
Hong Kong, China
APEC
Papua New Guinea
Nauru
Tuvalu
Niue
Tonga
Samoa
Cook Is.
Fiji Is.
Vanuatu
Solomon Is.
Palau
FSM
Marshall Is.
Kiribati
PIF
12. UN Population Statistics 2006, http://www.smadja.ch/PDF/Hongkong_Nov_07.pdf
13. CUTS Briefing Paper 2006
Notes : ASEM includes also the
European Commission as a
member.
For CAREC, the PRC’s
membership is focused on the
Xinjiang Uygur Autonomous
Region.
Source : Asian Development Bank.
APEC = Asia-Pacifc Economic
Cooperation
ASEAN+3 = ASEAN plus three countries, as
shown
ASEAN = Association of Southeast Asian
Nations
ASEM = Asia-Europe Meeting;
EAS = East Asia Summit
CAREC = Central Asia Regional Economic
Cooperation
FSM = Federated States of Micronesia
Lao PDR = Lao People’s Democratic
Republic
PIF = Pacifc Islands Forum; PRC =
People’s Republic of China
SAARC = South Asian Association for
Regional Cooperation.
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?Gaining political significance: In terms of the global policy framework, Asia has gained significant
importance over the years. The role and participation of Asian players is increasingly being discussed
across various major international institutions that are involved in international policy dialogue on 14macroeconomic and financial affairs. An important example is the Group of 8 (G8) summit in
Heiligendamm in 2007, which committed to embarking on a high-level dialogue with emerging 15economies, including China and India. This dialogue focuses on global issues that are likely to be of
prime importance in the future, including cross-border investment, research, innovation and
intellectual property rights, climate change, energy efficiency, and development, particularly of Africa.
Hence, in almost every sense, Asia now plays a more important role in the overall global arena both steconomically and politically and is emerging as the world's center of economic activity in the 21 century.
The cumulative effect of the likely economic and social developments in Asia-Oceania by 2020 is
expected to lead to remarkable growth in ICT–related activities in the region, i.e. manufacturing,
packaging, exports and services related to ICT. There are also high expectations that the region’s
economy may continue to build on the surge in the development and diffusion of various ICT
technologies in Asia.
Rise of Asia expected to drive ICT growth
ICT and Role of Asia – A Conceptual Base
Sources: KPMG Analysis
Expanding
regional use
of ICT
?Low penetration and rapid economic growth to fuel domestic demand for ICT both
from individuals and businesses
?Recognizing the role of ICT in social development and bridging digital divide, many
developed and developing economies are planning to use ICT for poverty and illiteracy reduction
strategies
?ICT is expected to serve as a powerful tool for small or developing countries to successfully face the on
going process of globalization by participating in the global marketplace through e-business, export of
software and IT-BPO
Role as a
Consumer
Expanding
regional use
of ICT
Expanding
regional use
of ICT
Role as a
producer &
supplier
Asia’
emergence
as a major producer
& supplier of ICT
s?ICT-producing sector (Hardware & IT-BPO) itself expected to witness strong growth given Asia’s
capabilities to service both commoditized and high end services
?Asia role in international out sourcing of services to rise and has prompted many
developing countries in Asia to try and develop a competitive advantage in this field.
14. G8 or Group of Eight refers to an international forum for eight industrialized nations, including Canada, France, Germany, Italy, Japan, Russia, UK and USA. In
addition, the European Union is included in the G8, but cannot host or chair the forum.
15. http://www.biac.org/comms/newsletter/BIACNewsJune2007.pdf
Expanding regional use of ICT
ICT use by businesses and individuals:
?Rapid industrialization, low penetration of ICT among both individuals and businesses, and increasing
sophistication of services in Asia are expected to motivate the regional consumption of ICT. The
economic impact of ICT could be important, in terms of externalities and spillovers of its use and
applications in different sectors of the economy
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?Enterprises are likely to be willing to use ICT for business processes in order to increase income
generation and increase labor productivity. ICT can also help to reduce the cost of transaction and
increase market access
?At the same time, the increasing use of technologies such as mobile telephony and internet by
individuals is likely to continue to have an impact, especially in developing countries within Asia. The
creation of many forms of services like e-banking, e-commerce and e-governance, which increasingly
rely on ICT, are anticipated to gain greater traction in Asia.
ICT for social development:
?The increasing diffusion of ICT in Asia-Oceania is also expected to contribute to bridging the large digital
gap that currently exists within the region. ICT penetration is currently low and subsequently
represents the low level of knowledge and use of various ICT tools to eradicate poverty, illiteracy and
inequality. Decision makers in poorer countries are considering the utilization of ICT in their
development agenda, given the potential and the applicability of ICT tools in the development process.
Asia Share in Global IT-BPO Consumption
ICT and Production efficiency
At the business level, the link
between ICT use and labor
productivity is well researched. For
example, in a developed country
like Finland a 10 percent higher
share of employees using
computers was found to generate
between 1.8 and 2.8 percent higher
labor productivity in the
manufacturing and services areas,
respectively. While in a developing
country like Thailand, a 10 percent
increase in the share of employees
using computers was associated
with 3.5 percent higher labor
productivity.
Source:
UN Information Economy Report 2007-08
Source: KPMG Analysis, NASSCOM McKinsey Perspective 2020
Note: Asia share in global IT-BPO demand includes share of China
2008 19.9%
2020 26.3%
Asia Others
ICT for globalization:
?Small or developing economies in Asia-Oceania can take full advantage of the potential of ICT to
advance their economic and social development. ICT can serve as a powerful tool to successfully face
the on-going process of globalization. As an enabler of globalization, ICT is expected to play a critical
role in the fragmentation of the global value-added chain and in shifting parts of production to low-cost
destinations in Asia. ICT provides opportunities that many developing countries can leverage, in order to
participate in the global marketplace through e-business and the export of software and ICT-enabled
services.
?There is increasing recognition that knowledge-based economic activities are likely to be the key for
international competitiveness and productivity growth. Comparatively, as the principal driver of
economic growth industrialization, particularly manufacturing is known to have longer gestation. At the
broader level, there is heightened consensus among policy makers that the ICT industry, and especially
services, can propel more employment and investment-driven gains for knowledge-based economies.
Especially in Asia, small and developing economies are expected to move towards a knowledge-based
economy leading to a rise in ICT trade, consumption and investments. On the other hand, mature
economies such as Australia are expected to play a key role in supporting the growth of the services
sectors in Asia-Oceania region, due to the maturity and cultural alignment.
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Asia’s emergence as a major producer and supplier of ICT
ICT as a production sector:
?Asia-Oceania is already playing a vital and active role in the development of ICT globally. The region is
emerging as the major source of ICT products and services to the world ICT markets
?Asia-Oceania has proven capabilities to produce and supply commoditized ICT products and services.
Increasingly, the region’s ability to innovate and produce high-end ICT products and services is
growing. This is likely to be a key decision driver for corporates worldwide considering shifting their
supply base to the region
?In addition, the increasing use and penetration of ICT within Asia-Oceania is expected to go hand in
hand with the rise of investments in ICT. ICT as a production sector in the region is expected to
benefit from rising ICT investments. Economies in Asia-Oceania are believed to service the majority
of the ICT demand emanating out of Asia, underscoring the region’s dominance as both producers
and suppliers of ICT and related services.
Asia’s role as a supplier of ICT:
?The export of ICT products and services to the West has been rapidly increasing during the last two
decades. The rise of ICT began with Japan, South Korea and Taiwan's significant contribution to the
global supply of ICT products and components. Recently, countries like Hong Kong, China and
Singapore have made significant contribution to ICT trade and manufacturing. Subsequently Malaysia,
the Philippines and Thailand have developed manufacturing and packaging capabilities. While China is
emerging as a production hub for ICT products, countries like India, Philippines, Malaysia are actively
contributing towards exports of IT-BPO services
?Asia is expected to play an important role in the growth of international sourcing given its proven
capabilities. While international sourcing in ICT manufacturing has been a more common feature, the
outsourcing of services experienced rapid growth over the last few years and prompted many
developing countries in Asia-Oceania to try and develop a competitive advantage in this field. This
Knowledge-based Approach for Globalization and Economic Growth
Knowledge-based economies
can propel more employment,
trade and investment driven
gains, thereby facilitating fast
globalization
Sources: KPMG Analysis
Agriculture and
Natural Resources
Manufacturing
Services
Knowledge-based
Att
ract
iven
ess
for
Inve
stm
ents
and
Inte
rnat
iona
l Tra
de
Employment
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trend is likely to continue and even accelerate in the next decade, as there has been a clear tendency to
migrate services from high-cost to low-cost destinations in Asia-Oceania.
Evolution of IT-BPO in Asia
Sources: KPMG Analysis
1980s
2000s
1960
ICT, Software & BPO
ICT Trading, Packaging
Manufacturing &
ICT Manufacturing
Japan, South Korea,Taiwan
Hong Kong, China, Singapore
China, India, Malaysia, Philippines
TRADITIONAL EMERGING LEADING
VALUE ADDITION
The relationship between the ICT industry and economic growth is not likely to be one-sided. Just as
economic growth is expected to contribute to the rise of the ICT industry, in turn higher adoption and use
of ICT is likely to contribute to the economic value added. This will be through an increase in productivity in
industries using ICT, as well as directly through the ICT industry.
Thus, the role of Asia-Oceania both as a producer and consumer of IT is expected to undergo a significant
shift, as the region stands at new frontiers. The region’s industrialized status is rapidly moving toward an
information-based and knowledge-intensive economy status.
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Challenges for the rise of ICT industry in Asia-Oceania
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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The rapid economic growth in Asia-Oceania is expected to fuel the pace of growth in ICT in several
countries. However, there are several global, regional and industry-specific challenges that may inhibit the
growth of the industry in this region.
Global challenges: Climate change and a rapidly ageing population are global challenges which are also
likely to impact the Asia-Oceania region
Regional challenges: Some of the major challenges that have particular significance to the region include
poverty and inequality, political instability and internal insecurity, and infrastructure deficit
Industry challenges: There are also industry-specific challenges in terms of people, process and policies
that impact the Asia-Oceania ICT industry.
The impact of these challenges as well as the strategies to overcome them have historically differed
based on each country’s resource availability, political will and commitment, and maturity of the society in
general. However, these challenges, if not addressed effectively, have the potential to constrain growth.
A case for an integrated approach to address the global and regional challenges
High economic growth in the region and a focus on moving towards the ‘knowledge economy’ is likely to
drive ICT penetration and adoption within Asia-Oceania in the next decade. Issues such as poverty,
instability or lack of infrastructure could constrain ICT growth in the region. The inter-dependencies
reinforce the need for comprehensively addressing macro-economic issues to remove roadblocks to ICT
growth in the next decade.
On the other hand, ICT-led growth has itself been propounded as a powerful tool to combat and alleviate
some of the macro-challenges. Investment in ICT has the potential to create a self-reinforcing spiral
conducive for broad-based growth for the country.
Global and regional challenges and their impact on ICT
ICT Growth in Asia-Oceania
POVERTY & INEQUALITY POLITICAL INSTABILITY & INTERNAL INSECURITY
INFRASTRUCTURE AGEING POPULATIONCLIMATE CHANGE
?Employment creation
?Capacity building
?Innovative
technologies
?Improved access
?Diversion in
investment priorities
?Lack of trained
workforce
?Low ICT penetration
and adoption
?Improved
communication
?Employment creation
?Tracking of anti-social
activities
?Diversion in
investment priorities
?Slower ICT progress
in the affected areas
?Lower attractiveness
as offshore location
?Pressure on reducing
emissions caused by
the ICT industry
?Vulnerabilities among
user-groups
?Greener, efficient
technologies that
lower energy use
?Technologies for
disaster management
?Shortage of trained
manpower
?Lower productivity
?Shrinking market due
to lower consumption
?Outsourcing
?Improving workforce
participation
?Improvements in
healthcare
?Higher automation
?Lower regional and
international
connectivity
?Reduced market
access
?Lower competitiveness
?Opportunities for ICT
trade
?Improved access for
poor and marginalized
sections
Sources: KPMG Analysis
How ICT can help Challenges for ICT
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Studies by global bodies such as the United Nations, World Bank, World Economic Forum as well as
regional entities like the Asian Development Bank have highlighted the correlation between increasing
ICT adoption and sustainable development. Research generally points to a strong case for countries to
invest in expanding ICT adoption, while maximizing on the innovative and creative use of ICT to optimize
the benefits per dollar spent.
The demographic dissimilarities in the region manifest in varying impacts of the challenges on different
countries within the region.
Challenges are set to impact every country within Asia-Oceania differently
Regional ChallengesGlobal Challenges
Climate Change Ageing Population Infrastructure DeficitPoverty and InequalityInstability and InsecurityImpact
High Bangladesh
Cambodia
India
Laos
Myanmar
Nepal
Bangladesh
Cambodia
Myanmar
Nepal
Pakistan
Sri Lanka
Thailand
Bangladesh
Cambodia
India
Laos
Mongolia
Nepal
Pakistan
Philippines
Bangladesh
Laos
Mongolia
Myanmar
Nepal
Philippines
Vietnam
Medium Australia
Hong Kong
Indonesia
Mongolia
Pakistan
Philippines
South Korea
Sri Lanka
Taiwan
Thailand
Vietnam
Sri Lanka
Thailand
Indonesia
Laos
Malaysia
Mongolia
Philippines
Singapore
South Korea
Indonesia
Sri Lanka
Thailand
Vietnam
Cambodia
India
Indonesia
New Zealand
Pakistan
Sri Lanka
Thailand
Low Japan
Malaysia
New Zealand
Singapore
Australia
Hong Kong
Japan
New Zealand
Singapore
SouthKorea
Taiwan
Australia
Hong Kong
India
Japan
New Zealand
Taiwan
Vietnam
Hong Kong
Malaysia
South Korea
Australia
Hong Kong
Japan
Malaysia
Singapore
South Korea
Taiwan
Source: KPMG analysis; Climate change and Ageing Population – ADB; Poverty – UN ($1/day poverty); Political instability – EIU; Infrastructure – World Economic Forum;
Note: All scales depicted are relative within the region
Cambodia
India
Indonesia
Laos
Malaysia
Mongolia
Myanmar
Nepal
Pakistan
Philippines
Vietnam
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1Climate Change
Impact of Climate Change on various parameters across continents
Climate change is expected to spare no geography in the coming years. In fact, Asia-Oceania is likely to be
especially vulnerable as it is expected to account for roughly 60 percent of the global population by 2025 2including the significant poor population . The region’s geographic location makes it especially prone to
natural disasters. Further, a large number of countries within Asia-Oceania are still agrarian economies, and
these are likely to be affected much more than others due to variations in the climate, monsoon and falling
crop yields.
Besides the impact, the Asia-Oceania region is itself expected to become a major source of greenhouse 3gas emissions in the near future as a consequence of rapid and carbon-intensive economic growth .
Over the period until 2020 and beyond, the economic impact of global climate change on Asia-Oceania
may lead to increasing demands for government spending in the areas of:
?Disaster preparedness and management
?Tackling lower agricultural produce, food and drinking water shortages
?Rehabilitating people exposed to weather-related risks and natural calamities including droughts,
floods, forest fires and disease outbreaks
?Increased healthcare costs due to climate-change related illnesses such as heat stress and pollutant
related illnessesEnergy management using alternative fuels and greener technologies
?Spreading greater awareness about climate change in the population.
Global Challenges
Global Challenges
Regional Challenges
Industry Challenges
1. See Appendix for definition
2. http://www.iiasa.ac.at/Research/LUC/Papers/gkh1/tabc1_2.htm
3. http://www.adb.org/documents/events/2009/high-level-dialogue/default.asp
N AmericaL America Aust & NZAsiaAfrica Europe
Water resources
Coastal ecosystems
Commercial Agriculture
Livestock
Urban areas
Heat stress
Vector-borne diseases
Increased energy demand
Transport
Construction industry
Tourism
Source: IPCC 2007
No informationPositiveNegative
Strongly PositiveNeutralStrongly negative
21
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4. IPCC Report
5. http://www.crn.com/hardware/208700292;jsessionid=BSPYCRGVOQMWQQSNDLOSKHSCJUNN2JVN
6. http://www.theclimategroup.org/assets/resources/publications/Smart2020ReportSummary.pdf
Addressing and mitigating the effects of climate change is likely to cast a large economic burden,
especially on developing countries. The Inter-governmental Panel on Climate Change (IPCC) estimates 4that globally the impact of these measures could be as high as 3 percent of a country’s GDP on average.
For the resource-constrained developing economies already burdened with other macro-economic issues
such as poverty alleviation, employment creation, or lack of infrastructure, spending on climate change
mitigation may not be a priority.
This may pose a huge risk in the face of rising international pressure on all countries for climate change
measures. Countries which cannot afford to spend on climate change may be at an increased risk from
changing climate patterns and not have the capacity to combat its after-effects.
Climate change vulnerabilities among countries in Asia-Oceania
Relatively resilient:
?Japan
?Malaysia
?New Zealand
?Singapore
High Exposure:
?Australia
?Mongolia
?Philippines
?South Korea
?Taiwan
High sensitivity:
?China*
?Indonesia
?Pakistan
?Sri Lanka
?Thailand
?Vietnam
Low adaptive capacity:
?Bangladesh
?Cambodia
?India
?Lao PDR
?Myanmar
?Nepal
Source: Adapted from Asian Development Bank Report, Building Climate Resilience in Agricultural Sector, 2009, and KPMG analysis;
* China includes Hong Kong
Implications on ICT growth
The ICT industry, like any other industry, is likely to be impacted due to increased vulnerabilities among
the population using and providing IT products and services.
Currently the IT industry itself is also a contributor to the climate change problem. According to a Gartner
study, greenhouse gas emissions from the IT industry accounted for 2 percent of total global CO2 5emissions in 2008. However, this forms a small proportion compared to emissions from automotive or
petrochemicals or manufacturing-based industries. Emissions from ICT are expected to increase as ICT
penetration and usage grows. However, ICT-led growth may still be one of the greener alternatives for
developing countries vis-à-vis that led by other industries.
There is likely to be continued pressure on the ICT industry, just as that on any other industry, to reduce
its carbon emissions. With increasing digital growth and trends such as e-governance, demand for data
centers is likely to increase. Gartner research also suggests that among the components of IT, emissions
from data centers are rising faster than other carbon emissions, mainly due to lack of floor space, failure
to house high-density servers, increased power consumption and heat generation.
However, the IT industry has the potential to reduce emissions of 7.8 Gt CO2e or 15 percent of its
business as usual emissions by 2020 according to Smart 2020, a report brought out by the Climate Group 6in 2008. Achieving this might necessitate investments in developing and adopting newer technologies
across the globe.
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Opportunities for the ICT industry
Climate change is expected to gain prominence as a very important ‘industry’ by 2020. Spurred by a rise in
spending on efficient technologies, renewable energy, recycling and waste management, climate change is
expected to be a major generator of employment going forward. HSBC Global Research estimates suggest
that global revenues from climate-related businesses such as energy efficiency reached USD 530 billion in 72008 and could exceed USD 2 trillion by 2020.
New ICT technologies are focusing on various products and services that reduce emissions and increase
efficiencies. The direct result is greener and ‘smarter’ hardware products that take up less space and use
less energy in terms of power. Already, governments in Australia, Japan and Korea have committed large
amount of resources over the next few years for the development and deployment of technologies such as 8Green IT and virtualization.
According to the Smart 2020 Report, while the ICT sector plans to significantly increase the energy
efficiency of its products and services, the ICT sector’s largest influence will be enabling energy
efficiencies in other sectors, an opportunity that could deliver carbon savings five times larger than the 9total emissions from the entire ICT sector in 2020. For cash-starved developing country governments, the
solution to climate change has to be at lower costs while simultaneously addressing practical realities
within their environments.
Governments of developing countries can also provide policy thrust in terms of prescribing greener norms
for new buildings and industrial zones, enforcing emission controls and imposing penalties for non-
compliance.
Some areas where ICT can assist are:
?Technology solutions that reduce emissions in vehicles and industrial motorsImproved energy efficiency
for power distribution and transmissionTechnology to reduce travel time and cost through solutions
such as video conferencing, and lower emissions through better logistics planning software and
services
?Technology and automation for better healthcare, the demand for which is expected to rise due to
climate change
?Innovative products using energy saving or renewable energy sources at much lower costs
?Software for better predictability for climate-related changes/ disasters
?ICT for disaster management.
Case Study - Managing
information during the SARS
outbreak in Singapore
During the SARS outbreak in 2003,
Singapore relied on ICT as
monitoring devices to enforce the
quarantine law. For example, Radio
Frequency Identification Device
(RFID) was used to trace individuals
who may have come into contact
with SARS victims. Hospital
workers, visitors and other patients
with the potential of coming into
contact with SARS victims were
given a card containing an RFID
transponder that tracked their
movements between different
zones in the hospital, making it
easy to detect who may have come
into contact with a patient later
confirmed to have contacted the
disease, which had different
incubation periods extending to a
maximum of 10 days. The
government also passed a law
permitting the installation of
surveillance equipment such as
electronic picture (ePIC) cameras in
the homes of quarantined
individuals (the ePIC cameras were
monitored by a private company
contracted for the purpose). In
addition, video facilities were often
the only tools available to families
to communicate with family
members who were gravely ill with
SARS in the hospital.
Source:
http://www.digital-review.org/themes/7-the-
role-of-icts-in-risk-communication-in-asia-
pacific.html?93d8e68695e76f3bf28837adbeb
3725c=e546c35f949c6822fa4cbd5bd683c82
0&start=4
7. http://www.reuters.com/article/GCA-GreenBusiness/idUSTRE58H2FM20090918
8. http://www.bloomberg.com/apps/news?pid=20601130&sid=aATxyQT1IE10
9. http://www.theclimategroup.org/assets/resources/publications/Smart2020ReportSummary.pdf
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10. ADB, Ageing in Asia – Trends, Impacts and Responds
Global Challenges
Regional Challenges
Industry Challenges
Ageing Population
The age distribution of the world’s population is undergoing a profound transformation. The world is
expected to witness a significant demographic shift in terms of age distribution over the next few
decades. With varying mortality and fertility rates, some regions are likely to experience steady
population growth, whilst others will face population decline. Population growth in Europe is expected to
slow down considerably relative to the United States and the emerging economies of China and India. 10The age distribution is expected to shift gradually to older ages.
Population ageing may not be an immediate issue for Asia-Oceania as a whole. The elderly population is
projected to reach 483.3 million, and their share is expected to rise to 10.1 percent of its total population 10of 4.8 billion in 2025 from 6.4 percent in 2005. However, certain Asian economies like Japan, Hong
Kong, the Republic of Korea, Singapore, and Thailand are expected to have a much higher proportion of
elderly people by 2025. Moreover, the process of population ageing is occurring more rapidly in Asia-
Oceania than that in Europe or North America. It is also likely to occur at a much earlier stage in
economic development in some Asian countries than that in the developed world.
Ageing Trend in Selected Asian Countries
Japan
Hong KongSingapore
China
Thailand
Korea
Indonesia
Malaysia
India
Philippines
Pakistan
Bangladesh
Sri Lanka
Vietnam
Australia
% o
f Pop
ulat
ion
aged
65
& a
bove
2005
29.5
22.8
21.7
14.9
10.9
13.7
8.7
10.9
7.3
13.8
6.5
5.6
6.4
5.8
8.7
19.1
Up to 2025
10.1
Most developing countries in the region
are making the transition at a much
faster rate
Asia is expected to account for
58% of the global elderly population in
2025
Source: KPMG Analysis, UN (2006), ADB
Note: Chart for illustrative purpose, not to scale
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Implications on ICT growth
Opportunities for the ICT industry
An ageing population has widespread economic and social implications. Ageing may also affect
macroeconomic fundamentals like productivity, investment, consumption, and savings, which in turn can
affect the growth and development of ICT. Spending on pensions, health and long-term care can affect
investments in ICT and infrastructure, thereby restricting regional growth.
Labor supply and productivity: Population change may potentially impact regional growth, mainly due to
shrinking working age-population and the dip in associated labor productivity. The ICT industry is likely to
be directly impacted through rising competition to attract qualified workforce.
Pension, health and long-term care: Population ageing puts pressure on pension, health and long-term
care expenditure, especially in countries where such services are under served. An ageing population may
put stress on the finances of developed Asian nations that have extensive social programmes targeted to
the older population, largely in the form of health care and pension programmes. Rising expenditure on
social security, pensions and healthcare, will burden the working age population and reduce government
investment potential in other priority sectors.
Savings, investment and consumption patterns: Economies with large proportions of working-age
population can potentially grow faster. This is because this demographic structure generates a larger
aggregate life-cycle surplus and because savings rates are expected to be higher as individuals save in
anticipation of their retirement. Thus, population ageing could lead to substantial changes in the
composition of the demand for goods and services, which in turn can impact the demand and adoption of
ICT.
Demographic change however also represents new economic opportunities. For instance, ICT can play a
key role to facilitate the inclusion of elderly people in society and the economy.
Major ICT domains for ageing population
Japan’s rapidly-ageing population
is expected to lead to a decline in
savings and wealth, which in turn
will affect the ability to finance
future growth of the economy.
Financial wealth in Japan is
projected to fall by 0.2 percent
annually from 2003 to 2024
Source:
Mckinsey 2005
Scotland Telecare Development
Programme 2007/8 – 2009/10
Over the period 2007-2010, the
actual operational savings analysis
will be a minimum of:
? 46,500 hospital bed days saved
by facilitating speedier hospital
discharge
?225,000 care home bed days
saved by delaying the
requirement for people to enter
care homes
?46,000 nights of sleepover care
and 905,000 home check visits
saved by substitution of
remote monitoring
arrangements
Collectively, these savings are
valued at around USD 71.7 million
Source:
http://ec.europa.euICT can help elderly
population to remain
connected with
surroundings and
community through
social networking
websites, mobile phones
and the internet.
ICT also helps ageing
population to get access
to government and other
essential services, such
as banking, online
shopping etc. are
delivered.
Communication and
online services
provide them with the
incentive and choice
to pursue a longer
working life
ICT is also a
necessary skill in
today’s working
environment. This
needs to be done
through ICT skills
training for elderly
people
ICT can go a long-way in providing access to healthcare and social system
through technologies like telecare / telemedicine to enjoy healthier and
high quality of lifestyle
Source: KPMG Analysis
Ageing at Home
?Healthcare
?Security/Remote
?Monitoring
Ageing at the
Community
?Engage with
surroundings &
community
Ageing at Work
?Financial Inclusion
?Labor Participation
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• The outsourcing of employment to offshore locations through ICT solutions could be considered to
tackle labor shortage, leading to greater automation, and technologies improving remote and online
delivery of services. Improvements in labor productivity can also be possible with greater
investments in ICT. For developing countries, this is likely to provide an opportunity to benefit from
cross-border movements in goods, capital, and labor in response to population ageing elsewhere in
the region or the rest of the world
• There are also a range of options with respect to enable prolonged employment and female
employment. In order to maintain productivity levels, the workforce participation rate might have to
increase. Older and female workers can be in a better position to participate if the benefits of the
ICT through communications and online services are extended to them. This is also likely to put
lower stress on government finances that are spent towards social security and pensions
• Delivering the full potential of ICT in healthcare can help countries minimize the pressure of
providing healthcare effectively and that too at lower costs. New technologies like telemedicine
open up new opportunities for providing medical care at the home. There are many such
developments in ICT-based home care, including ways of monitoring wellbeing and providing a
secure home environment. Moreover, personal health systems can provide wearable and portable
systems for monitoring and diagnosis, therapy and supporting treatment plans for individuals with a
chronic disease, complemented by tele-monitoring and tele-care
• ICT applications in areas related to safety and security.
Regional Challenges
Global Challenges
Regional Challenges
Industry Challenges
11 12Poverty and Inequality
The success story of exponential growth in Asia-Oceania has left out a large proportion of the population
in developing countries. Approximately 24 percent of the population of developing countries in Asia or
about 760 million people live in extreme poverty. Of this, South Asia is particularly hit, accounting for 13close to 60 percent of the world’s poor population.
International organizations focusing on poverty reduction, especially the United Nations and Asian
Development Bank, are working with developing countries to negotiate defined and measurable targets
through the ‘Millennium Development Goals’ (MDGs), instated in 2000. The MDGs aim to significantly
reduce income poverty and bring about improvements in key human development parameters for
developing countries by 2015.
Case Study: The Intelligent Tea-
Pot (i-Pot)
The Zojirushi Corporation, NTT
DoCoMo, and Fujitsu Corporation
have expanded the use of common
Japanese household appliance i.e.
electric teapots, and created a
user-friendly teapot (i-pot) that also
allows distant relatives to monitor
the well-being of their loved one,
especially those living alone.
Devices imbedded in the i-Pot
transmits a signal to a remote
server using NTT DoCoMo's
wireless communication line when
the i-Pot is being used; the
subscribers receive two e-mails in
mobile-phone and/or PC in a day
automatically at the time they set
in advance documenting the
activity which is also posted online.
The report specifies when the i-Pot
was turned on, how often hot-
water was supplied, and how long
the electric kettle was in use. If the
subscribers want to know the use
of i-Pot more, they can get the
latest information anytime by e-
mail recall. In addition to this e-
mail service, the subscribers can
check a weekly i-Pot use on the
personalized homepage run by
Fujitsu, the data is up-dated every
30 minutes; therefore they can get
almost real time information about
the loved one.
Especially for Japanese old people,
the electric pot is one of the most
frequently used household
appliances, and this information
becomes one of the barometers for
the person's condition.
Source:
http://www.cct.go.kr/data/acf2006/aycc/aycc
_0804_Shizuka%20Abe.pdf
11. See Appendix for definition
12. See Appendix for definition
13. ICT for Poverty Reduction in Asia, Global Knowledge Partnership 2005
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Poverty Ratio (Percentage of poor below the poverty line) in Asia-Oceania countries
No data
Less than 10%
10 – 20%
20 – 30%
30 – 40%
40 – 50%
Australia, Indonesia, Japan, New Zealand, Singapore
Hong Kong, Malaysia, Taiwan
South Korea, Thailand, Vietnam
India, Pakistan, Sri Lanka
Cambodia, Laos, Mongolia, Myanmar, Nepal, Philippines
Bangladesh
Source: CIA World Factbook 2008; KPMG analysis
The focus on achieving the MDGs is likely to lead to significant government attention, and also funding
from developed countries and international agencies into the poorer countries in Asia-Oceania. The
implications of achieving the poverty-reduction targets among the MDGs for developing countries are
massive:
?Lower poverty means a larger market for goods and services as more citizens move into the
‘consumer’ bracket
?Lower poverty leads to better literacy, as poorer people often trade-off employment against education.
A more literate population is likely to result in a larger labor force, enhancing the economic output and
further reducing poverty levels
?Reduction in poverty may lead to other benefits such as reduced social conflict that often results from
economic stability. This would free up resources of constrained governments for growth priority.
Though the developed countries in the region are relatively unexposed to the challenge of poverty, overall
growth in Asia-Oceania can be affected if large-scale poverty and inequality persists in the region, mainly
through increase in migration and stress on available natural resources.
The UN proposes a partnership approach for poverty alleviation in the Asia-Oceania region. Developed
countries can contribute in many ways, including - knowledge and capacity development, expertise, 14advocacy for the MDGs; regional cooperation in delivering public goods; and providing resources.
14. http://www.un.org.cn/public/resource/af09585456938fdec6e38d38d5981134.pdf
‘It is difficult to see how the
Millennium Development Goals
will be achieved without innovative
and widespread application of
ICTs’.
- UNDP Special Advisor,
Denis Gilhooly
Source:
ICT for Poverty Reduction in Asia, Global
Knowledge Partnership
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15. Widening Broadband reach by 50 percent can boost India's GDP: CISCO, Oct, 2009, http://www.livemint.com/2009/10/11120242/Widening-broadband-reach-by-50.html
Implications on ICT growth
Opportunities for the ICT industry
Diversion of priorities: Poverty and inequality has a direct, negative impact on ICT development, through
lower adoption and usage levels. Government spending on poverty alleviation in poorer countries could
translate to lower priority for spending on building ICT networks and increasing ICT penetration and
adoption. The lack of spending is likely to perpetuate the problems discussed in this paper.
Lack of participation in the knowledge economy: Poorer sections of the population may not have
access to basic services such as education, healthcare and sanitation. Access to infrastructure such as
roads or power may also be limited. In such situations, the use of digital information in the country is
likely to be limited. This is likely to translate into a growing digital divide relative to urban and
industrialized sections of the country.
Lack of a trained workforce: Limited access to education might also mean that the possibilities for
expanding the ICT-savvy workforce in the country will be limited alongside large-scale poverty. Currently
a large number of countries in Asia-Oceania are facing a shortage of ICT skills in their efforts to move
towards a knowledge economy.
The use of ICT as a tool for poverty reduction has been widely studied with ICT expected to provide
developing countries with an opportunity to meet vital development goals such as basic health care and
education, far more effectively than before. A study by the World Bank suggests that a 10 percentage-
point increase in broadband penetration for an average nation results in an acceleration in economic 15growth of 1.3 percentage points.
Experiences of using ICT for poverty reduction by regional and international bodies suggest that ICT can
contribute significantly by creating greater empowerment, opportunity and security. Some of the ways
include:
?Promoting opportunities for livelihoods: the effective use of ICT can lead to an increase in
agricultural productivity, improved market access for crops, and the creation of employment
opportunities by increasing the access to jobs
?ICT can be a powerful tool for strengthening good governance. ICT can help spread knowledge
and awareness of human and constitutional rights, bring more accountability, and give the poor a
voice. ICT is also known to enhance government efficiency in service provision that is directly
relevant for the poor
?ICT can be relevant for health interventions and in the fight against diseases such as malaria,
tuberculosis or HIV/AIDS through timely broadcasts, information exchange and better diagnostic
abilities
?ICT can help create direct as well as indirect (secondary and tertiary) employment, and help the
development of tier II and III cities in the countries. Already, countries such as India, Philippines and
Malaysia are focusing on developing tier III cities for offshore outsourcing service delivery.
Nasscom’s estimates suggest that in India, the IT-BPO industry provided direct employment to close
to 2 million people in FY2009 against revenue of USD 71.1 billion. However, the indirect
employment generation was estimated to be close to 8 million, with a multiplier of 3.6 times. Close
to 50 percent of new recruits are now from tier II cities in India, with the percentage of women
Case Study: eChoupal (India)
eChoupal is a rural kiosk network,
started by ITC, an FMCG company
in India. Each e-Choupal costs
between USD 3,000 and USD 6,000
to set up and about USD 100 per
year to maintain. The recurring cost
of using the system is negligible.
The kiosk has a computer, typically
housed in a local farmer’s house
(called the sanchalak) and linked to
the Internet via phone lines or a
VSAT connection. The kiosk serves
an average of 600 farmers in 10
surrounding villages within about a
5 kilometer radius. Farmers,
assisted by the sanchalak use the
computer to access daily closing
prices on local markets, track
global price trends, find
information about new farming
techniques, and to order seed,
fertilizer, and other products such
as consumer goods from ITC or its
partners at prices lower than those
available from village traders. The
sanchalak typically aggregates the
village demand for these products
and transmits the order to an ITC
representative. At harvest time, ITC
offers to buy the crop directly from
any farmer at the previous day’s
closing price; the farmer then
transports his crop to an ITC
processing center, where the crop
is weighed electronically and
assessed for quality. The farmer is
then paid for the crop and a
transport fee. ‘Bonus points’, which
are exchangeable for products that
ITC sells, are given for crops with
quality above the norm.
The ITC eChoupal network is
bringing huge benefits to Indian
farmers through market-based
pricing for produce, elimination of
middle-men and a ready buyer for
the produce.
Source:
http://planningcommission.gov.in/reports/ser
eport/ser/stdy_ict/4_e-choupal%20.pdf
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employees (25 percent) the highest among other industries. Moreover, the ‘indirect’ employment is in
the form of ancillary industries supplying food, transport, infrastructure support and other inputs to
the ICT industry, and need not necessarily be high-skilled employment. IT-BPO industry is making a 16large contribution towards the ‘inclusive-growth agenda’ in India.
?ICT can aid in building capacity through training, distance learning and relevant workshops
?ICT can be instrumental in developing and promoting lower cost, innovative technologies aimed at the
poorer populations in developing countries, especially in rural areas.
Political instability and internal insecurity
Case Study: Grameen Telecom
(Bangladesh)
In 1996, Grameen Bank initiated a
new programme aimed at largely
increasing information that was
available to rural farmers and
villages. Grameen Bank had seen
that a lack of timely information
had been a major deterrent in their
poverty reduction efforts. As the
telecom sector opened up to
competition in the mid-1990s in
Bangladesh, Grameen created a
non-profit organization named
Grameen Telecom aimed at
increasing access to telephones for
Grameen Bank customers while
providing a new avenue of business
for clients. Grameen Telecom in
turn joined three other foreign
partners to create the for-profit,
Grameen Phone Limited which
obtained a license for GSM
technology throughout the country.
In rural villages where no
telecommunications services have
previously existed, cellular phones
are provided via a sustainable
financing mechanism to very poor
women who use the phone to
operate a business.
Source:
siteresources.worldbank.org/.../Resources/14
648_Grameen-web.pdf
16. Nasscom Strategic Review 2009
Global Challenges
Regional Challenges
Industry Challenges
Political stability and internal security are often regarded as the key to economic development. The overall
political environment in the country is instrumental in bringing foreign investment to a country, ensuring
timely and adequate reforms, maintaining credibility and bolstering the prospects of trade. A 2008 study
published in the American Journal of Applied Sciences upholds that political stability plays a dominant role
in the determination of economic growth and sources of capital accumulation through the existence of a
supportive and predictable policy and legal framework.
Internal insecurity may be a more local occurrence, but in some countries, it affects the overall economic
environment. Fear of insecurity deters the investment and generation of jobs. Moreover, the resolution of
political as well as internal conflicts is difficult, often taking up years of negotiation and involves diverse
stakeholders.
Both political instability and internal security may contribute to lower economic growth by way of a rise in
poverty, lack of access to healthcare or poor infrastructure development in the affected regions, and could
even undo years of developmental efforts in countries. Where conflict and its impact are regional, the
country may face unbalanced economic growth, leading to a growing divide and isolation with the rest of
the country.
The EIU’s Index for ‘Underlying vulnerability’ shows countries in Asia-Oceania placed diversely across the
scale of 1 to 10 (1 being lowest), with Australia ranked as the most stable country in the region.
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EIU’s Index of ‘Underlying Vulnerability’ – 2009/10 (0 being most stable)
Cambodia
Pakistan
Sri Lanka
Nepal
Bangladesh
Thailand
Malaysia
Indonesia
Myanmar
India
Philippines
China
Mongolia
Laos
South Korea
Singapore
Taiwan
Vietnam
Hong Kong
Japan
New Zealand
Australia
USA
UK
Norway
7.9
7.5
7.5
7.1
7.1
7.1
7.1
6.7
6.3
5
4.6
4.6
4.2
4.2
4.2
3.3
2.5
2.5
1.3
2.1
1.3
1.7
2.5
1.3
0.4
Source: EIU, Political Instability Index
Case Study: Sri Lanka
Nearly three decades of war with the LTTE led
to a series of challenges in Sri Lanka. Despite
high human development indicators and an
educated workforce, Sri Lanka suffered from
low public capital investment, low foreign
inflows, decline in tourism and devastation in
northern parts of the country.
The end of the crisis in 2009 has brought new
optimism for economic growth in Sri Lanka.
?The Northern region, which bore the brunt
of the war in terms of lack of access,
poverty and other challenges, is now
expected to get high priority and
development focus from the government
?Investors and businesses can expect a
better economic outlook. Fitch has
upgraded Sri Lanka's national risk rating
?Several multinational companies, including
IT-BPO companies are considering setting
up operations in Sri Lanka.
Source:
Media reports, KPMG Analysis
Case Study: Crime Detection through the
use of ICT
Mobile technology has made easier the
denunciation and reporting of crime in Ireland,
Turkey, and Peru by providing real-time
exchange of information between citizens and
law enforcement units. In Ireland, multimedia
messaging system (MMS) has been used to
send photos of criminal suspects to law
enforcement agencies; in Turkey, law
enforcement units have used mobile devices
to retrieve information from vehicles they
stop. Then they cross check the data with
other government units, such as tax payment,
criminal records and motor registration. In
Peru, crime reporting systems have helped in
the reduction of crime at the locality of
Miraflores by providing timely information.
Source:
http://blogs.worldbank.org/governance/from-m-euphoria-
to-m-governance-thinking-about-the-potential-of-mobile-
technology
Several inter and intra-country conflicts in the Asia-Oceania region, such as the India-Pakistan
conflict over Kashmir or the differences between North and South Korea have been going on for
several years. History has shown that due to the complexities in the resolution of such problems,
and the number of stakeholders that are involved, some of the issues within the region may not
see quick resolution.
Slow progress on ICT awareness and adoption: With internal conflict and strife, the
government's focus can easily shift from developmental activities to conflict control and security
issues. The efforts towards building capacity for greater ICT adoption and use may also be
impacted, as access to education or infrastructure is likely to be constrained during an unstable
geo-political environment.
Diminished attractiveness as an offshoring location: For several Asia-Oceania countries that are
trying to promote their attractiveness as an offshore location for IT-BPO services, a secure
investment climate becomes pertinent. Multinational companies may regard stability as an
important factor in their location selection strategy, as their business continuity plans may be
adversely affected if the political environment is unstable or internal security is threatened.
Implications on ICT growth
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Opportunities for the ICT industry
The use of ICT for direct conflict resolution may be limited, but ICT can help the marginalized or remote
locations get more involved into mainstream activities through employment creation. Breakdown of
communication often fuels conflicts through informal networks, and penetration of ICT networks and
infrastructure can improve information access to affected populations.
Improved access is also expected to enable affected populations to accrue the benefits of development
initiatives of the government, information about markets, job opportunities, healthcare, education,
government schemes and policies.
Besides, ICT can be directly used for tracking activities of terrorists, cyber criminals and other
unscrupulous members of the society.
Infrastructure Deficit
The development of infrastructure is one of the main drivers of growth in an economy. Infrastructure
systems such as water supply and sanitation, solid waste and wastewater treatment, power, and transport
form the backbone of the economy as they provide social as well as economic benefits to the people.
Rapid economic growth over the past decade has put enormous pressure on Asia-Oceania's infrastructure.
Inadequate infrastructure is not only likely to affect the competitiveness of the region, but can also involve
large social risks. The infrastructure gaps among economies in the region are coupled with asymmetries in
the progress made, with some countries having a much more efficient and extensive infrastructure than
others.
Overall Infrastructure Quality Index in Asia
Global Challenges
Regional Challenges
Industry Challenges
Case Study: Information
Systems in Thailand
Thailand recently sanctioned the
distribution of Smart ID Cards to
Thai residents. Three factors seem
to be driving the move to smart
cards. First, the Thai government
intends to improve technology use
in the country. Radio Frequency
Identification (RFID) and smart card
technology are used frequently in
Thailand, with applications ranging
from tracking voting machines to
storing cars in automated parking
garages. Second, Thailand has
engaged in a major electronic
government undertaking; smart ID
cards would provide the keys of
access for citizens to use the
state's online services. Third, in
response to the terrorist activity in
Southern Thailand, the government
sees smart ID cards as a
mechanism to create security, track
the movement of suspicious
elements and control border
infringement.
The Smart Card project has come
under some degree of criticism due
to a lack of supportive legislative
framework; especially with respect
to guarding misuse of personal
information stored on the Smart
Card. Countries wishing to replicate
the project will have to study the
privacy considerations and their
implications on such a project.
Source:
http://www.privacyinternational.org/article.sht
ml?cmd%5B347%5D=x-347-559484
China 4.0
Mongolia1.9
Pakistan 3.2
India 3.2
Sri Lanka 4.1
Nepal 2.2
Bangladesh 2.5
Myanmar 2.9
Thailand4.8
Malaysia5,4
Korea, Rep.5.8
Japan5.8
Cambodia3.4
Taiwan5.8
Singapore6.7
Australia5.0
New Zealand4.7
Hong Kong6.7
Vietnam2.8
Philippines3.1
Indonesia3.1
Source: World Economic Forum, Global Competitiveness Report, 2009
Note: General infrastructure (e.g., transport, telephony, and energy)
1 = extremely underdeveloped;
7 = extensive and efficient by international standards
(2008–2009 weighted average)
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Infrastructure development has been in the spotlight in recent years, as governments across most
countries in Asia-Oceania have allocated large resources for upgrades. However, the gap between
infrastructure needs and the available government resources to meet those needs is ever growing,
especially in the case of developing countries. On an average, it is estimated that the region needs to 17invest about USD 750 billion per year in infrastructure during 2010-2020.
Alongside physical infrastructure, countries in Asia-Oceania might increasingly also need to consider ICT
infrastructure as the key for sustainable and inclusive growth in future, especially for countries aspiring to 18become knowledge economies. ICT infrastructure can range from basic telecom services, mobile
phones, and internet to high-end variants like high-speed broadband, wireless networks and others.
Essential Infrastructure for the Future
17. ADB
18. See appendix for defination
19. See appendix for definition
Sources: KPMG Analysis
Refers to physical networks (voice/ data), internet, broadband etc.
Also includes application level interfaces, search engines,
messaging, etc via ISPs and portals service providers.
Refers to non-tangibles supporting the development and operation
of hard infrastructure, through policy, regulatory, and institutional
frameworks; governance mechanisms; systems and procedures;
social networks; and transparent procurement systems
Refers to physical structures that facilitates the society and
economy, through medium such as transport; energy;
telecommunications; and basic utilities (e.g., drinking water supply,
hospitals and health clinics, schools, irrigation, etc.).
ICT Infrastructure
Soft Infrastructure
Physical Infrastructure
Traditional Infrastructure
Essential Infrastructure
for future
19Countries within Asia show as diverse progress on e-readiness as well as on physical infrastructure
quality. Countries like Hong Kong, Australia and Singapore figure among the top ten countries globally on
the World Economic Forum’s e-readiness index, while progress in other countries is for the most part
limited to wireless penetration.
Regional infrastructure deficit has various direct and indirect implications on the development of ICT,
which is particularly important to Asia’s economic and social development. Some of the major
implications are examined below:
?Reduces regional and international connectivity: Lack of basic infrastructure restricts economic
exchange among various sectors of an economy, both locally and internationally. It makes it difficult
to provide greater access to key inputs for economic growth, such as resources, technology, and
knowledge. This impacts the potential of ICT adoption among business and also ICT trade
Implications on ICT growth
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?Leads to unfavorable socio-economic conditions: Unavailability of proper infrastructure affects socio-
economic conditions by limiting the availability of basic needs and utilities. This leads to poverty by
restricting access to basic services, reducing economic opportunities and income generating capacity,
particularly for poorer groups and communities in remote areas. It also limits the creation of a quality
talent pool available for a knowledge economy and ICT
?Affects competitiveness and ability to attract investments: Lack of infrastructure increases the cost
of regional (and global) trade, affects market competitiveness, and reduces propensity to attract
investment (including FDI). This affects the country’s potential to attract ICT investments. Also, poor
infrastructure raises the costs of goods and services, affecting competitiveness.
?Deprives market access to remote locations: Small, poor, landlocked, and remote countries, and
even regions within countries, are deprived of better access to wider regional (and global) markets
due to lack of infrastructure, affecting ICT investment, trade, and economic growth in those areas.
ICT has created various opportunities to advance economic and social development through
infrastructure development.
?Facilitates trade: ICT is an increasingly productive complement to physical infrastructure. ICT helps to
reduce the costs of finding suppliers, contracts negotiations, monitoring contract implementation,
and tracking the location and status of shipments. ICT also helps facilitate trade by streamlining the
movement of goods and services within nations as well as across borders. For instance, ICT can help
increase port efficiency by reducing the average time shipments spend at sea and in ports. Service
tends to become more frequent, facilitating timely delivery
?Attracts investments: The ability of developing nations to attract investments is also largely
influenced by the availability of superior and efficient infrastructure. For example, trade in services-
related areas, such as banking and business services, or communications, a well-developed physical
and ICT infrastructure is required
?Social benefits: Besides the direct contribution of ICT to trade and investment related infrastructure,
ICT allows poorer people and underdeveloped areas better access to markets and economic
opportunities. It can also improve access to education and healthcare.
It is becoming increasingly important for the IT industry to look into some key considerations that directly
impact growth. The future of the industry depends on how solutions are built to overcome these
challenges and reduce the threat of external competition.
It has been repeatedly proven that better innovation in ICT leads to higher economic growth. The biggest
challenge for the IT industry in the Asian region today is, therefore, to build an ecosystem that is
conducive to innovation. This would also help the industry in maintaining its performance and retaining its
reputation of being a favored information technology and services industry. Considering the dynamic
global scenario, it is imperative for the industry to ensure competitiveness through innovation.
Some key considerations for the Asia-Oceania IT industry, moving towards an environment that is
conducive for innovation and progress include:
Opportunities for the ICT industry
Industry specific challenges
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Global Challenges
Regional Challenges
Industry Challenges
Global Challenges
Regional Challenges
Industry Challenges
Industry Challenges
PEOPLE
PROCESS
POLICIES
MAINTAININGPERFORMANCE
IMPROVING SERVICE OFFERING
BUIL
DIN
G IN
TERN
AL C
APAB
ILIT
IES M
INIM
IZING EXTERN
AL THREATS
Sources: KPMG Analysis
People: The IT industry is extremely labor-centric and therefore people are the most important
component of the industry. Favorable demographic though is not a problem for the Asian economies as a
whole; the key consideration for human resources in the region is the quality of available skills.
According to Springboard’s study - ‘Bridging the Gap: Asia-Pacific IT Skills’ domain knowledge and
management skills are the top HR challenges faced by the region today.
In terms of technology skills, Asia-Pacific companies are finding the greatest shortages in areas including 20enterprise architecture, application development and system integration.
Besides the availability of skills, the industry also faces other universal HR challenges: recruitment,
attrition and retention. However, these are particularly sensitive in IT-BPO as it is a services industry.
Process: Improving productivity and efficiency and finding ways and means to meet increased customer
expectations are extremely important for the growth of the IT industry. Moreover, high standards of
corporate governance, risk management, security and an adequate intellectual property framework have
to be achieved. Standardization becomes an important tool to drive efficiency & innovation and improve
transparency.
20. http://www.nationmultimedia.com/worldhotnews/30102019/Gaps-in-IT-skills-hurting-businesses,-hindering-recovery
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Global Challenges
Regional Challenges
Industry Challenges
While formal standards have an important role to play, the IT ecosystem is defined by continuous and
rapid innovation, vigorous competition, and broad customer choice among available solutions.
Market-led, customer-driven acceptance of technology and cross-industry support for popular ICT
specifications also plays a crucial role. The resulting situation is a dynamic coexistence of both formal
standards and the countless industry-developed specifications in the ICT marketplace. Together, these
standards and specifications fuel innovation and economic development, while enabling interoperability in 21ICT products and services to ultimately deliver better user experiences.
Policies: A favorable business policy and regulatory environment is critical role to the growth of the IT
industry. The government must play an active role as a key stakeholder of this industry. Countries that have
not articulated an effective IT policy, could, despite their potential, find itself under immense pressure of
competition.
Collaboration with the key stakeholders of the industry would help in overcoming these challenges and
building an ecosystem that is innovative and competitive. There is, thus, an action agenda for key
stakeholders: the government, the industry players and associations, as well as the academia.
21. Microsoft: Standards in the ICT industry
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Opportunities
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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As the Asia-Oceania region recognizes and takes measures to overcome the challenges that could
potentially hamper the growth of the ICT industry, there lie significant opportunities.
Some challenges, when they are addressed, could convert to opportunities that positively impact not only
the development status of countries, but also grow the ICT market size.
Demand and Supplier Market:
The Asia-Oceania region takes on a role as a supplier as well as a demand market for ICT. Under-
penetration in the region has the potential to bring immense domestic opportunities for countries in areas
such as e-governance and telecommunications. These opportunities are very country-specific and require
a great amount of localization and therefore need to be serviced within the country itself, giving rise to a
large domestic market.
There is a demand for technology convergence, Green IT and services catered to Small and Medium
Businesses (SMB), and healthcare within the Asia Oceania region; however, the global opportunities for
these services are far more significant. These are being tapped into by Asia-Oceania as a supplier region.
There is, of course, competition for this market share, especially from the Central and Eastern European
countries and Latin America, but the experience in the ICT industry has given the region an edge over the
others. The Asia-Oceania economies hold the majority of the market share.
The access to these global opportunities however, would vary according to the inherent capabilities of
each economy in the Asia-Oceania region. The more ICT and export focused countries within the region
would most likely have a better chance at winning deals as compared to the others who have relatively
nascent ICT industries.
Global Opportunities
Opportunities in the ICT industry
Global Opportunities
Asia demand for ICT services in upcoming segments
Oceania is poised to service global
Regional Opportunities
Global trends likely to assume larger proportion in Asia Oceania in the next decade
WIRELESS
e-GOVERNANCE
WIFI
s-COMMERCE
e-COMMERCE
HEALTHCARE
TECHNOLOGY CONVERGENCE
EDUCATION
GREEN IT
SMBs
Sources: KPMG Analysis
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Convergent Technologies
Convergent technologies, that integrate
fixed with mobile, include:
?IP Multimedia Subsystem (IMS)
?Internet Protocol Television (IPTV )
?Voice Over Internet Protocol (VOIP)
?Voice Call Continuity
?Digital Video Broadcasting - Handheld
?Video On Demand Technologies
Convergent Services
Some of the new convergent services
are:
?Voice Telephony through the internet
?Video On Demand
?Fixed-Mobile Convergence
?Mobile-to-Mobile Convergence
?Location Based Services
?Integrated Products and Bundles
?Convergent Services
Technology convergence
Number of devices accessing the internet
Technology convergence is gaining its importance as it has wide economic implications for both the
demand and the supply sides. Consumers are benefited by an interactive access to information
independent of the terminal they might be able to use in a given context.
On the other hand, significant opportunities open up for suppliers in a growing market. Service providers
in both the telecommunications and the broadcasting sectors have seen convergence as a powerful
means to leverage the existing infrastructure to provide a wider range of services at lower costs,
generating higher revenues and reaching new subscribers.
Convergence has increased device capability and the market continues to move towards fewer devices
with a wider range of applications. The mobile is expected to be the next computer. While the PC is
currently the dominant means of gaining access to the internet, IDC expects the number of mobile 1devices accessing the internet to surpass the number of online PCs by 2012.
1.5
3
2008 2012
By 2012, half of the number of devices accessing the Internet will be mobile devices.
Billi
on u
nits
Source: IDC
CAGR: 19%
Opportunities for the ICT industry
·Device design: With convergence changing the technology at a rapid pace, the replacement lifecycle
of all devices is witnessing a steady fall. Consumers not only adopt newer devices but also replace
them in a quicker time frame.
This presents a huge opportunity for device design, which is pioneered by nations such as Korea and
Japan. Korea, which has been a test-bed for ICT innovations, was the first in the world to launch the
commercial satellite Digital Multimedia Broadcasting (DMB) services in 2005 for mobile handset
users to watch TV while riding public transport. Together with Japan, the two countries have also 2pioneered in the implementation of the 3G mobile broadband. Along with mobile service operators,
manufacturers of mobile handsets and the components in the region are aiming to develop next 3generation (so-called 4G) services by about 2010.
·Content and services: Content providers are likely to experience a huge demand in the converged
environment. Internet and portal providers, as well as telecom companies have recognized that the
penetration into the wireless market for bundled services would require collaborative relationships.
1. http://www.mobilephoneblog.org/2008/06/15-billion-mobile-internet-users.html
2. http://www.itudaily.com/home.asp?articleid=528200901
3. http://www.abiresearch.com/research/1003400-Mobile+Phone+Innovation+in+Japan+and+South+Korea
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4. http://www.itwire.com/content/view/26116/127/1/1/
The convergence of technologies has given birth to the prospect of multimedia services which offer
interactive computer-based applications that can combine text, graphics, audio and animation features
into a media experience for users.
The global market for mobile content and services is expected to rise to around USD 150.2 billion in
2011 from USD 89.3 billion in 2006. Service providers in Asian countries like India have already gained
experience in converged services and media and digital content. According to Frost & Sullivan, 20.8
percent of households across 14 Asia-Pacific countries subscribed to a dual-, triple-, and quadruple-4play (quad-play) services in 2008. This experience in the delivery of bundled services would give the
region an upper hand in being the preferred service provider for global converged services.
While there is an increased expenditure on healthcare in North America and Western Europe, the trend is
not matched by an increase in the number of nurses/caretakers, and in some cases there is, in fact, a net
decline of healthcare professionals
Healthcare
Health expenditure and availability of nurses in developed countries
Asian service providers are
gaining experience in
converged services
IMImobile, an India-headquartered
provider of mobile value added
services for content providers,
mobile operators and media
agencies acquired dx3, a UK-based
digital content delivery services
provider. The acquisition of dx3
was a part of the IMI’s expansion
plan designed to establish the
company as an important managed
service provider for digital content
and converged value added
services in the region.
Africa's mobile operator MTN has
hired the firm to manage the digital
content for phones of its 103
million clients in 21 countries.
MTN is one of the first operators in
Africa to outsource the providing of
news, games, ring tones, music
and other data services, as the
mobile industry worldwide seeks
ways to boost revenues.
Healthcare establishments of the Western world are facing several challenges.
Most of the Western countries are experiencing the ageing population phenomenon, which is leading them
to an increased spend on healthcare. This is leading to a rising demand for healthcare services. In the US,
spending on healthcare has exceeded GDP growth by about 2.7 percentage points each year, over the past
three decades. The country is one of the largest spenders on healthcare in the world.
An ageing population and the lack of requisite skills are leading to healthcare salary increases. According to
the 2009 Compensation Data Healthcare survey; nurses, occupational and physical therapists have been
high in demand and have received nearly double-digit salary increases since 2007. The US Bureau of Labor
Statistics has projected a 21.7 percent increase in the total US healthcare employment between 2006 and
2016.
Increasing regulatory compliance such as HIPAA is adding to the workload of the healthcare institutions.
The rising cost pressures coupled with the increasing workload have forced healthcare institutions to
explore the outsourcing/offshoring option.
Year 2000 Year 2007
Total
health /capita USD PPP
expenditure on Practising nurses
Density per 1000
Total expendit. on
health /capita USD PPP
Practising nurses
Density per 1000
Canada
France
Germany
Luxembourg *
Netherlands
Switzerland
United Kingdom
United States
2516
2542
2671
2553
2337
3217
1833
4704
10.13
6.73
9.41
7.38
9.58
12.87
9.15
10.17
3895
3601
3588
4162
3837
4417
2992
7290
9.02
7.73
9.94
11.02
9.93
14.89
10.2
10.57
* Statistics available for year 2000 and 2006 only
Source: World Health Organization
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Opportunities for the ICT industry
Opportunities for the ICT industry
New delivery platforms: The digitization of medical records and the establishment of an intelligent
network for sharing those records are bringing reform in the healthcare industry, which could enable 5other technological advancements to be introduced. Telemedicine, picture archiving and communication
systems (PACS), and healthcare information systems (HIS) are a few of the many IT applications in
healthcare.
Increasing outsourcing/offshoring in Healthcare: The healthcare sector is expected to be one of the
greatest beneficiaries of productivity improvements generated through increasingly automated and
integrated processes, creating a particularly strong market for companies offering BPO and outsourced IT
solutions.
?The total addressable healthcare provider market (which includes hospitals, nursing homes, long-term
care facilities, physicians and other professional service groups, and a specialized therapeutic
enterprises) is expected to reach USD 58 to 65 billion by 2020. Of this nearly 88 percent is expected
to come from North America and Western Europe
This represents an opportunity for Asian economies such as India and Thailand. An abundance of skills
in India and Thailand’s healthcare system that is comparable to the West (ranking at 47 out of 190 6countries according to the WHO 2000) is attracting healthcare and medical outsourcing to Asia
?Global Pharmaceutical companies that are based in developed countries are increasingly turning to
Asian economies for conducting clinical trials. The reduced costs combined with easy availability of
patients with varied diseases make these countries favorite destinations for clinical research
outsourcing. According to US government publications, today, 8.9 percent of clinical trials registered 7with US health authorities are conducted in the emerging countries of Asia
India, China and Singapore are emerging as the hotspots of outsourcing activities for big
pharmaceutical companies mainly in the areas such as contract research, clinical research and
contract manufacturing. Other countries like Korea, Taiwan and Malaysia too are trying their best to
attract the pharmaceutical companies to outsource their research activities.
The ageing population problem has also hit the trainers and teachers’ profession in the Western
countries. The UK, USA and Europe are experiencing a shortage of teachers. Forty percent of all teachers
in the UK are aged 45-55, and those aged over 55 account for another 6 percent of the workforce. Over
50 percent of US teachers and principals are baby boomers and the wave of departures for retirement is
likely to peak during the 2010-11 school year. This is driving the education services to the outsourcing
market.
The advances in internet technologies have spurred the demand for e-learning, and global corporations
are adopting e-learning either to supplement or to replace classroom training. Corporate e-learning is one 8of the fastest-growing sectors within the education market. The e-learning global market size in 2007
9was over USD 20 billion, which has grown 10 fold since 1999.
Today the e-learning space is vast and fairly undefined as an industry. Almost any vertical that is training-
intensive ranging from airlines, IT, banking, healthcare, publishing or education has tremendous scope for
incorporating e-learning for their employees, customers, dealers or their core business.
Education
5. The Economist special report on Healthcare
6. http://www.photius.com/rankings/healthranks_alpha.html
7. http://www.offshoringtimes.com/Pages/2006/BPO_news926.html
8. KPMG Consulting: http://specials.ft.com/elearning/FT3W67AL2ZC.html
9. Valuenotes
Healthcare outsourcing has four
clients:
?Healthcare provider (hospitals
and physicians)
?Healthcare payer (health
insurance companies)
?Pharmaceutical companies
?Healthcare IT companies
KPO which includes medical
analytics for providers and
insurance companies seems to be
the next big opportunity in
Healthcare
Jaguar used e-learning
outsourcing to maximize the
global sales of a newly
launched car
Jaguar wanted to train its dealers
all over the world on how to sell its
newly launched X-TYPE. Instead of
going through their traditional
offline training program that was
held for dealers at an offsite
location; Jaguar decided to
outsource this to an e-learning
service provider. The provider, after
collaborating with the offline
training supplier, created a CD
ROM-based training module in
English and other European
languages for dealers across the
world.
Source:
www.e-learningcentre.co.uk
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10. Valuenotes
11. Firms with fewer than 1,000 employees
12. Access Markets International (AMI)-Partners research
13. Nasscom Perspective 2020 Report
14. http://seekingalpha.com/article/71188-time-for-india-s-outsourcers-to-focus-on-smb-client-segment
The e-learning outsourcing industry consists of third-party providers as well as offshore delivery centers of 10the e-learning providers and consulting firms
11Small and midsize businesses (SMBs) have been the backbone of nearly every regional economy in
terms of share in GDP and employment. SMBs employ 90 percent of the world’s work force and account 12for more than 50 percent of GDP worldwide.
Small and Medium Business segment
Source: KPMG Analysis, NASSCOM
To address the opportunity, service providers have specialized the
delivery model and solutions to suit the business needs of the SMB market
Software as a Service
Software enabled solutions
Packaged/ License
Transaction Subscription/ On Demand Session Based
Open Source
Cloud Computing
Virtualization
Making commoditized technologies
available to enable savings
Embrace innovative Delivery Models
Low infrastructure investment: Innovative
Revenue Models
The SMB market is relatively untapped today and is expected to drive future growth in the IT-BPO market.
The number of SMBs is expected to reach 330 million in 2014, and by 2020 the SMB market is poised to
provide an addressable opportunity worth USD 250 billion in technology and business services. The BFSI 13and manufacturing segments are expected to be the largest contributors.
Key drivers for outsourcing in this segment are similar to those of large firms – (reduced costs, focus on
core activities of the business, access to the talent pool across borders, etc.) with the objective of 14improving competitiveness in the market.
Companies in the SMB segment are currently lower on the offshore maturity curve as compared to larger
firms, but greater offshoring is expected from SMBs in the coming years. Moreover, the growing market
maturity in this segment is expected to lead to rising demand in the higher-end areas such as knowledge 14services.
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Opportunities in the ICT industry
Opportunities for the ICT industry
The SMB market represents an attractive segment for service providers in Asia-Oceania to tap into in the
coming years. However, the segment poses certain distinct challenges to service providers, including
relatively smaller contract sizes, high cost consciousness and therefore lower margins. To address this
market, Asian service providers need to develop targeted services and solutions. New solutions and
business models such as Software as a Service (SaaS), virtualization, and cloud computing are already
emerging for this segment.
Climate change and global warming has brought to the fore the need for urgent action to control carbon
emissions. This trend is not limited to businesses like manufacturing, heavy engineering or power
generation; but the IT industry has also come under pressure for reducing its own share of carbon
emission. With the increasing drive towards centralized mega data centers the IT function of business is
driving an exponential increase in the demand and the associated costs.
According to a survey by the Black Book of Outsourcing; US, French, UK and German outsourcing buyers
are becoming more and more aware of green issues and are driving the vendors to add sustainability
value to its customers. Environmental regulations are becoming more consistent globally, as those
legislated in one region have corresponding effects in other regions. For example, Europe's stringent 15 16 RoHS and WEEE regulations have forced suppliers in Asia to re-look at their processes.
The availability of Green technologies and services is becoming an important part of the decision making
process for companies outsourcing their processes.
The global green IT market brings opportunities in both hardware and software services for service
providers in Asia-Oceania. Virtualization and consolidation are likely to be particularly strong areas for 17future growth.
Service providers in Asia-Oceania can also benefit from the experience and knowledge of servicing the
green IT needs of Asian governments. Recent interest in energy efficient solutions by countries like
South Korea, Japan and Australia is expected to contribute to the increased visibility and adoption of
green IT in Asia-Oceania.
In addition to catering to global demand, Asia-Oceania is also slated to benefit from high growth rates in
the domestic IT-BPO market in the region. Almost all of this demand is expected to be serviced within
the region, due to the cultural and language similarities and also because a significant cost arbitrage can
be tapped within the region itself.
Several opportunities are witnessing high traction in Asia-Oceania. These opportunities stem from global
trends, but they take on larger proportions in Asia-Oceania because of the region’s large share of the
world population. The large poor population and the relative under-penetration of the ICT within the
developing countries further boosts the potential for the ICT growth in the future.
Green IT
Regional Opportunities
Case Study: Australia and South
Korea
The Australian government, being
one of the largest consumers of IT
in the country has taken up the
responsibility of leading by example
to encourage others to look into the
Green IT solutions. The Department
of Defence has realized savings of
over AUD 5 million per annum, or in
environmental terms, approximately
31,000 tons of carbon dioxide each
year by an innovative switch off of
their desktops. There are several
Green IT related government
policies and programs that are
intended to promote the green
revolution in Australia such as an
AUD 100 million investment for the
development of a new National
Energy Efficiency Initiative, using
smart grid technology
To make the IT industry more energy
efficient, South Korea has adopted
initiatives to spur private sector
development of green hardware and
IT services. The Korean government
is instituting stronger certification
requirements for manufacturers that
want to use a “green” label on their
IT devices, similar to the Energy
Star in the United States.
The goal of these programs is to use
the certification to encourage the
green product development and to
provide consumers with accurate
information on the environmentally-
friendly items
15. Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Regulations
16. U Waste Electrical and Electronic Equipment (WEEE) Directive
17. http://www.eetindia.co.in/ART_8800477743_1800007_NT_a2ecad97.HTM
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Some of the opportunities in Asia-Oceania are:
The term e-government (electronic government) refers to the use of ICT to enhance the range and quality
of the public services to the citizens and the businesses while making the government more efficient, 18accountable, and transparent.
The use of e-Government to achieve a variety of benefits has reached mature levels in the developed
countries in Asia, where large sections of the population use and benefit from these services.
E-Governance
Case Study: Impact of e-
governance on marginalized
sections in Phnom Penh,
Cambodia
Cambodian citizens in Phnom Penh
were paying around USD 80 to 100
in all or close to 30 percent of the
country’s per capita GDP for the
basic services such as registration
for resident book, family book,
identification cards and certification
of current addresses, birth and
death, and purchase of vehicles.
As this was unaffordable to the
poorest and marginalized sections
in the city, they were often left out
of the mainstream society and
denied public services.
The Government Administrative
Information System (GAIS) system
was started through a concession
loan from the South Korean
government; with the objective to
connect and computerize four core
practical applications, namely: the
Electronic Approval System (EAS),
the Real Estate Registration, the
Resident Registration and the
Vehicle Registration.
As a result of the GAIS
implementation, citizens have one-
stop access to these services and
unofficial fees have been reduced
significantly. Though GAIS has been
criticized on its implementation and
high cost, but the impact on
bringing the marginalized and
vulnerable sections of the society
into the folds of government
services has been invaluable.
E-governance imperative
Information and workflows
are getting complex
across govt agencies
Source: Adapted from e-Government in the Asia-Pacific Region: An Assessment of Issues and Strategies – Subhash Bhatnagar
Costs are rising,
demanding measures to
improve efficiency
Public expectations for
service delivery from
the govt are rising
Competition for overseas
investments will demand
more transparency
In Singapore, for example, citizens have access to government information and services through a portal
called ‘eCitizen’. While typically most of the successful e-Government applications in the world offer around
200 services through a single access point, the eCitizen portal act as the gateway to a staggering 1,600 e-19services.
Having reached a certain maturity, developed economies are expected to exhibit growth in their e-
governance models through ICT sophistication and a greater interaction with the industry and the society.
Developing countries in Asia-Oceania are at different stages of maturity, with countries like India, Malaysia
and Vietnam relatively more developed than Nepal or Lao PDR, which are as yet in their infancy in the use
of e-governance. Governments in poorer countries are highly constrained due to lack of resources, poor
ICT infrastructure, low ICT awareness and illiteracy.
Notwithstanding these constraints, e-Governance presents an innovative approach to address some of the
traditional challenges of governance for Asia-Oceania, and in particular, the poorer countries. Already in
Asia, there is a growing recognition that e-government can play a significant role in creating efficiencies,
and in expanding access to government services and information, especially for the vulnerable and
marginalized sections of the society.
18. Schware 2005
19. http://publications.ksu.edu.sa/IT%20Papers/eGov/APDIP-eGovPaper-Subhash.pdf
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Case Study: Australia and South
Korea
The Australian government, being
one of the largest consumers of IT
in the country has taken up the
responsibility of leading by example
to encourage others to look into
Green IT solutions. The Department
of Defence has realized savings of
over AUD 5 million per annum, or in
environmental terms, approximately
31,000 tons of carbon dioxide each
year by an innovative switch off of
their desktops. There are several
Green IT related government
policies and programs that are
intended to promote the green
revolution in Australia such as an
AUD 100 million investment for the
development of a new National
Energy Efficiency Initiative, using
smart grid technology
To make the IT industry more energy
efficient, South Korea has adopted
initiatives to spur private sector
development of green hardware and
IT services. The Korean government
is instituting stronger certification
requirements for manufacturers that
want to use a “green” label on their
IT devices, similar to Energy Star in
the United States.
The goal of these programs is to
use certification to encourage green
product development and to provide
consumers with accurate
information on environmentally-
friendly items
However, implementing e-governance often requires positive modern leadership and a trans-sector
approach to bring together several avenues of information, making e-governance implementation difficult
for developing countries. Yet, in the next decade, implementing e-governance might increasingly become
imperative for the developing country governments to help ensure their competitiveness for foreign
investment, as well as overall integration into global economics.
The adoption and use of e-governance in Asia poses a massive opportunity for service providers in the
region due to the sheer population size. The hardware requirement for connecting populations within
countries is likely to be huge and so also the demand for customized software and application
management.
Besides, resource-constrained countries might require practical, innovative solutions which may have to
be developed keeping in mind challenges at the grassroots. For example, the e-Choupal described earlier
is an innovative solution to connect farmers directly to the retailers. It is also a practical solution which
takes into account the lack of ICT literacy among Indian farmers by having a trained facilitator that helps
them overcome the challenge.
If e-governance is implemented successfully, it can also give rise to a range of benefits including spread
of ICT awareness, access to timely information, and an extended reach to the poorer and marginalized
sections. This could feed back into the growth of the ICT industry as a whole.
A growing internal demand that appears sustainable even during downturns makes the Asia Oceania
region the most attractive consumer market in the world. Telecommunications is one of the major
opportunity areas in Asia-Oceania. An under-penetrated market, with a large population base and
favorable demographics are some of the factors that make a compelling proposition.
The new world of telecommunication brings a myriad of opportunities within the segment. Some of the
technologies that can bring voice and data services to a large population include wireless phones (voice
and data), Wi-FI LAN (data/ internet)
The mobile phone is able to provide voice communications to a large population spread over a wide
geographical area. Therefore, mobile phones are experiencing a faster growth rate than fixed phone in
the Asian market.
Developing countries in the Asia-Oceania region have had the benefit of leapfrogging in this technology
space and it now uses the second and third generation digital technology. These new technologies are
able to deliver voice services at a fraction of the cost, making mobile phones affordable and accessible to 20even the poorer segments of the society
Opportunity for service providers
Wireless: Mobile voice
Telecommunications
20. Digital Review of Asia Pacific 2007/2008
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Mobile subscriber and fixed telephone lines in Asia and the Pacific 1997 – 07
594
1997 1999 2001 2003 2005 2007
1385
0
200
400
600
800
1000
1200
1400
1600
Source: International Telecommunication Union
Fixed Lines Mobile cellular subscriptions
Case Study: Bangladesh
Following a number of years of
strong growth, starting from a very
low base, mobile telephone
penetration was approaching the 30
percent milestone in early 2009. As
against this, the fixed-line segment
of the local telecom market has
been stagnant with a tele-density of
less than one percent, the lowest in
South Asia, with 80 percent of the
fixed line telephones concentrated
in the four main cities in
Bangladesh.
GrameenPhone was the leading
mobile operator, with around 47
percent market share, as at mid-
2009, despite the best commercial
efforts of its five competitors. Wireless: Mobile data
There is a significant opportunity for device manufacturers as newer services necessitate advanced mobile
handsets with better features, which include mobile data services. Recent trends also point towards
consumers changing handsets rapidly to keep abreast of newer technologies and innovations.
The large rise in subscriber base in the region’s mobile markets is offering huge potential for mobile data
services. Operators are now increasingly relying on mobile data services to boost revenues, fuel growth
and help retain subscribers in a fiercely competitive market, where traditional call rates are on the
downward trend. Besides, data services such as messaging, entertainment, internet access and mobile
banking are providing retention tools and differentiators for operators.
Asia-Pacific offers prime opportunities as its geography, existing infrastructure and socio-economic factors
can accelerate the adoption of new technologies at a faster rate than that in other markets. Already, low
and middle income countries are showing much faster wireless growth rates. However, average revenue
per user (ARPU) remains low in developing countries as compared to those in developed countries. While
the ARPU in Japan was USD 53.2 per month, that for South Korea was USD 38.04 in 2008. Comparatively,
the ARPU in countries like India, Indonesia and Vietnam are less than USD 10 per month, despite rapid
growth in the mobile markets. The difference can be attributable to lower per capita incomes, high number 21of pre-paid subscribers and low propensity to spend on content-driven applications.
In the developing markets, mobile usage is likely to continue to be dominated by voice and basic text
messaging services. Also there is focus on providing services to rural and under-penetrated areas. The
advent of the next generation technologies such as 3G has started relatively slowly, but is expected to pick
up fast. It is also likely that rural or under-penetrated areas may see wireless broadband even before fixed
broadband reaches them.
By contrast, in the developed markets such as Japan, Korea, Hong Kong, Singapore and Taiwan where
newer technologies such as 3G/3.5G/4G are making inroads, voice and data traffic have increased further.
This is leading to a greater demand for more bandwidth-intensive, high-speed multimedia applications and
services. Operators are likely to seek new methods to expand capacity and improve the performance of
existing networks to provide advanced, multimedia and IP services.
45
21. http://www.mediabuzz.com.sg/asian-emarketing/september-october-2009/621-asia-will-continue-to-lead-in-mobile-growth-and-revenues-with-china-in-the-forefront
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Wi-Fi LAN (Wireless LAN/ WLAN)
Asia-Oceania is one of the most under-penetrated markets for Wi-fi and therefore presents significant 22opportunities for local service as well as equipment providers.
Unlike mobile phones where the equipment supplier base is small, the number of manufacturers of
WLAN equipment is fairly large. Many of the manufacturers originate from East Asia and are able to 23release products at very cost-competitive prices, in order to cater to the local Asian markets.
Innovations in the wi-fi technology not only reduce the costs but are also able to bring these networks to
the rural areas due to a lower requirement of transmitters
Though initially wi-fi adoption was slow, the Asia Pacific region today is a high-growth market with Japan, 24Taiwan, South Korea and Hong Kong experiencing high growth.
25 The Wireless LAN industry revenues in Asia-Pacific are expected to reach USD 1.84 billion in 2009, and 26the region has been experiencing double digit growth rates. Support from the government is also
benefiting the industry. Key telecommunication companies in Korea and Taiwan such as Korea Telecom,
Hanaro, and Chunghwa Telecom are being supported on their Wi-Fi implementation plans by the
government’s strategic national information and communication roadmaps.
Wireless LAN is expected to become an important new revenue segment in Asia’s service market, 27driven by an increasing broadband penetration and a rising usage of hybrid devices.
With Wi-Fi increasingly being deployed as a feature on the handset and the Wi-Fi hotspot footprint on the
rise, Asians are likely to use Wi-Fi to connect to the internet without having to own a laptop or a PC,
which may be an expensive investment.
Future growth in the region is expected to be fuelled by Japan, the Wi-Fi application and the innovation
hub, as well as other emerging markets such as China, Thailand, Malaysia, and India.
E-Commerce: An increasing access to information through numerable avenues is leading to an increased
adoption of eCommerce. The growth of e-commerce creates an environment that is conducive to the
expansion of the ICT sector and in turn creates new economic opportunities, even for countries that are
physically isolated or have difficulty attracting foreign investment.
E-Commerce and M-Commerce
Case Study: Wireless for rural
development
Ashwini Project of the Byrraju
Foundation - a leading not-for-profit
organization, is transforming lives in
rural India by using license-free Wi-
Fi spectrum to provide employment,
develop cottage industries and
provide education. The success of
projects such as Ashwini is
testimony to the potential of
wireless technology. The project
was implemented to provide a
virtual delivery platform to rural
people in Andhra Pradesh to drive
rural savvy services such as
computer literacy, telemedicine, e-
education, personality development
programs, etc, through the help of
videoconferencing. At present, there
are 33 WiFi enabled Ashwini
centers in operation.
25. http://infotech.indiatimes.com/articleshow/35273646.cms
26. http://www.bwcsenergy.com/news_detail.cfm?item=3893&from=press
27. http://www.researchandmarkets.com/reports/39741/the_future_of_wireless_lan_in_asia.htm
22. http://networks.silicon.com/mobile/0,39024665,39170389,00.htm?sr=travel
23. Digital Review 2007-2008
24. http://www.clickz.com/1468631
2006 2007 2008 2009 2010
USD 433 bn
USD 560 bn
USD 690 bn
USD 827 bn
USD 967 bn
17%
37%
43%
Rest of the WorldNorth AmericaEuropeAsia - Pacific
Source: Glenbrook Partners LLC
Global e-Commerce Sales (2006-10)
22% CAGR
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28. http://www.ean-int.org/docs/mobile/GS1_Mobile_Com_Whitepaper.pdf
29. http://www.budde.com.au/Research/2008-Global-Digital-Economy-M-Commerce-E-Commerce-E-Payments.html
30. Datamonitor Report
31. See appendix for definition
The developed countries in Asia-Oceania have seen sustained growth in e-commerce due to their high ICT
penetration and ICT awareness in the society. However, the developing countries have been slower to
catch up on the trend due to low ICT penetration and even lower awareness.
However, lately, due to high wireless penetration in developing countries, there is a sense of tremendous
opportunity to conduct e-commerce using mobile applications. In fact, IBM forecasts 22 percent growth in
mobile, digital and interactive advertising formats between 2006 and 2010 against 4 percent growth in 28traditional advertising formats.
M-Commerce: Mobile commerce, often referred to as m-commerce, builds on the advances made by e-
commerce (such as automated, electronic processes) but makes interaction available to a wider audience
in a more personalized way, through a mobile phone.
Wireless penetration has exceeded PC penetration in Asia-Oceania, giving rise to the opportunity to
connect not just large businesses but also small businesses and individuals. In this sense, mobile phones
have the potential to bridge the digital divide much more effectively than computers. Asia Pacific already
leads the world in terms of using mobile phones for m-payments, accounting for around 85 percent of
customers worldwide. However, most of this growth is currently led by markets like Japan, Korea and
Singapore.
There are yet some practical limitations to mobile commerce. While there are good applications, the
technologies and business models to date have not been well suited to mass market applications. The
regulatory environment has also constrained this market. This is beginning to change as banks and 29merchants collaborate with mobile operators.
0
10
20
30
40
50
60
70
80
90
Australia China Hong Kong India Japan Korea Singapore Thailand APAC
Online shopping penetration rate Online shopping Penetration depth
perc
enta
ge
Source: MasterCard's survey: Online shopping in Asia-Pecific - Patterns, trends and future growth, 2008
Note: Online shopping penetration rate - defined as the proportion of online shoppers population, among online population, calculated using the probability of purchase
Online shopping Penetration depth is calculated using the proportion of online purchases over personal consumption expenditure
Online shopping penetration rate and depthGrowing importance of social
networking sites: LinkedIn in
India
TUS-based professional networking
site LinkedIn.com has 50 million
users worldwide, of which over 3
million are from India. On a year-on-
year basis, the number of Indian
users has increased by almost 180
percent from less than a million,
making it the fastest growing
market for Linkedin.
Social Networking
The advent of Web 2.0 promoted the interconnectivity and interactivity of Web delivered content thus
leading to the birth and growth of Social Networking. Social Networking sites (SNS) have witnessed
exponential growth in the recent years.
The revenues from Social Networking services were estimated to be USD 965 million in 2007. Asia Pacific accounted for 35 percent of the world's social networking memberships. While EMEA followed with 28
percent and North America with 25 percent.
30
31
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32. S-Commerce is Social commerce, a term coined by a market research firm Compete
Social networks have now localized their sites by translating them into new languages and bringing
opportunities for local service providers. Asian networks like QQ in China with 300 million active
accounts, Cyworld in South Korea (20 million users) and Mixi in Japan with close to 14 million user
accounts, are in the local languages, and have grown remarkably.
33S-Commerce : A convergence of Social Networking Sites and E-Commerce
The growing popularity of SNS among the web users is creating a wealth of new marketing opportunities
for online advertisers. Social network users create a significant amount of data about themselves on
these sites such as their friend networks, likes/dislikes, opinions, which could be used by advertisers. E-
commerce is slowly seeping into social networking sites, however as consumers have limited social
bandwidth, marketing agencies must use innovation to ensure customer stickiness.
Social networks are also gaining attraction for the online travel industry. Referrals posted on these sites,
especially for the hotel industry, are seeing an increasing conversion rate.
48
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Country Profiles
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Each economy in Asia-Oceania is banking on its distinct capabilities to propel its growth over the next
decade, whether as an ICT demand market or a supplier. Even within the ICT industry, most countries are
targeting the services space and more importantly, are recognizing the potential from IT and BPO
services in global sourcing. Already economies such as India and the Philippines are considered leading
players in this space globally.
Several other economies in Asia-Oceania are now looking to emulate these success stories.
Governments, especially in developing economies, are according priority to the software services and
business process outsourcing (BPO) sectors. This is expected to act as an enabler to improve education
and to drive the country towards achieving the status of the ‘knowledge economy’.
Even as total demand for global sourcing services is expected to grow by 4.9 percent every year from
2008 to 2020, demand from ASOCIO member countries is expected to grow by around 7 percent every
year in the same period. This will take the contribution of ASOCIO member countries in the total global
sourcing demand from 20 percent in 2008 to around
26 percent by 2020.
1Regional growth potential 2008-2020
ASOCIO member countries as ‘Consumers’ of IT-BPOASOCIO member countries as ‘Producers’ of IT-BPO
Source: KPMG Analysis
Note: Chart for illustrative purpose, not to scale
79
450
335 - 340
Total Global Outsourcing Size ASOCIO member countries
2020
USD billion
58 - 62
850
1500
169 - 173
395 - 400
2008
ASOCIO member
countries share in
Global IT - BPO
Outsourcing is expected
to increase from ~73%
in 2008 to ~75% in 2020,
growing at a CAGR of
around 16%
Total Global Outsourcing Size ASOCIO member countries
2020
USD billion
2008
ASOCIO member
countries share in
Global IT BPO demand is
expected to increase from
~20% in 2008 to ~26%
in 2020, growing at a
CAGR of around 7%
On the supply side too, Asia-Oceania is expected to dominate the global services sourcing industry. The
share of ASOCIO member countries in the supply of global sourcing services is likely to reach around
74.5 percent in 2020, from around 73.1 percent in 2008.
1. KPMG analysis, aggregation of projections outlined in individual
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2. KPMG analysis, aggregation of projections outlined in individual
2Forecasts for CountriesThe composition of demand will undergo a change from 2008 to 2020. The contribution of some of the
developed countries like Japan, Australia and New Zealand in the regional demand for IT-BPO services is
likely to decrease. However, the contribution of developing countries like India and Thailand is expected
to increase in the coming years.
Share of ASOCIO member countries in global supply of IT-BPO
20202008
Source: KPMG Analysis
20202008
Source: KPMG Analysis
India currently commands a leadership positioning global sourcing supply, servicing approximately 51
percent of overall global sourcing demand in 2008. By 2020, India is expected to retain its leadership
position. Newer countries such as Sri Lanka, Pakistan and Bangladesh are expected to make their mark
on the global sourcing supply landscape by 2020.
Share of ASOCIO member countries in global demand of IT-BPO
India51%
Philippines8%
Malaysia2%
Vietnam1%
Others 10%
(Demand countries)
Non- 28%
ASOCIO export
India51%
Non - 27%
ASOCIO exportBangladesh
1%
Pakistan3%
Sri Lanka1%
Malaysia2%
Others 4%
(Demand countries)
Vietnam1%
Philippines10%
Japan62%
Korea6%
Australia8%
Taiwan6%
Hong Kong1% Singapore
4%
New Zealand2%
Others11%
Thailand2%
India15%
New Zealand1%
Singapore4%Hong Kong
1%
Taiwan9%
Australia7%
Korea9%
Japan43%
Others 9%
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Australia
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Source: EIU, 2008
GDP Composition
Agriculture 3%
Industry 27%
Services 70%
GDP at Market Prices (2008)
Population (2008)
Exchange Rate (USD:AUD) (Jan-Sep ’09 avg)
Inflation (1Qtr - 2009)
Unemployment (2008 avg)
S&P Risk Rating
55
USD 993.4 billion
21 million
1.34
2.5 percent
4.2 percent
AAA/Stable/A-1+
Source: S&P, EIU, x-rates.com
1.
2. http://www.dbcde.gov.au
http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
1Economy and Industry
Australia has a stable economy with its annual average GDP growth rate estimated to
be around 3.5 percent during the 1998 to 2009 period.
36.8
-35.6
26.4
39.6
28.9
7.5
25.8
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
115.3
138.0
157.7
182.3
234.1
181.3
220.7
Note: Year (f) indicate forecasts made for the year
Source: EIU
Australia's economy is dominated by its services sector, which accounts for nearly 70 percent of its GDP.
Since the 1980s, Australia has undertaken various structural reforms to transform its
economy to an open, internationally competitive and export-oriented economy. The key
economic reforms included unilaterally reducing high tariffs and other protective barriers
to free trade, deregulating the financial services sector, privatizing many government-
owned monopolies, and reforming the taxation system
The Government of Australia is predicting that the GDP is likely to shrink by 0.5 percent
in 2009-2010 as a result of the global economic downturn
Australia has a diversified trade exposure with a comparative advantage in the
agriculture and mining sectors. Australia remains a major supplier for essential
commodities like base metal ores and fuel as the large industrializing countries of Asia 2draw heavily from its large mineral reserves
Trade and Investment
Inward FDI (USD Billion) Exports (USD Billion)
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3. http://www.dbcde.gov.au
4. http://www.austrade.gov.au/Invest/Opportunities-by-Sector/ICT/default.aspx,
http://www.manpower.com.au/documents/White-Papers/IT%20Market%20Insights-Australia.pdf
5. AAII
6. http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
Evolution of the IT-BPO Industry
Current State of the IT-BPO Industry
1990s:
The Australian Government adopted the term ‘information economy’
in 1997 to describe the transformation of economic and social
activities by information and communication technologies
2000s:
In 2009, recognizing the importance of the digital economy, the
Government released the Digital Economy: Future Directions paper
and re-emphasized on creation of a National Broadband Network
(NBN). Under the NBN strategy, the Government plans to invest
nearly USD 36.1 billion over eight years to establish and operate a
high-speed, fiber-to-the-premises broadband network to service 3Australian homes and businesses
The Australian IT-BPO services market is estimated to be the fifth
largest market in the Asia Pacific in 2008. Australia’s IT-BPO services
market has grown at a CAGR of 8 percent between 2004 and 2008,
to reach a size of USD 15.1 billion in 2008. It is currently about 14.6
percent of the total ICT market, which was USD 103.4 billion in 4,52008 . Australia’s IT services penetration as a proportion of GDP, at
about 1.2 percent in 2008, was relatively small compared to the
Western countries.
The Australian IT-BPO industry is well-known internationally for
providing a variety of services, including security, intelligent
transport systems, e-commerce, wireless networking and digital
content. Exports of IT-BPO services reached around USD 2.5 billion 5in 2008, recording a CAGR of 9 percent from 2004 - 2008
Large companies such as IBM, Canon, Citrix, EDS, Fujitsu, Google
and NEC have built major software development facilities in
Australia. However, over 96 percent of software and computer 6services firms are small to micro sized .
There are presently around 30,300 ICT and related businesses in 6Australia that employ around 532,500 ICT professionals in 2009
IT-BPO Industry Size
9.4 10.2 11.2 12.0 12.6
1.82.0
2.02.4
2.5
0
2
4
6
8
10
12
14
16
USD
bill
ion
2003 2004 2005 2006 2007
Domestic Market Exports
Industry CAGR8%
Note: The industry size includes the domestic market as well as exports of IT services and software
products. BPO market estimates were not available.
Source: ACS, WITSA
Source: EIU, 2008
Services 69%
Break up of IT-BPO
Software 31%
Australian Information Industry Association (AIIA)
The Australian Information Industry Association (AIIA) is the nation’s peak industry body for the technology sector. AIIA was
set up in 1978, and its membership encompasses all sectors of the industry, from hardware and software services to
multinational companies and local SMEs. AIIA member companies employ 100,000 Australians, generate combined annual
revenues of more than USD 40 billion and export more than USD 2 billion in goods and services each year.
AIIA’s Chief Executive Officer and national secretariat are based in Canberra. It also has executive officers in Melbourne,
Sydney, Brisbane, Adelaide, Perth and Darwin who work with our state committees and special interest groups.
For more details on AIIA please refer appendix section or visit www.aiia.com.au
56
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Drivers of the IT-BPO Industry
Human resource availability
! Australia has a high literacy rate of 99 percent and its tertiary
education enrolment ratio of 75 percent is also among the 7highest among developed economies
! Although most of Australia's 39 universities offer undergraduate
and graduate courses in ICT related areas, applications to study
undergraduate ICT degrees in Australia fell by about 65 percent
over the past seven years. Moreover, an ageing population and a
low resident population pose challenges for Australia’s IT
industry. In 2008, the Australian ICT industry was estimated to 8, 16face a shortage of nearly 12,000 FTEs
ICT penetration in the country
! ICT penetration is high in Australia. In 2008, 79.4 percent of the
Australian population used the internet; while there were 9700,200 broadband subscribers in September 2007 . The mobile
penetration rate is almost 111 percent with 23.29 million 10subscribers in 2008
! Despite the high penetration, the penetration of IT-BPO services
is relatively limited.
! Australia was ranked fourth in the world for e-readiness by the
Economic Intelligence Unit (EIU) in 2008. Australia is also the
source of a number of distinctive technologies, especially in the
areas of e-health, e-government and financial services
IP protection and data protection
! Australia’s piracy rate of 26 percent in 2008, was lower than
most of the Asian countries, except Japan. However, losses due
to software piracy have increased over the years to reach USD 11613 million in 2008
Infrastructure development
! Australia has an extensive multi-modal transport infrastructure
comprising of well-developed road, rail, air and coastal networks.
However, with significant economic growth, there is a rising
need to invest in water transport, ports, telecommunications,
and education infrastructure to expand Australia's supply 12capacity
! Australia provides reliable and competitively-priced power, given
that the country has vast reserves of coal. Power outages remain
low across most of the states in Australia, providing stable 13infrastructure for businesses to operate
Government support and incentives
! The Australian Government offers tax deduction of 125 percent
for R&D and a 175 percent premium tax deduction is available for
increases in R&D expenditure above a rolling three-year 14average
! Foreign companies investing in R&D in Australia are entitled for a
175 percent international premium tax deduction In addition, an
R&D offset is available for companies with a turnover of less
than USD 5 million that spend less than USD 1 million on 9R&D.accessories
Competitiveness in the exports market
! Export of ICT amounted to USD 5.5 billion, including USD 3 billion
in goods and USD 2.5 billion in services in 2008. Major export
markets include the USA, UK and ASEAN. Most of the smaller 8, 16companies focus on generating innovation and exports
GDP growth
! Australia has an advanced economy with the value of goods and
services produced in the country estimated at USD 1 trillion. In th2007-08, Australia registered its 17 consecutive year of
economic expansion with GDP growth averaging 3.5 percent per 8, 17annum over this period
! The country has successfully capitalized on its proximity to the
emerging Asian markets and on its trade links with Japan and the
United States. Australia also has Free Trade Agreements (FTAs)
with Singapore, Thailand, and Chile, and is pursuing other FTAs, 8, 16including China and Japan .
Doing business
! Australia is ranked ninth out of 183 economies for the ease of
doing business in the World Bank Doing Business Survey 2010. It
takes three days to start a business in Australia, which is 15significantly lower than the OECD average of 13.0
! Australia enjoys a higher standard of living than any G7 country
other than the United States. Salaries in the business and
professional services sector rose by 5.8 percent in 2008. ICT
salaries are around 20 percent higher on an average than the rest 16, 17of the economy
7. CIA, http://www.manpower.com.au/documents/White-Papers/IT%20Market%20Insights-Australia.pdf
ACS, http://www.australianit.news.com.au/story/0,24897,25570641-5013038,00.html
8. Austrade Website
9. http://www.businessmonitor.com/telecommunications/australia.html,
http://www.business.nsw.gov.au/PDF/infrastructure-D6_it_takeup.pdf
http://www.business.nsw.gov.au/aboutnsw/infrastructure/D8_businessuseoftechnology.htm
10. http://www.dbcde.gov.au
11. BSA IDC Study
12. http://www.austrade.gov.au
13. AAII
14. http://www.dbcde.gov.au/__data/assets/pdf_file/0003/10578/Australian_Government_Support_for_the_IC
T_Sector.pdf
15. World Bank
16. http://www.state.gov/r/pa/ei/bgn/2698.htm,
17. http://www.mercer.com/summary.htm?siteLanguage=100&idContent=1321740
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18. EIU
19. Inputs from KPMG Australia
The Australian Government’s Digital Economy Strategy and the
announcement of the (NBN) are expected to drive the future prosperity
for the IT-BPO Industry. ICT is expected to play an increasingly central
role across businesses and industry under the National Digital Economy
strategy.
Prospects 2020: Innovation to act as a stimulus for
driving future growth of IT-BPO industry
IT-BPO services are estimated to be a USD 15 billion industry in
Australia. IT-BPO industry growth in Australia has been facilitated by
the availability of a highly-educated workforce, investment in R&D and
a sophisticated business environment.
By 2020, the industry is likely to reach an industry size of USD 24.3
billion. The major challenges that the industry are expected to face up
to 2020 are shortage of trained manpower due to adverse
demographics, rising operating costs and competition from other
countries in innovation and exports
The industry growth rate can increase, taking the industry size to USD
27.2 billion if the focus on BPO services within the ICT industry is
strengthened and the human resource constraints are addressed by
Australia. The higher rate of growth is likely to be driven by increasing
adoption of IT by industries such as healthcare, tourism and
agriculture, alongside traditional industries such as financial services
and manufacturing. The dispersion of innovative technologies such as
Green IT, virtualization, etc. and an increase in spending by the
government and public entities in Australia is also likely to help provide
a boost to the IT services industry. The BPO industry in Australia is
expected to grow much faster than IT and provide an incremental
growth to the industry.
Australia IT-BPO Industry 2020
2008 2020 ‘As Is’Scenario
2020 ‘Likely’Scenario
CA
GR
4%
CA
GR
5%
USD 15.2 bn
USD 24.3 bnUSD 27.2 bn
Source: ACS, KPMG Analysis
Implications for Stakeholders:
The ICT industry has been a critical source of economic stimulus and
growth for Australia. However, for achieving faster growth and a rising
role for the IT-BPO industry, Australia needs to address some of
following issues:
Sustained focus and investment in innovation:
Australia is well placed to develop higher-end industries and fares well
in global rankings of R&D expenditure, ranking 12th with an R&D 18spend of around 1.7 percent of GDP in this area . Going forward,
Australia needs to maintain its focus on value added services, which
are needed to deliver a flourishing Digital Economy
Build a solid skills base:
Australia needs to address the human resource constraint to help
ensure that it can respond to market opportunities and deliver world
class technological solutions. Australia needs to find creative new
ways to attract and retain young people, women and mature
professionals. Until recently, Australia lacked a uniform-approach to ICT
curricula in higher education institutions, and a formal link connecting
these institutions with the industry
Ensure cost-competitiveness:
Australia needs to support a low cost and pervasive business
environment for IT-BPO companies in order to maintain international
competitiveness. As other Asian countries make rapid improvements
to economic and social well-being, it may be necessary to ensure that
Australian businesses have access to a business climate which
encourages both global and domestic companies to invest in the
country and promotes Australian businesses to seek export
opportunities
Australia needs to look at collaborated ways in which it can build a
greater shared future in the region, making a bigger contribution to the
IT-BPO industry in Asia Oceania as well as focusing on what it can gain
from collaboration. The multicultural environment in the country makes
Australia easy to collaborate with. Some of the opportunities of
collaboration could be:
! Collaborating with other countries with more skilled labor, to capitalize
on the opportunities that are available for growth within Australia
! Closer collaboration with countries to leverage opportunities that
emerge from rapidly growing emerging economies and their markets
! Australia has the potential to become the gateway to the West by
offering a platform to pilot new products and solutions of
companies that are based in Asia-Oceania region, due to high
quality of infrastructure and the use of the skilled population
! The Australian government has assigned high priority to
environmental sustainability initiatives and can create a leadership
position in the region. The innovation and advancements in the
area of environmental sustainability could lead to several
opportunities for collaboration with Australia playing a significant
role in the region
! Australia leads the discussion on creation of a national broadband
network that will enable the creation of a digital economy. The
advancements planned within Australian under the NBN project
culd lead the way for many Asia-Oceania countries that are keen to
improve their infrastructure to follow suit.
19Opportunities for Collaboration
Australian: Outlook 2020©
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20. Austrade Website
21. http://www.innovation.gov.au/Section/AboutDIISR/FactSheets/Pages/ICTSector
FactSheet.aspx
22. http://www.acs.org.au/news/021008.htm, http://aiia.e-
newsletter.com.au/link/id/c461c2682dfe05791fe9P00d24d697331b6bbe1f4/page.html,
IT-BPO Industry Capabilities
Strengths Weaknesses
Shortage of Skills
Australia faces a widening gap between the demand for ICT skills and the
supply of qualified ICT workers. According to ACS, the shortage of ICT
industry skills is expected grow 29 percent by the year 2010 to over 14,000
jobs. In addition, the rate of eligible applicants for undergraduate ICT
education has declined by11.4 percent between 2006 and 2008 . The
problem is likely to be compounded in the next decade due to an ageing
population and rising dependency ratio in Australia. The adverse
demographics is expected to present major challenges in terms of
economic, fiscal and social impacts and impact on the future growth in
living standards of Australians. Moreover, it has been noticed that
population growth and higher migrant intakes are much less popular with
the general public, despite strong support from business and government.
Rising Costs
Inflation is affecting the labor markets and other operating costs for the ICT
industry in Australia. Remuneration paid to ICT professionals across the 12-
month period of 2008 rose by 4.9 percent, slightly above the previous year’s
increase of 4.5 percent. In a tight labor market and rising competitiveness
from low-cost destinations, Australian companies are increasingly facing
the challenge of retaining the best talent and maintaining an appropriate
cost structure . 22
Developed IT-BPO marketthAustralia has the 14 largest ICT market globally and the fifth largest in the
Asia Pacific region in 2008. The Australian market is almost as large as the
combined ICT markets of Hong Kong, Indonesia, Malaysia and Singapore.
Moreover, the Australian IT-BPO industry is regarded as sophisticated in
areas like telecommunications, security, e-commerce, wireless networking,
intelligent transport system and digital content. Australia is also the source
for distinctive technologies in areas like e-health, e-government and
financial services .
Focus on Innovation
The Australian Government supports innovation by providing various
incentives for carrying R&D. The government has committed USD 380
million over 10 years (to 2011) to establish and operate a center of
excellence for ICT research i.e. known as National ICT Australia (NICTA). In
addition, during 2006-07 Australian businesses (from all industry sectors)
spent approximately USD 2.7 billion on research and experimental
development in the field of information, computing and communication
sciences. This represents 26 percent of all business expenditure across all
fields of research and experimental development .
20, 21
22
Intensifying competition
Australian businesses are likely to face increasing competition from
overseas companies in the domestic as well as international markets.
Since a bulk of the Australian companies is in the SME segment, these
companies are likely to be vulnerable unless they invest in staying ahead of
the competition through innovation, strategic alliances and collaboration.
Domestic Market Opportunities
ICT adoption among Australian businesses remains very high. Moreover,
ICT demand particular in financial services, resources, energy,
manufacturing, health, education and entertainment has improved given
the productive and innovative capacity of these industries. In 2008,
Australia's imports of ICT were around USD 21.9 billion (USD 19.2 billion in
goods and USD 2.7 billion in services). Moreover, the Australian
Government’s Digital Economy Strategy and the announcement of the NBN
are expected to further augment the demand for the IT-BPO industry
Outsourcing Opportunity
Australia’s capacity to innovate has made it an internationally recognized
place to invest and successfully develop solutions with global applicability.
Many international companies are delivering niche services out of Australia
to both the region and the world. For e.g. Australian digital content
expertise has global recognition. The creative digital industry has earned
more than AUD 23 billion in revenues per year. The digital game
development sector alone generated AUD 136.9 million in 2006-07, with 93
percent derived from exports .
20
20
Opportunities Threats
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Bangladesh
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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1.
2. http://www.state.gov/r/pa/ei/bgn/3452.htm, http://aktuell.eulerhermes.de, BCS
3. http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
World Bank, CIA 4. EIU, BCS
5. http://www.moef.gov.bd/moef.pdf
Economy and Industry
Trade and Investment
Since its independence in 1971, Bangladesh has been focused towards creating a
market economy. Economic policies aimed at encouraging private enterprise and
investment, denationalizing public industries, reinstating budgetary discipline, and 1, 2liberalizing the import regime were accelerated after independence .
Economic growth has
recorded an average
GDP growth of above 6
percent over the past six
years (2003-08). The
percentage of people
living in poverty in
Bangladesh has also
declined from 59
percent to 40 percent
between 1991 and
2005, and the country's
Human Development
Index improved from
0.347 in 1975 to 0.547 in 2005, indicating an improvement in the overall living
standards in Bangladesh . However, more than 50 million people still live in poverty and 3the country’s GDP per capita is low, at USD 690 during 2009 .
Although, the services sector contributes more than half of GDP, agriculture remains a
major source of employment providing employment to nearly two-thirds of
Bangladeshis.
Exports of goods and services formed nearly 22 percent of the GDP in 2008.
Bangladesh is one of the major exporters of readymade garments. Exports of
readymade garments accounted for nearly 66 percent of the total national exports in 42008
Garment exports and remittances from Bangladeshis working overseas - mainly in the
Middle East and East Asia - has helped fuel economic growth in Bangladesh. However,
the global recession has led to a slowdown in Bangladesh’s ready-made garments 1, 5exports and remittances
Source: S&P, EIU
GDP at market prices (2008)
Population (2008)
Exchange Rate (BDT:USD) (Jan – Sep ’09 avg)
Inflation (1Qtr - 2009)
Unemployment (2008 avg)
S&P Risk Rating
USD 79.6 billion
160 million
68.94
5.6 percent
2.5 percent
-
GDP Composition
Service 52%
Industry 29%
Agriculture 19%
813.3
697.2
652.8
710
500.2
901.3
448.92004
2005
2006
2007
2008
2010 (f)
2013 (f)
9.2
11.7
14.9
16.9
18.8
24.2
8.7
Note: Year (f) indicate forecasts made for the year Source: EIU
Inward FDI (USD Million) Exports (USD Billion)
Source: EIU, 2008
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6. ASOCIO Website, www.icmab.org.bd
7. http://www.itweb.co.za/sections/features/callcentresandbpo/feature0710290710.asp
8. http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
9. BASIS Soft Expo Website
10. BCS
industry and to liaise with and assist the government on development 6issues of this sector
1990s:
Bangladesh Association of Software and Information Services (BASIS)
was formed in 1997 with the vision of developing the local software
and IT service industry in the Bangladesh. In 1998, the Government
removed all import duties and VAT for computer hardware and 7software imports
2000 - Present
The ICT Taskforce was formed headed by the Prime Minister in 2001.
Bangladesh finalized its first National ICT Policy in 2002 aimed at
building an ICT-driven nation comprising of a knowledge-based society.
In July 2009, the Government approved the new National ICT Policy,
after reviewing and amending the National ICT Policy 2002. The new
policy incorporates 306 action plans to achieve the country’s IT vision
of a ‘Digital Bangladesh’ in 2021. The Government prioritized the ICT in
the budget of the fiscal 2009-10 allocating a total of more than USD 80 8million
The IT-BPO industry in Bangladesh is estimated to be around USD
593.5 million in 2008. Export earnings from IT-BPO was USD 37
million in the fiscal year 2009-10 registering a high growth of 25 9, 10percent from the previous year
The adoption of IT among businesses in Bangladesh remains low, as
IT spending as a percent of GDP was around 0.8 percent in 2008.
Banking, financial services and telecom are among the major industry 10verticals consuming IT-BPO services
Out of the 550 registered IT-BPO companies in Bangladesh, more than
400 companies export their products to the US, Canada, EU, Middle
East, Japan, Australia, South Africa and some South East Asian 9, 10countries. Most of the IT-BPO companies are of Bangladesh origin
Foreign investment in the IT-BPO industry has increased over the past
few years. Nearly 30 companies are established through joint ventures
with foreign companies or as Offshore Development Centers with 100 9, 10percent foreign capital investment
Bangladesh offers competencies in areas of software development,
web development, desktop publishing, data entry, 3D animation and
back office development.
Current state of the IT-BPO Industry
Evolution of the IT-BPO Industry
1960s - 1980s:
The Bangladesh Atomic Energy Commission first introduced
computers in the country in 1964, to be followed in late 1960s and
1970s by their use in the financial sector. The National Computer
Committee, the predecessor of Bangladesh Computer Council (BCC)
was formed in 1983. Later, BCC was officiated by an act passed in the
Parliament in 1990 under the Ministry of Science and Technology.
Bangladesh Computer Samity (BCS) was established in 1987 with a
view to assemble all entrepreneurs in the field of computer and
information technology under one roof to explore the then infant
Bangladesh Computer Samity (BCS) is the voice of the ICT industry of Bangladesh. It is the national association of the ICT
companies in Bangladesh. BCS was established in 1987 with 11 members.
BCS contributes to the country’s ICT policy making and takes part in the implementation of national ICT action plans, along
with public entities. It also provides support and cooperation to NGOs in ICT related development and services.
The ICT industries of Bangladesh comprises of distributors, dealers, resellers of computer and allied products, locally
assembled computer vendors, software developers and exporters, internet service providers, ICT based educational
institutions and training houses, ICT embedded services providers etc. The total number of members stands at 710 at present.
For more details on BCS please refer appendix section or visit www.bcs.org.bd For more details on AIIA please refer appendix
section or visit www.aiia.com.au
Bangladesh Computer Samity (BCS)
Source: BCS, 2008
Computer Network &
Hardware 60%
Break up of IT-BPO by Service Line
Other IT Enabled
Services 15%
Software 15%
Internet & Network
Services 10%
IT-BPO Industry Size
USD
mill
ion
Domestic Exports
Note: Data for exports is for Bangladesh’s financial years; while data for domestic market is for
calendar years
Source: BCS, WITSA Digital Planet Report
488.6 541.1 568.7 598.9 635.4
27.0126.08 24.82 29.5
37
0
200
400
600
800
2006 2007 2008 2009E 2010E
Industry CAGR 10%
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11. CIA, EIU
12. BCS, http://www.um.dk
13. World Bank
14. http://www.thedailystar.net/story.php?nid=93653, BRTC Website
15. http://www.internetworldstats.com/asia.htm, BCS Website
16. IIPA, BSA-IDC Piracy Study 2008
17. http://go.worldbank.org/ASJDZO82Q0, Energy Bangla Website
18. BOI, http://www.um.dk, http://www.thefinancialexpress-bd.com/2009/04/07/63318.html
19. http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
20. http://www.dbcde.gov.au
21. ASOCIO
22. World Bank Website, http://aktuell.eulerhermes.de, CIA
23. Various News sources
24. http://www.jetro.go.jp/bangladesh/topics/20070619122-topics?print=1
Drivers of the IT-BPO Industry
Human resource availability
! Bangladesh has a young population, with nearly 63 percent
within the age group of 16 to 64 years, which is favorable for the 11IT-BPO industry
! Bangladesh has nearly 60 universities that produce more than
5,500 graduates in IT-related areas. Nearly 2,500 of these 11students specialize in software engineering
! However, the available workforce is still not adequate to meet
the demand of IT-BPO industry, as each year the industry faces a
shortage of about 1,800 to 2,600 professionals. In addition, the
quality of education remains low affecting the employability of 12, 13graduates
ICT penetration in the country
! ICT penetration is limited in Bangladesh. Penetration of tele-
services reached nearly 34 percent with 46.41 million mobile
subscribers in May 2009. Penetration of mobile services has 14been limited in rural areas
! PC penetration is low with 4.5 PCs per 1000 people. Internet
penetration is also minimal at 0.3 percent and 500,000 users in
March 2008. However, Bangladesh is now connected to the
submarine cable network and has brought major cities and 15towns under the optic fiber network
IP protection and data protection
! Despite formulated polices and laws, the IT-BPO industry in
Bangladesh continues to be severely affected by piracy. In 2008,
Bangladesh had a software piracy rate of 92 percent and incurred
losses amounting to USD 102 million due to piracy. Bangladesh 16has established a taskforce to enforce IPR
Infrastructure development
! Physical infrastructure to support the IT-BPO industry remains
weak in Bangladesh. Although the road network has been
expanded and improved to carry a majority of the national
passenger traffic, it still records a high fatality rate. Moreover, a
lack of adequate resource allocation for maintenance threatens
the sustainability of road transportation in Bangladesh.
! Irregular and unreliable power supply also affects the IT-BPO
industry. There is a substantial gap of nearly 2000 megawatts
between supply and demand of electricity. The Government has
adopted a master plan to improve infrastructure in the country
and disturbances in the power supply are expected to minimize 17by 2013
! Bangladesh has been developing the Kaliakoir Hi-tech Park and
the Mahakhali Software Technology Park for the promotion of IT-
BPO infrastructure in the country
Government support and incentives
! The Bangladesh government has declared the IT-BPO sector as a
thrust sector. The government offers tax holiday for a period of
five or seven years depending on the location and allows full
repatriation of invested capital, profit and dividend. The
government has exempted customs duties and VAT on 18computers, hardware and accessories
! The Bangladesh government also provides 60 percent of the
salary or allowance cost for recruiting fresh graduates by any 19software company
Competitiveness in the exports market
! Export of IT-BPO is relatively low with USD 37 million in revenues
in the fiscal year 2009-10. There are a few companies in 20Bangladesh that develop quality software for export
! There are more than 100 software and IT service companies that
are exporting their services. Software export has achieved the
highest growth in recent years with an average annual growth of 21around 60 percent during the last few years
GDP growth and stability
! Bangladesh’s economy has grown in the range of 5-6 percent
since 1996. The country's ready-made garment industry grew at
double-digit rates through most of the 1990s, achieving a 22prominent place in the in the global garments marketplace
! The country faces considerable development challenges in terms
of poor infrastructure, poverty, unstable political environment,
corruption and slow implementation of economic reforms.
However, the new government elected in December 2008 plans
to improve the investment climate in the country through 23effective governance and policy-making
Doing business
! Bangladesh is ranked 119 out of 183 economies for the ease of
doing business in the World Bank Doing Business Survey 2010. It
takes 44 days to start a business in Bangladesh, which is 13significantly higher than the regional average of 28.1
! Bangladesh has an abundant supply of human resources and is
competitive in terms of wages, but broadband and internet rates 24and electricity tariffs continue to remain very high
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25. KPMG Analysis, and interviews with representatives from ASOCIO, the member association, and
companies operating within the country
Vision for Bangladesh
The Bangladesh government has formally emphasized on the ICT sector
including software industry and declared it as one of the 'thrust sectors'.
Bangladesh has established an ICT vision of 'Digital Bangladesh' for
2021 to commemorate 50 years of its independence.
The country aims for a 'Digital Bangladesh' by expanding and diversifying
the use of ICT to establish a transparent, responsive and accountable
government, develop skilled human resources, enhance social equity,
ensure cost-effective delivery of citizen-services through public-private
partnerships, to support the national goal of becoming a middle-income
country within 10 years and join the ranks of the developed countries of
the world within 30 years.
2008 2020 ‘Base Case’Scenario
2020 ‘Optimistic’Scenario
CA
GR
17%
CA
GR
23%
USD 0.59 bn
USD 3.7 bn
USD 7.2 bn
Source: KPMG Analysis
Bangladesh IT-BPO Industry 2020
Implications for Stakeholders
Opportunities for Collaboration
The following are some of the major elements that can help
Bangladesh determine the growth of IT-BPO industry and achieve its
vision of becoming a digital nation:
Promote adoption of ICT among local businesses:
Bangladesh must enhance productivity across all economic sectors,
especially among SMBs, through the adoption of ICT. The
appropriate utilization of IT-BPO services can help the SMBs to
focus on innovation and competitiveness. The country can also
leverage its established capabilities in areas such as micro finance to
bridge the digital divide among the lower income groups
Improve quality of education:
Although Bangladesh is working to extend the reach of ICT literacy
by incorporating ICT courses in various education streams, the
country will need to overcome the skills shortage in the ICT industry
through professional skills assessment and enhancement
programmes. The country needs to encourage closer co-ordination
between academia and industry to create more ‘industry-ready’
professionals
Build competitiveness for becoming an outsourcing
destination:
It is important for Bangladesh to raise the competitiveness of the
local IT-BPO enterprises by ensuring adequate access to finance and
providing marketing support. Providing reliable infrastructure and
suitable operating environment can significantly raise Bangladesh’s
potential of becoming an attractive IT-BPO destination.
Bangladesh’s IT-BPO industry prospects are expected to improve
significantly, if the country successfully collaborates with countries
in the Asia Oceania region. A collaboration strategy can help
Bangladesh to address some of the major concerns affecting its
potential to be a favored outsourcing destination
! Human resource development is imperative for tapping the
outsourcing opportunity for Bangladesh. The country needs to
upgrade its education system and make IT education more
industry oriented. It needs to draw knowledge and resources
from countries in the Asia-Oceania region, especially in South
Asia
! Bangladesh needs to aggressively promote adoption of ICT
among its local businesses and upgrade its physical and ICT
infrastructure with co-operation from countries in Asia
! Bangladesh must strive to attract few key multinational ‘anchor’
companies to demonstrate its viability and attractiveness as an
offshore IT-BPO destination.
Prospects 2020: Opportunity to become a sizeable
outsourcing destination
The IT-BPO industry in Bangladesh is currently small as compared to
the size of its population and economy. The IT-BPO industry is
estimated to be around USD 593.5 million in 2008, with exports
amounting for 4 percent of the industry size. Given its current
attributes, the IT-BPO industry is expected to reach USD 3.7 billion 25in 2020, growing at a CAGR of 17 percent over the period 2008-20 .
Though possibilities abound in the IT-BPO industry, some constraints
are visible in areas related to the quality of human resources,
infrastructure and the overall business environment. This has affected
the offshoring potential of the IT-BPO industry in Bangladesh.
If Bangladesh is able to successfully resolve issues that are affecting
its potential of being a favorable offshoring destination, the IT-BPO
can grow at a faster rate, reaching an estimated size of USD 7.2
billion largely driven by growth in exports. Bangladesh has the
potential to build a sizable IT-BPO outsourcing market given some of
the advantages like favorable demographics, cost competitiveness
and rising government focus. Bangladesh has also shown good
competencies in area of software development. Moreover, the
demand for IT automation in domestic industries is also expected to
augment demand for IT-BPO. Large-scale automation projects in
sectors like telecom, banking, finance, pharmaceutical, e-
governance, SME and garment/textile industries is likely to create
demand for the software and BPO industries.
Bangladesh: Outlook 2020©
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26. http://magazinebd.com/download.php?id=34
27. http://www.um.dk, http://www.bangladoot.org/VibrantBangladeshFeb09.pdf
28. http://www.adb.org/Documents/Evaluation/Learning-Curves/SAPE/LC-Education-Sector-Bangladesh.pdf
29. Energy Bangla Website, http://www.connectivityscorecard.org/countries/bangladesh
30. World Bank
31. http://www.moef.gov.bd/moef.pdf
IT-BPO Industry Capabilities
Strengths Weaknesses
Unavailability of quality manpower
Although Bangladesh has been able to achieve the universal gross
enrollment rate in primary education with gender balance, the gross
tertiary education enrollment is low at 6.8 percent. Also, the institutional
capacity and quality aspects remain low given the low adult literacy rate of
about 55 percent and high cycle dropout rate of about 50 percent. There is
lack of educated and trained manpower; brain drain also further affects the 28availability of engineers and IT graduates
Undeveloped Infrastructure
The present situation of ICT infrastructure in Bangladesh is not comparable
to developed countries. PC and high-speed broadband penetration in
Bangladesh is low. Moreover, ICT usage among business and government
also remains minimal. Bangladesh faces acute power shortage and power 29outages which last from one to eight hours in city areas
High Government focus
The government of Bangladesh has declared the ICT sector as one of the
major thrust sectors. Along with special incentives for the ICT sector,
Bangladesh also exhibits a strong policy focus on the ICT training of
professionals in the tertiary sector. Bangladesh also has a National ICT
Task Force, headed by the Prime Minister, to achieve the ICT vision 26highlighted in its ICT Policy
Favorable Demographics
Bangladesh has a young and rapidly growing population with nearly two-
thirds under the age of 29. Bangladesh's population is projected to grow at
an annual average rate of 1.7 percent during 2008-20, reaching 194.8
million by 2013. A substantial number of educated youth, with the ability to
read and write English, exists in the country. This manpower can be trained
in the required skills for making the country a potential offshore source of
Software and Data Processing Services.
Slow pace to implement reforms
Policy implementation, especially regarding key structural reforms has been
slow, due to weak political environment. The World Bank’s Governance
Indicator emphasizes that Bangladesh has a relatively weak regulatory 30quality and the lack of concerted success in eradicating corruption .
Enforcing contracts can be slower, more complex and more costly than
elsewhere in the South Asia region. Bangladesh ranks 175 out of 181 in
terms of enforcing contracts in the World Bank’s latest Doing Business
2009 survey
Natural Disasters
UNDP has identified Bangladesh to be highly vulnerable country to tropical
cyclones and the sixth most vulnerable country to floods. Over the last
three decades, the Government has invested over USD10 billion (at
constant 2007 prices) to make the country more climate resilient and less
vulnerable to natural disasters. These changes will threaten the significant
achievements Bangladesh has made over the last 20 years in increasing
incomes and reducing poverty, and make it difficult to achieve the 31Millennium Development Goals (MDGs)
Domestic Market Opportunities
In order to promote ICT as a thrust sector, the government of Bangladesh is
taking various initiatives in areas of e-governance, public IT projects and IT
education. In addition, growth in telecom presents another opportunity for
the IT companies, especially in areas of mobile content development and
value added service solutions. The SME and corporate sector in
Bangladesh also represents a major opportunity given their low adoption of
ICT. IT services demand of the specific SME segments was estimated to be 27around USD 17.94 million
Outsourcing Opportunity
Bangladesh has recently been focused by other countries as an outsourcing
target. At least 30 companies, among 100 companies that export their
products, are established through joint venture with overseas companies or
as offshore development centers (ODC) by 100 percent foreign capital
investment. The European Union (EU) has officially announced that,
Bangladesh is one of the best 20 outsourcing target countries of the world.
Opportunities Threats
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Hong Kong
Special Administrative Region (SAR)
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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1. Phillyimc
2. EIU
3. Market Profile for ICT in Hong Kong by New Zealand Trade and Enterprise
Economy and Industry
Trade and Investment
Hong Kong is a free market economy, which is fairly dependent on international trade
and finance. The total value of goods and services trade was equivalent to nearly 212.5 1percent of GDP in 2008 .
In 1997 Hong Kong was handed over to China after being colonized by Britain for over
150 years. Under the Sino-British Joint Declaration the Chinese government guaranteed 1that it would preserve Hong Kong's capitalist economy for at least 50 years .
Hong Kong
industrialized rapidly
through the growth of
the textile and
manufacturing
industries. However,
today most of the
factories in Hong Kong
have moved over the 1border to the mainland .
The service sector
dominates Hong Kong's
economy currently. The 2major services are trade, financial services, tourism, retail, and real estate
In November 2008, Hong Kong officially slid into recession. The economy is increasingly
facing challenges of rising unemployment, increased competition from mainland China 3and an ageing population
China accounts for a major portion of direct investment inflow, followed by the British
Virgin Islands, United States, the Netherlands and Bermuda. Large inflows from the
British Virgin Islands, Bermuda and the Cayman Islands reflect the common practice of
Hong Kong enterprises setting up offices in these tax havens in order to redirect funds 2back to Hong Kong
Note:
Source: EIU, Board of Investment, Hong Kong
Year (f) indicate forecasts made for the year;
Source: EIU, S&P, AsiaOne News, x-rates.com
Inward FDI (USD Billion) Exports (USD Billion)
GDP at market prices (2008)
Population (2008)
Exchange Rate (HKD:USD) (Jan – Sep ’09 avg)
Inflation at Consumer Prices (1Qtr - 2009)
Unemployment (2008 avg)
S&P Risk Rating
USD 215.4 billion
7.0 million
7.75
2.6 percent
3.5 percent
AA+/Stable/A-1+
Source: EIU, 2008
Services 93 %
Industry 7 %
GDP Composition
2004
2005
2006
2007
2010 (f)
2013 (f)
2020 (f)
-
33.6
45.1
55.9
-
-
-
315.4
353.2
390.4
430.6
457.5
398.4
509.5
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4. ICT profile of Hong Kong NZ Trade and Enterprise
5. www.info.gov.hk
6. EIU
Evolution of the IT-BPO Industry
Current state of the IT-BPO industry
1980 - 2000:
The Government first announced its vision of making Hong Kong a stleading digital city in the globally connected world of the 21 century
4in 1998 by setting out the Digital 21 IT Strategy
2001 - 2005:
In 2004, there were about 700 independent software vendors in
Hong Kong. Most companies were relatively small with 56 percent
of them employing 1-10 full-time staff in Hong Kong. The
government added digital entertainment as one of the focus areas
for technological development in the Digital 21 Strategy in March 42004
2006 - Present:
In 2008, the government revised the Digital Strategy 21 and
highlighted five areas for action: facilitating a digital economy,
promoting advanced technology and innovation, developing Hong
Kong as a hub for technological cooperation and trade, enabling the
next generation of public services and building an inclusive, and a 5knowledge-based society
According to a survey conducted by the Hong Kong Productivity
Council in 2006, nearly 80 percent of the Hong Kong IT service
providers are SMEs with less than 20 employees.
Most of the IT service providers specialize in Enterprise Resource
Planning, e-commerce services and IT consulting services.The
estimated IT spend for 2008, are at USD 1.4 billion, amounting to 6approximately 0.7 percent of GDP
Banking and finance; shipping, freight forwarding and logistics;
trading and transportation are the main sectors that outsource IT 6services in Hong Kong .
IT-BPO industry size
Note: Includes domestic IT revenues, does not include BPO
Source: Digital Planet 2008
355.2 380.2 430 444.2 462.9 486.5
756.8 790.5 890.9 912.2 945.3 990.7
0
200
400
600
800
1000
1200
1400
1600
2004 2005 2006 2007 2008 2009
Software Services
USD
mill
ion
CAGR: 6%
Source: March 2007, Hong Kong Productivity Council
Break up of IT Spend by Service Line
Software design & development 37%
IT Consultancy15%
Application maintenance 12%
support &
System implementation 8%
integration &
Web design anddevelopment 7%
Hardware consultancy 6%
Hardware & maintenance 5%
support
Website hostingservices 4%
Infrastructure & support 3%
consultancy
Hardware development 3%
design &
The Information and Software Industry Association (ISIA) was established in July 1999. Its objective is to promote the
standard, recognition and profitability of the local information and software industry and to expedite the development of
high value-added information and software services for the industries in Hong Kong and the region.
For more details on ISIA please refer to the appendix section or visit www.isia.org.hk
Information and Software Industry Association (ISIA)
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7. CIA Factbook
8. Visabureau.au
9. Hong Kong Special Administrative Region: Macroeconomic Impact of an Aging Population
IMF Working Paper
10. Austrade
11. www.gov.hk
12. Roadtraffic-technology.com
13. Invest HK
14. Hong Kong Monetary Authority Quarterly Bulletin
15. Hong Kong Trade Development Council, Census and Statistics Department of the Hong Kong SAR
Government)
16. BBC
17. http://www.doingbusiness.org/ExploreEconomies/?economyid=43
18. NZ Herald article dated 06 Jun, 2009, Cushman and Wakefield
Drivers of the IT-BPO Industry
Human resource availability
! Adult literacy rate in Hong Kong is high at 93.5 percent for 7population aged over 15 years
! Though Hong Kong invested about 4.2 percent of GDP on
education in 2008, the skills availability may pose to be a 8problem in the region due to an ageing population
! Low fertility rates and increasing life expectancy are causing a
gradual decline in population growth and a shift in the age
structure of the population toward a greater share of the elderly.
While higher labor productivity growth and increased migration
of younger skilled workers from the Chinese mainland would
lower the economic impact of aging, they would not offset it 9fully
ICT penetration in the country
! Hong Kong’s ICT market is highly penetrated. Mobile penetration
in Hong Kong is high, with the number of mobile phone
subscribers reaching 10.98 million at a penetration rate of 176 10percent
! Hong Kong’s broadband penetration is also one of the highest in 11the world – 76 percent of households use the broadband service
IP protection and data protection
! A new intellectual property law was introduced in 2001 in Hong
Kong, which made infringements of intellectual property rights
associated with computer software, films and music, a criminal
offense
! According to the Business Software Alliance (BSA), Hong Kong
posted the best performance in Asia in stopping the illegal use of
software products. In 2008, software piracy in Hong Kong was at
48 percent which dropped from the 2006 figure of 53 percent
Infrastructure development
! Hong Kong has a strong infrastructure backbone. It is well
connected by air to numerous international as well as domestic
(in Mainland China) cities
! Hong Kong's roads have one of the highest vehicle densities in 11the world . However, a USD 423 million Intelligent Transport
System (ITS) is being developed to improve the traffic 12management and control systems in Hong Kong
! The launch of the Hong Kong Applied Science and Technology
Research Institute (ASTRI) in 2001, Cyberport, Hong Kong’s
flagship IT project announced in 1999 and the Hong Kong
Science and Technology Park has given a boost to the IT-related
infrastructure in the region
13Government support and incentives
! There are schemes available in Hong Kong that support the IT
industry, such as a USD 640 million fund that supports projects
that contribute to innovation and technology upgrade in local
industry, including joint R&D projects between the private sector
and local universities
! The New Technology Training Scheme reimburses up to 50
percent of staff training costs in new technology
! The R&D Centre Programme aims to strengthen collaborative
applied research activities between industry and research
organizations
Competitiveness in the exports market 14
! Hong Kong is an export-oriented economy of largely re-exports
! Though Hong Kong’s major export market include US, the EU
and Japan, the Chinese mainland accounted for 47 percent 15respectively of Hong Kong's total exports in 2006
! Major exports in Hong Kong include electrical and electronic 16goods and clothing
GDP growth and stability
! According to EIU estimates Hong Kong’s per capita income (at
PPP) was USD 43,710 in 2008, putting the country in the high
income bracket.
! The economy is in recession and real GDP contracted by 6
percent in 2009. However, the strong link to the Chinese
economy, which is expected to record relatively strong growth of
6.8 percent in 2009, is expected to support the state's own GDP
Doing business
! Hong Kong is ranked high at number three in terms of Ease of
Doing Business. According to the World Bank Index 2010, it
takes six days to start a business in Hong Kong, compared to the 17region’s average of 41 days
! According to several reports, Hong Kong has topped the list of 18the highest office space rentals in the world in 2008
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19. The Pearl River Delta comprises of Hong Kong, nine municipalities of the Guangdong Province in China
and Macao
20. Chamber.org.hk
21. Euromonitor.com
22. www.chamber.org.hk
Vision for Hong Kong
The development of the IT-BPO industry is important to retain Hong
Kong’s position as a global center for business. Realizing this, the
Government has announced its vision of making Hong Kong a leading
digital city by setting out the Digital 21 IT Strategy. The Digital 21 is
updated regularly to take into account technological advancements and
changing needs of the society. The latest update takes into account five
action areas that would be implemented between 2008 -10. The state 19will also play a key role in transforming the Pearl River Delta to become
an exporter of software, digital content and services as well as an 20exporter of traditional manufactured goods
Hong Kong: Outlook 2020
Prospects 2020: Hong Kong is expected to be a net
importer of IT-BPO services, and is likely to remain a
key market for China.
Hong Kong’s IT market is marked by SME players. In 2008 Hong
Kong IT services spend reached USD 1.4 billion.
At the current pace, Hong Kong could grow at a CAGR of 5 percent
(2008-20), if challenges such as higher costs and shortage of skills,
that could adversely affect this growth are mitigated.
The SAR has the potential to grow at a CAGR of 7 percent, with
revenues reaching nearly USD 3.1 billion. Increased government
spend on IT would contribute to the growth in the industry.
Hong Kong specializes in high-value services like legal and
accounting services, publishing and logistics which are the enablers
of the IT industry in Hong Kong and are expected to drive growth.
Therefore the SAR must retain its global competitiveness in these
sectors.
Implications for Stakeholders:
Focus on skills training and innovation
Hong Kong is said to face a skills shortage. According to a 2007
survey by Manpower Inc 49 percent of employers in Hong Kong 21have difficulties in filling up positions, with the suitable skills
An increase in the focus on IT-related education and skills-training is
likely to enhance the skills availability in the state and also advance
Hong Kong's role as a center for international finance.
Fostering innovation is also important as the state needs to focus on
higher value adding services. The educational curriculum could be
redesigned so as to inculcate higher analytical abilities in the
students
Leverage the China relationship
The relationship with Mainland China could bring in opportunities for
Hong Kong companies. The IT-BPO market is likely to show
considerable growth through initiatives encouraging the integration
of Hong Kong’s economy with the Mainland and the abolition of
taxes on cross-border trade
Outsource low-value operations; focus on high value
activities
Due to a high cost structure, Hong Kong could undertake
outsourcing of high value-added activities such as commercial 22management, software design and content production . Activities
such as call center operations, data center operations and software
coding could be outsourced to lower-cost locations.
Hong Kong has already partnered with China and both the countries
have reaped benefits of this collaboration. This experience could be
Areas for Collaboration
replicated with other countries in the Asia-Oceania region:
! Collaborating with Japan on R&D training programmes is likely to
develop the innovative capabilities of service providers in Hong
Kong
! The SAR could provide workshops for IP law enforcement
techniques, and host shared learning sessions for countries in
the region that are still struggling with IP protection
2008
CA
GR
5%
CA
GR
7%
USD 1.4 bn
USD 2.6 bnUSD 3.1 bn
Hong Kong IT-BPO Industry - 2020
2020 - ‘Base-Case’Scenario
2020 - ‘Optimistic’Scenario
Source: KPMG Analysis
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23. EIU
24 hketosf.gov
25. Business Monitor Hong Kong IT Report 2009
26. GoingGlobal.com
27. Industryhk.org
IT-BPO Industry Capabilities
Strengths Weaknesses
High costs
Hong Kong is regarded as one of the most expensive places to live in the
world. As there is very little space in Hong Kong, office rentals are the
highest in the world. Salaries for experienced professionals are also 26matched to this high cost of living
Availability of labor
An aging population and decreased birth rates has affected the
demographics of Hong Kong, and is therefore also adversely affecting the 27availability of labor
Pro-business economic environment
Hong Kong has a pro-business government and an independent legal
system therefore attracts investments easily. The state ranks high, at
number four in the World Bank’s Ease of Doing Business Index. Hong Kong
has also been ranked as one of the most e-ready economies in the world,
sitting behind the US. Hong Kong’s telecommunications sector is fully 23privatized and has one of the highest mobile penetrations in the world
Location of choice for multinationals
According to a survey conducted by Invest Hong Kong and the Census and
Statistics Department (C&SD) in October 2008, Hong Kong is a preferred
location for overseas and Mainland China companies to manage their 24regional businesses
Growing importance of Shanghai as a financial hub
The city council of Shanghai aims to make Shanghai the financial center by
2020, posing as a stiff competitor for Hong Kong going forward. Hong Kong
may also lose the status of being the world’s gateway into China and this
can affect investments from the global financial sector into Hong Kong
Strong links with China
The Chinese mainland is one of the leading investors in Hong Kong. Hong
Kong’s IT market is increasingly defined by its relationship with China. In
the 10 years since the handover to Chinese control, around 77,000 Hong
Kong-owned or -controlled manufacturing operations have been
established in the Pearl River Delta region, representing an increasing
opportunity for Hong Kong-based IT companies to provide IT products and 25services to the Mainland
Increased spending by government on IT
Government IT spending is likely to be the key to market growth and is
expected to rise as the government attempts to stimulate the economy.
Government IT spending for the 12 months to March 2009 was up to 20 25percent from USD 4.09 billion reported in the previous year
Opportunities Threats
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India
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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1.
2. Economywatch.com
3. Indlaw.com
UNIDO.org
Economy and Industry
Economic reforms since 1991 in India have signaled a paradigm shift to a more open
economy with greater reliance on market forces, a larger role for the private sector 1including foreign investment, and a restructuring of the role of the government
India’s economy has grown by approximately 9 percent a year since the last three
years, and has seen a decade of over seven percent growth every year. Key industries
include textiles, chemicals, food processing, steel, engineering and machine tools, 2electronics and software
The government has liberalized the foreign investment regime substantially over the
last decade. Today, FDI is allowed in almost all sectors barring a few sensitive sectors
such as defense. FDI up to 100 percent is allowed in most sectors (including 3petroleum, exploration, development of airports) under the automatic route .
Trade and Investment
Source: EIU, S&P, x-rates.com, rediff.com
Source: EIU, 2008
GDP Composition
GDP at Market prices (2008)
Population (2008)
Exchange Rate (INR:USD) (Jan – Sep ’09 avg)
Inflation at Consumer Prices (1Qtr - 2009)
Unemployment (2008 avg)
S&P Risk Rating
USD 1,225 billion
1,148 million
48.96
9.6 percent
10.4 percent
BBB-/Negative/A-3Agriculture
17%
Industry
26%
Services
57%
Note:
Source: EIU
Year (f) indicate forecasts made for the year
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2010 (f)
2013 (f)
2020 (f)
5.8
7.6
19.6
25.05
36
63
-
126.1
160.8
205
239.8
331.7
510.9
1726
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4. Itweb.Co
5. NASSCOM website
6. Atimes.com
7. NASSCOM-McKinsey: Perspective 2020
8. NASSCOM Strategic Review 2009
9. NASSCOM-McKinsey: Perspective 2020
10. http://news.bbc.co.uk/2/hi/business/6288247.stm
11. www.mit.gov.in/download/ocb_executivesummary_09.pdf
1990s:
India's new telecom policy, post-liberalization, brought in further
changes with the introduction of IP telephony and the end of the
state monopoly on international calling facilities. The Department of
Electronics (DoE) of the Central government introduced the concept
of Software Technology Park of India (STPI). STPIs were set up at
various locations throughout the country and were given basic
infrastructure, dependable power supply, tax exemptions and also
given 100 percent ownership for the foreign firms. In May 1998, a
National Task Force on Information Technology and Software
Development was formed to formulate a long-term national policy
for the country and also to remove impediments for the growth of
the IT industry. IT domestic and export revenues amounted to USD 65.7 billion in 1999-2000
2000 - Present:
The millennium started with the Y2K problem, and India was the
only country that had an abundant workforce to solve the
millennium bug, which brought in considerable business. Over the
past decade, the industry has achieved average annual growth of 40
percent as businesses access India's talented, low-cost workers.
Seventy five percent of the Fortune 500 companies have been 7involved in the Indian IT-BPO industry . The country's reputed three
IT services companies—Infosys Technologies, Tata Consultancy
Services (TCS), and Wipro Technologies—have evolved rapidly into
established global players.
With the sector clocking export and domestic revenues of
approximately USD 71.6 billion in 08-09, the IT-BPO industry has
become an important segment for the Indian economy, generating
direct employment for over 2.23 million people in FY2009. The IT 8market has contributed to nearly 5.8 percent of GDP in 2009 .
The sector has made considerable investments in talent
development and has thus built capabilities of graduates from Tier II
cities as well. Fifty percent of the new IT-BPO recruits are now from 9Tier II cities
Over 4,000 companies (including over 500 international companies
such as HP-EDS, Intel, Microsoft, Dell, IBM,, Siemens, CSC,
Accenture, Oracle, Cap Gemini,, OPI) operate in the IT-BPO industry 10in India, serving both the Indian as well as the global market . The
US and UK are key export markets for the industry, accounting for 11nearly 79 percent of the total export market .
Current state of the IT-BPO industry
Evolution of the IT-BPO Industry
1980s:
Software was recognized as an industry and was eligible for
incentives such as, lower import tariffs. One of the first companies
to set up a technology base in India was GE, following the chairman
Jack Welch’s visit to India. During the late 1980s, several European
airlines started using Delhi as a base for back-office operations; 4British Airways being one of them . The National Association of
Software and Services Companies (NASSCOM) was set up in 1988
to facilitate business and trade in software and services and to 5encourage research in software technology
IT-BPO Industry size
8.2 9.9
13.2 16.2 23.1 24.3 13.4 18.2 24.2
31.8
40.9 47.3
0
10
20
30
40
50
60
70
80
2004 2005 2006 2007 2008 2009
(est.)
USD
bn
Domestic Export
Note: NASSCOM Strategic Review 2009
CAGR: 27%
Break up of IT-BPO Exports by Service Line
IS Outsourcing10%
Support and Training5%
Software testing5%
Other IT services12% Customer
services 14%interaction
Finance and 7%
accounting
Vertical specific 6%
BPO
Other BPO Services5%
Note: Other IT Services include: systems integration, IT Consulting, Network consulting and
integration and Others
Other BPO Services include: Knowledge Services, HR Admin, Procurement and logistics
and others
Source: NASSCOM Strategic Review 2009
Custom Application Development
Management 36%
NASSCOM is the premier trade body and the chamber of commerce of the IT-BPO industries in India, with more than 1300
members. NASSCOM’s membership base constitutes over 95 percent of the industry revenues in India and contributes 5.5
percent to the GDP of the country. The IT industry employs over 2.24 million professionals directly and indirect employment
attributed to the IT-BPO industry is estimated to be fourfold, translating to over 8 million additional jobs. Its primary focus is
on Public Advocacy, providing thought leadership to the industry through research and business development by building and
leveraging on global linkages.
For more details on NASSCOM please refer appendix section or visit www.nasscom.in
National Association of Software and Service Companies
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12. CIA Factbook, Asia Times Online
13. UNICEF
14. NASSCOM McKinsey Perspective 2020
15. Connectivity Scorecard 2009: Nokia Siemens
16. TRAI press release 01 June 2009
17. Indiastat
18. WEF Global Competitiveness Report 2009
19. BSA 2008
20. Federation of Indian Airlines
21. Financial Express
22. KPMG: Exploring Global Frontiers
23. www.mit.gov.in
24. Economic Times article 01 June 2009
25. IBN Live
Drivers of the IT-BPO Industry
Human resource availability
! Approximately 35 percent of India’s population (nearly 400 12million) is in the working age group (15 – 59)
! Literacy rates are low at 66 percent (average for years 2000 – 132007), with tertiary enrollment at 10.5 percent
! Employability of Indian graduates is considered to be low, with
EIU rating India 2 on a scale of 5 on the quality of labor force
! Despite these drawbacks India bears the title of having the
largest pool of available talent in the global sourcing market.
India’s supply of employable graduates is estimated at 510,000 a 14year According to the All India Council for Technical Education,
in 2004-05, India produced 464,743 engineering graduates, of
which 31 percent were computer engineers
ICT penetration in the country
! The total wireless telecom subscriber base (GSM, CDMA, WLL) 15crossed the 400 million mark and the overall tele-density was
1638 percent in 2009
! As of October 2008, the number of broadband subscribers
totaled close to 5 million. India is not a strong performer in terms
of internet usage with just below 10 percent of the population 17using the internet
! In 2007, India server market revenues touched USD 727 million,
shipments grew nearly 19 percent to 135,615 units during the
year, and the client PC market touched 6.5 million units
according to IDC, indicating healthy growth as Indian customers
expand their IT infrastructure
IP protection and data protection
! A India already has IPR laws in place, however, stronger
enforcement is required. In 2008, the World Economic Forum 18ranked India 48 out of 60 countries in IPR protection .
! Piracy rates in India are at 68 percent in 2008, down nearly 6
percent since 2004. Losses in 2008 due to piracy amounted to 19USD 2,768 million
Infrastructure development
! There are about 92 airports operational in India, out of which 12
are international. The government has taken a number of
measures to step up the airport infrastructure for the country. It
has envisaged a modernization plan with a view to modernize 35 20airports in smaller cities
! Power supply is a challenge in Indian metros. India Inc lost an
estimated USD 8.9 billion during 2008-09 due to high occurrence 21of power outages, both scheduled and non-scheduled
! The Special Economic Zones (SEZ) scheme provides similar
incentives as STPI to exporting companies (not limited to IT-BPO
companies). IT-BPO companies are expected to move from the
STPI scheme to the SEZ scheme post 2010, following the phase-22out of the STPI scheme
23Government support and incentives
! The Indian government provides a variety of incentives to IT-BPO
industry, including 100 percent foreign equity participation in
companies. Some of the incentives include: Income tax
exemption up to 31 March, 2010 to Export Oriented Units /
Software Technology Park units, customs duty exemption for
import of software, and on import of hardware for 100 percent
export-oriented projects, complete pass-through mechanism
with single point taxation for venture capital fund and special
concessions for R&D
Competitiveness in the exports market
! India’s major export products are engineering goods (23 percent
of total exports in ’07-08), petroleum products, gems and jewelry
and textile
! IT exports constitute 14 percent of India’s overall exports.
Exports from the industry have helped in maintaining India’s
trade balance, by offsetting India’s cumulative oil imports by 14nearly 65 percent over the last decade
GDP growth and stability
! Construction and manufacturing have led growth in GDP since
the last few years. In the last quarter, however services 24accounted for nearly 85 percent of incremental growth
! The economy is expected to grow at 6.5 percent in the second 25half of the current fiscal year . Sectors like construction, trade
hotels, transport and communication, financing, insurance, real
estate and business services, and community, social and
personal services have achieved over 5 percent growth
Doing business
! The World Bank's Doing Business Report of 2010 ranks India 133
out of a total of 183 economies. It takes an average of 30 days to
start a business in India, which is marginally higher than the
region's average of 28.1
75
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26. NASSCOM Strategic Review
Prospects 2020: India is expected to achieve double
digit growth rates in the IT-BPO industry, with a focus
on innovation.
The IT-BPO industry in India has achieved impressive growth rates
over the past decade, contributing significantly to India’s GDP. The IT-
BPO market (including exports) has grown to around USD 51.5 26billion in 2008 and USD 71.6 billion in 2009 . Revenues could touch
USD 285 billion in 2020, growing at a CAGR of 15 percent if the
country is able to sustain its cost competitiveness and develop the
requisite skills of its large workforce
Implications for Stakeholders:
According to NASSCOM, the Indian IT-BPO industry should aim to
drive innovation, in addition to retaining its competitiveness. In order
to successfully achieve its goal, key stakeholders of the Indian IT-
BPO industry need to address the issues currently faced by the
industry:
Improved infrastructure:
India needs to aggressively push to improve its current
infrastructure, largely in areas of power, telecom and transport. It is
also imperative for the government to build and upgrade business
infrastructure in next level cities given that the industry is highly
concentrated in Tier -I locations
Employability of graduates
Though India has a large workforce, employability seems to be a big
challenge for graduates. An academia and industry partnership
seems to be imperative to improving the quality of education in a
way that it answers the recruitment woes of the industry.
Moreover, the industry needs to increasingly collaborate with
universities to help develop training programmes for the current
employees as a re-skilling exercise.
Further, the Government needs to upgrade its primary and tertiary
education system with a focus on improving the quality of education
and student achievement levels
Promoting the adoption of IT across sectors
The Government should encourage ICT adoption across all sectors.
There is high need to promote ICT adoption in sectors like
manufacturing, SME and education, where IT adoption can be
transformational
Favorable policies
India should put in place a favorable business environment through
effective policies that can keep pace with industry growth. The
Government needs to continue with its incentives programs,
thereby helping the industry maintain its cost competitiveness.
Collaboration with Asia-Oceania members could help India mitigate
some of the challenges it faces:
The country in collaboration with countries like the Philippines
that also has an export-oriented industry, could develop a paper
that discusses the perils of protectionism that the industry is
facing today
By learning from the experience of countries that are strong in
hardware, India could develop complementary skills so that it
can showcase a more diversified portfolio of products and
services
Areas for Collaboration
!
!
2008
CA
GR
13%
CA
GR
15%
USD 51.5 bn
USD 225 bnUSD 285 bn
India IT-BPO Industry - 2020
2020 - ‘Base-Case’Scenario
2020 - ‘Optimistic’Scenario
Source: KPMG Analysis
India is considered to be a favorable IT-BPO location because of its
sustained cost competitiveness, experienced and large labor force.
However, the Indian IT-BPO industry is now expected to evolve further
due to the radical changes in global economic environment and growing
sophistication of customer needs.
It is, therefore, imperative for all the stakeholders to identify challenges
and put an action plan that can catalyze the future growth of the
industry. At this critical stage, NASSCOM and McKinsey have articulated
a long-term growth perspective for the IT-BPO industry in 2020.
India: Outlook 2020©
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27. BDA & FICCI; 3G and BWA - The Next Frontier
28. www.rediff.com
IT-BPO Industry Capabilities
Strengths Weaknesses
Talent Pool
Historically, a large talent pool has been one of India's strengths. However,
estimates suggest that employability is low, about 10 to 15 percent for
business services and close to 26 percent for engineering graduates. This is
likely to create a talent crunch despite an increase in the number of
graduates in the years to come. Moreover, a shortage of PhDs and top-
quality technology graduates is also anticipated, which may affect the
country's capability to innovate. Currently, India produces barely 400 28engineering PhDs a year, and R&D spend is at a mere 0.85 percent of GDP
Infrastructure
Infrastructure in India is proving to be inadequate to handle rapid growth in
urbanization and the rise of disposable incomes in Indian cities. Tier I cities
are already saturated, and smaller cities are quickly reaching their limits.
India is expected to need an investment of over USD 500 billion up to fiscal
2011-12 to upgrade its infrastructure to maintain its growth
ICT penetration
Low ICT penetration in India would substantially hinder the domestic
market growth opportunity, and limit inclusive growth in the country,
especially in the semi-urban and rural areas
Experience
The Indian IT-BPO industry has developed a reputation of being one of the
most preferred destinations for IT-BPO services due to its experience in
catering to global customers. The country scores high in terms of process
maturity as well as professionalism: India has 30 percent of firms with the
CMMI certifications and 65 percent of companies assessed at CMM Level 5
Focus
The IT-BPO sector is being given increasing attention by the government, as
it contributes significantly not only to the net exports of the country, but also
to the generation of employment. Continued focus on the sector by the
government, both at the central and state level, will play an important role
in removing current inefficiencies in the system, building a strong IPR
framework, stimulating investor confidence, and boosting the domestic IT
spending through the IT budgets
Perception of risk
The recent incidence of lapse in corporate governance and recurring terror
attacks have tarnished India’s image and increased the risk perception in
terms of doing business with the country. Additional effort will be required
for the industry to reduce this perception of risk
Protectionism
Increasing protectionism in global demand markets due to the rise of
unemployment could prove to be a threat to the growth of the sector if the
global markets reduce outsourcing to lower cost destinations
New customer segments
SMB and individual customers who had traditionally shied away from
technology adoption are expected to become the new target customers for
the sector. The addressable market for SMBs is slated to be about 230-250
billion. There is an opportunity for vendors to understand the needs of the
SMB segment and develop new solutins such as Software as a Service
(SaaS) targeted at this segment
Large consumer market
The sheer size of the nation has turned to its favor for India as it today
boasts of one of the world’s largest consumer market for electronics and
technology. India is expected to cross 500 million mobile users by 2012 and
89.9 million 3G subscribers by 2013, indicating a huge and growing 27domestic market . There is great potential for India to develop internet
offering on mobile platforms and innovative mobile applications to cater to
this growing market
Opportunities Threats
77
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Indonesia
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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1. CIA Fact book
2. EIU
Economy and Industry
Indonesia is characterized among the lower middle-income countries of the world. It
has a market-based economy, in which the government plays a significant role. Industry 1accounts for nearly 50 percent of Indonesia’s GDP . Major industries include petroleum
and natural gas, textiles, apparel, footwear, mining, cement, chemical fertilizers,
plywood and rubber.
Source: EIU, S&P, Forbes
The Asian financial crisis of 1997 affected Indonesia badly, leaving it with a negative 2growth of 13.1 percent . Indonesia has recovered slower than some of its neighbors.
The country recapitalized its banking sector, and took steps to stimulate growth and
investment, particularly in infrastructure. Real GDP grew at over 6 percent between
2007 and 2008
The country’s major exports consisted of oil and gas (accounting for 23.2 percent of
total exports), fat, edible oil and waxes, mineral products, machinery and electrical 2equipment. Leading investor markets include Japan, UK, Singapore and China
Trade and Investment
GDP at market prices (2008)
Population (2008 estimate)
Exchange Rate (IDR:USD) (Jan – Sep ’09 avg)
Inflation at Consumer Prices (1Qtr - 2009)
Unemployment (2008 avg)
S&P Risk Rating
USD 510.8 billion
237.5 million
10,731.7
7.9 percent
8.4 percent
BB-/Stable/B
Source: EIU, 2008
GDP Composition
Agriculture
14%
Industry
48%
Services
38%
Note:
Source: EIU
Year (f) indicate forecasts made for the year
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
1.90
8.34
4.9
6.9
8.3
3.0
7.0
82.7
97.4
113.1
127.2
152.0
116.4
160.3
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3. IDC
4. NCS.com
5. Digital Review of Asia Pacific 2007
6. http://www.idc.com/getdoc.jhtml?containerId=IDC_P7164
7. Asiamedia.ucla.com
8. Businessweek.com, IDC 2004
9. Zdnetasia.com
10. Reuters
11. Thejakartaglobe.com
12. Newsinfo.inquirer.net
13. AT Kearney GLSI
2005 - Present:
According to Indonesia’s ICT Ministry, 65 percent of the industry is
made up of consulting services and 30 percent of multimedia software
houses. According to IDC, the Indonesian IT market grew at a CAGR 6of 10 percent over five years till 2007 . Indonesia's ICT industry
7employed over 58,000 workers in 2007
In 2008, the domestic IT spend was USD 1.8 billion, accounting for a
small percentage of GDP. While banking, manufacturing, and
telecommunications dominated IT expenditre, the SMB segment is 8expected to drive future spending in Indonesia
Ninety-nine percent of businesses in Indonesia are SMBs, accounting
for about 78 percent of the total ICT spend. The highest growth in the
SMB market is expected in data security deployments at 33 percent,
followed by data storage at 26 percent and internet-related 9implementations at 24 percent
Government spending on IT is less, and therefore e-governance is only
at its nascent stages in the country. However, e-learning initiatives by
the Indonesian government to facilitate internet in schools, is said to
be a major driver for IT growth.
In order to improve efficiency and to compete globally, large
enterprises are looking for customized strategic applications such as
Supply Chain Management, Customer Relationship Management and 10Business Intelligence systems . The Indonesian software industry is
11also being looked at for the development of computer games
The software companies are concentrated in Jakarta, Bandung, 5Surabaya and Medan . Players in Indonesia include IBM, Valdo Global
12Services, which acquired a Filipino call center firm recently , and
Astagraphia, which was ranked by IDC as the third largest IT services 4provider in Indonesia
According to the latest global services location index ranking, 13Indonesia has moved up one spot to fifth, overtaking Brazil this year
Current state of the IT-BPO industry
Evolution of the IT-BPO Industry
2001 - 05:
In 2002, nearly 14 percent of ICT spending in Indonesia was on 3services, 8.4 percent on software and 77 percent on hardware . A
Gartner study in 2003 showed the financial services, government,
communications and manufacturing sectors were expected to be the 4four largest markets in BPO spending
The total IT services and software market grew to about USD 1.1
billion. During this period ICT revenues of USD 0.5—0.75 billion came 5from the banking sector .
IT-BPO Industry size
Break up of IT Spend by Service Line
Source:
Source: Digital Plant 2008
Note: Includes domestic IT revenues, does not include BPO
503.1 581.9 736 841.3
872.6
921.5
1,037.70 935.7 835.5
705.2 537.4
395.5
0
500
1000
1500
2000
2500
2004
2005
2006
2007
2008
2009
USD
Mn
Services
Software
CAGR: 17%
Services 48%
Software 52%
The Indonesian Information Technology Federation (IITF) was established on November 21, 2001 in Jakarta, United Republic
of Indonesia. The national development of Indonesia requires a maximum use of Information Technology for raising
productivity of all resources and for increasing the competitiveness of the economy. IITF was formed in order to capture all
the aspirations of the various national associations in one federated body, and, to accelerate industrial development and
increase the rapid utilization of Information Technology (IT) so that various technologies can be better integrated and
appropriately deployed.
IITF consists of eight industry associations in IT-related fields covering ISP, software, hardware, games/animation, wireless,
phone and internet kiosks, satellite and cellular businesses.
For more details on IITF, please refer to the appendix section or visit www.ftii.or.id
Indonesia Information Technology Federation (IITF)
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14.
15. EIU
16. Worldbank.org
17. Indonesiaeceonomywatch.com
18. Computerworld.com
19. Penerbitdatakom.com
20. Internetworldstats.com
21. Thejakartapost.com
Marketresearchworld.com 22. Building and enforcing intellectual property value 2008
23. http://www.indonesiamatters.com/905/intellectual-property-rights/
24. Mida.gov.my
25. Forbes.com
26. Indonesiamatters.com
27. Xinhuanet.com
28. Austrade.gov.au
29. Themalaysianinsider.com
Drivers of the IT-BPO Industry
Human resource availability
! Indonesia has a young population, and the age group 20-54
years, accounted for over 50 percent of the country's population 14in 2006
! Adult literacy rates in Indonesia are high at 90.4 percent for the 15population aged over 15 years
! The education gap between the rich and the poor in Indonesia is 16pronounced. Tertiary school enrollment rate is only at 17 percent .
The country plans to invest about 20 percent of GDP on 17education in 2008
! The improvement of higher education system in Indonesia is
leading to a better quality of IT graduates and thus better 18employability . About 200 universities have a course related to
IT education at the undergraduate, masters, and doctoral levels.
These, along with some others are offering diploma courses and 19are producing more than 25.000 graduates each year
ICT penetration in the country
! Mobile penetration in Indonesia is low, with the number of
mobile phone subscribers reaching 20.83 million at a penetration 20rate of 24.2 percent as of December 2008
! At the end of 2008, the country's fixed household broadband
penetration rate was only 1.3 percent. Indonesia's internet user 21penetration rate stood at less than 11 percent in 2008
IP protection and data protection
! The new legal environment has helped Indonesia make some 22progress in strengthening its IP protection regime . Indonesia had
been on the Office of the United States Trade Representative's
Special 301 Priority Watch List for violations of intellectual property 23rights since 2001, but was removed in 2006
! According to the Business Software Alliance (BSA), software
piracy in Indonesia was at 85 percent which rose marginally from
the 2007 figure of 84 percent. The country has incurred losses of
USD 544 million due to piracy
24Infrastructure development
! The government has announced an increased spending on
infrastructure to attract more investment and spur growth in the 25country
! Indonesia has four unconnected railway systems, one in Java,
and three in Sumatra
! Air transportation in Indonesia is important to connect the islands
spread throughout archipelago. However, the safety issue still
remains a problem. The accidents that happened in the last two
years have made Indonesia’s air transportation’s safety among
the lowest in the world
26! There are 83 industrial parks in Indonesia . The industry ministry
and Sum Microsystems recently inaugurated a technology center
called the Center for Open Source Technology Awakening in an
effort to develop the Regional Information Technology Center and 27an Incubator Business Center
28Government support and incentives
! IT product tariffs have a 10 percent Value Added Tax and zero to
10 percent import duty
! Software has no import duty and local partners can assist in
import procedures, hence lowering import duties
15Competitiveness in the exports market
! Major export markets are Japan, USA, Singapore and China. They
respectively made up 21, 11.7, 11.1 and 10.1 percent of the total
exports in 2008
! Indonesia’s major export products were oil and gas, edible oils
and fat, mineral products, machinery and electrical equipment
15GDP growth and stability
! According to EIU estimates, Indonesia’s per capita income (at
PPP) was USD 2,150 in 2008, putting the country in the lower-
middle income bracket
! Real GDP is expected to expand by 2.6 percent in 2009 and 3.4
percent in 2010 as robust private consumption growth helps the
economy through the downturn in external demand
! Historically, Indonesia’s economy has suffered from political
instability, slow government reforms and corruption. This
however, has changed with efforts being made towards building 29a democratic state
Doing business
!? Indonesia is ranked 122 in the World Bank's Doing business
index of 2010, from a total of 183 economies. According to the
Index, in Indonesia it takes 60 days to start a business, which is
higher than the region’s average of 41 days
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30. Presentation by The Indonesia Telematics Software Association
31. UNESCO
32. Austrade.gov.au
Implications for Stakeholders:
The country must look at the following aspects in order to reach its
target of developing the nation through ICT:
Focus on education:
This is imperative for the growth of Indonesia as a favorable IT-BPO
destination. Besides improving basic education and literacy rates in
the country, Indonesia also has to focus on the sustainability of
learning and the quality of teaching. A defined certification and
qualification system may be necessary in order to encourage 31lifelong learning
Creating IT support systems:
The country needs high commitment to improve its business
operating environment and to encourage both domestic and foreign
investment. The government needs to promote infrastructure
spending for supporting ICT businesses
Improved branding:
Better branding of the country may be necessary to attract further
investment. Moreover, within the country access to government as
well as information is difficult as a high proportion of market data is
not publicly available. Forming partnerships therefore becomes 32imperative, which may lead to some entry barriers .
Collaboration could push IT-BPO growth to higher than the projected
‘optimistic’ growth
Areas for Collaboration
! Indonesia benefits from a large population that could be trained
for skills specific to the IT-BPO industry. Collaboration with
Australia and Malaysia on domain specific training such as mining
could bring opportunities to the country through business
sourced from US and Canada
! The growing telecommunication sector is likely to enable
investors to tap into the large consumer market of Indonesia.
These opportunities could be tapped by countries such as India,
who in turn could also host training programmes for Indonesian
entrepreneurs setting up IT-BPO companies.
2008
CA
GR
8%
CA
GR
15%
USD 1.8 bn
USD 4.6 bn
USD 9.7 bn
Indonesia IT-BPO Industry - 2020
2020 - ‘Base-Case’Scenario
2020 - ‘Optimistic’Scenario
Source: KPMG Analysis
Vision for Indonesia
The Indonesia government has put forth an ICT 2025 plan, with the
vision: ‘Prosperous information society through the implementation of an
effective and efficient ICT within the Republic of Indonesia’. This vision
is based on the three pillars of Information Infrastructure Development,
Regulation, Incentive system and and Institutions Convergence and ICT
Human Resource development. In this plan Indonesia aims to become a 30developed country based on ICT
Prospects 2020: Indonesia’s IT-BPO industry is
expected to be focused on its domestic market, with
SMBs providing considerable growth potential
Indonesia’s IT software and services spend was USD 1.8 billion in
2008, growing at its current pace at a CAGR of 8 percent (2008 -20)
the industry could reach USD 4.6 billion. However, factors such as
lack of ICT literacy, lack of focus on the sector and slow reforms
could hamper the IT industry’s growth.
The Indonesian IT-BPO industry has the potential to reach USD 9.7
billion with a CAGR of 15 percent. The growing SMB market could
bring immense opportunities for the industry.
Indonesia: Outlook 2020©
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33. Themalaysianinsider.com
34. Austrade.gov.au
35. Presentation by The Indonesia Telematics Software Association
36. Indonesiamatters.com
37. Asiamedia.ucla.com
IT-BPO Industry Capabilities
Strengths Weaknesses
Scalability and English language
Indonesia has a limited supply of skills. Technically proficient university
graduates make up a small proportion of the total work force which hinders
the country's outsourcing industry. A large qualified labor pool is important
to accommodate an expansion in outsourcing. Moreover English language
capabilities are weak in the country
Important member of the ASEAN
Indonesia is a key member in ASEAN and has also been one of the 33founding member countries of the group . ASEAN has been a major focus
of Indonesia's regional international relations.
Negative perception about stability
The international community regards Indonesia as a country that has been
prone to both natural disasters as well as political instability. Historically
the country has been viewed as a slow reformer in terms of human rights 35and terrorism
High software piracy
Indonesia features in the BSA 2008 Top 20 list of countries with the highest
piracy in the world, with USD losses worth 544 million. These regulatory 36issues have hampered the progress of the IT industry in the country
Growth in the telecommunications market
Indonesia is the sixth largest mobile market in Asia Pacific The focus on the
telecommunications market in terms of infrastructure and solutions has
created a growing demand in mobile-related application content and niches 32such as mobile banking
Large consumer market
Banking and telecommunications industries dominate IT spending in
Indonesia. The large customer base in Indonesia promises good 34opportunities for the ICT industry as technology adoption increases .
Opportunities Threats
83
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Japan
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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1. Japan: patterns of development
2. CIA Factbook
3. Financial Express article
Economy and Industry
Japan ranks as the second most technologically-advanced economy in the world after the
US and the fourth-largest economy after the US, EU and China, as measured on a
purchasing power parity (PPP) basis.
For nearly three decades, Japan's overall economic growth had been remarkable, 1averaging at 10 percent in the 1960s, 5 percent in the 1970s, and 4 percent in the 1980s
Source: EIU, S&P, X-rates.com, Japan Research Institute
Growth in Japan in the 1990s was slower and the government efforts to revive the
economic growth met with little success and were further hampered in 2000-01 by the 2slowing of the global economy . The country, however, has benefited from trade
surpluses, amounting to USD 107 billion in 1999 and USD 95 billion in 2000.
3Japan's main export goods are cars, electronic devices and computers . Export of goods
and services accounted for 17.4 percent of the GDP in 2008. As exports plunged during
the first three months of 2009, Japan’s economy (which is highly dependent on exports)
has contracted and trade surplus is expected to shrink to USD 7.3 billion in 2009.
Japan External Trade Organization (JETRO) reports that the United States, Cayman Islands,
Singapore, Switzerland and the British Virgin Islands were the largest sources of FDI in
2007. The top sectors that received FDI were finance and insurance, wholesale and retail,
and real property
Trade and Investment
Note:
Source: EIU
Year (f) indicate forecasts made for the year
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
GDP at Market Prices (2008)
Population (2008)
Exchange Rate (JPY:USD) (Jan – Sep ’09 avg)
Inflation (1Qtr - 2009)
Unemployment (2008 avg)
S&P Risk Rating
USD 4,908.9 bn
127.3 mn
94.9
-1.2 percent
4.0 percent
AA/Stable/A-1+
Source: EIU, 2008
GDP Composition
Agriculture
1%
Industry
26%
Services
73%
7.8
3.2
-6.8
22.7
24.6
18.5
18.9
611.8
651.2
701.4
769.4
856.3
607.4
793.8
85
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Break up of IT-BPO Spend by Service Line
Source: IT Service Industry in Japan 2009, JISA
Note: Includes domestic IT revenues, does not include BPO
Due to currency fluctuations, the revenue figures of 2007 seem to be lower than 2006, which
in fact is incorrect. Please refer to the current state of the industry for revenues in Japanese Yen
IT-BPO Industry size
112.76 100.35
44.61 42.23
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
2006 2007
USD
Bn
Software Data Processing
Source: IT Service Industry in Japan 2009, JISA
Services
61%
Database services
2%
Research
2%
Others
4%
Software
10%
products
Facility M
operations 10%
anagement &Data processing
11%
services
86
4. JISA representatives
5. FICCI: Market potential in Japan for the Indian ICT industry
6. MAIT: Issue March 2008
7. METI “Annual Survey 2007”
8. ASOCIO Connect Issue 6
Source: IT Service Industry in Japan 2009, JISA
Note: Includes domestic IT revenues, does not include BPO
Due to currency fluctuations, the revenue figures of 2007 seem to be lower than 2006, which
in fact is incorrect. Please refer to the current state of the industry for revenues in Japanese Yen
Source: IT Service Industry in Japan 2009, JISA
Evolution of the IT-BPO Industry
1960s:
The Ministry of the Economy, Trade and Industry (METI, formerly
MITI) paired each major Japanese computer system developer with
a US counterpart. The objective of the pairing was to introduce
Japan to the computer revolution and to enable the Japanese
providers to compete with the international giants. However, these
initial pairings were one of the causes of the fragmented state of
the Japanese computer software industry
1980s:
in the 1980s, the development of enterprise system for the
mainframe computers of Fujitsu/Hitachi was a major part of the
Japanese IT services market. There was a huge investment in the
development of an online banking system, through which most of 4the banks were linked .
1990s – 2002:
In 1990, the collapse of the bubble economy caused a reduction in
the PC sales market. However, between 1995 and 2000, Japan’s ICT
industry was one of the country’s fastest growing segments,
recording annual growth rates of 7.5 percent.
The rapid ICT penetration since 1996 set the stage for an info-tech
revolution, and the government placed ICT as an important sector.
During early 2000, Japan focused on the i-mode system and the 3rd
generation mobile phone networks.
In order to establish an e-governance in Japan, the country’s IT
Strategy announced in June 2002 an ’e-Japan Priority Programme 52002’. This attracted foreign players into the market as well . In
2002, China and Korea expanded their presence in the Japanese 6gaming market .
2003 – Present:
In order to contribute to the e-Japan strategies, in 2006, the
Ministry of Internal Affairs and Communications (MIC) adopted the
‘u-Japan Policy’ aimed at creating a ubiquitous network society, 7through the integration of wired and wireless technologies .
According to the METI Annual Survey, the IT Services industry
employed nearly 820,723 workers in 2006, indicating a 43 percent 8increase over the previous year . Several software companies
opened up IT delivery centers in Japan to cater to the software
development and IT services demand of the local Japanese
automobile and electrical machinery manufacturing industry
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9. WITSA – Digital Planet
10. Survey by IDC Japan: http://www.telecomasia.net/content/no-outsourcing-please-were-japanese
11. NASSCOM’s Emerging Market Series: Japan October 2008
12. Fujitsu Annual report 2008
Current state of the IT-BPO industry
Estimates indicate that the IT market in Japan has to be about USD 142.58 billion (JPY 9167,959 million) in 2007, growing marginally at 0.40 percent over the previous yea . A
survey conducted in Feb 2009, found that 35.2 percent of the Japanese firms were
using security services, 27.2 percent network operation and maintenance and 20.7 10percent backup/storage services .
11BFSI, automobile and consumer electronics are the highest spenders of IT in Japan .
The growth in demand is particularly strong for Enterprise Resource Planning(ERP),
Customer Relationship Management (CRM) and Business Intelligence (BI) software in
Japan.
According to a survey by Nork Research, the ERP package software market in 2006
was estimated at USD1 billion and is expected to grow to over USD1.2 billion in 2010.
The increase is expected to come mainly from sales to SMBs.
Companies such as Microsoft, IBM, EDS-HP, Oracle, Sales force, SAP, Hyperion, TCS,
Infosys and Wipro already have a presence in Japan. Fujitsu, one of Japan’s important 12outsourcing companies, has the top share of the Japanese outsourcing market . Other
players include Hitachi, Toshiba, Accenture and NTT data.
China is the largest receiver of Japanese offshoring. The reasons are its low wages,
proximity to Japan, common script and many Japanese-speaking people. However,
other countries, such as the Philippines, India and Vietnam have also identified Japan as
a potential market for offshored services.
JISA was established in 1984 and its members include leading software developers, information processing and
database/VAN service suppliers. Associate members are predominantly the leading Japanese hardware vendors, bankers,
insurers, manufacturers, traders and common carriers, etc. The mission of JISA is to maintain the growth of Japan's
information services industry and to contribute to the overall growth of the country's economy.
JISA has over 620 member enterprises, 30 local associations, and 50 associate members. Total sales revenue of its
members touched 9.2 trillion yen (55 percent of the national market), and employees were 313,000 (40 percent of employees
in the domestic IT services and software industry).
For more details on JISA, please refer to the appendix section or visit www.jisa.or.jp/en/
Japan Information Technology Services Industry Association (JISA)
87
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13. Web.rollins.edu
14. Library of Congress Country Studies, Japan
15. Nsf.gov/statistics
16. Efytimes.com
17. ITU
18. BSA-IDC Piracy Study, 2008
19. International Airport Guide
20. IPA
21. Asiarisk.com
22. Realclearworld.com
23. Cushman and Wakefield
Drivers of the IT-BPO Industry
Human resource availability
! Japan suffers from an ageing population. The elderly population
(aged 65 or older) is the largest among the industrialized nations, 13while the nation’s birthrate is at the lowest
! The literacy rates are high at 99 percent average. In 2005, 2.5
million students were enrolled in the Japanese universities, of 14which 17.3 percent studied engineering
! Though Japan is known to be a country with advanced
technological skills, its share in the number of engineers in the
global scenario has declined from 10 percent in 1980 to 6 15percent in 2006 . This shortage could lead the country to move
16towards greater outsourcing
ICT penetration in the country
! The total wireless telecom subscriber base was 107.49 million in
2009. Tele-density has reached saturation point at almost 100 17percent
! According to the report titled Measuring the Information Society:
The ICT Development Index 2009 Japan has significantly
improved its ICT levels. In December 2008, the broadband
penetration in Japan was at 23.6 percent and the internet usage
penetration was 73.8 percent
IP protection and data protection
! The BSA-IDC Piracy study, 2008 shows that Japan has the
lowest piracy rates in the Asia-Pacific region, at 21 percent in 182008, with dollar losses from piracy pegged at USD 1.5 billion
! Japanese companies have started to place greater emphasis on
acquiring and registering intellectual-property rights and also
enforcing their rights. The government is also, on its part, putting
IPR law reform on high priority.
Infrastructure development
! Transportation in Japan is modern and infrastructure spending
has been considerable
! Railways are a major means of passenger transport, especially
between major cities and for commuter transport in metropolitan
areas
! Japan has several airports, with the domestic hub being Tokyo
International Airport, which is the fourth busiest airport of the 19world
Government support and incentives
! National and local governments in Japan offer incentives to
companies located in the IT clusters
! Under the IT Investment Promotion Tax incentive, all companies
are allowed to receive either a tax deduction of 10 percent of
amounts invested in IT for the company's own use, or an
accredited depreciation of 50 percent for assets acquired as an
IT investment
Competitiveness in the exports market
! Japan's free market economy is highly efficient and competitive
in areas linked to the international trade, but productivity is far
lower in the protected areas such as agriculture, distribution and
services
! China and India accounted for 60 percent and 20.6 percent, 20respectively, of Japan’s offshore spending in 2007
GDP growth and stability
! After sustaining several consecutive years of growth in this
decade, the Japanese economy began to fall into its first
recession in roughly six years in 2008, as real GDP growth was
at -1.8 percent in FY 2008
! The country’s political leadership remains relatively weak and
divided, which means it is likely to be slow to adopt and 21implement new initiatives . Although deregulation and
liberalization are important policy issues, the pace of change has
been slow
! General elections held this year in August is being labeled as
historic, as the Liberal Democratic Party (LDP), which has been
in power since its formation over 50 years (except for a 11-month
period in 1993), lost to the opposition, Democratic Party of Japan 22(DPJ)
Doing business
! Japan is ranked at number 15 in terms of ease of Doing
Business. According to the World Bank Index 2010, it takes 23
days to start a business in Japan, compared to the OECD
average of 13 days
! Tokyo ranks second as being the most expensive office location 23in the world .
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25. Ministry of Economy, Trade and Industry
26. JISA
http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website 27. World Intellectual Property Organization
28. Nasscom 2009
Prospects 2020: Japan is likely to be a net importer of IT-BPO services
Japan is the second largest IT services market in the world. In 2008 Japan’s IT services
spend reached USD 104.5 billion, growing at a CAGR of nearly 7 percent since 2001.
With the advent of new technologies and architectures such as Service Oriented
Architecture (SOA), SaaS and cloud computing. The structure of the information society 25in Japan has changed to an advanced information society . At the current pace, the
Japanese IT-BPO industry could reach USD 149.3 billion by 2020, growing at a CAGR of
3 percent. However, some of the constraints towards Japan’s future outlook would be
the conservative attitude of Japanese enterprises to offshoring, as well as the cultural
dissimilarities and the limited English language capabilities. Another threat to the
Japanese economy as a whole is an ageing population and declining birth rates, which
could lead to a severe shortage of skills by 2020.
The Japanese IT-BPO industry has the potential of growing at a CAGR of 4 percent, if it
is able to embrace globalization and try to limit the barriers of language and culture.
Currently, China has the lion’s share of offshore outsourcing (nearly 60 percent), mainly 26because of the similarities in culture . As Japan opens to other markets such as India,
Vietnam and the Philippines, it would gain access to a pool of service providers with
domain expertise as well as service delivery maturity. Japan is known for its R&D 27capabilities and has one of the highest rates of patents filing in the world . A continued
focus on innovation and R&D would bring opportunities in high-end services
The Ministry of Economy, Trade and Industry, in order to prepare the foundation of an
advanced IT-enabled society plans to foster innovation and strengthen international
competitiveness. Moreover, the Japanese IT Strategic Headquarters has been enacting a
policy programme called i-Japan (formerly e-Japan) through which the country is likely to
focus on three areas: (a) Promotion of e-Government (b) Devising countermeasure against 24internet crime and (c) Promotion of Green IT .
Japan IT-BPO Industry - 2020
2008
CA
GR
3%
CA
GR
4%
USD 104.5 bn
USD 149.3 bn
USD 175.3 bn
2020 - ‘Base-Case’Scenario
2020 - ‘Optimistic’Scenario
Source: KPMG Analysis
Implications for Stakeholders:
Japan is a high adopter of IT services and the second largest market of IT-BPO services 28globally . To sustain growth rates till 2020, key stakeholders in Japan would have to
consider the following:
Japan: Outlook 2020
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29. OECD.org
Improve the availability of skills for the IT market
Japan needs to aggressively push for Immigration reforms in order to open its doors to
foreign workers. Japan’s population is expected to shrink 0.4 percent a year in the
2010s and 0.7 percent a year in the 2020s. Moreover, Japan's working population of
66.5 million could drop to just 42 million by the middle of the millennium, mainly as a
result of the falling birthrate and the rapidly growing population of people aged over 65
years
Improve labor productivity
Japan’s labor productivity growth in the service sector, which accounts for 70 percent
of the country’s economic output and employment, has slowed over the past few years
in contrast to manufacturing. The slowdown in productivity is due to a weak
competition in the service sector resulting from a strict product market regulation and
the low level of import penetration and inflows of foreign direct investment (FDI).
Reversing the deceleration in productivity growth, in the service sector is likely to be 29essential to raise Japan’s growth potential
Encourage business owners to use IT as an enabler
Businesses in Japan must be educated on the benefits of using IT as a strategic tool,
and not consider IT as a cost-center. Currently, the BFSI and automobile sectors are the
highest users of IT. There is great potential for the manufacturing, government and
utilities sectors to adopt IT to strengthen competitiveness
Bridge the digital divide
Although ICT penetration in Japan is much higher than that in other ASOCIO member
countries, there is evidence of a digital divide between the urban and rural areas in
Japan that needs to be bridged. Local businesses may need to play a more active role
in promoting technology in disadvantaged areas.
The country which has had limited outsourcing partners, could gain access to a host of
vendors with diverse capabilities across the region. Collaboration with other countries
Areas for Collaboration
from the Asia-Oceania region could push Japan higher on the growth path. Some
collaboration areas could be as follows:
! Japan could run training programmes for supplier nations like India, Vietnam,
Philippines to familiarize them with the Japanese culture and language. This
partnership could also lead to knowledge-sharing sessions by service providers on
reduction of operating costs through IT
! Being one of the forerunners in the fight against piracy, Japan could train nations like
Bangladesh and Malaysia on efficient IPR enforcement techniques
! Opening up its labor market to the regional countries could provide Japan with
access to skills, which are currently on the decline in the country.
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30. IPR in Japan: Asahi Koma Law
31. Eetasia.com
32. The Guardian, U.K., Aug 2, 2001
33. NASSCOM’s Emerging Market Series: Japan October 2008
IT-BPO Industry Capabilities
Strengths Weaknesses
Language and cultural dissimilarities
Japan’s weakness in English language capabilities has restricted foreign
partnerships. The country’s wary attitude towards cross-border mergers
have deterred the fostering of outsourcing arrangements. Moreover, the
software industry in Japan has been fragmented with incompatible 32platforms and therefore it has struggled to be competitive globally
Businesses do not consider IT to be an enabler
IT spending in Japan is relatively low. The IT Spend to Sales ratio in Japan
are at an average of 1 – 1.5 percent, whereas in the US this ratio is close
to 3.5 – 4 percent. As Japanese companies continue to operate legacy
mainframe, they have been unable to take advantage of integrated 33software applications
High value adding skills
Japanese skills in high-technology industries suggest that the country may
continue to enjoy an advantage in the production of high value added
goods and services, while lower value added production can be sent to
lower-cost countries, such as China and members of the Association of
South-East Asian Nations
Strong IPR
Japan is a signatory to most of the international treaties concerning 30intellectual property rights . Collaborations with the US and EU in IPR and
patenting have helped to build a secure ecosystem in Japan.
Ageing Population
Japan’s population has been shrinking since 2005, and it is estimated that
this decline may accelerate to 0.5 percent percent per annum up to 2020.
An article in 2001 suggested that Japan may need 600,000 immigrants a
year to make up for the shortfall in its workforce towards the end of this
decade. The implications of these demographic trends for Japan's 32economic growth are profound
Declining dominance
Japan's political and economic position in Asia is under threat due to the
rising importance of China and India. India and China’s growing importance
in world trade can affect Japan’s position of an important exporter in Asia.
However, Japan is expected to retain its expertise in high-technology
industries and is expected to enjoy an advantage in the production of high
value added goods.
Capitalize on innovation power and R&D capabilities
Japan has ranked number one on The Economic Intelligence Unit’s R&D
environment index, thus gaining a high score on its IT industry
competitiveness index. Creating a flexible skills resource could increase
internal IT and business process capabilities. Employees could be directed
into new areas such as R&D, which the Japanese have proven expertise 31in
Strong mobile and animation markets
Japan’s global leadership in mobile internet can potentially give the nation
a substantial advantage for mobile commerce applications
Opportunities Threats
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Republic of Korea
(South Korea)
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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1. Viewswire One Click Report on South Korea, Economic Intelligence Unit
2. CIA World Factbook, South Korea, 2009
3. Economist Intelligence Unit, August 2009
Source: EIU, S&P
Korea, however, suffered heavily in the Asian economic crisis of 1997-98. After the
crisis, the country embarked on financial and corporate sector restructuring. The
country joined the trillion dollar economy club in 2004. Korea’s GDP growth was 2between 4 and 5 percent from 2003 to 2007 .
The Korean industry is dominated by the ’Chaebol’ (South Korean conglomerates)
controlling a majority of the market share in exports as well as domestic retail and
financial services sectors. The major exports are automobiles, electronics, telecom,
steel and shipbuilding.
The Korean economy is currently in recession and the EIU expects the GDP to shrink 3by 1.8 percent in 2009 as per its recent forecast .
Trade and Investment
Source: EIU
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
Source: EIU, 2008
GDP Composition
Services
58%
GDP at Market Prices (2008)
Population (2008)
Exchange Rate (USD:SKW) (Jan – Sep ’09 avg)
Inflation (1Qtr - 2009)
Unemployment (2008 avg)
S&P Risk Rating
USD 929.1 billion
49.2 million
1,102
3.9 percent
3.2 percent
A/Stable/A-1
1Economy and Industry
The country’s rapid capital-intensive growth over the last few decades has been driven
by a high internal savings and investment rate and an emphasis on education. The
economic growth model which started with import-substituting industrialization after
the Second World War shifted to export-oriented growth from the ‘60s onwards. Korea
joined the Organization for Economic Co-operation and Development (OECD) in 1996.
9.2
6.3
3.6
1.6
2.2
0.6
4.3
315.3
339.8
378.4
426.1
450.5
400.1
459.3
Agriculture
3%
Industry
39%
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4. http://investintaiwan.nat.gov.tw/en/opp/inds/info.html
5. http://www.austrade.gov.au/ICT-to-Korea/default.aspx
6. Digital Planet Report, WITSA 2008
7. ICT in the Korea market, by the New Zealand Trade and Enterprise, Seoul, February 2009
8. FKII
9. http://www.nzte.govt.nz/explore-export-markets/market-research-by-industry/Information-and-
communication-technologies/Documents/ICT-market-in-South-Korea-February-2009.pdf
4Evolution of the IT-BPO Industry
Current state of the IT-BPO industry
1990s:
The ICT sector has been a major contributor to the country’s
economic growth and its recovery from the financial crisis of 1997-598 . The number of IT companies in Korea grew at an average rate of
20.2 percent from 1996 to 2000.
2000s:
The ICT industry has formed the backbone of the country’s growth
in this decade, but the size of the IT services sector is currently
small. After 2008, when a new government took office in Korea, the
Ministry of Knowledge Economy (MKE) has been made responsible
for the promotion of the IT industry, including business support,
R&D and HR development.
6
7
8
9
South Korea’s IT industry has grown at a CAGR of 11 percent from
2004 to 2008 and was valued at USD 10.49 billion in 2008 . Though,
the Korean ICT industry is large (USD 261 billion in 2008 , accounting
for more than 28 percent of the GDP), but the IT component is
relatively much smaller, accounting for just 1.13 percent of the GDP in
2008 .
In computing services, 10 large local systems integration companies
(including Samsung SDS, LG CNS and SK C&C) accounted for about
80 percent of the total market in 2008. These companies are primarily
servicing the IT services demand from the large conglomerates or
Chaebols in Korea through their captive subsidiaries. The remaining 20
percent of the market is serviced by foreign companies and local
small-medium enterprises. Large Korean conglomerates (including
Samsung, LG, SK and Hyundai) and local and foreign banks demand
most of the IT services .
IT-BPO Industry size
Note: The industry size includes domestic market as well as exports of IT services and software
products. BPO market estimates are not included in the figure above
Source: Digital Planet Report, WITSA 2008
10.4910.029.21
8.087.02
0
2
4
6
8
10
12
2004 2005 2006 2007 2008
USD
bill
ion
Industry CAGR11%
The Federation of Korean Information Industries (FKII) is a private and non-profit organization. The association was formed in
1979 and since 1979, FKII has contributed to spurring the growth of the IT industry and informatization of Korea. FKII has
emerged as a beacon of the IT industry in Korea to lead the ubiquitous area. The vision of FKII is to become a renowned IT
Leader displaying creativity and leadership. FKII has around 250 members, including regular and associate members.
In 2008 (P), the total revenue of the Korean IT industry was 288 trillion Korean Won (equal to USD 2,880 billion), it includes
all amounts from production and export in telecommunication services, Information Communication devices manufacturing,
and Software and related service.
For more details on FKII, please refer to the appendix section or visit www.fkii.or.kr
Federation of Korean Information Industries (FKII)
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10.
11. Cabinet Office, Annual report on the ageing society, 2007, EIU
12. http://ec.europa.eu/information_society/activities/itgirls/doc/stats_annex1_.pdf
13. http://www.oecd.org/dataoecd/32/24/41277858.pdf
14. http://www.austrade.gov.au/ICT-to-Korea/default.aspx
15. Piracy Study, BSA-IDC 2008
16. http://news.xinhuanet.com/english/2009-07/29/content_11792733.htm
17. http://memory.loc.gov/frd/cs/profiles/South_Korea.pdf
18. http://www.international.gc.ca/canadexport/articles/90121h.aspx
Viewswire One Click Report on South Korea, Economic Intelligence Unit 19. http://www.software.or.kr/english/activity/index05.html
20. http://www.koreaittimes.com/story/3651/incheon-strives-be-reborn-world-class-global-city
21. http://www.fdimagazine.com/news/fullstory.php/aid/800/South_Korea_offers_a_wealth_of_incentives
_to_investment.html
22. Viewswire One Click Report, South Korea, Economic Intelligence Unit, 2009
23. CISA, Taiwan
24. http://www.euromonitor.com/South_Korea_working_another_miracle
25. http://www.koreatimes.co.kr/www/news/biz/2009/01/123_38369.html
26. http://www.doingbusiness.org/ExploreEconomies/?economyid=104
Drivers of the IT-BPO Industry
Human resource availability
! The literacy rate in Korea is around 97 percent with an estimated 1072 percent population in the working age group . However, the
National Statistical Office expects the total population to stop
growing in the middle of the next decade and shrink from the 10early 2020s . By 2010, the proportion of the population above
1165 years is expected to reach 11.3 percent . The adverse
demographics are likely to create a shortage of human resources
in the ICT industry in the near future
! Korea has a highly trained labor pool, adding close to 40,000 ICT 12graduates to its workforce every year . Korea produces the
highest number of science graduates per 100,000 employed 25-34-13year-olds among OECD countries, both for males and females
ICT penetration in the country
! Korea is highly advanced in terms of ICT penetration, with the
use of new technologies such as 3G, and IPTV also well
entrenched. 3G services were commercially launched in Korea in
2007, and the number of 3G subscribers is 11.2 million as of May 142008
! Internet usage has expanded rapidly with over 76.3 percent
(34.82 million) of Koreans accessing the internet as of December
2007. There were over 41.9 million wireless internet subscribers 14as of January 2008 . Korea has more than 45 million mobile
phone subscribers (compared to around 23 million land lines) as
of July 2008. The high level of ICT penetration is bringing about
rapid technological convergence in Korea compared to other
countries
IP protection and data protection
! According to the BSA-IDC study, South Korea had a piracy rate of
43 percent in 2008 (compared to 21 percent in Japan). In Korea, 15piracy amounted to dollar losses of USD 622 billion in 2008
! The South Korean President has urged more efforts on
intellectual property rights (IPR) protection as a result of growing 16losses from IPR violations in Korea
Infrastructure development
! The country has advanced infrastructure including expressways
and high-speed rail transport. Expansion of the expressway and
subway systems in major cities is underway as urban areas are 17getting congested
! In late 2008, the government announced spending plans of close
to USD 8.7 billion on infrastructure, including investment in
shipping and ports, improvements to the land transportation
system, expansion of a high-speed rail service and investment in 18roads and motorways
! An IT complex called the Nuritkum has been constructed in 19Seoul, and is expected to become the IT hub in Korea . Incheon
city in South Korea has established the Incheon Free Economic
Zone which aims to attract foreign companies to set up regional
headquarters, international organizations and foreign university 20campuses
Government support and incentives
! In May 2008, the government declared plans to grant cash
subsidies to foreign companies setting up R&D facilities
proportionate to the number of Koreans employed. Under this
plan, the government is to bear part of the wages for up to 100
jobless Korean graduates of engineering universities and 21graduate schools, who are hired by foreign-owned R&D centers
Competitiveness in the exports market
! Exports have been the major engine for South Korean economic
growth. In 2008, exports contributed around 48.5 percent to the 22country’s GDP . The major export markets are China (including
17Hong Kong), US, Europe and Japan
! Exports from the ICT industry contributed 30 percent to Korean 23exports and close to 17 percent of the GDP in 2005
GDP growth and stability
! The Korean economy is showing signs of a rebound from the
recession. In Q2-2009 the economy grew by 2.3 percent in real
terms against the last quarter. However, private consumption, 19exports and imports are expected to fall in 2009
! The overall business environment is stable, but there is a political
risk due to the difficult relations with its nuclear-armed neighbor
North Korea.
! Korea is part of the Organization for Economic Co-operation and
Development (OECD), and has doubled its income in the last 12
years. The government in 2006 set the goal of doubling the 24disposable per capita income to around USD 20,000 . The per
25capita income in 2008 was USD 18,000
Doing business
!? South Korea is ranked 19th among 183 economies in World
Bank’s ease of Doing Business report of 2010. It takes an
average of 14 days to start a business in Korea as against the 26OECD average of 13 days
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27. KPMG Analysis, based on secondary research as well as extensive interviews with executives from the
country associations, companies operating within the country and local KPMG offices
Prospects 2020: Catch-up growth potential for the
domestic market in Korea
The focus on IT-BPO services in South Korea is on the rise. The total
IT-BPO services industry was USD 10.5 billion in 2008, growing at
an annual growth rate of 10 to 12 percent over the last few years.
Though growth is expected to slow down in this year and the next
due to the recession, robust growth is expected up to 2020, with
the industry expected to reach USD 29.3 billion by 2020.
The major concerns in Korea’s IT-BPO industry are maintaining a
steady supply of trained professionals to the IT-BPO services
industry given the attractiveness of other careers and the adverse
demographics in future. Besides, the Korean IT services market is
relatively small and dominated by the Chaebols.
We believe that if certain corrections occur, Korea may be able to
tap the potential of its high ICT penetration to reach a much larger IT-
BPO services industry size of USD 40.2 billion by 2020.
Industries such as auto electronics have already been identified in
the New IT strategy as drivers for growth. The strong manufacturing
sector and engineering services are also likely to generate robust
demand for IT services. Government spending on the sector is likely
to rise, given the focus on promoting the IT industry going forward.
Expectation of high growth in new areas such as media and
entertainment and Green IT are also likely to lead to the high
demand for IT-BPO services from now to 2020. Innovation and rapid
catch-up growth are likely to be the mainstay of the industry in
South Korea.
A comparison with other countries with similar-sized economies
shows that Korea's share of IT-BPO services in the GDP is currently
much lower, indicating high potential for the IT-BPO services
industry in Korea. Korea can consider the following measures to
induce expansion in the industry size:
Improving IT services adoption in the SME segment
Currently, in the ‘Chaebol’ structure, most of the IT-BPO services
demand from the Chaebol segment is serviced through their captive
subsidiaries. A focus on improving services demand from the rest of
the market, especially the SME segment is likely to help ensure robust
growth for the IT-BPO services industry and the vendor landscape
Making the IT services industry more attractive to the
talent pool
Korea may have to initiate internal branding to make IT services
more attractive as a career option for professionals. The government
is already focusing on promoting IT services. By taking measures
such as improving compensation levels, creating opportunities for
innovation and showing a career path to the workforce, more
graduates could take up careers in IT services
Cost-reduction alternatives
Korean companies may have to look at greater outsourcing as well
as offshoring to retain competitiveness as operating costs are likely
to increase. Given language issues, countries in the Asia-Pacific with
relative cultural similarities – such as China, Philippines, or Vietnam
may be choices for offshoring.
Korea can ensure much higher growth for its IT-BPO industry than
what is projected here by effectively working with other nations in
the region and building on its strengths:
! Tying-up with culturally similar countries within the region for
outsourcing and offshoring is likely to help ensure a lower
operating cost environment for Korean companies, which can
then focus on innovation and higher-value add
! With Korea leading the technology convergence space, it can
look at extending its market to other advanced economies with
high ICT penetration, as well as emerging economies where ICT
penetration is rapidly rising. The gaming and digital content
industry is one such example, where Korea has inherent
strengths owing to its high ICT access environment and is
therefore likely to have an early mover advantage if it taps into
emerging markets.
Implications for stakeholders:
Opportunities for Collaboration
Vision for Korea
In late 2008, the Ministry of Knowledge Economy announced a new
policy vision called "New IT Strategy", for promoting the IT industry,
highlighting the convergence of IT and other industries, and the
pervasiveness of IT in business, society and individual life.
The IT policy identifies auto-electronics as an important industry for
Korea given its capabilities. It aims for Korea to seize 10 percent, or
about USD 4 billion, of the world's automotive electronics and IT market
by 2010. The strategy also calls for improving energy efficiency by 20
percent through the development of energy-saving products and a more
extensive use of large building energy management systems based on
advanced network technology such as ubiquitous sensor networks.
2008
CA
GR
8.9
%
CA
GR
11.
8%
USD 10.5bn
USD 29.3bn
USD 40.2bn
South Korea’s IT-BPO Industry - 2020
2020 - ‘Base-Case’Scenario
2020 - ‘Optimistic’Scenario
Source: FKII, KPMG Analysis
27South Korea: Outlook 2020©
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28. http://www.wipo.int/ipstats/en/statistics/patents/wipo_pub_931.html
29. http://www.computerweekly.com/Articles/2009/08/11/237283/south-korea-to-become-green-it-world-
leader.htm
30. OECD Economic Survey of Korea, 2009 http://www.oecd.org/dataoecd/22/56/41878147.pdf
31. Discussions with various stakeholders in South Korea
32. http://www3.villanova.edu/gartner/research/125300/125311/125311.pdf
IT-BPO Industry Capabilities
Strengths Weaknesses
Lack of proactive policy reforms in Korea
The government has been slow to implement the critical reforms required 30in the areas of labor market, education and tax systems . This may create a
mismatch in the availability and demand of technology workers in future.
IT services not preferred career option
Korea has abundant technical manpower, but skilled engineers prefer to
work in the manufacturing or electronics industries, where remuneration is 31higher and career options are perceived to be wider
Strong ICT industry
Korea has a strong ICT industry dominated by global companies in
telecoms, semi-conductor and hardware manufacturing. Going forward, this
is expected to create strong demand for software and IT services in Korea
Highly developed infrastructure
South Korea is a developed country with highly advanced and sophisticated
real and virtual infrastructure. ICT adoption rates are very high and capable
of generating large demand for IT services in the near future.
Growth in IP creation
Korea was historically good at adaptation and practical application of
technologies but lagged in basic research fields compared to countries like
the US and Japan. However, Korea’s share in global patents granted has
been increasing rapidly, growing from 5.8 percent in 2000 to 14.1 percent in 282006
Loss of cost-competitiveness
Emerging nations are bringing in huge cost-competition in the ICT industry.
If costs in Korea continue to rise, the country may have to focus heavily on
innovation and R&D to survive the competition
Primarily a captive market
IT services is primarily a captive market in Korea, with IT services demand
from most Chaebol group companies serviced by their respective captive IT
services arms. This is resulting in fewer multinationals and in turn, lowers 32competition in the IT market, especially in the IT outsourcing market . The
monopolistic market induced by the Chaebol structure could pose a threat
to the development of the Korean IT services industry going forward.
New markets on account of digital – broadcast
convergence
Korea has an advantage in terms of newer technologies in wireless, digital
media and broadcast media. Given the convergence in these media, Korea
is at an advantage to dominate the global industry in this area, which in
turn is likely to create opportunities for IT-BPO services
Green IT
South Korea has a wide range of green government policies and clearly
earmarked public funding. South Korea's President has envisaged a "low
carbon, green growth" strategy for the country. In July 2009, a South
Korean Committee on Green Growth announced a five-year plan to invest
USD 87.7 billion in its Green New Deal programme. The money is set to be
spent on various aspects of IT, including faster broadband networks and
green technologies such as solar panels and hybrid cars and is likely to 29provide a boost to IT services growth in the country .
Opportunities Threats
97
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New Zealand
Asia-Oceania Vision 2020:
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1. New Zealand Debt Management Office
2. EIU
Source: EIU, S&P, x-rates.com, stats.govt.nz
In 1997-98, large parts of the country suffered a drought, which brought down growth.
After this period the economy performed well, with GDP growth ranging between 3.5- 14.5 percent; between 2002 and 2004
Apart from a strong agricultural sector, other leading manufacturing sectors include
food processing, wood and paper products, and metal fabrication. Service industries,
particularly financial, insurance, and business services, also form a significant part of
New Zealand's economy.
New Zealand’s key exports are agricultural goods. Leading agricultural exports include
dairy products, meat, forest products, fruit and vegetables, fish, and wool.
New Zealand’s economy fell into recession in 2008, in line with its key trading partners,
Australia, Japan and the US, which together consume over 45 percent of New 2Zealand's exports
Trade and Investment
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
Source: EIU, 2008
GDP Composition
Agriculture
4%
Industry
26%
Services
70%
Economy and Industry
New Zealand has an export-dependent economy based on its very efficient agricultural
system. Moving from high levels of protection for the domestic industry, New Zealand
opened its economy to competitive pressures and world prices in 1984. It has been a
free-market economy since then.
GDP at market prices (2008)
Population (2008)
Exchange Rate (NZD:USD) (Jan – Sep ’09 avg)
Inflation at Consumer Prices (1Qtr - 2009)
Unemployment (2008 avg)
S&P Risk Rating
USD 115 billion
4.3 million
1.67
3.0 percent
4.2 percent
AA+/Stable/A-1+
2.5
1.5
7.8
2.5
2.0
2.2
2.5
28.6
30.6
30.7
36.5
39.6
24.7
30.9
Note: Year (f) indicate forecasts made for the year
Source: EIU, Board of Investment, New Zealand
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3. NZ Herald news article
4. EIU
5. Digital Review of Asia Pacific
6. WITSA
7. IT ANZ
8. New Zealand Trade and enterprise website
9. Statistics New Zealand
10. Investment NZ.com
Major employers in the ICT sector include Microsoft, IBM, Vodafone
and local companies Datacom, Gen-I and Eagle. Tait Electronics,
Jade and UK-owned Allied Telesis, Navman, are internationally-
recognized examples of New Zealand's innovative ICT industry. New
Zealand also has renowned digital content producers such as Weta 5Digital and Stracker International
ICT is one of the three focus areas for the New Zealand
government's Growth and Innovation Framework (GIF). The IT
spending in the country reached USD 2.53 billion in 2008. Export
forms a small part of the overall industry, amounting to around USD 6341 million in 2008
New Zealand’s software industry is involved in various engineering
applications, ranging from embedded software that supports
electronic devices to high-performance software used for special
effects in games and films. Moreover, the industry is also active in
the creative sector, including advertising and publishing, as well as
computer services. The sector exports primarily to Asian markets, 7the US, the EU and Australia
New Zealand is a market of overseas vendors and local ICT
companies. There are approximately 8,800 ICT players in the 5country, of which most are focused on the domestic market . The
sector employs approximately 40,000 people. Telecommunications 8remains the most significant ICT sector in the domestic market
Government, agriculture and dairy and financial services are other 9sectors that outsource functions in New Zealand
A number of software vendors have established their own
development centers in New Zealand for example: Hewlett
Packard’s Enterprise Application Centre in Christchurch and EDS’s 10Best Shores Centre in Auckland .
Current state of the IT-BPO industry
Evolution of the IT-BPO Industry
1990s:
The USD 7.39 billion (NZD 15 billion) contract of information systems
services signed between Telecom and EDS in 1999, is said to be the 3largest outsourcing contract in Australasia
2000 - Present:
IT sales in the country have hovered around USD 2 - 2.5 billion since 42004 . In 2005, New Zealand released the Digital Strategy, which
took a more holistic approach rather than isolating ICT within a
single ministry.
IT-BPO Industry size
Break up of IT-BPO Revenues by Service Line
Source: EIU, Statistics New Zealand
Note: Revenues include IT services and software only, and not BPO
2.00 2.08 2.022.43 2.53
0.24 0.23 0.24
0.36 0.34
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2004 2005 2006 2007 2008
IT BPO Sales IT BPO Export
USD
Bill
ion
CAGR: 5%
Source: EIU, 2008 estimates
Packaged
Software 23%IT Services
77%
NZSA is New Zealand's national software association. Association has relationship with regional software clusters and other
Information and Communications Technology (ICT) sector groups, associations and organizations. NZSA is also closely aligned to
government agencies responsible for software sector growth, development and investment. NZSA has built a collaborative
alliance between the country's primary software associations: Canterbury Software Inc (CSI), Website Developers Association
NZ (WDANZ) and Wireless and Broadband Forum (WBF). The Software New Zealand alliance enables members of each
constituent organization to access a wider range of events, companies and resources.
NZSA was established in year 1999 with objective to align with government for growth in the software sector and build
collaborative environment for sector to grow further.
NZSA seeks to help its members acquire in-depth industry knowledge and learn the essential business management, sales and
marketing skills required to enter and grow profitable export markets.
For more details on NZSA, please refer to the appendix section or visit www.nzsa.org.nz
New Zealand Software association (NZSA)
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11. CIA Factbook
12. investmentnz.govt.nz
13. Visabureau.com
14. New Zealand Trade and Enterprise
15. State Government website
16. BSA2008
17. Doing business in New Zealand
18. Newzealand.com
19. NZSA
20. www.state.gov
21. EIU
22. NZ Herald article dated 06 Jun, 2009, Cushman and Wakefield
Drivers of the IT-BPO Industry
Human resource availability
! The population of New Zealand is highly literate, with literacy 11rates at 99 percent for the people aged over 15 years
! According to a study by Investment New Zealand, 3,818 students
graduated in 2002 with ICT-related qualifications and this number 12was projected to climb by 32 percent to 5,045 graduates in 2007
! New Zealand invests about USD 1.5 billion annually in the tertiary
(universities and polytechnics) education system, and has been
able to attract several international students who are looking for
an alternative to Australia
! Immigration is important to New Zealand and the Skilled
Migration category is core to the New Zealand Immigration
strategy. The Skilled Migration category allows those people to
emigrate, whose skills are likely to help boost the New Zealand 13workforce
ICT penetration in the country
! Mobile penetration remains high in New Zealand, with an
estimated 109 mobile-phone subscriptions for every 100 people,
and this figure is expected to increase to an average of just 14under 111 subscribers in 2009-10
!? New Zealand had 1.5 million internet subscribers as of March
2008, amounting to approximately 65 percent of New Zealand 15households, ranking above Australia, the UK and US
IP protection and data protection
! New Zealand has one of the lowest piracy rates in the world at 1622 percent in 2008, down from 23 percent in 2005
17Infrastructure development
! New Zealand’s infrastructure is strong to support the business
environment. In February 2009 the government has announced a
spending of USD 61.3 million on housing and USD 70 million on
transport
! The country is well connected by air and has a comprehensive 18network of international and domestic airports
! Rail network is not vast in New Zealand, and rail services are
focused primarily on freight, with limited passenger services on
some lines
19Government support and incentives
! There are no specific incentives for the IT-BPO industry in New
Zealand, and in fact, in general the country has relatively few
incentive schemes aimed at foreign investment. However, the
government has made changes to the general tax regime in
2008, which are aimed partly at encouraging foreign investment
! The 2008 tax package introduced a 15 percent tax credit for
research and development expenditure that is carried out
predominantly in New Zealand.
Competitiveness in the exports market
! New Zealand is an export oriented economy. Although New
Zealand's trading partners include US, China, Japan, Singapore,
and Germany. Australia continues to be New Zealand's principal 20export market . Proximity and cultural similarities between the
two countries have been the principal reasons. This has caused
New Zealand to seem remote compared to other countries in
the region
21GDP growth and stability
!? New Zealand had a high per capita income (in PPP) of USD
26,700 in 2007
! The economy is currently in recession and is facing reduced
demand in key export markets. Real GDP is expected to contract
by 2.7 percent this year, and is expected to grow by just 0.6
percent in 2010
! The country predicts long-term average growth rate to 3.5
percent in 2011-20, which could be achieved through increased
productivity
! A growing emphasis on higher-value added production
(particularly in the agricultural sector) is likely to help boost
overall productivity. This could be achieved by encouraging the
use of farm technologies and other specialized software
technologies
Doing business
! New Zealand is ranked second out of 183 countries in terms of
ease of Doing Business. According to the 2010 Index, it takes
one day to start a business in New Zealand, compared to the
OECD average of 13.0 days
! According to Cushman & Wakefield’s report, New Zealand is said 22have one of the lowest office space rentals in the world
101
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21. Statistics New Zealand
22. american.edu.com
Implications for stakeholders:
Areas for Collaboration
Promotion programmes to attract talent
New Zealand is characterized by its small population and the small
average sizes of businesses. Thus, it is necessary for the country to
attract global ICT businesses by rolling out aggressive investment
promotion programmes. This is also likely to enable to create
opportunities for local residents and migrant students
Build capabilities in R&D
The country needs to invest in R&D programmes to foster
innovation, by creating niche services that are aligned to the
important segments like agriculture, healthcare, digital content and
biotechnology. New Zealand carries a potential to emerge as a
supplier for advanced technologies
Encourage relations with extended neighbors
New Zealand needs to renew its efforts towards coordinating with
Asia to leverage its advanced business climate and developed
infrastructure
New Zealand has exceptional trading relations with Australia and the
country accounts for nearly 23 percent of total exports. However, if
trading relations could be extended to the Asia-Oceania region, the
IT-BPO industry growth rate could be accelerated.
Vision for New Zealand
The country has made significant progress through its Digital Strategy,
released in 2005. This strategy identifies new legislation and funding
opportunities to try and make New Zealand 'a world leader in using
information and technology’ to realize its economic, social,
environmental and cultural goals, to the benefit of its people. The New
Zealand Government also has an aim to increase the sector's
contribution to GDP from 4.3 percent to 10 percent by 2012, under the
Growth and Innovation Framework (GIF).
New Zealand: Outlook 2020
2008
CA
GR
5%
CA
GR
6%
USD 2.9 bn
USD 5.1 bn
USD 5.8 bn
New Zealand IT-BPO Industry - 2020
2020 - ‘Base-Case’Scenario
2020 - ‘Optimistic’Scenario
Prospects 2020: New Zealand’s IT-BPO industry is
likely to grow through domestic revenues
New Zealand's IT-BPO industry has grown a CAGR of 6 percent 21during the period 2004-08, to reach a size of USD 2.9 billion .
IT-BPO is an important component of the New Zealand economy,
both as an enabler and as an industry in itself. IT currently accounts 22for approximately 4.3 percent of New Zealand's GDP
As the country moves towards 2020, the IT-BPO industry could
grow at 5 percent CAGR (2008 – 2020) reaching revenues of USD
5.1 billion.
However, the country may need to account for certain constraints
such as lack of skills and must increase investments in R&D to
foster innovation
New Zealand is well positioned in terms of the uptake and use of
ICT. It is one of the highest per capita users of the internet. New
Zealanders are also quick adopters of new technology and services,
as demonstrated in their high usage of electronic point-of-sale
transactions and electronic and internet banking.
These factors could increase the growth potential of the IT-BPO
industry to 6 percent CAGR, from 2008 – 2020.
Source: KPMG Analysis
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23. Beehive.govt.nz
24. Investmentnz.govt.nz
25. Investmentnz.govt.nz
26. CEBIT
27. Statistics New Zealand
IT-BPO Industry Capabilities
Strengths Weaknesses
High costs
New Zealand is a high cost country, in comparison to other nations in Asia-
Pacific. Wage growth has also increased over recent years, reflecting a
tight labor market. Growth in the index of salary and ordinary-time wage 27rates has been above 3 percent since September 2005
A remote country
New Zealand is a remotely located country; which is close, both
geographically as well as culturally, only to Australia. Trade with other
Asian countries is at the minimum
Strong infrastructural backbone
Investment in productive infrastructure ranks second on the Government's
list of policy drivers to lift New Zealand's productive capacity. The 20-year
National Infrastructure Plan makes significant investments to the
infrastructure of the country such as broadband network, roads and 23transport and schools
Cultural similarities and strong economic relations
New Zealand has a close economic relationship (CER) with Australia.
Economic co-operation agreements have been signed with Singapore,
Thailand, Chile and Brunei. New Zealand has entered into a comprehensive
free trade agreement with China and negotiations are on with US,
Malaysia, Hong Kong, Vietnam and the Association of Southeast Asian 24Nations (ASEAN)
Strong competition
New Zealand faces strong competition from countries such as Sri Lanka
and India that are able to provide IT-BPO services to demand markets at
lower costs
Dependence on migration for skills
New Zealand uses its Skilled Migration programme to attract those skills
to the country that can help in boosting the New Zealand workforce. Its
dependence on migration could prove a threat to the country’s growth
Legal processes
The similarity of its legal architecture with that of Britain, makes New
Zealand an attractive destination for niche services such as patent
application and litigation support
Health IT
New Zealand providers are making a mark in the health IT business, both
domestically as well as internationally. They are providing clinical
management systems for hospitals and general practitioners (GP),
Electronic health records, etc. More than a third of UK dental practices use 25specialist dental software, provided by a New Zealand company
Agri-tech and Biotech
Since a large part of New Zealand’s exports are farm goods, the country
has been proactive in building farm management solutions, specialized 26agricultural technology infrastructure and breeding analysis software
Opportunities Threats
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Pakistan
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Source: EIU, S&P, CIA
GDP at market prices (2008)
Population (2008)
Exchange Rate (PKR:USD) (Jan – Sep ’09 avg)
Inflation (1Qtr - 2009)
Unemployment (2008 avg)
S&P Risk Rating
USD 165.2 billion
166 million
70.4
-0.2 percent
7.4 percent
CCC+/Developing/C
1. http://www.sbp.org.pk/about/speech/economic_management_policies/2005/Economy_of_Pakistan_Expo_2005.pdf, CIA
2. http://www.state.gov/r/pa/ei/bgn/3453.htm
3. http://www.dbcde.gov.au
4. EIU, http://www.state.gov/r/pa/ei/bgn/3453.htm, PSEB Pakistan IT Industry Year Book 2007-08
However, Pakistan’s economy remains vulnerable to external and internal shock due to
internal security concerns and the global financial crisis. Faced with large budgetary
deficits, high inflation and depleting foreign exchange reserves, the government agreed 2to an International Monetary Fund Standby Arrangement in November 2008 .
Cotton textiles, apparel, food processing, beverages, construction materials, clothing
and paper products are among the major industries in Pakistan. The manufacturing
sector growth has slowed down in the last two years due to energy shortages, weak 3demand for exports and an uncertain political environment .
Exports accounted for 12.8 percent of Pakistan’s GDP in 2008. Cotton textile production
and apparel manufacturing are Pakistan's largest industries, accounting for about 51.4 4percent of total exports. US and UAE remain the largest trading partners of Pakistan .
Trade and Investment
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
Source: EIU, 2008
GDP Composition
Agriculture
20%
Industry
27%
Services
53%
Economy and Industry
In 2000, Pakistan made significant macroeconomic reforms like privatizing its state-
subsidized utilities, reforming the banking sector, instituting a new anti-money
laundering law, cracking down on piracy of intellectual property and resolving investor
disputes. GDP grew in the range of 6-8 percent during 2004-07, spurred by the gains in 1the industrial and service sectors .
Note: Year (f) indicate forecasts made for the year
Source: EIU
1.1
2.2
4.3
5.3
5.4
2.7
4.0
15.4
17.2
19.4
20.3
20.4
15.9
18.9
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5. http://www.pseb.org.pk/page.php?prid=54, http://atimes.com/atimes/south_asia/id05df02.html
6. http://www.pakboi.gov.pk/pdf/IT%20&%20Telecom.pdf, Pakistan IT Industry Yearbook 2007-08
7. PSEB Website
9. http://www.dbcde.gov.au
10. BSA IDC Study
11. http://www.austrade.gov.au
12. AAII
13. http://www.dbcde.gov.au/__data/assets/pdf_file/0003/10578/Australian_Government_Support_for_the_IC
T_Sector.pdf
IT infrastructure. The government also made changes to the taxation
rates and introduced governance-related reforms in this period, thus
giving the IT sector its momentum.
Post-2001:
The Electronic Government Directorate was set up in 2002 to drive
the e-government initiative envisioned under the IT Policy and Action
Plan adopted in 2001.
The IT-BPO industry has been one of the fastest-growing industries
in Pakistan. Starting from a relatively low base, Pakistan’s IT-BPO
industry has reached a size of around USD 1.7 billion in 2008.
Pakistan’s IT-BPO exports have grown by more than 40 percent over
the past few years and were estimated to be around USD 175 5million in 2007-08 by PSEB .
The IT services spend in Pakistan was estimated to be 1.1 percent
of GDP in 2008. Banking, financial services, telecom and
government are among the major industry verticals consuming IT-5BPO service .
There are nearly 1,082 IT-BPO companies in Pakistan that employ
110,000 IT professionals and cater to the domestic as well as the
major IT-BPO demand markets like the USA, UK, EU, South Africa,
Australia, and the Middle East. The main services of the Pakistan’s
IT-BPO industry include ERP solutions and applications, engineering
and design applications, e-commerce and e-business solutions,
CRM and call center solutions, multimedia and training applications, 6medical and legal transcriptions .
Pakistan is also home to nearly 60 foreign IT-BPO companies such
as NCR, IBM and DHL, employing more than 15,000 IT
professionals, providing software development and call center 7services .
Current state of the IT-BPO industry
Evolution of the IT-BPO Industry
Pre - 1999:
IT received focus in Pakistan in early 1990s. In 1993 Pakistan
Software House Association (PASHA) was formed as an association
that represents the IT industry. The government also formed
Pakistan Software Export Board (PSEB) in 1995 with the mandate to
promote the IT industry.
1999-2001:
During this time, the government placed a lot of emphasis on the IT
sector. Large investments were made in the telecommunication and
IT-BPO Industry size
Source: PSEB, WITSA Digital Planet Report
946.7 1124.4
1356.1 1467.8 1574.8
175
116
72
2004
USD
Mn
0
300
600
900
1200
1500
1800
2100
Domestic Exports
2005 2006 2007 2008
CAGR: 6%
Break up of IT-BPO Industry Verticals
Engery 5%
Telecom17%
Government10%
Finance31%
Other Sectors37%
Source: PASHA, 2007
Pakistan Software Houses Association (PASHA) for IT and BPO was initiated by a number of software houses in an attempt to
create a functional trade association for the IT industry in Pakistan. Over 350 companies are active members of PASHA. PASHA
acts as a voice of the industry and is also a platform for promoting, protecting and developing the software industry in Pakistan.
It provides a focal point of representation for outside agencies of various concerns. The main objective striven for is devising
ways to tackle issues by confronting the concerned authorities to achieve desirable gains for the organization’s members.
The Mission of PASHA is to create an enabling environment that makes Pakistan an attractive destination for foreign and
domestic ICT investments, sustain the ICT industry’s growth by raising the awareness at all levels of the society to invest into
the development of human resources, develop new and innovative avenues for PASHA's members to access partners and
customers outside Pakistan and open up new possibilities for the ICT industry to access finance.
For more details on PASHA, please refer to the appendix section or visit www.pasha.org.pk
Pakistan Software Houses Association (PASHA)
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8. Pakistan IT Industry Year Book 2007-08, www.ssidecisions.com
9. http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
10. http://www.internetworldstats.com/asia.htm#pk,
http://www.itu.int/ictnewslog/Permalink.aspx?title=PakistansMobileSubscriberBaseNears92MnMarkAtA
prilEnd
11. http://www.pro-pakistan.com/2009/02/19/microsoft-focuses-on-software-piracy-in-pakistan-collaboration-
with-fia/, BSA-IDC
12. http://news.bbc.co.uk/2/hi/south_asia/country_profiles/1157960.stm, EIU
13. PSEB Pakistan IT Industry Year Book 2007-08
14. CIA, http://www.manpower.com.au/documents/White-Papers/IT%20Market%20Insights-Australia.pdf
15. World Bank Doing Business Report
Drivers of the IT-BPO Industry
Human resource availability
! Pakistan, with a moderate literacy rate of around 50 percent,
annually produces a talent pool of nearly 20,000 IT graduates
from more than 100 universities offering IT or computer science
courses. However, only one-fifth of this talent pool is regarded to
be competitive and adequately trained to be absorbed in the IT-8BPO industry
! Although the country has a large young population with good
English language and people skills, it also faces a challenge from
brain drain, as a considerable part of educated workforce prefer 9to migrate to other countries
ICT penetration in the country
! Although Pakistan is working towards improving its ICT
infrastructure given the rising focus on the IT-BPO sector,
internet and broadband penetration remain low with 17.5 million
internet users and 128,700 broadband users as on March 2008
! Pakistan has one of the highest mobile penetration rates in
South Asia, at 57.1 percent, with around 92 million mobile 10subscribers as on April 2009
IP protection and data protection
! Pakistan has a high rate of software piracy which stands at 86
percent in 2008, resulting in losses amounting to USD 159
million. High piracy rates have negatively impacted investments 11in the software industry and the R&D within the economy
Infrastructure development
! Pakistan has a reasonably developed transport infrastructure
comprising the railway, roads and airports. Road transport is the
backbone of Pakistan's transport system, carrying around 80
percent of the country’s total traffic. However, over the past few
years, road traffic has grown significantly faster than the
infrastructure can handle, leading to the pressures on existing
infrastructure
! Pakistan witnesses a high incidence of power outages and an
acute shortage of electricity. Peak level of demand for electricity
is around 17,500 MW, while generation remains restricted to just
one third (6500 MW) of the demand
! Currently there are nine National IT parks in Pakistan. PSEB is
also setting up a large National IT Park at Chak Shahazad,
Islamabad. This project is expected to be completed by January
2011
Socio-political stability
! The political landscape in Pakistan has witnessed alternating
periods of civilian and military rule, which has not contributed to
macro stability. In the last few decades, civilian politics has been
tarnished by corruption, inefficiency and confrontations between 12various institutions
Government support and incentives
! Pakistan provides various incentives to companies in order to
promote its IT-BPO industry. Major benefits include a tax holiday
for 15 years, 100 percent repatriation of profits allowed and 100 13percent foreign equity ownership
! Pakistan also offers zero custom duties and tariffs on import of
all IT related equipment and zero percent income tax liability for
software development firms. A seven year tax holiday is also 14offered to venture capital funds in the IT sector
Competitiveness in the exports market
Pakistan’s IT-BPO exports have witnessed a rapid growth over
the past few years to reach USD 175 million in 2008. Companies
are capitalizing on opportunities in areas of software 9development, call centers and back-office services1
GDP growth and stability
! Pakistan’s economy has grown by more than 6.5 percent per
year since 2003 with a per capita GDP of USD 1,010 in 2008.
Pakistan's economic prospects improved due to unprecedented
inflows of foreign assistance at the end of 2001. However, the
country continues to struggle with reforms, having met with
mixed success, especially in reducing its budget and current 9account deficits
! Pakistan’s investment climate has been affected due to the
unstable political landscape and issues related to international
terrorism
Doing business
! Pakistan ranked 85 out of 183 economies for the ease of doing
business in the World Bank Doing Business Survey 2010. It takes
20 days to start a business in Pakistan, which is lower than the 15South Asian region’s average of 28.1 days
! Pakistan remains a low cost destination for outsourcing of
services. Consolidated operating costs for companies in Pakistan
are estimated to be lower by nearly 30 percent as compared to
other major IT-BPO destinations in Asia.
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country. In order to achieve this objective Pakistan needs to
concentrate on an effective policy making and implementation,
covering the following areas:
Build quality human resources capability
Pakistan needs to aggressively work towards improving the quality
and availability of human resources, especially on quality education
and training, nurturing and retention of technical manpower in the
country. The country also needs to embark on major programmes for
improving the education system with specific focus on IT education. In
addition, the country should also work towards improving the labor
participation rate, which can facilitate the growing BPO industry in
Pakistan
Necessitate an appropriate ICT infrastructure
The country needs to support a suitable infrastructure for IT-BPO
companies, especially in the area of internet connectivity and
bandwidth, office space and electricity. The country needs to establish
more IT parks and incubators, equipped with the modern facilities
Promote the use of IT among both consumer and industry
Pakistan also has to expand provision and use of the internet in
Pakistan, throughout the public, private and consumer segments. The
government should promote policies that enable SMEs to embrace
the IT to improve their competitiveness. The country should push for
widespread public access to networked computers, a base of
educated and trained users, providers and support for the
development of the national internet content
Support local enterprises
Pakistan can encourage local IT-BPO companies to build capabilities to
execute large projects and support local companies in terms of
improving their go-to-market capability
Provide a business climate conducive for the future growth
of IT-BPO
Improving investor perceptions through establishing a stable political
and security environment can also play a significant role to help the
industry realize its true potential
Pakistan needs to improve its efforts to strengthen its tie-ups with the
Asia Oceania countries, especially in the South Asia region. An
effective collaboration can help Pakistan to fruitfully leverage its
existing IT-BPO capabilities and put the Pakistani IT-BPO industry on a
higher growth trajectory
! Pakistan needs to improve quality of education through a
collaborative approach. This can help the country improve the
availability of quality IT talent
! Develop go-to-market capabilities of local companies and market
locally developed software products or solutions by forming
alliances with countries in the South Asia region
! Develop ICT infrastructure through gaining knowledge and
assistance from developed countries in the Asia Oceania region.
Opportunities for Collaboration
Implications for stakeholders
Pakistan needs to harness the potential of its IT-BPO industry, so that
the industry can be a key contributor towards the development of the
Vision for Pakistan
The vision of the Pakistan’s IT Policy is to harness the potential of the
Information Technology as a key contributor to the development of
Pakistan and the broad-based involvement of the key stakeholders is a
must for its sustainable development.
The IT Action Plan is an integral part of the IT Policy. The Action Plan
provides a framework for implementation of the IT Policy which includes
priority areas like human resources, infrastructure, software and
hardware industry development, the internet, incentives, IT promotion
and adoption, and regulations.
Pakistan: Outlook 2020
2008
CA
GR
19%
CA
GR
24%
USD 1.7 bn
USD 13.8 bn
USD 22.7 bn
2020 - ‘Base-Case’Scenario
2020 - ‘Optimistic’Scenario
Prospects 2020: Outsourcing to lead way for future
growth
The IT-BPO has assumed greater importance in Pakistan. From its
nascent beginnings in the late 1980s, the industry has reached a size
of around USD 1.8 billion in 2008. The industry has experienced an
annual growth of around 40-50 percent, over the past few years. IT-
BPO companies in Pakistan are in the mainstream, contributing
towards the growth of the industry by providing a number of services
ranging from software, BPO, ERP and data centers. Given its current
attributes, Pakistan’s IT-BPO industry is estimated to reach a size of
USD 13.8 billion by 2020, registering a CAGR of 19 percent during the
period 2008 to 2020.
Nevertheless, Pakistan’s IT-BPO industry is still well below its potential
given the various obstacles that it faces. Political stability, availability of
adequate skills, ICT penetration and infrastructure are some of the
major concerns that are hindering the growth of the industry.
Identifying these challenges, Pakistan has accorded high priority for
developing the industry by addressing these concerns. If Pakistan is
able to successfully address these issues, the IT-BPO industry has the
potential to reach a size of USD 22.7 billion by 2020. Exports of the IT-
BPO services are expected to drive majority of the growth for the IT-
BPO. In addition, low penetration of IT among local industries and
government also paves the way for the future growth of the industry.
Source: KPMG Analysis
Pakistan's IT-BPO Industry 2020
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16. PSEB website
17. 2 http://www.dailytimes.com.pk/default.asp?page=2009%5C07%5C05%5Cstory_5-7-2009_pg5_8
IT-BPO Industry Capabilities
Strengths Weaknesses
Brain Drain
Pakistan faces a problem of brain drain as the young and educated
population is leaving the country, because of the economic and political
tensions. Lack of opportunities for growth and career advancement are
leading to a loss of highly skilled labor. The outflow of human capital can 17affect the prospects of the country’s long-term growth potential
ICT Penetration
Internet penetration remains low and broadband growth has been
negligible. For instance, even in major cities like Karachi and Lahore, the
overall penetration is 0.32 percent and 0.48 percent of population
respectively, which implies that even the major cities of the country are not
optimally served
Skills availability
Pakistan has a young and rapidly growing population, which facilitates the
availability of a large pool of qualified personnel. Annually, the country
produces nearly 465,000 English proficient graduates across disciplines. As
literacy rates are low, Pakistan is investing to improve the quality of its
state education. Human resource costs are lower as compared to other 16established outsourcing destinations in Asia
Rising focus on developing the IT-BPO industry
Over the years, Pakistan has demonstrated good efforts to develop its IT-
BPO industry by offering various facilities and incentives. The rising
emphasis to establish reliable IT infrastructure, develop the quality of
human resources and provide attractive incentives package is likely to be
instrumental in the development of the local IT industry
Political instability and security issues
International terrorism and unstable politics may affect the risk perception
of the country and inhibit foreign investment. It may also lead to the flight
of capital out of the country in the longer term.
Lower labor participation rate
Pakistan remains a relatively low-skilled economy. Although, Pakistan's
labor force is expected to grow rapidly, it suffers from a low participation
rate. Pakistanis had an average of only four years of schooling in 1990-99,
and illiteracy remains a major problem. In addition, cultural factors are
likely to continue to hinder the increased participation of women in the
workforce.
Potential to become a sizable outsourcing
destination
Pakistan has attracted a significant number of IT-BPO companies over the
past few years. The IT-BPO industry specializes in international call
centers, BPO, medical transcription, data entry, engineering outsourcing,
custom software, and several other businesses specializing in animation,
mobile content, retail banking, industry-specific ERP and document
management. Companies are increasingly leveraging Pakistan’s large base
of qualified English speaking talent pool and the low costs of infrastructure
Domestic Opportunity
Pakistan’s economy is expected to maintain the growth momentum, as the
GDP is expected to grow annually at an average of 7.9 percent during the
period 2009-20. Pakistan is expected to benefit from a rising middle class,
increasingly dynamic private sector and increasing FDI. Moreover, the low
adoption of ICT among domestic SME and other companies is expected to
provide a large opportunity for local IT-BPO companies. Pakistan also has a
developing telecom and financial services industries, which are expected to
bring in additional demand for services like ERP software, mobile content
and domestic call centers.
Opportunities Threats
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Philippines
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Source: EIU, S&P
1.
2. EIU, http://www.state.gov/r/pa/ei/bgn/2794.htm
http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
Economic growth has averaged 5.4 percent since 2001, with growth rates reaching the
highest in 2007. GDP grew by 7.3 percent in 2007, the fastest annual pace of growth in
over three decades. Recent economic growth has been fueled by an increase in
government and private construction expenditures, growth in IT –BPO, improved
agricultural harvests, strong private consumption and spurt in remittances from 1overseas workers .
Despite a number of policy reforms, the Philippines continue to face challenges in
alleviating poverty for a rapidly expanding population. In 2006, almost 27.6 million
people lived below the Philippines’ poverty threshold.
Export of goods and services constituted nearly 38 percent of the country’s GDP in
2008. The Philippines' major exports include electronic products, petroleum products,
minerals and garments. The US, Japan, Hong Kong and China are among the major 2trading partners
Trade and Investment
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
Source: BPAP & EIU, 2008
GDP Composition
Agriculture
15%
Industry
32%
Services
53%
Economy and Industry
The Philippine Government introduced a broad range of economic reforms during the
1990s. These initiatives were designed to spur business growth and foreign
investment. This move also helped the Philippines to move from a predominantly 1agricultural economy, to become a services and manufacturing-driven economy .
Note: Year (f) indicate forecasts made for the year
Source: EIU
GDP at market prices (2008)
Population (2008)
Exchange Rate (PHP:USD) (Jan – Sep ’09 avg)
Inflation (1Qtr - 2009)
Unemployment (2008 avg)
S&P Risk Rating
USD 166.9 billion
92.7 million
47.75
6.9 percent
7.4 percent
BB-/Stable/B
0.7
1.9
2.9
2.9
1.5
0.3
1.6
44.3
47.0
55.6
61.4
64.0
54.7
80.0
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5. http://www.state.gov/r/pa/ei/bgn/2794.htm, BPAP
6. http://www.jetro.go.jp/philippines/topics/20090424623-topics/2009-03-31E.pdf
7. http://www.austrade.gov.au/Invest/Opportunities-by-Sector/ICT/default.aspx,
8. http://www.dbcde.gov.au
9. http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
2000s:
The Philippine IT-BPO industry grew from under 5,000 employees in
2000 to 400,000 in 2009. The Business Processing Association of
the Philippines (BPAP) was formed in 2004 with the merger of two
large associations, namely Contact Federation Philippines and
Outsource Philippines. In 2007, the BPAP launched its road map to
2010 with an aim to capture a 10 percent share of the global IT-BPO
market by 20101.
The IT-BPO industry has been the fastest-growing segment of the
Philippine economy, accounting for an estimated 10 percent of the
global outsourcing market in 2008. The IT-BPO industry in the
Philippines has grown at a CAGR of 42 percent during the period
2001-2008, generating more than USD 6.1 billion in revenues in 5, 62008
The customer service sector of the Philippines has doubled every
year from 2,400 employees in 2000 to 112,000 in 2005. Voice-
related services now constitute two-thirds of the country’s IT-BPO
industry. More recently, back-office BPO/KPO has evolved as the
fastest-growing segment, owing to the rapid growth of finance and 7accounting outsourcing and human resource outsourcing .
Back-office BPO/KPO has been among the fastest growing
segments, recording a CAGR of over 60 percent during 2004-08. The
other areas that have helped fuel IT-BPO growth include Contact 8Centers
The IT-BPO industry employed close to 370,000 workers at the end 9of 2008
Current state of the IT-BPO industry
Evolution of the IT-BPO Industry
1970s - 1980:
Philippines started export of IT services as early as the 1970s. In the
1980s, export of IT services and data-encoding services gained
traction in the Philippines. The Philippine Contact Center Cluster can
be traced back to the 1980s when companies outsourced services
such as animation and indexing. Later in the decade, animation in 3the Philippines entered its first ‘Golden Age’
1990s:
Growth of animation, IT, and data encoding from Manila continued
and spread to Davao and Iloilo. Large call centers and captives 4started operating from Manila toward the end of the decade
IT-BPO Industry size
Source:
Transcription3%
Animation2%
BPO/KPO14%
Engineering Services4%
The Business Processing Association of the Philippines (BPAP) is the umbrella organization for the fastest-growing industry in
the Philippines: offshoring and outsourcing (O&O). BPAP serves as the one-stop information and advocacy gateway for the
country's key O&O services sector and has over 200 company members, including 5 association members.
BPAP's thrust is to promote the competitive advantages and the growth potential of the Philippines in the existing and new
areas of outsourcing and supports the industry in areas such as offshore marketing, education and training, security and privacy,
legislation and public policy, among others. It aims to create a supportive environment for the Philippine O&O industry and
strengthen the Philippine case to be the preferred O&O destination by the end of the decade.
For more details on BPAP, please refer to the appendix section or visit www.bpap.org
1.5
2.4
3.3
4.9
6.1
0
1
2
3
4
5
6
7
2004
2005
2006
2007
2008
USD
bill
ion
CAGR: 42%
Break up of IT-BPO by Service Lines
Source: BPAP, 2008
Customer Care 67%
IT Outsourcing10%
Business Processing Association of the Philippines (BPAP)
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10. BPAP
11. Internet World Stats, http://www.itu.int
12. http://www.gmanews.tv/story/150593/Copyright-piracy-rose-in-RP-US-lobby-group-says, BSA Website,
http://www.iipa.com/rbc/2009/2009SPEC301PRESSRELEASE.pdf
13. http://www.senate.gov.ph/publications/PB%202008-08%20-%20Revisiting%20Infrastructure%
20Spending.pdf
http://www.businessweek.com/adsections/2008/pdf/092908_phil.pdf
14. AAII
15.
16. http://www.bpap.org/bpap/index.asp?faqs
17. http://www.dbcde.gov.au
18. http://www.austrade.gov.au/Invest/Opportunities-by-Sector/ICT/default.aspx,
http://www.manpower.com.au/documents/White-Papers/IT%20Market%20Insights-Australia.pdf
19. http://www.state.gov/r/pa/ei/bgn/2794.htm , http://www.iadvisory.com.sg/upload/market_08oct08.html,
CIA
http://www.offshoringtimes.com/Pages/2007/BPO_news1783.htm
Drivers of the IT-BPO Industry
Human resource availability
! The Philippines is recognized as a prominent IT-BPO destination
for its value proposition of large pool of English speaking human
resources with a literacy rate of over 90 percent. Annually, over
450,000 college graduates are produced with the majority
specializing in accounting and business, engineering and IT 10education
ICT penetration in the country
! Mobile penetration in the Philippines has improved over the
years, reaching 75 percent at the end of 2008. However, internet
and broadband penetration remain low. In 2008, there were
around 14 million internet users with a penetration rate of 15.1
percent, while broadband subscribers were at 967,600 as of 11March 2008
IP protection and data protection
! Intellectual property theft in the Philippines has grown over the
years and losses due to PC software piracy reached USD 202
million in 2008 from USD 69 million in 2004. The International
Intellectual Property Alliance (IIPA) has recommended placing 12Philippines in the priority watch list in 2009
Infrastructure development
! The Philippines faces constraints in terms of inadequate
infrastructure to support growth in investment. Although, the
Philippines Government has initiated various development
projects including the USD 20 billion countrywide infrastructure-
development programme to upgrade airports and seaports,
construction of major bridges and highways, public infrastructure
spending as a percentage of GDP is low, averaging 2.4 percent 13during the period 1985 to 2008
! The Philippines’ transport system relies heavily on the road
network which handles about 90 percent of the country’s
passenger movement and about 50 percent of freight
movement. Although the road network is quite extensive, less 14than half is considered to be in good condition . Road
congestion has become a major problem in the highly-urbanized 14Metro Manila
! Availability of affordable electricity remains a major constraint for
businesses operating in the Philippines. Electricity rates for 14industrial use were as high as USD 0.19 per kWH in 2008
! The country remains competitive particularly in Special Economic
Zones (SEZ). Most IT-BPO companies are concentrated in the
urban areas around metropolitan Manila, Cebu and Davao given
the availability of human resources, telecom facilities and office 15infrastructure
Government support and incentives
! The Philippine Economic Zone Authority (PEZA) and the Board of
Investments (BOI) offer various fiscal and non-fiscal incentives to
companies investing in the Philippines. Companies located in eco
zones and IT locators are offered income-tax holiday or a four-
year exemption from corporate income tax, extendable up to
eight years, with the option to pay a special 5 percent tax on
gross income in lieu of all national and local taxes after the tax 16holiday
! Besides this, companies are also offered exemption from duties
and taxes on imported capital equipment, spare parts, supplies 17and raw materials
Competitiveness in the exports market
! The Philippines has become one of the major global destinations
for outsourcing over the past few years, generating more than
USD 6 billion in revenues in 2008 (up 26 percent from 2007) and 14, 18equivalent to about 3.6 percent of Philippine GDP
GDP growth and stability
! Economic growth has averaged 5 percent since 2001 largely
driven by domestic consumption that accounts for more than 70 19percent of the country's GDP
! Over the last two decades, the Philippine economy has been
opened up significantly through foreign exchange deregulation,
foreign investment and banking liberalization, tariff and market
barrier reduction, and permission for foreign entry into the retail
trade sector. However, despite a number of policy reforms, the
country faces challenges related to poverty, inadequate
infrastructure, policy and regulatory instability and governance
issues. The Philippines suffers from political instability, fuelled by
rumors of a coup and fairly frequent mass protests. President
Gloria Arroyo, who was elected in 2001, has faced multiple 14impeachment and coup attempts
Doing business th
! Philippines is ranked 144 out of 183 economies for the ease of
doing business in the World Bank Doing Business Survey 2010
! The Philippines offers a low-cost business environment, which
has helped it to emerge as one of the leading low-cost
outsourcing destinations. Human resource costs in the
Philippines are estimated to be less than a fifth of the costs in
the US and other developed countries. Also, costs of real estate
and telecom services are relatively low. However, high electricity
costs remain one of the major concerns for businesses operating
in the country.
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20. BPAP
Raise operating competitiveness of local companies
In view of intensifying global competition for outsourcing and
offshoring, the Philippines need to drive companies to build higher
specialization. Companies need to strive to improve efficiency and
deliver real results, as buyers are likely to become increasingly
sophisticated. Companies are likely to find it difficult to compete
unless they constantly revise and improve their business processes
and build reliable business models
Develop talent suitable for rising sophistication
Although the Philippines do not face a major challenge in the supply
side of human resources given the steady pipeline of talent in the
system, it may be required to develop comprehensive assessment
and training programmes suitable for complex and sophisticated
services and increase the suitability of hires for industry in future.
Moreover, the country also needs to develop managerial skills among
its professionals, as rapid growth of industry has led to a gap in
industry-specific mid-management skills
Improve focus on non-voice services
The Philippines need to put in place a full ecosystem in place to
support the industry with its ‘next wave cities’. Till date, availability of
talent and infrastructure remains limited in next wave cities. This is
also creating costs pressure in areas around Metro Manila and Metro
Cebu. Hence, it is essential to upgrade the availability of quality
infrastructure and human resources in next wave cities not only to
maintain cost competitiveness but also to trigger the next phase of
growth. The country needs to raise its infrastructure spending in order
to promote the IT-BPO industry
Offer a suitable business environment
The country also has a challenge towards improving its business
environment and risk profile. Philippines would need to evaluate its
existing legislations and put in place new policies that promote
competitiveness and minimize costs.
The Philippines constructive relations with its Asian neighbors through
its membership in the ASEAN and the Asia-Pacific Economic
Cooperation (APEC) forum can help it to resolve major challenges and
gain more share in the global outsourcing industry
! Philippines need to drive innovation and build capabilities to offer
high end services trough tie-ups with Asia Oceania countries.
Philippines companies can collaborate with companies in Asia
Oceania region to build capabilities in high-end outsourcing within
engineering, F&A, etc.
! The country needs to develop its talent to suit rising industry
needs. Philippines need to support a talent base that has good
management capabilities and a higher aptitude for R&D.
Opportunities for Collaboration
Implications for stakeholders:
Philippines have demonstrated high focus towards developing its IT-
BPO industry and enhancing its competitive advantage. To reach its
projected target for 2020, the country needs to address the following
areas:
Industry stakeholders, including the Philippine government, aim to build
and sustain an environment which can result in further expansion of the
IT-BPO industry and help Philippines to retain and grow market share in
the global IT-BPO market
Philippines: Outlook 2020
2008
CA
GR
15%
CA
GR
22%
USD 6.1 bn
USD 31.5 bn
USD 45.0 bn
2020 - ‘Base-Case’Scenario
2020 - ‘Optimistic’Scenario
Prospects 2020: Along with commoditized services,
high-end services to facilitate the future growth of IT-
BPO Industry
The Philippines is now regarded as one of the top outsourcing
destinations in the world, with revenues of USD 6.1 billion from
outsourcing and offshoring in 2008. The Philippines IT-BPO industry
has been growing at a CAGR of 42 percent during the period 2001-2008 . The Philippine success in the IT-BPO industry is largely due to the
favorable supply of human resources, superior English language
capabilities, low-cost base and appropriate government support in the
form of incentives. Based on the current growth attributes, the
Philippines IT-BPO industry is expected to reach USD 31.5 billion in
2020, growing at a CAGR of 15 percent during the period 2008-20.
However, competition is rapidly increasing, especially in areas of
commoditized services like customer care where Philippines holds
majority of the share. Hence, going forward it will be more difficult for
the Philippines to grow at the same rate as it has been in the IT-BPO
space. Therefore, the Philippines needs to formulate effective
strategies to sustain and grow its market share in commoditized
services. Moreover, Philippines can also expand its offerings in high-
end services like KPO, engineering and F&A, and provide a full gamut
of outsourcing services. This can help fuel additional growth for the
Philippines IT-BPO industry, reaching a size of USD 45 billion by 2020.
In addition, the local IT-BPO industry is also expected to benefit from
rising IT adoption in local industries like telecom, banking etc.
Source: KPMG Analysis
Philippines IT-BPO Industry 2020
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21. BPAP
22. World Bank – Philippines overview
IT-BPO Industry Capabilities
Strengths Weaknesses
Poor state of infrastructure
Although Philippines have increased its infrastructure spending over past
few years, the country lacks available key infrastructure due to
inefficiencies in areas of financing, implementation and setting priorities.
The country is also ranked low in the 2008 World Competitiveness
Yearbook in which it ranked 48 out of 55 economies in terms of
infrastructure. The poor state of infrastructure, especially electricity has
constantly been blamed for the high cost of doing business, resulting in low 22investment inflows and high unemployment rates .
Lack of focus on innovation and R&D
R&D in Philippines universities and government research institutes is
moderate, but business R&D remains weak. The main reasons for low R&D
is due to brain drain of technical manpower and low focus of government
on R&D and innovation. The lack of a critical R&D capacity is discouraging
new foreign investments in manufacturing, including in the crucial
electronics and computer sector.
Availability of Talent Pool
The Philippines has a steady supply of labor to enter the workforce per year
with nearly 450,000 graduates, which include 100,000 accounting, finance
and business management graduates and 50,000-70,000 IT or computer
science and mathematics graduates. Moreover, the graduates are
proficient in English, given the Philippines strong affinity to western
culture. In addition, universities and Government have launched various
programmes along with the private sector for developing the talent base in
future.
Established Outsourcing Destination
Over the past few years, the Philippines has emerged as a top destinations
for outsourcing, with revenues growing from USD 100 million in 2001to
USD 6.1 billion in 2008. As a result of this growth, the Philippines is now
the Southeast Asia market leader and, along with India and China, one of
the top countries providing IT-BPO services globally. Attractiveness of
Philippines as a outsourcing destination has resulted in large multinational
participants such as Accenture, Citibank, Convergys, Dell, HSBC, etc. 21setting up large operations in Philippines .
Political instability
There is a potential risk of unstable political environment in Philippines.
The current government headed by President Gloria Arroyo has weathered
multiple impeachment and coup attempts. Domestic insurgencies,
terrorism, and security issues, though largely confined to towns in remote
areas of the south, have also affected the Philippines’ ability to attract
much-needed foreign investment.
Commoditization of services
The Philippines outsourcing industry is heavily skewed towards
commoditized services and non-core processes. In terms of revenues, call
centers remain dominant in the outsourcing business. Hence, the
Philippines is often recognized for its call centers, which might not be
appealing to customers looking to outsource high-end services. Also,
commoditized services and non-core processes are easily learned and
replicated by others competitors, which can lead to pressure on pricing and
margins in the future.
Emerging Segments
Apart from voice-based services, companies are increasingly exploring
opportunities in areas of non-voice services like F&A, engineering, KPO,
architecture, medical, animation and graphics. There is also an opportunity 21for companies to set up shared service centers .
Local Opportunities
IT awareness in both the consumer and commercial sectors in Philippines is
growing due to rise of the outsourcing industry. Call centers, BPO’s, SME
businesses and the education sector are also expected to continuously
upgrade their technologies to maintain quality business processes. Green
IT, next generation customer care, wireless technologies, etc. are expected
to create new demand in the domestic IT-BPO market.
Opportunities Threats
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Singapore
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Source: EIU, S&P
1.
2. http://www.state.gov/r/pa/ei/bgn/2798.htm, https://www.cia.gov/library/publications/the-world-factbook/geos/SN.html
http://www.gov.sg/50_selfgovernance_1959.html 3. http://www.austrade.gov.au/Invest/Opportunities-by-Sector/ICT/default.aspx,
4. http://www.gov.sg/50_selfgovernance_1959.html
Since its independence in 1965, Singapore has adopted a pro-business, pro-foreign
investment, export-oriented economic policy framework, combined with the state-
directed investments in the strategic government-owned corporations. The real GDP
growth averaged 8 percent from 1960-99 and 7 percent between 2004-07, but dropped 2to 1.2 percent in 2008 due to the global financial crisis .
Singapore's manufacturing industry is led by electronics and chemicals industries, 3accounting for 27.6 percent and 37.8 percent respectively, of the output in 2008 .
Singapore is a major hub for multinational corporations with a presence of more than
7,000 Multinational corporations (MNCs). MNCs account for more than two-thirds of 3the manufacturing output and direct export sales .
The export of goods and services constituted nearly 24 percent of Singapore’s GDP in
2008. Singapore's major exports include petroleum products, food and beverages,
chemicals, pharmaceuticals and electronic components. Malaysia is Singapore's major
trading partner, absorbing 12.1 percent of Singapore's exports, followed by Indonesia, 4Hong Kong, EU and China .
Trade and Investment
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
GDP Composition
Industry
33%
Services
67%
Economy and Industry
Singapore is a developed free market economy, which is dependent on its entrepôt 1trade, benefiting from its strategic location in the middle of Southeast Asia .
Note: Year (f) indicate forecasts made for the year
Source: EIU
GDP at market prices (2008)
Population (2008)
Exchange Rate (SGD:USD) (Jan – Sep ’09 avg)
Inflation (1Qtr - 2009)
Unemployment (2008 avg)
S&P Risk Rating
USD 181.9 billion
4.8 million
1.51
2.1 percent
2.2 percent
AAA/Stable/A-1+
19.8
13.9
24.7
24.1
17.4
10.5
17.4
246.1
286.0
338.8
384.3
426.4
325.4
430.8
Source: EIU, 2008
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6. IDA Website
7. http://www.dbcde.gov.au
8. IDA Annual Infocomm Industry Survey 2008
9. KPMG Analysis, IDA, http://www.buysingapore.com/InfoComTechnology.aspx
10. http://community.jobscentral.com.sg/node/116
11. AAII
! Since the 1980s,Singapore has formulated and implemented
national ICT master plans with a primary focus in areas related to
manpower development, ICT awareness and literacy of its 7residents and businesses
! The Infocomm Development Authority of Singapore (IDA), a
statutory board of the Singapore Government, was formed in
1999 when the government merged the National Computer
Board (NCB) and Telecommunication Authority of Singapore 7(TAS)
2000s to present:
! In 2006, Singapore launched a 10-year masterplan (iN2015) with
an objective to expand the benefits from ICT for the people, to 7businesses and the global community .
Singapore’s IT-BPO industry remains a key contributor to its
economic growth by raising productivity and transforming business
processes. The IT-BPO industry recoded a CAGR of around 10
percent over the period from 2001-08 to reach a size of USD 13.8
billion in 2008. Exports accounted for 52 percent of IT-BPO industry 8revenues in 2008 .
The IT spend in Singapore has been growing steadily, with total
revenues forming 3.6 percent of the GDP in 2008. The key sectors
that the Singapore ICT Industry is known for are e-government,
financial technology, intelligent transport systems and 9telecommunications .
Singapore remains a major hub for the global IT-BPO companies
performing a full suite of business activities, ranging from research
and development, product development to the deployment of 10solutions to global markets .
There are approximately 139,000 professionals working in
Singapore’s ICT industry, in over 100 ICT multinational companies
like HP, Yahoo, Salesforce.com, Siemens, Autodesk, Accenture, TCS
and Infosys. Some leading global companies such as Citigroup,
Credit Suisse, ExxonMobil, Procter & Gamble, Dell, Sony,
DaimlerChrysler, FedEx and Reuters are using Singapore for 11outsourcing or managing their business operations .
Current state of the IT-BPO industry
Evolution of the IT-BPO Industry
1970:
In the late 1970s, the Singapore government introduced IT in the 5local labour-intensive industries with an aim to improve productivity
1980s - 1990s:
! A Committee for National Computerization (CNC) was formed to
map out the national- level strategy and the policy for the IT
development in Singapore. The CNC came up with a five-year 6National Computerization Plan in 1980
! The National Computer Board (NCB) was formed in 1981 to 7implement the computerization of the civil service
IT-BPO Industry size
Singapore infocomm Technology Federation (SiTF) is Singapore’s premier infocomm industry association and it brings together 400
corporate members from MNCs and local companies. This association was set up in 1982. The main charter of the federation is to
assist its members in business development, market intelligence, overseas trade missions, networking and alliances.
SiTF's mission is to engage and connect the Singapore infocomm industry with a worldwide reach and recognition. SiTF works
towards achieving this mission through our strong working relationships with government agencies, other local trade associations
and international organizations.
SiTF operates on the principle of being highly responsive to its members' concerns. They are also a proactive organization that pre-
empts the possible influences on the industry. SiTF provides support infrastructures for harnessing the opportunities in a dynamic
and a rapidly changing infocomm industry.
For more details on SiTF, please refer to the appendix section or visit www.sitf.org.sg
CAGR: 19%
Break up of IT-BPO by Service Lines
Source: IDA, 2008
Source: Data calculated based on IDA Annual survey on Infocomm Industry 2008
Note: SGD numbers converted into USD based on average rate of SGD:USD
3.3
2.9
4.3
4.6
6.6
3.5 4.1
5.1 6.2
7.2
0
2
4
6
8
10
12
14
16
2004 2005 2006 2007
2008
USD
bill
ion
ExportsDomestic
IT Services 44% Software
50%
Content Services6%
Singapore Infocomm Technology Federation (SiTF)
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12. Ministry of Manpower Website, Singapore
13. IDA Annual Survey of Infocomm Industry Manpower 2008
14. http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
15. IDA Website
16. http://www.austrade.gov.au/Invest/Opportunities-by-Sector/ICT/default.aspx
17. EIU, BSA-IDC Software Piracy Study
18. http://www.edb.gov.sg, http://www.contactsingapore.sg
19. CIA, http://www.manpower.com.au/documents/White-Papers/IT%20Market%20Insights-Australia.pdf
ACS, http://www.australianit.news.com.au/story/0,24897,25570641-5013038,00.html
20. http://www.ema.gov.sg/Electricity/introduction_to_sg.php
21. http://www.edb.gov.sg/edb/sg/en_uk/index/why_singapore/Guide_to_Investing_in_Singapore/
financial_assistance.html#one
22. http://www.business.gov.sg/EN/Government/GovernmentAssistance/index.htm?SearchCategory=6
&BrowseByPostingGuid= {4AE8CC19-08D4-4E32-9B89-388A2E651D55}
23. http://www.edb.gov.sg/edb/sg/en_uk/index/why_singapore/dynamic_global_city.html
24. EIU
25. http://www.doingbusiness.org/ExploreEconomies/?economyid=167
Drivers of the IT-BPO Industry
Human resource availability
! Singapore has a well developed education system with a literacy
rate of 96 percent among its resident population. The country’s
two public universities (National University of Singapore and
Nanyang Technological University) produced more than 5400
engineering graduates in 2008., However, the ICT industry faced
a shortage of nearly 6,500 professionals especially in areas of 12, 13software development and infrastructure support
! Moreover, given the small size of the resident population,
Singapore relies on immigrant workers. In 2008, the foreigners
constituted about 36 percent of the total labor force in 14Singapore
ICT penetration in the country
! ICT penetration among businesses and individuals remains very
high in Singapore. Mobile penetration rate marched above 130
percent in 2008 from 24 percent in 1997. 3G subscriptions have 15advanced to nearly 2.6 million
! Household broadband penetration also remains high at almost
100 percent in 2008, while the business usage of the computer
and the internet stood at 76 percent and 72 percent, 16respectively
IP protection and data protection
! Over the years, Singapore has made several amendments and
extensions toward IP rights protection. The country has adopted
strong enforcement and public awareness is also high. This has
helped reduce software piracy rates from 42 percent in 2004 to 1736 percent in 2008
! However, the absolute losses from piracy have increased from 17USD 96 million to USD 163 million over the same period
Infrastructure development
! Singapore has developed an advanced and reliable transport and
trade infrastructure. Singapore’s container ports and airport are
among the busiest in the world
! Singapore’s Changi Airport serves 180 cities in more than 50
countries, while the International Maritime Centre (IMC) serves 18an average of 140,000 vessel calls annually
! Further, a Mass Rapid Transit system in the form of rail, bus and
taxi services provides good connectivity within Singapore.
Internal transport is largely land-based, as all parts of Singapore 19are accessible by road
! Singapore offers a wide choice of office space. There are various
business parks and specialized industrial parks that provide an
environment conducive for IT-BPO companies to operate.
Singapore’s electricity retail market is liberalized to facilitate
competition and it provides a reliable power supply, comparable 20to that of the developed countries
Government support and incentives
! The Singapore Economic Development Board offers incentive
and development schemes in areas of manpower development,
technological/equipment upgrading, R&D, intellectual property
and industry development
! Companies using Singapore as regional headquarters and
international headquarters pay a lower corporate tax rate of 15
percent and 10 percent, respectively. The current corporate tax 21rate is 18 percent
! Besides this, the Infocomm Development Authority (IDA)
provides support in areas related to human resource
development and assists local companies in partnering with 22multinational companies
Competitiveness in the exports market
! Export revenue is the main contributor to the IT-BPO industry
revenue, contributing nearly 52 percent of revenues. Nearly 70 15percent of export revenue comes from software development
! Numerous multinational companies have set up their regional or
international headquarters in Singapore. Singapore has a network
of over 50 comprehensive Double Taxation Avoidance
Agreements and 13 Free Trade Agreements (FTA). In addition, 23Singapore is part of the ASEAN Free Trade Area
GDP growth and stability
! Singapore is a major business hub in Southeast Asia in spite of
its small size. The country’s real GDP growth moved down to 1.2
percent in 2008 from 7.8 percent in 2007 due to the nature of its
trade-dependent economy, which was affected due to the global 16economic downturn
! Singapore seeks to promote higher value-added activities in the
manufacturing and services sectors. It has also opened, or is in
the process of opening, the financial services,
telecommunications, and power generation and retailing sectors 16to foreign service-providers and greater competitors
Doing business
! Singapore offers overall regulatory ease of doing business and is
ranked first in World Bank’s Doing Business Ranking in 2010 in
Asia, It only takes three days to start a business in Singapore as
compared to the OECD average of 13.0 days. However, the 24country has a relatively higher operating cost environment
! Strong economic growth from 2004 to the first quarter of 2008
has led to a tightening of the markets for labor and commercial
and industrial space, which has contributed to higher business 16, 25costs .
119
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26. IDA, SiTF, KPMG Analysis
27. SiTF
promote its competitiveness as a favorable location for the off-shoring
of services that can be achieved through the focus on:
Ensuring long-term competitiveness
Maintaining competitiveness of Singapore’s economy by developing
and managing its human capital and by taking a holistic view of the
national, business, organizational, as well as the individual
competencies. Moreover, the country should be competitive to
continue to attract international talent given the rising competitiveness
among developed countries to attract quality manpower. Again, the
country needs to maintain its cost competitiveness in order to sustain
the long-term economic growth, given that the other developing
economies especially in Asia are likely to scale up their business
environment, infrastructure, value-addition and the talent base
competitively and at a lower cost base
Opening up of the skilled labor market
As Singapore is facing demographic issues, the country should open
their labor markets and have a controlled, skill-based immigration
policy. Such policies help ensure that the country is the recipient of
only those skills that are needed to develop the IT-BPO industry
further
Fostering innovation and supporting the local enterprises
Singapore needs to move upwards in the services value chain by
driving innovation and entrepreneurial exploitation of knowledge. There
is a need for Singapore to shift its focus on higher value activities in IP
creation and exploitation. Local enterprises should develop go-to-
market capabilities and successfully showcase their innovation in the
global arena. The academia could also be involved in a re-skilling
programme for the IT-BPO employees. Short term programmes that
are focused on specific growth areas could be developed.
Singapore is a highly developed and successful free-market economy
with trade relations with nearly all of the Asia Oceania countries.
Singapore needs to leverage its existing tie-ups to resolve issues
affecting its IT-BPO potential
! Singapore’s local enterprises needs to collaborate with companies
in other countries to promote and develop innovative and new
applications and services, especially in areas related to digital
content, manufacturing and financial services
! Quality IT talent is critical for realizing Singapore’s IT potential.
Singapore needs to develop more stronger ties with Asia Oceania
countries to attract and retain IT talent.
Opportunities for Collaboration
26Vision for Singapore
The Infocomm Development Authority of Singapore (IDA) has launched
the Intelligent Nation 2015 (iN2015) master plan, with the vision of
transforming Singapore into an intelligent nation, leveraging on ICT
capabilities. Under the iN2015 plan, Singapore aims to be a leader in the
world in harnessing ICT to add value to the economy and the society.
The iN2015 master plan encompasses the following objectives:
Realize a two-fold increase in the value-add of the infocomm
industry to USD 18.4 Billion (SGD 26 Billion)
Realize a three-fold increase in infocomm export revenue to USD
42.4 Billion (SGD 60 Billion)
To create 80,000 additional jobs
To achieve 90 percent home broadband usage
To achieve 100 percent computer ownership for all homes with
school-going children
The iN2015 masterplan also aims to spearheading the transformation of
the key economic sectors like digital media and entertainment, financial
services, education and learning, healthcare and biomedical, government
services, manufacturing and logistics, and tourism, hospitality and retail.
!
!
!
!
!
Singapore: Outlook 2020
Prospects 2020: Maintaining competitiveness and
spearheading innovation can be key for future growth
Implications for Stakeholders
Singapore has a developed IT-BPO industry with the presence of
leading MNC software and services companies. The IT-BPO industry is
estimated to be around USD 13.8 billion, with exports accounting for 27
nearly 52.2 percent of the total industry size . Singapore’s ability to
provide a developed infrastructure, a superior business environment
and quality human resources has helped support its IT-BPO industry.
Given its current attributes, Singapore’s IT-BPO industry is expected to
reach a size of USD 26.4 billion in 2020, growing at a CAGR of 6
percent during 2008-20.
However, Singapore’s IT-BPO industry is likely to face considerable
challenges in the future, as there is rising competitiveness to attract
quality human resources among many of the developed countries.
Moreover, Singapore’s rising cost environment and the increasing
attractiveness of low-cost destinations can affect the future prospects
of attracting the IT-BPO businesses.
Notwithstanding these challenges, Singapore plans to build a Next
Generation National ICT Infrastructure (Next Gen NII) consisting of
wired and wireless broadband network that offers pervasive and high-
speed connectivity. Singapore also plans to focus on developing an
ICT-savvy workforce and raise the competitiveness of its local ICT
enterprises by promoting innovativeness and developing go-to-market
capabilities. Spearheading the innovation of the key economic sectors
like digital media and entertainment, financial services, education and
learning, healthcare and biomedical, government services,
manufacturing and logistics, and tourism, hospitality and retail, also
remains a major focus area. In case, Singapore is able to successfully
achieve its objectives, the IT-BPO industry has the potential to grow at
a much faster CAGR of 8 percent over the period 2008-20, achieving a
size of USD 34.4 billion by 2020.
Singapore’s plans of becoming an intelligent nation by enhancing the
use of the ICT across both, economic and social spheres and to
2008
CA
GR
6%
CA
GR
8%
USD 13.8 bn
USD 26.4 bn
USD 34.4 bn
2020 - ‘Base-Case’Scenario
2020 - ‘Optimistic’Scenario
Source: KPMG Analysis
Singapore IT-BPO Industry 2020
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28. http://www.ida.gov.sg/Programmes/20060419111757.aspx?getPagetype=33
29. http://www.contactsingapore.sg/home/index.php/eng/working_investing_in_singapore/why_singapore/
business_environment
30. http://www.ida.gov.sg/doc/Infocomm%20Industry/Infocomm_Industry_Level1/BCDR_BPO%
20Brochure.pdf, http://www.investasiapacific.com/Singapore.htm
31. IDA Report
32. http://app.mti.gov.sg/data/article/17604/doc/AES_2008_TradeInv.pdf
33. http://app.mti.gov.sg/data/article/17601/doc/AES_2008_Bizcost.pdf
IT-BPO Industry Capabilities
Strengths Weaknesses
Lack of Critical Talent Mass, Dependence on
Foreign Talent
Singapore with a resident population of 4.8 million in 2008, depends on the
migrated population for its manpower requirements. Foreign labour
constituted about 36 percent of the Singapore total labour force in 2008.
Moreover, the country produces around 5,400 engineering graduates from
National University of Singapore and Nanyang Technological University, as
compared to nearly 6,500 job vacancies in the ICT industry .
Lack of Scale Among Local ICT Enterprises:
Although, Singapore’s local infocomm companies have showcased good
growth over the past few years, the industry relies largely on a few major
players. Nearly 96.5 percent of the local companies have operating
revenues of less than USD 50 million. Moreover, very few of the local
enterprises have penetrated into the overseas market. A good number of
domestic companies lack the ability to market their offerings overseas,
despite having high technological capabilities. Limited finance and
marketing skills are the major challenges for the local IT enterprises .
30
31
Major Business Hub
Singapore is a major hub for trade and commerce. The country has gained
the status of a reliable business hub due to the presence of nearly 7,000
MNCs, many of which have established their regional headquarters in
Singapore. Singapore’s strategic location for entrepot trade, key Free Trade
Agreements (FTAs) and Double Taxation Agreements has made it an ideal
choice for companies looking for a suitable nerve center to control and
conduct their regional opportunities. Moreover, Singapore is home to more
than 80 of the top 100 software and service companies with many of them,
including the top 15 software companies, using Singapore as their regional
or Asia Pacific headquarters .
Conducive Business Environment
Singapore leads in the ease of doing business in Asia based on the World
Bank’s Doing Business Ranking 2009. The country has adopted a pro
business policy making it one of the many business friendly nations.
Singapore has also put in place an advanced and reliable physical and ICT
infrastructure for the benefit of businesses. Moreover, the country’s stable
political landscape presents an attractive low risk assessment to many
international business operations .
28
29
Dependence on Re-exports
Singapore has historically been reliant on external trade. From 2004-08, the
total trade was about 3.5 times of its GDP, while net exports were about 27
percent of its GDP. Hence, Singapore’s economic growth depends on
performance of its major trading partners like the US, EU, Japan, Malaysia,
Indonesia and China given that these remain major markets for the
electronic components, chemicals, and petroleum products. Also, re-
exports account for 48.1 percent of Singapore's total sales to other
countries in 2008 .
Loss of Competitiveness:
Strong economic growth over the past few years has led to the tightening
of the markets for labour, commercial and industrial space. This has
contributed to higher business costs, given that the labor and real estate
costs form a major proportion of operating costs for service industries.
Although, the Singapore government is taking measures to control costs,
businesses may be affected in the future. Also, low cost and rising
capabilities of other Asian economies are likely to lead to higher
competition .
32
33
Emerging Business Segments
Singapore has opportunities in digital media and entertainment (DME),
Software-as-a-Service (SaaS) and wireless solutions. Singapore has a high
potential to offer innovative content, services and technologies to the
world. Also, the government’s focus to create more value addition by
adoption of the ICT in key industries can lead to more demand for the IT-
BPO services in the future.
Centralization of Services:
Singapore is being increasingly used as a base for shared services in areas
such as IT, finance, logistics and general functions including administration,
human resources and manufacturing services by major multinationals. In
the future, more and more companies are likely to consolidate their
corporate horizontal functions by setting up shared service centers and
Singapore holds good potential as an attractive destination, given its
proven track record, reliable infrastructure and favorable business climate.
Opportunities Threats
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Sri Lanka
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Source: EIU, S&P
1. CIA Factbook
2. EIU
3. EIU Risk briefing
4. Board Of Investment, Sri Lanka
May 2009 marked the end of a civil war, which started in 1983, after the fall of the
Liberation Tigers of Tamil Eelam (LTTE). Security risks are therefore expected to 2decrease sharply in 2010 . EIU has already revised Sri Lanka’s Political Stability risk
score from 53.9 in the second quarter of 2009 to 43.4 as on 30 September 2009, 3where 100 represents a ‘most-risky’ situation .
The country’s main export markets are the US and UK. Due to the global slowdown,
the EU and the US markets for exports are expected to shrink rapidly in 2009. However,
demand from China and India are likely to help to stimulate a recovery in Sri Lanka’s
exports in 2010. The maximum FDI in 2008 was in the services/infrastructure sector
accounting for 78 percent of total FDI, with telecom being the leading sub-sector.
Malaysia, India, Netherlands and the UK have been the largest source of FDI for the 4country .
Trade and Investment
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
GDP Composition
Industry
30%
Services
58%
Economy and Industry
Sri Lanka’s GDP has grown at an average of 4.5 percent over the last decade, with the
exception of a recession in 2001.
The 2004 tsunami caused major destruction in the country. Government spending and
reconstruction drove growth to more than 7 percent in 2006; however, reduced 1agriculture output slowed the growth down to 6 percent in 2007 .
Note: Year (f) indicate forecasts made for the year
Source: EIU, Annual report of Finance ministry
Source: EIU, 2008
USD 92 billion
19.4 million
115.13
5.3 percent
5.2 percent
B/Negative/B
GDP at market prices (2008)
Population (2008)
Exchange Rate (LKR:USD) (Jan – Sep ’09 avg.)
Inflation at Consumer Prices (1Qtr - 2009)
Unemployment (2008 avg.)
S&P Risk Rating
Agriculture12%
0.2
0.3
0.5
0.6
0.8
0.6
0.7
7.3
7.9
6.8
7.6
8.1
12.1
16.3
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5. LIRNEasia
6. Sunday Observer News article dates 02/09/2007
7. SLASSCOM
8. Board of Investment Sri Lanka
9. Export Development Board Survey 2007
Evolution of the IT-BPO Industry
Current state of the IT-BPO industry
1980 - 2000:
The first offshore US BPO was set up in Sri Lanka 1983 and the first
software park was established in 1999. In the early stages, the IT
sector was dominated by multinational companies like IBM and
Siemens-Nixdorf. It is only in 2000 that the Sri Lankan IT-BPO sector
started growing
2001 – 2005:
This period saw a major change in the Information Technology
sector. Many entrepreneurs founded IT organizations to serve the
local and the international markets. According to the Board of
Investments (BOI), by 2001 Sri Lanka had 50 software development
houses with an employee strength of 25 or more. The industry is
predominantly export-oriented with 71 percent of the companies 5exporting 100 percent of their services
2006 - Present:
The estimated export revenue in 2006 was USD 171.2 million, which
grew to USD 211.3 million in 2007. In that year, for the first time Sri
Lanka was ranked 29 among the top 50 outsourcing destinations in
a global location index report, and in 2009 the country moved up its 6ranking to 16 .
There are approximately 178 IT-BPO exporting companies that
operate in Sri Lanka, mostly small and medium companies and a
few large global players. Among these are several leading global IT-
BPO companies including HSBC, WNS Global Services, Aviva,
Microsoft, Motorola, Industrial & Financial Systems (IFS), Amba 7Research, RR Donnelley, Quatrro BPO, and Virtusa .
Currently, over 50,000 are employed in the IT-BPO industry in
Colombo and the workforce is growing at over 20 percent year-on-8year .
The US is the largest market for Sri Lankan BPO services, and 69
percent of the BPO companies cater to this market. The UK is
targeted by 63 percent of BPO companies and 31percent are
exporting to Australia. Other export markets are Sweden, New 5Zealand, Hong Kong, Singapore and Japan . Top markets for the IT
industry include Europe - which is the largest – apart from North 9America, South Asia, Australia/New Zealand and Asia .
Accounting services is the most popular BPO service undertaken in
Sri Lanka, followed by call center services and medical insurance
IT-BPO Industry size
CAGR: 10%
Source: Sri Lanka ICT profile by UNDP, Export Development Board Survey 2007, WITSA Digital Planet
Note: Includes only domestic revenues, does not include BPO
Export IT-BPO revenues for 2006 amounted to USD 171.2 million, and in 2007 revenues grew
to USD 211.3 million
195.4
219
248.6
270.5
290.2
309.1
0
50
100
150
200
250
300
350
2004 2005 2006 2007 2008 2009
USD
mill
ion
Domestic
Break up of IT Exports by Service Line
Source: Export Value Survey 2008
IT Services 20%
Consulting16%
Software Development35%
Software 29%
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10. ICTA
11. Export Development Board Survey 2007
12. The Times of India (Chennai edition) October 5, 2009
13. Newsrilanka.com
10processing . According to the Export Value Survey 2008, 72 percent of BPO export
companies offer non-voice services and 14 percent offer only voice services. The
leading sectors for software in Sri Lanka are Telecommunication, Banking Financial 11Services and Insurance (BFSI) and Government .
The IT industry today is concentrated around the Colombo metropolitan areas;
however, as the government plans incentives for companies setting up in the Northern 12region, greater IT investments in this area seem likely . Jaffna, in North Sri Lanka,
which was recently named the first ‘City of Excellence in English and IT’, is being
projected as a hub for BPO and KPO for its English literate population and accountancy 13skills .
FITISS was set up in 1996 with the purpose of giving a much needed focal point for the IT industry in Sri Lanka. The
mission of FITISS is to be the apex national organization leading and representing the IT Industry in Sri Lanka.
FITISS member associations are namely the Sri Lanka Association for Software Industry (SLASI), Sri Lanka Computer
Vendors’ Association (SLCVA) and Association of Computer Training Organizations (ACTOS) and LISPA. FITISS has as its
members in hardware, software, computer education and training, internet services and communications.
The activities of FITISS include: conducting a school Software Competition leading to participation at regional level at the
Asia Pacific ICT Alliance Awards (APICTA), organizing various networking events on ICT and business-related topics,
publishing a newsletter and ICT companies directory and hosting road shows for building awareness about the Sri Lankan
ICT industry within and outside the country.
For more details on FITISS, please refer to the appendix section or visit www.itlanka.lk
Federation of Information and Communications Technology Industry and Services Sri Lanka (FITISS)
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14. Virtualcampuses.edu
15. http://www.medianama.com/2009/01/223-airtel-launches-sri-lanka-ops-vas-3g-services-free-sim-cards/
16. http://www.dailynews.lk/2008/09/09/bus01.asp
17. Srilankan ICT Market Analysis by RNCOS
18. World Bank ICT at a glance: Sri Lanka
19. FITIS
20. www.adb.org
Drivers of the IT-BPO Industry14Human resource availability
! More than 30 percent of Sri Lanka’s population is aged below 20 years. Literacy
rates are high in Sri Lanka, at 91 percent
! In Sri Lanka university education is controlled by the government. There are 16
public universities, and a number of specialized institutions, both public and private
for fields, such as computer science, business administration and law
! Next only to the UK, Sri Lanka has the largest pool of professionals who are fully
certified or in the process of getting Chartered Institute of Management
Accountants (CIMA) or Association of Chartered Certified Accountants (ACCA)
professional qualifications
! In Sri Lanka, CIMA has more than 11,000 students and 1,800 members. According
to ICTA, approximately 50,000 Sri Lankans qualify as accountants each year
! The Sri Lanka Institute of Information Technology (SLIIT) has about 3,500 students
graduating annually with IT degrees
ICT penetration in the country15
! In 2008, the total teledensity (fixed and cellular) was at 61.3 percent
! Showing a strong telecommunications market, mobile tele-density in Sri Lanka 16increased to 43 percent in 2008
! During 2001-2007, the total broadband subscribers in Sri Lanka grew at a CAGR of 17143.99 percent . The sector has further growth potential, as in 2007 the number of
internet subscribers per 100, was only at 1, which was below the South Asia region 18average of 1.3
19IP protection and data protection
! Sri Lanka is a signatory to international treaties on Intellectual Property Rights such
as the Berne Convention and WTO/TRIPS and has adopted a comprehensive IP
regime
! Sri Lanka also enacted an Electronics Transactions Act, Computer Crimes Act and is
a signatory to the latest UN e-contracting convention. A Data Protection Code of
Practice is also under preparation
! Sri Lanka’s piracy rates remain high at 90 percent in 2008 according to the BSA IDC
Piracy report. However, the country has already implemented stringent laws and
regulations to prevent piracy and towards the protection of IP
20Infrastructure development
! Sri Lanka’s infrastructure has been weak, which has adversely affected the
investment climate. The country is, however, making increased investments in
infrastructure. The transport and communication sector has received the maximum
percentage of loans from Asia Development Bank (amounting to nearly USD 1
billion as on end 2008) with a high project success rate of 80 percent
! The electrification ration has improved from 67 percent in 2003 to 79 percent by
2007
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21. The Times of India (Chennai edition) October 5, 2009
22. EIU
23. http://www.doingbusiness.org/ExploreEconomies/?economyid=174
! The Board of Investment of Sri Lanka (BOI) has allocated USD 300 million for Techno
Park at Katunayake
! The BOI has also entered into an agreement with Orion Development for a project
to construct a building complex to set up an IT Park at Colombo, as well as establish
an IT Park in Malabe in collaboration with SLIIT and two Indian companies
21Government support and incentives
! Tax holidays for specific categories of investments range from 5-12 years. In
addition, a concessionary rate of income tax of 15 percent up to a maximum period
of 20 years is also extended after the tax holiday period (qualifying criteria would
apply to be eligible for such incentives)
! The government also provides special assistance on real estate acquisition based on
the investment and employment generation potential
! The government of Sri Lanka together with several international development
agencies have also in many instances provided substantial grants for companies in
the IT-BPO sector to support the business development and encourage investments
! Grants are provided for Training, Consulting expertise, Marketing, Quality
enhancements (CMMi, COPC, ISO etc.) and for a host of other industry
developmental initiatives
! In order to attract investments in the former war zones in Northern and Eastern
region the government announced a 15-year tax holiday for companies setting up
operations there
Competitiveness in the exports market
! Sri Lanka is an export oriented economy. The country’s key exports are apparel, tea, 22rubber, gems and jewelry
! According to SLASSCOM, the IT-BPO sector has become the fifth largest export
earner for the country
GDP growth and stability
! Sri Lanka has a relatively high GDP per capita (USD 1,600) compared to other
developing economies in the South Asia region. This could reflect a high labor cost,
which might reduce the investment attractiveness of the country
! GDP grew by 6.8 percent in 2007; remittances from foreign workers, estimated at
USD2.5 billion, helped the economy to achieve this growth. The economy is
estimated to grow by 6.0 percent in 2009
! After a civil war of over 25 years, in May 2009, Sri Lanka defeated the rebellious
group Liberation Tigers of Tamil Elam (LTTE) and restored peace in the northern part
of the island, boosting the chances of a long-term socio-political solution
Doing business
! Sri Lanka ranked 105 in World Bank's Doing business index of 2010, from a total of
183 economies. According to the Index, in Sri Lanka it takes 38 days to start a
business, which is higher than the region’s average of 28.1 days. This would improve 23as Sri Lanka moves to a more secure political situation .
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24. FITISS
Implications for Stakeholders
Areas for Collaboration
Focus on branding:
Better marketing and positioning of the country is important for the
country today. With the end of the war with the LTTE, the
investment climate in the country is likely to improve significantly,
but efforts still have to be made to market the country and highlight
the reduction in political risk
Collaboration between industry and academia to improve
employability:
Though the education system in Sri Lanka is strong, there needs to
be an emphasis on improving IT-specific education in order to
improve the employability of the graduates for the industry. Due to
its small population and size of labor force, the country can face
resource constraints in the future. There also needs to be better co-
ordination between the industry and the academia, to provide
‘industry-ready’ candidates to the IT-BPO industry
Greater adoption of IT in key sectors:
Adoption of IT in the public and government sectors is likely to bring
about improved government effectiveness. IT adoption should also
be encouraged in potentially high-growth industries like tourism,
ready made garments and agricultural processing. This can provide
drivers for future growth alongside traditional industries such as
financial services, telecom and the government.
Collaboration with Asia-Oceania members could further boost
industry growth, as the effect of some of the challenges faced by
the country could be reduced:
! Sri Lanka could collaborate with countries such as India and
Malaysia and obtain some insights into creating a brand that
could help promote the Sri Lankan software industry
! Collaboration could ease access to developing markets such as
Bangladesh, for Sri Lankan companies to set up development or
data centers in these countries.
The “Mahinda Chinthana: Vision for a New Sri Lanka” is a10-year Horizon
Development Framework (2006- 2016).
Sri Lanka aims to be a knowledge economy, which is able to sustain
global competitiveness, and where higher education is one of the
privileged channels to achieve this goal. Since there was no real long-
term higher education strategy, the Government is using a two-pronged
approach combining technical expertise and a consultative process, for
building education in the country.
FITISS, an umbrella ICT industry organization for all sectors of the ICT
industry (such as hardware, software, telecommunications, training) is
working very closely with the government and the National Task Force for
ICT and English, appointed by the President of Sri Lanka to develop the
sector.
Sri Lanka: Outlook 2020
Prospects 2020: Sri Lanka’s IT-BPO industry is likely to
be export oriented, with a focus on niche services
such as finance and accounting. Double digit growth
rates are expected as the industry moves up from a
small base
Sri Lanka’s IT-BPO exports are currently at a nascent stage. IT-BPO 24revenues (including exports) in 2008 were at USD 585 million .
The IT Industry association SLASSCOM has set a target of USD 2
billion of export revenues by the year 2012.
The country could record double digit CAGR of 23 percent from
2008 – 2020 if the country is able to improve the employability of its
graduates, and also encourage vendors to scale up and build
capabilities in high-value niche services.
IT-BPO could reach USD 7.7 billion by 2020, growing at a CAGR of 24
percent. To maintain the IT-BPO industry as a high priority and a key
revenue earner, tax benefits are likely to continue to attract
multinational players to set up base in the country. Moreover, the
country’s supply of skills in the F&A area could bring in opportunities
for knowledge services.
2008
CA
GR
23%
CA
GR
24%
USD 0.57 bn
USD 6.7 bn
USD 7.7 bn
2020 - ‘Base-Case’Scenario
2020 - ‘Optimistic’Scenario
Source: KPMG Analysis, FITISS
Sri Lanka IT-BPO Industry 2020
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25. Virtualcampuses.edu
26. http://www.totel.com.au/sri-lanka-telecommunications-research.asp
27. advocatesinternational.org/pages/asia/sriLanka.htm
28. http://www.dailynews.lk/2009/06/15/bus02.asp
IT-BPO Industry Capabilities
Strengths Weaknesses
Infrastructure
Though the Government of Sri Lanka is making an effort to address
infrastructural weaknesses in the country, the transport infrastructure
would need further development. Moreover, Sri Lanka’s satellite
communication is underutilized, due to which the country is required to pay 28six times more .
Lack of geographical diversification
Sri Lanka’s IT -BPO industry is in and around Colombo, with the other areas
being very slow to adopt measures to build the industry in their region. This
could prove to be detrimental to the country, which plans to make IT and
BPO one of the key focus areas for export. The country being small in size,
would have further difficulties in offering services that require scale, if
operations are just centered around the Colombo metropolitan region.
Skills
Sri Lanka’s workforce is young and highly literate, with good English
language skills. The country has one of highest number of CIMA certified 25graduates, and is said to produce 50,000 accounting graduates annually .
Strong telecommunication sector: Sri Lanka's telecom sector has seen
considerable expansion in recent years. As telecommunication is a
backbone of the IT-BPO industry, strong development in the sector is likely 26to further encourage industry growth .
Strong competition
Sri Lanka faces competition in the IT-BPO space from its Asian neighbors
as well as countries in the Eastern European region. Relatively high labor
costs could bring down the competitiveness of the country.
Proximity to the Indian subcontinent
Geographical, as well as cultural proximity, and good relations between
India and Sri Lanka, brings investments from India. Indian service providers,
who would use Sri Lanka as a disaster recovery site, wish to set up
operations in the country and utilize the skills available for niche areas.
Bangladesh is also considered to be an opportunity area for Sri Lankan
outsourcing companies
Aligned with the western system of education
Sri Lanka has a western system of education, and therefore is able to
attract business in high end knowledge services from US and UK, and also
has the potential of attracting business from Australia and New Zealand.
Sri Lanka follows the British Commercial Law principles and practices in its
legal system, which can create opportunities in legal process outsourcing 27for the country .
Opportunities Threats
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Malaysia
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Source: EIU, Department of Statistics, Malaysia, X-rates.com
1. Microsoft.com
2. CIA Fact book
3. Index Mundi
4. Speech by Deputy prime minister and Minister of finance 10 March 2009
5. EIU
In 2005, Malaysia unpegged its currency from the US dollar, and thereafter it 3appreciated 6 percent per year against the dollar in 2006-07
GDP growth which had averaged about 6.3 percent in the first 9 months of 2008 went
down to 0.1 percent in the last quarter of the year because of the global slowdown.
Export value contracted by 13.4 percent in 2008, which adversely affected economic 4growth, particularly in the manufacturing sector
Malaysia’s major export markets are Singapore, USA, Japan, China, Thailand, Hong
Kong, Korea and India and major export products include electronics, palm oil, crude 5petroleum, liquefied natural gas, chemicals .
Trade and Investment
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
Economy and Industry
The growth experienced by Malaysia in the early 1970s transformed the country from a 1producer of raw material to a multi-sector economy . The country has been able to
attract investments in high technology industries, medical technology, and
pharmaceuticals. The government is trying to boost domestic demand in order to
reduce the export-dependence of Malaysia. As an oil and gas exporter, Malaysia has 2profited from higher world energy prices
Note:
Source: EIU
Year (f) indicate forecasts made for the year
GDP Composition
Industry
44%
Services
46%
Source: EIU, 2008
Agriculture10%
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GDP at market prices (2008)
Population (2008)
Exchange Rate (MYR:USD) (Jan – Sep ’09)
Inflation at Consumer Prices (1Qtr - 2009)
Unemployment (2008)
S&P Risk Rating
USD 221.6 billion
27.7 million
3.57
3.7 percent
3.3 percent
A-/Stable/A-2
4.6
4
6.1
8.5
6.6
1.8
6.2
143.9
162
182.5
205.7
229.6
188.8
262.6
6. MSC Malaysia (formerly known as Multimedia Super Corridor) is a Government initiative, to build the ICT
industry. The major categories of sectors in MSC Malaysia include Shared Services and Outsourcing,
Application Software, Creative and Multimedia Companies, Mobility Embedded Software and Hardware
(MeSH) Internet based companies, and Institutions of Higher Learning and incubators. It originally
included an area of approximately 15x50 km² which stretched from the Petronas Twin Towers to the
Kuala Lumpur International Airport and also included the towns of Putrajaya and Cyberjaya.
7. Ktak.gov.my
8. News.cnet.com
9. Sharedservicesbpo.com
10. The Malaysian Insider.com
11. Mis-asia.com
12. Faotoday.com
13. MSC Malaysia
14. Bloomberg.com, Governor's Keynote Address at the 12th Malaysian Banking Summit 05 June 2008
2001 – 2005:
Many vendors in Malaysia actively started pursuing opportunities in
the outsourcing space, following a USD 250 million contract signed
between EDS and Bumiputra Commerce Bank Berhad (BCB) in 82002 . Global companies like HSBC, DHL, Shell, British American
Tobacco and IBM had set up regional hubs in the MSC Malaysia area 9by 2004 . In 2005, domestic software and services spend was USD
101.4 billion, while exports reached USD 564 million
2006 - Present:
The shared services and outsourcing sector was the biggest
contributor to MSC Malaysia’s revenue, accounting for 31 percent of 11revenue in 2007 . Taking advantage of language capabilities in
Malaysia, Outsource Partners International recently opened a
service center in Kuala Lumpur that provides F&A services in more 12than 16 languages .
IT services and software spend in 2008 was only at approximately
1.2 percent of the country’s GDP. Currently, there are over 163
Shared Services and Outsourcing companies that have been
awarded the MSC Malaysia Status. The country is home to 250 call 13centers . MSC-status companies employ about 79,000 people, and
this number is expected to increase to 100,000 by 2010.
The finance sector has been identified as one of the driving sectors 14for outsourcing and offshoring industry in Malaysia .
Current state of the IT-BPO industry
Evolution of the IT-BPO Industry
1990 - 2000: 6MSC Malaysia , a Government initiative meant to develop the ICT
industry in the country, was conceptualized in 1996. Twenty-three
percent of the IT outsourcing market in the late 1990s was
contributed by the BFSI sector, followed by 18 percent from
manufacturing and 16 from percent retail. Key services included
data centre management, disaster recovery, systems integration,
hardware and software maintenance, desktop management and 7applications maintenance
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IT-BPO Industry size
CAGR: 22%
0
500
1000
1500
2000
2500
3000
3500
2004 2005 2006 2007 2008 2009
USD
mill
ion
Break up of IT-BPO Spend by Service Line
Source: IDC 2007
Outsourcing 28%
Support & Training
32%Project Oriented40%
694
525
8301038
1317
1665
2049
602 724 883 1075 1272
Software spend Services spend
Source: Digital Plant 2008
*Note: Represents Domestic software and services spend, does not include BPO
PIKOM, The National ICT Association of Malaysia is the association representing the information and communications
technology (ICT) industry in Malaysia. Its membership currently stands at over 1000 comprising companies involved in a whole
spectrum of ICT products and services which commands 80 percent of the total ICT trade in Malaysia. By facilitating
Malaysia's business growth and competitiveness through application of information technology, PIKOM is positioned to be the
voice of the Malaysian ICT industry.
PIKOM was formed in August 1986 with the objective of creating an environment that is conducive to the health, prosperity
and competitive nature of the ICT industry. In line with this, PIKOM aims to be a catalyst for the growth of the ICT industry in
Malaysia.
For more details on PIKOM please refer appendix section or visit www.pikom.org.my
Association of the Computer and Multimedia Industry of Malaysia (PIKOM)
15. CIA Factbook
16. Ministry of Higher Education
17. Thestar.com article 19 April 2008
18. Bt.com
19. Reuters, PRNewswire.com
20. US Trade Representative (USTR) issues an annual Special 301 Report which "examines in detail the
adequacy and effectiveness of intellectual property rights" in many countries around the world. Countries
may be designated in the categories of Priority Watch List, Watch List, and/or Section 306 Monitoring
status.
21. Star-techcentral.com ; USTR Watch List 2009
22. Mida.gov.my
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Drivers of the IT-BPO Industry
Human resource availability15
! Adult literacy rates in Malaysia are at 88.7 percent
16! More than 900,000 students are enrolled for higher education in Malaysia , and the
Ministry of Higher Education has the vision of making Malaysia a centre of higher
educational excellence by the year 2020
17! The country is making aggressive plans to attract foreign students , and the Higher
Education Ministry aims for foreign students to make up 10 percent of student
enrolment.
! Therefore, despite the small population size of the country, the outsourcing industry
may probably have access to higher value adding skills and be able to grow through
niches
ICT penetration in the country
! Malaysia has ranked first on the Nokia Siemens Connectivity Scorecard 2009
! Broadband penetration is currently at 26 percent, but needs to nearly double to 50 18percent next year if it has to achieve the National Broadband Plan target
! Mobile penetration was at 98 percent in 2008. Mobile data services are expected to
grow with the increasing penetration and would account for 45 percent of all mobile 19revenue by 2014
IP protection and data protection
! Malaysian Intellectual Property Association (MIPA) was set up to promote the
protection and development of IP in Malaysia and the Asian region. Malaysia is also
a member of the World Intellectual Property Organization (WIPO)
! According to the Business Software Alliance (BSA), piracy was at 59 percent in 2008
and has remained unchanged over the pervious year. Malaysia made losses of USD
368 million in 2008 due to piracy
20! Malaysia has consecutively been on the US Government’s Special 301 Watch List
since the last eight years, and may need to make a focused effort to curb piracy in 21the country
22Infrastructure development
! Malaysia has made investments in infrastructure in view of its 2020 vision of
becoming a fully developed nation
! Today, more than 90 percent of the country's trade is by sea and therefore
Malaysia's seven international ports have been well maintained.
! Malaysia has five international airports and is well connected internationally.
! There are 200 industrial estates or parks and 18 Free Industrial Zones (FIZs)
developed throughout the country. Malaysia currently has more than 12 technology
parks, concentrated in and around the Klang Valley. The government continues to
invest in technology parks, with emphasis on other areas: Penang, Johore, Kedah
and Melaka
25. Governor's Keynote Address at the 12th Malaysian Banking Summit 05 June 2008
26. Malaysianinsider.com article dated Aug 28, 2009
23. Gartner
24. Bernama.com
23Government support and incentives
! Under the MSC Malaysia initiative, the government introduced several incentives for
MSC companies, including five-year tax holidays, 100 percent investment tax
allowance, 100 percent foreign ownership, duty-free imports of multimedia
equipment and eligibility for government R&D grants
! The government provides a "bill of guarantee" to MSC companies, which gives them
access to competitive telecommunications tariffs and good physical and information
infrastructure
Competitiveness in the exports market
! The country has good trade relations with ASEAN countries, and this experience
would ease collaboration efforts in the Asia-Oceania region. Exports to ASEAN 24accounted for 25.8 percent of total exports in 2008
! Malaysia’s competencies in the electronics and energy export market will attract 25investment in these areas and provide an impetus to the ICT industry
GDP growth and stability
! According to EIU estimates Malaysia’s per capita income (at PPP) was USD 7,630 in
2008, putting it in the middle income bracket.
! This is expected to reach 17,070 by 2020 pushing it in World Bank’s threshold of
high-income economies. As the country moves into a higher-income bracket, a
similar growth could be expected in domestic IT-BPO market as well, with increased
ICT penetration
! According to the Prime Minister, the country must grow at 8 percent in order to 26achieve its Vision 2020 of being a developed nation
Doing business
! Malaysia ranked 20 in World Bank's Doing business index of 2009, from a total of
181 economies. According to the Index, in Malaysia it takes 13 days to start a
business, which is considerably lower than the region’s average of 44.2 days
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27. Star-technical.com
Implications for Stakeholder
Areas for Collaboration
Following are some of the major elements that could help Malaysia
on its path of achieving a developed nation status, and could also
determine the growth of IT-BPO industry:
Focus on education and improving skills
The relative lack of scale may be another problem that could be a
hindrance to Malaysia’s target of ranking number two globally, given
the country’s relatively smaller population compared to competitors
such as India, China and the Philippines. Malaysia has also been
projected to face a shortage of engineers by 2020. Education, which
is a key focus today, must therefore remain an important investment
area for the government.
Establish competitiveness in niche markets
Malaysia’s cost parameters are comparatively higher than its Asian
competitors. The focus, therefore, for the Malaysian outsourcing
industry should be to establish competitiveness in niche areas and
in high-value added services
Tap new customer segments
Malaysia is represented in the Organization for Islamic Countries
(OIC) and in 2003 it was named the OIC’s strategic hub for the Asia
Pacific region . The country is well linked to the Middle East and
could tap into this market for investments. As Middle Eastern
countries expand operations in Malaysia, Islamic funds could be
accessed by financial companies which would give a further boost
to vertical specific IT services.
Regional collaboration could accelerate the industry growth rate to
higher than 13.6 percent. Malaysia already has proven trade
relations with the ASEAN region. If the country is able to collaborate
with the Asia-Oceania region for IT-BPO, the growth rate could be
pushed up further:
Malaysia’s IP enforcement techniques could be enhanced by
training and education by countries like Japan and New Zealand
who are considered to be the top achievers of IP protection.
Using its experience in outsourcing, Malaysia could provide
training for IT-BPO entrepreneurs in smaller countries, such as
Nepal and Cambodia, and in turn also get access to these
markets.
28
!
!
Vision for Malaysia
The Malaysian government has envisioned a technologically advanced
society and a technologically enabled government through its Vision
2020. The 8th Malaysian Plan and the Knowledge-Based Economy Master
plan aims to drive transformation of the economy through innovation,
knowledgeable and skilled human capital as well as wide-spread use of
technology, in particular information and communication technology (ICT)
The Master plan also encourages good governance, thus demanding a
high degree of transparency and accountability particularly in the public
service
Malaysia: Outlook 2020
Prospects 2020: Malaysian IT-BPO sector is expected
to be an export focused industry
According to the Multimedia Development Corporation (MDeC),
Malaysia is gearing up to be ranked 2 globally for outsourcing
activities, edging out China, in five year’s time by ramping up its 27production of knowledge workers
The IT-BPO is estimated to be around USD 2.7 billion in 2008. Given
its current attributes, the IT-BPO industry is expected to reach USD
7.1 billion in 2020, growing at a CAGR of 8.3 percent over the period
2008-2020.
Even though the shared services and outsourcing industry is
considered to be a priority sector for the country, some constraints
should be looked into which could hamper the overall growth rates.
These are related to high cost parameters, lack of scale and
requisite skills.
Malaysia’s IT market has the potential of growing at a CAGR of 13.6
percent, reaching USD 12.7 billion in 2020, if it is able build
innovative capabilities of outsourcing companies and solve the
problem of lack of suitable talent. The country’s experience in the
exports market, especially in the energy and electronics sectors
along with the maturity in the Islamic financial services segment,
will push growth in the IT segment, enabling Malaysian IT to growth
through niches
Malaysia IT-BPO Industry 2020
2008
CA
GR
8.3
%
CA
GR
13.
6%
USD 2.7 bn
USD 7.1 bn
USD 12.7 bn
2020 - ‘Base-Case’Scenario
2020 - ‘Optimistic’Scenario
Source: KPMG Analysis
28. MSC Malaysia’s Solutions for the World
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29. Themalaysianinsider.com
30. Indexmundi.com
31. Bloomberg
32. Outsourcingmalaysia.com
33. Thestar.com article 20 April 2009
IT-BPO Industry Capabilities
Strengths Weaknesses
Lack of skilled workers:
The quantum of growth that has occurred in the outsourcing industry in
Malaysia has not been replicated in the growth in skills. The industry is
grappling with a limited supply of skilled labour167. The country is likely to
face a shortage of skills by 2020, by when it is said to require 200,000 33engineers
Weak IP Protection:
Although Malaysia has made considerable effort to curb piracy, it still
remains on the USTR’s watch list of 2009. There seems to be a decline in
enforcement efforts over last year, which has been evidenced by the
reluctance of Ministry of Domestic Trade and Consumer Affairs’ (MDTCA)
to initiate ex officio IPR raids, which are authorized under Malaysian law
Local players not globally competitive:
Local vendors in Malaysia are mostly of small size and lack the scale and
competencies to compete in the global IT-BPO space. Stronger local
companies would help push the growth further and also provide assistance
to others that are still on the learning curve
Mobile applications:
Although nearly three-quarters of Malaysia's mobile revenue is generated
by voice services today, broadband data services will account for an
increasing proportion of mobile revenue over the next five years. Mobile
data services could account for 45 percent of all mobile revenue by 2014,
driven by increases in adoption of mobile broadband services and mobile
data applications
Niche services:
With its advanced role in Islamic products and services, as a center for
Islamic business processing — Malaysia could create niches in Islamic
banking, procurement, etc. Bio-technology and vertical specific IT
processes for the energy companies are other areas where Malaysia has
the potential to enter. Malaysia has the requisite talent pool to serve the 31oil and gas industry, which has been in the country for 130 years . By 2020,
biotechnology is expected to create 280,000 jobs and contribute 5 percent 32to GDP
Opportunities Threats
Strong government support:
The government, through the MSC, encourages the outsourcing industry, 29 especially in the logistics, financial-services and energy sectors MSC
status companies are provided with several benefits including incentives
and tax holidays. Moreover, the government has lifted Foreign Investment
Committee (FIC) restrictions with the objective of attracting further
investments. This, as well as other liberalization measures would also help
the country in achieving the status of a high-income economy within the 29 next 10-20 years
Multilingual capabilities:
Malaysia is known to have a multi-cultural population, thereby bringing in
several Asian language capabilities. Besides English and Malay other 30language support includes Chinese, Tamil, Telugu, Malayalam and Thai .
This has helped the country win international projects such as the recent
call center deal with SAP.
Aggressive branding:
The government has made proactive efforts to increase its branding in the
outsourcing/ offshoring world. Malaysia is promoting itself as a host for
outsourcing summits such as the International Association of Outsourcing
Professionals (IAOP).
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© 2009 K
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Printe
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Chinese Taipei
(Taiwan)
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Source: EIU, S&P
1. http://www.asianinfo.org/asianinfo/taiwan/pro-economy.htm
2. http://investintaiwan.nat.gov.tw/en/opp/inds/info.html
3. http://investintaiwan.nat.gov.tw/en/news/200410/2004100801.html
4. Economist Intelligence Unit - Viewswire, One-click Country Report, 10th June 2009
5. http://www.roc-taiwan.org/glance/en/ch7.htm
Taiwan’s economic success has been dominated by export-led growth in its
manufacturing sector, especially high-technology goods. In recent years, the services
sector has become the key indicator of the Taiwanese economy, accounting for 73 3percent of the GDP and 60 percent of the employment in all industries .
Taiwan’s export-oriented economy has made it susceptible to the current economic
downturn. The GDP reportedly shrunk by 10.2 percent in the first quarter of 2009, and 4recovery is expected only by 2010 . The government moved fast by launching a plan for
around USD 16 billion in 2009 along with a four-year stimulus package to boost the 5economy .
Trade and Investment
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
Source: EIU
GDP Composition
Industry
25%
Services
73%
Source: EIU, 2008
Agriculture2%
GDP at Market Prices (2008)
Population (2008)
Exchange Rate (TWD:USD) (Jan – Sep ’09 avg.)
Inflation (1Qtr - 2009)
Unemployment (2008 avg.)
S&P Risk Rating
USD 392.1 billion
22.8 million
31.5
0 percent
5.6 percent
AA-/Negative/A-1+
1.9
1.6
7.4
7.8
5.4
2.6
7.5
208.8
228.7
255.2
282.7
290.8
220.9
297.6
Economy and Industry
Chinese Taipei (henceforth referred to as Taiwan) has been among the world’s fastest 1growing economies in the last few decades . The country’s economic growth has
2averaged 6 percent since the mid-1990s
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6. http://investintaiwan.nat.gov.tw/en/opp/inds/info.html
7. Department of Statistics / IDB, MOEA
8. http://investintaiwan.nat.gov.tw/en/news/200804/2008040401.html
2000s:
The IT services industry was identified as a strategic service
industry for development. The move was expected to improve
Taiwan’s competitiveness in manufacturing by way of greater value-
addition through strategic services. The IT services industry
experienced an average growth rate of 10 percent from 2000 to
2006. Software products and applications formed the largest
proportion of the IT services market.
In 2007, Taiwan's IT and software services market was valued at
USD 9.9 billion, including exports. The industry’s annual growth rate
from 2003 to 2007 was 12 percent. The IT-BPO industry in Taiwan is 7likely to reach USD 10.4 billion in 2009 .
The industry employed around 77,900 workers in 2008, forecast to 7grow to 83,200 in 2009 .
According to a study by the Taiwan Economic Research Institute, the
average annual turnover for most local IT service companies is
around USD 605,300 (NTD20 million), indicating a relatively limited 8business size on an average .
Current state of the IT-BPO industry
6Evolution of the IT-BPO Industry
1990s:
The Taiwan government launched technical services programmes to
assist with business automation and computerization projects, and
to develop local IT service capabilities and solutions. The rise of e-
commerce in the mid-1990s spurred the expansion of the local IT
services industry.
Founded in 1983, CISA is the sole representative body of Taiwan’s software and information services industry. CISA’s 750
members cover the full spectrum of the industries which include independent software vendors, turnkey project operators,
system integrators, ICT consultants, ICT outsourcing service providers. Our member base includes small, large and international
companies.
Different from other associations, CISA keeps a large-size secretariat of about 50 full-time employees. The secretariat’s main
task is to undertake many government projects won from open bidding processes. These projects aim at promoting ICT and
deploying ICT to medium and small industries. By taking these projects, CISA is able to help create direct and indirect business
opportunities to its members. CISA actively lobbies the government to put more resources to enable its international
competitiveness. During CISA’ 20th anniversary in 2003, the industry leaders reached the consensus of forming a vertically
integrated and horizontally allied infrastructure to enhance the overall strengths of exporting to the China market.
For more details on CISA, please refer to the appendix section or visit www.cisanet.org.tw/En/Background
Note: The industry size includes domestic market as well as exports of IT services and software
products. BPO market estimates are not included in the figure above.
Source: Department of Statistics/IDB, MOEA
Domestic Exports
5.7 6.5 6.6 7.58.7
0.50.7 0.8
1.0
1.2
0
2
4
6
8
10
12
2003 2004 2005 2006 2007
USD
Bill
ion
IT-BPO Industry size
CAGR: 12%
Source: Department of Statistics / IDB, MOEA, 2007
Data processing &
information provision
service industry 18%
Break-up of IT-BPO Exports by Service Line
Computer system
design service
industry 82%
Information Service Industry Association of Chinese Taipei (CISA)
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9. Taiwan Investment Guide, http://www.dois.moea.gov.tw/tig/english/page.asp?class_id=1&page=3
10. World Economic Forum, Global Information Technology Report, 2008
11. http://www.brookings.edu/reports/2008/0817_egovernment_west.aspx
12. Industrial Development in Taiwan, R.O.C., 2007
13. World Copyright Law Report 2005; http://www.winklerpartners.com/files/WCLR_08z5.pdf
14. BSA IDC and http://www.taipeitimes.com/News/biz/archives/2009/05/13/2003443486
15. http://www.businessmonitor.com/infra/taiwan.html
16. http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Taiwan-INFRASTRUCTURE-
POWER-AND-COMMUNICATIONS.html
17. Taiwan Investment Guide, http://www.dois.moea.gov.tw/tig/english/page.asp?class_id=1&page=3
18. CISA
19. http://www.gio.gov.tw/info/taiwan-story/economy/edown/3-5.htm
20. World Economic Forum, Global Competitiveness Report, 2009-10
21. http://www.chinapost.com.tw/taiwan/t-business/2009/02/19/196692/Taiwan-GDP.htm
22. http://www.doingbusiness.org/ExploreEconomies/?economyid=45
Drivers of the IT-BPO Industry
Human resource availability
! The literacy rate of population above 15 years in Taiwan is over 97
percent, with 32 percent graduating from college or university in 92008 . A pool of about 3.5 million graduates was available in
Taiwan in 2008
! The country produces 20,000 Masters and Doctoral degree
holders every year
ICT penetration in the country
! The country has a high “networked readiness index” and is 10ranked 13 among global economies on networked readiness .
Taiwan ranked second in the Global e-Government index among
198 countries in 2008 and has been considered a model in e-11Government among Asian countries
! Taiwan’s ICT penetration is relatively high, with 64 percent
internet users, 106 percent wireless subscribers and 4.55 million 12broadband subscribers . According to the World Broadband
Statistics, Taiwan ranked in fifth place in household broadband
penetration and eleventh in the number of broadband
subscribers
! The government is implementing the Mobile Taiwan (M-Taiwan)
project, which focuses on constructing a mobile environment for
the next generation, integrating mobile and wireless networks
and establishing a nationwide internet environment
IP protection and data protection
! Efforts by the government in Taiwan over the last few years have
seen the piracy rate reduce from 43 percent in 2004 to 39
percent in 2008. The rate in 2008 is below the world average of
41 percent. The government brought in major revisions to the
Copyright Act, increased co-operation between government
agencies on copyright enforcement and started campaigns
targeted at reducing end-user business software piracy, illegal
copying of books and infringement over the internet, among 13other measures
! The estimated economic losses for the software industry caused
by the use of pirated programmes dropped 7 percent to USD 14200 million in 2008 from USD 215 million in 2007
Infrastructure development
! The island is well connected through road, rail and air transport.
90 percent of the roads are paved. The Taiwan High Speed Rail
Network which uses Japanese bullet trains allows reaching from 15one end of the island to another in 1.5 hours
! Taiwan has three international airports, several domestic airports 16and six international harbors
! The government continues to develop science-based industrial
parks, general industrial parks, and free trade zones in addition to
the existing ones
! In addition, the government provides incentives for automation, 17newly emerging and strategic industries
Government support and incentives
! The government is supporting IT Services with the objective of
making the overall IT industry more competitive. The government
sponsors key industry development programmes including Best
e-Service Export of Taiwan (BEST) Programme, Bridging the
Digital Divide and encouraging CMMi certification
! Besides this, the government currently offers one-stop
clearances for investors who want to set up in the Technology
Parks, along with other incentives such as facilitation to acquire
land and even exemption of rentals for up to four years
Competitiveness in the exports market
! Taiwan is an export dominated economy with the US and Japan
being among its major trading partners. Exports accounted for
about 74 percent of the GDP in 2007
! Taiwan is ranked first in the worldwide ICT product market share
for more than 10 products, including personal computers, 18motherboards, laptops, LCD monitors, CDT monitors, etc
GDP growth and stability
! The country has seen above average GDP growth for the last few
decades. However, the distribution of income has shown an 19adverse trend over the last few years
! Taiwan had a high per capita income of USD 17040 in 2008, 20putting it in the high-income country bracket of the world
! Taiwan’s Directorate General of Budget, Accounting and
Statistics forecast that Taiwan’s GDP would shrink by 2.97
percent in 2009, due to the reduction in exports and private 21spending
Doing business
! The World Bank's Doing Business Report of 2010 ranks Taiwan at
number 46 out of a total of 183 economies. It takes an average
of 23 days to start a business in Taiwan, which is lower than the 22region's average of 41.0 days
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23. Taiwan Statistical Data Book, Council for Economic Planning and Development, 2008
24. KPMG Analysis is based on discussions and interviews with executives from the country IT-BPO
associations, Companies operating in the country and local KPMG offices
24Implications for Stakeholder
Areas for Collaboration
The target for the industry is achievable, provided Taiwan aims at
significant restructuring and re-organization in its domestic IT-BPO
delivery capabilities. The implications for stakeholders are:
Targeting higher value-add services
Taiwan needs to maintain its focus towards innovation and applied
research and development within the economy, managed by higher-
skilled Taiwanese workers. Since there is a projected shortage of
working age population on the island by 2020, the revenue per
worker has to go up to achieve the targets set by the vision
Outsource commoditized services
As costs on the island are rising, Taiwan has to re-organize its
industry to deliver higher-value adding products and services, while
outsourcing commoditized, repetitive processes to lower-cost
countries such as China, Vietnam, or Thailand
Expanding the geographical target market
The target market needs to expand beyond the Chinese-speaking
markets to the global market. This would involve improving the
English language capabilities of the workforce, as well as improving
the capabilities to market and commercialize its products and
services. The experience in ICT products and hardware are likely to
be an advantage and can be leveraged in the services space.
Taiwan is already a leading economy in the ICT space, but faces
challenges in terms of rising competition and higher operating costs.
It can collaborate with other economies, especially those with
complementary strengths, to mitigate some of these challenges and
to sustain its competitive advantages
Taiwan can collaborate with lower-cost countries to
offshore/outsource lower-value services so as to help Taiwanese
companies reduce their cost of operations
Taiwan can collaborate with countries with strength in software
services to jointly create products, leveraging on Taiwan’s
strength in hardware products.
!
!
Taiwan’s goal by 2020 is to attract more hardware companies to invest
and develop IT software and services businesses to strengthen the
competitiveness of the IT service industry. It aims to become one of the
major IT software and services suppliers in Asia Oceania.
The Science and Technology Advisory Group (STAG) in 2008 set the
“Intelligent Taiwan” goal as the direction for Taiwan's next decade of
technology development. The goal aims to achieve balanced development
between the living environment and industry in Taiwan. The project
includes three phases with distinct goals. The first, lasting from 2005 to
2008, is aimed at creating an environment suitable for developing
products applicable to tourism, recreation and family life.
The second phase between 2009 and 2013 is to focus on manufacturing
an expanded range of products for public services, care of the elderly and
emergency aid. In the third phase 2014-2020, the project is to aim to
transform Taiwan into a producer of intelligent robots with special,
medical and surgical purposes .
Taiwan: Outlook 2020
Prospects 2020: Potential to become an innovation
leader in IT-BPO services
Taiwan is the largest producer of 15 ICT products and second-largest 23producer of three ICT products in the world . Taiwanese IT software
and service providers have strong domain know-how which can
create potential for growth in the next decade. The IT-BPO industry
in 2008 was around USD 9.4 billion, and is projected to reach USD
31.3 billion by 2020, as estimated by the Taiwanese government.
Taiwan’s vision envisages greater automation and a move towards
innovation and creativity by 2020. There is significant government
focus on the ICT sector and a rising focus on IT services. The major
challenges towards achieving the vision are likely to be in terms of
maintaining a flow of adequate and skilled talent to the sector, and
continuing emphasis on innovation in the face of rising cost
competitiveness of other countries such as Thailand or Vietnam.
2008
CA
GR
10.
5%
USD 9.3 bn
USD 31.3 bn
2020 - ProjectedScenario
Source: KPMG Analysis, CISA
Taiwan’s IT-BPO Industry 2020
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25. http://investintaiwan.nat.gov.tw/en/opp/inds/info.html
26. http://www.moeaidb.gov.tw/external/ctrl?lang=1&PRO=pda.NewsView&id=727
27. Annual e-Competitiveness Report, Taiwan 2008
28. http://taiwanjournal.nat.gov.tw/ct.asp?xItem=44929&CtNode=428
29. Economist Intelligence Unit - Viewswire, One-click Country Report, 10th June 2009
30. http://www.etaiwannews.com/etn/news_content.php?id=957946&lang=eng&cate_img=35.jpg&
cate_rss=news_Business_TAIWAN
IT-BPO Industry Capabilities
Strengths Weaknesses
Talent Pool:
The vision for 2020 envisages a move towards higher value adding
occupations for Taiwanese human resources. However, Taiwan is likely to
face a shortage in the available talent pool by 2020. Its birth rate is likely to
average only 0.25 per year during 2008-30 and working age population will 29begin to decline after 2017 according to EIU estimates . Besides, being an
island state with high population density, measures such as allowing
foreign labor, etc are likely to have limited potential.
Political status of Taiwan:
In the past, the cross-strait ICT co-operation was somewhat restricted due
to the diplomatic realities and political barriers. However, the relationship
between China and Taiwan has thawed since the election of Ma Ying-Jeou
as Taiwan's President in May 2008, and Taiwan is expected to follow an 30open trade policy on links to China .
Experience in the global exports market
Taiwan has adequate experience and exposure – in terms of project
management, skilled labor and in-place logistics - in the global IT hardware
export market and can leverage this in the IT services market going
forward. The markets for Taiwan’s hardware products have been US, Hong 25Kong and Japan, which are also large markets for IT services .
Strong domain know-how in ICT
The IT service industry in Taiwan is a competitive service-exporting industry
with strong domain know-how. IT software and service providers have
launched several IT services applications, which cover various sectors 26including finance, manufacturing, information security and e-government .
Eroding cost competitiveness
Taiwan’s historical strength in electronics and hardware may be challenged
in future by emerging economies such as Mainland China, Thailand,
Vietnam and others, which are likely to offer lower cost manufacturing
bases.
Very strong hardware industry
Taiwan ranks among the top countries in “Network readiness” and is a top 27hardware producer and exporter . Developing complementary IT services
skills can contribute to the dominance of Taiwan in the IT market.
Opportunity from co-operation with China
China is a large opportunity area for Taiwan, both in terms of mainland
China as a lower cost base for manufacturing and services support, and
also Greater China as a large and growing market for Taiwanese products
and services.
Focus on infrastructure
The “Intelligent Taiwan” initiative is focused on creating an innovation-28oriented nation . Companies can take advantage of the policy focus and
significant investment set aside for the initiative until 2020 for research
and development and creation of intellectual property.
Opportunities Threats
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Thailand
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Source: EIU, S&P
GDP at Market prices (2008)
Population (2008)
Exchange Rate (TBH:USD) (Jan – Sep ’09 avg.)
Inflation (1Qtr - 2009)
Unemployment (2008 avg.)
S&P Risk Rating
USD 273.3 billion
67 million
33.3
-0.2 percent
1.4 percent
BBB+/Negative/A-2
1. World Bank Website, Thailand Country Overview
2. Viewswire One Click report, Economist Intelligence Unit
3. US Chamber of Commerce Website, EIU
4. http://www.state.gov/r/pa/ei/bgn/2814.htm
Over the last few decades, Thailand has transformed itself from being an agricultural
economy to a manufacturing and export-driven economy. Exports of goods and 3services accounted for over 76 percent of GDP in 2008 .
Thailand’s economy is in recession in 2009 and EIU expects real GDP to shrink by 4.4
percent in 2009.
4
Trade and Investment
Thailand has negotiated free trade agreements with countries like New Zealand,
Australia, Japan, China, India and Peru. The country has a diversified manufacturing
sector comprising of industries like computers, electronics, garments, footwear,
furniture, gems and jewelry, and vehicles, and vehicle parts .
Economy and Industry
Thailand has made considerable economic progress since the 1990’s, after suffering 1several years of financial and economic distress . It is the second largest economy in
Southeast Asia with an average GDP growth rate of 5.6 percent during 2002-2006. The
country’s GDP growth moderated to 2.6 percent during 2008 due to political instability 2and the global economic slowdown .
GDP Composition
Industry
45%
Services
43%
Source: EIU, 2008
Agriculture12%
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
Source: EIU
5.9
8.1
9
9.5
8.1
2.4
8.5
114.1
129.7
152.5
180.1
208.8
181
223.5
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IT-BPO Industry size
Note: The industry size includes domestic market as well as exports of IT services and software
products. The BPO market is currently small and BPO estimates are not included in the figure above.
Source: SIPA, EIU
0.901.20
2.00
2.30
2.64
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004 2005 2006 2007 2008
USD
Mill
ion
Source:
Note: Other Software Services e-learning, CAD/CAM, games (excluding online
games), etc Other IT Enabled Services include: Data Center and Disaster Recovery
Center, IT-related Training & Education, IT Consulting
SIPA, Thailand ICT Market 2008 and Outlook 2009
Break up of IT-BPO Exports by Service Line
EnterpriseSoftware 62%
Other IT EnabledServices 5%
MaintenanceServices 4% Systems
Integration 15%
IT Outsourcing 5%
Other SoftwareServices 3%
MobileApplication 3%
EmbeddedSystem Software 3%
5. http://chiangmai2.mofcom.gov.cn/aarticle/lawsofhostcountry/investmenthost/200807/
20080705675174.html
6. SIPA, Thailand ICT Market 2008 and Outlook 2009
7. S International DS Paper July 2007, BOI Thailand
2000s:
Thailand established the Ministry of Information and Communication
Technology (ICT) in 2002 with the objective of developing and
supporting comprehensive electronic processes for the government,
commerce, industry, business and education. In 2002, the Thai
Government also approved The National IT Policy Framework 2001-
10. This policy has identified the goals, strategies and linkages
between strategies and the development of the country towards a
knowledge-based society.
Thailand’s IT-BPO industry has grown at a CAGR of 31 percent from
2004-08 and was valued at over USD 2.6 billion in 2008. In 2008, 6USD 120 million worth of Thai software was exported . IT-BPO
spending as a percentage of GDP in 2008 was 0.97 percent, which
is smaller than that in the developed countries, but larger than that
in countries like Vietnam and the Philippines.
Many of the Thai IT companies focus heavily on domestic markets
given the rising domestic consumption. The corporate sector and
primary sectors such as financial services and telecom, accounted
for nearly 57 percent of the total software sales in 2008, followed by
the government sector which contributes 29.8 percent.
As of 2007, Thailand had more than 300 software companies hiring
over 40,000 qualified ICT professionals across all regions. The Thai
software industry currently has a mix of the local and multinational
commercial software developers such as Reuters Software, DST 7International and Microsoft .
Current state of the IT-BPO industry
5Evolution of the IT-BPO Industry
1990s:
During 1997, the Thai government approved a plan to start Software
Park Thailand. The plan intended to stimulate the development of the
Thai software industry by attracting local and international partners,
supported by advanced infrastructure and technologies.
The Association of Thai ICT Industry (ATCI) is Thailand's first and foremost, professional information technology trade
association. ATCI has around 121 members (ATCI only has corporate members).
The membership of the ATCI is comprised of corporate members whose total share of the IT business represented over 80
percent of the overall market in Thailand. ATCI is a membership led organization.
The ATCI performs a vital role as the collective voice of the industry, by communicating the various needs interests of its
members to government policy makers, in an effort to collaboratively develop appropriate measures that can genuinely
stimulate the industry's continual expansion as well as foster healthy competition and sustained economic growth made
possible through the deployment of information and communications technology (ICT).
For more details on ATCI, please refer to the appendix section or visit www.atci.or.th
The Association of Thai ICT Industry (ATCI)
CAGR: 31%
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8. UNESCO,, CIA, SIPA Annual Report 2007
9. www.nationmultimedia.com/, SIPA, Thai American Business
10. http://www.business-in-asia.com/automotive/interview_engineer.htm
11. http://comm215.wetpaint.com, Nokia Connectivity Scorecard
12. IIPA
13. http://www.state.gov/r/pa/ei/bgn/2814.htm, BOI Thailand
14. http://siteresources.worldbank.org/INTTHAILAND/Resources/333200-1177475763598/3714275-
1234408023295/5826366-1234408105311/chapter1-overview-of-thailand-infrastructure-development.pdf
15. BOI Thailand
16. US Department of State
17. US Chamber of Commerce Website, EIU
18. http://thailand-business-news.com/news/headline/1041-1q09-gdp-to-fall-5-pct-utcc/
19. http://doingbusiness.org/ExploreEconomies/?economyid=186
Drivers of the IT-BPO Industry
Human resource availability
! Thailand has a high literacy rate of around 90 percent and a talent
pool of nearly 506,000 university graduates students in 2007.
Employability, however, remains a major issue due to lack of 8skills and English language capabilities , which has so far made it
difficult for Thailand to export IT-BPO services to English-speaking
countries in particular
! Thailand also faces a shortage of engineers and technically
skilled manpower. The Education Ministry of Thailand estimates
that the country is expected to face a shortfall of 100,000 9engineers by 2010 . As of June 2005, there were 139,956
10engineers in Thailand
ICT penetration in the country
! Thailand has made substantial progress in improving its ICT
infrastructure, as the country has witnessed a 10 fold increase in
mobile penetration since 2000, and by mid-2008 mobile 11penetration increased to 88 percent
! Wireless has grown faster than internet and broadband
penetration. Thailand had nearly 13.4 million internet users
indicating a penetration of 20.5 percent as of March 2008.
Broadband services are moderately developed, and penetration
remains low, as only 4.2 percent of households had broadband
connections as of 2008
IP protection and data protection
! Thailand faces a major challenge in terms of widespread
counterfeiting and piracy. Losses due to pirated software were
estimated at USD 468 million during 2007. Piracy levels for
software were 76 percent, generally above average for the Asian 12region
Infrastructure development
! Thailand has a good road network that connects to Malaysia and
provides direct linkages to Singapore. Thailand witnesses low
incidence of power outages on account of its stable and 13dependable electricity generating system
! The Thailand Infrastructure Annual Report of 2008 by the World
Bank mentions that availability and accessibility of infrastructure
are no longer constraints in Thailand. The next step for Thailand is
to move toward ensuring “quality of service deliveries, 14management, and sound regulation”
! Software Park Thailand has set up a number of software and
technology parks in Thailand, supporting modern infrastructure,
making infrastructure easily available to software companies
15Government support and incentives
! Thailand provides various tax-based incentives like corporate tax
break for eight years and exemption of import duty on machinery
for the ICT industry. There are no restrictions on foreign
investments in the IT sector, but foreign participation in the
telecom sector is restricted to 49 percent
! The government also offers non-tax incentives that include
permission to bring in foreign workers, own land and remit
foreign currency abroad
16Competitiveness in the exports market
! Thailand is an export dominated economy with exports
accounting for nearly 76 percent of the economy. US, Japan and
China are among its major trading partners. Computer parts,
integrated circuits and parts, gems and jewelry, etc. lead the
growth in exports. The IT-BPO exports are relatively small
! Thailand is a member of the Association of South East Asian
Nations (ASEAN), which offers certain advantages and privileges
like minimal to zero tariffs when dealing with member countries
17GDP growth and stability
! The World Bank ranks Thailand as a lower middle income
economy with a GDP per capita of USD 3,400 and an average
growth rate of 6 percent since 1997. Thailand's increasingly
diversified manufacturing sector is the largest contributor to
growth. Thailand’s growth has been moderate in comparison
with other east-Asian economies, given the politically unstable 18environment which is affecting investor confidence
! The country has initiated wide-ranging reforms in financial
services, bank lending, and corporate governance to improve
investor attractiveness
Doing business
! Thailand was ranked 12th in the Doing Business 2010 report by
the World Bank, out of 183 economies . It takes 32 days to start
a business in Thailand, which is significantly better than the East 19Asia and Pacific region’s average of 41 days
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The key drivers for growth are likely to be an increase in ICT
penetration in the country and a reduction in the digital divide within
the country. An increase in IT adoption in industries such as tourism,
agriculture and healthcare are also likely to be improve the IT
services sector’s prospects, alongside traditional industries like
financial services and telecom which are likely to continue to drive
demand. Animation and gaming, is another area that can drive
growth in the IT-BPO industry in Thailand, as the penetration of
wireless technologies increases and the domestic market develops.
!
!
Implications for Stakeholders
Areas for Collaboration
The Thai IT-BPO services industry potential by 2020 can be boosted
by the following measures:
Build competitiveness for exports
Thailand should aim to build competitiveness in the export market
through a greater focus on skills creation and by targeting niche, but
high growth areas such as gaming, animation and digital content.
This can provide a large fillip to growth of the IT-BPO industry
Convert imports to a domestic opportunity
Thai service providers should aim to service more and more of the
domestic market locally. Currently, a significant proportion of the
domestic demand, especially for software products, is served
through imports
Target markets in neighboring countries
In the future, Thailand can service the IT markets in its neighboring
countries such as Cambodia, Bhutan, Laos, etc. where Thailand has
a relative language and cultural advantage. As of now, the market
size in these countries is not significant. But Thailand can get an
early mover advantage as these markets grow, and this could
provide a large, combined market for Thai vendors to tap.
Thailand’s growing ICT penetration is likely to create huge
opportunities for growth in the domestic market. By enhancing the
reach and access to markets for Thai companies through
collaboration, Thailand can aim for higher grow the rates in its IT-BPO
industry than those that are currently projected:
Create a joint market for Thai software companies by targeting
neighboring countries such as Lao, Cambodia and Myanmar with
language and cultural similarities
Tie-up with the media and entertainment companies in countries
like Japan, Korea, and Singapore to provide animation and
gaming services.
Vision for Thailand
Thailand’s ICT Ministry in collaboration with the National Electronics and
Computer Technology Center (NECTEC) has articulated a vision for
Thailand’s ICT industry. The vision refers to a society that develops and
uses ICT in a smart manner. People at all levels of society should be smart
and information literate, leading to benefits for themselves and the
society as a whole. ICT should be managed with smart governance in
order to support the development of a knowledge- and innovation-based
society and economy that are sustainable and stable.
In order to achieve its objectives and goals, NECTEC has developed the
Second ICT Master Plan for 2009-2012. This Master Plan has issued
strategies that focus on improving the labor force to support a knowledge
and innovation-based society, developing ICT infrastructure, enhancing
competitiveness of the ICT industry, using ICT to build sustainable
competitiveness for Thai industries, promoting e-Governance and
improving National ICT governance.
Thailand: Outlook 2020
Source: KPMG Analysis, ATCI
Thailand’s IT-BPO Industry 2020
Prospects 2020: Large potential for domestic market
growth
Thailand’s domestic IT-BPO market currently dominates the industry.
IT-BPO exports stood at USD 120 million out of an overall industry
worth USD 2.6 billion in 2008. At the present rate of growth with
the available resources, Thailand’s IT-BPO industry is expected to
reach USD 7.8 billion by 2020.
Thailand is likely to face challenges in the future associated with a
shortage of human resources for the ICT sector, and the lack of
export competitiveness.
We believe that by tapping opportunities and overcoming key
challenges, Thailand has the potential to achieve a higher growth
rate than otherwise possible. Optimistically, the Thai IT-BPO industry
can reach USD 8.2 billion by 2020.
CA
GR
9.3
%
CA
GR
13.
0%
2008 2020 - ‘Base-Case’Scenario
2020 - ‘Optimistic’Scenario
USD 7.8 bn
USD 8.2 bn
USD 2.6 bn
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IT-BPO Industry Capabilities
Strengths Weaknesses
Talent Pool
Thailand faces a shortage of engineers and skilled technical personnel. The
Education Ministry of Thailand estimates that there is likely to be a
shortage of 100,000 engineers by 2010, while the overall labor shortfall of 23is expected to be 580,000 over the same period . The lack of English
language and project management skills acts as a barrier for development
of the IT industry in Thailand.
Piracy
IPR protection and piracy remain an area of concern despite government
efforts to enforce stringent laws and policies to curb piracy.
Leveraging the existing capabilities
Thailand’s competitiveness in the areas of manufacturing and exports can
be leveraged by software companies to expand markets for their products.
Moreover, Thailand free trade agreements with New Zealand, Australia,
Japan, China, India, Peru and the ASEAN members countries provides an 20added advantage to expand business .
Investor attractiveness
Thailand offers an investor-friendly environment and was ranked 13 in the
World Bank’s Doing Business 2009, scoring ahead of some developed
countries in Western Europe. The country has initiated wide-ranging
reforms in the financial services, bank lending, and corporate governance 21to improve investor attractiveness .
Instability
Political instability can be a deterrent to foreign investment. Recent events,
such as protests at the Bangkok airport which stranded passengers, could
go against the perception of Thailand being a stable state. This could also
negatively impact Thailand's export dependent economy.
Domestic market
Thailand has the potential for a large domestic IT market. Thailand’s
improving focus in areas of agribusiness, automobile production, tourism
and health care can bring in many opportunities for growth in the domestic
IT market.
Demand market
Neighboring countries such as Laos, Bhutan and Cambodia can be served
from Thailand given their market and cultural affinity.
Emerging service lines
Thailand in animation and gaming, though currently small, offers a large
potential in future development. Thai workforce is believed to be inherently
creative and now universities offer dedicated courses in animation and
gaming. Thailand is also improving its efforts to tap markets in Japan and
Korea by partnering with local companies there.
22Opportunities Threats
20. Software Park Website
21. World Bank Website, US Chamber of Commerce Website
22. Thai American Businesses News Letter
23. SIPA, Thailand
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Vietnam
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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151
Source: EIU, S&P
1. http://www.agro.gov.vn/map2/page/d3e.htm
The period of 1996 – 2000 was regarded as an important stage to further accelerate
the national industrialization and modernization and the GDP growth averaged 7.5
percent every year.
Vietnam's trade and economic growth has gained more prominence with its trade
agreement with the ASEAN countries and the US, and its WTO membership.
Trade and Investment
Inward FDI (USD Billion) Exports (USD Billion)
2004
2005
2006
2007
2008
2010 (f)
2013 (f)
Economy and Industry
Vietnam has often been referred to as Asia’s ‘miracle economy’ due to its high GDP
growth rate over the last two decades. In 1986, Vietnam started implementing
economic reform policies (known as "Doi Moi") that introduced market reforms and
liberalized foreign investment. These policies resulted in significantly high GDP growth
rates, averaging around 8 percent from 1990-97 and 6.5 percent from 1998-2003. From
2004-07, GDP grew over 8 percent annually, which increased from an average of 3.9 1percent (1986-1990) to 8.2 percent (1991-95) .
Note: Year (f) indicate forecasts made for the year
Source: EIU
GDP at Market Prices (2008)
Population (2008)
Exchange Rate (VND:USD) (Jan – Sep ’09 avg.)
Inflation (1Qtr - 2009)
Unemployment (2008 avg.)
S&P Risk Rating
USD 90.2 billion
85.2 million
16,440
11.2 percent
4.9 percent
BB/Negative/B
GDP Composition
Agriculture
20%
Industry
39%
Services
41%
Source: EIU, 2008
1.61
1.95
2.4
6.7
7.6
4.0
8.0
29.9
36.7
44.8
54.6
72.6
62.5
94.9
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2. KPMG Vietnam
3. VINASA, KPMG Vietnam, KPMG Analysis
Evolution of the IT-BPO Industry
Current state of the IT-BPO Industry
1990s:
The IT industry in Vietnam started in the 1990s and since then has
been one of the fastest growing sectors within the country.
2000s:
The ICT industry growth rate has been high in this decade. Around
half the enterprises in Vietnam are utilizing IT in business,
production management and service. The software sector in
Vietnam started to gain greater recognition after IBM opened its 2delivery center in Vietnam in 2007 .
3
The combined size of the industry in 2008 was an estimated USD
600 million, with exports contributing around 29 percent. An
estimated 15 percent of the export market was accounted for by
BPO exports. The domestic IT-BPO spending as a percentage of the
GDP in Vietnam was low, at around 0.44 percent in 2008.
There were an estimated 800 software companies with around
45,000 employees in Vietnam in 2008. However, many of the
software enterprises are small, and there are only about 20
enterprises with more than 500 employees. Companies offer
services such as software development, systems integration, BPO,
animation and gaming services.
Vietnam is getting increasing popularity as an outsourcing
destination. Hanoi and Ho Chi Minh City are among the popular
cities for outsourcing.
Vietnam Software Association (VINASA) is a national association in Vietnam, operating on a non-governmental and not-for-
profit basis. VINASA was established in April 2002. VINASA currently comprises of more than 160 corporate members, many of
whom are leading software firms operating nationwide. VINASA member companies are employing about 50 percent of the
total number of professional programmers and account for about 60 percent of software production in Vietnam. Beside the
software business, many VINASA member companies also engage in other ICT-related businesses such as hardware, telecom,
Internet, ICT training, etc.
The objectives of VINASA is to promote the co-operation and mutual support among the members, in order to promote the
development of Vietnam software industry and to protect the members' rights; to act as the bridge between companies and the
government as well as the international organizations.
For more details on VINASA, please refer to the appendix section or visit www.atci.or.th
Vietnam Software Association (VINASA)
Break up of IT-BPO Exports by the Service Line
Source: KPMG Vietnam, 2008
Software
exports 85%
BPO exports
15%
Exports
125180
255354
42545
70
105
146
175
0
100
200
300
400
500
600
700
2004 2005 2006 2007 2008
USD
mill
ion
Domestic market
IT-BPO Industry size
Note: The industry size includes domestic and export market for the IT services, software products and
BPO in Vietnam
Source: Ministry of Information and Communications of Vietnam, EIU, KPMG Analysis
CAGR: 40%
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4. http://www.prb.org/Articles/2003/AnOverviewofPopulationandDevelopmentinVietnam.aspx
5. http://www.ilo.org/public/english/region/asro/bangkok/skills-ap/skills/vietnam_literacy.htm
6. VINASA
7. http://www.2456.com/JasperWeb/Shows/Info/sid-230/nid-10505/lang-eng/MessageDetails.aspx
8. Digital Review of Asia Pacific 2007-08
9. http://english.vietnamnet.vn/ITTelecom/2009/05/847654/
10. http://www.eetasia.com/ART_8800465531_499495_NT_9eb89201.HTM
11. http://www.vietnam-ustrade.org/index.php?f=news&do=detail&id=36&lang=english
12. http://www.iipi.org/Conferences/Hawaii_SW_Conference/Nguyen%20Paper.pdf
13. http://www.businessmonitor.com/telecommunications/australia.html,
http://www.business.nsw.gov.au/PDF/infrastructure-D6_it_takeup.pdf
http://www.business.nsw.gov.au/aboutnsw/infrastructure/D8_businessuseoftechnology.htm
14. Department of Planning and Investment, Vietnam, December 2008
15. http://asiansourcingvietnam.com/news.php?id=29&cid=1, EIU
16. http://www.state.gov/r/pa/ei/bgn/4130.htm
17. http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
18. http://www.lookatvietnam.com/2009/03/servicing-a-desire-for-growth.html
19. Viewswire One Click Report on Vietnam, Economist Intelligence Unit, July 2009
20. http://www.vpa.org.vn/detail_temp.jsp?page=2&id=961&cate_id=31
21. http://english.vietnamnet.vn/biz/2008/12/819299/
22. http://www.doingbusiness.org/exploreeconomies/?economyid=202
Drivers of the IT-BPO Industry
Human resource availability
! More than half of Vietnam’s population is in the working age 4group . The literacy rate of population above 15 years in Vietnam
5is 90 percent
! The IT industry adds more than 15,000 university graduates and 6more than 10,000 college graduates to its labor pool every year .
However, the labor pool is relatively poor at soft skills and the
English language competency. Software training for graduates is,
therefore, a flourishing area with over 400 educational
institutions operating in the country3. The large population size in
itself creates potential for scalability in the IT-BPO industry if the
skill-sets of the talent pool improve
7ICT penetration in the country
! According to the Vietnam Internet Centre (VNNIC), there were
more than 17 million internet subscribers, reflecting a
penetration rate of 20.8 percent as of October 2007. There were
roughly 320,000 net additions to internet subscribers per month
in 2007. Wireless penetration is around 40 percent, but is
expected to grow annually by around 23.5 percent from 2008 to
2013
! However, ICT penetration in rural areas remains low. Less than
two percent of the rural population has a telephone. Moreover,
more than 86 percent of internet users are concentrated in Hanoi 8and Ho Chi Minh cities , which is where the ICT industry is also
concentrated
IP protection and data protection
! Vietnam’s PC software piracy rate was 85 percent in 2008,
remaining unchanged from 2007 after two years of consecutive
reductions. Despite the stagnant piracy rate, monetary losses in
2008 (USD 257 million in 2008) increased by 30 percent over 9those in 2007
! In 2007, Microsoft signed a pact with the Vietnamese
government mandating to legalize the use of Microsoft software
in all government departments and agencies. The move was also
seen as a reaffirmation of the government’s commitment to 10control the piracy and infringement problem in Vietnam
Infrastructure development
! Vietnam’s infrastructure has historically been poor. However,
since the 1990s, Vietnam has invested in increasing the reach of
utilities, transport and telecom services within the country.
Vietnam invested about 9 percent of its GDP in 2008 into 11infrastructure development
! Vietnam offers at least 10 software parks, offering tax holidays
and other incentives to software and related services firms, with 12more expected to begin operations in the next few years
Government support and incentives
! The Vietnamese government provides a variety of incentives to
the IT-BPO industry, such as exemption from corporate income
tax for four years from the date of generation of the first taxable 13income
! Vietnam also provides exemption from VAT and export tax for
software products and on the tariff for imported materials that 14are used directly in software production
Competitiveness in the exports market
! Vietnam is an export-dominated economy with exports
accounting for about 80 percent of GDP in 2008. However, a
large proportion of exports comprise agricultural goods and 15fisheries products . In the recent past, Vietnam has increased
exports of manufactured goods, especially labor-intensive 16manufactures, such as textiles and footwear . ICT exports are as
yet small, but the country is targeting significant contribution
from IT-BPO exports in the future
! The US remains the Vietnam’s major trading partner. Bilateral
trade between the USA and Vietnam has grown from USD 2.9
billion in 2002 to USD 15.7 billion in 2008 given the Bilateral 17Trade Agreement (BTA) between the US and Vietnam
GDP growth and stability
! Vietnam has seen rapid economic growth in the last few years.
Since the reform package announced in 1987, the GDP has been
doubling every decade which is equivalent to a CAGR of 7 per 18cent from 1986 - 2007 . The relative political stability is also
19generating large FDI inflows into the country
! Vietnam’s per capita income in 2007 was around USD 835. The 20government set a target of USD 1000 for 2008 , which will put
the country in the ‘middle-income bracket’ by the United Nation’s
definition of a middle-income nation (a country with per capita 21income above USD 960) . According to EIU estimates, Vietnam
achieved this target, ending the year with a per capita income of 19USD 1054
Doing business
! Vietnam was ranked 93 in the Doing Business 2010 Report by
the World Bank among 183 countries. It takes an average of 50
days to start a business in Vietnam, against the East Asia and 23Pacific regional average of 41 days
! IT professionals in Vietnam are regarded as one of the “head
hunted” with salaries relatively higher than that in other
professions. The salaries for IT professionals are very low, 6starting from USD 6000 per year for an entry level professional
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23. Vietnam Business Forum;
http://vibforum.vcci.com.vn/news_detail.asp?news_id=17305&parent_id=0&cate_id=5
Implications for Stakeholder
Areas for Collaboration
The target for the IT-BPO industry in Vietnam by 2020 is achievable, if
the industry continues to focus on the following:
Improving human resource skills
Vietnam can leverage its demographic advantage by creating a skilled
labor force for its IT-BPO industry. Some measures that it could take
include:
Greater autonomy to educational institutions to help keep courses
relevant to industry requirements
Greater collaboration between industry and academia to improve
employability of candidates by understanding industry
requirements
Focus on improvement in English and Japanese language skills
through training and certifications
Intensify branding and marketing
Vietnam can intensify efforts to brand and market the country better
as a destination for lower cost IT and BPO offshore services, and for
multinational IT-BPO vendors to set up offshore development center.
Some measures that can be taken are:
Participation at and hosting of international events and conferences
that are related to outsourcing
Provide attractive incentives and subsidies. Also, simplify entry
procedures and provide one-stop information and assistance to
companies who wish to set up
Showcasing of success stories
Assist local vendors
The industry will need to provide assistance and support to local
vendors to scale up and develop capabilities to manage and execute
larger projects from multinational companies. Vietnam currently has
very few mid-to-large vendors of IT-BPO services. The country could
consider:
Providing start-up and venture funding, subsidies and taxation relief
to vendors
Outsourcing government projects to Vietnamese vendors to
provide them with experience and scale.
Vietnam is rapidly making strides as an important IT-BPO outsourcing
destination. By collaborating with leading markets or with leading
suppliers it can gain a range of advantages which are likely to help it
further in its industry and make a mark in the global IT-BPO space:
Vietnamese companies can collaborate closely with companies in
Japan to learn their business etiquette and provide them with greater
confidence in outsourcing IT-BPO services to Vietnam
Vietnam can tie-up to sell software products and services in
neighboring markets like Cambodia and Lao, which are as yet
nascent markets but where IT-BPO growth is likely to pick up in the
next few years
Vietnam can tie-up with countries like India and the Philippines to
understand strategies in order to promote the industry, such as how
to grow and promote the second tier cities for outsourcing.
!
!
!
!
!
!
!
!
!
!
!
By 2010, Vietnam aims to be in the upper average level among the
ASEAN countries in terms of information society. By 2020, based on ICT
as the key element, Vietnam aims to change its socio-economic structure
to become an advanced country in terms of knowledge-based economy
and information society, to greatly contribute towards the success of the
country’s industrialization and modernization process.
The government of Vietnam aims to focus on developing the IT service
and software industries to become a key sectors of the country’s economy
in the next few years.
Vietnam: Outlook 2020
2008
CA
GR
21%
USD 0.6 bn
USD 6.2 bn
2020 - ProjectedScenario
Source: Vietnam Business Forum, VINASA, KPMG Analysis
Vietnam IT-BPO Industry 2020
Prospects 2020: Vietnam aims to be a competitive IT-
BPO services exporter
Vietnam is progressing well to become a key player in the IT-BPO
services export market. The IT-BPO services market was USD 600
million including exports in 2008, and has grown by close to 40 percent
every year in the last few years.
The government projects the Vietnam software industry to contribute
around 2.5 percent to the GDP by 2020, from 0.5 percent in 2008. The
industry is expected to generate revenues of USD 6.2 billion by 2020.
Vietnam has good potential to become an important IT-BPO outsourcing
destination. However, it is likely to face constraints in terms of creating a
talent pool that is adequately skilled and improving the infrastructure in
the country.
However, the projected target of USD 6.2 billion is achievable
considering the growth momentum of the industry over the last few
years. Vietnam has many advantages such as low cost, a trainable
workforce, cultural affinity with the US and a large population which
makes it favorable as an outsourcing destination. The IT-BPO industry is
already getting high priority from the government as a revenue and
employment generator for the economy. The government has plans to
spend close to USD 58 million by 2012 to boost the development of the
software and digital content industry. The government also plans to
earmark funds of around USD 50 million to provide training for IT 23professionals .
Demand from the domestic market is expected from financial
services, telecom and exports sectors, including tourism in the future.
The government in Vietnam is also expected to increase its spending.
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24. http://www.cpv.org.vn/cpv/Modules/News_English/News_Detail_E.aspx?CN_ID=328080&CO_ID=30294
25. http://www.innovations.harvard.edu/cache/documents/6533/653317.pdf
IT-BPO Industry Capabilities
Strengths Weaknesses
Lack of scale
While Vietnam is aiming to get a share of the pie in the outsourcing
exports market, its domestic vendor landscape in general lacks the
necessary scale to support large clients or large projects. The lack of scale
also hampers the ability to build capabilities in providing end-to-end
solutions across the value chain, as well as in terms of marketing and
strategic business development.
Weak infrastructure
Vietnam’s infrastructure, especially transport and electricity, is cited as a
weak link in the high growth prospects for the country. Although the
government is making investments into infrastructure, a Harvard study
suggests that the non-viability of the projects is the more important 25challenge .
Brand awareness
Awareness of Vietnam as a brand and as a serious contender in the export
market is currently limited and will need to be built in order to reach the
export target that is envisioned.
Human resources
Vietnam has a large pool of qualified talent. With various initiatives to
improve the quality and employability of labor, talent availability is
expected to strengthen going forward. Besides, the demographics favorably
support Vietnam, as a majority of the population is expected to be in the
working age-group by 2020.
Increase in FDI
Vietnam has witnessed high FDI growth rates in the last few years,
especially since the country joined the WTO. The increase in FDI is mainly
attributed to Vietnam’s economic renewal policies, the shift to a market 24economy and openness towards international integration . The IT services
industry can leverage this trend to attract multinationals to set up centers
in Vietnam.
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Cambodia
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Source: EIU, S&P, CIA Fact book
1. http://www.state.gov/e/eeb/ifd/2008/103670.htm
2. Viewswire one click report for Cambodia, EIU
3. http://www.adb.org/Documents/Fact_Sheets/CAM.pdf
4. Https://www.cia.gov/library/publications/the-world-factbook/geos/cb.html
5. http://www.entrancechina.org/news.php?id=82418
Cambodia’s real GDP growth in this decade has been robust, at around 9 percent,
averaging more than 10 percent in the last four years. Cambodia became a member of 2the WTO in 2004 .
Despite robust growth, the incidence of poverty in Cambodia is high, alongside its low 3gross national income per capita of USD 540 in 2007, and high inequality . Agriculture
contributes 29 percent to the GDP and estimates suggest that roughly 73 percent of
the labor force is engaged in subsistence agriculture.
The Cambodian economy and its main sectors have been affected by the global
slowdown. GDP growth dropped below 7 percent in 2008, and GDP is expected to
shrink by 3 percent in 2009. Growth is likely to revive in 2010 when GDP growth goes
back to the positive, at around 2.2 percent, according to EIU estimates.
4
5
Trade and Investment
Cambodia’s main sectors for foreign trade are garments and tourism. The garment
industry currently employs more than 320,000 people and contributes more than 85
percent of Cambodia's exports, with the US being the largest consumer of Cambodian
garment exports . The country attracted more than 2 million foreign tourists in 2007-08
FDI proposals approved by the Council for the Development of Cambodia (CDC) have
dramatically increased in recent years, with approved FDI reaching USD 871 million
during the first nine months of 2007, compared with USD 201 million in all of 2004
In 2008, China was the largest investor in Cambodia in terms of approved projects,
followed by South Korea .
Economy and Industry
Cambodia began the process of transforming from a command economy to a free
economy in the 1980s. The economy grew steadily since then, except in 1997-1998 due
to brief political instability and the Asian financial crisis. A new coalition government 1was formed in 1998 .
GDP at Market Prices (2008)
Population (2008)
Exchange Rate (USD:KHR) (Jan-Sep ’09 avg.)
Inflation at Consumer Prices (2008)
Unemployment (2008 avg.)
S&P Risk Rating
USD 11.2 billion
14.49 million
4054
25.0 percent
3.5 percent
B+/ Stable/ B
Agriculture
29%
Industry
25%
Services
41%
Source: CIA, 2007
GDP Composition
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6. CIA World Factbook
7. Ministry of Education, Youth and Sport, Cambodian government
8. Cambodia Competitiveness Study, Overseas Development Institute, February 2009
9. Current status and development of ICT in Cambodia, Sorasak Pan, 2005
10. http://www.adb.org/Documents/periodicals/ADB_Review/2001/vol33_4/building_cam.asp
11. http://www.doingbusiness.org/ExploreEconomies/?economyid=33
Information Communication Technology Association of Cambodia (ICT-CAM) is the Telecom and IT industry body of Cambodia,
registered with the Ministry of Commerce of the Royal Government of Cambodia as business association. Members of ICT-
CAM include the leading of IT companies, Telecoms operators, IT consulting and system integration companies in Cambodia.
ICT-CAM is a proud member of ASOCIO and WITSA. The objective of the association is to build a sustainable Telecom and IT
industry in Cambodia.
For more details on ICT-CAM, please refer to the appendix section
Information Communication Technology Association of Cambodia (ICT-CAM)
Drivers of the IT-BPO Industry
! Currently, more than half the country’s population is less than 21 years old.
However, skill levels for the IT-BPO industry in the population are low. Most of the 6manpower is in the rural areas of the country is low-skilled
! The total enrolment in higher educational institutions (public as well as private) 7was 91,873 in 2007
! ICT penetration in Cambodia is low. Internet penetration in 2005 was 0.1 percent.
Other ICT usage statistics are similarly low. However, Cambodia is making
progress in telecom and internet penetration. The number of cellular users 8reached 2.6 million in 2008 . The country is also receiving assistance from other
countries such as South Korea and Germany and this is likely to create many 9potential opportunities for IT services and products in the future
! Cambodia’s history of civil unrest led to neglect on the infrastructure front.
Several international agencies such as ADB and the World Bank are providing
loans to the country to improve the electricity situation, waterworks, irrigation, 10etc
! Cambodia is ranked 145th out of 183 countries in the World Bank’s Doing
Business ranking in 2009. It takes 85 days to start a business in Cambodia 11according to the report .
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12. Cambodia Competitiveness Study, Overseas Development Institute, February 2009
13. National ICT Development Authority (NiDA), November 2007
14. International Telecommunication Union (ITU) statistics 20046
Current state of the IT-BPO Industry12
! The ICT sector revenues in 2008 were USD 429 million
13! In 2003, Cambodia exported USD 46 million worth of IT-BPO services
! About 30 IT services companies were identified in Phnom Penh in 2006,
providing mainly applications development or systems and networks 14administration .
47
50
54
46
2000
2001
2002
2003
Exports of IT-BPO services (USD Million)
Source: National ICT Development Authority (NiDA), Nov 2007
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Lao PDR
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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161
Source: EIU, CIA World Fact book
1. BBC Country profile: Laos
2. http://www.idrc.ca/en/ev-47579-201-1-DO_TOPIC.html
3. Lao PDR Country Report on ICT, Prime Minister’s Office, 2006
4. EIU
5. http://news.xinhuanet.com/english/2009-02/09/content_10789096.htm
6. http://balita.ph/2009/08/12/fdi-to-asean-countries-dwindled-in-2008/
7. Lao PDR Economic Monitor, June 2009
8. International Journal of Business and Management, Jan 2008
9. UNCTAD, World Investment Report 2008
3Between 2001 and 2005, GDP growth averaged 6.3 percent per year . Recent
economic growth in Laos is driven by an expansion in industrial growth at double-digit 4rates. The main engines of industrial growth are construction and mining , although
agriculture still forms 39 percent of the GDP.
Due to the global recession, the Laos economy is expected to face a number of
challenges. The slowdown has affected every area in the country this year, including
tourism, exports and foreign investment. Although the government has set a target of
achieving a growth rate of 8 percent in the fiscal year 2008-09, economists believe 5growth might be slower between 6 and 6.5 percent .
6
7
8
9
Trade and Investment
Inward FDI has shown a sharp increase from USD 27.7 million in 2005 to USD 227.8
million in 2008 . Around 80 percent of this FDI comes in to the natural resource
industry
Thailand has been the dominant investor in the country. In 2004, Thailand, US, France,
Malaysia and China accounted for 34 percent, 13 percent, 9 percent, 5 percent and 4
percent of foreign investment respectively
Exports increased from USD 475,000 from 2005 to USD 922,000 in 2007
Economy and Industry
Lao PDR (Laos) is a landlocked economy in East Asia and one of Asia’s poorest 1countries . In the 1980s, the Laos government began to introduce market-oriented
economic reforms and later developed trade links with the West and other Asian
countries. In 1997, Laos became an ASEAN member and has applied to join the World 2Trade Organization .
GDP at Market Prices (2008)
Population (2009)
Exchange Rate (USD:LAK) (Jan-Sep ’09 avg.)
Inflation at Consumer Prices (2007)
Unemployment (2005 avg.)
S&P Risk Rating
USD 5.2 billion
6.8 million
8,760.7
8.6 percent
2.4 percent
Not available
Agriculture
39%
Services
27%
Industry
34%
Source: CIA, 2008
GDP Composition
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10. Lao PDR Country Report on ICT, Prime Minister’s Office, 2006
11. Digital Review of Asia-Pacific 2007-08
12. Asia-Pacific Development Information Programme
13. http://www.doingbusiness.org/ExploreEconomies/?economyid=107
Drivers of the IT-BPO Industry
! The National University of Laos has the capacity to produce 25 ICT professionals
every year, besides IT-related courses at other colleges in Laos. Curriculums are
undergoing change to enhance the ability of teachers to introduce computer skills 10in schools . However, human resource availability for the ICT industry is still
weak
! The ICT sector in Laos is fairly underdeveloped. Though the government
recognizes that ICT is essential to the development of Laos, it still hasn’t been
identified as a priority area. The sector is progressing slowly and the country 11relies on foreign cooperation for skills as well as financial aid
! The application of IT in Laos is in its infancy. The market is very small so most
computer service companies are located in capital Vientiane. Only a few smaller
companies serve the other provinces. Most of the large IT companies have
significant foreign investment which account for 50-100 percent of the 12capitalization
th! Lao PDR was ranked 167 out of 183 countries in World Bank’s ease of Doing
Business rankings. It takes 100 days to start a business in Laos according to the 13report .
Lao ICT Commerce Association (LICA) is association under the umbrella of the Lao National Chamber of Commerce and
Industry (LNCCI). Members of association are ICT related business enterprises, Internet Service Providers (ISP), Telecom
service providers (TSP) and IT related institutions of learning
The objective of LICA is to: promote the ICT market in Lao PDR, and promote ICT products, services, and human resources
development as a vehicle of economic development and growth of Lao PDR. It also aims to continuously improve the standard
of provisioning of ICT product and services to society and foster a closer and effective public-private-partnership in ICT
market.
For more details on LICA, please refer to the appendix section or visit www.lica.datacomlao.com
Lao ICT Commerce Association (LICA)
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14. ICT Development in Lao PDR, http://www.unescap.org/idd/events/2009_EGM-
WSIS/Presentation%20materials/Lao%20PDR_EGM%20July%202009.ppt
Current state of the IT-BPO Industry
! The IT services market in Laos was USD 12 million in 2006. The ICT sector 14employs 3,688 people representing just 1.1 percent of the total work force
! The government has recently formulated the National ICT policy with the
objective for Laos to advance beyond the least developed country status.
Break up of ICT Revenues by Service Line
Source: ICT Development in Lao PDR
Hardware services83%
IT services17%
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Mongolia
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Source: EIU, S&P, CIA World Fact book
1. Economist Intelligence Unit, One Click Report on Mongolia, August 3rd, 2009
2. http://www.ide.go.jp/Japanese/Ideas/pdf/followup_14/04.pdf
3. CIA World Factbook, 2009
4. http://www.ebrd.com/country/country/mongolia/econo.htm
Mongolia’s GDP growth averaged 9 percent per year from 2004 to 2008 on the back of
high commodity prices. Poverty and inequality remain widespread in Mongolia even
today .
The country is facing a downturn due to the global slowdown and poor world demand
for natural resources, with real GDP growth likely to be around 2.5 percent in 2009. The
country had to take an emergency loan from the IMF in March 2009 due to soaring
budget deficits.
4
! Trade with China accounts for more than half of Mongolia’s total external trade
! Export growth is driven by metal and mineral exports. The largest share of foreign
direct investment (67 percent) of a total of USD 500 million in 2007 also went to 2the mining sector .
Trade and Investment
1Economy and Industry
The Mongolian economy has been historically based on agriculture and mining. The
country has one of the lowest population densities in the world and vast natural
resources, especially mineral deposits . Mongolia was a communist country, but after
the fall of Soviet Russia, the country brought on economic reforms and moved to a
democratic system and a free-market economy. During this transformation Mongolia
saw deep recession and political inaction in the 1990s, and was compounded by natural
disasters .
2
3
GDP at Market Prices (2008)
Population (2008)
Exchange Rate (USD:MNT) (2008 avg.)
Inflation at Consumer Prices (2008)
Unemployment (2008 avg)
S&P Risk Rating
USD 5.3 billion
3.04 million
1165.7
23.2 percent
2.8 percent
BB-/Negative/B
Agriculture
19%
Industry
39%
Services
42%
Source: CIA, 2008
GDP Composition
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, a
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Mongolian Information Development/National Information Technology
Association (MIDAS/MONITA)
5. http://www.cicc.or.jp/japanese/kunibetsu/pdf_ppt/mongolia-softwareindustry.pdf
6. http://internationalbusiness.wikia.com/wiki/Emerging_use_of_IT_in_Mongolia
Drivers of the IT-BPO Industry
! Mongolia has 20 universities offering IT-related education. Typically, about 7,000
students are enrolled in IT-related courses with 450 students graduating every 5year . Human resource availability for the ICT sector is generally low
! An IT Park was set up in 2003 with the objective of centralizing national IT
capacity and creating a favorable environment for IT business, promoting IT
outsourcing, and providing incubation services for newly established IT 6companies
! There are multiple mobile cellular service providers and the number of subscribers
is increasing rapidly. In addition, a fiber-optic network has been installed that is
improving broadband and communication services between major urban centers 7with multiple companies providing inter-city fiber-optic cable services
! Mongolia is ranked fairly high in World Bank’s 2010 ranking on Ease of Doing
Business – 60th out of 183 countries. It takes 13 days to start a business in 8Mongolia, according to the report .
The vision of the MIDAS NGO is to create an information-based society in Mongolia that will improved the quality of life of
citizens and intensified all economic sectors of the country by developing Information and Communications Technology sector
as a one of the competitive sector. MIDAS NGO is a bridging 'hub' of the Mongolian ICT players and its related aspects and
assists bottom to top management of the ICT sector.
For more details on MIDAS/MONITA, please refer to the appendix section or visit www.ict.mn/midas/
7. CIA Factbook
8. http://www.doingbusiness.org/ExploreEconomies/?economyid=131
MIDAS/MONITA
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ll rights
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9. Digital Review of Asia Pacific 2007/08
10. http://www.unapcict.org/academy/national/mongolia/Academy-National-Mongolia-Workshop-CaseStudy-
DevelopingHumanCapital-Ariunaa.pdf
Current state of the IT-BPO Industry
!
!
!
The Mongolian Information Development Association / Mongolian Information
Technology Association (MIDAS/MONITA) was established in 2001 with assistance 9from the United Nations Development Programme to promote ICT in Mongolia
? According to a recent study conducted by Mongolian Software Industry
Association (MOSA), there were over 100 software development companies in 10Mongolia employing over 3,000 people
The software development companies have formed the Mongolian Software
Industry Association (MOSA) to protect their legal rights and promote the industry
in Mongolia
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Myanmar
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Source: EIU, CIA World Fact book
1. http://www.adb.org/Documents/Fact_Sheets/MYA.pdf
2. http://www.asean.fta.govt.nz/myanmar-economic-situation
3. http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
4.
5. http://sinoburmanews.net/archives/2009/july-sept-2009/china-boosts-myanmars-fdi-more-than-five-fold-in-2008-09
http://www.dbcde.gov.au
Myanmar’s economy is chiefly agro-based, including fisheries and forestry, and this
sector accounts for nearly half the total economy and employs more than 60 percent of 3the total labor force
In May 2008, the country was affected on an unprecedented scale by a cyclone, which
resulted in large-scale casualties and economic losses estimated to be about 2.7
percent of the GDP in 2008. Moreover, a combination of domestic factors and the 3impact of the global economic recession also affected the economy in 2008
! Natural gas remains one of the largest sources of export revenue for the country,
accounting for about 30 percent of the total exports
4! India, China and Thailand are the major trading partners for Myanmar
! FDI increased from USD 173 million in 2007-08 to USD 985 million in 2008-09. The
large increase was accounted for by a nearly five time increase in the FDI from
China mainly into Myanmar’s mining sector. Russia and Vietnam were the other 5two large investors in the last year .
Trade and Investment
Economy and Industry
Myanmar is a resource-rich country, endowed with natural resources like arable land, 1forestry, minerals (including gas and oil), and marine resources
Despite the liberalization of the early 1990s, Myanmar’s economy largely stagnated
since 1997 due to poor macroeconomic management, a large public sector debt, a 2sharp decline in foreign investment, isolationist policies and trade sanctions
Agriculture
41%
Industry
20%
Services
39%
Source: CIA, 2007
GDP Composition
GDP at Market Prices (2008)
Population (2008)
Exchange Rate (USD:MMK) (Jan-Mar ’09 avg.)
Inflation at Consumer Prices (1Qtr - 2009)
Unemployment (2008 avg.)
S&P Risk Rating
USD 27.2 billion
48.1 million
1,068
12.7 percent
9.4 percent
Not available
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6. Digital Review of Asia Pacific 2007-08, http://www.apdip.net/projects/dig-rev/info/mm/, CIA World Fact
Book
7. http://www.mp3-mp4-ipod.cn/world/2009-03/09/content_7555162.htm, Digital Review of Asia Pacific
2007-08
Drivers of the IT-BPO Industry
Current state of the IT-BPO Industry
! The focus on education remains high in Myanmar with an overall literacy rate of
around 90 percent, including an estimated literacy of 25 percent in English
language. Yangon University and Dagon University along with various private
institutes provide degree and certification courses in IT. These institutions were 6estimated to produce around 25,000 ICT professionals per year starting 2004 .
Despite the large number of professionals, the ICT industry has not yet picked up
in the country
! ICT penetration in Myanmar is low in comparison with developing countries. Tele
density, including mobile telephony, is only 1.23 percent, amongst the lowest in
ASEAN countries. There were around 214,200 mobile users in 2006. The number
of internet users is also small with an estimated 40,000 users in 2007. The
country is making efforts to improve ICT infrastructure and has set up the 7Yadanabon cyber city and Myanmar ICT Park in December 2007
! Myanmar was introduced to IT in 1971, when its first computer center,
Universities Computer Center, was established. In the mid-1980s there were
efforts to introduce e-government mainly for administrative purposes via the 8Computing Development Project, a UNDP project
! Myanmar Computer Science Development Council was established in 1996. The
council is the highest policymaking and implementing body for the IT sector
! The Myanmar Computer Federation (MCF) was formed in 1998 for raising
awareness of ICT. The Myanmar Computer Professionals Association (MCPA), the
Myanmar Computer Industry Association (MCIA) and the Myanmar Computer 9Enthusiast Association (MCEA) are subordinated by MCF
ICT is recognized as a key element in implementing political, economic and social objectives in Myanmar. There are many
opportunities for application of ICT in socio-economic organizations to increase the productivity, market penetration, reduce
costs and improve services so that they can compete in the global market. The Myanmar Computer Federation (MCF) was
established to contribute towards the socio-economic development through ICT, lay down and implement measures necessary
for development and dissemination of Information Communication Technology.
Three NGOs, Myanmar Computer Professional Association (MCPA), Myanmar Computer Industry Association (MCIA), and
Myanmar Computer Enthusiast Association (MCEA), were formed in 1998. With the representatives from these associations,
the Myanmar Computer Federation (MCF) was formed later in the same year. Presently, there are more than 7,000 professionals
as members of MCPA, more than 400 companies as members of MCIA, and 100,000 members of MCEA.
For more details on MCF, please refer to the appendix section or visit www.mcf.org.mm
Myanmar Computer Federation (MCF)
8. http://www.dof.or.kr/pdf/Myanmar%5BWD%5D.pdf
9. http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
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10. http://www.digital-review.org/uploads/files/pdf/2007-2008/2007_C18_mm_Myanmar_223_229.
pdf?93d8e68695e76f3bf28837adbeb3725c=da08c7bac160115e5422949f542a4611,
http://www.cicc.or.jp/Prg/pdf_ppt/070305ict_cooperation_myanmar.pdf
! The IT-BPO industry in Myanmar was estimated to be around USD 20 million in
2003-04 with the presence of nearly 267 companies. The IT market is estimated
to grow between 10 and 20 per cent per year, largely due to internet-related IT 10services
! Banks and the government are the largest consumer of IT-BPO. The commercial
market consists mainly of customized applications such as accounting packages,
Computer-Based Training (CBT), Web-enabled applications and multimedia 11design
! Myanmar Computer Science Development Council approved its first ICT master
plan in 2001. The second ICT plan is called the Myanmar ICT Development Master
Plan and Action Plan and covers the period 2006-10, The Master Plan guides all
ICT development efforts in Myanmar with an aim to achieve the following
objectives:
! Increase the adoption of ICT in state management and business
organizations with the intention of providing better services to the public,
improving efficiency, and reducing costs
! Development of the IT Industry to become one of the main economic sectors
! Utilization of IT as a low-cost communication infrastructure for the smooth
operation of socio-economic organizations, which also helps to bridge digital
divide
! Widespread application of IT to improve the educational level of the whole
population and the development of IT human resources.
Break up of IT-BPO by Service Line (2008)
Source: MCF
Other IT Enabled Services15%
Internet & Network Services
10%
Software15%
ComputerNetwork & Hardware60%
11. http://www.state.gov/r/pa/ei/bgn/2698.htm, Austrade Website
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Nepal
Asia-Oceania Vision 2020:
Enabling IT leadership through collaboration
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Source: EIU, CIA World Fact book
1. EIU, https://www.cia.gov/library/publications/the-world-factbook/geos/np.html
2. http://www.imf.org/external/np/pp/eng/2009/081709.pdf
3. CIA World Factbook, 2008
4. http://www.state.gov/e/eeb/rls/othr/ics/2009/117847.htm
GDP growth touched 5 percent in 2008 due to a good harvest. Nepal is expected to
remain relatively insulated from the global economic slowdown due to the large
contribution of agriculture. IMF expects real GDP growth to be around 4 percent in the 2fiscal year 2009-10 .
! Major exports from Nepal are garments, carpets, leather goods, jute goods,
pulses and foodgrain
! Nepal’s exports in 2008 amounted to USD 868 million (FOB). However these 3estimates do not include unrecorded border trade with India
! The country received a total of USD 724 million of foreign investment in 2008. 4India accounts for nearly 45 percent of the total foreign investment into Nepal .
Trade and Investment
1Economy and Industry
Real GDP growth in Nepal declined from an average of 5 percent per year in the 1990s
to only 2 percent during 2000- 2005 due to political instability. Nepal remains one of the
poorest countries in the world, with an estimated three-fourths of the population
engaged in agriculture. Industrial activity, too, is centered on processing of agricultural
products.
GDP at Market Prices (2008)
Population (2009)
Exchange Rate (USD:NPR) (2008 avg.)
Inflation at Consumer Prices (2007)
Unemployment (2008 avg.)
S&P Risk Rating
USD 31.09 billion
28.56 million
69.8
6.1 percent
46 percent
Not available
Agriculture
33%
Industry
17%
Services
50%
Source: CIA, 2007
GDP Composition
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5. http://www.adb.org/Documents/Events/2004/SASEC/First_Mtg_ICT/Nepal_Country_Paper.pdf
6. http://www.i4donline.net/news/news-details.asp?newsid=2272
7. http://www.itu.int/ITU-D/ict/conferences/bangkok07/doc/16.country%20presentation_Nepal.pdf
8. http://www.doingbusiness.org/ExploreEconomies/?economyid=136
9. Computer Association of Nepal
10. http://www.idrc.ca/fr/ev-127145-201-1-DO_TOPIC.html
Drivers of the IT-BPO Industry
Current State of the IT-BPO Industry
! The median age of the population is 21 years, with 60 percent in the working age 5group. The overall literacy rate is around 49 percent
! There were about 1200 IT professionals in Nepal in 2004461. The 'National ICT
Workforce Survey 2005', carried out by Computer Association of Nepal (CAN),
shows that of the total ICT workforce of around 4,000, only around 1,000 have 6formal ICT education from recognized colleges and universities
! The penetration of the internet in Nepal is very low, at 0.24 percent of the 7population, while the penetration of wireless was about 6 percent in 2007
! Nepal is ranked 123rd among 183 countries in the World Bank’s Doing Business
report of 2010. It takes 31 days to start a business in Nepal, slightly higher than 8the region’s average of 28.1 days .
! The IT services market in Nepal is at a nascent stage. Exports of IT-BPO services 9according to latest available data for the year 2002 were USD 4.6 million
! The Computer Association of Nepal (CAN) is the national apex body for promotion
of ICT in Nepal
! A few small outsourcing service providers in capital Kathmandu are providing
services such as call center, medical transcription and digitization services to 10overseas companies .
Computer Association of Nepal (CAN) was formed in May 1992 but was formally registered in December 1992 as an
autonomous, non political, non partisan, non-profitable and service oriented organization. The Computer Association has been
formed with the involvement of professionals, specialists, manufacturers, institutions and the related organization of Computer
and Information Technology within the country.
The main activities of CAN include organizing and conducting seminars, workshops, talk and training programmes and to
provide consultancy and R & D services and also to exchange knowledge, skill and technology in the field of Computer and
information technology with similar types of organizations within and outside the country.
For more details on CAN, please refer to the appendix section or visit www.can.org.np
Computer Association of Nepal (CAN)
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© 2009 K
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egis
tere
d p
art
ners
hip
and a
mem
ber
firm
of
the K
PM
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etw
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of
independent
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ber
firm
s aff
iliate
d w
ith K
PM
G Inte
rnational, a
Sw
iss
coopera
tive.
All
rights
rese
rved.
Printe
d in India
.
Collaboration Imperative
Asia-Oceania Vison 2020:
Enabling IT leadership through collaboration
© 2
009 K
PM
G, an
India
n r
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tere
d p
artn
ers
hip
and a
mem
ber
firm
of
the K
PM
G n
etw
ork
of
independent
mem
ber
firm
s af
filia
ted w
ith K
PM
G Inte
rnat
ional
, a
Sw
iss
coopera
tive
. A
ll rights
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India
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177
Today the center of gravity of the global IT-BPO is shifting to ASOCIO member countries. The region is
already emerging as a leading producer, supplier and consumer of IT-BPO. The detailed profiles of
ASOCIO member countries covered in the earlier chapter also depict the distinct capabilities possessed
by each country that has helped them till date to leverage the IT-BPO opportunity.
However, as these countries move forward to fully realize their aspiration of bringing economic and social
development through IT-BPO adoption and establish their leadership in the global IT-BPO arena, they are
also faced with diverse challenges that restrict their ability to fully benefit from the enormous potential
that IT-BPO offers.
Moreover, ASOCIO members are now so important to the world IT-BPO backdrop that they must also
play a larger role in global IT-BPO leadership. Hence, it becomes necessary for these countries to
collaborate and leverage on each others capabilities. Collaboration is equally essential for addressing a
range of threats, including poverty, an ageing population, terrorism and environmental degradation.
The case for effective collaboration in Asia is broad, deep and compelling. In fact, Asia’s great diversity –
in terms of its size, culture, languages, political systems, natural resources, level of industrialization, or
economic development status – sets a very favorable context for effective collaboration. Asian economies
can flourish if they become more closely intertwined with each other to build on their strengths and
collectively address the challenges that the region faces.
Diversity to act as catalyst for effective collaboration in Asia-
Oceania
Building Blocks for Collaboration
What is collaboration?
Collaboration is defined as a
cooperative arrangement in which
two or more parties (which may or
may not have any previous
relationship) work jointly towards a
common goal. Some of the
attributes of collaboration include
sharing of planning, making
decisions, solving problems, setting
goals, assuming responsibility,
working together cooperatively,
communicating, and coordinating
openly. For a successful
collaboration, it is important that
the parties involved possess diverse
skills or characteristics that they can
bring to the table to share.
Source: EIU Foresight 2020 Report, KPMG Analysis
Diversity
Complementary Proximity
Linguistic CapabilitiesSkills & Resources
Knowledge
Cost Arbitrage
Demographics
Cultural Similarities
Level of Globalization
© 2
009 K
PM
G, an
India
n r
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tere
d p
artn
ers
hip
and a
mem
ber
firm
of
the K
PM
G n
etw
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of
independent
mem
ber
firm
s af
filia
ted w
ith K
PM
G Inte
rnat
ional
, a
Sw
iss
coopera
tive
. A
ll rights
rese
rved. P
rinte
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India
.
NEXT PAGE FOR LARGER VIEW
178
Moreover, countries with complementary skills or proximity in terms of location, language or culture are
also likely to collaborate effectively. Economies which are able to use all the three blocks of collaboration,
viz. diversity, complementary attributes or skills and proximity are likely to achieve the maximum out of
the collaborated relationship. For instance, a country with advanced software capabilities (such as India)
and a country with established hardware design and production skills (such as South Korea) would be
able to collaborate effectively for newer opportunities in embedded systems that require c software as
well as hardware capabilities; Economies with language and/or cultural affinity (such as Japan, China and
Vietnam) have proven effective collaboration manifested through trade or knowledge share.
Without effective collaboration, however, diversity is believed to breed regional inequalities rather than
prosperity. The varied pattern of the Asian countries’ development status highlights this phenomenon.
Some countries in Asia boast of a highly-sophisticated IT-BPO industry, while there are many other fairly
remote and landlocked countries that have been left out of the IT-BPO overdrive and have remained
isolated not only geographically but also economically. This has led to a large untapped potential in the
region. Collaboration would be able, thus, to not only seal Asia’s dominance in the global IT-BPO scenario
by 2020, but also has the power to bring up the development status of smaller and fairly underdeveloped
economies of the region.
Collaboration in the IT-BPO space has not been fully explored in the Asia-Oceania region. Most initiatives
have been around trade, investment and other economic relationships. Eventually, as Asian economies
move towards an environment of fierce competition as well as greater challenges, they will need to
invest in collaborated efforts that have far-reaching consequences. Asia will need to adopt some of the
elements identified in ‘The Collaboration Iceberg’ to facilitate better integration and ensure an inclusive
and sustainable growth.
Creating an architecture for co-operation: The collaboration iceberg
The Collaboration Iceberg
The Collaboration Iceberg
‘The Collaboration Iceberg’ implies
that the concept of collaboration is
like an iceberg, with majority of the
opportunities as well as benefits
lying below the visual line and not
so obvious on the surface. The four
key elements – Investments, Trade,
People Mobility and Knowledge
Sharing and Creation - defined in
‘The Collaboration Iceberg’ indicate
that the collaboration efforts should
focus on both a long-term vision and
short-term pragmatic initiatives that
are likely to show effective, step-by-
step results. In other words, these
elements are likely to have an
implied interdependency, and as
such each successive element has
the potential to influence the one
before it, and ultimately bring more
opportunities for the region.
The graduation from the base to the
tip of the iceberg denotes the
visibility of benefits that each
collaboration element can bring. The
elements towards the top of the
Collaboration Iceberg may have
more visible benefits in the short-
term, but they may benefit only a
small section of the stakeholders.
On the other hand, the elements at
the base of the iceberg may have
less visible or tangible benefits,
they are expected to be more
powerful, beneficial and create a
long-term impact. Again, the impact
and visibility of benefits from each
opportunity across different
elements would also differ from
country to country, and from
stakeholder to stakeholder.
© 2
009 K
PM
G, an
India
n r
egis
tere
d p
artn
ers
hip
and a
mem
ber
firm
of
the K
PM
G n
etw
ork
of
independent
mem
ber
firm
s af
filia
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ith K
PM
G Inte
rnat
ional
, a
Sw
iss
coopera
tive
. A
ll rights
rese
rved. P
rinte
d in
India
.
KEY
ELE
MEN
TS O
F C
OLL
AB
OR
ATI
ON
CO
NTE
XT
AN
D S
CO
PE
FOR
CO
LLA
BO
RA
TIO
NK
EY S
TAK
EHO
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S
INV
ESTM
ENT
Com
pani
es c
an in
vest
in A
sia
Oce
ania
cou
ntrie
s
CO
LLA
BO
RA
TIV
E TR
AD
E
Trad
e w
ith c
olla
bora
tive
appr
oach
with
ben
efits
whi
ch
are
beyo
nd im
med
iate
eco
nom
ic b
enef
its
Sale
of g
ood
and
serv
ices
from
com
pany
to c
ompa
ny a
nd
coun
try
to c
ount
ry w
ith d
irect
eco
nom
ic b
enef
its
SA
LE O
F G
OO
DS
and
SER
VIC
ES
TRADE
?In
dust
ry P
laye
rs
?In
dust
ry P
laye
rs
?In
dust
ry P
laye
rs
?G
over
nmen
t
?A
sia
Oce
ania
cou
ntrie
s w
ill b
e in
crea
sing
ly lo
oked
as
hub
for I
nnov
atio
n an
d
crea
tivity
?Co
llabo
ratio
n fo
r kno
wle
dge
crea
tion
will
be
impo
rtan
t to
sust
ain
and
acce
lera
te
futu
re g
row
th
?M
ovem
ent o
f pro
fess
iona
ls c
an b
e us
ed to
bui
ld s
kills
whi
ch a
re re
quire
d by
coun
trie
s ha
ving
sho
rtag
e of
ski
lled
prof
essi
onal
s
?St
uden
ts m
ovem
ent w
ill fo
ster
the
know
ledg
e ex
chan
ge a
cros
s th
e co
untr
ies
?Kn
owle
dge
shar
ing
can
be d
one
eith
er to
fost
er IT
-BPO
trad
e an
d de
velo
p IT
-BPO
skill
s or
to im
pact
ICT
usag
e w
ith th
e A
sia
Oce
ania
cou
ntrie
s
Mov
emen
t of p
rofe
ssio
nal a
s w
ell a
s st
uden
ts w
ill b
uild
a
plat
form
to s
hare
info
rmat
ion
in v
ario
us s
yste
ms
acro
ss th
e
coun
trie
s
PEO
PLE
MO
BIL
ITY
KNOWLEDGE SHARING AND CREATION
KN
OW
LED
GE
SH
AR
ING
Plat
form
for s
harin
g go
od p
ract
ices
and
avo
id
rein
vent
ing
the
whe
el
INN
OV
ATI
ON
AN
D IP
CR
EATI
ON
Crea
te c
ondu
cive
env
ironm
ent f
or in
nova
tion
and
new
IP c
reat
ion
?In
dust
ry P
laye
rs
?Ed
ucat
iona
l Ins
titut
es
?G
over
nmen
t
?In
dust
ry P
laye
rs
?Ed
ucat
iona
l Ins
titut
es
?G
over
nmen
t
?In
dust
ry P
laye
rs
?Ed
ucat
iona
l Ins
titut
es
?Re
sear
ch In
stitu
tes
INDUSTRY ASSOCIATIONS
TRADITIONAL COLLABORATION NON TRADITIONAL COLLABORATION
VISIBILITY OF BENEFITS
?Co
mpa
nies
can
leve
rage
ben
efit
like
cost
arb
itrag
e, ta
lent
ava
ilabi
lity
by in
vest
ing
in
som
e of
the
unex
plor
ed c
ount
ries
in A
sia
Oce
ania
regi
on
?Th
e re
gion
has
com
petit
ive
adva
ntag
e ac
ross
var
ious
are
as ra
ngin
g pr
oduc
tion
of
elec
tron
ics,
tele
com
equ
ipm
ent,
hard
war
e, IT
ser
vice
s an
d BP
O
?Th
is c
ompe
titiv
e ad
vant
ages
can
be
leve
rage
d by
Asi
a O
cean
ia c
ount
ries
by
cond
uctin
g co
llabo
rativ
e tr
ade
in c
ompl
emen
tary
ski
lls
?Th
ere
are
lot o
f opp
ortu
nitie
s av
aila
ble
for i
ntra
-reg
ion
trad
e du
e to
div
ersi
ties
as
wel
l as
prox
imiti
es w
ithin
eac
h of
the
Asi
a O
cean
ia c
ount
ries
© 2
009 K
PM
G, an
India
n r
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tere
d p
artn
ers
hip
and a
mem
ber
firm
of
the K
PM
G n
etw
ork
of
independent
mem
ber
firm
s af
filia
ted w
ith K
PM
G Inte
rnat
ional
, a
Sw
iss
coopera
tive
. A
ll rights
rese
rved. P
rinte
d in
India
.
180
Since prioritization of various elements of collaboration is difficult, it is vital that collaboration occurs
across all levels – between companies, industry, academia and government - in order to comprehensively
address the challenges and aspirations of the individual country as well as the region. This is likely to
create strong, prosperous and outward-looking Asian economies that are not only regionally integrated
but also exercise influence in the global IT-BPO landscape.
The Collaboration Iceberg could also facilitate sub-regional to inter-regional co-operation. This would also
offer capabilities for addressing diverse issues ranging from technical cooperation (such as on
infrastructure projects) to broad global and interregional agreements (such as on IIP).
Potential benefits of successful collaboration
Outcome of collaboration: Benefits at each level
Source: KPMG Analysis
? Regional Ecosystem
? Improved
Geopolitical Stability
?Better Utilization of
Natural resources
? Reduced dependence
on Global Aid
programmes
? Positive contribution
to global economy
through product and
service innovation
? GDP Growth
?Infrastructure &
Human Resources
Development
? Utilization of
Complementary
resources
CO
UN
TRY
LEV
EL
REG
ION
AL
LEV
EL B
ENEF
ITS
GLO
BA
L LE
VEL
BEN
EFIT
S
A collaborated Asia could bring together the region’s immense intellectual and other resources to
address the numerous regional and global challenges. It could also help accelerate the global economy
by boosting productivity, raising living standards and reducing poverty.
Adopting ‘The Collaboration Iceberg’ each of the individual countries can collectively translate into a
higher growth, higher integration and increased competitiveness for the region vis-à-vis other regions in
the world. A collaborated growth is also likely to lead to benefits for the entire global community,
especially as knowledge sharing and knowledge creation in ICT has the power to lead transformational
growth driven by innovation and efficiencies.
Therefore, although regional collaboration for the IT-BPO development is primarily motivated by the
aspiration to advance the economic and social development in the region, it is also expected to bring
several positive contributions to the global economy. Asia’s regional collaboration can help to sustain
global economic progress at a time when other major regions are reaching the economic maturity.
© 2
009 K
PM
G, an
India
n r
egis
tere
d p
artn
ers
hip
and a
mem
ber
firm
of
the K
PM
G n
etw
ork
of
independent
mem
ber
firm
s af
filia
ted w
ith K
PM
G Inte
rnat
ional
, a
Sw
iss
coopera
tive
. A
ll rights
rese
rved. P
rinte
d in
India
.
© 2
009 K
PM
G, an
India
n r
egis
tere
d p
artn
ers
hip
and a
mem
ber
firm
of
the K
PM
G n
etw
ork
of
independent
mem
ber
firm
s af
filia
ted w
ith K
PM
G Inte
rnat
ional
, a
Sw
iss
coopera
tive
. A
ll rights
rese
rved. P
rinte
d in
India
.
Collaboration Opportunities
Asia-Oceania Vison 2020:
Enabling IT leadership through collaboration
© 2
009 K
PM
G, an
India
n r
egis
tere
d p
artn
ers
hip
and a
mem
ber
firm
of
the K
PM
G n
etw
ork
of
independent
mem
ber
firm
s af
filia
ted w
ith K
PM
G Inte
rnat
ional
, a
Sw
iss
coopera
tive
. A
ll rights
rese
rved. P
rinte
d in
India
.
183
Integrating Asia’s growing importance in the global IT-BPO landscape demands more determined and
efficient regional collaboration. To play a greater role in addressing global issues that impact IT-BPO, Asia
must increasingly act together, which is also likely to help it maintain global economic prosperity.
The distinctive approach of ‘The Collaboration Iceberg’ allows any group of countries to take part in the
integration process and share its benefits, regardless of its level of development and the stage at which it
operates in the IT-BPO landscape. As initiatives across each collaboration element strengthen, they could
lead to deeper and wider collaboration and ultimately the region’s leadership in the global IT-BPO. ‘The
Collaboration Iceberg’ ensures that Asia’s economic integration remains market friendly and responsive
to the region’s diverse economic, political, social and cultural realities.
Collaboration opportunities for Asia-Oceania
Be it access to new markets through collaboration on trade, or sharing best practices on a common
platform, each country is in a position to offer niche competencies to its partners. The illustration below
details each element into a generic set of possibilities for collaboration. The following sections outline
specific opportunities for countries in the region, based on their unique strengths and capabilities.
Collaboration Opportunities across Key Elements
Investment Trade People Mobility Knowledge sharing and creation
Collaborative Trade Trade Knowledge sharing Innovation & IP creation
?Investment will
bring economic and
employment
growth
?
newer skills and
areas can be
significant revenue
generator for
several economies
& companies
Collaboration in ?
countries to come
closer and can be
used as a input for
future collaborative
trade
Trade helps ?
skilled professional
as well as students
can help in creating
an ecosystem for
countries to grow
by collaboration
Movement of ?
to information that
is either difficult to
recreate or involves
time and resources
Helps to get access ?
important form of
collaboration in
terms of its
capacity to create
impact
This is the most
?
for IT-BPO
companies
?Strategic
acquisition of
smaller industry
player
Offshore centers ?
domain skills
?Complementary
software/Technical
skills
?Complementary
market skills
?Complementary
geographic
advantage
Complementary ?
trading
opportunities
?Extended market
for IT-BPO
Good and services ?
from labor surplus
countries
?Student’s exchange
programmes
Skilled work-force
on
?To improve the IT-
BPO trade within
the country
?To improve the IT-
BPO industry
specific skills
?To impact ICT
usage and
development of the
country
Knowledge sharing ?
ICT products
?Conducive
environment for
Innovation and IP
creation
Joint research on
?
arbitrage
?Employment
creation
?Momentum to the
IT-BPO industry
Cost and skills ?
capabilities
development
?Address to market
demands
?Creation of new
markets with
comprehensive ICT
solutions
End-to-end ?
within the region
?Lead to future
collaboration
initiatives
Increased trade ?
skills resources
?Better education
system
?Better
understanding of
cultures
Improved supply of ?
opportunities
?Improved Asia
Oceania region in
IT-BPO capabilities
?Higher ICT
penetration
?Better handling of
worldwide IT-BPO
services demand
Foster collaboration ?
IP creation system
across the region
?Greater
collaboration
opportunities
within the region
Better research and
Sources: KPMG analysis
Key
Collaboration
Elements
Illustrative
Opportunity
areas to
Collaborate
Indicative
Outcome
© 2
009 K
PM
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India
n r
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tere
d p
artn
ers
hip
and a
mem
ber
firm
of
the K
PM
G n
etw
ork
of
independent
mem
ber
firm
s af
filia
ted w
ith K
PM
G Inte
rnat
ional
, a
Sw
iss
coopera
tive
. A
ll rights
rese
rved. P
rinte
d in
India
.
Investment
The role of foreign investments for economic development and employment creation in developing
countries has been widely recognized. Cross-border investments by companies can bring deeper
specialization and productivity driven gains on the outsourcer’s side and employment driven gains in the
host country. Moreover, strategic investment by foreign companies can also provide an opportunity to
serve the local markets in the developing countries in the future.
The supplier countries can offer attractive monetary and non-monetary incentives and market themselves
aggressively to increase their attractiveness to the foreign companies.
Opportunity Description Probable partner countries
Offshore centers for IT-BPO
companies
Investments in setting up offshore centers can play a critical role in the
development of the IT-BPO sector by shifting parts of production to low cost
destinations in Asia Oceania. Through global sourcing, services can be provided
by more cost-effective suppliers. Moreover, companies can tap specialized skills
and thus benefit from various incentives provided by the host country.
India, Philippines, Malaysia, Singapore (countries where
foreign companies can be tapped);
Bangladesh, Vietnam, Sri Lanka, Pakistan (can market their
destinations to foreign companies)
Strategic acquisition within ASOCIO
member countries
Companies can do strategic acquisitions with companies in Asia Oceania region
countries. This is likely to give them a scale to grow in the region with the
existing set-up of target companies. The country’s IT-BPO sector is likely to grow
with increased business opportunities due to acquisition.
All ASOCIO member countries
Investment – Illustrative opportunities
Trade
Trade can be divided into two major components
?Collaborative trade with long term strategic benefits
?Sale of goods and services with economic benefits
Collaborative Trade
Collaborative trade is an extended form of trade. In this form of collaboration, there is a shared belief in
the benefits and a high commitment to promote growth and sustainable development.
In this form of trade, companies that have complementary skills collaborate with each other either in the
form JVs or other arrangements like profit sharing. Complementary skills can be in either domain,
technology or market knowledge. The benefits of this kind of trade are beyond economic benefit. In the
long-term employment opportunities are created, companies can acquire complementary skills, the IT-
BPO industry can take further momentum and new markets can be tapped for future trading.
Case Study:
Investment opportunities in
Sri Lanka:
Post the end of the LTTE
crisis in Sri Lanka, there is
a change in the risk profile
of the country. There is an
urgent need to brand and
market the country to
investors. Sri Lanka could
showcase its capabilities
by organizing and hosting
international conferences in
Sri Lanka. They can invite
customers as well as
service providers of the IT-
BPO services to Sri
Lanka.`
© 2
009 K
PM
G, an
India
n r
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tere
d p
artn
ers
hip
and a
mem
ber
firm
of
the K
PM
G n
etw
ork
of
independent
mem
ber
firm
s af
filia
ted w
ith K
PM
G Inte
rnat
ional
, a
Sw
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. A
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185
1. http://www.mis-asia.com/news/articles/singapore-and-malaysia-outsourcing-companies-collaborate-to-improve-market-share
Opportunity Description Probable partner countries
Complementary domain skills Companies can collaborate with enterprises that are based in low cost
destinations and have the potential to develop domain specific products. This
kind of collaboration can create high domain-specific products at lower costs.
All ASOCIO member countries
Opportunity 1 - Islamic banking opportunity: Companies in Malaysia which
are already experienced providers of IT-BPO services can contribute process
maturity, while companies from Bangladesh or Indonesia can provide talented
manpower at lower costs. Together these companies can tap the large Middle
East market for IT-BPO services in the Islamic banking segment through joint
ventures or on a profit sharing basis.
Malaysia; Bangladesh, Indonesia
Complementary software skills Companies with complementary software/technology skills can collaborate to
develop new technologies and services.
All ASOCIO member countries
Opportunity 1 - Embedded system and products: Companies in Taiwan
which are very strong in hardware products can collaborate with companies
with services skills to develop a diversified product and services range in the
embedded systems and products.
Taiwan; India, Vietnam, Malaysia (likely partners for Taiwan)
Opportunity 2 - Gaming and digital content: Countries with a high demand
for gaming and digital content can collaborate with lower-cost countries.
Conceptualization of the idea can be handled in the demand market, while it
can be executed at lower costs in the partner countries. Joint IP creation can
also be considered.
Singapore, Korea, Japan (potential demand markets);
Vietnam, Thailand, Philippines (potential supplier markets)
Complementary market skills Companies with knowledge of specific markets can collaborate with companies
with software/technology skills to tap the new market. These markets can also
be in the Asia Oceania region. This can also help Asia Oceania to serve its IT-
BPO demand within the region.
All ASOCIO member countries
Opportunity 1 – Tapping new markets: The IT-BPO service provider
companies in India and other Asia Oceania countries, who want to tap the
Japanese market, can form JVs with either Japanese, Chinese or Vietnamese
companies. These companies are likely to have a good understanding of the
Japanese market and service providers are likely to bring IT-BPO specialization
to tap the market.
India, Sri Lanka, Phillipines, Thailand (potential supply
markets);
Japan, China, Vietnam (potential JV partner)
Collaborative trade - Illustrative collaboration opportunities
Sources: KPMG Analysis
1Singapore-Malaysia SME tie-up
Case Study:
The National ICT Association of Malaysia (PIKOM), the Singapore Infocomm Technology Federation (SiTF) and the Singapore
Business Federation (SBF) have developed an agreement which is likely to involve 50 outsourcing companies from Singapore
and Malaysia to collaborate with each other. The partnership aims to increase the market share for the companies, which are
mostly small and medium enterprises (SMEs).
Several aspects constitute the agreement’s proposed growth strategy. These include multi-shore delivery, which aims to
provide a distributed delivery capability across Singapore and Malaysia for the regional and global customers. Another
element of the partnership involves dispensing with subcontracting, and instead of dividing a project’s components among
the partnering outsourcing companies from both Singapore and Malaysia. Such a move aims to give customers better
visibility of service levels.
Like Singapore and Malaysia, other countries within the region which have similar strengths as well as complementary
capabilities can come together and create extended markets for their service providers.
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2. Growing The Asian ICT Maret Together, http://app10.internet.gov.sg/
2Thailand-Singapore Mutual Recognition Agreement
Case Study:
Thailand and Singapore signed a Mutual Recognition Agreement (MRA) for telecom equipment. The agreement enables
Thai telecom equipment that has been tested and certified in Thailand to be accepted in Singapore without further
certification, and vice versa.
This not only saves money and time, but also boosts trade in ICT products in the two countries. Consumers also
benefit, as lower costs and higher volumes help to drive down prices. There is intent to extend such MRAs amongst all
ASEAN economies.
Sale of Goods and Services
Bilateral trade for simple exchange of goods and services is one of the most obvious opportunities for
greater cooperation in the future. Although, bilateral trade is growing rapidly, it remains modest in
relative terms for collaboration, as it simply involves an exchange of goods and services for monetary
value. Essentially diversified economic structures including output, consumption, capital stock, human
resources etc. facilitates bilateral trade.
Opportunity Description Probable partner countries
Sale of good and services Asia Oceania constitutes a strategically important market both in terms of
immediate opportunities as well as future potential. Therefore, there are very
obvious opportunities as each of the Asia Oceania countries have strength in
some services, which they can offer to Asia Oceania region from a trade
perspective.
All ASOCIO member countries
Extended market for software
companies
Apart from complementary requirements, proximity in terms of language,
culture, etc. can also facilitate effective bilateral trade. For instance, companies
in Thailand can sell their products and services in neighboring countries with
language and cultural similarities and create an extended market. Thai
companies are likely to gain from scale while consumers in the neighboring
countries are likely to gain from the extended product and service availability.
Thailand; Cambodia, Laos, Myanmar (neighboring markets that could be tapped)
Sale of Goods and Services - Illustrative opportunities
People Mobility
The movement of people in the region can be in two ways. It can be either movement of skilled
professionals or movement of students. Movement of skilled professional from countries with labor
surplus to countries with labor shortages can help countries enhance their capabilities. In the long term,
additional employment opportunities are generated in the receiving country. Student exchanges can help
countries understand the curriculum, appreciate each other’s culture and develop synergies between the
countries for future trade.
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Opportunity Description Probable partner countries
Skilled workforce from labor-surplus
countries
The ICT industry bodies in countries with a projected labor shortage could
consider direct tie-ups with their counterparts in labor-surplus countries. A
National Skills Registry in the labor-surplus country could identify areas where
abundant skills are available internally. Companies in the labor shortage country
could get an access to this registry at a negotiated price. This can help address
the skills shortage in the labor shortage countries and also help the labor
surplus country channel its human resources productively.
India, Indonesia, Malaysia, Pakistan, Philippines (countries
with projected labor surplus);
Japan, Australia, Singapore (countries with projected labor
shortage)
Student exchange programmes The Asia Oceania countries have different levels of education and student
exchange programme that can be useful to understand the country’s culture,
skills and education system.
Australia, Japan, India, Thailand, Philippines (countries with
better education system); Cambodia, Myanmar, Nepal,
Pakistan, Bangladesh (Countries that can improve education
system)
3. http://www.ameinfo.com/182989.html
People Mobility – Illustrative collaboration opportunities
3India-Egypt branding and marketing collaboration
Case Study:
Egypt’s Information Technology Development Agency (ITIDA) showcased its capabilities in the annual NASSCOM leadership
forum in 2009. By participating in the globally well attended event, Egypt got a platform to market itself as the next location
for geographical expansion for the Indian outsourcing companies. In addition, Egypt positioned itself as a gateway especially
to the Middle Eastern and European continental markets, which remain largely untapped.
Asia-Oceania comprises of leaders in various segments within the ICT space, and the other economies can use their
leadership position as a launch pad for their own industries. In turn, mutual access to markets is likely to help the leading
country.
Knowledge Sharing and Creation
This can be further divided into two major components,
?Knowledge Sharing
?Knowledge, Innovation and IP Creation
Knowledge sharing
Knowledge sharing within the Asia Oceania can help the region grow faster by developing the existing
knowledge rather than reinventing the knowledge. Different stakeholders can be involved for different
kinds of knowledge sharing.
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Opportunity Description Probable partner countries
Knowledge sharing Knowledge
sharing to improve the intra-region
IT-BPO trade improve the intra-
region IT-BPO trade
Countries which are leading the IT-BPO trade, either in software or in hardware,
can share their trade related knowledge in areas related with market
development, potential opportunities, future growth areas etc. with developing
Asia Oceania countries. ASOCIO’s initiatives such as trade-visits and
Ambassador programmes aim to improve intra-region trade.
Australia, Hong Kong, Singapore, India, Taiwan, Thailand,
South Korea, Vietnam (can share experience in IT-BPO
services trading) Nepal, Mongolia, Myanmar, Cambodia, Laos
(can learn from experience of leading countries)
Knowledge sharing to improve the
IT-BPO industry’s specific skills
Countries with IT-BPO skills can share their knowledge in areas of disaster
management, entrepreneurship, lowering cultural barriers, promotion of tier II &
III cities etc. with some of the developing Asia Oceania countries.
Australia, India, Taiwan, Philippines, Vietnam, South Korea
(can share experience in IT-BPO services trading) Pakistan,
Bangladesh, Thailand, New Zealand, Indonesia, Nepal,
Mongolia, Myanmar, Cambodia, Laos (can learn IT-BPO skills
from leading countries)
Opportunity 1 – Knowledge-sharing on disaster management systems:
For countries with severe vulnerabilities to climate change, disaster
preparedness for the IT industry needs to be high. Using the experience of other
countries with high preparedness against natural disasters, companies in such
countries can put in place systems to counter and react effectively to disasters.
Collaboration is also possible through tie-ups to set up disaster recovery and
business continuity centers in partner countries, with special visas for critical
staff handling these centers at the time of a crisis situation. Partner countries
stand to gain from employment creation in the recovery centers set up by
companies in the disaster-prone countries.
Japan, Taiwan, Singapore, Malaysia (can lend their expertise
in disaster management);
Bangladesh, Cambodia, Laos, Myanmar, Nepal, India (disaster
prone countries)
Opportunity 2 – Knowledge-sharing for entrepreneurs: Countries that are
trying to create opportunities in the IT-BPO services space can negotiate with
companies in established supplier nations to help them design and deliver
training to potential entrepreneurs in the IT-BPO space. These trainings may
cover aspects such as how to set up companies, develop marketing abilities,
train employees, and formulate good human resource practices.
Training companies in the established supplier nations stand to gain from the
increase in business opportunities.
Singapore, India, Philippines, Vietnam, Malaysia (countries
that can provide training)
Cambodia, Mongolia, Lao PDR, Myanmar, Nepal (countries
requiring the training)
Opportunity 3 – Knowledge-sharing to lower cultural barriers to
offshoring: Countries such as Japan and Korea are large markets for IT-BPO
services but the proportion of offshoring has been low. One reason for this has
been that companies in these countries are culturally less inclined to offshore.
However, these companies can gain through lower operating costs by
proactively providing assistance to companies in the supplier countries to
reduce cultural and language barriers and prepare them to partner with
Japanese or the Korean companies.
Japan, Korea, Taiwan, Hong Kong (countries with relatively
low offshoring)
India, Philippines, Vietnam, Bangladesh, Sri Lanka, Pakistan
(countries that can take up offshoring)
Opportunity 4 - Knowledge-sharing on how to promote tier II and III
cities: Countries such as India and the Philippines have recognized the need to
de-congest the IT-BPO centers away from the larger metro areas. A number of
smaller cities are now being promoted as lower cost IT-BPO destinations.
Upcoming supplier countries can apply this knowledge to promote the IT-BPO
industry in the country. In turn, the smaller cities can be promoted as alternate
delivery locations to service as providers in the established supplier nations.
Vietnam, Bangladesh, Sri Lanka (countries that may need to
promote smaller cities);
India, Philippines, Malaysia (can provide knowledge on how
to promote smaller cities)
Knowledge sharing – Illustrative collaboration opportunities
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Opportunity Description Probable partner countries
Knowledge sharing to impact ICT
usage and development of the
country
Countries having higher ICT usage can share their knowledge in the areas of e-
governance, piracy reduction, ICT education, use of IT for the country’s
development etc. with some of the Asia Oceania countries which are low in ICT
usage.
Australia, Taiwan, Philippines, Singapore, Hong Kong,
Vietnam, New Zealand, South Korea (can share experience in
ICT usage) India, Pakistan, Bangladesh, Indonesia (can learn
the ICT usage from the leading countries)
Opportunity 1 - Host workshops /learning sessions for reducing piracy
and enhancing IP protection: Governments in countries with lower piracy
and strict IP infringement regulations could conduct workshops on IP law
enforcement techniques, and host shared learning sessions for countries in the
region that are still struggling with IP protection.
This could be done through knowledge sharing on important regulations and
enforcement experiences through seminars, conferences and regular
communication. It can also discuss regional challenges such as cross-border
piracy and ways to address them. In turn, all countries stand to gain through
lower cross-border trafficking of pirated materials.
All ASOCIO member countries
Opportunity 2 - Improving e-governance adoption in the region:
Countries at lower stages in the adoption of e-governance can learn from the
more developed countries through knowledge sharing. Understanding of best
practices, innovative use of technology, implementation of challenges and other
issues can be discussed through targeted seminars and conferences.
Companies in both countries can gain through increased business due to e-
governance adoption.
All ASOCIO member countries
Opportunity 3 - Knowledge sharing on the use of technology on key
development parameters: Developed countries can share knowledge on the
use of technology in critical areas such as traffic management, pollution
monitoring, energy efficiency, waste management, health-care management,
digitalization, and others. Companies implementing these solutions in the
developed countries can gain from the business opportunities that will open up
in the developing countries.
All ASOCIO member countries
Opportunity 4 - Improve ICT education in the country: Multiple countries
can collaboration to introduce systems for ICT education starting from primary
levels. This can happen through:
Student exchange programs
?Common curricula and educational material
?Train the trainer programs for teachers
?Reserving a certain number of dedicated seats in the partner countries for
students who want to study ICT.
Developing countries struggling to create a talent pool qualified in ICT can
especially gain through such collaboration. Universities/schools in developed
countries can strengthen branding in global markets and also gain economically
through supplying faculty and teaching material.
?
All ASOCIO member countries
Opportunity 5 - Common accreditation systems for ICT courses and
universities: Universities in the region could gain by formulating a common
accreditation system for ICT-related courses. This is likely to help standardize
the level of ICT education in the region and especially help developing countries
improve the standard of ICT education in the country.
All ASOCIO member countries
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4. http://www.articlesbase.com/international-business-articles/cambodia-calls-on-indian-smes-831212.html
4India – Cambodia entrepreneurship and training programme
Case Study:
The Cambodia-India Entrepreneurship Development Centre (CIEDC), set up in 2006 is a platform serving new
entrepreneurs who want to set up their business in Cambodia. Similarly, the Indian government runs the Indian Technical
and Economic Cooperation (ITEC) program to train Cambodian entrepreneurs. These technical exchanges aim to provide
the best industrial training to the next generation of entrepreneurs in India and Cambodia and provide an impetus to the
SME sector in particular.
Smaller countries within the region can leverage the knowledge and leadership of higher-growth countries within the
region to create opportunities for all.
The NetTel@Africa experience
Case Study:
NetTel@Africa is a collaborative master's program in ICT policy and regulation developed for the Telecom Regulatory
Association of Southern Africa (TRASA) by a collaborative effort of seven African and three US universities, together
with other partners from the ITU, the US Federal Communications Commission (FCC), and the Commonwealth
Telecommunications Organization (CTO) among others. The NetTel@Africa master's program consists of 10 course
modules and a thesis or equivalent. The program encourages and aims at standardization in the ICT related skill-sets
across the seven countries.
Countries within Asia-Oceania can adopt this model to improve the human resource availability and capabilities in the ICT
sector. The lack of qualified human resources has been identified as a large hindrance to the sustainability and growth of
the IT-BPO industry.
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5. http://www.insead.edu/v1/gitr/wef/main/fullreport/files/Chap1/1.8.pdf
6. http://www.morst.gov.nz/international/global/korea/ict-delegation
Case Study:
6New Zealand – Korea ICT Collaboration
In August 2006, the New Zealand Foundation for Research Science and Technology led a delegation of eight scientists to
Seoul for workshops in wireless and mobile communications, robotics, embedded systems and digital content.
Following the summit, Korea’s leading research and development organization, the Electronics and Telecommunications
Research Institute or ETRI and the Foundation signed an MoU, to work more closely together in robotics, embedded
systems, wireless and mobile communications, and digital content. This MoU records the intention to establish joint
research centers in New Zealand and Korea in robotics and digital content.
This type of collaboration builds on mutual strengths and aims at building capabilities and extended markets for newer
technologies and upcoming growth areas.
Opportunity Description Probable partner countries
Joint research on ICT products Collaboration could be among companies or academia, where two or more
parties can come together and contribute resources such as funds and qualified
talent. Companies or universities in countries with existing strengths in R&D
and IP-creation can especially partner with those in developing countries which
possess the talent but inadequate resources to conduct R&D.
The outcome of the research in terms of intellectual property creation could be 5jointly owned. This collaboration could be executed in areas such as:
• Computing systems and architecture
• Converging technologies
• Network infrastructures
• Software engineering and data management
• Digital content technologies
• Human technology interfaces
• ICT and internet-related security and safety
• Energy efficient ICT.
All ASOCIO member countries
Conducive environment for
Innovation and IP creation
Member countries can form a consortium with the help of ASOCIO to create
conducive environment for Innovation and IP creation. The consortium can host
seminars to create awareness within the companies and can advise the
government in IP-related laws. An overall system can be created which fosters
Innovation and IP creation within the region.
All ASOCIO member countries
Innovation and IP creation - Illustrative collaboration opportunities
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The Role of ASOCIO
Asia-Oceania Vison 2020:
Enabling IT leadership through collaboration
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Celebrating 25 years:
ASOCIO has played a key role in bringing together representatives from the ICT industry in various Asia-
Oceania countries in the past 25 years. Since its establishment in 1984, in Tokyo, Japan, ASOCIO has
dedicated itself to promoting, encouraging and fostering relationships, while promoting trade between its
member organizations. As a federation of computing industry associations from Asian-Oceania,
ASOCIO's overriding objective is to develop the computing society and industry in the region. For this, it
is well represented in the Asia-Oceania region having a wide range of members from developed and
developing countries that extend beyond SAARC, ASEAN or such regional associations.
ASOCIO has been instrumental in connecting IT companies in its member economies. The annual
ASOCIO ICT Summit is one of the region's high-powered IT forums, providing platforms for government
and industry to share information, develop closer relationship and, most importantly, identify new
business opportunities. In its 25 years of operation, ASOCIO has seen the rise of ICT industries in many
countries, including the success of offshoring in India and the Philippines.
The rapid growth of technology and the changes that it has brought about in this century necessitates a
new agenda for the next 25 years in terms of sustaining the efforts made so far, and providing greater
impetus going forward. ASOCIO is set to have a key role to play in fostering effective collaboration
among member countries and providing strategic direction, especially at the multi-lateral level. ASOCIO
can use the consortium approach to address specific needs of countries through member associations.
There is also an opportunity to further strengthen relationships with government departments and UN
bodies at the regional and global levels.
ASOCIO has the advantage of oversight since it is made up of countries at various levels on the
economic growth and development trajectory. It can therefore assist members in putting together
enablers for creating a robust environment for future growth. Over the next 25 years, the role and
representation from developing countries within the region is likely to rise significantly and this in turn is
likely to reflect in the activities and decision-making for ASOCIO in its new agenda.
Moreover, though ASOCIO represents associations in a single industry i.e. ICT, that industry has the
potential to contribute significantly to economic growth and development. ASOCIO has a much larger
responsibility in that sense and its policies can reap rich benefits for the population at large in the
economies that its members represent. For this, it will have to solicit greater participation from its
members in its regular activities as well as new initiatives, through targeted and result-oriented
programs.
Furthermore, ASOCIO will have to deliver much more by way of value perception to its members’
members, or the end-user companies, to ultimately garner sustained co-operation from its members.
Member economies are likely to look up to ASOCIO to provide them greater value and encompass larger
goals in the global arena that can also enable cross-industry collaboration as ‘technology convergence’
starts to spread its wings wider.
Collaboration through growth, and under the umbrella of ASOCIO, can enable member economies to
achieve each economy’s Vision 2020, as well as collectively set their sights for Asia-Oceania higher than
has been ever envisaged.
A new 'collaborative' agenda for the next 25 years
Activities conducted by ASOCIO:
?Business exchange missions
?Multilateral trade visits
?Ambassador programs
?Advocacy to regional ICT ministries
?Trading network creation
?ICT summit
?ICT exhibition
?Point of view / position papers
?Rewards & recognition.
ASOCIO led six economies in
Multilateral Trade Delegation to Ho
Chi Minh, Vietnam
Forty delegates from the Asia-Oceania
economies including Japan, Laos,
Malaysia, Thailand, China and Hong
Kong attended the ASOCIO lead
Multilateral Trade Delegation to Ho Chi
Minh, Vietnam.
The international delegates had the
opportunity to meet prospective
business partners and improve their
understanding of the potential of the
ICT market in Vietnam.
The ASOCIO delegation got networking
opportunities with over 100 ICT
companies from Ho Chi Minh and
Hanoi.
ASOCIO ambassadors sharing
expertise with Mongolian
companies
As part of the Ambassador
programmes, ASOCIO members visited
Mongolia in May 2008, with the
objective of:
?Gaining an understanding of the
Mongolian ICT Industry and local ICT
Association
?Sharing the Ambassador’s experience
in ICT development and Association
building
?Advising on ICT Outsourcing
opportunities for Mongolia
?Based on the visit, a set of
recommendations were passed to
the ASOCIO member body in
Mongolia along with action areas
that the country could take up to
improve the potential for IT.
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Focus Areas for ASOCIO
Collaboration for growth is a powerful theme in the Asia-Oceania region and ASOCIO can play a very
important role in fostering effective partnerships.
Given the important role that ASOCIO can play, it can prioritize the illustrated action areas based on the
relative impact that they will bring to the region and the ease at which they can be implemented.
Moreover, even as the illustrative action areas hold potential across all set of countries; ASOCIO can
practice them based on their relevance to different set of countries, given the diversity in the maturity
level of the IT-BPO industry in various member countries. This will also lead to focused efforts in a
specific direction for ASOCIO. At the same time, as member countries evolve and move to the next level
of growth in future, ASOCIO should also change its priorities and focus areas for those set of countries.
In addition, even as possibilities abound, ASOCIO must continue to improve its focus on core areas such
as enhancing trade ties across all its member countries and enabling more power and co-operation
among its affiliated associations.
Note:
*'Leading' countries include established offshore locations such as India, Malaysia, Philippines and mature ICT markets such as Japan, Singapore, Hong Kong,
Australia, New Zealand, South Korea and Taiwan
'Emerging' countries include locations that are striving to develop IT-BPO capabilities. These include Bangladesh, Indonesia, Pakistan, Sri Lanka, Vietnam and Thailand
‘Promising' countries include relatively underdeveloped locations such as Cambodia, Laos, Mongolia, Myanmar and Nepal
**Size of the box does not indicate the actual opportunity size and is indicative in nature
Source: KPMG Analysis
IMP
AC
T TO
R
EGIO
NA
SIA
OC
EAN
IA
EASE OF IMPLEMENTATION
LOW HIGH
LOW
HIG
H
Focus area
Be OpportunisticFuture growth areas
Be opportunistic
Offshore centers for IT - BPO companies
Complementary domain skills
Complementary market skills
Develop human resources capability
Skilled workforce from labor- surplus countries
Joint research on ICT products
Knowledge sharing to ICT usage & impact
development of the country
Conducive environment for Innovation and IP creation
Knowledge sharing to
improve the IT BPO trade
Knowledge sharing to
improve the ITBPO industry skills
Extended market for software companies
Trade within the Asia Oceania regionc
Co-member associations
operation among
Focus areas for leading countries
Focus area for promising countriesFocus area for developing countries
Focus areas for all member countries
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ASOCIO can facilitate the following collaborations and interventions in various member countries for
overall development of ICT in the region:
Building a conducive environment for Innovation and IP creation:
ASOCIO needs to foster an environment that is conducive for Innovation and IP creation in order to
support long-term competitiveness of ASOCIO members. ASOCIO can play an important role in setting
incubators that facilitate new ideas and generate resources. ASOCIO can bring countries together to
improve initiatives to protect IP and enforce compliance
Collaborative trade based on domain /technology skills:
ASOCIO can promote collaborative trade opportunities among its member countries based on their
complementary capabilities in various domains and technologies. This will enable further advancement in
development of pockets of expertise in global sourcing and solutions
Encourage movement of specialized workforce:
ASOCIO can play a pivotal role in bringing governments together in formulating policies and procedures
that encourage free flow of specialized workforce from one country to another. This may involve
initiatives such as special visa and immigration procedures for specialized talent
Facilitate joint research on ICT products:
ASOCIO can help develop reliable networks and partnerships among its member countries to conduct
R&D. ASOCIO can also encourage collaboration between emerging innovation destinations and
established innovation countries to create an ecosystem of advanced technology companies, newer
solutions and start-ups. ASOCIO can also explore integrating R&D efforts of universities to drive joint
R&D projects.
Knowledge gain from mature locations:
ASOCIO can create forums and platforms for sharing best practices and providing mentorship and
support to developing IT-BPO locations. This knowledge will enable these countries to take cues on the
steps taken and missteps to avoid during their development
Attract foreign/cross-border investment:
ASOCIO can support developing countries in attracting prominent outsourcers to set up their offshore
centers in the country. This will enhance the skill and scale of the industry and provide an impetus for
globalization of services. ASOCIO can also help service providers from such developing locations to
showcase their value proposition and capabilities through cross-industry collaborations with associations
Facilitate strategic acquisitions:
ASOCIO can facilitate in bringing together companies from two different locations for mergers and
acquisitions, thereby helping them build scale and capabilities to serve global markets
Extend markets for goods and services:
ASOCIO can encourage member countries that have developed significant IT-BPO scale to extend their
markets, build new verticals and customer segments by cross-country collaborations.
Leading Countries
Developing countries
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Promising countries
Exhibit trade opportunities:
Relatively underdeveloped IT-BPO countries offer attractive trade opportunities, especially given their low
cost, under-penetrated market, specific skills etc. ASOCIO can encourage trade with these countries by
introducing delegations from prospective trading partners to various aspects of doing business and trade
in these countries
Develop human resource capability:
ASOCIO must focus on initiatives and programs to enhance the skill level of the potential IT-BPO
workforce. In the short-term, this can be achieved by providing requisite trainings through exchange
programs for student and professionals and collaborations with universities
Forge partnerships with mature or developing locations:
ASOCIO can offer networking platforms for countries that currently lack visibility as attractive IT-BPO
partners. It can provide opportunities to these countries to collaborate with mature and developed
locations to develop competitive and scalable business models.
While implementing these action areas, ASOCIO will also need a prudent mechanism to track
developments and monitor effectiveness of its steps at proper intervals. This will help ASOCIO to
benchmark performance for future advancement and success of several of its initiatives.
As stated earlier, dominance of the region in the global IT-BPO landscape will require collaborative efforts
and ASOCIO can play an essential role in this context. In doing so, ASOCIO will have to re-look at new
ways in which it can motivate, engage and leverage its members. One important mechanism can be to
re-strategize working groups to focus on the illustrated action areas. Next ASOCIO will also need to
garner more financial resources to pursue new initiatives and fund new programmes.
Hence, with an ambitious programme and plans for next 25 years, ASOCIO can play a crucial role in
establishing the region’s leadership in IT and global sourcing as well its own transformation.
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Methodology
In developing the qualitative aspects of this report, we conducted interviews with a variety of players
associated with the ICT industry in ASOCIO member countries between June and September 2009. The
interviews were conducted in the form of in-depth, structured discussions with multiple respondents in
each country, including:
?̀ASOCIO executive council member
?Chairmen and executive members from the 21 ASOCIO member associations
?Companies operating in the member countries wherever possible – both local companies as well as
multinational players who have set up operations in the country
?Representatives from government departments in a few countries.
The responses were combined with insights obtained from professionals in KPMG offices across
member countries to collectively obtain objective and validated learnings from the field.
The projections for IT-BPO revenues in 2020 for each member country were developed using at least
three distinct quantitative assessments, based on past performance of the IT-BPO industry in the
country, growth prospects for the next ten years, likely constraints and a detailed SWOT analysis. To allow
for structural changes that may take place in the next decade, we incorporated two possible growth
scenarios – the one in which a status quo is expected to continue (base-case scenario), and another in
which today’s constraints are likely to be addressed and mitigated in the coming years (optimistic
scenario). The data as well as the two sets of projections were validated by our multiple respondent
groups.
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Appendix
Association profiles
Asia-Oceania Vison 2020:
Enabling IT leadership through collaboration
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Australia
Australian Information Industry Association (AIIA) The Australian Information Industry Association (AIIA) is the nation’s peak industry body for the
technology sector. AIIA sets the strategic direction of the industry, influences public policy and provides
members with productivity tools, advisory services and market intelligence to accelerate their business
growth.
AIIA was set up in 1978, and its membership encompasses all sectors of the industry, from hardware
and software services to multinational companies and local SMEs. Membership is open to information
technology and telecommunications hardware, software and services companies, telecommunications
carriers, multimedia developers, and online services providers.
AIIA member companies employ 100,000 Australians, generate combined annual revenues of more than
USD 40 billion and export more than USD 2 billion in goods and services each year.
The mission of AIIA is to lead and represent the ICT industry in Australia to maximize the potential of the
Australian economy and society.
AIIA’s mission is to provide exceptional value to its members by:
?Shaping the image of the information industry within public and private business sectors and the
community
?Providing industry leadership and influence in its key focus areas
?Delivering effective programs and offerings.
AIIA was founded as the Australian Computer Equipment Suppliers' Association in 1978. The association
was founded by Bill Wells, then Managing Director of Sperry Univac (later to become Unisys), who
recognized the need for the Australian computing industry to form industry views on matters of common
interest. In July 1981 the association became a company, with the chief executives of 9 of the 21
member companies being elected to the first board of directors. In January 1985 the company changed
its name to AIIA to reflect the broadening scope of the ICT sector.
AIIA’s Chief Executive Officer and national secretariat are based in Canberra. It also has executive officers
in Melbourne, Sydney, Brisbane, Adelaide, Perth and Darwin who work with our state committees and
special interest groups.
Key members
Chairman : John Grant
CEO : Ian Birks
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Bangladesh
Bangladesh Computer Samity (BCS)
the ICT companies in Bangladesh. BCS was established in 1987 with eleven members.
BCS safeguards the interest of ICT entrepreneurs, promotes and diversifies effective use of ICT, renders
expert business advice on ICT to the concerned authorities, negotiates with various authorities and
parties on ICT and related issues, organizes mammoth ICT expositions, seminars, workshops, and
conferences, arranges training programs for ICT professionals, entrepreneurs and users, publishes
brochures and catalogues, supplements the Government’s effort in the development of ICT and
represents ICT community of Bangladesh in local, regional and global forums.
BCS contributes to the country’s ICT policy making and takes part in the implementation of national ICT
action plans, along with public entities. It also provides support and cooperation to NGOs in ICT related
development and services.
The ICT industries of Bangladesh comprises distributors, dealers, resellers of computer and allied
products, locally assembled computer vendors, software developers and exporters, internet service
providers, ICT based educational institutions and training houses, ICT embedded services providers etc.
The total number of members stands 710 at present. The body is run by a 7-number executive council
elected every two years.
The aims and objectives of BCS is
?To unite and encourage all computer vendors to join in one platform for achieving their common interest
?To unit and encourage cooperation amongst companies, firms and industries
?To seek cooperation among all the members in the ICT business
?To safeguard the interest of its members and their development
?To boost/encourage, promote and diversify effective use of Computer in Bangladesh
?To render expert advise to the concerned authorities on computer technology and its implication of the
economy of Bangladesh
?To make representation to the Government and related bodies on behalf of BCS members with a view
to reduce bottlenecks, grievances, anomalies and meeting legitimate demands
?To discuss and promote legislative support and other measures connected to or having bearing on the
business
Bangladesh Computer Samity is the voice of ICT industry of Bangladesh. It is the national association of
Key members
Chairman : Mustafa Jabbar
COO : Birendra Nath Adhikary
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Hong Kong - Special Administrative Region (SAR)
Key members
Chairman : Aldous Ng
Secretary : Adele Tsang
Information and Software Industry Association (ISIA) The Information and Software Industry Association (ISIA) was established in July 1999. Its objective is to
promote the standard, recognition and profitability of the local information and software industry and to
expedite the development of high value-added information and software services for the industries in
Hong Kong and the region.
Since its inauguration, the Association has rapidly established as a contributing organization in promoting
continuous prosperity of the local IT industry. Closely collaborating with other representative
organizations in the IT sector, ISIA has become the bridge to facilitate effective communications between
the local IT industry and government as well as industry organizations in overseas markets.
The ISIA is established to promote the interest of its members, in specific:
?To enhance the competitiveness of Hong Kong information and software industry locally and globally
?To promote the awareness and usage of information technology
?To provide a forum for experience sharing and partnership facilitation
?To represent and safeguard the interests and opinions of the industry to the Government and other
international parties
?To promote co-operation between Hong Kong and Mainland China information and software
organizations
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Key members
Chairman : Pramod Bhasin
President : Som Mittal
India
National Association of Software and Service Companies
(NASSCOM)
About NASSCOM
NASSCOM® is the premier trade body and the chamber of commerce of the IT-BPO industries in India.
NASSCOM is a global trade body with more than 1300 members, which include both Indian and
multinational companies that have a presence in India. NASSCOM's member and associate member
companies are broadly in the business of software development, software services, software products,
consulting services, BPO services, e-commerce & web services, engineering services offshoring and
animation and gaming. NASSCOM's membership base constitutes over 95 percent of the industry
revenues in India and employs over 2.24 million professionals.
NASSCOM was set up in 1988, at Mumbai to facilitate business and trade in software and services and
to encourage advancement of research in software technology. It is a not-for-profit organization,
registered under the Indian Societies Act, 1860. Currently, NASSCOM is headquartered in New Delhi,
India with regional offices in the cities of Mumbai, Chennai, Hyderabad, Bangalore, Kolkata and Pune.
Aims and Objectives
NASSCOM aims to drive the overall growth of the global offshoring market and has the role of a strategic
advisor to the industry. NASSCOM's varied strengths include advocacy on public policy, international
trade development, research and market intelligence services, and access to an international network
through 20 MoUs and linkages with 40 industry associations across the globe.
Other goals include accelerating trade development efforts, improving talent supply, strengthening local
infrastructure, building partnerships and driving operational excellence. It also boosts the process of
Innovation; IT workforce development and enhanced cyber security.
NASSCOM's seven fold strategy towards achieving these objectives:
1. Strengthen the brand equity of India as a premier global sourcing destination
2. Partner with Government of India and State Governments in formulating IT policies and legislation.
Partner with global stakeholders for promoting the industry in global markets
3. Strive for a thought leadership position and deliver world-class research and strategic inputs for the
industry and its stakeholders
4. Expand the quantity and quality of the talent pool in India
5. Continuous engagement with all member companies and stakeholders to devise strategies to achieve
shared aspirations for the industry and the country.
6. Encourage and facilitate members to uphold world class quality and service delivery standards
7. Aim to uphold Intellectual Property Rights
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Indonesia
Indonesia Information Technology Federation (IITF)The Indonesian Information Technology Federation (IITF) was established on 21 November 2001 in
Jakarta, United Republic of Indonesia. It was formalized by a Notary, Mr. Mansur Ishak, SH and
witnessed by the Honorable Syamsul Mu'arif, State Minister of Communication and Information and by
the Chairperson of Info-Comm Society (MASTEL), Mr. Ir. Sukarno Abdulrahman.
The national development of Indonesia requires a maximum use of Information Technology for raising
productivity of all resources and for increasing the competitiveness of the economy. IITF was formed in
order to capture all of the aspirations of various national associations in one federated body, and, to
accelerate industrial development and increase the rapid utilization of Information Technology (IT) so that
various technologies can be better integrated and appropriately deployed.
In addition, as there was a perceived need to needed to bring about a greater coordination and a greater
cooperation by the various IT-related associations, through a single point of contact' for international
relations.
IITF consists of 8 industry associations in IT-related fields covering ISP, software, hardware,
games/animation, wireless, phone and Internet Kiosks, satellite and cellular businesses. The founding
member associations are:
?Indonesia Telematics Software Association (ASPILUKI - Asosiasi Peranti Lunak Telematika Indonesia)
?Indonesia Computer Business Association (APKOMINDO - Asosiasi Pengusaha Komputer Indonesia)
?Internet Services Providers Association of Indonesia (APJII - Asosiasi Penyelenggara Jasa Internet
Indonesia)
?Animators Association of Indonesia (ANIMA - Asosiasi Animasi Indonesia)
More recent association members are:
?Cellular Phone Association of Indonesia (ATSI - Asosiasi Telepon Seluler Indonesia)
?Internet Kiosk Association of Indonesia (AWARI - Asosiasi Warnet Indonesia)
?Telephone Kiosk Association of Indonesia (APWI - Asosiasi Pengusaha Wartel Indonesia)
?Indonesia Satellite Association (ASSI - Asosiasi Satelit Indonesia)
Main focus of FTII is
?Development of Supporting Infrastructure
?Development of Human Resources
?Electronic Transaction Law and Cybercrime Law
?Bridging the Digital Divide so we can live in a world in which technology compensates for and corrects
the harmful effects of globalization of the economy through programs on information communication
technology for development programs (ICT4D)
Key members
Chairman : Teddy Sukardi
General Secretary : Teddy A. Purwadi
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Japan
Japan Information Technology Services Industry Association
(JISA) JISA was established in 1984 and its members include leading software developers and information
processing and database/VAN service suppliers. Associate members are predominantly leading Japanese
hardware vendors, bankers, insurers, manufacturers, traders and common carriers, etc. The mission of
JISA is to maintain the growth of Japan's information services industry and to contribute to the overall
growth of the country's economy.
JISA has nearly 600 member enterprises, 35 local associations, and 50 associate members. Share of the
total sales revenue of our members is about 50 percent of the national market, and total employees'
share is about 40 percent in the IT Service Industry in Japan.
The mission of JISA include maintain sound growth of the Knowledge Economy, through promoting skill
development, improving the business environment, and enlarging IT products and services availability.
The objectives of JISA include market expansion, enhancing industry reliability, providing information on
public policies, promoting industry academia partnerships, protecting personal data from piracy,
collaborating with domestic overseas and international organizations and promoting international
affiliations.
JISA activities include responding to government initiatives, including domestic/international public policy
issues; offering basic computing skill courses for training based on ITSS to nurture IT professionals with
on-demand skills; conducting research and surveys to study industry trends, issues, markets and cutting-
edge information technology; promoting quality control, standardizing and promoting security measures
for information systems; studying workforce issues and intellectual property rights issues; holding
meetings, seminars and symposiums covering various topics; introducing the "privacy mark" certificate;
and taking part in international activities business seminars, and multilateral meetings.
Key members
Chairman : Tomokazu Hamaguchi
President : Norihiro Kono
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Malaysia
Association of the Computer and Multimedia Industry of Malaysia
(PIKOM) PIKOM, The National ICT Association of Malaysia is the association representing the information and
communications technology (ICT) industry in Malaysia. Its membership currently stands at over 1000
comprising companies involved in a whole spectrum of ICT products and services which commands 80
per cent of the total ICT trade in Malaysia. By facilitating Malaysia's business growth and
competitiveness through application of information technology, PIKOM is positioned to be the voice of
the Malaysian ICT industry.
PIKOM was formed in August 1986 with the objective of creating an environment that is conducive to the
health, prosperity and competitive nature of the ICT industry. In line with this, PIKOM aims to be a
catalyst for the growth of the ICT industry in Malaysia.
PIKOM has taken on the task of growing the size and capability of the ICT industry in Malaysia by
creating opportunities for its members as well as all Malaysians to capture the benefits offered by
advances in ICT.
PIKOM's focus is based on the following key strategies:
?Advocacy and promotion.
?Networking both with other PIKOM members, and with the wider business community and
Government.
?Government relations - to spearhead the ICT industry's support to the government in achieving k-
economy status.
?̀Building links to other industry organizations, reducing the perceived fragmentation, and achieving a
leadership position.
?Partnering with other members when applicable.
?Growing Membership Services.
?Using PIKOM global networks to assist exporters and to facilitate technology transfer.
PIKOM actively represents the IT industry's problems and concerns to the government; acts as the
advisory, consultative and coordinating body on many government forum and agencies, including the
Malaysian Institute of Microelectronic Systems (MIMOS); Malaysian Administrative Modernization and
Management Planning Unit (MAMPU); Industrial Standards Committee on IT; Multimedia Development
Corporation (MDC); and Malaysian Industrial Development Authority (MIDA). PIKOM conducts a series of
seminars, talks, conferences and industry forum on topical matters of national and policy interests in IT.
PIKOM actively participates in annual dialogues with the Ministry of Finance (Budget Dialogue); Ministry
of International Trade and Industry (MITI); Malaysian Royal Customs and Excise Department; Standards
and Industrial Research Institute of Malaysia (SIRIM); Ministry of Domestic Trade and Consumer Affairs.
Key members
Chairman : Wei Chuan Beng
President : C J Ang
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New Zealand
Key members
Chairman : Wayne Hudson
Treasurer : Steve Corbett
New Zealand Software association (NZSA) NZSA is New Zealand's national software association. Association has relationship with regional software
clusters and other Information and Communications Technology (ICT) sector groups, associations and
organizations. NZSA is also closely aligned to government agencies responsible for software sector
growth, development and investment. NZSA has built a collaborative alliance between the country's
primary software associations: Canterbury Software Inc (CSI), Website Developers Association NZ
(WDANZ) and Wireless and Broadband Forum (WBF). The Software New Zealand alliance enables
members of each constituent organization to access a wider range of events, companies and resources.
NZSA was established in year 1999 with objective to align with government for growth in the software
sector and build collaborative environment for sector to grow further.
NZSA seeks to help its members acquire in-depth industry knowledge and learn the essential business
management, sales and marketing skills required to enter and grow profitable export markets.
Some of the benefits achieved by Software companies by joining NZSA are,
?Reduce risk: Proven legal templates, advice from experienced entrepreneurs and seminars on important
subjects are provided, reducing the uncertainty of operating a software business.
?Build relationships: Can find business partners, gain some wise advisers or share experience with like-
minded business people.
?Contribute: Become part of a tight-knit community, share experiences and help the software community
grow.
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Pakistan
Pakistan Software Houses Association (P@SHA) Pakistan Software Houses Association (P@SHA) for IT and BPO services was initiated by a number of
software houses in an attempt to create a functional trade association for the IT industry in Pakistan.
Aiming to protect the rights of its members; P@SHA lobbied with the government to initiate policies and
create an environment that would attract more firms to join the industry. Over the course of the last
fifteen years, P@SHA has broadened its scope to include other IT enabled services companies such as
Internet Service Providers, Call Centers etc.
Today 350 companies are active members of P@SHA, thus demonstrating how in the long run P@SHA
has achieved its aim to help firms establish themselves providing assistance to help them gain access to
potential clients, locally and internationally.
P@SHA acts as a voice of the industry. Over the years it has dealt with issues that no company could
manage single handedly; such as providing input on policies, legislation and incentives related to the
industry, for organizations in the IT industry. Sponsored career events and salary surveys are also
conducted regularly to assist in the growth of a dynamic sector.
P@SHA has made consistent efforts to ensure that the right policy frame works are employed for
continued growth and development. The Government is also being encouraged to act as a facilitator in
creating a certain consistency in growth rates. Efforts to promote Pakistan’s IT industry internationally are
being channeled through trade and technical delegations sent to all corners of the world.
P@SHA has gained international recognition by having won several awards in the Asia Pacific ICT awards.
Pakistani companies are involved in leading edge work, thereby helping the software; services and
outsourced industry grow at an enormous pace.
The Mission of P@SHA is to - Create an enabling environment that makes Pakistan an attractive
destination for foreign and domestic ICT investments; Sustain the ICT industry’s growth by raising the
awareness at all levels of society to invest into the development of human resources; Develop new and
innovative avenues for P@SHA's Members to access partners and customers outside Pakistan; Open up
new possibilities for the ICT industry to access finance.
Key members
Chairman : Muhammad Yusuf Jan
President : Jehan Ara
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Philippines
Business Processing Association of the Philippines (BPAP)The Business Processing Association of the Philippines (BPAP) is the umbrella organization for the
fastest-growing industry in the Philippines: offshoring and outsourcing (O&O). BPAP serves as the one-
stop information and advocacy gateway for the country's key O&O services sector and has over 200
company members, including 5 association members.
BPAP's thrust is to promote the competitive advantages and the growth potential of the Philippines in
existing and new areas of outsourcing and supports the industry in areas such as offshore marketing,
education and training, security and privacy, legislation and public policy, among others. It aims to create
a supportive environment for the Philippine O&O industry and strengthen the Philippine case to be the
preferred O&O destination by the end of the decade.
Given the excess global demand for O&O resources and the attractiveness of the resources the
Philippines has to offer, BPAP believes it is possible for the Philippines to increase its share of the global
O&O market from 5 percent in 2006 to 10 percent in 2010. This will mean the Philippine O&O industry
will earn revenues of about USD13 billion and directly employ close to one million people by the end of
2010.
The Philippine O&O industry has grown rapidly because it has the ingredients critical to O&O service
providers and customers:
?large-scale people resources, with close to half-a-million English-speaking students graduating from
college yearly
?quality, with a well-deserved reputation for excellence in communication skills, interpersonal warmth,
customer-service orientation, problem-solving abilities, and cultural affinity with Western markets and
customs
?an operational cost advantage, with costs competitive with any supplier country in the world, including
India
?infrastructure, with world-class telecommunication networks and BPO workplace facilities; and
?financial incentives, with highly competitive investment packages for information technology (IT) and IT-
enabled services investors, whether third-party services providers or captive regional shared services
centers.
BPAP's Team 2010 will also ensure a better business environment and wider opportunities for the O&O
industry by positively influencing the various stakeholders of the industry and by proactively assisting
BPAP's members in positioning themselves as global leaders in outsourcing and offshoring.
Key members
Chairman : Alfredo I. Ayala
CEO : Oscar R Sanez
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Singapore
Singapore Infocomm Technology Federation (SiTF) Singapore Infocomm Technology Federation (SiTF) is Singapore’s premier infocomm industry association
and brings together 400 corporate members from MNCs and local companies. The association was set
up in 1982. The main charter of the federation is to assist its members in business development, market
intelligence, overseas trade missions, networking and alliances.
The eight chapters under SiTF include: Best Sourcing, Digital Media, eGovernment, eLearning, Security &
Governance, Singapore Enterprise, Service-Oriented Architecture and Wireless. Besides working closely
with government and foreign agencies, SiTF is also a member of World Information TechSinology and
Services Alliance (WITSA), Asian-Oceanian Computing Industry Organization (ASOCIO) and Asia Pacific
ICT Alliance (APICTA). SiTF also manages Infocomm Solutions Centre (ISC) in China (Shanghai and
Hangzhou) to give local infocomm companies a foothold into China.
SiTF's mission is to engage and connect Singapore infocomm industry with worldwide reach and
recognition. SiTF works towards achieving this mission through our strong working relationships with
government agencies, other local trade associations and international organisations.
SiTF operates on the principle of being highly responsive to its members' concerns. They are also a
proactive organisation that pre-empts possible influences on the industry. SiTF provides support
infrastructures for harnessing the opportunities in a dynamic and rapidly changing infocomm industry.
SiTF serves its members best by providing a backbone on which they can rely for achieving success in
their global aspirations.
SiTF provides our members with a range of services and activities that support their business growth.
SiTF’s member services include :Business Intelligence; Trade Missions; Networking events; Conduit for
the Industry to the government; focused conference and seminar and International representation.
Key members
Chairman : Tan Yen Yen
President : Ho Semun
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Republic of Korea (South Korea)
Key members
Chairman : Jae-Chul Shin
CEO & President : Chan Sung Kim
Federation of Korean Information Industries (FKII)The Federation of Korean Information Industries (FKII) is a private and non-profit organization. The
association was formed in 1979 and since 1979, FKII has contributed to spurring the growth of the IT
industry and informatization of Korea. FKII has emerged as a beacon of the IT industry in Korea to lead
the ubiquitous area. The vision of FKII is to become a Renowned IT Leader with Creativity and Leadership
in the ubiquitous Society. FKII has around 250 members, including regular and associate members.
In 2008 (P), the total revenue of the Korean IT industry was 288 trillion Korean Won (equal to 2,880 billion
USD, 1USD = 1,200 Won): it includes all amount from production and export in telecommunication
services, Information Communication Devices manufacturing, and SW and related service.
The mission of FKII is:
Setting Policy direction and providing information on IT issues
Strengthening IT networks to create synergy effects
Supporting glabalization and marketing for IT companies
Creating growth engines to strengthen Korean IT competitiveness
The activities of FKII include -
?Policy Recommendation: FKII voices for IT industry in developing and formulating policies. Its
differentiated position makes FKII a special role as a bridge between government and business
?Research and Survey: FKII forecasts business environment in the IT industry to help companies make
decision by providing information and data. FKII searches for next generation growth engines and
formulates business strategies to conduct research and studies on the growth engines for the
ubiquitous era. FKII provides differentiated information and data to IT community circles
?International Cooperation: In bilateral and international arena, FKII has a close relationship with leading IT
organization of U.S. (ITAA), Japan (JISA), China (CIIA), India (NASSCOM), Singapore (SiFT), etc. and its
major cooperation fields cover digital convergence, healthcare IT, ubiquitous technologies, promotion of
the software industry, etc. In addition, FKII supports globalization and overseas marketing for Korean IT
companies. Its main activities are also to participate in overseas exhibition and organize Korea pavilions
and to bridge developing countries and domestic companies in the sector.
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Sri Lanka
Federation of Information and Communications Technology
Industry and Services Sri Lanka (FITISS)FITISS was set up in 1996 with the purpose of giving a much needed focal point for the IT industry in Sri
Lanka. The mission of FITISS is to be the apex national organization leading and representing the IT
Industry in Sri Lanka.
FITISS member associations are namely the Sri Lanka Association for Software Industry – SLASI, Sri
Lanka Computer Vendors’ Association – SLCVA and Association of Computer Training Organizations –
ACTOS and LISPA. FITISS has as its members in hardware, software, computer education and training,
Internet services and communications.
The objectives of FITISS
?To provide a negotiating body and represent the IT industry on all matters concerning and in discussion
with, the Government of Sri Lanka and instrumentalities thereof
?To encourage and promote members to provide world class products, services and solutions in Sri
Lanka and overseas.
?To act as the advisory consultative body for the industry
?To formulate and propose model legislation and other such measures for the advancement of the IT
industry to the best interests of the country
?To collaborate with the relevant government, national and international organizations
?To establish a forum for exchanging information, developing closer relationships between members and
identifying new business opportunities with IT organizations in other countries
The activities of FITISS include: schools Software Competition leading to participation at regional level at
the Asia Pacific ICT Alliance Awards – APICTA; various networking events on ICT and business related
topics; to publish Newsletter and ICT companies directory and doing road shows for building awareness
about the Sri Lankan ICT industry within and outside the country.
Key members
Chairman : Govind Nangrani
Executive Director : Mrs. Suranee
Samarasekara
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Chinese Taipei (Taiwan)
Information Service Industry Association of Chinese Taipei (CISA) Founded in 1983, CISA is the sole representative body of Taiwan’s software and information services
industry. CISA’s 750 members cover the full spectrum of the industries which include independent
software vendors, turnkey project operators, system integrators, ICT consultants, ICT outsourcing service
providers. Our member base includes small, large and international companies.
Different from other associations, CISA keeps a large size secretariat about 50 full-time staffs. The
secretariat’s main task is to undertake many government projects won from open bidding processes.
These projects aim at promoting ICT and deploying ICT to medium and small industries. By taking these
projects CISA is able to help create direct and indirect business opportunities to its members. As well as
all associations do, CISA actively lobbies the government to put more resources to enable its
international competitiveness. In CISA’ 20th anniversary in 2003, the industry leaders reached the
consensus of forming a vertically integrated and horizontally allied infrastructure to enhance the overall
strengths of exporting to China market.
Key members
Chairman : James Liu
Secretary General : David Chang
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Key members
President : Bunrak
Saraggananda
Executive Director : Pravit Chattalada
Thailand
The Association of Thai ICT Industry (ATCI) The Association of Thai ICT Industry (ATCI) is Thailand's first and foremost, professional information
technology trade association. ATCI has around 121 members (ATCI only has corporate members).
Officially, inaugurated in'89, the primary mission of the ATCI has been to represent the overall
information technology industry by promoting its continued growth and facilitating industry excellence in
areas such as quality, production and service, which ultimately brings added value, both to the national
economy and Thai society, as a whole. The ATCI performs a vital role as the collective voice of the
industry, by communicating the various needs interests of its members to government policy makers, in
an effort to collaboratively develop appropriate measures that will genuinely stimulate the industry's
continual expansion as well foster healthy competition and sustained economic growth made possible
through the deployment of information and communications technology (ICT). As trends like the merging
of IT and communications become increasingly prevalent, the role of the ATCI also encompasses
providing a conducive growth environment for convergence technologies such as ICT to go forth and
multiply.
The membership of the ATCI is comprised of corporate members whose total share of the IT business
represent over 80 percent of the overall market in Thailand. ATCI is a membership led organization. ATCI's
membership listing includes all leading companies of Thailand's information industry granting the
association a high recognition factor and respect nationally and internationally.
The main objective of ATCI is to promote the Thai ICT industry
?To promote and assist infrastructure and human resource development to grow IT industry in Thailand.
?To stimulate the exchange of knowledge, experiences, trade and research among members, interested
parties and the public
?To act as an advisory, consulting and coordinating body for the industry.
?To encourage and promote cooperation among associations and professional organizations whose
objectives are consistent with ATCI's.
?To provide and disseminate information and views on information technology to the public, policy
makers and government.
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Vietnam
Vietnam Software Association (VINASA) VINASA is a national association in Vietnam, operating on a non-governmental and not-for-profit basis.
VINASA was established in April 2002. VINASA currently comprises 160+ corporate members, most of
whom are leading software firms operating nationwide. VINASA member companies are employing about
50 percent of the total number of professional programmers and account for about 60 percent of
software production in Vietnam. Beside software business, many VINASA member companies also
engage in other ICT-related businesses such as hardware, telecom, Internet, ICT training, etc.
Now VINASA have divisions for:
?Program Promotion Department: in charge of holding events, seminars, symposia, organize trade
delegation to study overseas or take part in international exhibitions
?Human Resource Development Center: in charge of holding training courses in order to improve the
capacity of IT and software human force of Vietnam; implementing the DI project to strengthen the
Vietnam Software Association; building the Vietnam ranking system (VRS); holding seminars.
?Digital Life Magazine (or Nhip Song So): the voice of the Association
The objectives of VINASA is to promote co-operation and mutual support among the members, in order
to promote the development of Vietnam software industry and to protect the members' rights; To act as
the bridge between companies and the Government as well as international organizations.
VINASA is operating in the following activities:
?Promote Software Industry
?Business matching/conference activities
?Industrial awards and exhibitions
?Policy recommendation
?Training and human resource development
Key members
Chairman : Truong Gia Binh
General Secretary : Pham Tan Cong
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Cambodia
Information Communication Technology Association of Cambodia
(ICT-CAM) Information Communication Technology Association of Cambodia (ICT-CAM) is the Telecom and IT
industry body of Cambodia, registers the Ministry of Commerce of the Royal Government of Cambodia
as business association. Members of ICT-CAM include the leading of IT companies, Telecoms operators,
IT consulting and system integration companies in Cambodia. Association is prodund member of
ASOCIO and WITSA
The objective of ICT-CAM is:
Building a sustainable Telecom and IT industry for Cambodia's future
ICT-CAM’s main activities and services include:
?Policy Advocacy
?Consulting and assessing the Telecom and IT projects/programs
?Organizing market promotion activities for Telecom and IT enterprises to promote IT and Telecom
services in the society
?Expanding foreign affairs, international cooperation activities
?Provide communication channels to members and ICT communities
?Organizing events/meetings for members as well as for other associations to cooperate with each other
associations
Key members
Chairman : Rada Nong
President : Chanthan Ken
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Lao PDR
Key members
President : Thanongsinh Kanlagna
Lao ICT Commerce Association (LICA) Lao ICT Commerce Association (LICA) was established on 8th July 2005 under the umbrella of the Lao
National Chamber of Commerce and Industry (LNCCI). Members of association are ICT related business
enterprises, Internet Service Providers (ISP), Telecom service providers (TSP) and IT related institutions of
learning
The objectives of LICA are:
?To promote ICT market development and growth in Lao PDR
?To promote ICT product, services and human resource development as a vehicle of economic
development and growth for Lao PDR
?To improve continuously the standard of provisioning of ICT product and services to society
?To foster a closer and more effective public-private- partnership in the area mentioned above
?To ensure the sustainability for the development and growth of its members as well as all beneficiaries,
stakeholders involved in the ICT progress in Lao PDR
Some of LICA activities include:
?Participation in multiple ICT events to represent Lao PDR’s IT industry at different forums
?Joined groups like ASOCIO and WITSA
?Organized a multi-trade study visit as well ASOCIO planery meetings with ASOCIO (especially ATCI)
?Participating and sponsoring the Ministry of Labor in joining the ASEAN Skill competition on IT
?With the cooperation of LNCCI has assisted members in sending their staff for ICT training abroad,
specifically in India, South Korea and Japan
?Planning to work closely with ASOCIO for the ambassador program to get experience IT pioneers and
leaders to provide advice on key ICT strategy and Plan.
?With the authorization and support from the Lao National Chamber of Commerce and Industry, under
the Ministry of Commerce, organizing its first ICT Expo, scheduled on 12th – 17th January 2010.
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Mongolia
Key members
Chairman : S. Natsagdorj
Executive Director : Enkhjargal
Sukhbaatar
Mongolian Information Development/National Information
Technology Association (MIDAS/MONITA) In the year 1999 the National ICT Council in cooperation with UNDP Mongolia, APDIP and Mongolian
Foundation for Open society (Soros foundation) started the development of the MIDAS (Mongolia
Information Development Application Scheme) project. The National ICT Council was initially selected to
be the implementing agency.
The aim of the MIDAS project is to support the government in the creation of an intellectually geared
society and in the development of information and communications technology (ICT) in Mongolia. The
MIDAS project facilitates the selection of subprojects for grant services in order to support the
implementation of ICT Vision 2010 - the 'blueprint' for ICT development in Mongolia.
The National ICT Council was acting without any legal status and permanent secretariat. On the other
hand, they are expected to initiate ICT-related activities such as influencing to organize regular activities
and to follow-up.
During the period of MIDAS project implementation, the members of the National ICT Council were
working more closely and they are also known as a MIDAS Council. In order to broaden the Council's
activities and to have a legal status, the MIDAS Council members registered the MIDAS project as an
NGO named "MIDAS" or Mongolian Information Development Association.
The vision of the MIDAS NGO is to create an information-based society in Mongolia that will improved
the quality of life of citizens and intensified all economic sectors of the country by developing Information
and Communications Technology sector as a one of the competitive sector. MIDAS NGO is a bridging
'hub' of the Mongolian ICT players and its related aspects and assists bottom to top management of the
ICT sector.
The activities of MIDAS include: surveys in ICT field: Organization of workshops, seminars, meeting and
discussions; Consultation and support ICT-related activities: Supports creation of the ICT related work
places; Assists companies in recruiting ICT professionals and other ICT related issues; Prepares ICT-
related proposals for conducting surveys through questionnaires and public opinions for the National ICT
Committee; Cooperates with local and foreign entities in ICT field; Cooperates with other government
and public entities and NGOs in ICT field; Supports the implementation, monitoring and auditing of the
subprojects ; Prepares proposals on ICT-related policies and decision-making documents prior to future
development; Protects rights of the ICT players and Improves public awareness on ICT
MIDAS/MONITA
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Myanmar
Myanmar Computer Federation (MCF) ICT is recognized as a key element in implementing political, economic and social objectives in Myanmar.
There are many opportunities for application of ICT in socio-economic organizations to increase the
productivity, market penetration, reducing cost and improving services so that they can compete in the
global market. Myanmar computer Federation (MCF) was established to contribute towards the socio-
economic development through ICT, to lay down and implement measure necessary for development
and dissemination of Information Communication Technology.
Three NGOs, Myanmar Computer Professional Association (MCPA), Myanmar Computer Industry
Association (MCIA), and Myanmar Computer Enthusiast Association (MCEA), were formed in 1998. With
the representatives from these associations Myanmar Computer Federation (MCF) was formed later in
the same year. Presently, there are more than 7,000 professionals as members of MCPA, more than 400
companies as members of MCIA, and 100,000 members of MCEA.
The objectives of MCF are:
?To contribute towards the emergence of a modern developed State through ICT
?To lay down and implement measures necessary for the development and dissemination of ICT
?To create opportunities for the youth, especially students, in studying ICT
?To promote Research and Development in ICT
?To promote the application of ICT in the respective fields of work
?To supervise the import and export of computer hardware, software and information services.
Key members
President : U Thein Oo
Executive Director : Dr. Myint Myint
Than(Mrs)
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Nepal
Computer Association of Nepal (CAN) Computer Association of Nepal (CAN) was formed in May 1992 but was formally registered in December
1992 as an autonomous, non political, non partisan, non-profitable and service oriented organization. The
Computer Association has been formed with the involvement of professionals, specialists,
manufacturers, institutions and the related organization of Computer and Information Technology within
the country.
The objectives of CAN is
?To assist in the utilization, enhancement and promotion of computers and information technology within
the country and help to develop strategies to meet the necessary requirements for the development of
literacy and skills regarding computer science.
?To provide and protect the necessary rights and privileges, benefits to individuals, institutions,
companies and organizations affiliated to the activities of CAN.
?To provide support and facilities to all general, corporate and honorary members of CAN.
The activities of CAN is
?To assist in the institutional development of Computer Technology.
?To assist and develop the synchronization and standardization in the field of computer training and
education.
?To develop coordination among computer professionals with their services.
?To organize and conduct seminars, workshops, talk and training programmes and to provide consultancy
and R & D services.
?To exchange knowledge, skill and technology in the field of Computer and information technology with
similar types of organizations within and outside the country.
?To assist in the field of technology transfer, export, import and formulation of national policies.
Key members
President : Suresh K. Karna
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Glossary of Terms (In alphabetical order)
?
Australian continent
?ASOCIO Member Countries/ Economies: ASOCIO currently has 21 members in the Asia-Oceania
region, including Australia, Bangladesh, Cambodia, Hong Kong SAR, India, Indonesia, Japan, Lao PDR,
Malaysia, Mongolia, Myanmar, Nepal, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri
Lanka, Taiwan, Thailand and Vietnam. These countries together have been referred to as ASOCIO
member economies or member countries
?Climate change: A change of climate that is attributed directly or indirectly to human activity that alters
the composition of the global atmosphere and which is in addition to natural climate variability observed
over comparable time periods. Source: UNFCCCDigital Divide: The term digital divide refers to the gap
between individuals, households, businesses and geographic areas at different socio-economic levels
with regard to both their opportunities to access ICT and to their use of the internet for a wide variety of
activities. The digital divide reflects various differences among and within countries. Source: OECD
website
?e-Readiness: E-readiness is the ‘state of play’ of a country’s ICT infrastructure and the ability of its
consumers, businesses and governments to use ICT to their benefit. Source: EIU
?ICT industry: The ICT or information, communication and technology industry is defined as the broader
term including the domestic market, imports and exports of IT services, software products, BPO
services, hardware and telecommunication equipment and services
?IT-BPO Industry: The term ‘IT-BPO industry’ is defined as the total of revenues earned by the domestic
market in the respective country including imports and exports of IT services, software products and
business process outsourcing services. The term does not include hardware and telecom products and
services
?Inequality: refers to the dispersion of a distribution, whether that is income, consumption, or some
other welfare indicator or attribute of a population. Inequality is often studied as part of broader analyses
covering poverty and welfare, although these three concepts are distinct. Inequality is a broader concept
than poverty in that it is defined over the whole distribution, not only the part of the distribution of
individuals or households below a certain poverty line. Source: ADB
?Knowledge Economy: A knowledge economy is ‘an economy that creates, disseminates, and uses
knowledge to enhance its growth and development’. A knowledge economy necessitates development
along four pillars: Education and Training, ICT Infrastructure, Economic Incentive and Institutional
Regime, and Innovation Systems. Source: The World Bank
?Poverty/ Absolute poverty: The degree of poverty below which the minimal requirements for survival
are not being met. This is a fixed measure in terms of a minimum calorific requirement plus essential
nonfood components. While absolute poverty is often used interchangeably with extreme poverty, the
meaning of the latter may vary, depending on local interpretations or calculations. Source: ADB
?Working Age Population: Population in the age group between 15 and 64 years. Source: United Nations
Asia-Oceania: Asia-Oceania is defined as the region including South Asia, East Asia and Pacific, and the
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Abbreviations (In alphabetical order)
??AIIA - Australian Information Industry Association
??ARPU - Average revenue per user
??ASEAN – Assaociation of South East Asian Nations
??ASOCIO – Asia Oceania Computing Industry Association
??ATCI - The Association of Thai ICT Industry
??AUD - Australian Dollar
??BCS - Bangladesh Computer Samity
??BFSI – Banking, Financial Services and Insurance
??BPAP - Business Processing Association of the Philippines
??BPO – Business Process Outsourcing
??CAGR – Compound Annual Growth Rate
??CISA - Information Service Industry Association of Chinese Taipei
??DMB - Digital Multimedia Broadcasting
??EAS - Electronic Approval System
??EIU – Economist Intelligence Unit
??EMEA – Europe, Middle East and Africa
??EU – European Union
??FDI – Foreign Direct Investment
??FITISS - Federation of Information and Communications Technology Industry and Services Sri Lanka
??FKII - Federation of Korean Information Industries
??FTA – Free Trade Agreement
??GAIS - Government Administrative Information System
??GDP – Gross Domestic Product
??HIS - Healthcare information systems
??ICT – Information Communication and Technology
??ICT-CAM - Information Communication Technology Association of Cambodia
??IITF - Indonesia Information Technology Federation
??IMF – International Monetary Fund
??IMS - IP Multimedia Subsystem
??IP - Intellectual property
??IPCC - Inter-governmental Panel on Climate Change
??IPR – Intellectual Property Rights
??IPTV - Internet Protocol Television
??ISIA - Information and Software Industry Association
??ISP - Internet Service Provider
??IT – Information technology
??JISA - Japan Information Technology Services Industry Association
??JPY - Japanese yen
??LICA - Lao ICT Commerce Association
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??MCF - Myanmar Computer Federation
??MIDAS/MONITA - Mongolian Information Development/National Information Technology Association
??MMS - Multimedia Messaging System
??MNC – Multi-National Company
??MoU - Memorandum of understanding
??MRA - Mutual Recognition Agreement
??NASSCOM - National Association of Software and Service Companies
??NGO - Non-government organization
??NZD - New Zealand dollar
??NZSA - New Zealand Software association
??O&O - Offshoring and outsourcing
??OECD – Organization for Economic Co-operation and Development
??PACS - Picture archiving and communication systems
??PASHA - Pakistan Software Houses Association
??PIKOM - Association of the Computer and Multimedia Industry of Malaysia
??PPP – Purchasing Power Parity
??R&D – Research and Development
??RFID – Radio Frequency Identification Device
??RTA – Regional Trade Agreement
??S&P Rating – Standard and Poor's Foreign Currency Risk Rating
??SAARC - South Asian Association for Regional Cooperation
??SaaS – Software as a Service
??SAFTA – South Asian Free Trade Agreement
??SAR - Special Administrative Region
??SiTF - Singapore Infocomm Technology Federation
??SMBs – Small and Medium Businesses
??SNS - Social Networking sites
??SWOT - Strengths, Weaknesses, Opportunities and Threats
??TSP - Telecom service providers
??UK – United Kingdom
??UN – United Nations
??UNCTAD – United Nations Conference on Trade and Development
??USA / US – United States of America
??USD – United States Dollars
??VINASA - Vietnam Software Association
??VOIP - Voice Over Internet Protocol
??WEF – World Economic Form
??WITSA - World Information TechSinology and Services Alliance
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Acknowledgements
This report would not have been possible without the commitment and contributions of the following
individuals:
Concept and Direction:
Ashank Desai (President, ASOCIO), Kumar Parakala (Global Head of Sourcing Advisory, COO, Advisory,
KPMG in India, Chairman, ACS), Viral Thakker (Executive Director, KPMG in India), Jehil Thakkar (Executive
Director, KPMG in India)
KPMG Report development team:
Nimish Thaker (KPMG in India), Shailesh Narwaiye (KPMG in India), Arpita Bedekar (KPMG in India), Aditi
Mehra (KPMG in India), Kunal Jain (KPMG in India), Medha Sharma (KPMG in India)
Lucas Lim (General Secretary, ASOCIO), Akansha Tete (NASSCOM)
Key individuals who provided valuable help in completing the report
KPMG:
Saurabh Mathur (KPMG in India), Ganeshji Awasthi (KPMG in India), Anoop Vijaykumar (KPMG in India),
Kartik Ramakrishnan (KPMG in India), Sidharth Tewari (KPMG in India), Sandeep Chopra (KPMG in India),
Pranav Desai (KPMG in India), Jiten Ganatra (KPMG in India), Nisha Fernandes (KPMG in India), Remedios
D’silva (KPMG in India), Rohit Almeida (KPMG in India), Shweta Mhatre (KPMG in India), Siera D'Costa
(KPMG in India)
Michael Smart (KPMG Australia), Guy Holland (KPMG Australia), Prem Krithivasan (KPMG Australia), Ali
Ashfaq (KPMG Bangladesh), Mahmud Hasan (KPMG Bangladesh), Ning Wright (KPMG China), Alan Fung
(KPMG China), Iwan Atmawidjaja (KPMG Indonesia), Enoki Chiaki (KPMG Japan), Noako Suzuta (KPMG
Japan), Hiroyuki Ishikawa (KPMG Japan), Kwang-Woo Song (KPMG Korea), Ganesan Kolandevelu (KPMG
Lao PDR), Paul Bahnisch (KPMG Malaysia), Alin Ungureanu (KPMG New Zealand), Wahid Ahmed (KPMG
Pakistan), Reginald Nery (KPMG Philippines), Ronald Gonzales (KPMG Philippines), Gia Phong Le (KPMG
Philippines), Brett Hall (KPMG Singapore), Idan Moskovitch (KPMG Singapore), Priyanka Jayatilake (KPMG
Sri Lanka), Stanley Chang (KPMG Taiwan), Tommy Woo (KPMG Vietnam), Nazish Zaman (KPMG US)
ASOCIO Members:
Ian Birks, Kelly Hutchinson, Lisa Robey (AIIA, Australia), Abdullah Kafi, Birendra Nath Adhikary, Mustafa
Jabbar (BCS, Bangladesh), Ken Chanthan (ICT-CAM, Cambodia), Hidemi Yamamoto, Junko Kawauchi
(JISA, Japan), Sangeeta Gupta (NASSCOM, India), Dr. Y.T. Lee, Grant Son (FKII, Korea), Thanongsinh
Kanlagna (LICA, Laos), Ong Kian Yew, Rama Chandran (PIKOM, Malaysia), Wayne Hudson, Steve Corbett
(NZSA, New Zealand), Oscar Sanez, Gillian Joyce Virata, Nette Roselo (BPAP, Philippines), Sim Wee Leng,
Leo (SiTF, Singapore), Udaya De Silva, Govind Nangrani (FITISS, Sri Lanka), Bunrak Saraggananda, Pravit
Chattalada (ATCI, Thailand), Richard Yin, James Liu, David Chang, Ivy Chang, Tina Hsu (CISA, Taiwan),
Truong Gia Binh, Tran Vu Viet Anh, Lam Quang Nam (VINASA, Vietnam)
Last but not the least:
Tanweer Aiyub (Capgemini Australia), Anuj Kackar (Aptech, India),Sonia Nirula (Aptech, India), Nilesh
Bakhle (Sugen Software, India), Jae Hoon Shin (Samsung, Korea), Md Nazri bin Tumin (MDeC, Malaysia),
Norzainab Paee (MDeC, Malaysia), Alan Fung (Outsourcing Malaysia), Khun Somkiat Chinthammit (Wealth
Management System Ltd., Thailand)
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223
Contacts
KPMG Contacts
Viral Thakker
India Leader
Sourcing Advisory
Mumbai, India
+91 22 3090 1730
Brett Hall
ASPAC Leader
Sourcing Advisory
Singapore
+65 6411 8335
Chiaki Enoki
Partner, Business Advisory
Tokyo, Japan
+81 (3) 3266 7621
Ning WrightPartner, IT AdvisoryShanghai, China+86 21 2212 [email protected]
Ian HancockPartner in Charge, IT AdvisorySydney, Australia+61 (2) 9335 [email protected]
Paul Bahnisch
Partner, IT Advisory
Petaling Jaya, Malaysia
+60(3) 7721 3388
Stanley Chang
Partner, Risk Advisory Services
Taipei
+886 2 8101 6666
Alan Brame
Partner, IT Advisory
Auckland, New Zealand
+64 (9) 367 5811
Iwan Atmawidjaja
Partner
Jakarta, Indonesia
+62 21 574 2333
Reginald C. Nery
Partner
Makati City, Philippines
+63 917 577 5296
Tommy Woo
Partner, Risk Advisory Services
Hanoi, Vietnam,
+84 4 3946 1600
Kwang Woo Song
Partner, IT Advisory
Seoul, Korea
+82 2 2112 7810 [email protected]
Priyanka Jayatilake
Partner
Colombo, Sri Lanka
+94 777 313 390
Wahid Ahmed
Director, IT Advisory
Karachi, Pakistan
+92 (21) 3568 5847
Ali Ashfaq
Partner
Dhaka, Bangladesh
+880 (2) 988 6450
Ganesan Kolandevelu
Director
Vientiane, Lao PDR
+856 21 900 344
ASOCIO Contacts
Ashank Desai
President, ASOCIO
Mumbai, India
+91 22 6695 1313
Lucas Lim
Secretary General, ASOCIO
Tokyo, Japan
+81-3-2614-0035
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© 2
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independent
mem
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G Inte
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in.kpmg.com
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