Stanford University

Migration and Citizenship (Society)

The Political Economy of the Korea-Japan Free Trade Arrangement: A Korean Perspective

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In the aftermath of the Asian economic crisis and the Chinese accession to the WTO, the East Asian countries that have up until now been ambivalent towards regional trade integration have recently begun actively to pursue regional and bilateral trade agreements. The recent start of negotiations between Korea and Japan on a bilateral free trade agreement (FTA) has spurred much debate among many different groups and financial sectors in Korea. However, the contention of the various interest groups is not necessarily based on an economic rationale. Professor Bark will present the political issues that may emerge during the negotiation of the Korea-Japan FTA and some policy recommendations to reduce the negative effects of the FTA.

Taeho Bark is a professor at the Graduate School of International Studies at Seoul National University. From 1998 he has served as commissioner of the Korea Trade Commission. He has also served as Chair of the Investment Expert Group of APEC, Secretary for Economic Affairs, Office of the President, ROK, and as a consultant at the World Bank.

Philippines Conference Room

Taeho Bark Professor, Graduate School of International Studies Seoul National University
Conferences
Korea Program

United States and Russia in isolation

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Any strategic vision in the war on terrorism requires broad international cooperation. But the United States and Russia appear to be headed down the path of isolation, according to an op-ed piece by William J. Perry, published May 7 in the Moscow Times.

Faced with the deadly menace posed by transnational terror organizations, the nations of the world must redouble their cooperative efforts. The tasks ahead -- to disrupt terror groups and preempt their attacks -- require intense coordination among a multitude of national intelligence, national law enforcement, and military organizations. Unprecedented cooperation among all of the nuclear powers is needed to prevent nuclear weapons from falling into the hands of terror groups.

Yet, paradoxically, the two nations that have suffered the worst terror attacks -- the United States and Russia -- are regressing more and more to national strategies. They have been unwilling to make the extra effort to reap the benefits of real international cooperation.

I believe that the United States' strategic vision of the war on terrorism is flawed. I fear it is following the isolationist path of the United States after World War I rather than pursuing the broad international programs it successfully undertook to protect its security interests after World War II.

The terrorists posing the greatest threat to the United States and to Russia are transnational, with cells in many different countries. To support their training and operations, they raise funds in many countries and maintain these in international bank accounts. They use satellite-based television as their principal means of propaganda, the World Wide Web as their principal means of communication and international airlines as their principal means of transportation. Their efforts to get weapons of mass destruction are based on penetrating the weakest security links among the nations possessing these weapons, and their successful guerrilla operations depend on their ability to get support from sympathizers among the more than 1 billion Islamic people around the world.

An international operation is clearly needed to successfully deal with this threat. But the United States is not making full use of other nations and international institutions to dry up the terrorists' funds in international bank accounts, to gain intelligence on their planning for future attacks, to penetrate their cells so that it has a chance of preempting these attacks, to organize all nuclear powers with effective security of their nuclear weapons and fissile material, and to conduct counterinsurgency operations wherever they are needed. Dealing effectively with transnational terror groups that operate with impunity across borders requires an international operation with the full cooperation of allies and partners in Europe and Asia.

This is not "mission impossible." In 1993, the United States was able to get all of the former members of the Warsaw Pact to join up with NATO in forming the Partnership for Peace to cooperate in peacekeeping operations. In 1994, the United States with the full cooperation of Russia was able to negotiate an agreement by which all nuclear weapons were removed from Uzbekistan, Belarus and Kazakhstan and by which substantial improvements were made in the security of nuclear weapons in Russia. In 1995, the United States was able to get an agreement under which NATO took responsibility for the peacekeeping operations in Bosnia, an operation that was believed at the time to be as dangerous and filled with religious and sectarian strife as Iraq today, and it was able to get dozens of non-NATO nations -- notably including Russia -- to join it in that operation.

Securing Russian cooperation required listening to Russian views and making accommodations wherever possible. As U.S. defense secretary, I had to meet with my Russian counterpart four different times before I came to understand how to structure the command in Bosnia in a way acceptable to both Russians and NATO. The general lesson from this example, which is still applicable today, was best expressed by Winston Churchill, who observed during World War II, "The problem with allies is they sometimes have ideas of their own." But in reflecting on that problem, he also said, "The only thing worse than fighting a war with allies is trying to fight a war without allies."

What lessons can we learn from Churchill today? Had the Bush administration understood better the dangers of the post-conflict phase, surely it would have worked harder to get the support of those countries before invading Iraq. In any event, after the war it would have reached out to them and tried to achieve an accommodation that would have allowed their support during the reconstruction phase.

Instead, the administration took the position that any nation that was not with the United States during the war would not have a role in the reconstruction. To compound the problem, the United States did not seek meaningful assistance from the United Nations. Today, in the light of the difficulties experienced in restoring security in Iraq, the administration is reaching out to the United Nations and requesting that it play a major role in the political reconstitution of Iraq, but it is still not working effectively with the governments of France, Germany and Russia.

Just as the United States erred in believing that it did not need more international support in Iraq, so did the Russian government err in believing that it did not need more international support as it reconstituted its government after the Soviet era. The Putin administration believed -- correctly -- that it could turn around the Russian economy without significant assistance from other countries, and it believed that it could deal most effectively with its terrorist threat without interference from other countries. It also apparently believed that moving toward a level of democracy conflicted with the controls necessary for economic recovery and for fighting its terror war. So today we see a Russia that has enjoyed a healthy 7 percent growth rate each of these past five years, but has stopped -- indeed reversed -- its move towards becoming a liberal democracy. This reversal over the long term will have profoundly negative consequences for the Russian economy and for the Russian people, and unquestionably it is setting Russia on a course that will alienate it both from the United States and the European Union.

Both the Bush administration and the Putin administration have apparently made the decision that they can achieve their goals without broad international support. Both governments have erred in that judgment. But it is not too late to correct the judgment, and I fervently hope that both of governments will do so. The most important step in that process is reviving cooperation between the United States and Russia.

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Managing the Flow of Work and Talent, Globally

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Mr. Prakash will discuss the various challenges and issues that a company grapples with as it starts to plan a global sourcing initiative. He will present the different phases of such a life cycle and the nature of the work involved in each phase. His talk will highlight the stages and steps involved in a typical center buildout and work migration from "pitcher" country to "catcher" country. Anupam Prakash is the practice leader of Hewitt's Global Sourcing practice in the Asia-Pacific region. He has been leading Hewitt's efforts in this area with considerable success (including co-leading Hewitt's own, internal global sourcing initiatives two years ago). More recently, he has been instrumental in helping to develop Hewitt's external global sourcing offer, as well as supporting client work in "pitcher" countries, such as the United States and the European Union countries. He has consulted with a "who's who" of companies moving operations and talent to the Indian subcontinent. Current projects include work with major multinationals such as Goldman Sachs, Bank of America, Thomson, Dell, Deloitte, Agere, and Gillette. In addition, Prakash consults with several state governments, trade bodies, third-party outsourcers and alliance partners on the "catcher" side. Prakash is currently involved in cross-border sales and projects with several Fortune 500 companies and Hewitt's global clients looking at sourcing work and talent worldwide.

Daniel and Nancy Okimoto Conference Room

Anupam Prakash Practice Leader, Global Sourcing for the Asia-Pacific Region Hewitt Associates, India
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No Other Option

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Larry Diamond
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In the past ten days, the US-led Coalition effort to rebuild Iraq as a stable, unified, and democratic state has fallen into crisis. The most alarming aspect is not the Baathist-inspired violence in Fallujah, bloody and horrific though that fighting has been. This has been a limited uprising from the minority Sunni section of the country, many of whose politicians have now entered the peaceful political game. It does not threaten the overall viability of the political transition program in Iraq.

The Shiite uprising that began a few days ago is another story, however. Scholars and historians of Iraq have long warned that an uprising among the Shia would spell doom for the Coalition, and for any hope of peaceful transition to a decent form of governance. We are not yet facing a generalized Shiite resistance. Rather, we are locked in a confrontation with a ruthless young thug, Muqtada al-Sadr, who leads an Iranian-backed, fascist political movement that spouts a shallow mix of Islamist and nationalist slogans in a bid to conquer power.

Among most Shia -- including, crucially, Iraq's most widely revered religious leader, Ayatollah Ali al-Sistani-Muqtada Sadr is a reviled figure, a crude street tough with no religious qualifications and no positive political program, who has used coercion and intimidation as a substitute for genuine religious knowledge and authority. Unfortunately, however, since the Coalition began a crackdown ten days ago on his malicious operation, Sadr has maneuvered brilliantly to portray himself as the leader of a broader nationalist and Islamist insurgency. Now, growing numbers of frustrated and marginal young Iraqi men -- including it appears, some Sunni elements -- are rallying to his cause.

If we do not confront this new resistance in a politically agile and militarily forceful and adept manner, everything we have done to help Iraqis rebuild their country as a democracy could unravel in a matter of weeks.

The democratic transition is moving forward, in many inspiring ways. With US assistance, civil society is organizing, political parties are beginning to mobilize, and hundreds of "democracy dialogues" are discussing the country's constitutional structure and future. Two UN teams are consulting with Iraqis on how to structure the interim government that will assume power on June 30, and how to structure and administer the elections for a transitional government, due by this December or January.

However, elections can only go forward and the transition succeed if the agents and means of violence are brought under control.

Underlying the current upsurge in violence has been the mounting problem posed by heavily armed militias in the Shiite south. Loyal to political parties and religious militants, riven by factional divides, determined to impose an Iranian-style theocratic dictatorship, and lavishly armed, funded, and encouraged by various power factions in Iran, these radical Islamist militias (as well as Sunni and Kurdish peshmerga militias in the north) have been casting a long shadow over the political process in Iraq. In many provinces, the militia fighters outnumber and certainly outgun the new Iraqi armed forces.

Several Islamic fundamentalist parties have been playing a clever double game. As their representatives in Baghdad negotiate and compromise with other parties, exhibiting sweet reason and moderation, their militias have been stocking heavy arms, menacing opponents, and preparing for the coming war in Iraq.

Unless the militias are demobilized and disarmed, a transition to democracy in Iraq will become impossible. Rather, at every step of the way -- from the formation of parties, to the registration of voters, to the election campaign, to the casting and counting of votes -- the democratic process will be desecrated by violence, fear, and fraud.

Key officials within the Coalition Provisional Authority (CPA) have begun to recognize the urgency of this issue. Over the last three months, a plan has quietly been prepared and negotiated for the comprehensive disarmament, demobilization, and reintegration of all the major militias. But this plan, which relies heavily on financial and employment incentives for voluntary compliance by the major militias, can only work if all the militias are disarmed. Those forces that will not negotiate and cooperate must be confronted and disarmed by force.

This brings us to the events of the last week, to the person of Muqtada Sadr, and to the biggest, most ruthless militia that stands indefatigably outside any process of negotiation and voluntary disarmament. A fiery thirty-one-year-old mullah, whose father and brothers were martyred in the Shiite resistance to Saddam, Muqtada has nothing of the Islamic learning and sophistication that would put him anywhere close to the religious stature and authority of an Ayatollah. But he knows how to organize, mobilize, and intimidatehas used the reputation of his father among the poor urban masses, and the language of historic resistance to external impositions, to mobilize a growing following among downtrodden young urban men in particular. His support is confined to a small minority among the Shia of Iraq, but it is the kind of minority, demographically, that makes revolutions and seizes power, and its devotion to his declarations and obedience to his commands is apparently intense.

In recent months, Sadr's militia -- the al-Mahdi Army -- and his loose political movement that surrounds it have been growing alarmingly in size, muscle, and daring. They have seized public buildings, beaten up university professors and deans, taken over classrooms and departments, forced women to wear the hijab, set up illegal sharia courts, imposed their own brutal penalties, and generally made themselves a law onto themselves. As with the Nazis or any other totalitarian movement, all of this street action and thuggery is meant to intimidate and cow opponents, to create the sense of an unstoppable force, and to strike absolute fear into the hearts of people who would be so na?ve as to think they could shape public policy and power relations by peaceful, democratic means.

As with the Nazis, Muqtada has been guilty of brazen crimes well before his effort to seize power openly. A year ago, Sadr's organization stabbed to death a leading moderate Shiite cleric, Ayatollah Abdel-Majdid al-Khoei, who would have been a force for peaceful democratic change and a dangerous rival to Sadr. The murder took place in the Imam Ali mosque, Shiite Islam's holiest shrine. That is the level of respect that Sadr manifests for his own religion. Just three weeks ago, on the night of March 12, apparently in alliance with fighters from other Shiite militias and with the local Diwaniyya police force, the Mahdi Army invaded the Gypsy town of Qawliyya after a dispute over what Sadr's forces alleged were morals violations by the town. After pumping round upon round of automatic rifle fire, mortars, and RPGs into Qawliyya, the Mahdi Army brought in bulldozers and literally leveled a town of some thousand people. We still do not know how many people died in this blatant act of ethnic cleansing (as the towns folk had been warned in advance of the impending doom, and many if not most were able to flee). But at the very least, Iraq now has hundreds of internally displaced people from this incident of terror, and eighteen refugees apprehended by Sadr's forces endured ten days of brutal beatings in the organization's detention center. By the logic of Muqtada Sadr, this is the kind of "rule of law" Iraq needs.

In recent weeks, Sadr's propaganda, both in his oral statements and through his weekly newspaper, the Hawza, have become increasingly incendiary, propagating the most outrageous and explosive lies (for example, that the US was responsible for recent deadly bombings) deliberately designed to provoke popular violence. Finally, on March 28, after months of costly delay, the Coalition finally began to move against this monster. Ambassador L. Paul Bremer ordered the closure of the newspaper, and Muqtada Sadr reacted by ordering his followers to rise up violently against the Coalition. Perhaps in response, the Coalition finally ordered the arrest on April 4 of a senior Sadr aide, Mustafa al-Yacoubi, and 24 others -- including Sadr himself -- for the murder of al-Khoei. About half the suspects, including Sadr, are still at large.

Sadr responded to these arrests by unleashing a revolutionary campaign to seize power. Having already stormed numerous public building in recent months, his followers took over the offices of the Governor of Basra and assaulted police stations in several cities, including Karbala with its sacred Shiite religious shrines to the Imam Abbas and the Imam Husayn. In Najaf his followers invaded Shia Islam's holiest center, the Shrine of the Imam Ali. These attempted power grabs are not new. Last October, Coalition forces intercepted 30 busloads of a thousand heavily armed Sadr followers as they were headed down from Baghdad to Karbala to seize control of its shrines and the central city.

On Monday, the Administrator of the Coalition Provisional Authority in Baghdad, L. Paul Bremer III, declared Muqtada Sadr an "outlaw." Now there is no turning back. If any kind of decent, democratic, and peaceful political order is to be possible in Iraq, the Coalition will need to arrest Muqtada Sadr, crush his attempt to seize power by force, and dismantle his Mahdi army.

We are now embarked on a dangerous and bloody campaign in which, tragically, many more American, other Coalition, and Iraqi lives will be lost. But if we do not confront this military challenge now, while we work to rebuild a broader consensus among Iraqi political forces on the rules of the game and the shape of the new political system, we will lose the second war for Iraq, with frightening implications not only for the peace and stability of that country and the wider region, but for our own national security.

Larry Diamond, a senior fellow at the Hoover Institution, has served periodically in the past three months as a senior advisor to the Coalition Provisional Authority in Baghdad.
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Norway's foreign minister speaks on fighting terror and promoting peace

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Norway's Foreign Minister Jan Petersen spoke at SIIS on April 14, 2004.

In his lecture, "Fighting Terror and Promoting Peace: The Norwegian Perspective," Petersen shared his thoughts on how the transatlantic community can use its common values to counter terrorism and the proliferation of weapons of mass destruction. In addition, he outlined Norway's peacekeeping efforts in different parts of the world.

Petersen, Norway's foreign minister since October 2001, has long been a key player in Norway's efforts to promote peace and reconciliation in the world.
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The Contested Transnational Field of Corporate Citizenship: Implications for Sovereignty, Development, Democracy and the Rule of Law

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(Abstract from paper) Sociological theorizing and research on the relationship between inequality and corruption is surprisingly rare given the discipline’s long-standing focus on the correlations of inequality with democracy and development, as well as research that demonstrates the associations between corruption, democracy and development.  We propose that greater income inequality increases corruption and find that its explanatory power is significant relative to conventionally accepted correlates of corruption such as low levels of economic development and democracy.  We argue that the rich will employ corruption as one means to preserve and advance their own status, privileges and interests while the poor will be vulnerable to extortion at higher levels of inequality.

While countries with authoritarian regimes are likely to have greater levels of corruption on average, higher levels of inequality increase the likelihood of corruption in countries with democratic regimes because the wealthy cannot employ oppression to advance their interests in these political systems.  Contrary to conventional wisdom, smaller and not larger government is associated with higher levels of corruption because higher inequality through corruption is associated with both lower tax rates as well as lower government transfers and subsidies. We also corroborate the finding that the negative effect of inequality on economic growth can be explained at least in part by its impact on corruption. 

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Encina Ground Floor Conference Room

Sanjeev Khagram Visiting Scholar CDDRL
Seminars

Not Quite the World's Silicon Valley

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APARC's Rafiq Dossani comments on offshoring U.S. jobs to India, the so-called "reverse brain drain."

Silicon Valley cannot be replicated-not even in the US, leave alone India.

But there is no underestimating the complex and high end nature of information technology work that's increasingly being done in India.

There is almost nothing that is not doable, except certain high investment, high value manufacturing, like microprocessors.

This year stands out for the speed with which India, still very much a poverty ridden developing country, has emerged as a partner of mature econom-ies in a wide ranging field that covers information technology, business processes and research and development.

Unsurprisingly, such a major development has been accompanied by drama, excitement, anguish and misunderstanding. The rapid acceleration in trends, which in some cases date back to over 10 years, has given little time to players on both sides to rationally assess and adjust to new realities.

Some don't seem to know what has hit them and have therefore gone on to make unrealistic assumptions.

In the west, particularly in the US, there is a backlash against outsourcing to countries like India, China, the Philippines and Russia, with India being the most visible and so taking most of the rap.

Correspondingly, there is an element of euphoria in India in the belief that it has arrived. Some are making unrealistic assumptions that it is on the way to becoming a new Silicon Valley to the world.

Significantly, the knowledgeable and those who are in the vortex of change have a realistic view of what exists on the ground and an enlightened foresight of the shape of things to come.

In this survey of opinion leaders in the information technology industry, we try to come to grips with the new, rapidly emerging reality what is the exact nature of the high tech work taking place in India in information technology and what are the precise contours of the emerging cross border partnerships?

First, the Silicon Valley red herring. Sridhar Mitta, managing director of the incubating firm e4e Labs, almost snorts at the mention of Silicon Valley.

He recalls how the good professors at Stanford University started to get too many visitors who came and asked the same questions what makes Silicon Valley tick and can we replicate it in our country?

They undertook a methodical study for a couple of years and helped define the uniqueness of the creative process that occurs in a small geography 30 miles by 10 miles, near the Californian city of San Francisco.

To Mitta, the Valley's defining characteristic is that some of the best brains in the world are concentrated in a small geography. "It is an innovative high tech cluster. There is an ecosystem of companies which add value to each other."

In Silicon Valley people are willing to share ideas and are not worried about theft. Business discussions are concluded very fast as people want to get on with a project. A project can be started in a week.

There is no concern over individual ideas being stolen as it is assumed that if you are bright you will have many more worthwhile ideas. In the Valley, people don't care about religion, creed or nationality. "There is only one religion, business," Mitta says.

Another industry insider concurs. "Silicon Valley is not a service, but a risk taking model, whereas the Indian software model is largely based on cost effective and efficient delivery of services," he differentiates.

Many of tomorrow's problems are first defined in US universities and then get crystalised as business opportunities. "Firms in the Valley work closely with those universities to quickly grasp the business ideas that emerge from diagnosing and solving a technical problem, for example."

Where does Indian expertise and capability stand then? "The Indian environment still lacks the original ideas that create the new business models. This is because of the lack of proximity to markets," the industry insider explains.

"Once an engineering problem is defined, it can be executed in India." The key and growing Indian competency now is that it has crossed the technical hurdle, there is little that cannot be technically done in India.

If Silicon Valley scores 100 for the purpose of our present discussion, Mitta gives Bangalore 15.

"Bangalore has passed criticality in technical prowess but is still abysmally low in interaction. The culture of networking is better in Bangalore than in the rest of India but nowhere near what exists in the Valley. Here a major part of the load is carried by multinationals which guard their secrets very jealously," Mitta says.

Bangalore also scores on its educational institutions which can deliver the raw materials or skills. Like the Valley, it has some of the best brains, relatively speaking, and some companies have reached criticality of size. Some complex work gets done here in a serial way within companies.

"I know that a US company can start a complex work group here which involves doing many things, though not all. But I don't know what the company on the floor above mine is doing," notes Mitta.

Subroto Bagchi, COO of MindTree Consulting, who is based in the US, explains that in the 1990s people thought that any work that required a high degree of customer knowledge and collaboration, design and architecting had to be done exclusively in the US.

"Anything that required innovation had to be done near the water cooler. So now there is hardware, software and wetware the coffee machine and what's between your two ears, as most of the human brain is water."

But the big change has come with the availability of high bandwidth which has made the water cooler virtual.

"If earlier we looked at India for just development or maintenance work, now we are able to look at co-development and co-architecting," Bagchi notes.

Till two human beings meet, trust is not established. Innovation-related activity, co-development and co-architecting are not done by two entities but by two human beings.

Two techies have to accept each other as "buddies" before they can innovate together. "That happened after Y2K. It established the cross cultural comfort. In a nutshell, India has become legitimate," Bagchi adds.

Higher value add projects are now coming to India and company boards across the world are increasingly being asked, 'What is your India strategy?' Investors in venture capital funds are asking them, 'What are your plans for India,' and they in turn are asking companies 'What are your India development plans?'

The software insider says India's current role is to "complement" not "replace" Silicon Valley. "If present trends continue, maybe India can equal Silicon Valley in seven to 10 years. But the approach cannot be 'We versus they.'"

Another authority adds his support to this scenario, making a deft distinction between what is on and not on.

Says Madhukar Angur, David M French distinguished professor at the Flint School of Management, University of Michigan: "Today almost nothing is too high-tech for India. In technology (IT, designing, R&D) India has taken significant strides. It is pretty close to self-sustaining growth. But it is not quite there. So MNCs will look at India as a location for startups but not standalone ones."

So they will also seek out partners, as Intel has done with startups like Tejas Networks.

The cooperation and joint development approach is underlined by K P Balaraj, managing director of WestBridge Capital Partners.

He feels that "the vast majority of the work being done by start-ups in India is led by teams located in the Valley. What is changing though is the timing of an India ODC (overseas development centre) which is being set up much earlier in the life cycle or even at the seed stage."

What is more significant is that as multinationals which follow the example of early leaders such as GE, TI, Intel, Oracle and others start to do more cutting edge work here, there will be a large base of India-based engineers and managers who will have the experience of building and bringing a world-class product to global markets, primarily the US.

"From this base, we will see a future generation of product entrepreneurs emerge who will have the vision and market credibility to attract high quality VC funding for their plans," Balaraj adds.

Innovation means developing new technology or products. Product development in India is already taking place but as a secondary exercise.

Sanjay Kalra, CEO of the HCL-Deutsche Bank joint venture DSL Software, explains the sequence of what came first and then what followed. At any point of time more than 70 percent of spending takes place on sustaining investments in existing technologies.

This, like work on new technologies, also requires high end work that is innovative. But a majority of the effort is in tasks that are process and procedure bound.

In such tasks, innovation is focused on how to deliver the subcontracted tasks better (process improvement, quality).

High end startups are now beginning to allocate and locate a high percentage of employees (or contractors) in India.

In the past it was the large technology players that leveraged the lower costs and high availability of talent. The smaller startups would contract to small and large players on a need basis.

But of late a lot of smaller startups are also beginning to factor in India as an integral part of their business plans right from the beginning.

What is more, several start-ups are now using India as the base to also conceptualise and then produce in India for markets in Asia.

The good news on products is that Intel is in India in a big way and is going in for the joint effort startups that hold the key to the future. Intel's own agenda, says Ketan Sampat, president of Intel India, is to establish leading edge design capability.

Says Sampat: "At Intel's development centre (its largest non-manufacturing site outside the US), we are engaged in some of the most advanced development activities not just in India but anywhere in the world. For example, the flagship next-generation enterprise processor that Intel will have in volume production is being designed entirely in Bangalore."

But he sees an important milestone that has to be crossed Indian firms still have not broken into the ranks of product companies with their own intellectual property and branded product lines.

"The i-flex's of the world are still too few and far between," Sampat says. So Intel Capital, the company's strategic investment programme, has been an investor in several Indian technology companies. Sampat mentions the investment in Sasken Technologies.

"Its product GSM/ GPRS software stacks complements our "Manitoba" (wireless Internet on a chip) product and it has customers worldwide."

He also mentions another telecom company, Tejas Networks. "It is starting with the Indian market which is sizeable now and is using it as a springboard to the global market."

Sanjay Nayak, CEO, Tejas Networks, sees only the beginnings of high end startups in India, like his company. "It will take some time before we see a major shift in startups originating in India, though the enablers are all there."

The most common trend is to have an "engineering backend" in India of a US originating startup. Within this, the major amount of work that is being done is "software" centric not much system design or hardware design work is done.

He expects that "once we have a few success stories of high-end product companies from India, it will accelerate the trend." In the past, countries like Israel and Taiwan have witnessed such trends.

Srini Rajam, chairman and CEO of Ittiam, another startup product company, sees high end start ups becoming increasingly dependent on designs done in India.

"There is a strong push coming from the investors of the start ups to locate a large part of their design team in India or source their key designs/IP from Indian companies, in order to improve R&D budget utilisation and time-to-market."

He sees early revival worldwide in one segment-the semiconductor and embedded systems. "This is in turn is enabling the growth of chip design, embedded software and system design activities in India."

Several factors are likely to encourage more high end work to come to India and help it become an increasingly important partner of Silicon Valley.

First, the reverse brain drain or brain gain that has been taking place in the last few years, especially since the tech bubble burst in early 2000 and the recession that set in in Silicon Valley.

One person who has been plotting it carefully is Rafiq Dossani, a senior research scholar at the Asia-Pacific Research Centre of Stanford University.

"My guess is that 6,000 jobs have been lost from Silicon Valley in IT to India. Looking ahead, the flow will depend on both opportunities in India and here."

The Silicon Valley economy is picking up rapidly and hiring should soon increase, feels Dossani. In addition, it remains unbeatable on new product development because of its global reach of talent and proximity to markets.

So the younger and more innovative will be attracted to the Valley. India will continue to attract those in the 30-40 age group interested in raising families in India and those interested in a rapid rise up the executive ladder through a stint at a senior level in India.

Also, a key security factor is enabling high end work to shift to India, argues Angur. India will be a country of choice for location of partnerships on considerations of economic stability.

"Multinationals gamble on technology but are cautious on geography. Even China and Taiwan have a security downside. India-Pakistan relations is indeed perceived as a security risk but still India is on the preferred US list."

He sees a significant historical parallel. Technology and IT will be to India what the automobiles industry was to the US.

"One out of every three in the US has something to do with automobiles. The IT revolution has the seeds of becoming something like that. In the immediate future mutlinationals will consider India more and more for high-tech startups and there will be more high tech jobs."

Bagchi shares a deeper insight rooted in Indian history and social development. India, he feels, has two cards up her sleeve: "One is the power of diversity and two the power of pluralism, imparted to it by its institutions."

The future of the global economy is in more trade but post 9/11, the west is also looking for a sense of comfort a degree of security and cultural fit.

How many countries are there with world class capability in IT services from which an American company can source? Out of the choices available, how many countries are both diverse, so that there is a democratic-cultural fit, and believe in institutional pluralism - executive, judiciary, legislative system? "These institutions give a guarantee of continuity," he says.

To become an innovation partner to Silicon Valley, an economy must innovate. Innovation is invariably linked to diversity. The US has been at the cutting edge of technologies because it has such a pro-immigration policy.

"We did IT services for 15 years and moved up the value chain. But the next big value chain is about innovation. That innovation depends on the fertility condition on the ground. That condition is necessarily about diversity," Bagchi adds.

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Rafiq Dossani discusses business process outsourcing to India

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When times were good, the U.S. technology industry was famous for attracting some of the best and brightest minds in India. But now that the industry has slumped and jobs in the U.S. are scarce, an uproar is growing in America over work being outsourced to India. %people1% comments.

For months now, it's been popular in the United States to whack China for its trade and currency policies. But India could soon become the next political whipping boy because it has been snaring U.S. hi-tech jobs. Recently unemployed computer professionals, labour unions and politicians have become alarmed that U.S. companies are moving growing numbers of information-technology jobs to India.

The Politics of Unemployment

Joblessness among tech workers in the U.S. is stubbornly high. Meanwhile, U.S. firms are exporting tech jobs to low-cost India. As an election nears, American politicians see votes in complaining about offshore outsourcing. In mid-September, technology workers staged a protest at a San Francisco conference promoting offshore outsourcing of service jobs to countries like India. The protesters were backed by a unit of one of America's most powerful unions, the Communications Workers of America. The unit, called the Washington Alliance of Technology Workers, or WashTech, was set up to fight the exodus of jobs overseas. The protesters carried such signs as "Chip in, don't chip out." A new group of unemployed computer specialists calling itself the Organization for the Rights of American Workers, or Toraw, protested at a similar job outsourcing conference in New York in July.

These sentiments were bolstered in mid-October when Intel Chairman Andy Grove warned at a software conference that a huge number of IT jobs could move from America to countries like India and China in the next decade. The hi-tech pioneer added that his California-based semiconductor manufacturing firm had "no choice" but to continue sending work offshore because of rising costs and the pressure to increase productivity.

It would be one thing if the protests and dire warnings stayed confined to angst-ridden words, but now American legislators are getting involved. Faced with an election next year, many smell a populist, potentially vote-attracting issue. On October 20, the House of Representatives' small-business committee held a hearing on the exodus of white-collar jobs. "At what point will we send so many jobs overseas that we won't have any jobs here to buy the products, regardless of where they're made?" asked the committee's chairman, Donald Manzullo of Illinois.

One of those who testified was California engineer Natasha Humphries, who was laid off in August by hand-held computing-device provider Palm Inc. several months after she was sent to India to train Indian engineers to perform her job. Humphries, who joined TechsUnited.org, a group created to protest against the departure of U.S. hi-tech jobs, believes that "offshoring has created a devastating economic climate."

There is an irony in Humphries' words that goes beyond her travelling to India to train the people who may have taken her job. Only a few years ago, American technology companies were accused of stealing some of the best and brightest engineering and scientific minds from India to meet a severe talent shortage. But now that the global economy has struggled for many months, technology unemployment in the U.S. is high and the jobs are moving to India.

Some industry insiders blame at least part of the unemployment problem on the U.S. programme of granting temporary work visas to hi-tech workers from India. Ron Hira of the Institute of Electrical and Electronics Engineers told the October 20 hearing that many of those who come to the U.S. under this visa scheme go home to set up or work for companies that compete with American companies. He called the visas for these workers "a subsidy promoting the movement of American jobs overseas."

This concern has prompted legislators in at least nine states to join the fight to slow job migration. New Jersey took the lead in drafting legislation after lawmakers learned that a company hired to help welfare recipients had moved its help-centre jobs to Mumbai. Legislation requiring state government contractors to use U.S.-based employees is still stuck in various committees. But the threat of the new law was enough to persuade the welfare-help contractor, eFunds Corp., to move the jobs back to New Jersey.

A flurry of comparable bills in several states has prompted India's National Association of Software and Service Companies, an umbrella grouping of some 850 companies, to hire high-powered lobbying firm Hill & Knowlton. "India is being made to look like the enemy in some parts of the media," says Nasscom's president, Kiran Karnik. "The popular mood is reinforced by politicians, and those statements make customers wary. They're concerned, as are we."

So far, none of the state-level bills have become law. If they did, however, "purely on a business plane, it wouldn't matter at all," says Karnik, since the bulk of India's outsourcing comes from private-sector customers, not from government contracts.

Cheap, Tech-Savvy Workers

Seeking to cut costs, U.S. multinationals such as General Electric, Honeywell and Citigroup have for years moved jobs to India, seeking to capitalize on the country's inexpensive but technology-savvy, English-speaking workforce. Nasscom estimates that job outsourcing to India saved U.S. companies $10 billion-11 billion in 2001 and was accompanied by a $3 billion increase in American exports to India that year.

The migration of these jobs wasn't a big issue when the U.S. economy was roaring and companies had a hard time filling job openings. But that attitude changed abruptly with the dotcom bust in 2000 and subsequent recession in the industry. Today, despite a tentative recovery, U.S. technology jobs remain scarce.

The exact number of jobs that have moved to India isn't known. The Communications Workers of America estimates that 400,000 white-collar jobs have already been lost, particularly to India, and projects that a good proportion of 3 million more expected to migrate offshore by 2012 will go to India as well. "This is not about protectionism," says Marcus Courtney of WashTech, the union affiliate that organized the San Francisco protest. "We have to find a way to engage in globalization so that it doesn't come at the expense of our best workers."

More of Courtney's anger is directed at U.S. companies than at India. "This is an issue about how companies want to increase profits at the expense of highly-skilled American employees," he says.

Others believe the figures cited by labour unions are exaggerated. Economist Rafiq Dossani of Stanford University cites Nasscom statistics estimating that India had 171,500 "business processes" jobs by March 2003, up from 106,000 a year earlier. And that number is expected to grow annually by about 45% over the next five years to be nearly 1 million by 2008. But even that heady growth is substantially less alarmist than what labour unions warn will be India's job-grab from America.

"Am I concerned that the U.S. information-technology industry will end up in India over the next year?" asks Harris Miller, who heads the Information Technology Association of America that includes America's leading multinationals. "That's rubbish. Only about 6%-8% of the all information-technology outsourcing will move offshore. Now it's only 2%."

Miller argues that the best way to protect U.S. jobs is to promote free trade. He believes that there are steps the U.S. government could take to bolster job growth, including such measures as establishing a tax credit for companies that engage in research and development. Miller also says that the current surplus of hi-tech workers in the U.S. will dissipate as the baby-boomer generation retires.

Others add that sending work offshore leads to important benefits to the U.S. John Chen, who heads Sybase, the software giant, argues that "when we spend $1 in India and China, 65 cents comes back" in the form of orders for hi-tech equipment.

Still, the new breed of hi-tech activists can boast of at least one recent success. They helped persuade a majority in the U.S. Congress to let lapse on September 30 a measure that had temporarily tripled the number of foreign professional workers, many from India, admitted to work in the U.S.--to 195,000 a year up from the usual 65,000.

But this victory may be short-lived. Utah Senator Orrin Hatch, the influential chairman of the Senate Judiciary Committee, is in the early stages of floating a proposal that would introduce a variety of exemptions that would effectively circumvent the 65,000-visa limit. If the proposal succeeds--and that's not assured--the number of hi-tech workers admitted into the U.S., many from India, could again top 100,000 a year.

Any moves to expand the number of visas for foreign hi-tech workers will likely be opposed by groups such as Toraw, the one founded last December by recently unemployed information-technology workers. These are people like John Bauman, a computer expert who lost his job in Connecticut a year ago. Toraw is lobbying Connecticut and other state governments to pass legislation making it illegal for a company in the U.S. to bring in a foreign worker and lay off an American employee within six months. "We'd like to see tax incentives for companies that don't offshore work and tax penalties for every job offshored," says Bauman. "I'm going to tell my kids to go into [car] repair so they can't be offshored," he adds.

If tech jobs in the U.S. remain scarce, the biggest uncertainty as to whether the U.S. ultimately takes action on the issue of outsourced jobs is the U.S. election coming up in November 2004. "It's anyone's guess as to which way the political roulette wheel will spin," says Vivek Paul, vice-chairman of Wipro, one of India's largest software firms. "We will definitely see more posturing, but the question is: Will we see regulatory action?"

Still, even if outsourcing opponents are big election winners, analysts doubt that India will face the strident critiques that China is likely to experience in the months ahead.

"There's no constituency for bashing India," says James Steinberg, a foreign-policy analyst in the Brookings Institution think-tank. Steinberg, who served as No. 2 in the Clinton administration's National Security Council, points out that it's politically easier in the U.S. to attack Beijing's communist government than the world's largest democracy. On top of that, American politicians raise a lot of money from Indian Americans. Says Steinberg: "There are only two countries that get an applause line when they're bashed [in the U.S.]: China and France."

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Global Shared Services

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The seminar will focus on how HP leverages ?Global Shared Services? to address its cost management issues throughout its operations. It will cover practical issues such as internal office review for deciding how to outsource, how to manage migration, risks as anticipated by HP measured against actual experience. It will evaluate challenges of creating global shared services and how to meet them. It will illustrate how shared services add value to HP and provide metrics on speed, proportion of the work can be offshored. Sanjay Singh is a director of Business Operations for HP?s Business Process Delivery organization. His responsibilities include operations strategy, business development, including alliances, marketing operations as well as quality and operations risk management. Currently, he is the program manager for HP?s BPO initiative. Prior to HP, Sanjay was an engagement manager within Accenture?s Strategy group, where he led and managed a number of projects related to business strategy and market entry into new spaces for clients in the High Technology and Telecommunications industry. His work experience also includes working for IBM Corporation within their PC group.

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Sanjay Singh Director, Business Operations, Business Process Delivery Hewlett Packard
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Stedman named to U.N. High-Level Panel on Threats, Challenges, and Change

Authors
Stephen J. Stedman
News Type
News
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On November 4, 2003, %people1%, CISAC Senior fellow, was appointed research director for the United Nations' new High-level Panel on Threats, Challenges, and Change. The panel is charged with examining current global threats and analyzing future challenges to international peace and security.

Stephen Stedman, senior fellow at the Stanford Institute for International Studies (SIIS), has been appointed research director for the United Nations' new High-Level Panel on Threats, Challenges and Change. Stedman will leave for New York City next month for the remainder of the academic year.

On Nov. 4, U.N. Secretary General Kofi Annan appointed Stedman and 16 members of the blue-ribbon commission, which is chaired by Thailand's former Prime Minister Anand Panyarachun. The panel is charged with examining current global threats and analyzing future challenges to international peace and security. The group will not formulate policies on specific issues or on the United Nations' role in specific places, but it will advise the organization on reforms necessary to cope with emerging challenges. The panel will complete a 10,000- to 15,000-word report by late next year.

Stedman, a senior fellow at the Center for International Security and Cooperation (CISAC) at SIIS, has served as a consultant to the United Nations on issues of peacekeeping in civil war, light weapons proliferation and conflict in Africa, and preventive diplomacy. His most recent co-authored publications include Ending Civil Wars: The Implementation of Peace Agreements (2002) and Refugee Manipulation: War, Politics and the Abuse of Human Suffering (2003).

Asked about the genesis of his new appointment, Stedman said he has developed relations with a set of people at the United Nations during the last six years. "A lot of the work I've done has had resonance in the U.N.," he said. "Policymakers read it and they understand I have sympathy for people who have to make tough decisions."

CISAC co-director Scott Sagan said the appointment is a "great tribute to the quality and policy relevance of the work that Steve has done over his career."

Stedman said his biggest challenge will be producing a report "that is both hard-hitting and has the potential for leading to change. There is a general sense within the U.N. that, basically, the effectiveness and legitimacy of the organization has been called into account. When Kofi Annan announced his intention to create the panel, he declared that the U.N. was at a crossroads where it needed to rethink how it can effectively provide collective security in today's world."

In addition to Panyarachun, the panel members include such international policy figures as former Norwegian Prime Minister Gro Harlem Brundtland; former Australian Minister of Foreign Affairs Gareth Evans; former U.N. High Commissioner for Refugees Sadako Ogata of Japan; former Russian Prime Minister Yevgeny Primakov; and retired U.S. Lt. Gen. Brent Scowcroft, former national security adviser.

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