India continues to beckon US financial companies

Thursday, 18 March 2004, 08:00 Hrs
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WASHINGTON: Even as job losses has become a political hot button in this presidential election year, India continues to beckon the US financial services companies, with many of them responding.

From Citibank to American Express, US financial giants have shifted thousands of jobs to India in recent years, generating huge savings for themselves thanks to the country's smart, relatively inexpensive labour pool, says a report in the Orlando Sentinel, published from Florida.

The banking industry, like the high-tech and manufacturing sectors, has tasted the economic joys of cheap foreign labour.

Seeking to cut costs, companies from the US and other Western countries have hired about 170,000 workers in India for jobs such as payroll accounting, telemarketing and customer support services. The figure is expected to reach 1.1 million by 2008, industry groups say.

But as companies prosper from it, outsourcing of tech jobs has triggered a political backlash at a time when the country is struggling to extricate itself from a so-called jobless recovery.

Some lawmakers have denounced the flight of jobs overseas, while some states are trying to outlaw it.

Edward Markey, Democrat from Massachusetts who is co-chairman of the Congressional Privacy Caucus, recently cited the overseas transfer of financial-services jobs as a potential threat to US citizens' privacy.

He issued letters to various federal regulatory agencies, urging them to protect the confidentiality of computerised personal and financial data being processed outside the country.

"Americans are losing their jobs and privacy in one fell swoop. I am concerned that in their rush to cut costs and increase their bottom line, these companies may be sacrificing the privacy protections the law affords to American citizens," Markey wrote.

"The off-shoring of jobs processing, analysing or accessing sensitive personal, financial or health information could put Americans' privacy beyond the reach of the US law and outside the jurisdiction of US regulators."

Such criticism and political debate have somewhat muted companies' boasts of offshore employment's cost savings, but the trend itself shows no signs of letting up.

Bank of America announced plans last month to establish an Indian subsidiary for back-office work such as accounts management and transaction processing. It could employ as many as 1,000 people by mid-2005.

As an industry, banks and other financial-services companies are expected to move anywhere between 500,000 and two million jobs offshore by 2008, according to separate studies by Deloitte Research and A.T. Kearney Inc.

Many of the jobs will go to India, where workers are well educated, motivated and skilled in use of the English language. But countries such as Canada, Brazil and Mexico will also get a share.

The types of jobs being moved abroad are also changing, experts say.

In the past, most jobs involved call-centre operations, telemarketing, technical support, and back-office data processing.

Now banks are exporting more sophisticated work, including financial analysis, research, accounting and human resources, according to a report in the Orlando Sentinel.

On one hand, it is difficult to quarrel with the economics of offshore employment -- the potential savings can be mammoth and the gains in productivity substantial.

For example, a typical software engineer in India is considered affluent with an annual salary of $10,000 -- a small fraction of what an American counterpart would earn.

Those who favour outsourcing argue that U.S. companies must capitalise on cheaper labour sources to compete in a global marketplace and to keep the price of goods and services from rising.

Failure to do so, they say, would eventually leave US firms at a disadvantage, eroding profits and triggering even greater job losses.

By keeping US firms competitive on a worldwide basis, offshore employment will help the country's economy remain strong enough to make up for the resulting job losses, they say.

"We would argue that the US is fully able to withstand these changes, as it will be able to create jobs faster than off-shoring eliminates them," stated a 2003 report by McKinsey Global Institute, a consulting firm.

"Off-shoring creates wealth for U.S. companies and consumers and, therefore, for the U.S. as a whole."

But some politicians have found plenty of reasons to oppose the trend. Democrat presidential candidate John Kerry has made it a key campaign issue, and more than two dozen states are considering laws that would try to limit or deter the practice.

Many of those proposals would ban companies that receive state contracts from shipping any of that work abroad. Others would prohibit companies from using offshore workers to process confidential data of US customers.

Others say with all the talk about the loss of American jobs, companies figure that maybe they don't want to advertise so much of what they are doing right now.

But after the election, no doubt there will be a return to normalcy. This globalisation trend is not going to turn back, especially with huge markets such as India and China.

Competing for such markets will require the US banks to operate as efficiently as possible, they said, according to the Sentinel report.

Source: IANS
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