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A PRESENTATION ON
MOVEMENT OF NATURAL PERSONS
UNDER THE GATS IN
COMPUTER AND RELATED SERVICES
ON BEHALF OF
NASSCOM
BY
VAIBHAV PARIKH
Nishith Desai Associates
Legal and Tax Counselling Worldwide
[email protected]
www.nishithdesai.com
SYNOPSIS
• IT software and services sector in India: An
introduction
• Issues / constraints facing the movement of
software professionals (natural persons)
• Necessity for freer movement of natural
persons under the GATS
• Policy initiatives and reforms
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it SOFTWARE AND SERVICES
SECTOR IN INDIA
• This sector accounts for
– 16% of the country's overall exports;
– 500,000 jobs; and
– US$ 1.6 billion in investments.
NASSCOM
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DOMESTIC SOFTWARE MARKET
Source:www.nasscom.org
NASSCOM
Nishith Desai Associates
SOFTWARE AND SERVICES
EXPORTS
NASSCOM
Source:www.nasscom.org
Nishith Desai Associates
SOFTWARE DESTINATIONS
Source:www.nasscom.org
NASSCOM
Nishith Desai Associates
INDIAN SOFTWARE EXPORTS:
DELIVERY MODELS
Delivery
1999-00
2000-01
2001-02 (Projected)
Onsite
57.4%
56.1%
47.3%
Offshore
34.7%
38.6%
48.6%
Products and
unclassified
7.9%
5.3%
4.1%
Total
(US$ Billions)
2.65
6.2
7.7
Source:www.nasscom.org
NASSCOM
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BIRD’S EYE VIEW
Productized
services
Mode 4
Products
GATT
Mode 1
Mode 3
Services
GATS
Servicized
Products
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NEED FOR MOVEMENT OF
NATURAL PERSONS
• Globalisation of economic-activities and
technological developments
• Facilitation of cross-border trade in services
• Leveraging on the expertise and skill that
Indian software professionals possesses in
order to reach out to a global market
• Direct contact between supplier and
consumer necessary for effective services
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ISSUES / CONSTRAINTS
• Immigration related issues
• Inadequate recognition of qualifications,
experience and training
• Differential treatment of foreign service
personnel
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IMMIGRATION ISSUES
• Visa Requirements
– Prior adequate search in national markets
– Wage parity requirement
• Negates cost-based advantage of developing countries
– Differentiation in processing permits based on the
level of employment
• Faster to process intra-company transferee permits for
higher level employees than permits for software
professionals system analysts and database consultants
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IMMIGRATION ISSUES
• Visa Requirements (contd.)
– Cumbersome procedure for issuance of work
permits
• Time frame of 2 weeks to 3 to 4 months, or even longer!
– Quota restrictions
• H-1B visa quota – Cap on economic expansion
– Restrictions on transferability and mobility
– Limitation on duration of stay
• Economic Needs, local market needs test
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INADEQUATE RECOGNITION
• Foreign countries find the educational and
work experience / training qualifications of
software engineers to be insufficient
– Eg. UK – Five years of experience or
graduation and two years of senior postgraduation work experience
– Eg. U.S. – 3 years professional experience
• Issue: Indians may be sufficiently skilled
without satisfying the above criteria
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DIFFERENTIAL TREATMENT
• Tax implications on temporary foreign
service providers
– Social security taxes in the US – no tax credit in
home country – erodes the cost advantage
• Government procurement policies favour
domestic suppliers – eg. data processing
• Government approval required
– Setting up operations – nature of entity and
establishment of local offices
– Remittance of foreign exchange
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DRAWBACKS / LOSSES
•
•
•
•
Loss of business opportunities
Higher costs for the customers / consumers
Uncertainty, delays in deputing personnel
Difficulties in transferring between sites in
host country
• Wage parity condition erodes cost
advantage
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BROAD POLICY INITIATIVES/
REFORMS
• Improving the structure of GATS
commitments
• Removal of existing limitations
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IMPROVING THE STRUCTURE OF
GATS COMMITMENTS
• Horizontal Commitments
–
–
–
–
Specifically include individual professionals
Clear eligibility criteria to be determined
Uniformity in definitions
Further expansion to include middle and lower
level professionals in the category of “other
persons” or “specialists”
Source: India’s proposal to WTO
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IMPROVING THE STRUCTURE OF
COMMITMENTS
• Sectoral Commitments
– Developed countries to make commitments in
all sub-sectors for computer and related
services.
Source: India’s proposal to WTO
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REMOVING EXISTING
LIMITATIONS
• Visa requirements
–
–
–
–
–
–
–
–
NASSCOM
Transparent visa application procedures
Simplify application procedures
Less stringent norms for entry and stay
Remove labour conditions for specialty occupations
(US)
Remove labour market test requirement for all
specialists (Australia)
Establish guidelines for wage parity
Impose conditions to prevent exploitation of foreign
workers
De-link temporary visas from permanent visas
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REMOVING EXISTING
LIMITATIONS
• Clear criteria for the Economic Needs Test
• Social Security and Totalisation issues
– Bilateral agreements
– Exemptions from contributions for professionals
of developing countries
• Recognition of work experience and
qualifications of IT professionals
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WAY FORWARD
• Liberalization of Mode 4
• Amendments in domestic regulations
• Formation of international and bilateral
agreements and treaties
• GATS Visa – Debate already initiated
THANK YOU
NASSCOM
Nishith Desai Associates