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INPUT PRESENTED TO THE COLLOQUIUM ON“Problems encountered by Indian IT and other Professionals in the European Union” ON 23 MAY 2003 ON THE OCCASION OF THE VISIT OF MR. ARUN SHOURIE, MINISTER FOR COMMUNICATIONS AND INFORMATION TECHNOLOGY, GOVERNMENT OF INDIA
The information technology is one of the priority areas for India and the European Union to deepen their economic partnership. Demand for India's software and support services has seen a phenomenal growth and in spite of several unfavourable conditions, among which visa restriction is a major one, its software industry is becoming more attractive to European companies outsourcing work. Europe accounts for about 25 per cent of the total software exports. With the slowdown in the US economy, Indian software firms are making a beeline for Europe. But unlike the US, European markets are complex, with wide differences in language and culture. The slow economic growth in the EU countries is also contributing to several problems being encountered by professionals from India.
This input has been prepared in the light of recent developments in Holland (following Malaysia) when Indian Software professionals were detained and expelled for alleged visa irregularities. Britain's fast-track visa scheme ushered in three years ago to attract Indian IT professionals is coming under political scan. This is nothing but “neo-protectionism” policies by many EU countries to hamper the free movement of professionals and services under the World Trade Organization. These are disturbing developments for Indian software industry. India's competitive advantage is also likely to come under serious threat in near future for various reasons.In order to address these issues, this input takes into account the development in the US with respect to Business Process Outsourcing (BPO) and its likely effect in the EU countries. India needs to tackle these problems in more proactive ways. Indian firms have to create a commercial friendly image of India’s software industry in Europe and capturing market should have priority over profit in the immediate terms. We also need to analyze why India is receiving bad press.
Skills shortage in the EU countries needs change in policy framework
The countries of the European Union face a massive shortage of skill labour in coming years. It is estimated that the EU needs nearly 80 million immigrants by the year 2050 if it is to maintain the present number of working age residents. Western Europe stands to lose € 380 billion due to the shortage of skilled IT staff alone.
The EU countries have to find out what is inspiring IT professionals from India to head for the US and why is Europe failing to evoke any palpable excitement among Indian techies? Compared to US policy the European economies are being held hostage by their inability to shrug their image of being deeply conservative rigid, introverted, parochial and hierarchical societies.
The IT budget for Western Europe this year is $363.4 billion. This is expected to increase to $584.1 billion by 2004.It is estimated that the demand for IT professionals in the EU will be around 13.07 million by 2003. Only 5% of the EU workforce is employed in IT, but with an average annual wage of € 48,000, for IT professionals compared with the average annual wage of € 28,700, they contribute heavily in tax. As the skills shortage continues, and those wages rise, their individual worth to the EU will increase correspondingly. The benefits to the EU countries on account of taxes from Indian IT professionals are equally too high.
Indian software industry and GATS provision
While the future of the Indian software sector seems bright, lack of proper implementation of the GATS provisions and inadequate liberalization in Mode 4 may dampen the prospects in this sector. MODE 4 under which temporary movement of persons from provider country who go to consumer country for delivering services (Indian software engineers going to EU countries or US on assignment), is of special interest to India. While the GATS deals with trade in services, and the General Agreement on Tariffs and Trade, 1994 (“GATT”) regulates trade in goods, there is a strong interdependence and co-relation between these two multilateral instruments. To ensure that the GATT is properly implemented, services under the GATS too have to be progressively liberalized.
Issues facing the movement of natural persons
However, there are several quantitative and qualitative constraints, which are imposed on the movement of natural persons that hinder the liberalization of services as envisaged by the GATS. While addressing these issues, it is understandable that some of the constraints imposed by countries may be due to reasons of national security, social obligations, cultural differences and public policy reasons. The following are the most significant issues confronting Indian professionals:
Immigration related issues
Visa related issues are the most critical barriers affecting the Indian software professional. Immigration regulations impose quantitative restrictions on the movement of persons with an aim to create a protected labour market. Not only do the regulations change depending on the economic and political situation prevalent in the regulating country without considering the needs of other countries, but there is also a lack of adequate transparency in the immigration procedures. In many cases the professionals are not allowed to bring in their families. Some of the major issues in this context are: prior adequate search in national markets, wage-parity requirement, differentiation in processing of visas, cumbersome and non-transparent immigration procedures, quantitative limits, restrictions on flexibility and limited duration of stay.
Inadequate recognition of qualifications, training and experience
The inadequate recognition of qualifications, training and experience restrict the opportunities for software professionals from India to provide services overseas. Several EU countries have certain restrictions concerning issuance of visas based on the qualifications and experience of the applicant. However, though the applicant may not satisfy the criteria, he may still qualify for the job.
For example, at times the particular nature of the work may not require the qualifications or experience required to obtain a visa. Therefore, even if the software professional is competent enough to complete that work, he/she may not be granted the visa because it does not meet the eligibility criteria for the visa. It could also happen that a software professional with lesser experience / qualifications in India may be capable of performing more complex work in another country.
Differential treatment of foreign service providers
Trade in Mode 4 is also restricted due to the policies, which differentiate against Foreign Service providers. Some of the issues in this area include imposition of stringent conditions for eligibility concerning residency or citizenship are: Priority in Government Procurement and Government Approval.
Policy reforms and initiatives
India has already suggested to the WTO, that in order to improve the liberalization in Mode 4, countries would have to re-look at and solidify the existing GATS commitments under Mode 4 and also remove or curtail the other limitations imposed by them on movement of natural persons. Some the significant issues are summarized hereunder.
Improving the structure of GATS commitments by EU
To enable the Indian professionals to get fair treatment in the EU countries the GATS should improve their horizontal commitments in Mode 4 to specifically include individual professionals, eligibility criteria, uniformity in definitions of different classes, include middle and lower level professionals in the category of “other persons” or “specialists”. Last month the European Commission published its GATS offer which relates the horizontal section of the issue of temporary entry of foreign nationals. But when seen in the perspective of the wide ranging requests the EU is making to the developing countries, the EU offer in Mode 4 appears very insignificant. The possibility of concessions in Mode 4 has been used by EU and by business to “sell” the GATS negotiations to developing countries. The entry of individual service suppliers is also subject to the application of a numerical ceiling.
In the context of the above, in essence the following are the technical suggestions with regard to the existing limitations
a. Visa requirements to be relaxed
Countries should ensure that the visa application procedures are transparent
Countries should also try and simplify visa application procedures
Less stringent norms should be imposed for entry and stay of software professionals in the country
Labour tests and conditions for software professionals should be waived or removed
Proper guidelines should be formulated for wage parity conditions to ensure that the cost-based advantage is not lost
Conditions should be imposed to prevent exploitation of foreign workers
Temporary visas must be de-linked from permanent visas and there should be separate criteria, which need to be satisfied to obtain temporary visas. Many a times, the immigration laws of countries permit temporary visa holders to convert to permanent status, if they satisfy certain conditions. At the same time, these countries may not wish to encourage permanent migration into their territory. Due to this paradoxical situation, seekers of temporary visas may not be granted the visas, as host countries may feel that the intention of the visa seekers is to permanently settle in the country. Moreover, sometimes it may be necessary for software professionals to stay in the host country for a longer period than allotted in order to complete their assignments. However, they may not be allowed to do so because then they may have an opportunity to convert their temporary status to a permanent one.
In Europe competent/qualified sportspersons are given nationalities to represent the host country for fame. In this context why competent, productive IT as well as experts in other professions from India should not be given permanent recognition status. One solution to this problem that can be discussed is to separate temporary migration from permanent migration by creating a special category of visas (like the GATS visa).
b. Recognition of qualifications and experience of IT professionals
EU countries must try and evolve certain criteria for the recognizing the qualifications and experience of IT professionals. These countries could also try and establish norms whereby work experience could be substituted for accredited educational qualifications. A proper EQUIVALENCE formula to recognize a degree from a reputed university should be introduced. This would be advantageous in the software industry where skills are developed and polished on the job rather than in only educational institutions.
Economic Needs Tests (ENTs)
The widespread use of the ENThas emerged as one of the major artificial barriers preventing free movement of service providers from India. Many EU countries use ENTs to regulate trade flows in one or more modes and all or selected service sectors. Under the ENT arrangement, government grants market access to natural persons under some conditions such as local market needs or management needs. The discretionary nature of ENT reduces the predictability of trade through mode 4. It actually nullifies the opportunity for market access otherwise extended in Article XVI of GATS which includes ENT in the market access barriers list.
The key problem experienced in EU is the language problems between Indians in general and the co-employees. It is also the social environment and difficult to integrate socially that adds to the barrier. Most professionals do not have the knowledge of the EU language. Though improving over time, knowledge remains mostly at the basic level. Due to restricted period of residence in EU countries and the limited need to speak the language both in personal and professional life, learning has a low priority. Work pressure is another striking factor that prevents the professionals from attending classes. Most educated Indians have access to an English education. In mainland Europe, the cultural alienation is accentuated and reinforced by the linguistic divide. English is neither the mainstream nor the second language in Europe. It takes an average three to four months to acquire the basics of a foreign language, the life span of a short-term project for an IT programmer. The career risks are far too great for a professional to undertake language lessons.
Reciprocal Pension Policy required
One issue that should receive high priority is the taxation and pension policy in most of the EU countries. For example, the Belgian Pension and Social System deprive Indians the benefits of pension. The situation has attained a remarkable proportion with several Indians coming to Belgium for work with no possibility of getting access to the Pension Fund after retirement. The Government of India has to take up this issue with the Government of Belgium and other EU countries. Recently Finland has allowed all Indians the right to Pension Fund. The Indian Government does not have a reciprocal arrangement with the Belgian Government the Indian Government is urged to directly take this matter with the government of other EU countries.
Driving licenses exchange agreement
Until few years ago, Belgium had an agreement with India for exchange of Driving Licence issued in India. For reasons unknown to us, this facility has been withdrawn. With increasing number of Indians coming to Belgium for work and other business opportunities, they have difficulty in acquiring a Driving License in Belgium. The Government should take up this issue with the Belgian government.
Although intolerance against Indian professionals in Belgium is not very visible, one can certainly find a degree of uneasiness among some political parties. These racially divided political parties may try to create hatred against our presence and this might turn to be major problem for our professionals in future.
The treatment of Individuals by local administrations once the professionals enter Belgium is very disappointing. Individuals wanting to register with certain Communes or renew their stay permits are forced to undergo hardship and humiliation with certain practices of Belgian local administrations. They have a system where they give out a limited number of tokens as early as 0730H. This means people have sometimes to queue up outside these offices even before daybreak. This hardship is worse during the winter months. Other EU nationals and long-term residents are not subjected to this treatment but new entrants face this problem. Some ten years ago the system did not discriminate people from non-EU countries. There are cases where the residence permit provided by the Belgian government to the professionals allows them to travel to Europe for business work whereas the spouses are given a residence permit “A” under which they have to seek a fresh visa to enter Belgium once they leave the country. This is a strange policy which needs to be addressed. Another issue is the Lease System in the accommodation. An expatriate finds it difficult to obtain appropriate accommodation as the local practice demands lease for three years and the contract are sometimes as short as 6 months.
The situation with regard to residence/work permit of Indian Software professionals employed in Greece by Greek Companies is confusing. The long delay in the issuance of resident card is a serious problem there. Their new work permit is made available to them few months after the expiry of their existing permit and the fresh renewal takes almost another seven-eight months due to which these professionals are unable to travel to any other country. This situation has forced many professionals to return to India.
SP/19 May 2003