The National Association of Software and Services Companies (Nasscom)-McKinsey Report 2002 acknowledged that China and Philippines can emerge as serious competitors to India in the IT-enabled services (ITES) arena in the long-term.
Other potential competitors such as Ireland, Malaysia and Mexico are constrained by issues such as language and scarcity of talent.
The Philippines government has drawn up a targeted approach to develop its ITES sector. It has also set aggressive targets for the growth of the sector. For example, in the call centre domain, the government's aim is to grow the industry to $ 864 million by 2004 at a compounded annual growth rate of 50 per cent, the report said.
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Though Philippines is trying to build a sizeable ITES industry, high-quality and low-cost bandwidth continue to remain an issue, and the country is constrained by a small entrepreneurial base and an insufficient supply of capital, the report said.
Today, China only serves the niche requirements of Japanese and south-east Asian markets, the report categorised.
For example, GE Capital and HSBC have established back-office service centres in China to serve their Japanese markets.
However, China, riding on the back of its large graduate pool and infrastructure, could emerge as a threat to India in the medium-to-long term, the report said.
The Chinese government has taken several initiatives to ensure that the pool of English-speaking talent grows with time.
5-point agenda suggested: To beat emerging competition, the report suggested that the government has to play a primary role in expediting unfinished agenda in regulation, drive growth of domestic market and proactively address infrastructure and talent issues.
In addition, the Nasscom should strengthen the India Inc brand and shape expansion into new service lines and geographies, the report further suggested.
Key initiatives by the Union government should include assigning priority sector status to ITES and providing a debt funding option, ensuring consistency in taxation policy, the report said.
The states should address labour law issues, facilitate single window clearance for establishing an ITES unit and work with the Central government to simplify custom bonding procedures, the report recommended.