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**Information Technology Enabled Services (ITES) -- Bangladesh**

ELEMENTS OF A NATIONAL STRATEGY FOR DEVELOPMENT OF AN INFORMATION
TECHNOLOGY ENABLED SERVICES SECTOR IN BANGLADESH

**USAID Bangladesh IT Enabled Services Project**

## SETA Task Order Number: 4002-345-001

#### Subcontract Number: 011227001/4000

#### Contract Number: GSOOK97AFD2185

**Table of Contents**

# [*Executive Summary* 3](#executive-summary) {#executive-summary-3 .TOC-1}

# [*1. Introduction* 10](#introduction) {#introduction-10 .TOC-1}

# [*2. The Market for IT Enabled Services* 13](#the-market-for-it-enabled-services) {#the-market-for-it-enabled-services-13 .TOC-1}

[*Market Characteristics 13*](#market-characteristics)

[*Factor Requirements to be Competitive
15*](#factor-requirements-to-be-competitive)

# [*3. Bangladesh Market Advantages and Disadvantages* 19](#bangladesh-market-advantages-and-disadvantages) {#bangladesh-market-advantages-and-disadvantages-19 .TOC-1}

[*Costs and Efficiency 19*](#costs-and-efficiency)

[*Productive capacity 21*](#productive-capacity)

[*General business environment 25*](#general-business-environment)

# [*4. A Bangladesh ITES strategy* 28](#a-bangladesh-ites-strategy) {#a-bangladesh-ites-strategy-28 .TOC-1}

[*Potential ITES Market Segments 29*](#potential-ites-market-segments)

[*Building Productive Capacity 32*](#building-productive-capacity)

[*Lowering Costs 37*](#lowering-costs)

[*Building a Competitive Environment
38*](#building-a-competitive-environment)

[*Marketing of Bangladesh ITES sector
40*](#marketing-of-bangladesh-ites-sector)

# [*5. Recommended Actions* 42](#recommended-actions) {#recommended-actions-42 .TOC-1}

[*Improving Productive Capacity 42*](#improving-productive-capacity-1)

[*Lowering Cost, Improving Efficiency
44*](#lowering-cost-improving-efficiency-1)

[*Marketing and Business Environment
45*](#marketing-and-business-environment-1)

[*Focus on Growth 47*](#focusing-on-growth-1)

# [*Annex A: Analysis of Market Segments* 49](#annex-a-analysis-of-market-segments) {#annex-a-analysis-of-market-segments-49 .TOC-1}

# [*Annex B: ITES Workshop Report* 63](#annex-b-ites-workshop-report) {#annex-b-ites-workshop-report-63 .TOC-1}

# [*Annex C: The opinion surveys of this study* 68](#annex-c-the-opinion-surveys-of-this-study) {#annex-c-the-opinion-surveys-of-this-study-68 .TOC-1}

# [*Annex D: Summary of the Philippines Case Study* 81](#annex-d-summary-of-the-philippines-case-study) {#annex-d-summary-of-the-philippines-case-study-81 .TOC-1}

#   {#section .TOC-1}

# Executive Summary {#executive-summary .TOC-1}

Information Technology Enabled Services (ITES) is a large, fast-growing
worldwide industry fueled by customers seeking efficiency and
cost-savings from outside vendors, as well as rapid advancements in
telecommunications and information technology. Offshore outsourcing of
these services has become accepted and prevalent. Bangladesh has the
potential to obtain a share of this market, which could result in a
substantial number of jobs and meaningful export diversification for the
country.

As a provider of ITES for (principally) overseas customers, Bangladesh
meets the minimal requirements in terms of telecommunications
infrastructure, labor costs, and government policies. However, there is
a great need to focus on creating or promoting factors within Bangladesh
that are competitive in the international arena. Other countries are
already vying for their share by focusing on reduced costs, increased
quality, and meaningful incentives for corporations to award their
business to their locations instead of others.

The chief advantage of Bangladesh in this market is low cost labor.
However, the high costs of telecommunications clearly constrain the
potential and profitability of companies in this sector, which is
critically dependent on information transfer. The small domestic market
for IT related services also limits training and experience of local
workers in order to gain expertise in higher value-added ITES. Lastly,
there is the need to build overseas awareness of Bangladesh as a
potential ITES provider.

Entering a new market such as ITES is always difficult, even more so
with strong competitors from other countries. The Bangladesh IT sector
is not currently competitive in the ITES market. Its only clearly
identified market advantage is in low cost labor. However, this is
balanced against high communications costs. Moreover, low cost is not a
sufficient advantage if potential buyers are not confident of the
ability of Bangladesh firms to deliver a high quality product.

It is important to recognize that with no fundamental market advantage,
firms and the government of Bangladesh must be prepared for a relatively
high risk and long term growth strategy. It is high risk because
Bangladesh is not likely to be able to seize much of this market without
beating competitors who are currently in better position. It is a long
term growth strategy because beating those competitors will require
steady and constant improvements in the capacity and marketing of
Bangladesh firms.

The strategy must also be opportunistic, taking advantage of any
openings in the market that present themselves. While there are
promising segments in the market, Bangladesh firms must remain flexible
in their focus. One of the advantages of a new market entrant is that
they can react to market opportunities faster than firms already
entrenched in the market. Bangladesh cannot afford to give up this
advantage.

Bangladesh firms will also require considerable support from the
government, donors, and any other sources available. At a minimum, the
government must create a general business environment conducive to this
venture into a new market. The government can also be useful in
stimulating growth in the capacity of IT firms, and in marketing that
capacity internationally.

A reasonable strategy for Bangladesh entry into the ITES market includes
a number of components:

-   Target segments of the industry where Bangladesh has a comparative
    advantage, but remain flexible in the search for growth prospects.

-   Improve the deficiencies of the Bangladesh IT industry to make it
    more competitive.

-   Market the sector well to overcome the unfamiliarity of the market
    with Bangladesh products.

Recommendations for the sector involve building the productive capacity
of the local IT industry, reducing costs and improving efficiency,
creating an environment favorable to entering this sector, and marketing
the potential contributions of Bangladesh IT firms.

While the following are covered throughout the report, and listed in
Section 5, the chart below details the findings and key actors required
to implement beneficial changes.

## Improving Productive Capacity

+----------------------------+-------------------+--------------------+
| **Actions**                | **Participants**  | **Possible         |
|                            |                   | Impact**           |
+----------------------------+-------------------+--------------------+
| 1\. **Develop              | Ministry of       | It is too early to |
| international standards    | Education,        | expect Bangladesh  |
| for education in IT**. The |                   | to score well on   |
| customer will look for     | Private sector IT | consultant survey  |
| some international         | association       | rankings- this     |
| standard by which to       |                   | should be a mid    |
| evaluate that workforce on |                   | term goal.         |
| external, not internal     |                   | Initially          |
| measures. It is therefore  |                   | Universities and   |
| recommended that metrics   |                   | training           |
| on the following standards |                   | Institutes must    |
| be maintained:             |                   | increasingly focus |
|                            |                   | on standards that  |
| -   Vendor certifications  |                   | will be recognized |
|                            |                   | by the             |
| ```{=html}                 |                   | international      |
| <!-- -->                   |                   | customer.          |
| ```                        |                   |                    |
| -   Results on             |                   | This information   |
|     internationally        |                   | will also serve as |
|     recognized exams       |                   | an element of      |
|                            |                   | Bangladesh ICTES   |
| -   Affiliations with      |                   | marketing.         |
|     internationally        |                   |                    |
|     recognized             |                   |                    |
|     Universities           |                   |                    |
|                            |                   |                    |
| -   Survey rankings        |                   |                    |
+----------------------------+-------------------+--------------------+
| 2\. **Support the ICT Task | Prof.             | Better             |
| Force** in defining skill  | J.R.Choudhury and | coordination of    |
| deficiencies and           | his team in       | the education      |
| supply/demand numbers.     | defining skill    | system and the     |
|                            | deficiencies and  | private sector     |
|                            | numbers of        |                    |
|                            | student enrolment |                    |
|                            | and projection of |                    |
|                            | demand.           |                    |
+----------------------------+-------------------+--------------------+
| 3\. **Develop programs for | Professional      | Institutes not     |
| informed consumer choice   | Training          | providing value    |
| in private training        | Institutes (some  | eventually become  |
| institutes.** It is        | of which are      | known to the       |
| recommended that a         | ISO9000           | public or do not   |
| consumer awareness program | certified). While | gain recognition   |
| provide students the       | some government   | within the         |
| information to select a    | control is        | industry.          |
| training institute         | attempted in      |                    |
| conforming to industry     | various           |                    |
| minimum standards.         | countries,        |                    |
| Typically in emerging      | consumer          |                    |
| sectors the 'pioneers' in  | education and     |                    |
| the sector are followed by | definition by     |                    |
| numerous other entrants    | industry of       |                    |
| attempting to copy the     | minimum standards |                    |
| success of the early       | is most effective |                    |
| entrants. It is in the     | in targeting low  |                    |
| interest of the industry   | value vendors.    |                    |
| to define standards for    |                   |                    |
| itself that will gain      |                   |                    |
| public confidence.         |                   |                    |
+----------------------------+-------------------+--------------------+
| 4\. **Create a Training    | Private sector    | Associations of    |
| Institution Association.** | firms.            | member             |
|                            |                   | organizations      |
|                            | BCS, ISP          | similar to BCS and |
|                            | Association       | the ISP            |
|                            |                   | association can    |
|                            |                   | play a valuable    |
|                            |                   | role in creating   |
|                            |                   | standards, giving  |
|                            |                   | accreditation to   |
|                            |                   | its members,       |
|                            |                   | helping to upgrade |
|                            |                   | the skill levels   |
|                            |                   | of all faculty and |
|                            |                   | creating a         |
|                            |                   | consumer awareness |
|                            |                   | criteria for       |
|                            |                   | Training           |
|                            |                   | Institutes.        |
+----------------------------+-------------------+--------------------+
| 5\. **Private              | A Training        | Typically such     |
| Sector-Education           | Association is in | consumer awareness |
| Dialogue.** Develop a      | the best position | programs might     |
| close relationship between | to prepare such a | provide knowledge  |
| the private sector and     | checklist. The    | of selection       |
| educational institutions.  | experience in     | criteria such as:  |
| It is important that the   | other nations is  |                    |
| private sector make known  | that Government   | \- Internationally |
| its needs for human        | involvement is    | recognized         |
| resources in various skill | not as effective. | curriculum         |
| areas. It will then fall   |                   |                    |
| to the training institutes | The efforts of    | \- International   |
| to respond. A close        | the private       | vendor             |
| relationship will allow    | sector, ISP       | certification      |
| scarce resources to be     | Association, BCS  | program            |
| directed where they are    | etc. to make      |                    |
| most needed. The rate of   | known their       | \- Existence of a  |
| change and evolving        | requirements is   | computer lab       |
| business needs make it     | well placed       |                    |
| inadvisable for government | provided          | \- Minimum hours   |
| to prescribe a curriculum  | educational       | of study           |
| of study other than in     | institutions are  |                    |
| broad terms. To do so may  | in a position to  | \- Minimum hours   |
| mean resources are         | respond.          | of lab work        |
| expended in a subject area |                   |                    |
| that is out of date.       |                   | \- Internship      |
|                            |                   | programs           |
|                            |                   |                    |
|                            |                   | \- List of faculty |
|                            |                   | and their          |
|                            |                   | qualifications     |
+----------------------------+-------------------+--------------------+
| 6\. **Develop domestic     | GOB               | Private Sector     |
| capacity through           |                   | will be mobilized  |
| e-government               | Donor support     | in ITES.           |
| applications:**            | recommended.      |                    |
|                            |                   | Easier access of   |
| -   Computerize all        |                   | GoB information to |
|     ministries and GOB     |                   | the public.        |
|     departments starting   |                   |                    |
|     with a pilot ministry  |                   | Enhanced           |
|     such as Commerce and   |                   | transparency.      |
|     MOSICT.                |                   |                    |
|                            |                   |                    |
| -   Use local IT Training  |                   |                    |
|     institutes.            |                   |                    |
|                            |                   |                    |
| -   Post all information   |                   |                    |
|     and forms on the web.  |                   |                    |
|                            |                   |                    |
| -   Introduce interactive  |                   |                    |
|     applications, such as  |                   |                    |
|     forms, applications,   |                   |                    |
|     tender, tax payment    |                   |                    |
|     and so forth.          |                   |                    |
+----------------------------+-------------------+--------------------+
| 7\. **Increase funding for | The private       | In an environment  |
| technology education** at  | sector can play a | where rapid        |
| all levels. A strong base  | role here as in   | expansion is       |
| of literate, computer      | North America     | desired it is      |
| literate students with     | where the private | critical that      |
| solid basic skills is the  | sector sees an    | resources for the  |
| entry point into ICTES     | economic benefit  | educational sector |
| training and the           | in supporting     | match enrolment    |
| workforce. It was found    | educational       | targets otherwise  |
| that funding at the        | institutions with | already stretched  |
| University level did not   | facilities, work  | resources are      |
| necessarily follow the     | placement         | stretched further  |
| enrolment numbers.         | opportunities,    | resulting in a     |
|                            | expertise and     | decrease in        |
|                            | advice.           | quality.           |
+----------------------------+-------------------+--------------------+

## Lowering Cost, Improving Efficiency

+----------------------------+-------------------+--------------------+
| #### Actions               | #### Participants | **Possible         |
|                            |                   | Impact**           |
+----------------------------+-------------------+--------------------+
| 8\. **Allow ITES exporting | BTRC, BTTB        | International      |
| companies to connect to    |                   | communications at  |
| international              |                   | prevailing world   |
| telecommunications         |                   | rates.             |
| networks**, allowing       |                   |                    |
| immediate access to the    |                   |                    |
| affordable, reliable, and  |                   |                    |
| available                  |                   |                    |
| telecommunications service |                   |                    |
| needed for the ITES        |                   |                    |
| industry.                  |                   |                    |
+----------------------------+-------------------+--------------------+
| 9\. **Allow private sector | BTRC, Private     | More effective use |
| aggregation of             | t                 | of international   |
| international BW through   | elecommunications | communications,    |
| international gateways.**  | firms             | lower cost         |
+----------------------------+-------------------+--------------------+
| 10\. **Provide technical   | BTRC, Donors      | More effective     |
| assistance to BTRC**.      |                   | operation of the   |
| Projects include           |                   | BTRC               |
| development of specific    |                   |                    |
| bodies of regulations to   |                   |                    |
| cover such things as       |                   |                    |
| dispute resolution, radio  |                   |                    |
| spectrum allocations, and  |                   |                    |
| cost-based tariff          |                   |                    |
| evaluations.               |                   |                    |
+----------------------------+-------------------+--------------------+
| 11\. **Implement           | BTTB/private      | Significant        |
| sub-marine cable           | sector            | increase in BW at  |
| project.** Explore         |                   | lower cost.        |
| possibility of private     | BTTB, BTRC        |                    |
| sector participation in    |                   | Facilitates ITES   |
| the project.               |                   | and Bangladesh's   |
|                            |                   | entry to ITES      |
|                            |                   | segments that      |
|                            |                   | require large BW.  |
+----------------------------+-------------------+--------------------+
| 12\. **Legalize voice over | BTTB, BTRC,       | Lower cost         |
| Internet protocol (VOIP)** | private sector    | telecommunications |
| by private                 |                   |                    |
| telecommunications         |                   |                    |
| providers.                 |                   |                    |
+----------------------------+-------------------+--------------------+
| 13\. **Support universal   | Financial         | Improved           |
| application of             | institutions,     | international      |
| computerized               | GOB, Donors       | payment systems.   |
| transactions** in banks    |                   |                    |
| and other financial        |                   |                    |
| institutions.              |                   |                    |
+----------------------------+-------------------+--------------------+
| 14\. **Establish training  | ITTF, Bangladesh  | Improved financing |
| program for banking        | Bank, MOF,        | of IT sector       |
| professionals** to improve | Financial         | businesses.        |
| their knowledge of the IT  | institutions      |                    |
| sector.                    |                   |                    |
+----------------------------+-------------------+--------------------+
| 15\. **Continue no-VAT,    | ITTF, Ministry of | Improved           |
| no-tax policy on computer  | Finance           | environment for    |
| and related products**     |                   | investment in ITES |
|                            |                   | sector.            |
+----------------------------+-------------------+--------------------+

## Marketing and Business Environment

+----------------------------+-------------------+--------------------+
| **Actions**                | **Participants**  | **Possible         |
|                            |                   | Impact**           |
+----------------------------+-------------------+--------------------+
| 16\. **Develop a strong    | IT firms, BASIS,  | Export enhanced.   |
| ITES marketing campaign**, | BCS, ISPs and     |                    |
| including:                 | EPB.              | Sustainable growth |
|                            |                   | ITES sector        |
| -   Support IT-firms in    | GOB support.      |                    |
|     their marketing        |                   | Bangladesh will    |
|     efforts                | Donor support.    | gradually be       |
|     (identification of     |                   | recognized as ITES |
|     buyer, selection of    |                   | provider country.  |
|     market niches, regular |                   |                    |
|     participation in       |                   | Increased          |
|     software fairs to make |                   | employment.        |
|     presence felt in the   |                   |                    |
|     international area).   |                   |                    |
|                            |                   |                    |
| -   Joint marketing        |                   |                    |
|     campaign with private  |                   |                    |
|     sector, including      |                   |                    |
|     BASIS, BCS and ISP     |                   |                    |
|     Association and group  |                   |                    |
|     firms in the same      |                   |                    |
|     industry/niche.        |                   |                    |
|                            |                   |                    |
| -   Private associations   |                   |                    |
|     conduct market         |                   |                    |
|     research to            |                   |                    |
|     continuously stay in   |                   |                    |
|     touch of the market    |                   |                    |
|     and feed information   |                   |                    |
|     to ITES firms and GOB. |                   |                    |
|                            |                   |                    |
| -   Financial support from |                   |                    |
|     GOB/donors for         |                   |                    |
|     implementing sustained |                   |                    |
|     marketing efforts by   |                   |                    |
|     private sector groups  |                   |                    |
|     in domestic and        |                   |                    |
|     international markets. |                   |                    |
+----------------------------+-------------------+--------------------+
| 17\. **Provide technical   | Donors, private   | A more business    |
| assistance to ITES         | sector            | friendly           |
| advocacy groups** (ISP     | associations      | regulatory         |
| associations, computer     |                   | environment        |
| industry associations,     |                   |                    |
| chambers of commerce,      |                   |                    |
| etc.) to help them better  |                   |                    |
| inform their membership    |                   |                    |
| about policy reform, and   |                   |                    |
| help stakeholders          |                   |                    |
| understand the regulatory  |                   |                    |
| process and express        |                   |                    |
| arguments to the regulator |                   |                    |
| that are constructive.     |                   |                    |
+----------------------------+-------------------+--------------------+
| 18\. **Link BTRC with      | Donors, BTRC      | Better consistency |
| regional regulators.**     |                   | with international |
| Assure that the BTRC has   |                   | standards and      |
| ample opportunity to       |                   | practices          |
| benefit from the           |                   |                    |
| experiences of regulators  |                   |                    |
| in other countries that    |                   |                    |
| face similar conditions.   |                   |                    |
| Participation in regional  |                   |                    |
| and other international    |                   |                    |
| forums will be beneficial. |                   |                    |
+----------------------------+-------------------+--------------------+
| 19\. **Provide model       | Donors, private   | Better IT policy   |
| legislation and regulatory | sector            | in Bangladesh      |
| frameworks to stakeholder  | associations,     |                    |
| groups**. Material should  | BTRC, GOB.        |                    |
| be from other countries,   |                   |                    |
| and assist these groups in |                   |                    |
| using these examples to    |                   |                    |
| formulate an appropriate   |                   |                    |
| policy position tailored   |                   |                    |
| to Bangladeshi             |                   |                    |
| circumstances.             |                   |                    |
+----------------------------+-------------------+--------------------+
| 20\. Internships and work  | Donors,           | 'Real world' and   |
| experience programs. Part  | educational       | gains valuable     |
| of the demonstration of a  | institutions, GOB | work experience    |
| highly skilled ICTES       |                   | which is a benefit |
| workforce comes from       |                   | both to the        |
| performance on the job. In |                   | student and to the |
| preparation work           |                   | private sector.    |
| experiences as part of the |                   | Such programs also |
| training and education of  |                   | ensure closer      |
| ICTES professionals should |                   | communication      |
| be provided.               |                   | between training   |
|                            |                   | institutes and the |
|                            |                   | private sector.    |
+----------------------------+-------------------+--------------------+
| 21\. **Interconnect cell   | BTRC, BTTB, cell  | Better             |
| phone system and landline  | phone operators,  | communications     |
| system.**                  | MOPT              | within Bangladesh  |
|                            |                   |                    |
|                            | IT Task Force,    |                    |
|                            | MOSICT            |                    |
+----------------------------+-------------------+--------------------+
| 22\. **Develop a           | BTRC, GOB, BTTB,  | Better             |
| transparent manual based   | phone companies,  | understanding and  |
| management system with     | business          | predictability of  |
| BTRC** so the players in   | associations.     | BTRC decisions.    |
| the telecom sector know    |                   |                    |
| the rules of BTRC          |                   |                    |
| operations.                |                   |                    |
+----------------------------+-------------------+--------------------+

## Focusing on Growth

+----------------------------+-------------------+--------------------+
| **Actions**                | **Participants**  | **Possible         |
|                            |                   | Impact**           |
+----------------------------+-------------------+--------------------+
| 23\. **Finalize an IT      | ITTF, MOSICT,     | A roadmap for      |
| Action Plan (e-plan)**     | FBCCI             | development and    |
| with input from            |                   | priority areas     |
| stakeholders and building  |                   | identified with    |
| on past efforts such as    |                   | participation and  |
| USAID/JOBS e-conference,   |                   | ownership of the   |
| MOSTs IT Action            |                   | stakeholders.      |
| recommendations, etc.      |                   |                    |
+----------------------------+-------------------+--------------------+
| 24\. **Continue the        | ITTF, Ministry of | Improved           |
| implementations of liberal | Finance           | environment for    |
| pro-private sector         |                   | foreign and local  |
| policies** (tax            |                   | investment.        |
| incentives, IT parks       |                   |                    |
| creation, further          |                   |                    |
| liberalizing foreign       |                   |                    |
| ownership, repatriation of |                   |                    |
| hard currency, etc)        |                   |                    |
| encouraging imports of ICT |                   |                    |
| enabling products, exports |                   |                    |
| of ICT products and        |                   |                    |
| services, and to attract   |                   |                    |
| FDI in IT based on         |                   |                    |
| successful world models    |                   |                    |
| such as Ireland.           |                   |                    |
+----------------------------+-------------------+--------------------+
| 25\. **Legal and           | Ministry of Law,  | Provide strong     |
| regulatory reform**,       | MOSICT, IT Task   | legal environment  |
| including:                 | Force, Law        | to encourage       |
|                            | Commission        | electronic         |
| -   Promulgate IT Law now  |                   | transactions and   |
|     under review           | Advocacy by       | investment in ITES |
|                            | BASIS, BCS, ISP   | areas.             |
| -   Promulgate Cyber and   | Association,      |                    |
|     Digital Signature law  | Chambers, donors. |                    |
|     currently under review |                   |                    |
|                            |                   |                    |
| -   Review other criminal  |                   |                    |
|     and civil laws to      |                   |                    |
|     incorporate clauses    |                   |                    |
|     relating to electronic |                   |                    |
|     transactions.          |                   |                    |
+----------------------------+-------------------+--------------------+
| 26\. **Assist the BTRC to  | GOB, MOPT, IT     | A fully privatized |
| be an independent and      | Task Force,       | telecom sector     |
| strong regulatory          | MOSICT            | leading to higher  |
| agency**, including:       |                   | investment in      |
|                            | Donors, business  | telecom sector,    |
| 1\. Separation of the BTRC | associations as   | and lower          |
| from MOPT                  | advocate. They    | communication cost |
|                            | should facilitate | for businesses     |
| 2\. Providing financial    | the process of    |                    |
| power to BTRC to make its  | strengthening     |                    |
| own budget and             | BTRC              |                    |
| compensation package for   |                   |                    |
| staff members              |                   |                    |
|                            |                   |                    |
| 3\. Providing training to  |                   |                    |
| all levels for effective   |                   |                    |
| functioning of the newly   |                   |                    |
| formed regulator;          |                   |                    |
|                            |                   |                    |
| 4\. Providing              |                   |                    |
| opportunities to observe   |                   |                    |
| functioning of similar     |                   |                    |
| regulators in the region   |                   |                    |
| and outside the region;    |                   |                    |
| (e) assisting to develop   |                   |                    |
| specific bodies of         |                   |                    |
| regulations in each areas  |                   |                    |
| of its activities,         |                   |                    |
+----------------------------+-------------------+--------------------+
| 27\. **Strengthen industry | IT firms, GOB     | Better public and  |
| associations and business  | support.          | private sector     |
| organizations**, such as   |                   | coordination.      |
| FBCCI and DCCI. The        | Donor support     |                    |
| associations can lead in   |                   |                    |
| enhancing the              | BCS, BASIS, SIP   |                    |
| competitiveness of the     | Association,      |                    |
| Bangladeshi ITES industry. | FBCCI, DCCI       |                    |
| This could be in the form  |                   |                    |
| of marketing and promotion |                   |                    |
| exercises, sponsored       |                   |                    |
| studies to monitor and     |                   |                    |
| benchmark the industry and |                   |                    |
| to lobby with the          |                   |                    |
| government for necessary   |                   |                    |
| reforms and actions.       |                   |                    |
+----------------------------+-------------------+--------------------+
| 29\. **Provide strong      | ITTF, MOF         | Attract foreign    |
| thrust to facilitate       |                   | direct investments |
| supportive infrastructure  |                   | (FDI) and          |
| for proliferation of IT**  |                   | expatriate         |
| Enabled Services           |                   | Bangladeshis to    |
| throughout the country,    |                   | channel capital to |
| with stress should on      |                   | set up ITES        |
| developing suitable        |                   | providing firms in |
| infrastructure in          |                   | the country        |
| \`non-software\' cities.   |                   |                    |
|                            |                   |                    |
| ITES companies set up in   |                   |                    |
| EPZ units should claim tax |                   |                    |
| holiday                    |                   |                    |
+----------------------------+-------------------+--------------------+
| 30\. **Provide GOB         | GOB               | Better funded and  |
| Financial support for      |                   | more effective     |
| marketing campaign.**      | Donor support     | marketing          |
|                            |                   | campaign.          |
+----------------------------+-------------------+--------------------+
| 31\. **Promote the use of  | GOB, industry     | Visibility and     |
| the ".bd" Internet domain  | association       | some revenue       |
| name**. This helps         |                   | generation         |
| identify Bangladesh as an  |                   |                    |
| "IT competent" country and |                   |                    |
| "brand" Bangladesh on the  |                   |                    |
| Internet.                  |                   |                    |
+----------------------------+-------------------+--------------------+
| 32\. **Enable IT firms to  | IT firms, BASIS,  | Better financing   |
| gain access to better      | BCS, ISPs.        | of the ITES sector |
| lines of credit** (Program |                   |                    |
| like LPG/USAID should be   | GOB support.      |                    |
| continued).                |                   |                    |
|                            | Donor support     |                    |
| Moveable asset financing   |                   |                    |
| for ITES firms.            |                   |                    |
+----------------------------+-------------------+--------------------+
| 33\. **Develop and         | GOB and business  | Presence of        |
| implement "Bangladesh      | associations,     | Bangladesh in      |
| Ltd."** Campaign in a      | NRBs (as          | international ITES |
| sustained fashion in       | appropriate and   | market enhanced.   |
| collaboration with GOB     | practical).       |                    |
| (MOSICT, Ministry of       |                   | Increased export.  |
| Commerce, IT Task Force)   |                   |                    |
| and business associations. |                   |                    |
|                            |                   |                    |
| Regularly attend targeted  |                   |                    |
| software fairs as a        |                   |                    |
| country.                   |                   |                    |
+----------------------------+-------------------+--------------------+
| 34\. **Deregulate the      | MOPT,             | Increased          |
| landline sector of         | Privatization     | connectivity.      |
| telecom.** This will allow | Commission,       |                    |
| for increased private      | Ministry of       | Low telecom cost.  |
| investment.                | Finance           |                    |
|                            |                   | Increased          |
| 35\. **Privatize BTTB**    |                   | investment and     |
|                            |                   | employment in ICT  |
|                            |                   | sector.            |
+----------------------------+-------------------+--------------------+

# 1. Introduction

**Background to the Study**

Information Technology Enabled Services (ITES) is a large, fast-growing
worldwide industry fueled by customers seeking efficiency and
cost-savings from outside vendors, as well as rapid advancements in
telecommunications and information technology. Offshore outsourcing of
these services has become accepted and prevalent. Bangladesh has the
potential to obtain a share of this market, which could result in a
substantial number of jobs and meaningful export diversification for the
country.

While currently only 10% of outsourced services in the United States are
sent overseas, the growth in ITES business process offshore outsourcing
(such as financial accounting services, human resources administration,
customer care services) ranges from 20% to 30% per year. The Indian
NASSCOM McKinsey study provides one estimate of the ITES outsourcing
market size, reaching \$142 billion by 2008.

Bangladesh would appear to possess many of the same ingredients that
have contributed to the success seen in India and other developing
countries in the emergence of IT Enabled Services for local consumption
and for export. Such services include, but are not limited to, call
centers, data processing, medical transcription, back office operations,
payroll and HR services, website services and the use of IT for design
services for garment manufacture. Bangladesh's authorities are
considering how best the government can nurture emergence of an ITES
sector. This study is intended to provides information and analysis to
support this endeavor.

Bangladesh possesses a growing human resource base in the IT area, and
the number of training institutions for the sector has skyrocketed. At
the same time, the government has invested in infrastructure to support
the sector, and has plans for further investments. The government has
also sought to make IT a "thrust sector" by granting tax benefits and
preferential access to credit. There is a strong interest in evaluating
the package of support the government offers to the sector, to determine
if the mix of instruments is appropriate and if it is sufficient to
stimulate rapid growth in production and export of ITES. Public
discussion is considering the optimal role for government in the sector,
as well as the form that sectoral growth should take. For example, some
believe Bangladesh's comparative advantage lies in providing skilled IT
workers to other countries, while others seek to expand the use of ITES
in the local economy. The development of IT enclaves both by the
government and private investors is also under consideration.

#### Study Approach

This study focuses on market potential, rather than the public sector
orientation of many studies looking at policy or education systems. As
such, it examines the issue from the perspective of the decision makers
in this sector: the buyers and sellers of ITES. It examines the market
for these products, and the determining factors for a market transaction
to take place.

The private sector study focused on a few fundamental issues including:

-   What is the market for ITES? Who is producing it, and how? Who are
    the buyers?

-   What is the cost of producing ITES in Bangladesh? What is the cost
    of inputs? How efficiently can these services be produced in
    Bangladesh?

-   What is the productive capacity for ITES in Bangladesh? What is the
    capacity of the infrastructure and the quality of the human capital?

-   What is the comparative advantage of Bangladesh firms in this
    market?

-   What is a successful business plan for Bangladesh firms to enter
    this market?

This study is organized accordingly. It reviews the market for ITES, and
identifies the comparative advantage of Bangladesh firms. The most
critical determinants of success for any firm will be their costs and
their ability to produce. Costs and productive capacity are, therefore
highlighted in the analysis.

Finally, a business plan is outlined in the study. Because this plan is
being developed for the public sector, it is a strategic plan involving
the development of an enabling environment by the government and the
donors. Nevertheless, the focus of the plan is on how Bangladesh firms
can enter and succeed in the market for ITES.

#### Comparative Advantage

An important concept used in this study is the investigation of the
comparative advantage of Bangladesh firms in this market. It rapidly
became clear early in this study that Bangladesh firms possess no
absolute advantage in this market. That is, they are not the best choice
or dominant provider in any market niche of ITES. This was to be
expected in a country with such a nascent IT sector.

Not being the best in a particular sector, however, does not eliminate
Bangladesh firms as potential competitors. The search for comparative
advantage identifies those areas of the ITES sector where Bangladesh
firms are relatively better than they are in other areas. It is a
measure of what Bangladesh firms are better at doing, compared to other
areas of ITES, rather than a comparison of Bangladesh firms to those of
other countries.

The significance of comparative advantage is as a guide to areas where
Bangladesh firms may want to specialize. As firms in other countries
that may have an absolute advantage over Bangladesh firms move toward
their own comparative advantage specialties, the Bangladesh firms may be
able to fill a market niche.

The study examined the comparative advantage of Bangladesh firms in
terms of the requirements for success in these markets. It provides
general guidelines on the sectors of the ITES industry that Bangladesh
may want to target.

Study Activities

The execution of the study involved detailed research involving two
trips to Bangladesh, as well as a visit to the Philippines to examine
their recent success in this market. In addition, the study commissioned
two opinion surveys: one of Bangladesh firms, government officials, and
NGOs, and the second survey of non-resident Bangladeshis.

Among the issues considered by the survey were opinions on:

-   The ability of Bangladesh to compete in this market.

-   The role that government can play in promoting this sector.

-   The role of the private sector in developing this sector as an
    export market.

-   The possible role of Nonresident Bangladeshis in generating business
    in ITES.

-   The status of enabling conditions in Bangladesh and its
    competitiveness with India.

The survey sample was quite large, and covered several classes of
stakeholders in Bangladesh, as well as a group of Nonresident
Bangladeshis. The sample size was:

-   42 Government officials

-   194 executives and decision makers in ICT firms and ICT trade
    associations.

-   27 in NGOs, including business associations, development
    organizations, social service organizations, and others.

-   204 executives in non ICT firms and trade associations, including
    banking, legal, health, education, agribusiness, media, insurance,
    garment and textiles, transportation and others.

Because anecdotal evidence indicates that Non-Resident Indians played a
large part in the development of the Indian IT industry, an analysis of
Non-Resident Bangladeshis (NRBs) was included in this study. Moreover,
the NRBs are considered good information sources for providing another
perspective of the external market given their knowledge of the
Bangladesh situation and overseas business practices.

To determine the role of NRBs, a survey was conducted online, with
requests for participation issued via the Association of American
Bangladeshi Architects & Engineers (AABEA), eb2000, TechBangla, and
e-Mela. A total of 219 NRBs completed the survey. The majority were
based in the United States, in the IT and/or engineering profession, and
have spent more than 5 years away from Bangladesh.

# 2. The Market for IT Enabled Services

Information Technology-Enabled Services, or "ITES", involve business
processes and services that extensively utilize components of
information communication technology ("ICT"[^1]) such as software,
hardware and the Internet. As opposed to the manufacturing industry
where products are physically visible, the "raw materials" in the ITES
industry are data, information and knowledge. The industry is often
referred to as a "knowledge-based" industry; as such, the products and
services provided are less tangible.

## Market Characteristics

India controls 85% or more of the IT offshore outsourcing market, with
dominant companies like Tata, Wipro and Infosys.[^2] The following are
estimates from the McKinsey/NASSCOM analysis of this sector[^3]:

-   Global ITES market size of \$10 billion in 1998, dominated by
    customer call centers and animation

-   Projected 30% CAGRcumulative annual growth rate\], derived from an
    increase in other types of business processes being outsourced

-   Up to \$142 billion in ITES outsourcing by 2008

For solely the IT top-level services market (e.g. hardware and software
maintenance, consulting and other professional services):

-   Revenues reached \$609 billion in 1999 and are expected to grow to
    \$1.3 trillion in 2004[^4].

```{=html}
<!-- -->
```
-   94% of the worldwide IT top-level services market is produced by the
    top 20 companies in the industry.

-   For this industry sector, which would likely reflect a similar
    distribution for ITES, the worldwide market is dominated by the
    United States and Europe:

> ![](media/image2.wmf){width="4.041666666666667in" height="2.8125in"}

Worldwide IT Services Market; Gartner Group Dataquest, 2000

### 

Offshore outsourcing entails business processes delivered from outside
the corporation's home country. The industry has been substantially
enabled by advancements in global ICT, and corporations' eagerness to
find service providers at lower costs. Opportunities for IT-Enabled
Services exist throughout a company's business operations, also known as
the "value chain":

+-----------------------------------+-----------------------------------+
| **Process**                       | **Potential IT-Enabled Service**  |
+===================================+===================================+
| Product Development               | Market research, data gathering   |
|                                   |                                   |
|                                   | Data mining and analysis          |
|                                   |                                   |
|                                   | Engineering design                |
+-----------------------------------+-----------------------------------+
| Production, Service Delivery      | Pre-production; layout and        |
|                                   | graphic design                    |
|                                   |                                   |
|                                   | Data conversion                   |
|                                   |                                   |
|                                   | Publishing                        |
|                                   |                                   |
|                                   | Records and transcriptions        |
+-----------------------------------+-----------------------------------+
| Distribution, Sales and Marketing | Logistics, inventory tracking     |
|                                   |                                   |
|                                   | Sales support                     |
|                                   |                                   |
|                                   | Content, web development          |
|                                   |                                   |
|                                   | Outbound marketing, e.g.          |
|                                   | telemarketing                     |
+-----------------------------------+-----------------------------------+
| Customer Service                  | Customer care, e.g. call centers  |
|                                   |                                   |
|                                   | Insurance claims                  |
|                                   |                                   |
|                                   | Technical support                 |
|                                   |                                   |
|                                   | E-mail help                       |
+-----------------------------------+-----------------------------------+
| Finance, Accounting and Legal     | Data capture, conversion,         |
| Administration                    | processing                        |
|                                   |                                   |
|                                   | Billing, payables, general ledger |
|                                   |                                   |
|                                   | Record keeping                    |
|                                   |                                   |
|                                   | Transcriptions                    |
+-----------------------------------+-----------------------------------+
| Human Resources Administration    | Data, forms handling and capture  |
|                                   |                                   |
|                                   | Training, including remote        |
|                                   | education                         |
|                                   |                                   |
|                                   | Payroll processing                |
|                                   |                                   |
|                                   | Employee benefits services        |
+-----------------------------------+-----------------------------------+

Outsourcing of IT business processes became more realizable with
telecommunications costs rapidly decreasing in various areas of the
globe, combined with broadened bandwidth to transmit abundant amounts of
data. IT-related outsourcing grew specifically from budget constraints
and the need to free higher-skilled professionals for strategic
projects. The industry grew at a quick pace and to a high level during
the Y2K and Euro conversions of the late 1990's, when India became a
prominent player and leader in this arena as a low-cost labor provider
(of programmers). With experience, acceptance for offshore outsourcing
has grown and the types of work being outsourced have become more
diverse.

### 

With years of experience in offshore outsourcing, corporations have
become more knowledgeable of the pros and cons in sending business
processes and IT projects overseas[^5]:

+-----------------------------------+-----------------------------------+
| **Advantages**                    | **Disadvantages**                 |
+===================================+===================================+
| -   Significant savings in labor  | -   Additional upfront costs      |
|     costs                         |     because of distance           |
|                                   |                                   |
| -   Time zone differences --      | -   Time zone differences, can be |
|     increases work hours          |     difficult to manage           |
|     (shortens production cycle)   |                                   |
|                                   | -   Corporate and country culture |
| -   Corporate and country culture |     differences                   |
|     differences                   |                                   |
|                                   | -   Communication difficulties    |
| -   Qualities of skills           |                                   |
|                                   | -   Contract jurisdiction if      |
| -   Motivated workers who are     |     litigation becomes necessary  |
|     career-oriented (lower        |                                   |
|     turnover)                     |                                   |
+-----------------------------------+-----------------------------------+

While telecommunications infrastructure and low-cost labor have enabled
IT and ITES across the globe, the issues surrounding the management of
offshore outsourcing relationships remain. Communication and culture
differences are unique factors involved in knowledge- based industries,
in which the end customer's expectations need to be clearly understood
by the vendor. Companies are realizing with experience the importance of
selecting the right vendor, of a properly structured contract, and the
ongoing management of the outsourcing relationship.[^6]

## Factor Requirements to be Competitive

Forty-four percent of companies surveyed by The Outsourcing Institute
ranked "vendor selection" as the most important element for successful
outsourcing. The Institute's IT Index 2001, a survey of participants in
IT outsourcing, details the Top Factors in Vendor Selection, in order:

-   *Price:* Offshore providers can typically rely on less expensive
    labor and pass these savings on to their customers. Savings range
    from 30% to 60% of those in the United States.

-   *Commitment to quality:* An outsourcing provider's track record in
    its industry -- backed by measurable results, references and/or
    international certification -- becomes a key factor in whether or
    not it gets the business. To ensure quality, companies have
    increasingly included and monitored defined service level standards
    within their contracts.

-   *Flexible contract terms:* The processes for outsourcing are
    typically standard and routine. However, flexible contract terms
    often work best in the buyer's favor. Vendors might find themselves
    at a competitive disadvantage if flexibility is not demonstrated.

-   *Scope of resources:* Outsourcing firms with breadth of resources in
    up-to-date technology and supply of skilled labor possess
    competitive advantages over others. Reinvestment of profits to keep
    up with current infrastructure and subject matter expertise becomes
    necessary for outsourcing firms to sustain growth.

-   *Additional value-added capability:* The constant advance of
    technology requires outsourcing firms to expand their capabilities
    to meet their customers' IT and information management needs. Since
    customers rely on outsourcers for their subject matter expertise
    (acquired from the outsourcers' investments in current technology
    and training), the ability to provide varied levels of capabilities
    also becomes an outsourcer's strength.

When customers seek ITES offshore outsourcing suppliers, the supplier's
country location often does not play a primary role in the customer's
choice.

Country-related factors for competitiveness could be viewed as:

+-------------------------------+--------------------------------------+
| **Basic Requirements**        | **Positive Factors**                 |
+===============================+======================================+
| -   Established ICT           | -   Low or declining ICT             |
|     infrastructure            |     infrastructure costs, e.g.       |
|                               |     telecommunications costs,        |
|     -   Specifically, enabled |     consistent with the regional or  |
|         connectivity with the |     world market                     |
|         international         |                                      |
|         customer              | -   Reliability, e.g. high to 100%   |
|                               |     uptime of telecommunications,    |
|                               |     power supply                     |
|                               |                                      |
|                               | -   Varied choices for connectivity  |
|                               |                                      |
|                               | -   Fast service delivery from       |
|                               |     providers                        |
|                               |                                      |
|                               | -   Supporting infrastructure, e.g.  |
|                               |     transportation, housing          |
|                               |     complexes, tourist facilities    |
+-------------------------------+--------------------------------------+
| -   Supply of workers         | -   Availability and continuity of   |
|                               |     supply                           |
|     -   Low labor costs       |                                      |
|                               | -   Subject matter expertise already |
|     -   Relevant skills       |     in place, to reduce training     |
|                               |     time and costs                   |
|     -   Training aptitude     |                                      |
|                               | -   Language proficiency in host     |
|                               |     company's language               |
|                               |                                      |
|                               | -   Similarity or familiarity with   |
|                               |     host company's business          |
|                               |     practices and/or customer        |
|                               |     expectations                     |
|                               |                                      |
|                               | -   Visible educational support, to  |
|                               |     ensure supply of workers         |
|                               |                                      |
|                               | -   Benchmarked competency or        |
|                               |     proficiency levels, e.g.         |
|                               |     certifications or international  |
|                               |     exams and competitions           |
|                               |                                      |
|                               | -   Reasonable labor union framework |
+-------------------------------+--------------------------------------+
| -   Business environment      | -   Tax incentives local suppliers   |
|     conducive to              |     of IT and ITES                   |
|     international customers   |                                      |
|                               | -   Simplified customs procedures    |
| ```{=html}                    |                                      |
| <!-- -->                      | -   Foreign investment privileges    |
| ```                           |                                      |
| -   Stable country risk       | -   Intellectual property rights     |
|     conditions (peace and     |     protection; anti-piracy laws and |
|     order, political          |     enforcement                      |
|     environment)              |                                      |
|                               | -   Presence of successful foreign   |
| -   For higher end IT and     |     enterprises and business         |
|     ITES -- intellectual      |     partnerships                     |
|     property rights           |                                      |
|     protection                | -   Transparency; low level of       |
|                               |     corruption                       |
| -   Reasonable or competitive |                                      |
|     costs and ease of doing   | -   Minimal "red tape" and           |
|     business                  |     bureaucracy                      |
|                               |                                      |
|                               | -   Open market policies by the      |
|                               |     government, visibly being        |
|                               |     practiced                        |
|                               |                                      |
|                               | -   Favorable living conditions for  |
|                               |     ex-pats; hospitality for         |
|                               |     visiting business partners       |
|                               |                                      |
|                               | -   Legal and regulatory framework   |
|                               |     with processes that do not pose  |
|                               |     undue risk for foreign investors |
+-------------------------------+--------------------------------------+

#### The Philippine Example

The Philippines is a recent entry into the market for ITES. The
Philippine Board of Investment estimates that the ITES industry produced
\$349 million in revenues in 2001 (approx. 1% of exports). Growth is
projected to be at 68% annually, to an industry size of \$1.65 billion
in 2004. This figure amounts to about 18% of what India has projected
for its ITES exports of \$9 billion in revenues by 2004.[^7]

With a number of similarities to Bangladesh, the development of this
market in the Philippines can provide a model of how to enter this
market. While India has held a commanding lead for years, the
Philippines is only now showing its capabilities in various areas of
ITES -- and has been actively promoting its competitive advantages to
the international market. The Philippines also shares with Bangladesh a
few less favorable factors -- including a poor country image, low GDP
per capita, population density and unpredictable political shifts. In
NASSCOM/McKinsey's recent ITES study, the Philippines ranked low in both
"Country Attractiveness" and "Capability of Workers."

Declining telecommunications costs and the country's inherent strengths
in its English-speaking and service-oriented labor force, helped the
country to generate business in the American and English-speaking market
for outsourcing. Based on an articulated strategy by the IT and
E-Commerce Council (ITECC), a partnership organization composed of
public and private sector representatives, the Philippines began to
focus on its advantages and to target specific ITES segments in which to
compete.

In terms of the enabling environment, the public and private sectors of
the Philippines have made significant advances in creating a more
favorable and optimal location for IT and IT-Enabled Services. These
positive effects are becoming more evident, in terms of increased
employment and foreign investment, although the country is still in the
early stages of finding its competitive niche in the market.

# 3. Bangladesh Market Advantages and Disadvantages

Bangladesh firms enter this market at a serious disadvantage over firms
from countries already engaged in this industry. The U.S. Trade Center
in Dhaka serves as a resource for American companies conducting business
(specifically, selling American goods) in Bangladesh, and publishes the
Bangladesh Commercial Country Guide[^8] for those considering it. The
Guide paints an unfavorable general picture of Bangladesh as a country
in which to do business. When competing in a global market where there
are abundant choices of countries and companies as providers, the lack
of awareness and poor opinions regarding Bangladesh are obstacles that
require significant effort to overcome.

The market analysis of this study indicated that most companies overseas
lack awareness of Bangladesh as an IT services provider. According to
Bangladeshi software company representatives who attended the CeBIT
telecommunications and IT trade show in Germany, "surprise" is the
frequent reaction of customers upon hearing of Bangladesh's efforts to
supply IT services. Conversations with IT managers in the United States
also reflect this lack of awareness of the country's business
capabilities as a whole.

Any analysis of the advantages of Bangladesh firms in this market should
consider their position in the basic factors that contribute to success
in this market. For this study, these include the costs and efficiency
of production, the ability to deliver a high quality product, and the
general business environment within which the companies operate. Other
market advantages are possible, such as a significant monopoly position
in a market, or unique intellectual property that makes firms
competitive. However, there appears to be little indication that
Bangladesh firms possess such market advantages.

## Costs and Efficiency

The ability to operate at low cost is vital for competition in this
sector, and is widely perceived as the major advantage that Bangladesh
firms have. The major factor in the cost of operation in the ITES sector
is labor, and Bangladesh generally has very low labor costs.

Informal information collected during this study indicates that educated
computer literate workers for data entry positions would cost about
\$2,000 per year. University educated computer professionals are
available for about \$6,000 per year. These salaries are competitive
with the other major ITES exporting countries.

In the survey of Bangladesh stakeholders conducted by this study, low
labor costs were considered their major advantage over Indian IT firms.
The following figure indicates that all segments of the survey felt that
Bangladesh labor costs were competitive, particularly among nonresident
Bangladeshis and among firms in the ICT field.

![](media/image3.wmf)

While low labor costs are considered one of the major advantages of
Bangladesh, its high cost of communications is considered a problem.
Wired telephone service in the country is still being provided by a
state owned telephone monopoly, the Bangladesh Telegraph and Telephone
Board (BTTB). Cell phone service through four competitors has now
exceeded the number of land lines, which are only 500,000 lines for a
country of 130 million.

Because of the unreliable and low capacity international service, most
international data links are through satellite service, which is much
more expensive than undersea cables. As the following table indicates,
the cost of data communications in Bangladesh far exceeds that of its
potential competitors.

Typical Annual Cost for a 64kbps Business Data Link

+-----------------------------------+-----------------------------------+
| **Country**                       | #### Costs                        |
+-----------------------------------+-----------------------------------+
| USA                               | \$1,200                           |
+-----------------------------------+-----------------------------------+
| India                             | \$5,000                           |
+-----------------------------------+-----------------------------------+
| Philippines                       | \$5,900                           |
+-----------------------------------+-----------------------------------+
| Pakistan                          | \$8,000                           |
+-----------------------------------+-----------------------------------+
| Bangladesh                        | \$12,000                          |
+-----------------------------------+-----------------------------------+

> Sources:
>
> http://www.connectbd.com/forms/dsl1.html (Bangladesh 64kbps DSL)
>
> http://www.paknet.com.pk/tariff.htm (ISDN 64kbps)
>
> http://internet.vsnl.net.in/offers/vpn.html (India VPN with 64bps):
>
> http://www.unet.net.ph/rates.html (Philippines leased 64kbps)

Although data transmission by private satellite is permitted, voice
transmission is not. This puts Bangladesh at a further disadvantage
against potential competitors. In India, starting in April of 2002,
international consumer voice communications via the public Internet is
legalized, though Internet service providers seeking to offer such a
service will need to have their operating licenses amended. In
Bangladesh, the practice of providing voice via the Internet,
technically known as Voice over Internet Protocol (VoIP), is reportedly
widespread but illegal.

VoIP is prohibited to protect the revenue stream of the national
telephone fixed-line monopoly, the BTTB. Surpluses from this revenue
stream are reportedly used for a variety of purposes, including
reinvestment in telecommunications infrastructure, but also including
direct contributions to the national Treasury.

In addition to benefiting ordinary citizens, access to VoIP can greatly
reduce the cost of doing business for IT Enabled Services firms who must
communicate with their international customers. The experiences of other
countries around the world indicate that the increases in revenue
through VAT and other taxes on expanding business activities, as well as
income taxes on employees, will greatly outweigh the loss in direct
revenue from a protected international voice monopoly.

## Productive capacity

Bangladesh firms must be able to deliver ITES services in the quality
and quantity demanded by the market. As with costs, there are a number
of issues involved. The two primary issues are with the quality of
labor, and the levels of connectivity with the international market.

Although Bangladesh has a very large population, the supply of skilled
labor for the ITES industry is in question. Internationally, Bangladesh
compares poorly with its neighbors in education and human capital. In a
competitive market the market place seeks to find a demonstration of the
skills of the work force. As the degrees offered by one institution may
not be comparable to another an external measure is sought by those not
in the 'developed nation' category.

Such external measures are:

-   Results on internationally recognized examinations (i.e. Japanese IT
    exam)

-   Proven on job experience with graduates

-   Success stories

-   Certification through internationally recognized programs (i.e.
    MicroSoft, Oracle certification)

-   TOEFL scores for English proficiency

-   Credibility (experience and expertise) of Faculty

-   Results of consultancy comparative analysis (Gartner Group, PERC)

-   Results of 'perception' surveys

Some interesting comparisons illustrate where Bangladesh stands with
respect to other nations. The challenges section also shows that its
challenges are not unique to Bangladesh. In particular these problems
associated with brain drain and recruitment and retention of qualified
instructors appear problematic to many developing nations.

**a) Education Rankings:**

Political and Economic Risk Consultancy (PERC) rankings for Asia: The
criteria for this assessment included quality of local education, cost
of production labor, availability of production labor, cost and
availability of highly qualified staff, proficiency in English, and
overall skill of the labor force. Though China and India were not rated
high, they both have massive pools of skilled manpower, which have
endowed them with potentials of becoming formidable rivals. According to
Political and Economic Risk Consultancy (PERC) all the prosperous
countries of Asia have heavily invested in education which chiefly
accounts for their success.

Note below: Bangladesh does not make even the bottom tier of the
rankings throughout Asia.

  ------------------------------------------------------ ----------------
  **Country**                                            **Ranking**

  South Korea                                            1

  Singapore                                              2

  Japan                                                  3

  Taiwan                                                 4

  India                                                  5

  China                                                  6

  Malaysia                                               7

  Hong Kong                                              8

  India                                                  9
  ------------------------------------------------------ ----------------

b)  **Literacy Rankings:**

Bangladesh is far behind other nations. Literacy is a starting point for
the development of the basic skills required just to enter the ITES
entry level training.

  ----------------------------------- -----------------------------------
  **Country**                         **Literacy rate**

  Bangladesh                          51.3%

  Philippines                         94.8%

  China                               82.8%

  Thailand                            95.0%

  Malaysia                            86.4%
  ----------------------------------- -----------------------------------

Source: Although several statements of the Bangladesh literacy rate are
published, this is the highest figure the author has seen and comes from
ITU Asia 2000 conference.

The analysis of existing capacity indicates that basic education
(literacy, primary /secondary education) and access to ICT
infrastructure are significant barriers to joining the ITES workforce.
It is difficult to imagine a skilled ITES workforce without the basic
education to utilize ICT and access to the very ICT infrastructure on
which those services depend.

Virtually all countries with a strong IS/IT and ITES sectors also have a
primary and secondary school education system which recognizes the
importance of educational opportunities starting at the primary level.
An analysis of literacy rates, computer literacy rates indicate that
Bangladesh faces a significant challenge.

There are 11 Public Universities with an estimated 2001 intake enrolment
of 1630 students. This includes National University with 20 colleges and
BITs of which there are 4. In addition there are 16 private Universities
with an estimated intake enrolment of 2370 students. There are 28
Polytechnic Institutes (both public and private) with enrolment of
approximately 1100.

  ----------------------------------- -----------------------------------
  **Institution**                     **2001 Enrolment \***

  Public Universities                 1630

  Private Universities                2370

  Polytechnics                        1120

  Total                               5,120
  ----------------------------------- -----------------------------------

\* Source: preliminary draft of the ICT Task Force Report

There also exist a large number of privately run training institutes. An
estimated 10K students are enrolled in these institutions. Some are
franchise operations with a parent organization in the UK, USA, Canada,
India, Australia and elsewhere. These franchisees have access to a
curriculum developed and maintained elsewhere. There is little
uniformity in standards as the quality of instruction and facilities is
unknown.

Institutes not associated with a parent organization provide curriculum
developed by themselves.

Additionally some institutes provide international vendor certification
such as Microsoft, Cisco and Oracle. Such certification requires the
passing of an internationally recognized examination and carries a
degree of credibility with it. Some institutes offer lower end training
in Microsoft Word etc. Training Institutes are the subject of some
criticism due to the lack of standards in curriculum, instruction and
results.

Bangladesh businesses appear to provide a typical amount of on the job
training. The international standard for on the job training for new
hires is 3-6 months. In addition virtually all multi-nationals invest
significantly in upgrading of skills in a variety of areas for existing
employees in order to keep them current. The private sector is well
positioned to determine its own needs and provide the necessary on the
job training relevant to its own business.

Despite limitations at the primary/secondary education level there still
exists a pool of resources trained in ICT related fields. Preliminary
estimates from the ICT Task Force indicate that approximately 5000 IT
professionals exist in the country. The ICT Task Force points out that
most have degrees in fields other than ICT and have taken ICT training
through a variety of methods including on the job training. The growth
in interest in ICT and indeed the expectations of students that ICT
training will produce economic benefits has led to a rise in enrolment
in training institutions of all kinds.

#### Telecommunications

In addition to labor issues, Bangladesh industry suffers from a poor
telecommunications system. Access to the Internet, inexpensive
international voice communications, and reliable and affordable
electricity are an absolute minimum requirement in order to perform ITES
services. The quality and cost are inextricably linked to the ability of
the country to compete for work in this rapidly growing and fiercely
competitive market.

Depending on the type of ITES work being performed the
telecommunications needs vary greatly, but what remains consistently
necessary is the ability of the workforce to "connect" to the work when,
how and where required, meeting deadlines and not failing to deliver.
For some ITES product lines, data and voice access through the
copper-based local loop may prove important. To download the large data
files, local companies must have access to lines of excellent quality
and low price. Circuits must be "noise free," i.e. not prone to static
when in contact with rainwater or other disturbances due to frayed
insulation or poor connections to switching equipment. Switching
equipment and routing among telephone exchanges must be clean, in a
fashion generally made available through digital equipment. The status
of the local loop is dependent upon a capital investment program for
regular maintenance and renovation.

The existing national telecommunications infrastructure in Bangladesh is
currently only able to support the most rudimentary of ITES services.
This would include ITES services most reliant on manual labor, least
sensitive to downtime and poor quality, high cost telecommunications.
Bangladesh has one of the world's worst teledensities (5 phones per
thousand people), and aside from the cellular networks, the national
fixed network and all international voice traffic is owned and run by
the state monopoly BTTB.

Internet Service Providers play a large role in laying the foundations
for a successful environment where ITES services can grow and succeed.
ISPs not only provide the "pipes" required to connect the workers to the
work, but provide a wide range of associated services which are required
to run an efficient and safe network. Network security, backup and
restore, design, and hardware and software maintenance and provisioning
are all necessary and required services that an ITES company must either
manage themselves or outsource.

From interviews and previous reports the following examples illustrate
the current situation encountered by an entrepreneur looking to develop
an ITES business.

-   No fixed telephone lines are available. The national network is
    completely saturated and no businesses can be attracted to the area
    if they require fixed telephone service from the national monopoly
    BTTB. There is no transparency in the ordering and delivery of
    telephone lines.

-   No leased line service is available from the BTTB

-   The GSM cellular networks are very competitive and service is of a
    very high quality. Costs average out to \$0.10/minute all over the
    country and there are four networks to chose from.

-   Internet service is currently available from a large number of
    Internet Service Providers who get the service from satellite
    providers on the international market and resell this capacity to
    their customers over telephone lines. A telephone line is required
    to get service from a Bangladeshi ISP. There are a few ISPs who use
    wireless radio modems and coaxial cable to deliver their services,
    but the zones that are covered are restricted to the centers of the
    capital city and the legality of their service is under question.

-   National network services have no quality of service guarantees and
    there is no recourse or reimbursement in the case of network
    outages.

-   International calling rates to and from Bangladesh are some of the
    highest in the world.

-   Only one monopoly international voice carrier, BTTB.

-   Internet service via satellite is expensive in Bangladesh. The main
    reason for the high price of VSAT Internet is that VSATs are
    expensive due to the high cost of SAT bandwidth. No \"on the
    ground\" aggregator of BW is in the wholesale business so each
    end-user gets a contract directly with a VSAT company and no
    "interconnection" or "peering points" currently exist.

## General business environment

The environment for doing business in Bangladesh is considered very
poor. The policy and regulatory environment is not supportive of such
businesses, and the government is often accused to being bureaucratic
and corrupt.

The general perception of this environment is reflected in the responses
of the non-resident Bangladeshis to the study's opinion survey. Although
familiar with developments in Bangladesh, most are not involved in
business dealings there.

  -------------------------------------------------------------------------
                               **Yes**        **No**         **No Reply**
  ---------------------------- -------------- -------------- --------------
  Do you do business in        20.55%         70.78%         8.68%
  Bangladesh?                                                

  Are you familiar with trends 56.16%         35.16%         8.68%
  in ITES in Bangladesh?                                     

  Have you helped develop      26.03%         65.30%         8.68%
  business ties with the US?                                 
  -------------------------------------------------------------------------

NRBs already doing business with more developed countries (U.S., U.K.,
Australia, Singapore, Japan) have mostly negative perceptions regarding
Bangladesh's competitiveness. Most common responses outlined the
following problems with doing business in Bangladesh:

-   Government

    -   Rampant corruption and bureaucracy

    -   Lack of knowledge, understanding and support for IT

    -   Unfriendly business practices, both for entrepreneurs and
        foreign companies

    -   Political instability; intolerance between political parties;
        hartals or strikes damaging to country's operations and
        reputation

    -   No partnership between public and private sectors

    -   No evident influential leader to initiate and support IT efforts

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-   Infrastructure

    -   Costly and inadequate telecommunications

    -   Power supply not reliable

-   Human resources

    -   Can't meet quality standards of the developing world

    -   Poor or declining English capabilities

    -   Lack of understanding of IT benefits, so hesitation to implement
        IT programs in business

    -   Lack of commitment; lack of knowledge of western business
        practices

-   Financial systems

    -   Not developed to support IT projects

    -   Lack of foreign investment

```{=html}
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```
-   Poor country image

    -   Known as disaster area, low value-added exports (e.g., garments)

    -   Lack of marketing, awareness

    -   Lack of knowledge of overseas customer expectations

NRBs also do business in several other countries, including the United
States and Canada; United Kingdom and Europe; Australia, Japan, China,
Thailand, Malaysia and Singapore; Kuwait, Saudi Arabia; India and
Pakistan. In making international comparisons, the NRBs were quite
harsh:

-   "No comparison; can't compare" -- Bangladesh is "100 years behind"

-   Infrastructure, especially for the internet, is superior overseas

-   Business practices -- high productivity; market-driven and
    profit-oriented policies and practices in other countries vis-à-vis
    Bangladesh

-   Little bureaucracy and red tape; government is pro-business and
    promotes entrepreneurship

However, those that work in south Asia, Africa and the Middle East
stated that Bangladesh demonstrates similar technologies and business
practices to these areas -- with the exception of India.

Public policy plays a major role in the development of a good business
environment. The government has recently taken several steps to improve
this situation. Recent work on an IT action plan was a positive step,
and the government has promulgated a number of progressive polity
statements. In addition, several positive steps have been taken,
including:

-   The elimination of duty on hardware and software means that the
    Government is treating these goods as investment inputs.

-   A business-tax holiday for all firms, including those investing in
    new ventures in the IT-enabled services sector, starting from the
    date of commercial production, is a significant encouragement to
    investment. Leading competitors of Bangladesh, including India and
    the Philippines, offer similar incentives to their firms.

-   In a highly unusual move, the Government has greatly liberalized
    international access to telecommunications services. Licenses for
    Very Small Aperture Terminal (VSAT) satellite systems have been
    granted to a large number of firms in Bangladesh, in particular to
    Internet Service Providers (ISPs).

-   In yet another unusual move, the Government has permitted ISPs to
    bypass the copper-based telephonic local loop through the use of
    specialized radio equipment (see
    [http://www.breezecom.com](http://www.breezecom.com/) for a typical
    equipment vendor).

-   Numerous licenses have been granted to cellular telephone operators,
    representing direct competition with the Government's own
    copper-based voice telecommunications system.

These and other positive developments represent movement in the right
direction for the IT-enabled services sector. Nevertheless, a number of
important policy hurdles remain. For the IT-enabled services sector,
some more than others are critical to success.

Nevertheless, the non-resident Bangladeshis were critical of the
government involvement in this sector. In addition to the list below,
many respondents added that the government "should stay out of the way
of businesses and entrepreneurs" -- i.e., once the infrastructure and
logistics are resolved by the government, market forces should be
allowed to take over unobstructed.

-   Infrastructure, logistics

    -   Dismantle BTTB

    -   Truly liberalize telecommunications -- implement an independent
        regulatory commission

-   General business climate

    -   Promote political stability, peace and order

    -   Adopt business-friendly policies that promote foreign direct
        investment

    -   Increase transparency; reduce corruption

    -   Offer tax breaks and incentives for local businesses, foreign
        investors

    -   Implement IPR policies

-   Marketing

    -   Establish U.S. trade promotion office, in conjunction with IT
        trade associations

-   E-governance

    -   Implement IT projects with preference to local IT firms

# 4. A Bangladesh ITES strategy

Entering a new market such as ITES is always difficult, even more so
with strong competitors from other countries. The Bangladesh IT sector
is not currently competitive in the global ITES market. Its only clearly
identified market advantage is in low cost labor. However, this is
balanced against high communications costs. Moreover, low cost is not a
sufficient advantage if potential buyers are not confident of the
ability of Bangladesh firms to deliver a high quality product.

It is important to recognize that with no fundamental market advantage,
firms and the government of Bangladesh must be prepared for a relatively
high risk and long-term growth strategy. It is high risk because
Bangladesh is not likely to be able to seize much of this market without
beating competitors who are currently in better position. It is a
long-term growth strategy because beating those competitors will require
steady and constant improvements in the capacity and marketing of
Bangladesh firms.

The strategy must also be opportunistic, taking advantage of any
openings in the market that present themselves. While there are
promising segments in the market, Bangladesh firms must remain flexible
in their focus. One of the advantages of a new market entrant is that
they can react to market opportunities faster than firms already
entrenched in the market. Bangladesh cannot afford to give up this
advantage.

Bangladesh firms will also require considerable support from the
government, donors, and any other sources available. At a minimum, the
government must create a general business environment conducive to this
venture into a new market. The government can also be useful in
stimulating growth in the capacity of IT firms, and in marketing that
capacity internationally.

A reasonable strategy for Bangladesh entry into the ITES market includes
a number of components:

-   Target segments of the industry where Bangladesh has a comparative
    advantage, but remain flexible in the search for growth prospects.

-   Improve the deficiencies of the Bangladesh IT industry to make it
    more competitive.

-   Market the sector well to overcome the unfamiliarity of the market
    with Bangladesh products.

Each of these components is discussed in detail below.

The Philippines provides an example of a coordinated public and private
strategy that is beginning to yield some success. While the Philippines
appears to be gaining momentum in strengthening its competitive position
as a supplier of ITES, the country is still developing this industry and
its export potential. Strategic actions that have proved useful include:

Action: Liberalize telecommunications industry

*Results*: Lowered costs, enabled IT industry; increased company
competitiveness; increased foreign investment

Action: Focus on unique competitive advantages\
*Results:* Differentiation from other competitor countries

Action: Government provides institutional support

*Results:* Open market policies encourage foreign investment; marketing
the country as government's role

Action: Public and private sector partnership\
*Results:* Aligned objectives and tactics; united message to market the
Country

While still behind and lesser-known than India, the Philippines offers
several possible best practices to Bangladesh with its efforts to
formulate, articulate and implement its strategies for becoming a
"Supplier Country of Choice".

## Potential ITES Market Segments

The ITES market consists of a large number of segments, each with their
own requirements. Some high-end segments, such as programming and web
design, require special skills that are in short supply in Bangladesh.
Other segments, including call centers and technical support, require
real-time communications, which would be problematical with the current
infrastructure of Bangladesh.

Bangladesh has the greatest opportunities under current conditions in
market segments requiring low cost workers with only general computer
skills, and without a requirement for real-time communications. This
does place significant restrictions on areas of focus. In the opinion
survey, many of the NRBs suggested segments for Bangladesh to target.
However, they also admitted a lack of knowledge in this area:

-   Software development

    -   Quality assurance

    -   Smaller-scale applications or software modules

    -   Projects must be well-documented for offshore development

-   Data entry

    -   Documentation data entry

    -   Back office processing

    -   Bill preparation, accounting

-   Digitizing and conversion

    -   CAD CAM, assisted conversion

    -   Blueprints

    -   GIS

-   Web development

-   Database management

-   Transcriptions

-   Call centers, specifically for IT-related, hardware or technical
    support

This study also did an extensive review of several promising segments of
the market. An analysis of these segments is included in the annexes to
this report. A summary of these analyses is included in the following
table.

It seems clear that the Bangladesh IT sector will have to start with the
lower end market segments that make best use of their advantage in low
cost labor. However, this generalization can hide a wide variety of
market efforts from individual firms. The study revealed several
Bangladesh firms involved in international markets in software
development, graphics, medical transcription, and other areas.

As each firm develops its own comparative advantages, the country's ITES
strategy should be receptive to emerging opportunities. Accordingly, the
strategy should not adopt provisions that are specific to a particular
market segment. For example, public assistance with training or
marketing should not focus on specific areas such as transcriptions or
animation. Rather, public support should be forthcoming for any market
segment in which a firm can demonstrate a market opportunity.

**Competitive Position of Bangladesh in ITES Segments**

+--------+-------+-------------------------+-------------------------+
| **Seg  | **    | **Enabling Factors**    | **Limiting Factors**    |
| ment** | Bangl |                         |                         |
|        | adesh |                         |                         |
|        | P     |                         |                         |
|        | otent |                         |                         |
|        | ial** |                         |                         |
+--------+-------+-------------------------+-------------------------+
| Data   | **Med | Abundant supply of      | Telecomm infrastructure |
| Proc   | ium** | lower-skilled,          | -- low margins require  |
| essing |       | production-oriented     | low operating costs;    |
|        |       | workers; short training | industry moving towards |
|        |       | time;                   | images not paper --     |
|        |       |                         | demands on bandwidth    |
|        |       | Large overseas market   | becoming higher;        |
|        |       | with high growth rates  |                         |
|        |       |                         | Crowded industry        |
|        |       |                         | becoming very           |
|        |       |                         | competitive;\           |
|        |       |                         | Quality practices will  |
|        |       |                         | need to be learned      |
+--------+-------+-------------------------+-------------------------+
| Data   | **Med | Same as above           | Same as above           |
| D      | ium** |                         |                         |
| igitiz |       |                         |                         |
| ation, |       |                         |                         |
| Conv   |       |                         |                         |
| ersion |       |                         |                         |
+--------+-------+-------------------------+-------------------------+
| M      | **    | Available supply of     | Supply of workers with  |
| edical | Low** | workers proficient in   | English proficiency     |
| Tr     |       | written English;        | lower relative to       |
| anscri |       | relatively lower cost   | competitor countries;   |
| ptions |       | of labor                | these workers command a |
|        |       |                         | premium, and would      |
|        |       |                         | likely work elsewhere;  |
|        |       |                         | long training time      |
|        |       |                         | increases initial       |
|        |       |                         | investment; No viable   |
|        |       |                         | supply of workers       |
|        |       |                         | knowledgeable in        |
|        |       |                         | medical-related fields; |
|        |       |                         | lack of marketing       |
|        |       |                         | overseas                |
+--------+-------+-------------------------+-------------------------+
| Ani    | **Low | Supply of art           | Competitive market --   |
| mation | to    | graduates; low relative | other countries have    |
| &      | Med   | labor cost;             | strong head start       |
| Multi  | ium** |                         |                         |
| -Media |       | Short training time,    | Lack of domestic        |
|        |       | minimal investment in   | exposure to overseas    |
|        |       | equipment for 2D        | entertainment limits    |
|        |       |                         | creativity              |
+--------+-------+-------------------------+-------------------------+
| Geog   | **Med | Large, emerging         | Small domestic market   |
| raphic | ium** | international market    | limits training and     |
| Infor  |       | with few competitors;   | experience;             |
| mation |       | many linkages already   |                         |
| S      |       | made with US            | Equipment and software  |
| ystems |       | prospective customers;  | costly;                 |
|        |       |                         |                         |
|        |       | Supply of engineering,  | Telecomm infrastructure |
|        |       | math and science        | -- will require         |
|        |       | graduates;              | abundant bandwidth for  |
|        |       |                         | the international       |
|        |       | Opportunities for GIS   | market                  |
|        |       | experience with donor   |                         |
|        |       | community, universities | Quality practices will  |
|        |       | and government          | need to be learned      |
+--------+-------+-------------------------+-------------------------+
| So     | **Low | Supply of computer      | Small domestic market   |
| ftware | to    | science graduates;      | greatly limits          |
| Devel  | Med   |                         | experience and          |
| opment | ium** | Opportunities exist in  | expertise to develop    |
|        |       | niche markets (e.g.     | larger-scale projects   |
|        |       | Germany, Scandinavian   | and higher value-added  |
|        |       | countries), lower-end   | software services; lack |
|        |       | development for less    | of exposure to overseas |
|        |       | complex solutions       | business practices and  |
|        |       |                         | processes;              |
|        |       |                         |                         |
|        |       |                         | Telecomm infrastructure |
|        |       |                         | costly which diminishes |
|        |       |                         | labor cost advantages   |
+--------+-------+-------------------------+-------------------------+

## Building Productive Capacity

A useful strategy for building the productive capacity of Bangladesh
would have two main goals: increase the supply of skilled labor and
improve the communications system.

**Skilled Labor**

This study examined the levels of labor supply among several classes of
skills. While current supply is not severely constrained, shortages of
skilled labor could be a significant bottleneck to growth. Low skilled,
computer literate workers can be trained relatively quickly, but
higher-level skilled workers will require longer range planning and
investment.

+---------------------------+---------------+--------------------------+
| **Human Resources**       | **Current     | **Future Capacity**      |
|                           | capacity**    |                          |
| **skill level**           |               | **(assuming export       |
|                           |               | targets reached)**       |
+---------------------------+---------------+--------------------------+
| High end (systems         | Minor         | Major shortfall - Action |
| analysts, software        | shortfall     | required                 |
| architects, project       |               |                          |
| managers etc.)            |               |                          |
+---------------------------+---------------+--------------------------+
| Middle tier (s/w          | Adequate      | Adequate Capacity --     |
| programmers, specialized  |               | increase in line with    |
| animation and CAD         |               | demand                   |
| applications)             |               |                          |
+---------------------------+---------------+--------------------------+
| Low end (data             | Minor         | Can be ramped up with    |
| transcription, data       | shortfall     | minimal effort           |
| entry, low end animation) |               |                          |
+---------------------------+---------------+--------------------------+

The ICT Task force is recommending an increase in enrolment rates.
Additionally they have rightly attempted to categorize the skill level
and quantities required given an assumed target level of ICTES export.
It has also been identified by the private sector that there are
insufficient resources in some skill areas (high end) i.e. project
management, systems architects, software testers. The education system
struggles to upgrade computer skills but is challenged by the lack of
qualified staff, adequate facilities and low funding.

Meanwhile, the private sector reports that there are many more qualified
applicants than jobs. A typical response rate is 100 applicants with
perhaps 10-15 fully qualified for each position. This situation will
persist until there is economic growth in the sector.

Bangladesh has significant challenges in developing a competitive ITES
workforce but it also is making some significant steps in the right
direction

-   ICT task force in conjunction with private sector defining skill
    sets required, enrolment numbers and projected demand in conjunction

-   Private sector making recommendations on required curriculum

-   Some minimal internships / co-operative education opportunities
    supported by private sector

-   Move by some training institutions to offer international vendor
    certification courses

-   Some franchise training institutes providing internationally
    recognized curriculum, some ISO9000 certified (caveat concerning
    quality of instructors)

-   Private sector providing on the job training (OJT) in line with
    their needs

-   TechBangla facilitating NRB train the trainer sessions

A number of issues still remain in the education sector. A major goal is
to develop standards and certification that verify the skills of
Bangladesh workers. A comparison of international standards used in the
Philippines versus that of Bangladesh is as follows:

+--------------------------------+-----------------+------------------+
| **Int'l Standard**             | **Bangladesh**  | **Philippines**  |
+--------------------------------+-----------------+------------------+
| Vendor certification           | Yes             | Yes              |
|                                |                 |                  |
| (Cisco, Microsoft, Oracle      |                 |                  |
| etc.)                          |                 |                  |
+--------------------------------+-----------------+------------------+
| International examinations     | No              | Yes              |
|                                |                 |                  |
| (Japanese IT/Animation;        |                 |                  |
| Singapore Proj. Mgmt.)         |                 |                  |
+--------------------------------+-----------------+------------------+
| Included in Consultant         | No              | Yes              |
| rankings (PERC, META group,    |                 |                  |
| Gartner Group etc.)            |                 |                  |
+--------------------------------+-----------------+------------------+
| Included in expat perception   | No              | Yes              |
| rankings                       |                 |                  |
+--------------------------------+-----------------+------------------+
| University curriculum          | Yes             | Yes              |
| comparisons with N. America    |                 |                  |
+--------------------------------+-----------------+------------------+
| Examination benchmarking with  | No              | Yes              |
| N. American                    |                 |                  |
+--------------------------------+-----------------+------------------+
| Internships/co-op programs     | Some            | Some             |
+--------------------------------+-----------------+------------------+

This study's opinion survey showed strong support for the establishment
of skill standards for IT education. The need for better standardization
of skills in the industry was a common theme throughout the survey.

![](media/image4.wmf)

Other components of labor force improvement include:

-   While some private sector/educational institution partnerships
    involving work placements were found, more emphasis in this area is
    needed to produce a fully qualified workforce.

-   No training and educational professional organization or association
    exists. Such an Association could provide some self-regulating
    standards, advice for consumers, or public awareness campaigns.

-   Many ICT training organizations are using curriculum developed
    elsewhere (India, USA, UK) thus providing some measure of
    international credibility. The quality of the instructors and the
    instruction remain uncertain.

-   A number of organizations provide training as part of their business
    -- a high degree of vertical integration because the level of
    business is small. This requires firms to have a scattered focus. It
    is often the norm in an evolving sector that there are many entrants
    offering a variety of services. As the sector matures, typically
    organizations consolidate and businesses focus on their core
    competency and niche market. This helps increase both quality and
    efficiency. Bangladesh is still at the early stages of sector
    development.

-   The efforts of the IT task force to estimate HR capacity versus
    demand by job category is commendable. Such an analysis is critical,
    and the views and input of the private sector need to be referenced
    on an ongoing basis as demands shift. While the targeted demand is
    only an estimate (goal) it is never the less important to make such
    HR demand estimates versus various target levels.

In addition, there is poor information flow to consumers within the
education system. There is a gap evident in the expectations of those
entering ICT training institutions and the reality of the job market.
One ICT training organization reported a job placement rate of only 1 in
6. Students surveyed overwhelmingly suggested their motivation was to
get employment abroad. Moreover, firms considering institution graduates
for employment are unsure of the quality of education received by the
applicants.

The issue of consumer protection for the multitude of training
institutes is continually raised by a variety of stakeholders.
Certification of the quality of education and training would be a major
function for a professional training association. In the long run, this
independent measure of school quality, even if on a voluntary basis,
would allow market forces to distinguish the good performers from the
poor performers.

**Improved Communications Infrastructure**

This market requires good communications to function properly. Any
Bangladesh ITES strategy must include measures to improve
communications.

An important result highlighted in the study survey was that almost all
the groups believed that encouraging investment in information and
communication technology was a very effective method of developing this
market. This highlights a general opinion among the sample that
Bangladesh is disadvantaged in this sector by the lack of a good
communications technology infrastructure.

![](media/image5.wmf)

An appropriate vehicle for improving the communications system, and for
encouraging private investment in it, is the Bangladesh
Telecommunication Regulatory Commission (BTRC), which became operational
early in 2002 subsequent to the Bangladesh Telecommunications Act
gazetted in 2001.

The BTRC is mandated to promote competition (Paragraph 30 of the Act)
offer choices and lower prices to consumers as well as to businesses
that use telecommunications infrastructure as a critical input to their
products. In order to carry out this mandate, the BTRC is granted a
number or particularly important authorities:

-   The BTRC is charged with eliminating the cross-subsidization of
    competitive services from the revenues gained through the provision
    of monopoly services, such as voice loop revenues to subsidize an
    Internet services operation.

-   The BTRC has the authority to approve tariffs.

-   The BTRC can mandate interconnections among the providers of voice
    and data telephony.

-   The BTRC is the sole licensing authority for all telecommunications
    services, including those accomplished via wireless technologies.

The BTRC can take steps to remedy market failure. The Government of
Bangladesh had proposed to maintain its monopoly over copper-based voice
telephony in the local loop until the year 2010. However, there have
been some very recent signs that liberalization may occur sooner rather
than later.[^9]

One possible approach to overall telecom liberalization would begin with
the establishment of a national telephone company out of the current
BTTB, operating as a commercial monopoly enterprise wholly owned by the
Government. This would be followed by a gradual selling of shares in
this new company, first to strategic telecommunications partners and
then to the public. This privatized monopoly would then face eventual
competition, perhaps by 2010 as currently planned. These steps would be
in line with those taken by many other countries, including Pakistan,
where one local expert noted that teledensity once equal to that in
Bangladesh is now some 10 times better. The aim of the strategy would in
part be to secure a large initial payment to the national treasury,
followed by a liberalized private market for telecommunications
services, hopefully offering better service than the incumbent.

There are alternatives to the conventional strategy. Countries like El
Salvador have experimented with immediate liberalization -- the
immediate elimination of monopolies and the implementation of antitrust
regulations, including the breakup of existing monopolies. The sale of a
national telephone companies without the assurance of monopoly
protection might not result in as high an immediate return to the
national treasury, and for that reason might be politically more
difficult to accomplish. However, from a market development perspective,
this alternative strategy rightly focuses on the problem of
liberalization rather than privatization as the key to strong market
growth with lower consumer prices.

#### Building Domestic Capacity

In addition to improving labor and communications capacity, the
government can also promote the use of IT within the country as a way of
building the domestic capacity of the IT sector. One of the most direct
ways in which it can do this is to invest in developing e-government
capacities, particularly if it contracts with the local private sector
to deliver this product.

There was significant support for this activity among the survey. It is
noteworthy that the least support for e-government came from the
government officials, who presumably would be required to manage its
creation.

![](media/image6.wmf)

## Lowering Costs

While high costs is not a major issue with the Bangladesh IT sector, it
does have a significant problem with international communications. An
expectation among many in Bangladesh is that access to the world's major
trunk fiber network via an undersea cable will transform the
telecommunications market in Bangladesh, greatly reducing costs.

The Government of Bangladesh has decided to procure this cable through
its own telecommunications operator, the BTTB. According to plan, the
approval of financing, the survey of the cable route, and the
manufacture, installation, and testing of the system may be expected to
by the fourth quarter of 2003 or the first quarter of 2004.

Possible impacts on the information and communications technology
industry of Bangladesh include:

-   Significant reduction in telecommunications charges compared to the
    current costs for international VSAT links (perhaps as great as 50
    per cent)

-   Low cost, reliable data transfer for software exporters, call
    centers, banks, multinational corporations, foreign organizations,
    Internet service providers, and non-governmental organizations

-   Enhanced access to the global Internet

-   Higher usage levels as a result of higher data transfer speeds, e.g.
    to 64, 144, or 384 kilobits per second for typical subscription
    rates

An appropriate analysis of the probable impacts of a connection to such
an international telecommunications backbone would entail a look first
at the costs to the Government of securing a connection, and then at the
various successful pricing policies that have been implemented by
countries in similar circumstances around the world. Will the Government
of Bangladesh set prices based on a maximum short-term recovery of
investment costs, or will it favor a longer-term recovery of costs in
order to encourage rapid economic growth?

In either case, how will the local business community perceive these
prices and the quality of service with respect to available
alternatives? One knowledgeable local observer suggested that VSAT
satellite data links might very well prove to be a robust option even in
the presence of a connection to an undersea backbone. From a policy
perspective, how Government decides to price access to this new resource
will be critical. Availability of the resource is about two years away.

## Building a Competitive Environment

Virtually all stakeholders felt that the government should play a major
role in the development of an ITES sector. That role, almost
unanimously, was felt to be the creation of an environment in which the
private sector can invest in the infrastructure needed to develop the
sector.

![](media/image7.wmf)

The experience of the Philippines in developing a public and private
partnership for IT provides an example of the way in which a competitive
environment can be promoted. In that country, stakeholders created the
IT E-Commerce Council (ITECC). The organization combines the political
muscle of government officials, with the expertise of the private
sector. It should be noted, however, that (from interviews with
stakeholders) there was wide agreement that the government was slow to
react at first in focusing on the potential of IT and ITES. It was due
to repeated requests from private sector IT organizations that finally
gained the attention of government officials who eventually provided the
political determination to get organized and formulate a strategic
approach.

The ITECC falls under the Department of Trade and Industry, and is
headed by an Executive Director who holds a Cabinet-level post under the
President. The Committee is headed by the President Gloria
Macapagal-Arroyo, who has been credited for her focus on the economy
(she was an economist and former member of Congress). ITECC members
report that she indeed chairs the committee's monthly (now quarterly)
meetings, driving the agenda with her political promise to create over
100,000 high-value jobs by the end of 2002.[^10]

The Executive Committee under the President is composed of the
Secretaries of the Department of Trade & Industry (DTI) and the
Department of Science & Technology (DST), plus the Executive Director.
The Executive Committee is tasked with policy-making and planning for
the rest of ITECC.

There are many working sub-committees, including Infrastructure, Human
Resources, Business Development, e-Government, and Marketing and
Communications. The sub-committees are each co-chaired with a government
official and a volunteer member of the private sector. The Business
Development Committee, for example, is co-chaired by the Undersecretary
of the DTI and the Chief Information Officer of one of the largest
Filipino-owned conglomerates in the country. The Human Resources
Committee is co-chaired by the Department Chairman for Computer Science
in the University of the Philippines school system and the founder of
one of the largest chain of computer training schools. This arrangement,
demonstrating a public and private sector partnership, appears to be
working well for the ITECC in terms of aligning the goals of the public
and private sectors organizationally.

The ITECC wrote the "Internet Strategy of the Philippines" or ISP.com
that outlines the general issues concerning the committee for promoting
the IT and ITES industries in the country. As written on the Board of
Investments website, the committee set out to develop focused market
plan where Filipinos "can compete initially and immediately" in the ITES
industry, specifically by maximizing inherent advantages of human
resources.

In principle, the ITECC believes that the government's role is to
provide support in infrastructure, labor, financial, logistical and
legal/institutional means. However, development of the sector should be
left to the private sector -- that technology and markets are
"inherently ungovernable" and best if "left to do its thing".

There are several notable government incentives that have facilitated
the growth of local companies and foreign investment in the ITES
industry:

-   Philippine Export Processing Zones (PEZA) -- IT Parks in the country
    are typically owned and operated by the private sector

-   Tax Holidays for 4 to 8 years

-   Tax and duty free importation of machinery, equipment

-   Simplified flow of goods

-   Additional deductions for training expenses

-   Employment of foreign nationals made easier

## Marketing of Bangladesh ITES sector

For a new entrant in a market, marketing is a crucial, and somewhat
expensive, requirement in order to development some awareness of the new
product. The private sector in Bangladesh has made significant progress
in developing a marketing push through its industry associations. The
public sector, however, can also contribute to this effort.

However, the study survey indicated that even though all groups
supported government involvement in promoting Bangladesh industry, they
also felt that the private sector should be involved with a strong
association if its own. ICT firms in particular felt that an association
was crucial.

![](media/image8.wmf)

The Philippines provides an example of how this public/private
collaboration can take place.

The most visible effort of the ITECC and the Board of Investments in
promoting the industry is through the BOI's Center for International
Trade Expositions and Missions (CITEM; the CITEM director in charge of
the IT sector serves on ITECC's Business Development sub-committee).
CITEM has already sponsored two trade expositions in Manila, "e-Services
Philippines", which reportedly was well attended by Filipino service
providers (129 exhibitors) and other Filipino companies but not by
international prospects.

CITEM has also sponsored several trade missions to the USA, on a
cost-share basis with Filipino-owned ITES companies. In addition, CITEM
facilitated the participation of ITES companies in the Offshore
Outsourcing conference held in the United States in October 2001.

These missions were considered an effective means to create awareness
for the Philippines ITES industry. No contracts were agreed upon during
the missions; however, the trip generated sufficient interest as
evidenced by follow-up activities of companies inquiring about and
scheduling investigative trips to the Philippines (particularly for call
center vendors). Future trade missions are already scheduled for 2002,
including the conference for the American Medical Transcription
Association in Florida.

The Board of Investments in 2002 commissioned the Gartner Group to
produce a capabilities study of the ITES industry in the Philippines, at
the cost of \$60,000. The early results of the study (to be published
May 2002) confirm the country's strengths in call centers and BPO. The
study's costs were considered an effective investment considering the
influence and reach of the Gartner Group, and the resulting positive
outlook for two of the Philippines' target sectors.

#### Role of NRBs

A common perception of the success of India in this market is the role
that non-resident Indians play in marketing Indian firms. The survey
revealed that the NRBs do not play the role in Bangladesh that the
Non-Resident Indians are reputed to play. Major findings include:

-   NRB community is loose-knit. Although there are significant numbers
    of NRBs that stay in touch with each other and with the business
    community in Bangladesh, majority have only occasional connection
    with either community.

-   Harder view of Bangladesh as a competitor in IT and ITES, given
    their exposure to business environments in North America, Europe and
    Asia Pacific.

-   Believes low labor cost is only competitive advantage.

-   Strong opinions that the government has not fostered
    business-friendly environment with its control over infrastructure
    and levels of corruption.

-   Can play major role, specifically in knowledge transfer and
    marketing.

-   Investment is not a major contribution NRBs can make at this time.

Anecdotal information suggests that where non-resident Indians may have
achieved positions in foreign corporations that allow them to direct
business to Indian firms, non-resident Bangladeshis are not yet in that
position. Because they have moved into this sector later, most
non-resident Bangladeshis are working as engineers and programmers. Very
few have moved up the ranks yet to Vice President or above, or have
founded their own firms. In the future, non-resident Bangladeshis may
play a larger role in the success of the country in this sector. The
marketing efforts certainly should keep in touch with them and their
Associations in the future.

# 5. Recommended Actions

Implementing a complicated strategy to enter a new market is difficult
and involves a large number of steps that sometimes must be coordinated.
Recommendations for that strategy are listed here.

For ease of understanding, recommendations are grouped around major
components of an ITES market strategy. However, many recommended actions
will have impacts throughout the various facets of this sector.
Recommendations are grouped under:

-   Improving Productive Capacity

-   Lowering costs, improving efficiency

-   Marketing and Business Environment

-   Focusing on Growth

Many of the long-term components of the strategy are listed under the
growth category.

## Improving Productive Capacity

+----------------------------+-------------------+--------------------+
| **Actions**                | **Participants**  | **Possible         |
|                            |                   | Impact**           |
+----------------------------+-------------------+--------------------+
| 1\. **Develop              | Ministry of       | It is too early to |
| international standards    | Education,        | expect Bangladesh  |
| for education in IT**. The |                   | to score well on   |
| customer will look for     | Private sector IT | consultant survey  |
| some international         | association       | rankings- this     |
| standard by which to       |                   | should be a mid    |
| evaluate that workforce on |                   | term goal.         |
| external, not internal     |                   | Initially          |
| measures. It is therefore  |                   | Universities and   |
| recommended that metrics   |                   | training           |
| on the following standards |                   | Institutes must    |
| be maintained:             |                   | increasingly focus |
|                            |                   | on standards that  |
| -   Vendor certifications  |                   | will be recognized |
|                            |                   | by the             |
| ```{=html}                 |                   | international      |
| <!-- -->                   |                   | customer.          |
| ```                        |                   |                    |
| -   Results on             |                   | This information   |
|     internationally        |                   | will also serve as |
|     recognized exams       |                   | an element of      |
|                            |                   | Bangladesh ICTES   |
| -   Affiliations with      |                   | marketing.         |
|     internationally        |                   |                    |
|     recognized             |                   |                    |
|     Universities           |                   |                    |
|                            |                   |                    |
| -   Survey rankings        |                   |                    |
+----------------------------+-------------------+--------------------+
| 2\. **Support the ICT Task | Prof.             | Better             |
| Force** in defining skill  | J.R.Choudhury and | coordination of    |
| deficiencies and           | his team in       | the education      |
| supply/demand numbers.     | defining skill    | system and the     |
|                            | deficiencies and  | private sector     |
|                            | numbers of        |                    |
|                            | student enrolment |                    |
|                            | and projection of |                    |
|                            | demand.           |                    |
+----------------------------+-------------------+--------------------+
| 3\. **Develop programs for | Professional      | Institutes not     |
| informed consumer choice   | Training          | providing value    |
| in private training        | Institutes (some  | eventually become  |
| institutes.** It is        | of which are      | known to the       |
| recommended that a         | ISO9000           | public or do not   |
| consumer awareness program | certified). While | gain recognition   |
| provide students the       | some government   | within the         |
| information to select a    | control is        | industry.          |
| training institute         | attempted in      |                    |
| conforming to industry     | various           |                    |
| minimum standards.         | countries,        |                    |
| Typically in emerging      | consumer          |                    |
| sectors the 'pioneers' in  | education and     |                    |
| the sector are followed by | definition by     |                    |
| numerous other entrants    | industry of       |                    |
| attempting to copy the     | minimum standards |                    |
| success of the early       | is most effective |                    |
| entrants. It is in the     | in targeting low  |                    |
| interest of the industry   | value vendors.    |                    |
| to define standards for    |                   |                    |
| itself that will gain      |                   |                    |
| public confidence.         |                   |                    |
+----------------------------+-------------------+--------------------+
| 4\. **Create a Training    | Private sector    | Associations of    |
| Institution Association.** | firms.            | member             |
|                            |                   | organizations      |
|                            | BCS, ISP          | similar to BCS and |
|                            | Association       | the ISP            |
|                            |                   | association can    |
|                            |                   | play a valuable    |
|                            |                   | role in creating   |
|                            |                   | standards, giving  |
|                            |                   | accreditation to   |
|                            |                   | its members,       |
|                            |                   | helping to upgrade |
|                            |                   | the skill levels   |
|                            |                   | of all faculty and |
|                            |                   | creating a         |
|                            |                   | consumer awareness |
|                            |                   | criteria for       |
|                            |                   | Training           |
|                            |                   | Institutes.        |
+----------------------------+-------------------+--------------------+
| 5\. **Private              | A Training        | Typically such     |
| Sector-Education           | Association is in | consumer awareness |
| Dialogue.** Develop a      | the best position | programs might     |
| close relationship between | to prepare such a | provide knowledge  |
| the private sector and     | check list. The   | of selection       |
| educational institutions.  | experience in     | criteria such as:  |
| It is important that the   | other nations is  |                    |
| private sector make known  | that Government   | \- Internationally |
| its needs for human        | involvement is    | recognized         |
| resources in various skill | not as effective. | curriculum         |
| areas. It will then fall   |                   |                    |
| to the training institutes | The efforts of    | \- International   |
| to respond. A close        | the private       | vendor             |
| relationship will allow    | sector, ISP       | certification      |
| scarce resources to be     | Association, BCS  | program            |
| directed where they are    | etc. to make      |                    |
| most needed. The rate of   | known their       | \- Existence of a  |
| change and evolving        | requirements is   | computer lab       |
| business needs make it     | well placed       |                    |
| inadvisable for government | provided          | \- Minimum hours   |
| to prescribe a curriculum  | educational       | of study           |
| of study other than in     | institutions are  |                    |
| broad terms. To do so may  | in a position to  | \- Minimum hours   |
| mean resources are         | respond.          | of lab work        |
| expended in a subject area |                   |                    |
| that is out of date.       |                   | \- Internship      |
|                            |                   | programs           |
|                            |                   |                    |
|                            |                   | \- List of faculty |
|                            |                   | and their          |
|                            |                   | qualifications     |
+----------------------------+-------------------+--------------------+
| 6\. **Develop domestic     | GOB               | Private Sector     |
| capacity through           |                   | will be mobilized  |
| e-government               | Donor support     | in ITES.           |
| applications:**            | recommended.      |                    |
|                            |                   | Easier access of   |
| -   Computerize all        |                   | GoB information to |
|     ministries and GOB     |                   | the public.        |
|     departments starting   |                   |                    |
|     with a pilot ministry  |                   | Enhanced           |
|     such as Commerce and   |                   | transparency.      |
|     MOSICT.                |                   |                    |
|                            |                   |                    |
| -   Use local IT Training  |                   |                    |
|     institutes.            |                   |                    |
|                            |                   |                    |
| -   Post all information   |                   |                    |
|     and forms on the web.  |                   |                    |
|                            |                   |                    |
| -   Introduce interactive  |                   |                    |
|     applications, such as  |                   |                    |
|     forms, applications,   |                   |                    |
|     tender, tax payment    |                   |                    |
|     and so forth.          |                   |                    |
+----------------------------+-------------------+--------------------+
| 7\. **Increase funding for | The private       | In an environment  |
| technology education** at  | sector can play a | where rapid        |
| all levels. A strong base  | role here as in   | expansion is       |
| of literate, computer      | North America     | desired it is      |
| literate students with     | where the private | critical that      |
| solid basic skills is the  | sector sees an    | resources for the  |
| entry point into ICTES     | economic benefit  | educational sector |
| training and the           | in supporting     | match enrolment    |
| workforce. It was found    | educational       | targets otherwise  |
| that funding at the        | institutions with | already stretched  |
| University level did not   | facilities, work  | resources are      |
| necessarily follow the     | placement         | stretched further  |
| enrolment numbers.         | opportunities,    | resulting in a     |
|                            | expertise and     | decrease in        |
|                            | advice.           | quality.           |
+----------------------------+-------------------+--------------------+

## Lowering Cost, Improving Efficiency

+----------------------------+-------------------+--------------------+
| #### Actions               | #### Participants | **Possible         |
|                            |                   | Impact**           |
+----------------------------+-------------------+--------------------+
| 8\. **Allow ITES exporting | BTRC, BTTB        | International      |
| companies to connect to    |                   | communications at  |
| international              |                   | prevailing world   |
| telecommunications         |                   | rates.             |
| networks**, allowing       |                   |                    |
| immediate access to the    |                   |                    |
| affordable, reliable, and  |                   |                    |
| available                  |                   |                    |
| telecommunications service |                   |                    |
| needed for the ITES        |                   |                    |
| industry.                  |                   |                    |
+----------------------------+-------------------+--------------------+
| 9\. **Allow private sector | BTRC, Private     | More effective use |
| aggregation of             | t                 | of international   |
| international BW through   | elecommunications | communications,    |
| international gateways.**  | firms             | lower cost         |
+----------------------------+-------------------+--------------------+
| 10\. **Provide technical   | BTRC, Donors      | More effective     |
| assistance to BTRC**.      |                   | operation of the   |
| Projects include           |                   | BTRC               |
| development of specific    |                   |                    |
| bodies of regulations to   |                   |                    |
| cover such things as       |                   |                    |
| dispute resolution, radio  |                   |                    |
| spectrum allocations, and  |                   |                    |
| cost-based tariff          |                   |                    |
| evaluations.               |                   |                    |
+----------------------------+-------------------+--------------------+
| 11\. **Implement           | BTTB/private      | Significant        |
| sub-marine cable           | sector            | increase in BW at  |
| project.** Explore         |                   | lower cost.        |
| possibility of private     | BTTB, BTRC        |                    |
| sector participation in    |                   | Facilitates ITES   |
| the project.               |                   | and Bangladesh's   |
|                            |                   | entry to ITES      |
|                            |                   | segments that      |
|                            |                   | require large BW.  |
+----------------------------+-------------------+--------------------+
| 12\. **Legalize voice over | BTTB, BTRC,       | Lower cost         |
| Internet protocol (VOIP)** | private sector    | telecommunications |
| by private                 |                   |                    |
| telecommunications         |                   |                    |
| providers.                 |                   |                    |
+----------------------------+-------------------+--------------------+
| 13\. **Support universal   | Financial         | Improved           |
| application of             | institutions,     | international      |
| computerized               | GOB, Donors       | payment systems.   |
| transactions** in banks    |                   |                    |
| and other financial        |                   |                    |
| institutions.              |                   |                    |
+----------------------------+-------------------+--------------------+
| 14\. **Establish training  | ITTF, Bangladesh  | Improved financing |
| program for banking        | Bank, MOF,        | of IT sector       |
| professionals** to improve | Financial         | businesses.        |
| their knowledge of the IT  | institutions      |                    |
| sector.                    |                   |                    |
+----------------------------+-------------------+--------------------+
| 15\. **Continue no-VAT,    | ITTF, Ministry of | Improved           |
| no-tax policy on computer  | Finance           | environment for    |
| and related products**     |                   | investment in ITES |
|                            |                   | sector.            |
+----------------------------+-------------------+--------------------+

## Marketing and Business Environment

+----------------------------+-------------------+--------------------+
| **Actions**                | **Participants**  | **Possible         |
|                            |                   | Impact**           |
+----------------------------+-------------------+--------------------+
| 16\. **Develop a strong    | IT firms, BASIS,  | Export enhanced.   |
| ITES marketing campaign**, | BCS, ISPs and     |                    |
| including:                 | EPB.              | Sustainable growth |
|                            |                   | ITES sector        |
| -   Support IT-firms in    | GOB support.      |                    |
|     their marketing        |                   | Bangladesh will    |
|     efforts                | Donor support.    | gradually be       |
|     (identification of     |                   | recognized as ITES |
|     buyer, selection of    |                   | provider country.  |
|     market niches, regular |                   |                    |
|     participation in       |                   | Increased          |
|     software fairs to make |                   | employment.        |
|     presence felt in the   |                   |                    |
|     international area).   |                   |                    |
|                            |                   |                    |
| -   Joint marketing        |                   |                    |
|     campaign with private  |                   |                    |
|     sector, including      |                   |                    |
|     BASIS, BCS and ISP     |                   |                    |
|     Association and group  |                   |                    |
|     firms in the same      |                   |                    |
|     industry/niche.        |                   |                    |
|                            |                   |                    |
| -   Private associations   |                   |                    |
|     conduct market         |                   |                    |
|     research to            |                   |                    |
|     continuously stay in   |                   |                    |
|     touch of the market    |                   |                    |
|     and feed information   |                   |                    |
|     to ITES firms and GOB. |                   |                    |
|                            |                   |                    |
| -   Financial support from |                   |                    |
|     GOB/donors for         |                   |                    |
|     implementing sustained |                   |                    |
|     marketing efforts by   |                   |                    |
|     private sector groups  |                   |                    |
|     in domestic and        |                   |                    |
|     international markets. |                   |                    |
+----------------------------+-------------------+--------------------+
| 17\. **Provide technical   | Donors, private   | A more business    |
| assistance to ITES         | sector            | friendly           |
| advocacy groups** (ISP     | associations      | regulatory         |
| associations, computer     |                   | environment        |
| industry associations,     |                   |                    |
| chambers of commerce,      |                   |                    |
| etc.) to help them better  |                   |                    |
| inform their membership    |                   |                    |
| about policy reform, and   |                   |                    |
| help stakeholders          |                   |                    |
| understand the regulatory  |                   |                    |
| process and express        |                   |                    |
| arguments to the regulator |                   |                    |
| that are constructive.     |                   |                    |
+----------------------------+-------------------+--------------------+
| 18\. **Link BTRC with      | Donors, BTRC      | Better consistency |
| regional regulators.**     |                   | with international |
| Assure that the BTRC has   |                   | standards and      |
| ample opportunity to       |                   | practices          |
| benefit from the           |                   |                    |
| experiences of regulators  |                   |                    |
| in other countries that    |                   |                    |
| face similar conditions.   |                   |                    |
| Participation in regional  |                   |                    |
| and other international    |                   |                    |
| forums will be beneficial. |                   |                    |
+----------------------------+-------------------+--------------------+
| 19\. **Provide model       | Donors, private   | Better IT policy   |
| legislation and regulatory | sector            | in Bangladesh      |
| frameworks to stakeholder  | associations,     |                    |
| groups**. Material should  | BTRC, GOB.        |                    |
| be from other countries,   |                   |                    |
| and assist these groups in |                   |                    |
| using these examples to    |                   |                    |
| formulate an appropriate   |                   |                    |
| policy position tailored   |                   |                    |
| to Bangladeshi             |                   |                    |
| circumstances.             |                   |                    |
+----------------------------+-------------------+--------------------+
| 20\. Internships and work  | Donors,           | 'Real world' and   |
| experience programs. Part  | educational       | gains valuable     |
| of the demonstration of a  | institutions, GOB | work experience    |
| highly skilled ICTES       |                   | which is a benefit |
| workforce comes from       |                   | both to the        |
| performance on the job. In |                   | student and to the |
| preparation work           |                   | private sector.    |
| experiences as part of the |                   | Such programs also |
| training and education of  |                   | ensure closer      |
| ICTES professionals should |                   | communication      |
| be provided.               |                   | between training   |
|                            |                   | institutes and the |
|                            |                   | private sector.    |
+----------------------------+-------------------+--------------------+

+----------------------------+-------------------+--------------------+
| 21\. **Interconnect cell   | BTRC, BTTB, cell  | Better             |
| phone system and landline  | phone operators,  | communications     |
| system.**                  | MOPT              | within Bangladesh  |
|                            |                   |                    |
|                            | IT Task Force,    |                    |
|                            | MOSICT            |                    |
+----------------------------+-------------------+--------------------+
| 22\. **Develop a           | BTRC, GOB, BTTB,  | Better             |
| transparent manual based   | phone companies,  | understanding and  |
| management system with     | business          | predictability of  |
| BTRC** so the players in   | associations.     | BTRC decisions.    |
| the telecom sector know    |                   |                    |
| the rules of BTRC          |                   |                    |
| operations.                |                   |                    |
+----------------------------+-------------------+--------------------+

## Focusing on Growth

+----------------------------+-------------------+--------------------+
| **Actions**                | **Participants**  | **Possible         |
|                            |                   | Impact**           |
+----------------------------+-------------------+--------------------+
| 23\. **Finalize an IT      | ITTF, MOSICT,     | A roadmap for      |
| Action Plan (e-plan)**     | FBCCI             | development and    |
| with input from            |                   | priority areas     |
| stakeholders and building  |                   | identified with    |
| on past efforts such as    |                   | participation and  |
| USAID/JOBS e-conference,   |                   | ownership of the   |
| MOSTs IT Action            |                   | stakeholders.      |
| recommendations, etc.      |                   |                    |
+----------------------------+-------------------+--------------------+
| 24\. **Continue the        | ITTF, Ministry of | Improved           |
| implementations of liberal | Finance           | environment for    |
| pro-private sector         |                   | foreign and local  |
| policies** (tax            |                   | investment.        |
| incentives, IT parks       |                   |                    |
| creation, further          |                   |                    |
| liberalizing foreign       |                   |                    |
| ownership, repatriation of |                   |                    |
| hard currency, etc)        |                   |                    |
| encouraging imports of ICT |                   |                    |
| enabling products, exports |                   |                    |
| of ICT products and        |                   |                    |
| services, and to attract   |                   |                    |
| FDI in IT based on         |                   |                    |
| successful world models    |                   |                    |
| such as Ireland.           |                   |                    |
+----------------------------+-------------------+--------------------+
| 25\. **Legal and           | Ministry of Law,  | Provide strong     |
| regulatory reform**,       | MOSICT, IT Task   | legal environment  |
| including:                 | Force, Law        | to encourage       |
|                            | Commission        | electronic         |
| -   Promulgate IT Law now  |                   | transactions and   |
|     under review           | Advocacy by       | investment in ITES |
|                            | BASIS, BCS, ISP   | areas.             |
| -   Promulgate Cyber and   | Association,      |                    |
|     Digital Signature law  | Chambers, donors. |                    |
|     currently under review |                   |                    |
|                            |                   |                    |
| -   Review other criminal  |                   |                    |
|     and civil laws to      |                   |                    |
|     incorporate clauses    |                   |                    |
|     relating to electronic |                   |                    |
|     transactions.          |                   |                    |
+----------------------------+-------------------+--------------------+
| 26\. **Assist the BTRC to  | GOB, MOPT, IT     | A fully privatized |
| be an independent and      | Task Force,       | telecom sector     |
| strong regulatory          | MOSICT            | leading to higher  |
| agency**, including:       |                   | investment in      |
|                            | Donors, business  | telecom sector,    |
| 1\. Separation of the BTRC | associations as   | and lower          |
| from MOPT                  | advocate. They    | communication cost |
|                            | should facilitate | for businesses     |
| 2\. Providing financial    | the process of    |                    |
| power to BTRC to make its  | strengthening     |                    |
| own budget and             | BTRC              |                    |
| compensation package for   |                   |                    |
| staff members              |                   |                    |
|                            |                   |                    |
| 3\. Providing training to  |                   |                    |
| all levels for effective   |                   |                    |
| functioning of the newly   |                   |                    |
| formed regulator;          |                   |                    |
|                            |                   |                    |
| 4\. Providing              |                   |                    |
| opportunities to observe   |                   |                    |
| functioning of similar     |                   |                    |
| regulators in the region   |                   |                    |
| and outside the region;    |                   |                    |
| (e) assisting to develop   |                   |                    |
| specific bodies of         |                   |                    |
| regulations in each areas  |                   |                    |
| of its activities,         |                   |                    |
+----------------------------+-------------------+--------------------+
| 27\. **Strengthen industry | IT firms, GOB     | Better public and  |
| associations and business  | support.          | private sector     |
| organizations**, such as   |                   | coordination.      |
| FBCCI and DCCI. The        | Donor support     |                    |
| associations can lead in   |                   |                    |
| enhancing the              | BCS, BASIS, SIP   |                    |
| competitiveness of the     | Association,      |                    |
| Bangladeshi ITES industry. | FBCCI, DCCI       |                    |
| This could be in the form  |                   |                    |
| of marketing and promotion |                   |                    |
| exercises, sponsored       |                   |                    |
| studies to monitor and     |                   |                    |
| benchmark the industry and |                   |                    |
| to lobby with the          |                   |                    |
| government for necessary   |                   |                    |
| reforms and actions.       |                   |                    |
+----------------------------+-------------------+--------------------+
| 29\. **Provide strong      | ITTF, MOF         | Attract foreign    |
| thrust to facilitate       |                   | direct investments |
| supportive infrastructure  |                   | (FDI) and          |
| for proliferation of IT**  |                   | expatriate         |
| Enabled Services           |                   | Bangladeshis to    |
| throughout the country,    |                   | channel capital to |
| with stress should on      |                   | set up ITES        |
| developing suitable        |                   | providing firms in |
| infrastructure in          |                   | the country        |
| \`non-software\' cities.   |                   |                    |
|                            |                   |                    |
| ITES companies set up in   |                   |                    |
| EPZ units should claim tax |                   |                    |
| holiday                    |                   |                    |
+----------------------------+-------------------+--------------------+
| 30\. Provide **GOB         | GOB               | Better funded and  |
| Financial support for      |                   | more effective     |
| marketing campaign.**      | Donor support     | marketing          |
|                            |                   | campaign.          |
+----------------------------+-------------------+--------------------+
| 31\. **Promote the use of  | GOB, industry     | Visibility and     |
| the ".bd" Internet domain  | association       | some revenue       |
| name**. This helps         |                   | generation         |
| identify Bangladesh as an  |                   |                    |
| "IT competent" country and |                   |                    |
| "brand" Bangladesh on the  |                   |                    |
| Internet.                  |                   |                    |
+----------------------------+-------------------+--------------------+
| 32\. **Enable IT firms to  | IT firms, BASIS,  | Better financing   |
| gain access to better      | BCS, ISPs.        | of the ITES sector |
| lines of credit** (Program |                   |                    |
| like LPG/USAID should be   | GOB support.      |                    |
| continued).                |                   |                    |
|                            | Donor support     |                    |
| Moveable asset financing   |                   |                    |
| for ITES firms.            |                   |                    |
+----------------------------+-------------------+--------------------+
| 33\. **Develop and         | GOB and business  | Presence of        |
| implement "Bangladesh      | associations,     | Bangladesh in      |
| Ltd."** Campaign in a      | NRBs (as          | international ITES |
| sustained fashion in       | appropriate and   | market enhanced.   |
| collaboration with GOB     | practical).       |                    |
| (MOSICT, Ministry of       |                   | Increased export.  |
| Commerce, IT Task Force)   |                   |                    |
| and business associations. |                   |                    |
|                            |                   |                    |
| Regularly attend targeted  |                   |                    |
| software fairs as a        |                   |                    |
| country.                   |                   |                    |
+----------------------------+-------------------+--------------------+
| 34\. **Deregulate the      | MOPT,             | Increased          |
| landline sector of         | Privatization     | connectivity.      |
| telecom.** This will allow | Commission,       |                    |
| for increased private      | Ministry of       | Low telecom cost.  |
| investment.                | Finance           |                    |
|                            |                   | Increased          |
| 35\. **Privatize BTTB**    |                   | investment and     |
|                            |                   | employment in ICT  |
|                            |                   | sector.            |
+----------------------------+-------------------+--------------------+

# Annex A: Analysis of Market Segments

Data Processing

+-------------+--------------------------------------------------------+
| **Service** | **Data Processing**                                    |
+=============+========================================================+
| ITES        | Low -- Tier A                                          |
| Segment     |                                                        |
+-------------+--------------------------------------------------------+
| D           | Data Processing (DP) involves the broad category of    |
| escription, | capturing, manipulating and storing data obtained from |
| Definition  | various sources. Traditional DP services comprise of   |
|             | punching data from manually filled forms, images or    |
|             | publications; preparing databases and integrating      |
|             | them. More recent developments in multimedia and the   |
|             | Internet has resulted in more diverse sources such as  |
|             | digital images, sounds and video, and managing records |
|             | from internet-based queries.                           |
|             |                                                        |
|             | DP has become more important to corporations and       |
|             | organizations, as most businesses have become          |
|             | dependent on timely delivery and effective use of      |
|             | information. Industries and companies have to rely on  |
|             | data for quick decision-making in an increasingly      |
|             | information-driven, globally competitive landscape.    |
|             | Outsourcing has become a critical aspect of companies' |
|             | information strategy; in-house personnel are retained  |
|             | and required to use skills keenly focused on the       |
|             | enterprises' "core competencies", thereby releasing    |
|             | the lesser value-added services to outside vendors.    |
+-------------+--------------------------------------------------------+
| How It      | > Clients for DP services are companies and            |
| Works       | > organizations receiving or generating large          |
|             | > quantities of forms in handwritten or typed format;  |
|             | > these documents are usually time sensitive. Forms    |
|             | > can be sent physically or can be scanned and         |
|             | > transmitted to the vendor's facility.                |
|             | >                                                      |
|             | > Types of Data Processing:                            |
|             | >                                                      |
|             | > Document Preparation                                 |
|             | >                                                      |
|             | > Data Entry                                           |
|             | >                                                      |
|             | > Image Capturing                                      |
|             | >                                                      |
|             | > Image Keying                                         |
|             | >                                                      |
|             | > OCR & ICR Processing                                 |
|             | >                                                      |
|             | > Image Storage & Retrieval                            |
|             | >                                                      |
|             | > Handwritten, Machine Print, Mark Sense, Bar Coding   |
|             | > (Reader Response can be captured and processed from  |
|             | > any hard copy or faxed document) -- see below        |
|             | >                                                      |
|             | > Data entry front end edits                           |
|             | >                                                      |
|             | > ASCII format for upload to company database          |
|             | >                                                      |
|             | > Data Capture examples:                               |
|             | >                                                      |
|             | > General Ledger, accounting forms\                    |
|             | > Air bills                                            |
|             | >                                                      |
|             | > Account, Credit Card, Auto Loan, Mortgage Loan       |
|             | > Applications                                         |
|             | >                                                      |
|             | > Health Care Forms                                    |
|             | >                                                      |
|             | > Remittance Processing                                |
|             | >                                                      |
|             | > Insurance Documents                                  |
|             | >                                                      |
|             | > Catalog Orders                                       |
|             |                                                        |
|             | Many companies enter data manually (from image or      |
|             | paper) or through computer-assisted data capture using |
|             | OCR (optical character recognition), ICR (intelligent  |
|             | character recognition), mark sense (like pencil-formed |
|             | bubbles on a form), MICR (magnetic ink character       |
|             | recognition, like checks), and Bar Code (like grocery  |
|             | store items). The data is then processed or checked by |
|             | validation routines that are customized for the        |
|             | client, including table look-ups, data/range checks,   |
|             | or relationship validation.                            |
|             |                                                        |
|             | Processed documents are then sent to verification      |
|             | stations for quality assurance, after which the data   |
|             | is transformed into the client's formatted record      |
|             | layout and transmitted to the client's computer.       |
|             |                                                        |
|             | Further value can be added by vendors who could also   |
|             | provide data analysis -- database searches, database   |
|             | integration, data mining and custom reports. Higher in |
|             | this value chain is data warehousing and architecture, |
|             | involving the design of how to optimize accessibility  |
|             | to and relationships among the data. There are also    |
|             | companies striving for "end-to-end" services where     |
|             | they provide complete back-office operations           |
|             | management including data maintenance and customer     |
|             | support.                                               |
+-------------+--------------------------------------------------------+
| Size,       | Gartner Group (October 2000) forecast for "Transaction |
| Forecast    | Processing Services" Worldwide:                        |
|             |                                                        |
|             | 1999 - \$27.7 billion USD                              |
|             |                                                        |
|             | 2001 -- \$37.8 billion USD                             |
|             |                                                        |
|             | 2004 - \$67.9 billion USD                              |
|             |                                                        |
|             | compounded annual growth rate, 1991-2004 = 19.3%       |
|             |                                                        |
|             | Forecast by region, 2004:                              |
|             |                                                        |
|             | United States =48%                                     |
|             |                                                        |
|             | Europe =27%\                                           |
|             | Japan =8%                                              |
|             |                                                        |
|             | Other Asia =7%                                         |
|             |                                                        |
|             | Other =7%                                              |
+-------------+--------------------------------------------------------+
| Customers   | Industries or sectors that provide high information    |
| and         | turnover and which also need efficient archiving of    |
| Prospects   | records for frequent access:                           |
|             |                                                        |
|             | Insurance, Banks                                       |
|             |                                                        |
|             | Public utilities; Telecomm companies                   |
|             |                                                        |
|             | Airlines; Delivery services                            |
|             |                                                        |
|             | Government agencies, municipalities                    |
|             |                                                        |
|             | Legal                                                  |
|             |                                                        |
|             | Hospitals and Health Maintenance Organizations         |
|             |                                                        |
|             | Publishing                                             |
|             |                                                        |
|             | Payroll Providers                                      |
|             |                                                        |
|             | Accounting firms serving these industries              |
+-------------+--------------------------------------------------------+
| Inf         | -   Network-capable PCs and servers                    |
| rastructure |                                                        |
| and         | -   Scanners and readers as necessary                  |
| R           |                                                        |
| equirements | -   Word Processing, Database software                 |
|             |                                                        |
|             | -   Connectivity -- high-speed line; must be reliable  |
|             |     and ensure minimum disruption and data packet      |
|             |     loss; redundant links preferable to ensure against |
|             |     data and productivity loss                         |
+-------------+--------------------------------------------------------+
| Labor       | -   Majority requirement -- data entry operators; high |
|             |     school graduates; keyboarding skills               |
|             |                                                        |
|             | -   Other -- project leaders; quality assurance        |
|             |     experts                                            |
|             |                                                        |
|             | -   Multiple shifts are standard                       |
+-------------+--------------------------------------------------------+
| Success     | -   Quality of work process -- accuracy, efficiency;   |
| Factors     |     in many instances, clients will have already       |
|             |     studied and established data workflows and         |
|             |     processes that are proven to meet their needs      |
|             |                                                        |
|             | -   Availability of abundant manpower                  |
|             |                                                        |
|             | -   Ability to dedicate resources to client's needs    |
|             |                                                        |
|             | -   100% uptime of facilities/connection               |
|             |                                                        |
|             | -   100% availability of data                          |
|             |                                                        |
|             | -   Privacy and security of data                       |
+-------------+--------------------------------------------------------+
| Potential   | > Employment growth of data entry keyers will be       |
| Pitfalls    | > dampened by productivity gains, as various data      |
|             | > capturing technologies, such as bar code scanners,   |
|             | > voice recognition technologies, and sophisticated    |
|             | > character recognition readers, become more           |
|             | > prevalent.                                           |
+-------------+--------------------------------------------------------+
| Other       | Subcontracting of jobs is common; smaller companies    |
|             | may start providing services for a larger company with |
|             | the reputation and relationships to attract larger     |
|             | customers. The larger company may focus on providing   |
|             | more value-added services, or building a portfolio of  |
|             | accounts.                                              |
+-------------+--------------------------------------------------------+
| Competitive | Competitive and mature offshore outsourcing segment.   |
| Landscape & | As expected, DP provides lower value and results in    |
| Notable     | low margins. Many longer term vendors are striving to  |
| Companies   | "move up the value chain" by adding more analytical    |
|             | data reporting and data management. Where cost and     |
|             | savings are closely scrutinized, Western companies are |
|             | finding established countries/providers (India) too    |
|             | expensive and are likely to shop around.               |
|             |                                                        |
|             | -   LiveTech Solutions -- a conglomerate providing low |
|             |     to high end IT services; based in the US with      |
|             |     offices worldwide including a "Technology Center"  |
|             |     in Hyderabad, India.                               |
|             |                                                        |
|             | -   EDM International-- one of the largest diversified |
|             |     data processing companies in Mexico; located       |
|             |     across border of Texas; has 2300 employees;        |
|             |     positions itself as "understanding US business     |
|             |     needs" by hiring trained staff                     |
|             |     educated/experienced educated in the US            |
|             |                                                        |
|             | Also notable are large corporations establishing       |
|             | subsidiaries offshore solely for the purpose of        |
|             | back-office processing, e.g. in India -- British       |
|             | Airways (frequent flyer program data), GE Capital      |
|             | (accounting, credit card and loan processing)          |
+-------------+--------------------------------------------------------+
| Government  | Standard incentives for ITES.                          |
| Policies    |                                                        |
| and         |                                                        |
| Incentives  |                                                        |
+-------------+--------------------------------------------------------+
| Sources     | Selected list:                                         |
|             |                                                        |
|             | <http://www.bls.gov/oco/cg/cgs033.htm>                 |
|             |                                                        |
|             | US Bureau of Labor & Statistics; Profiles labor        |
|             | requirements                                           |
|             |                                                        |
|             | <http://www.dmr                                        |
|             | .com/corporatif/en/news/us/content/gartner_report.pdf> |
|             |                                                        |
|             | Gartner Group industry forecast                        |
|             |                                                        |
|             | <http://www.stpi.soft.net/ites_dp.html>                |
|             |                                                        |
|             | Software Tech Parks of India                           |
+-------------+--------------------------------------------------------+

Data Conversion, Digitization

+-------------+--------------------------------------------------------+
| **Service** | **Data Digitization (also Data Conversion)**           |
+=============+========================================================+
| ITES        | Tier A or B -- Low to Medium                           |
| Segment     |                                                        |
+-------------+--------------------------------------------------------+
| D           | Process by which physical or manual records such as    |
| escription, | text, maps, images, video and audio are converted into |
| Definition  | digital forms such as data files, CD-ROMs, and         |
|             | recently into content for the internet or other        |
|             | web-based applications (e.g. XML/SGML or HTML). The    |
|             | latter is a fast growing trend for publishing and      |
|             | corporate documentation.                               |
|             |                                                        |
|             | Benefits of digitization include: a) long term         |
|             | preservation of documents, b) orderly archiving of     |
|             | documents, c) easy and customized access to            |
|             | information, d) easy information dissemination through |
|             | images and text, CD-ROMs, Internet, intranets and      |
|             | extranets.                                             |
|             |                                                        |
|             | Some applications of digital technology include:       |
|             | books, research journals, annual reports, legacy       |
|             | documents, database archiving; movies, catalogs and    |
|             | brochures, training and educational manuals.           |
|             |                                                        |
|             | A sub-category of data digitization is Geographic      |
|             | Information Systems (GIS); see the separate Segment    |
|             | Profile on GIS.                                        |
+-------------+--------------------------------------------------------+
| How It      | The process begins with identifying the client's       |
| Works       | objectives, needs and intended use of the digitized    |
|             | records. As with most client arrangements, it is       |
|             | recommended that written requirements, specifications, |
|             | and agreement on final deliverables are completed with |
|             | the client's final approval.                           |
|             |                                                        |
|             | The following general schema was obtained and revised  |
|             | from a digitization software provider along with data  |
|             | from STPI (see below):                                 |
|             |                                                        |
|             | 1.  Administration - Document Classes and Batch        |
|             |     Management                                         |
|             |                                                        |
|             | > -define document classes, which specify both the     |
|             | > index fields and the processing queues for each      |
|             | > document.                                            |
|             |                                                        |
|             | 2.  Scanning\                                          |
|             |     - Documents to be scanned are prepared by sorting  |
|             |     into batches. As in any data entry production      |
|             |     system, the batches are entered into the system,   |
|             |     in this case by the scanner operator.              |
|             |                                                        |
|             | 3.  Image Processing and Character Recognition         |
|             |                                                        |
|             | > -using OCR (Optical Character Recognition) software, |
|             | > the documents are scanned by an operator\            |
|             | > -old and faded images are recovered using advanced   |
|             | > digital correction software; sound and video data    |
|             | > are treated similarly                                |
|             |                                                        |
|             | 4.  Index, Index Verify and Validation Scripts         |
|             |                                                        |
|             | > \- data entry operators are presented with images    |
|             | > for keying and verification; effective double-keying |
|             | > can be performed by routing the same documents       |
|             | > sequentially to two operators.\                      |
|             | > -validation scripts can be used to verify data       |
|             | > formats, and to specify that certain fields must     |
|             | > match; custom scripts can go much further, by        |
|             | > filling in fields from an external database          |
|             | > (indexing, tagging or mapping).                      |
|             |                                                        |
|             | 5.  Quality Assurance and Rescan                       |
|             |                                                        |
|             | > \- the Quality Control operator sends defective      |
|             | > batches are queued to the rescan workstation, with   |
|             | > instructions regarding rejected document or page to  |
|             | > describe the problem to the Rescan operator          |
|             |                                                        |
|             | 6.  Release                                            |
|             |                                                        |
|             | > -after Quality Control and Indexing, the images and  |
|             | > data are \"Released\" to the target application,     |
|             | > which could include Microsoft SQL Server, Informix,  |
|             | > Oracle, and Sybase. The digitized sources of         |
|             | > information are then integrated on a CD-ROM or other |
|             | > media, depending on the client's intended use.       |
|             |                                                        |
|             | 7.  At this point, the electronic data could be        |
|             |     further converted into final XML/SGML files for    |
|             |     digital use (e.g. web, diagnostic equipment,       |
|             |     handheld and voice devices)                        |
+-------------+--------------------------------------------------------+
| Size,       | Not readily available. This segment is bundled with    |
| Forecast    | other data segments, e.g. conversion, processing,      |
|             | transcription or integration.                          |
+-------------+--------------------------------------------------------+
| Customers   | -   Corporations with legacy documents; finance and    |
| and         |     insurance                                          |
| Prospects   |                                                        |
|             | -   Training                                           |
|             |                                                        |
|             | -   Legal                                              |
|             |                                                        |
|             | -   Libraries, Universities                            |
|             |                                                        |
|             | -   Government                                         |
|             |                                                        |
|             | -   Museums and educational, research organizations    |
|             |                                                        |
|             | -   Music and film industries                          |
+-------------+--------------------------------------------------------+
| Inf         | -   Hardware -- computers/servers with fast chips and  |
| rastructure |     abundant memory; scanners; color printers;         |
| and         |     plotters                                           |
| R           |                                                        |
| equirements | -   Software -- CAD, OCR, digitizing software (many    |
|             |     packaged software available, e.g. Adobe, JASC,     |
|             |     Macromedia, Correl; but there are also proprietary |
|             |     digitization software)                             |
|             |                                                        |
|             | -   Abundant storage media                             |
|             |                                                        |
|             | -   Telecomm -- high speed data link                   |
|             |                                                        |
|             | -   May require climate control depending on materials |
+-------------+--------------------------------------------------------+
| Labor       | -   Low, Semi-Professional depending on project type   |
|             |                                                        |
|             | -   Low end data conversion: hand/eye coordination,    |
|             |     keyboarding skills                                 |
|             |                                                        |
|             | -   Subject matter expertise may be necessary          |
|             |                                                        |
|             | -   English proficiency may be necessary, especially   |
|             |     for project and relationship managers              |
|             |                                                        |
|             | -   Technical training to handle equipment             |
|             |                                                        |
|             | -   Process, workflow management; quality assurance    |
+-------------+--------------------------------------------------------+
| Success     | -   Accuracy is paramount -- extremely low margin for  |
| Factors     |     errors is common, specifically with GIS (often     |
|             |     quoted 99.995% accuracy)                           |
|             |                                                        |
|             | -   Turnaround time                                    |
+-------------+--------------------------------------------------------+
| Potential   | -   Rapid technology obsolescence of digital           |
| Pitfalls    |     technologies                                       |
|             |                                                        |
|             | -   Media instability                                  |
|             |                                                        |
|             | The above could pose risk in terms of investment in    |
|             | infrastructure that could be deemed obsolete.          |
+-------------+--------------------------------------------------------+
| Competitive | http://www.dclab.com/default.asp                       |
| Landscape & |                                                        |
| Notable     | U.S.-based Data Conversion Laboratory --               |
| Companies   | privately-held; no financials readily available.       |
|             |                                                        |
|             | No overseas market leader easily discernible.          |
|             | Countries/areas where offshore outsourcing is taking   |
|             | place include the India, Philippines, Caribbean.       |
|             |                                                        |
|             | http://www.acmedataservices.com/ (India)               |
+-------------+--------------------------------------------------------+
| Government  | -   hardware and software duties, customs              |
| Policies    |                                                        |
| and         | -   income tax laws -- depreciation of equipment       |
| Incentives  |                                                        |
|             | -   export-import policies for hardware and software;  |
|             |     exportation of services                            |
|             |                                                        |
|             | -   copyright and IP                                   |
|             |                                                        |
|             | -   Telecommunications costs and availability of       |
|             |     high-speed data links                              |
+-------------+--------------------------------------------------------+
| Sources     | <http://www                                            |
|             | .ukoln.ac.uk/nof/support/help/papers/digitisation.htm> |
|             |                                                        |
|             | Provides background on how digitization Works          |
|             |                                                        |
|             | <http://www.stpi.soft.net/ites_dd.html>                |
|             |                                                        |
|             | Provides an overview of data digitization              |
|             |                                                        |
|             | <http:/                                                |
|             | /www.outsource2india.com/services/data_conversion.asp> |
|             |                                                        |
|             | Provides an overview of data conversion                |
+-------------+--------------------------------------------------------+

Medical Transcriptions

+-------------+--------------------------------------------------------+
| **Service** | **Medical Transcriptions**                             |
+=============+========================================================+
| ITES        | Data Tier B (Medium)                                   |
| Segment     |                                                        |
+-------------+--------------------------------------------------------+
| D           | Documentation of doctor's findings and results of a    |
| escription, | medical investigation. Purposes for these documents    |
| Definition  | include: 1) the need to maintain basic hospital data,  |
|             | 2) recording of data and medical procedures for        |
|             | research and 3) maintaining records for insurance      |
|             | purposes.                                              |
+-------------+--------------------------------------------------------+
| How It      | See diagram below.                                     |
| Works       |                                                        |
|             | 1.  Doctors are trained to dictate to a recording      |
|             |     devise, typically a magnetic recording device, or  |
|             |     recently an 800# attached to a server.             |
|             |                                                        |
|             | 2.  The sound is digitized and sent to the             |
|             |     transcription center via satellite link. The       |
|             |     digitized data is converted back to sound.         |
|             |                                                        |
|             | 3.  The trained transcribers listen to the dictation   |
|             |     and transcribes. Transcribed files go through      |
|             |     quality control; corrections are made as           |
|             |     necessary.                                         |
|             |                                                        |
|             | 4.  The transcribed reports are transmitted back to    |
|             |     the doctors' country in a document file (e.g.      |
|             |     Microsoft Word).                                   |
+-------------+--------------------------------------------------------+
| Size,       | -   Size of market = currently estimated \$15 billion, |
| Forecast    |     as estimated by HealthScribe CEO (industry data    |
|             |     not readily available from U.S. government); other |
|             |     estimate \$10-25 billion, MT Industry Alliance     |
|             |                                                        |
|             | -   Forecasted 20% growth p.a. (due to rising health   |
|             |     care needs of an aging population in the U.S.;     |
|             |     decline in U.S. supply of transcribers)            |
|             |                                                        |
|             | -   Only 20-30% of the market is currently outsourced  |
|             |     overseas                                           |
+-------------+--------------------------------------------------------+
| Customers   | U.S. hospitals, HMOs and other medical groups;         |
| and         | marketing arrangements are typically done through      |
| Prospects   | intermediaries which offset profits                    |
+-------------+--------------------------------------------------------+
| Inf         | -   Magnetic media (tapes) sent via courier -- this    |
| rastructure |     practice is rapidly being replaced by toll-free    |
| and         |     telephone method below                             |
| R           |                                                        |
| equirements | -   Toll-free telephone line designated for each       |
|             |     doctor into which s/he can dictate message;        |
|             |     converted into digitized message by a dedicated    |
|             |     server. Reduces shipping costs and time            |
|             |                                                        |
|             | -   Web-based Application Service Provider (ASP) that  |
|             |     provides digitized voice files to be transcribed,  |
|             |     workflow and management tools for both MT customer |
|             |     and MT provider. Examples: E-Transcribe, Sten-Tel  |
|             |                                                        |
|             | -   Servers                                            |
|             |                                                        |
|             | -   High speed data links (internet, satellite;        |
|             |     Virtual Private Networks)                          |
|             |                                                        |
|             | -   Stable power supply                                |
|             |                                                        |
|             | -   Word processing software and equipment (earphones, |
|             |     stop/start foot pedals)                            |
|             |                                                        |
|             | -   Medical transcription programs which include       |
|             |     medical libraries, terminology, definitions, spell |
|             |     checker                                            |
+-------------+--------------------------------------------------------+
| Labor       | -   English proficiency; good grammar and punctuation  |
|             |                                                        |
|             | -   Post-secondary education (vocational or community  |
|             |     college); certification from Am. Association for   |
|             |     Medical Transcription may be required              |
|             |                                                        |
|             | -   Good listening skills; keyboarding and word        |
|             |     processing skills                                  |
|             |                                                        |
|             | -   Familiarity with medical terms and use of medical  |
|             |     transcription software                             |
|             |                                                        |
|             | -   Quality assurance and supervisory skills           |
|             |                                                        |
|             | -   Median hourly rate in the U.S. was \$12.15, or     |
|             |     \$1,920 per month in 2000 (Dept. of Labor); in     |
|             |     India, average is \$308 per month                  |
+-------------+--------------------------------------------------------+
| Success     | -   Economies of scale; 50 stations considered         |
| Factors     |     minimum, with 150 operators on three 8-hour shifts |
|             |                                                        |
|             | -   Direct marketing relationships with end customers  |
|             |     (hospitals and health care groups) preserve profit |
|             |     margins; due to sensitive information, quality and |
|             |     trust in relationship are paramount                |
|             |                                                        |
|             | -   Lower costs, faster turnaround, higher quality     |
|             |                                                        |
|             | -   Additional value added through development of      |
|             |     software and hardware tools                        |
+-------------+--------------------------------------------------------+
| Potential   | -   Infrastructure costs can make this a business with |
| Pitfalls    |     high operating leverage offset by variable labor   |
|             |     costs                                              |
|             |                                                        |
|             | -   Marketing Intermediaries can significantly affect  |
|             |     profit margins and control relationships with end  |
|             |     customers, although are often necessary to reach   |
|             |     customers overseas                                 |
|             |                                                        |
|             | -   Many marketing intermediaries are suspect -- many  |
|             |     instances of providing training to earn fees but   |
|             |     do not deliver business accounts as guaranteed     |
+-------------+--------------------------------------------------------+
| Other       | -   Concerns over privacy, confidentiality and         |
|             |     security over the internet                         |
|             |                                                        |
|             | -   Movement towards handheld devices for physicians   |
|             |     and emergency medical personnel                    |
|             |                                                        |
|             | -   Voice/speech recognition not considered a threat   |
|             |     at this time as the technology has not             |
|             |     sufficiently been developed                        |
+-------------+--------------------------------------------------------+
| Competitive | Industry is highly fragmented with largest players     |
| Landscape & | commanding majority % of revenues.                     |
| Notable     |                                                        |
| Companies   | -   HealthScribe: based in the U.S., with operations   |
|             |     in India -- 500 employees, 6 million lines of      |
|             |     transcription per year; recently just broke even   |
|             |     after 7 years; 71% owned by Max India              |
|             |     (Indian-owned conglomerate)                        |
|             |                                                        |
|             | -   CBay Systems: U.S.-based with operations in India; |
|             |     functions as service provider for franchisees;     |
|             |     2000 employees                                     |
|             |                                                        |
|             | -   Heartland Information Systems: U.S.--based with    |
|             |     operations in India                                |
|             |                                                        |
|             | -   Transkripsyo: Philippines                          |
+-------------+--------------------------------------------------------+
| Government  | -   Zero import duties on computer hardware, software, |
| Policies    |     books, training materials in magazines, CD-ROM     |
| and         |                                                        |
| Incentives  | -   Ten year tax holiday in export-processing zones    |
|             |                                                        |
|             | -   Exim Policy 1999 -- allows import of wide range of |
|             |     computers without obtaining licenses               |
|             |                                                        |
|             | See India Info Online for more comprehensive list      |
|             |                                                        |
|             | -   India Info Online\                                 |
|             |     [h                                                 |
|             | ttp://www.indiainfoline.com/cyva/repo/medi/ch08.html]( |
|             | http://www.indiainfoline.com/cyva/repo/medi/ch02.html) |
+-------------+--------------------------------------------------------+
| Sources     | -   American Association for Medical Transcription     |
|             |     http://[www.aamt.org](http://www.aamt.org/)        |
|             |                                                        |
|             | -   Medical Transcriptions in India\                   |
|             |     http://mtindia.org                                 |
|             |                                                        |
|             | -   HealthScribe (a leading Indian MT firm; CEO        |
|             |     interview by the Wall Street Reporter)             |
|             |                                                        |
|             | -   India Info Online\                                 |
|             |     <                                                  |
|             | http://www.indiainfoline.com/cyva/repo/medi/ch02.html> |
|             |                                                        |
|             | -   STPI\                                              |
|             |     <http://www.stpi.soft.net/ites_mt.html>            |
+-------------+--------------------------------------------------------+

Animation & Multimedia

+-------------+--------------------------------------------------------+
| **Service** | **Animation and Multi-Media**                          |
+=============+========================================================+
| ITES        | Tier B -- Medium                                       |
| Segment     |                                                        |
+-------------+--------------------------------------------------------+
| D           | Animation is the art of creating movement in visual    |
| escription, | media such as film or the internet. It is commonly     |
| Definition  | used in entertainment (cartoons, full-feature          |
|             | animation films), advertising (TV commercials) and     |
|             | web-based programs (e.g. online learning).             |
|             |                                                        |
|             | Multimedia as a new form of content delivery allows    |
|             | for a new way of communicating and exchanging          |
|             | information, achieving this in more convenient and     |
|             | capable forms. The user becomes involved through       |
|             | multi-media by integrating the controlling and         |
|             | processing capabilities of computers with digitally    |
|             | stored information that can be presented using text,   |
|             | graphics, sound, animation, and still or motion        |
|             | pictures.                                              |
|             |                                                        |
|             | *(Interactive Multimedia Arts and Technologies         |
|             | Association)*                                          |
|             |                                                        |
|             | Applications:                                          |
|             |                                                        |
|             | Arts: Online books, interactive terminals, museum      |
|             | exhibitions, multimedia theatre performances           |
|             |                                                        |
|             | Entertainment: Full-feature films, TV commercials,     |
|             | digital video disk films, interactive television,      |
|             | video games, virtual game centers                      |
|             |                                                        |
|             | Education and Training: Educational software, online   |
|             | courses                                                |
|             |                                                        |
|             | Communications: Web sites, online teleconferencing and |
|             | electronic publishing                                  |
|             |                                                        |
|             | Health: Tele-medicine, computerization of patient      |
|             | files, medical imaging                                 |
|             |                                                        |
|             | Business: Corporate presentations, Home-shopping,      |
|             | direct access to government services, electronic data  |
|             | exchange                                               |
+-------------+--------------------------------------------------------+
| How It      | These are various types of multi-media production and  |
| Works       | stages, according to Penta-Media, the leading          |
|             | animation company in India:                            |
|             |                                                        |
|             | [Pre-Production]{.underline}                           |
|             |                                                        |
|             | -   Concept is developed into a story, and then a      |
|             |     screenplay or script.                              |
|             |                                                        |
|             | -   Concept drawings are done, which become bases for  |
|             |     storyboards.                                       |
|             |                                                        |
|             | -   Background layout and finally the background art   |
|             |     is completed. Costume, appearance, models and      |
|             |     props are designed, while simultaneously a         |
|             |     storyboard of angles, shots, dialogues and sound   |
|             |     is prepared.                                       |
|             |                                                        |
|             | -   Animation is then coordinated between frames and   |
|             |     background voice, etc.                             |
|             |                                                        |
|             | [Motion Capture]{.underline}                           |
|             |                                                        |
|             | Optical motion capture involves tracing and capturing  |
|             | the movements of an object and feeding it to a system  |
|             | generated 3D model, thus animating it.                 |
|             |                                                        |
|             | -   Motion capture set up with high-speed Falcon       |
|             |     cameras which emit infra red rays that are         |
|             |     reflected off special scotch brite markers fitted  |
|             |     on to the object\'s body. The reflected data is    |
|             |     read by the cameras at speeds ranging from 60 to   |
|             |     240 frames per second.                             |
|             |                                                        |
|             | -   Expert technicians then work on the collected data |
|             |     and give out the final output in a format that     |
|             |     convenient for usage by software packages.         |
|             |                                                        |
|             | [Film Conversion]{.underline}                          |
|             |                                                        |
|             | -   Synchronization of sound and picture for both      |
|             |     small and big screens                              |
|             |                                                        |
|             | -   Video format conversion; Real-time movies to       |
|             |     frames/ frames to real-time movies                 |
|             |                                                        |
|             | -   Digitizing of sound; output in any medium, film,   |
|             |     video or CD- Tapes used: Beta, digital beta and    |
|             |     DAT.                                               |
|             |                                                        |
|             | [2D Animation]{.underline}                             |
|             |                                                        |
|             | Involves drawing out every detail of an action into    |
|             | separate cell sheets, and then running them together   |
|             | at a very high speed so that an illusion of motion is  |
|             | created on screen.                                     |
|             |                                                        |
|             | -   Creative team includes; traditional artists, key   |
|             |     animators, background designers, ink and paint     |
|             |     experts, computer professionals, design and model  |
|             |     professionals, visualizers and compositors         |
|             |                                                        |
|             | [3D Animation]{.underline}                             |
|             |                                                        |
|             | Involves three specific stages; modeling, texturing    |
|             | and animation.                                         |
|             |                                                        |
|             | -   Modeling -- building the characters and sets that  |
|             |     go into the movie                                  |
|             |                                                        |
|             | -   Texturing -- life-giving touches like color,       |
|             |     texture etc. are added to the character model      |
|             |                                                        |
|             | -   The last stage is animation, where movement is     |
|             |     introduced into the model                          |
|             |                                                        |
|             | [Post-Production]{.underline}                          |
|             |                                                        |
|             | Comprises of scanning, non-linear editing and          |
|             | recording. Post-production activities include          |
|             | "Rotosplining", "Rotoscoping", Compositing, Motion     |
|             | tracking, Camera stabilization, Image retouching, Film |
|             | restoration, color corrections, morphing and warping.  |
+-------------+--------------------------------------------------------+
| Size,       | Robi Roncarelli, President, editor and publisher of    |
| Forecast    | PIXEL, the international magazine devoted to animation |
|             | industry predicts:                                     |
|             |                                                        |
|             | -   \$30 billion by year end 2001                      |
|             |                                                        |
|             | -   By 2005 up to \$70 billion                         |
|             |                                                        |
|             | -   Growing at a rate of 25% per year                  |
|             |                                                        |
|             | -   Share of the global animation business:            |
|             |                                                        |
|             |     -   North America, 46.9 % (down from 52% in 1996)  |
|             |                                                        |
|             |     -   Asia-Pacific, 28%                              |
|             |                                                        |
|             |     -   Europe, 25.1%                                  |
|             |                                                        |
|             |     -   The biggest gainers as vendors are Asian       |
|             |         countries like the Philippines, Thailand,      |
|             |         Korea and Japan.                               |
|             |                                                        |
|             | Outlook for outsourcing in this segment appears        |
|             | promising as Hollywood feature films include more      |
|             | animation and special effects, while cost cutting has  |
|             | also become more of a concern.                         |
+-------------+--------------------------------------------------------+
| Customers   | -   Entertainment vertical companies (film, TV, cable, |
| and         |     CD/DVD); in the U.S., there are 7 major studios, 3 |
| Prospects   |     major networks, and large number of independent    |
|             |     studios producing for film, TV and the Internet    |
|             |                                                        |
|             | -   Advertising                                        |
|             |                                                        |
|             | -   Gaming software companies                          |
|             |                                                        |
|             | \*Entertainment category = 72% of market, according to |
|             | PIXEL                                                  |
|             |                                                        |
|             | -   Publishing houses                                  |
|             |                                                        |
|             | -   Training and education content providers           |
+-------------+--------------------------------------------------------+
| Inf         | -   High-end hardware, e.g. Silicon Graphics           |
| rastructure |     workstations                                       |
| and         |                                                        |
| R           | -   High-end software, e.g. Maya, Softimage and 3DSMax |
| equirements |                                                        |
|             | -   High-end scanners, e.g. Kodak Genesis scanners,    |
|             |     Kodak Cineon image                                 |
+-------------+--------------------------------------------------------+
| Labor       | Semi-professional to Professional                      |
|             |                                                        |
|             | -   Drawing and creative skills                        |
|             |                                                        |
|             | -   Computer graphic skills                            |
|             |                                                        |
|             | -   Fine arts                                          |
|             |                                                        |
|             | -   Film production / film technology                  |
|             |                                                        |
|             | -   Multimedia marketing / Communication               |
+-------------+--------------------------------------------------------+
| Success     | -   Size, capabilities -- volume of production         |
| Factors     |                                                        |
|             | -   Quality, talent pool                               |
|             |                                                        |
|             | -   Delivery dates                                     |
+-------------+--------------------------------------------------------+
| Potential   | Although the financial threshold (e.g. costs of        |
| Pitfalls    | hardware and software) have been steadily decreasing   |
|             | and has lowered barrier to entry, larger, more         |
|             | profitable projects from major studios do not award    |
|             | these contracts to smaller, lesser-known companies.    |
+-------------+--------------------------------------------------------+
| Competitive | India                                                  |
| Landscape & |                                                        |
| Notable     | -   Total Infotainment                                 |
| Companies   |                                                        |
|             | -   Penta-media Graphics(2200 employees)               |
|             |                                                        |
|             | -   2D/3D Animation (300 employees)                    |
|             |                                                        |
|             | Japan                                                  |
|             |                                                        |
|             | -   Toei Animation -- largest animation company in     |
|             |     Japan; employs over 150 animators in the           |
|             |     Philippines                                        |
+-------------+--------------------------------------------------------+
| Government  | Same for other ITES.                                   |
| Policies    |                                                        |
| and         | -   Intellectual Property Rights in many instances.    |
| Incentives  |                                                        |
+-------------+--------------------------------------------------------+
| Sources     | <http://www.hrdc-drhc.gc.ca/hrib/hrp-prh/ss            |
|             | d-des/english/industryprofiles/mul/overview.shtmlArts> |
|             |                                                        |
|             | Provides definition of multi-media sector              |
|             |                                                        |
|             | <http://ww                                             |
|             | w.domain-b.com/infotech/itnews/20010922_animation.htm> |
|             |                                                        |
|             | Provides news of Indian animation industry             |
+-------------+--------------------------------------------------------+

Geographic Information Systems

+-------------+--------------------------------------------------------+
| **Service** | **Geographic Information Systems (GIS)**               |
+=============+========================================================+
| ITES        | Tier B -- Medium                                       |
| Segment     |                                                        |
+-------------+--------------------------------------------------------+
| D           | \"A computer system for capturing, storing, checking,  |
| escription, | integrating, manipulating, analyzing and displaying    |
| Definition  | data related to positions on the Earth\'s surface.     |
|             | Typically, a Geographical Information System (or       |
|             | Spatial Information System) is used for handling maps  |
|             | of one kind or another. These might be represented as  |
|             | several different layers where each layer holds data   |
|             | about a particular kind of feature. Each feature is    |
|             | linked to a position on the graphical image of a       |
|             | map.\" (Univ. of Edinburgh GIS Society)                |
|             |                                                        |
|             | Also referred to as "Geo-spatial information".         |
|             |                                                        |
|             | Map Data Types:                                        |
|             |                                                        |
|             | -   Base maps -- geographic area maps, street/highway  |
|             |     maps; boundaries for census, postal and political  |
|             |     areas                                              |
|             |                                                        |
|             | -   Business Maps and Data -- maps with census and     |
|             |     demographics; consumer products; financial         |
|             |     services; real estate; other industry; emergency   |
|             |     preparedness                                       |
|             |                                                        |
|             | -   Environmental Maps and Data -- environment,        |
|             |     weather, environmental risk; satellite imagery     |
|             |     (topography)                                       |
|             |                                                        |
|             | -   General Reference Maps -- world, country maps with |
|             |     data                                               |
|             |                                                        |
|             | Examples OF GIS                                        |
|             |                                                        |
|             | -   Area map with related customer and prospect        |
|             |     information for use by sales force to plan calls   |
|             |                                                        |
|             | -   Database creation of infrastructure (water, sewer, |
|             |     gas, electric, steam, telecommunications and       |
|             |     transportation) and engineering floor plans, shown |
|             |     against New York City's cartographic base maps;    |
|             |     used for rescue efforts at the World Trade Center  |
|             |                                                        |
|             | See for an overview:                                   |
|             |                                                        |
|             | h                                                      |
|             | ttp://www.esri.com/library/fliers/pdfs/what_is_gis.pdf |
+-------------+--------------------------------------------------------+
| How It      | Components of GIS services:                            |
| Works       |                                                        |
|             | 1.  Data Collection -- geographic data and related     |
|             |     tabular data can be collected in-house, purchased  |
|             |     from a commercial data provider, or provided by    |
|             |     the source company                                 |
|             |                                                        |
|             | 2.  Data Interpretation -- determination of how the    |
|             |     data will be represented within the spatial map,   |
|             |     according to the company's objectives for the GIS  |
|             |                                                        |
|             | 3.  Data Conversion and Integration including          |
|             |     scanning, digitization and format conversion --    |
|             |     GIS systems integrate the spatial data with the    |
|             |     other data resources, which can be organized       |
|             |     according to a database management system (DBMS)   |
|             |                                                        |
|             | 4.  Digital Data publishing -- final format of the GIS |
|             |     and results                                        |
|             |                                                        |
|             | The process is similar to and can be viewed as a       |
|             | sub-segment of Data Digitization (see Segment Profile  |
|             | -- Data Digitization).                                 |
+-------------+--------------------------------------------------------+
| Size,       | -   GIS total revenues reached \$7billion annually in  |
| Forecast    |     2001 (according to Daratech, IT market research    |
|             |     company, Cambridge, Massachusetts); growth rate or |
|             |     forecasts not found                                |
|             |                                                        |
|             | -   Of \$7 billion, nearly \$1 billion in software;    |
|             |     over \$900 million in hardware; the rest in        |
|             |     consulting, systems integration, database          |
|             |     development                                        |
|             |                                                        |
|             | -   Most of GIS services sent offshore (e.g. to India) |
|             |     typically consists of data collection, conversion  |
|             |     and interpretation (i.e., generating user defined  |
|             |     outputs for which data are either provided by the  |
|             |     client or need to be obtained/created)             |
+-------------+--------------------------------------------------------+
| Customers   | -   Business Marketing -- census, demographics,        |
| and         |     consumer research, market tests                    |
| Prospects   |                                                        |
|             | -   Utilities -- Electric, Gas, Water, Waste           |
|             |                                                        |
|             | -   Government -- Forestry, Land Use, Environmental,   |
|             |     Defense/Military, Transportation,                  |
|             |     Emergency/Disaster Relief Services, Risk           |
|             |     Management                                         |
|             |                                                        |
|             | -   Agriculture, Forestry, Geology                     |
+-------------+--------------------------------------------------------+
| Inf         | -   Hardware -- powerful PCs or servers with abundant  |
| rastructure |     memory; plotters; graph workstations; scanners;    |
| and         |     digitizers                                         |
| R           |                                                        |
| equirements | -   Software -- database management system; GIS        |
|             |     software (packaged or proprietary) -- supports     |
|             |     geographic query, analysis and visualization       |
|             |                                                        |
|             | -   Infrastructure -- high speed data link             |
+-------------+--------------------------------------------------------+
| Labor       | -   Professional, analytical; engineering              |
|             |                                                        |
|             | -   Project management, quality control                |
|             |                                                        |
|             | -   For Data Digitization -- basic rules-based skills; |
|             |     see section on Data Digitization (Conversion)      |
+-------------+--------------------------------------------------------+
| Success     | -   Accuracy, quality control -- guarantees to 99.995% |
| Factors     |     accuracy                                           |
|             |                                                        |
|             | -   Ability to handle various inputs; produce various  |
|             |     outputs                                            |
|             |                                                        |
|             | -   Proven conversion process; on-going research and   |
|             |     development to stay up-to-date with advanced       |
|             |     technologies                                       |
|             |                                                        |
|             | -   Fast turnaround                                    |
+-------------+--------------------------------------------------------+
| Potential   | -   Rapid technology obsolescence of digital           |
| Pitfalls    |     technologies                                       |
|             |                                                        |
|             | -   Media instability                                  |
|             |                                                        |
|             | The above could pose risk in terms of investment in    |
|             | infrastructure that could be deemed obsolete.          |
+-------------+--------------------------------------------------------+
| Competitive | -   Competitive Landscape -- majority of the market    |
| Landscape & |     wealth is in development of GIS hardware and       |
| Notable     |     software; market is dominated by core group of 32  |
| Companies   |     companies developing GIS software (Daratech)       |
|             |                                                        |
|             | -   Notable Companies                                  |
|             |                                                        |
|             |     -   ESRI -- market leader, based in Redlands,      |
|             |         California (2000 employees worldwide; no       |
|             |         financials available)                          |
|             |                                                        |
|             |     -   Infotech Enterprises Ltd. -- provides GIS      |
|             |         services, and also develops proprietary GIS    |
|             |         software; development centers at Hyderbad,     |
|             |         Mumbai and Bangalore house around 2000         |
|             |         software and engineering professionals         |
|             |         <http://www.infotechsw.com/>                   |
|             |                                                        |
|             |     -   Intergraph Mapping and GIS Services, partnered |
|             |         with Rolta in India\                           |
|             |         http://www.intergraph.com/gis/aboutus.asp      |
|             |                                                        |
|             |     -   GIS directory\                                 |
|             |                                                        |
|             |    <http://www.gisdevelopment.net/company/profile.htm> |
+-------------+--------------------------------------------------------+
| Government  | -   Hardware and software duties, customs              |
| Policies    |                                                        |
| and         | -   Income tax laws -- depreciation of equipment       |
| Incentives  |                                                        |
|             | -   Export-import policies for hardware and software;  |
|             |     exportation of services                            |
|             |                                                        |
|             | -   Copyright and IP                                   |
|             |                                                        |
|             | -   Telecommunications costs and availability of       |
|             |     high-speed data links                              |
+-------------+--------------------------------------------------------+
| Sources     | <http://www.infotechsw.com/>                           |
|             |                                                        |
|             | <http://www.stpi.soft.net/ites_gis.html>               |
|             |                                                        |
|             | <http://www.geoplace.com/default.asp>                  |
|             |                                                        |
|             | <http://www.gisdevelopment.net/index.htm>              |
|             |                                                        |
|             | [http://www.daratech.com](http://www.daratech.com/)    |
+-------------+--------------------------------------------------------+

Software Development

+-------------+--------------------------------------------------------+
| **Service** | **Software Development**                               |
+=============+========================================================+
| ITES        | Medium to High                                         |
| Segment     |                                                        |
+-------------+--------------------------------------------------------+
| D           | Development of packaged or proprietary applications    |
| escription, | that work with hardware to accomplish tasks or         |
| Definition  | manipulate information. Packaged software is generally |
|             | designed and configured for a broad range of users;    |
|             | proprietary software is customized to meet specific    |
|             | needs of the business.                                 |
|             |                                                        |
|             | Software has a wide range of products, and can be      |
|             | grouped as follows (Forrester Research, from The       |
|             | Economist, July 1999):                                 |
|             |                                                        |
|             | -   General applications (e.g., word processing,       |
|             |     database, etc.)                                    |
|             |                                                        |
|             | -   Custom Vertical Applications (e.g., customized     |
|             |     banking accounting systems)                        |
|             |                                                        |
|             | -   Development Platforms (e.g. Oracle, SAP, SQL)      |
|             |                                                        |
|             | -   Development Tools (e.g. C++, Visual Basic, Java)   |
|             |                                                        |
|             | -   Operating Systems (e.g. Windows, Mac OS)           |
|             |                                                        |
|             | -   Utilities (e.g. virus protection, memory           |
|             |     management)                                        |
|             |                                                        |
|             | Producing software requires design, programming and    |
|             | testing among other procedures.                        |
+-------------+--------------------------------------------------------+
| How It      | There are various stages to software development,      |
| Works       | requiring various levels of labor skills and           |
|             | infrastructure:                                        |
|             |                                                        |
|             | 1.  Needs analysis, functional specification           |
|             |                                                        |
|             | 2.  Design                                             |
|             |                                                        |
|             | 3.  Coding (also known as programming)                 |
|             |                                                        |
|             | 4.  Testing                                            |
|             |                                                        |
|             | 5.  Implementation and maintenance                     |
|             |                                                        |
|             | 6.  Customization                                      |
+-------------+--------------------------------------------------------+
| Size,       | According to Gartner Dataquest, October 2000:          |
| Forecast    |                                                        |
|             | 1.  Development and Integration services\              |
|             |     \$27.7 billion in 1999, projected \$341 billion in |
|             |     2004                                               |
|             |                                                        |
|             | 2.  Software Maintenance\                              |
|             |     \$40.6 billion in 1999, projected \$94.9 billion   |
|             |     in 2004                                            |
|             |                                                        |
|             | For packaged software sales, estimated by the Business |
|             | Software Alliance: \$51 billion in U.S. sales,         |
|             | forecast \$148 billion by 2005                         |
+-------------+--------------------------------------------------------+
| Customers   | Regionally, according to Gartner Dataquest:            |
| and         |                                                        |
| Prospects   | 1.  United States, 47% of the market                   |
|             |                                                        |
|             | 2.  Europe, 28%                                        |
|             |                                                        |
|             | 3.  Japan, 11%                                         |
|             |                                                        |
|             | 4.  Other, 6%                                          |
|             |                                                        |
|             | 5.  Asia-Pacific, 5%                                   |
|             |                                                        |
|             | 6.  Canada, 3%                                         |
+-------------+--------------------------------------------------------+
| Inf         | For the earlier software development stages, basic     |
| rastructure | connectivity (dial-up, small bandwidth) can be         |
| and         | sufficient. However, as the developer continues to the |
| R           | latter stages of the production cycle -- coding,       |
| equirements | testing, implementation/maintenance, and customization |
|             | -- high speed and large bandwidth subscriber lines are |
|             | required.                                              |
|             |                                                        |
|             | The infrastructure requirements become higher during   |
|             | these latter stages due to the transfer of code        |
|             | (either work-in-process or final product) to the       |
|             | overseas client or project team, when data packet loss |
|             | should be minimized.                                   |
+-------------+--------------------------------------------------------+
| Labor       | There are varying levels of labor requirements for     |
|             | each software development stage:                       |
|             |                                                        |
|             | 1.  Needs analysis, functional specification:\         |
|             |     Very high knowledge and technical expertise; plus  |
|             |     managerial and conceptual skills                   |
|             |                                                        |
|             | 2.  Design:                                            |
|             |                                                        |
|             | Same as above                                          |
|             |                                                        |
|             | 3.  Coding (also known as programming):\               |
|             |     Qualified programmers, project managers, technical |
|             |     documentation                                      |
|             |                                                        |
|             | 4.  Testing:\                                          |
|             |     Basic computer skills provided specific            |
|             |     instructions for testing                           |
|             |                                                        |
|             | 5.  Implementation and maintenance:\                   |
|             |     Same as Coding                                     |
|             |                                                        |
|             | 6.  Customization:\                                    |
|             |     Same as Coding, Implementation; but may also       |
|             |     require subject matter expertise for customization |
|             |     (e.g. insurance, airline industry experience)      |
+-------------+--------------------------------------------------------+
| Success     | Aside from qualifications in software development and  |
| Factors     | relevant certifications:                               |
|             |                                                        |
|             | -   Ability to understand customer's business          |
|             |     processes to effectively design solutions          |
|             |                                                        |
|             | -   Project management                                 |
|             |                                                        |
|             | -   Quality assurance                                  |
|             |                                                        |
|             | -   On-time delivery                                   |
+-------------+--------------------------------------------------------+
| Potential   | Poor project management quoted as the #1 problem with  |
| Pitfalls    | outsourced development projects (Cutter Consortium,    |
|             | November 2000). Common problem areas:                  |
|             |                                                        |
|             | -   Project exceeded budget                            |
|             |                                                        |
|             | -   System delivered didn't have required              |
|             |     functionality                                      |
|             |                                                        |
|             | -   Deliverables were of poor quality                  |
+-------------+--------------------------------------------------------+
| Competitive | 49% of IT services market dominated by top 20          |
| Landscape & | companies (IBM, EDS, Fujitsu, Accenture, etc.)         |
| Notable     |                                                        |
| Companies   |                                                        |
+-------------+--------------------------------------------------------+
| Government  | -   Intellectual property rights, policies and         |
| Policies    |     enforcement                                        |
| and         |                                                        |
| Incentives  | -   Policies that encourage foreign direct investment, |
|             |     joint ventures and subsidiaries -- to attract      |
|             |     leading companies                                  |
+-------------+--------------------------------------------------------+
| Sources     | -   Gartner Dataquest "IT Services Market Statistics", |
|             |     October 2000                                       |
|             |                                                        |
|             | -   Business Software Alliance, http:://www.bsa.org    |
|             |                                                        |
|             | -   The REACH Initiative: Jordan's Software and IT     |
|             |     Services Industry                                  |
+-------------+--------------------------------------------------------+

# Annex B: ITES Workshop Report

At the conclusion of this study, a workshop was held in Bangladesh for
about 100 stakeholders in the sector, including IT firms, government
officials, donor agencies, educators, and NGOs.

The workshop presented the findings of the study, and organized the
participants into work groups to develop recommendations and suggestions
on how to best develop ITES as an export industry for the country.

The agenda for the workshop included:

**Opening Session:**

**Chairperson:** Mr. Karar Mahmudul Hassan, Secretary, Ministry of
Science and Information and Communication Technology

9:30 Welcome by Dr. Larry Forgy, Team Leader, ITES Sector Study Team

9:35 Remarks by Dr. Mary C. Ott, Deputy Mission Director,
USAID/Bangladesh

9:40 Speech by Dr. Abdul Moyeen Khan, Honorable Minister, Ministry of
Science and ICT

9:55 Remarks by the Chairperson

**[Business Session: I]{.underline}**

Moderator: Dr. Mohammad Abu Yusuf, Senior Assistant Secretary, MOSICT

Presentations:

10:00 The external market for ITES: Risa Dimacali, Market Consultant,
CARANA

10:45 Market issues in the survey: Dr. Larry Forgy, CEO, Coursemark

Moderator: S.M Iqbal, Managing Director, ISN

11:15 Early Bangladesh entries in the International Market by
Bangladeshi firms

> Technovista: by Mr. Nurul Kabir, Managing Director
>
> Aftab IT Ltd: by Md. Akhtaruzzaman Manju, Operative Director

GSRC: by Amanat Ullah Khan, Chairman

12:30 Case study on the Philippine experience: Risa Dimacali, Market
Consultant, CARANA

1:00 Lunch

**[Business Sessions: II]{.underline}**

2:00 Panel on findings on conditions in Bangladesh

Moderator: Shah Alam Bakshi, Principal Scientific Officer, BANSDOC,
BCSIC

Members:

-   Prof. Jamilur R. Choudhury, Vice Chancellor, BRAC University

-   A.F.M.H. Choudhury, Commissioner, Bangladesh Telecommunication
    Regulatory Commission

-   Dr. Larry Forgy, CEO, Coursemark

-   Dr. Jeffrey Cochrane, Consulting and Information Services, USAID

Presentations on the relevance to the ITES market of:

1.  Policy and infrastructure

2.  Human Resources

3.  Survey finding on policy, infrastructure, skills

**[Work Session]{.underline}**

3:00 Working groups: Strategy and Recommendations

A.  Issue in Public and private Collaboration

-   Md. Musharraf Hossain Khan, Deputy Technology Advisor, MOSICT

B.  Business Development and Marketing for ITES in Bangladesh

-   Imran Shauket, Senior Policy Advisor, JOBS project

C.  The Key Supporting Factors for an ITES Sector

-   Dr. Mohammad Abu Yusuf, Senior Assistant Secretary, MOSICT

D.  Creating a domestic Capacity for ITES in Bangladesh

-   Habibullah N. Karim, President, BASIS

**[Closing Session]{.underline}**

Chairperson: Mr. Karar Mahmudul Hassan, Secretary, Ministry of Science
and ICT

4:00 Reports by Working Groups

Moderator: Mr. Nurul Kabir, Managing Director, TechnoVista

5:00 Summary of Recommendations and Closing Remarks

Instructions for the work groups were as follows:

**Instructions for afternoon working groups at the workshop on**

**the market for ITES in Bangladesh**

The objective of this exercise is to identify specific steps that can
improve the competitiveness of Bangladesh in the ITES market. Each
working group should determine what critical factors would promote
Bangladesh in the ITES market. A spokesman for the group will then
report back to the workshop on what specific actions will move
Bangladesh and Bangladesh businesses toward a competitive position.
Groups should prioritize the list of the most important measures in the
short term and the long term.

Working Groups:

**1. Issues in public and private collaboration**

What would a public/private partnership for ITES in Bangladesh look
like?

What goals and working groups would it have?

How would it be organized to represent the range of interests from
software to data entry?

What resources could it use, and where would it obtain them?

How would it develop and execute a long-term strategy?

**2. Business development and marketing for ITES in Bangladesh**

What unique competitive advantages does Bangladesh have in ITES?

What are the market segments where Bangladesh can be competitive?

What are the best and most cost effective marketing efforts?

Is subcontracting a priority strategy?

What role can non-resident Bangladeshis play?

**3. The key supporting factors for an ITES sector.**

What steps are necessary for more available and lower cost connectivity?

What is the role of the Telecommunications Regulatory Commission?

What improvements are necessary in the education system, such as
international standards and certification in education and training?

What is the role of IT parks, and should they be publicly operated,
publicly financed and privately operated, or private?

How critical are other supporting systems, such as payment and financial
systems, power, and transport?

**4. Creating a domestic capacity for ITES in Bangladesh**

How do you create domestic market for ITES?

What domestic private demand exists for ITES?

What immediate and implementable opportunities for e-government exist?

What business climate and government transparency changes are necessary?

What intellectual property rights changes are necessary?

The working groups produced a wide range of suggestions and
recommendations for areas to improve the general IT environment in
Bangladesh, as well as specific proposals related to ITES.
Recommendations from the working groups included:

Group 1:

-   There are few organizations in Bangladesh that formalize
    partnerships between the public sector and the private sector. There
    are a number of ad hoc groups that work together for particular
    issues, but not much history of collaboration.

-   There is some history of public/private work together in
    infrastructure. The private sector worked with BTTB on
    interconnections issues to help bridge a gap there.

-   The government and the private sector should work together on
    marketing and business development issues. The private sector put
    together a forum that would work with the various government offices
    around the world to improve marketing. The public sector and the
    private sector would do this on a cost-sharing basis.

-   It is critical for the students to have more practical experience to
    maximize their productivity. One possibility is to develop a
    professional apprenticeship program in the public sector. This would
    increase the student experience and develop better relationships
    between the public and the private sector.

Group 2:

-   There is widespread agreement that the country has a negative image.
    The marketing strategy for the sector should include work on a more
    positive image for the country, as well as business development and
    marketing of individual firms.

-   There needs to be a serious commitment to the legal infrastructure
    that promotes ITES and other IT services. This includes work on an
    e-commerce law, better regulatory environment, improved contract
    law, a digital signatures law, and others.

-   A major marketing problem is the quality of products from
    Bangladesh. We need to improve our capacity to meet international
    quality standards. This includes increased international training in
    both technical and management skills.

Group 3:

-   There must be more private and public investment in the
    telecommunications system. This would include better
    interconnections, an undersea fiber optics cable, and more bandwidth
    in the local loop.

-   There should be more competition among VSAT providers, with more
    licenses being issued.

-   There should be better interconnections among the data circuits of
    the ISPs within the country. This would improve the performance of
    local data exchange.

-   The BTRC must treat all parties in the telecommunications system
    equally, and must be truly independent. This would mean, among other
    things, that it would have its own budgetary power. It must
    promulgate transparent guidelines for all investors and potential
    investors in the telecommunications system.

-   The education system needs to adopt international certifications,
    and the quality of technical training must be upgraded and some
    institutions.

-   There is some concern about the proposed IT Parks, and whether they
    are really needed at all. If they are constructed, they should be
    jointly financed and managed by the public sector and the private
    sector. Location is an issue, and they cannot be too far from the
    city.

-   There is a need for better support systems. This would include
    bringing banking services on-line and interconnected. Reliable power
    is also needed, as well as better operation of the ports and customs
    services.

-   The intellectual property laws should be strengthened and enforced.

Group 4:

-   The government should make use of the Internet as a service delivery
    mechanism. In particular, it should engage in e-health and distance
    education programs in order to push government benefits out to rural
    areas.

-   The Commerce Ministry should be a champion for e-government, and
    should lead by example in getting its forms and information on-line.

-   In addition, the government should embark on a number of small
    projects to increase confidence and familiarity with e-government
    and electronic commerce.

-   It should also digitize its documentation, including developing a
    standardized coding scheme. This would allow greater access and
    transferability of the data.

-   The government should implement a directive to give preference to
    local software producers in order to spur growth in the industry.

-   There should be recognition of the need for a computer literacy
    program that can be promoted by the government.

-   The postal department should consider using its on network to
    provide for cyber kiosks in underserved areas.

# Annex C: The opinion surveys of this study

#### NOTE: The full data set of these surveys is available by request from USAID/Bangladesh

A key aspect of the ability of Bangladesh to compete in the
international market for ITES is the attitude and perception of that
market among market participants. The study conducted a survey to
determine the opinions of some key public and private stakeholders in
this market.

Among the issues considered by the survey were opinions on:

-   The ability of Bangladesh to compete in this market.

-   The role that government can play in promoting this sector.

-   The role of the private sector in developing this sector as an
    export market.

-   The possible role of Nonresident Bangladeshis in generating business
    in ITES.

-   The status of enabling conditions in Bangladesh and its
    competitiveness with India.

The survey sample was quite large, and covered several classes of
stakeholders in Bangladesh, as well as a group of Nonresident
Bangladeshis. The sample size was:

-   42 Government officials.

-   194 executives and decision makers in ICT firms and ICT trade
    associations.

-   27 in NGOs, including business associations, development
    organizations, social service organizations, and others.

-   204 executives in non ICT firms and trade associations, including
    banking, legal, health, education, agribusiness, media, insurance,
    garment and textiles, transportation and others.

-   219 Nonresident Bangladeshis, who were recruited through several
    Bangladesh expatriate organizations, primarily in the U.S.

The survey revealed a high degree of consistency among the different
classes of stakeholders. Almost the entire sample was in favor of
greater liberalization of the telecommunications sector, and of
privatization of the BTTB. There is strong support as well for an
independent telecommunications regulatory authority:

![](media/image9.wmf){width="6.376388888888889in"
height="3.504166666666667in"}

An important result highlighted in the survey was that almost all the
groups believed that encouraging investment in information and
communication technology was a very effective method of developing this
market. This highlights a general opinion among the sample that
Bangladesh is disadvantaged in this sector by the lack of a good
communications technology infrastructure.

![](media/image10.wmf){width="6.314583333333333in"
height="3.535416666666667in"}

In addition to the support for private investment, there was also strong
support for advances in education and training. Among the most popular
was the establishment of skill standards for IT education. The need for
better standardization of skills in the industry was a common theme
throughout the study.

![](media/image11.wmf){width="6.125in" height="3.0006944444444446in"}

One area in which most stakeholders had serious doubts was in the
ability of Bangladesh to compete in this market against India. India has
a significant head start over Bangladesh in all sectors of the
international IT market, and most observers thought this gave them a
major advantage.

Low labor costs was about the only category in which the Bangladesh
stakeholders felt that the country could compete currently with India:

![](media/image12.wmf){width="6.600694444444445in"
height="3.1798611111111112in"}

In almost all other aspects of the market, Bangladesh was considered
disadvantaged. Specifically, Bangladesh was considered weak compared to
India in:

-   Private and Academic connections

-   Domestic demand

-   English language

-   Image in ICT industry

-   Quality and certification of labor

-   IPR, security, authentication

-   Outsourcing relationships

-   Telecom infrastructure

-   Venture capital

-   Political stability

-   R&D spending, cutting edge technology

-   Marketing capacity, market research

Virtually all stakeholders felt that the government should play a major
role in the development of an ITES sector. That role, almost
unanimously, was felt to be the creation of an environment in which the
private sector can invest in the infrastructure needed to develop the
sector.

![](media/image13.wmf){width="6.429861111111111in"
height="3.5881944444444445in"}

An additional way in which government can support the ITES sector is to
generate demand for these services domestically by investing in
e-government initiatives. There was support for this activity among the
survey. It is noteworthy that the least support for e-government came
from the government officials, who presumably would be required to
manage its creation.

![](media/image14.wmf){width="6.55in" height="3.627083333333333in"}

There was less support, but still a majority of stakeholders, who felt
that the government should be a key proponent of Bangladesh firms in the
international markets. Even though there was support for government
efforts, there was less confidence in using the Export Promotion Board
as the main vehicle for government promotion, as it was not considered
very effective.

![](media/image15.wmf){width="6.55in" height="3.939583333333333in"}

Even though all groups supported government involvement in promoting
Bangladesh industry, they also felt that the private sector should be
involved with a strong association if its own. ICT firms in particular
felt that an association was crucial.

![](media/image16.wmf){width="6.616666666666666in"
height="3.6819444444444445in"}

One aspect of the survey results seemed at variance to other evidence.
Interviews with employers indicate that there are an abundance of
qualified job applicants for each technical position they advertise.
Nevertheless, most survey participants indicated that jobs were
available for qualified individuals. Not surprisingly, the nonresident
Bangladeshis were least convinced of job opportunities within
Bangladesh.

![](media/image17.wmf){width="6.903472222222222in"
height="3.4805555555555556in"}

**The Role of Non-Resident Bangladeshis**

Because anecdotal evidence indicates that Non-Resident Indians played a
large part in the development of the Indian IT industry, an analysis of
Non-Resident Bangladeshis (NRBs) was included in this study. Moreover,
the NRBs are considered good information sources for providing another
perspective of the external market given their knowledge of the
Bangladesh situation and overseas business practices.

To determine the role of NRBs, a survey was conducted online, with
requests for participation issued via the Association of American
Bangladeshi Architects & Engineers (AABEA), eb2000, TechBangla, and
e-Mela. A total of 219 NRBs completed the survey. The majority were
based in the United States, in the IT and/or engineering profession, and
have spent more than 5 years away from Bangladesh.

The survey revealed that the NRBs do not play the role in Bangladesh
that the Non-Resident Indians are reputed to play. Major finding
include:

-   NRB community is loose-knit. Although there are significant numbers
    of NRBs that stay in touch with each other and with the business
    community in Bangladesh, majority have only occasional connection
    with either community.

-   Harder view of Bangladesh as a competitor in IT and ITES, given
    their exposure to business environments in North America, Europe and
    Asia Pacific.

-   Believes low labor cost is competitive advantage.

-   Strong opinions that the government has not fostered
    business-friendly environment with its control over infrastructure
    and levels of corruption.

-   Can play major role, specifically in knowledge transfer and
    marketing.

-   Investment is not a major contribution NRBs can make at this time.

Most respondents, 69%, have been away from Bangladesh for over 5 years.
Although a sizable 28% have either "strong" or "very strong" connections
with other NRBs, majority of survey respondents had limited or
occasional ties with Bangladeshi business community outside of
Bangladesh.

*How strong is your connection (involvement, communication, networking)
with the Bangladeshi business community outside of Bangladesh?*

![](media/image18.wmf){width="3.9270833333333335in"
height="2.6840277777777777in"}

The majorities also have limited connection with business community
within Bangladesh, although 30% consider their connection "very strong"
or "strong".

*How strong is your connection with the Bangladeshi business community
within Bangladesh?*

> ![](media/image19.wmf){width="4.059722222222222in"
> height="2.7680555555555557in"}

The result is that the majority are also not currently doing business in
the country, nor facilitating business exchanges between Bangladesh and
the United States.

  -------------------------------------------------------------------------
                               **Yes**        **No**         **No Reply**
  ---------------------------- -------------- -------------- --------------
  Do you do business in        20.55%         70.78%         8.68%
  Bangladesh?                                                

  Are you familiar with trends 56.16%         35.16%         8.68%
  in ITES in Bangladesh?                                     

  Have you played a role in    26.03%         65.30%         8.68%
  developing business ties                                   
  between the US and                                         
  Bangladesh?                                                
  -------------------------------------------------------------------------

NRBs already doing business with more developed countries (U.S., U.K.,
Australia, Singapore, Japan) have mostly negative perceptions regarding
Bangladesh's competitiveness. Most common responses outlined the
following problems with doing business in Bangladesh:

-   Government

    -   Rampant corruption and bureaucracy

    -   Lack of knowledge, understanding and support for IT

    -   Unfriendly business practices, both for entrepreneurs and
        foreign companies

    -   Political instability; intolerance between political parties;
        hartals or strikes damaging to country's operations and
        reputation

    -   No partnership between public and private sectors

    -   No evident influential leader to initiate and support IT efforts

-   Infrastructure

    -   Costly and inadequate telecommunications

    -   Power supply not reliable

-   Human resources

    -   Can't meet quality standards of the developing world

    -   Poor or declining English capabilities

    -   Lack of understanding of IT benefits, so hesitation to implement
        IT programs in business

    -   Lack of commitment; lack of knowledge of western business
        practices

-   Financial systems

    -   Not developed to support IT projects

    -   Lack of foreign investment

Resoundingly, low labor costs were considered Bangladesh's chief, and
sometimes only, competitive advantage. Motivated entrepreneurs and a
hardworking labor force were also mentioned as advantages.

The competitive disadvantages of Bangladesh were more numerous:

-   Government

    -   Lack of open market policies, thinking; anti-competitive
        practices and too much intervention on business and industry

    -   Lack of vision regarding IT since lack knowledge

-   Human resources

    -   Lack of mid- and senior-level expertise

    -   Low efficiency compared to other countries, expectations of
        outside customers

-   Investment

    -   Absence of foreign, recognizable companies

    -   Small domestic market limits trained and skilled IT
        professionals

-   Poor country image

    -   Known as disaster area, low value-added exports (e.g., garments)

    -   Lack of marketing, awareness

    -   Lack of knowledge of overseas customer expectations

NRBs also do business in several other countries, including the United
States and Canada; United Kingdom and Europe; Australia, Japan, China,
Thailand, Malaysia and Singapore; Kuwait, Saudi Arabia; India and
Pakistan. In making international comparisons, the NRBs were quite
harsh:

-   "No comparison; can't compare" -- Bangladesh is "100 years behind"

-   Infrastructure, especially for the internet, is superior overseas

-   Business practices -- high productivity; market-driven and
    profit-oriented policies and practices

-   Little bureaucracy and red tape; government is pro-business and
    promotes entrepreneurship

However, those that work in South Asia, Africa and the Middle East
stated that Bangladesh demonstrates similar technologies and business
practices than these areas -- with the exception of India:

-   India: far ahead; more tuned with external market and customer
    expectations

-   Pakistan: similar problems as Bangladesh with regards to
    infrastructure and government, although there are already overall
    improvements in business environment (not specified)

-   Africa and Middle East: business practices, infrastructure and
    technology are similar to Bangladesh

In discussing the potential for ITES exports from Bangladesh, many of
the NRBs admitted a lack of knowledge in this area, but there were
responses from most respondents:

-   Software development

    -   Quality assurance

    -   Smaller-scale applications or software modules

    -   Projects must be well-documented for offshore development

-   Data entry

    -   Documentation data entry

    -   Back office processing

    -   Bill preparation, accounting

-   Digitizing and conversion

    -   CAD CAM, assisted conversion

    -   Blueprints

    -   GIS

-   Web development

-   Database management

-   Transcriptions

-   Call centers, specifically for IT-related, hardware or technical
    support

NRBs express a willingness to help Bangladesh businesses to develop an
ITES export sector, as can be seen below.

*If a "match-making" program were launched for NRBs to promote
Bangladeshi firms to provide services for companies in the United States
or Europe, would you agree to serve as "matchmaker"?*

![](media/image20.wmf){width="3.8041666666666667in"
height="2.5993055555555555in"}

The NRBs would generally expect to be compensated for this service. For
the question: *What would you expect as compensation for serving as
matchmaker? Check up to two that apply.*

The following were the top responses, in order:

-   Recognition from company, organizations, Bangladesh government,
    agencies (45.2%)

-   Commission or Revenue share as % of business deal (39.7%)

-   Finder's fee; flat fee (17.8%)

-   No compensation necessary (15.9%)

NRBs were equally harsh, if not more so, in judging the government role
in this sector. Responses reflect what NRBs find lacking in government
policies and practices to promote the IT and ITES sectors. In addition
to the list below, many respondents added that the government "should
stay out of the way of businesses and entrepreneurs" -- i.e., once the
infrastructure and logistics are resolved by the government, market
forces should be allowed to take over unobstructed.

-   Infrastructure, logistics

    -   Dismantle BTTB

    -   Truly liberalize telecommunications -- implement an independent
        regulatory commission

-   General business climate

    -   Promote political stability, peace and order

    -   Adopt business-friendly policies that promote foreign direct
        investment

    -   Increase transparency; reduce corruption

    -   Offer tax breaks and incentives for local businesses, foreign
        investors

    -   Implement IPR policies

-   Marketing

    -   Establish U.S. trade promotion office, in conjunction with IT
        trade associations

-   E-governance

    -   Implement IT projects with preference to local IT firms

### 

The NRBs surveyed generally live in the US, and have been out of
Bangladesh more than 6 years.

Geographic Location

-   USA 64.8%

-   Other 25.6%

-   Dhaka 2.3%

-   No reply 7.3%

How many years since left Bangladesh\
![](media/image21.wmf){width="4.059722222222222in"
height="2.7743055555555554in"}

-   Industry\
    ITES 65.3%\
    Non-ITES 26.0%\
    No reply 8.7%

-   Profession\
    ![](media/image22.wmf){width="4.059722222222222in"
    height="2.7680555555555557in"}

# Annex D: Summary of the Philippines Case Study

#### General

This report provides an additional external perspective to the
IT-Enabled Services industry by illustrating the competitive position of
the Philippines, a country gaining recognition as a "Supplier Country of
Choice" in this market. The objective of the study is to glean possible
strategic and tactical concepts and practices that could apply to
Bangladesh and its goal to increase its potential in this market.

#### Major Findings

The Philippines consistently lags behind its Asian neighbors in
development, with long-running problems such as overpopulation,
political instability and natural disasters. In recent years, however,
due to major reforms in its telecommunications infrastructure, the
Information Technology and IT-Enabled Services sectors of the economy
have demonstrated noticeable growth.

With declining telecommunications costs and the country's inherent
strengths in its English-speaking and service-oriented labor force, the
country recognized its competitive potential in serving the American and
English-speaking market for outsourcing. Based on an articulated
strategy by the IT and E-Commerce Council (ITECC), a partnership
organization composed of public and private sector representatives, the
Philippines began to focus on its unique advantages and to target
specific ITES segments in which to compete. While still facing internal
risks and threats from other countries vying for market share, the
Philippines has demonstrated organization and strategy from which to
work towards its goals of creating higher-value jobs and increasing
exports.

**[Why the Philippines for ITES Competitiveness Study]{.underline}**

As recently stated in the Asian Wall Street Journal, "It is not often
that the Philippines and the notion of competitiveness appear in the
same sentence."[^11] The article goes on to state that the country has
recently caught the attention of major companies around the world as a
supplier of IT-Enabled Services (ITES). Competitor countries like India
are taking notice as well.

As the subject of competitor country research, the Philippines became a
logical choice among others because of its recent advances in key areas
that foster its emerging ITES industry. While India has held a
commanding lead for years, the Philippines is only now showing its
capabilities in various areas of ITES -- and has been actively promoting
its unique competitive advantages to the international market. Its
emerging position as a country supplier was deemed to be more relevant
to Bangladesh's early efforts in establishing an ITES industry. Lastly,
the Philippines shares with Bangladesh a few less favorable factors --
including a poor country image, low GDP per capita, population density
and unpredictable political shifts.

#### Country's Competitive Position in ITES 

In NASSCOM/McKinsey's recent ITES study, the Philippines ranked low in
both "Country Attractiveness" and "Capability of Workers":

![](media/image23.png){width="5.0in" height="4.120138888888889in"}

If Bangladesh were included in the country comparison in this
report[^12], it would similarly be positioned in the lower left quadrant
of this map, i.e. with low Country Attractiveness and low Capability of
Workers.

**[Key Enabling Factors for ITES]{.underline}**

The public and private sectors of the Philippines have made significant
advances in creating a more favorable and optimal location for IT and
IT-Enabled Services. These positive effects are becoming more evident,
in terms of increased employment and foreign investment, although the
country is still in the early stages of finding its competitive niche in
the market.

#### Infrastructure 

Telecommunications Industry Reform

The telecommunications infrastructure in the Philippines had been
controlled by a privately held monopoly operating as the Philippine Long
Distance Telephone Company, founded in 1928. While majority-owned by the
powerful Lopez family, PLDT had a small amount of shares traded publicly
on the Philippine Stock Exchange, but nonetheless the monopoly over land
lines and the international gateway was a tremendous challenge to the
access and affordability of telephones in the country.

In 1993, then President Fidel Ramos embarked on a campaign to practice
more open-market policies in heavy industries including the power grid,
oil and gas, and telecommunications. He is widely recognized as having
provided the political will to break the monopoly of the PLDT by issuing
two Presidential Orders that greatly increased the availability of
telephone lines:

-   Executive Order 59: mandated interconnection between PLDT and other
    telecom operators

-   Executive Order 109: increased the number of lines; any company
    applying for a telecommunications license must construct 300,000
    international or 400,000 mobile lines within three years[^13]

The effects of the telecommunications industry reform were seen soon
after these mandates from the President. In addition, it is reported
that significant foreign investment began to flow into the country after
these policies were put into place, although a specific figure was not
readily attributable to the reform.

Teledensity and Internet Use

Signs of liberalization of the telecommunications industry began to
appear in the mid-to late 1990's, with increased competition, increased
investment, and reduced rates.

The following table is from data supplied by the National
Telecommunications Commission:

  -----------------------------------------------------------------------
                    **1995**          **2000**          **% Change**
  ----------------- ----------------- ----------------- -----------------
  Land Lines        1.4M              6.9M              393%

  Teledensity --\   2.01              9.05              350%
  fixed lines                                           

  Wireless          959k ('96)        6.5M              578%

  Wireless density  1.37              8.46              517%

  Internet users    100,000 ('97)     2,000,000         1,900%
  -----------------------------------------------------------------------

The significant and rapid increase in teledensity, wireless density and
internet use is clear evidence that the open-market policies of the
Ramos administration quickly took hold. Once the government liberalized
the telecommunications infrastructure, market forces stepped in to meet
demand.

Competition and Service

Soon after liberalization reform, penetration and availability of
telecommunications service increased in direct relation to the increase
from the one provider, PLDT, to many more.

  ------------------------------------------------ ----------------------
  **Operators**                                    **\# In 2000**

  Local exchange carriers                          77

  International Gateway Facilities                 11

  Public Trunk Line Operators                      10

  Cellular Mobile Telephone Carriers               5

  Satellite Services                               13
  ------------------------------------------------ ----------------------

*Source: National Telecommunications Commission*

It is important to note, however, that although there are numerous local
exchange carriers, PLDT still controls 80% of the market.[^14]

Another effect of increased providers and competition is the decline in
prices over the period. In 2000, for example, the average cost of a T1
line[^15] was reported to be \$35,000 to \$40,000 per month[^16]. In
2002, this figure was quoted to be as low as \$6,000 per month.[^17]
Moreover, service has become more responsive; a company can obtain a T1
line within two days of placing its order. Companies also have their
choice of connectivity -- whether by T1, microwave or coaxial cable.
These increased options significantly assist a typical ITES company,
where data operations redundancy could be critical to the business.

**[Human Capacity]{.underline}**

Labor Force, Literacy and Skills

The Philippines possesses a large labor force of over 33 million people.
The country chronically suffers from high unemployment rate,
approximately 11%, and many are underemployed even as a large number of
citizens seek work overseas.

The country has one of the highest literacy rates in Asia, 94.8%, as
well as a high English language proficiency obtained by following an
American-style public school system that teaches English in primary
through secondary schools.

The country produces 350,000 college graduates annually, including a
large number of graduates in engineering, accounting and medical-related
fields. The number of graduates in IT related programs illustrate an
exponential growth, from 4,000 in 1991 to over 21,000 in 1999.

International Benchmarks

The country's educational system, along with IT training institutes that
have spawned nationwide, have begun to encourage measurement of IT
programs and students against international standards. Specifically, the
government, in conjunction with Japanese company partners, has sponsored
voluntary testing of Philippine graduates in fields of IT and animation
using the standards exercised in Japan. Early results show Filipinos
lagging behind their Japanese counterparts, and educators and company
managers are at least now aware of this gap in order to intervene.

For project management, private companies are encouraging employees to
take the Singapore Project Management exam to assess their capabilities.
IT training institutes are expected to be certified training vendors by
the software or hardware developer (e.g. Oracle, Cisco), and to produce
certified graduates as well. The University of the Philippines is also
conducting its own study of how the UP curriculum and standards compare
with North American counterparts.

The country has also been recognized recently by international groups
for its skilled labor force. The Hong-Kong based Political & Economic
Risk Consultancy (PERC) in 1999 ranked the Philippines second in its
Skilled Labor Ranking, in terms of quality, cost and availability.[^18]

"Cultural Affinity" with the USA

An unquantifiable attribute of the Filipino labor force is what has been
termed its "cultural affinity" with the United States. As a former
protectorate of the U.S. for over forty years, the Filipino culture is
permeated with American attributes -- such as language (including
colloquialism), entertainment, and consumer goods and tastes. With this
quality, the Philippine government and private sector has eyed the
American market as its primary target for ITES business, and is
determined to feature this affinity as a competitive advantage of the
Philippines.

Concerns

The Philippines faces the usual challenges of a developing nation in
terms of the lack of resources for educational facilities and faculty,
and the desire of many graduates to leave the country in search of
better opportunities elsewhere.

Assessment

With regards to the ITES industry, the Philippines has the following
positive factors in its labor force:

-   High literacy rate

-   High fluency in English

-   Cultural affinity to North America

-   Large population with good primary education

The country also faces the following constraints or limitations:

-   Students and highly skilled workers want to leave

-   Difficulty recruiting/retaining qualified faculty

-   University level education under-funded

-   Low supply of higher-level managers, e.g. project or relationship
    managers, necessary for higher value-added services

In relation to IT-Enabled Services, the most promising segments for the
country given its current labor pool are the low- and mid-level segments
of the industry. The country's leadership appears to recognize that it
must increase the capabilities of IT and computer science graduates in
order to participate in the higher end of the market. There are
concerted efforts being done by the public and private sectors to bridge
the gap identified by the international tests, although these programs
are still under discussion at the time of writing.

#### Public & Private Sector Partnership: IT E-Commerce Council

During interviews with public and private sector stakeholders, many
provided insight into the potential and contributions of the IT
E-Commerce Council (ITECC). The organization combines the political
muscle of government officials, with the expertise of the private
sector. It should be noted, however, that (from interviews with
stakeholders) there was wide agreement that the government was slow to
react at first in focusing on the potential of IT and ITES. It was due
to repeated requests from private sector IT organizations that finally
gained the attention of government officials who eventually provided the
political determination to get organized and formulate a strategic
approach.

This section provides detailed discussion on this subject because the
organization and early activities of the ITECC appear to demonstrate the
committee members' understanding of the ITES industry, along with the
competitive "drive" for the country to achieve its business goals.

ITECC Leadership and Organization

The ITECC falls under the Department of Trade and Industry, and is
headed by an Executive Director who holds a Cabinet-level post under the
President. The Committee is headed by the President Gloria
Macapagal-Arroyo, who has been credited for her focus on the economy
(she was an economist and former member of Congress). ITECC members
report that she indeed chairs the committee's monthly (now quarterly)
meetings, driving the agenda with her political promise to create over
100,000 high-value jobs by the end of 2002.[^19]

The Executive Committee under the President is composed of the
Secretaries of the Department of Trade & Industry (DTI) and the
Department of Science & Technology (DST), plus the Executive Director.
The Executive Committee is tasked with policy-making and planning for
the rest of ITECC.

There are many working sub-committees, including Infrastructure, Human
Resources, Business Development, e-Government, and Marketing and
Communications. The sub-committees are each co-chaired with a government
official and a volunteer member of the private sector. The Business
Development Committee, for example, is co-chaired by the Undersecretary
of the DTI and the Chief Information Officer of one of the largest
Filipino-owned conglomerates in the country. The Human Resources
Committee is co-chaired by the Department Chairman for Computer Science
in the University of the Philippines school system and the founder of
one of the largest chain of computer training schools. This arrangement,
demonstrating a public and private sector partnership, appears to be
working well for the ITECC in terms of aligning the goals of the public
and private sectors organizationally.

### 

ITECC Strategy Highlights

The ITECC wrote the "Internet Strategy of the Philippines" or ISP.com
that outlines the general issues concerning the committee for promoting
the IT and ITES industries in the country. As written on the Board of
Investments website, the committee set out to develop focused market
plan where Filipinos "can compete initially and immediately" in the ITES
industry, specifically by maximizing inherent advantages of human
resources.

In principle, the ITECC believes that the government's role is to
provide support in infrastructure, labor, financial, logistical and
legal/institutional means. However, development of the sector should be
left to the private sector -- that technology and markets are
"inherently ungovernable" and best if "left to do its thing".

There are plans approved by Congress to create a new Department of
Information, Communication & Technology under which the ITECC activities
would fall. This move would separate "Communications" from the current
Department of Transportation & Communications, and demonstrates the
government's perspective of ICT as a separate infrastructure backbone
for the country. With its own budget and staff, the belief is that there
would be an increase in ICT research and program capabilities. The
intent is also to align under one department the objectives and
activities for infrastructure, labor and policies for business
development of ICT.

The Committee is admittedly still in its early organizational stages.
Future activities for the ITECC are being developed into a written
"management plan" (complete with objectives, tasks and delivery dates,
and funding proposals for donor presentations) with the assistance of
the USAID Mission in Manila, which is providing management consulting
assistance to the Committee and Executive Director.

**[Selected Market Segments and Competitive Advantages]{.underline}**

The ITECC recently developed its plan to concentrate on five specific
segments in which it believed the Philippines could claim unique
competitive advantages. The general criteria for choosing the segments
were:

-   Market potential

-   Employment potential -- job creation

-   Supply of knowledge workers

-   Unique competitive advantages of the country

    -   Education -- accounting, medical-related, art

    -   English speaking proficiency

    -   "Cultural affinity" with USA

-   In addition to low costs ("Value for Money" -- up to 50% savings),
    time difference

The selected segments are:

-   Customer Contact/Call Centers

-   Medical Transcriptions

-   Animation

-   Software Development

-   Business Process Outsourcing (BPO) -- specifically for financial
    services

#### Selected Segments

The following provides a general overview of what ITECC has published to
be the targeted ITES segments in which the Philippines wants to compete
and attract overseas customers. Note the unique competitive advantages
provided, which appear to be the anchors of the ITECC's strategy. Of
these segments, the Gartner Group has assessed the Call Center and
Business Processing Outsourcing areas as particularly promising for the
Philippines.[^20]

### Customer Contact/Call Centers

-   Market size: \$6.5 billion worldwide in 1998; projected \$33 billion
    in 2008[^21]

    -   Philippines: \$173 million in revenues for 2001

    -   Projected growth to \$864 million by 2004

-   Employment

    -   22 call centers with 3,600 agent seats; employed 4800 in 2001

    -   Projected growth to 24,000 jobs in 2004

-   Unique competitive advantages

    -   High English proficiency -- written and spoken, even with
        American colloquialism

    -   Culture inclined towards customer service

    -   Familiarity with American customer

    -   Decreasing telecommunications costs

-   Companies: America OnLine, Customer Contact Center (C-Qube)

### Medical Transcriptions

-   Global market estimated at \$10 to \$25 billion annually; growth
    rate of 15%

    -   Market expected to surge as 6,700 U.S. hospitals have yet to
        convert records as required

    -   \$40 million generated by Philippine MT firms in 2001

    -   Projected revenues to \$483 million in 2004

-   Employment

    -   16 firms in 2001 -- 4 have majority of market;

    -   1,200 professionals

-   Supply of knowledge workers

    -   Philippines is #1 exporter of nurses

    -   220 medical schools

    -   Produces 44k nursing graduates per year; only 20% get jobs
        domestically

-   Unique competitive advantages

    -   High English proficiency -- written and spoken

    -   Familiarity with medical practices in the U.S.

-   Companies: Radix Systems, Transkripsyo (see section 8.1)

### Animation

-   Worldwide market estimated at \$1.3 billion in 1998; projected to
    grow to \$15 billion by 2008[^22]

    -   Philippine-based companies generated \$21 million in revenues in
        2001; projected growth of 25% to \$40 million in 2004

-   Employment

    -   23 firms; \# employees not found

-   Unique competitive advantages

    -   Strong cultural affinity with USA -- American entertainment
        widely available

    -   Creativity

-   Companies: Walt Disney, Toei Japan

### Software Development

#### 

-   IT outsourcing for U.S. alone reached \$56 billion in 2001;
    projected to grow to \$100 billion by 2005[^23]

    -   Philippine software developers generated \$115 million in
        revenues for 2001; likely understated due to unreported exports

    -   Expect to grow to \$268 million in 2004

-   Employment

    -   36 registered software development houses

    -   Estimated employees: HeadStrong 1,500 programmers; Fujitsu
        2,000; Accenture 2,000

-   Supply of Knowledge Workers

    -   21,245 graduates in IT and related programs in 2000[^24]

-   Unique competitive advantage

    -   Developing wireless applications -- good fit with Filipinos'
        avid use of mobile phones and SMS

-   Encountering difficulty competing against India's lead and image

Business Process Outsourcing (BPO) -- Financial Services

-   Market size \$20 to \$25 billion (across industries) worldwide in
    2002

    -   Finance and accounting services expected to grow to \$15 billion
        by 2008[^25]

-   Employment & Supply of Knowledge Workers -- not found

-   Unique competitive advantage

    -   Filipino accounting system is similar to American Generally
        Accepted Accounting Principles (GAAP)

-   Companies: Procter & Gamble, Barnes & Noble, Caltex, American Data
    Exchange (see sections 8.2 and 8.3)

#### Revenues and Projections for the Philippine ITES Industry

The Board of Investment estimates that the ITES industry produced \$349
million in revenues in 2001 (approx. 1% of exports). Growth is projected
to be at 68% annually, to an industry size of \$1.65 billion in 2004.
This figure amounts to about 18% of what India has projected for its
ITES exports of \$9 billion in revenues by 2004.[^26]

**[Role of Government]{.underline}**

#### Perceptions of Stakeholders

During interviews, key stakeholders from the public and private sectors
were asked what they believed the appropriate role of the government
should be in promoting the ITES industry. The following were the most
common remarks on what the government could do:

-   Provide opportunities for local firms for e-government projects

    -   Currently, there is a government "E-procurement" project in
        progress (CIDA funded) that has been sent for bid to local IT
        development firms

    -   The government has already collaborated with Filipino firms to
        develop online registration for DMV, passports, visas; these
        arrangements were made on a cost- and revenue-share basis

-   Market the country and the ITES industry service providers

    -   More about marketing is mentioned below

-   Ensure affordable infrastructure, specifically telecommunications
    costs

    -   Many of those interviewed responded that the "most significant
        contribution" made by the Philippine government to the industry
        is to liberalize the telecommunications market.

**[Marketing and Business Incentives]{.underline}**

#### Marketing

### 

The most visible effort of the ITECC and the Board of Investments in
promoting the industry is through the BOI's Center for International
Trade Expositions and Missions (CITEM; the CITEM director in charge of
the IT sector serves on ITECC's Business Development sub-committee).
CITEM has already sponsored two trade expositions in Manila, "e-Services
Philippines", which reportedly was well attended by Filipino service
providers (129 exhibitors) and other Filipino companies but not by
international prospects. Despite the lack of attendance by overseas
customers, CITEM believed the expositions served as an effective way to
gather data about the industry. The Center is planning a more targeted
approach to attract international outsourcing companies to visit Manila
during these expositions, such as inviting companies that are planning
to visit India for that country's planned ITES trade shows.

CITEM has also sponsored several trade missions to the USA, on a
cost-share basis with Filipino-owned ITES companies. The agency acts as
the marketing coordinator for these missions, working with the country's
established export councils overseas to schedule these missions with
prospective customers, and providing the appropriate marketing materials
for promoting the country. In addition, CITEM facilitated the
participation of ITES companies in the Offshore Outsourcing conference
held in the United States in October 2001.

These missions were considered an effective means to create awareness
for the Philippines ITES industry. No contracts were agreed upon during
the missions; however, the trip generated sufficient interest as
evidenced by follow-up activities of companies inquiring about and
scheduling investigative trips to the Philippines (particularly for call
center vendors). Future trade missions are already scheduled for 2002,
including the conference for the American Medical Transcription
Association in Florida.

The CITEM budget was not discussed during the interview, but it was
often stated by ITECC members that there is limited funding for these
marketing programs. The costs of an overseas advertising campaign, for
example, are prohibitive at this time.

#### Public Relations

The Board of Investments in 2002 commissioned the Gartner Group to
produce a capabilities study of the ITES industry in the Philippines, at
the cost of \$60,000. The early results of the study (to be published
May 2002) confirm the country's strengths in call centers and BPO. The
study's costs were considered an effective investment considering the
influence and reach of the Gartner Group, and the resulting positive
outlook for two of the Philippines' target sectors.

#### Government Incentives

There are several notable government incentives that have facilitated
the growth of local companies and foreign investment in the ITES
industry:

-   Philippine Export Processing Zones (PEZA) -- IT Parks in the country
    are typically owned and operated by the private sector

-   Other Incentives

    -   Tax Holidays for 4 to 8 years

    -   Tax and duty free importation of machinery, equipment

    -   Simplified flow of goods

    -   Additional deductions for training expenses

    -   Employment of foreign nationals made easier

**[SWOT Analysis]{.underline}**

As the Philippines determines its competitiveness as a provider of ITES
to overseas customers, as well as the segments in which it chooses to
compete, elements of its position as a supplier of services can be
identified:

+--------------------------------+-------------------------------------+
| **Strengths**                  | **Weaknesses**                      |
+================================+=====================================+
| -   Declining                  | -   Country image                   |
|     telecommunications costs   |                                     |
|                                | -   Survey of executives of foreign |
| -   Skilled, educated labor    |     MNC's doing business in the     |
|                                |     Philippines cite concerns       |
| -   English proficiency, high  |                                     |
|     level among nations        | -   Peace and Order: Abu Sayyaf     |
|                                |     (separatist insurgencies in the |
| -   Cultural affinity with USA |     south)                          |
|                                |                                     |
| -   Professional niches --     | -   Corruption: increasing          |
|     medical-related fields,    |                                     |
|     accounting, art            | -   Political winds shift           |
|                                |     unpredictably                   |
| -   Political will;            |                                     |
|     partnership between public | -   Infrastructure (power, traffic  |
|     and private sectors --     |     conditions)                     |
|     united message             |                                     |
|                                | -   Lack of funding for overseas    |
| -   Successful ventures with   |     marketing                       |
|     overseas companies, MNC's  |                                     |
|     -- "Testimonials"          | -   Export-based enterprises        |
|                                |     (SME's) not enabled             |
+--------------------------------+-------------------------------------+
| **Opportunities**              | **Threats**                         |
+--------------------------------+-------------------------------------+
| -   Target countries[^27]      | -   Other countries also vying for  |
|                                |     ITES                            |
|     -   US and Canada          |                                     |
|                                |     -   China, all segments --      |
|     -   Japan                  |         competing on cost           |
|                                |                                     |
|     -   Singapore              |     -   Vietnam (animation),        |
|                                |         Pakistan (software),        |
|     -   Malaysia               |         Myanmar (BPO)               |
|                                |                                     |
|     -   Australia              |     -   India -- aggressively       |
|                                |         pursuing BPO                |
|     -   Germany                |                                     |
|                                | -   Future supply of skilled labor  |
|     -   UK                     |     -- recognized need to keep      |
|                                |     workers competitive on global   |
| ```{=html}                     |     level                           |
| <!-- -->                       |                                     |
| ```                            | -   Politics: Presidential          |
| -   Move up the value chain to |     elections in 2004               |
|     remain competitive         |                                     |
|                                | -   Foreign investment overshadows  |
|                                |     domestic -- acknowledged        |
|                                |     trade-off to create jobs        |
+--------------------------------+-------------------------------------+

**[Learnings for Bangladesh]{.underline}**

While the Philippines appears to be gaining momentum in determining and
strengthening its competitive position as a supplier of IT-Enabled
Services, the country is still in the emerging stage of developing this
industry sector and its export potential. The following summarizes the
actions and results discussed in this report, which serve as possible
action items for Bangladesh:

Action: Liberalize telecommunications industry

*Results*: Lowered costs, enabled IT industry; increased company
competitiveness; increased foreign investment

Action: Focus on unique competitive advantages

*Results:* Differentiation from other competitor countries

Action: Government provides institutional support

*Results:* Open market policies encourage foreign investment; marketing
the country as government's role

Action: Public and private sector partnership

*Results:* Aligned objectives and tactics; united message to market the
country

While still behind and lesser-known than India, the Philippines offers
several possible best practices to Bangladesh with its efforts to
formulate, articulate and implement its strategies for becoming a
"Supplier Country of Choice".

[^1]: "ICT", Information & Communications Technology: Electronic means
    of capturing, storing and communicating information. Modern ICT
    generally includes telephones, fax, photocopiers, computer hardware
    and software, and the Internet (e-mail and Web).

[^2]: Meta Group, "Offshore Outsourcing Fuelled by Budget Pressures," 23
    January 2002

[^3]: "The Indian I.T. Strategy," McKinsey & Company, NASSCOM, December
    1999

[^4]: Gartner Group Dataquest, IT Services Market Statistics, October
    2000

[^5]: "Offshore is Not Offhand", Kathleen Goolsby, Outsourcing Center,
    January 2002

[^6]: Outsourcing Institute IT Index 2001

[^7]: NASSCOM McKinsey

[^8]: U.S. Trade Center, "Bangladesh Country Commercial Guide,"
    2001-2002

[^9]: According to a recent press release on an August 8 meeting of the
    ICT Task Force, the Task Force has directed BTRC to: a) formulate
    uniform guidelines for mobile phones by October; b) invite
    expressions of interest from more private cell phone operators by
    November; c) legalize VOIP by January 2003; and d) open the fixed
    phone line market to private operators by April 2003.

[^10]: Interview with Executive Director, Virgilio Pena, March 2002

[^11]: "The Philippine Advantage: On electronic services, Manila finally
    is doing something right," Michael Alan Hamlin, Asia Wall Street
    Journal, 20 March 2002.

[^12]: NASSCOM McKinsey, "The India I.T. Advantage," December 1999. The
    country comparison matrix used here has subjective and arbitrary
    elements in deciding where countries are positioned along the axes.
    Additionally, there have been shifts in the country competitive
    landscape since 1999. It is used here as a guide and starting point
    for analysis, not as factual basis for considering country
    competitiveness. However, general conclusions from this matrix, i.e.
    the relative positions of the Philippines and Bangladesh as country
    suppliers, are considered relevant for illustrative purposes.

[^13]: Philippine Institute for Developmental Studies, "Liberalization
    and Regional Integration: the Philippines' Strategy for Global
    Competitiveness"

[^14]: Japanese Institute for Overseas Investment, "Telecommunications
    in Asia"

[^15]: Capacity of T1 = 64 kbps times 24

[^16]: Board of Investments publication, "Asia's IT Services Hub"

[^17]: Interview with Undersecretary of Board of Investments, Gregorio
    Domingo, March 2002

[^18]: As quoted by the Board of Investments; the PERC report was not
    readily found after a search on the Internet

[^19]: Interview with Executive Director, Virgilio Pena, March 2002

[^20]: Based on interview with Josie Gonzalez, CITEM Director for IT and
    Electronics. Gartner's report due to be published May 2002.

[^21]: NASSCOM McKinsey, "The Indian I.T. Strategy", 1999

[^22]: Robi Roncarelli, President, editor and publisher of PIXEL
    (animation magazine)

[^23]: Outsourcing Institute, 2001 IT Outsourcing Index

[^24]: Board of Investments

[^25]: NASSCOM McKinsey

[^26]: NASSCOM McKinsey

[^27]: CITEM