Wednesday, July 20, 2005

Offshore Outsourcing: unraveling the puzzle

From: hindubusinessline

OFFSHORING, or the outsourcing of services by developed country firms to captive units or independent suppliers in developing countries, has for some time now been a source for controversy in the developed countries, especially the US. Arguments that such offshoring involves not just the transfer abroad of new job opportunities that would have arisen in the developed countries, but the loss of existing jobs in the US to offshore locations abound.
They derive their strength from reports that specific corporations have been reducing or plan to reduce their workforce in developed-country locations, even while expanding them in developing countries such as India. In the event, calls for protectionist responses that limit and rollback the offshoring of services have increased.
WTO has decided to come out on the issue which argues that: i) the extent of net offshoring is exaggerated; and ii) to the extent that offshoring occurs, its negative effects on the source country and positive benefits for the host country have both been exaggerated.
The WTO's argument is built on an effort to examine that the principal data sources are private, with official information being primarily restricted to that which can be gleaned from input-output tables and balance of payments statistics.
Second, there are significant discrepancies in the evidence available from different sources, whether they be private or public. And, third, in some cases as in India, even official information as available in the balance of payments statistics is collected and collated by a private body — in this case the National Association of Software and Services Companies (Nasscom).

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