[kictanet] Day 4 of 10- BPO Discussions, Govt Subsidies

[muriuki mureithi]

Hi Walu

I agree that incentives for a young industry is necessary we need to think
through the basis that guides the incentives 

Today's discussion begs the questions - why do the bpos need an incentive in
the first place? Does the industry have barriers that ordinary business
strategies cannot overcome and therefore need a push? What is the boundary
between baby-sitting the industry and therefore weakening it and incentive
framework for growth and for how long? And if we cross-subsidise with
resources from other sectors, when will this sector pay back to that sector
or support other sectors to also grow? Should we incentivise the sector
because other countries are doing it?

Unfortunately I do not have the answer for these questions but my view is
that we should be very clear on the issue of incentives.  Our framework for
incentives should not be driven by what other countries are doing and then
copy them but rather quantify the non-business barriers to bpo business and
then provide resources to   overcome the challenge. These resources of
course go beyond fiscal measures and the effort should translate the benefit
to   whatever sector funded the incentives. 

Thus at the national level the cost/benefit of any such incentives should
compete favourably with other national options. The treasury will be looking
at the commitment set out in v2030 of 10000 jobs and ks10b and accept to
forego tax revenue in the same measure.  We start with low target and that
limits the   incentives the sector can get - a higher target should
galvanise more incentives and higher prioritisation
Cheers 
MM   


-----Original Message-----
From: kictanet-bounces+mureithi=summitstrategies.co.ke at lists.kictanet.or.ke
[mailto:kictanet-bounces+mureithi=summitstrategies.co.ke at lists.kictanet.or.k
e] On Behalf Of Walubengo J
Sent: 05 June 2009 07:48
To: mureithi at summitstrategies.co.ke
Cc: KICTAnet ICT Policy Discussions
Subject: [kictanet] Day 4 of 10- BPO Discussions, Govt Subsidies

-Dear Listers, 

I must thank all for your insights over the last few days.  I like the
challenge that asked whether we are "over-regulating" an emerging market as
the "answer" to the question on if we have legal and regulatory gaps.
Listers are encouraged to challenge and not just answer the questions. Other
arising issues included where we want to play within the BPO Value Chain,
the Impact of the Political (in-)stability, the need to map our Data
Protection laws to those in the target markets are just but some of the
highlights I picked - and by all means this is NOT exhaustive as am still
reading through the contributions. 

But today we need to open the theme on Government subsidies. The Researchers
found the S.Africa and India had elaborate subsidy provisions for the sector
that included Tax Holidays and Exemptions, Investment Grants to BPO
operators, Training Subsidies, One-stop shop for Corporate Company
Registrations that could be 100% foreign owned, etc. The Researchers noted
the unique Mauritius case which had similar incentives but eventually
abolished most of them arguing that they were more beneficial to the
Operators than to the Nation.  

On the Kenyan front - other than the not so succesfull Govt Bandwidth
subsidies for Operators, very little in terms of incentives was available to
BPO Operators. It was noted that the BPO operators had to be within the EPZ
in order to enjoy the subsidies other EPZ corporates operates - the problem
being that most BPO operaters exist outside the EPZ area. Whats more, BPO
operators had to pay additional charges to be registered by the CCK
(Regulator) and should be at least 20% locally owned.

Qtn6:  What incentives / subsidies should the government provide to BPO
operators?  What of the clause requiring 20% Local shareholding in foreign
companies - is it prohibitive or helpful?

Floor is open comments.

walu.
Encl: Synthesis 2:- Subsidies and Incentives