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

Fri Jun 5 09:44:16 EAT 2009

Dear MM,

There is more subjectivity to today's Q than would be expected. In olden
days when I went to secondary school some of us with a name starting with O
had to drop it so as to get admissions and comforts (bursaries) that came to
not being associated with Nyanza and Western Kenya. Sadly even in this
century those stereos still manifest themselves, but more subtle, hence the
subjectivity. Assuming objectivity let us consider the following:-

There is need to lump finance, grant and incentives together or clearly
differentiate them so as to be clear (reduce subjectivity).  From past EPZ
experience we need to come up with relaxed investment policies and taxation
regimes that does not discriminate, otherwise we shall have the new
phenomena of Kenyans rushing to Dubai and Qatar, registering companies which
return here purporting to be foreign so as to enjoy loop sided policies. The
reverse is when Kenyans go to Europe and America, register companies so as
to enjoy the comfort of laws there when getting jobs there which they
channel to their local outfits as outsourced. The ideal is just plain
partnership between locals and foreign nationals, but in a world that
encourages shortcuts ideals are mirages.
**
See http://www.businesstodayegypt.com/article.aspx?ArticleID=7931 for
Egyptian case of incentives like rental and training subsidies between 85%
and 100%.  The government incentives are based on two basic premises: one,
the incentives help international companies bring their names to Egypt; and
two, the companies are coming with both deep pockets and long-term plans,
bringing employment to hundreds if not thousands of people, something local
companies currently cannot do.

We need to add other incentives in our case. These ranges from (a)
investment grant to enable our fledgling locals ride the slump in the
economies in Europe and America where most clients come from,  (b) cash
incentives to career concern for the employee just as banks and others
attract maths, engineering and science graduates to pursue audit etc type of
jobs, (c) giving such stand-alone units the same incentives as the units in
the EPZ, IT Parks and Science & Technology Parks (removal of discrimination
since we all can see EPZ are being phased out in favor of Special Economic
Zones which might end up in the long run being a change just in the name and
not the decadent process experienced before and we all know reforms are not
about process but recognizing we cannot continue with 'the business as
usual' attitude).  Many BPOs provide transportation facility especially for
night duty shifts. We could add the facility for extensive health check-up.
Last but not least is subsidized Food.

Enjoy your Furahi day all,

David

On Fri, Jun 5, 2009 at 9:34 AM, muriuki mureithi <
mureithi at summitstrategies.co.ke> wrote:

> 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@
> lists.kictanet.or.ke
> [mailto:kictanet-bounces+mureithi <kictanet-bounces%2Bmureithi>=
> 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
>
>
>
>
>
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-- 
David Otwoma,
Chief Science Secretary,
National Council for Science and Technology,
Utalii House 9th Floor,
Mobile tel: +254 722 141771,
Office tel: +254 (0)20 2346915,
P. O. Box 29899 - 00100, Nairobi, Kenya
email: otwomad at gmail.com & otwoma at ncst.go.ke
www.ncst.go.ke
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