<html><head><style type="text/css"><!-- DIV {margin:0px;} --></style></head><body><div style="font-family:arial,helvetica,sans-serif;font-size:12pt"><div>Walu et. al.,<br><br>In answering the question, I believe incentives for incentives sake of course will not get us anywhere as a country. It is a natural question to ask why we need the incentives anyway? However, I do not believe incentives should be given simply because potential competitors are giving them. But we should look at our situation and ask is there something that is curtailing the industry from developing as it should? Could a little incentive spur the growth? If so what would it cost us to do it even if only for a little while (such as, the bandwidth subsidy). This is especially in an environment like the BPO industry (ICT sector by extension) where no one is waiting for us to play catch up and if we want to compete we must get the structures in place and/or encourage those
who can. We have decided that this is a key pillar in our Vision 2030 but we are moving slower than anticipated. What do we need to get us from Point A to B in a realistic time frame. I totally agree with Dr Ndemo that we must benchmark with similar countries, Kenya is not an ‘island’.<br><br>Nyaki<br><br></div><div style="font-family: arial,helvetica,sans-serif; font-size: 12pt;"><br><div style="font-family: arial,helvetica,sans-serif; font-size: 13px;"><font face="Tahoma" size="2"><hr size="1"><b><span style="font-weight: bold;">From:</span></b> "bitange@jambo.co.ke" <bitange@jambo.co.ke><br><b><span style="font-weight: bold;">To:</span></b> elizaslider@yahoo.com<br><b><span style="font-weight: bold;">Cc:</span></b> KICTAnet ICT Policy Discussions <kictanet@lists.kictanet.or.ke><br><b><span style="font-weight: bold;">Sent:</span></b> Friday, June 5, 2009 1:30:43 PM<br><b><span style="font-weight: bold;">Subject:</span></b> Re:
[kictanet] Day 4 of 10- BPO Discussions, Govt Subsidies<br></font><br>
Listers,<br>Incentives sometimes distort economic progress. If we were all compliant,<br>the tax rate would be very low that one may not need any incentives. In<br>Mauritious for example, they lowered taxes and removed incentives. <br>Everybody was happy as the revenue authority collected more revenue and<br>investors trooped there because of lower taxes.<br><br>It may have been easier to do that in a small country but if we emphasized<br>work ethics and honesty, we shall all benefit. In the absence of that, we<br>must benchmark those countries with similar social, political and economic<br>problems. I am thinking about Philipines and to some extent India. I<br>especially need way forward on this to make suggestions to Trade as they<br>develop new incentives for the Special Economic Zones.<br><br>As for ownership, I take the most liberal approach.<br><br>Ndemo.<br><br><br><br><br><br><br>> MM,<br>><br>> I like your
point. We should have a very strong basis for the incentive<br>> scheme that we create for BPOs. Mauritius abolished their incentives on<br>> the basis that the country did not benefit significantly from them. This<br>> did not stop the inflow of investment. The question is, how critical are<br>> incentives to attractiveness as a BPO destination? My humble submission<br>> is that attractiveness is a balanced of many factors and it should not<br>> be surprising that one can be attractive even without "incentives" as<br>> most people understand them. tm<br>><br>> On Fri, 2009-06-05 at 09:34 +0300, muriuki mureithi wrote:<br>>> Hi Walu<br>>><br>>> I agree that incentives for a young industry is necessary we need to<br>>> think<br>>> through the basis that guides the incentives<br>>><br>>> Today's discussion begs the questions - why do the bpos need an<br>>> incentive in<br>>>
the first place? Does the industry have barriers that ordinary business<br>>> strategies cannot overcome and therefore need a push? What is the<br>>> boundary<br>>> between baby-sitting the industry and therefore weakening it and<br>>> incentive<br>>> framework for growth and for how long? And if we cross-subsidise with<br>>> resources from other sectors, when will this sector pay back to that<br>>> sector<br>>> or support other sectors to also grow? Should we incentivise the sector<br>>> because other countries are doing it?<br>>><br>>> Unfortunately I do not have the answer for these questions but my view<br>>> is<br>>> that we should be very clear on the issue of incentives. Our framework<br>>> for<br>>> incentives should not be driven by what other countries are doing and<br>>> then<br>>> copy them but rather quantify the non-business barriers
to bpo business<br>>> and<br>>> then provide resources to overcome the challenge. These resources of<br>>> course go beyond fiscal measures and the effort should translate the<br>>> benefit<br>>> to whatever sector funded the incentives.<br>>><br>>> Thus at the national level the cost/benefit of any such incentives<br>>> should<br>>> compete favourably with other national options. The treasury will be<br>>> looking<br>>> at the commitment set out in v2030 of 10000 jobs and ks10b and accept to<br>>> forego tax revenue in the same measure. We start with low target and<br>>> that<br>>> limits the incentives the sector can get - a higher target should<br>>> galvanise more incentives and higher prioritisation<br>>> Cheers<br>>> MM<br>>><br>>><br>>> -----Original Message-----<br>>> From:<br>>>
kictanet-bounces+mureithi=<a ymailto="mailto:summitstrategies.co.ke@lists.kictanet.or.ke" href="mailto:summitstrategies.co.ke@lists.kictanet.or.ke">summitstrategies.co.ke@lists.kictanet.or.ke</a><br>>> [mailto:kictanet-bounces+mureithi=<a ymailto="mailto:summitstrategies.co.ke@lists.kictanet.or.k" href="mailto:summitstrategies.co.ke@lists.kictanet.or.k">summitstrategies.co.ke@lists.kictanet.or.k</a><br>>> e] On Behalf Of Walubengo J<br>>> Sent: 05 June 2009 07:48<br>>> To: <a ymailto="mailto:mureithi@summitstrategies.co.ke" href="mailto:mureithi@summitstrategies.co.ke">mureithi@summitstrategies.co.ke</a><br>>> Cc: KICTAnet ICT Policy Discussions<br>>> Subject: [kictanet] Day 4 of 10- BPO Discussions, Govt Subsidies<br>>><br>>> -Dear Listers,<br>>><br>>> I must thank all for your insights over the last few days. I like the<br>>> challenge that asked whether we are "over-regulating"
an emerging market<br>>> as<br>>> the "answer" to the question on if we have legal and regulatory gaps.<br>>> Listers are encouraged to challenge and not just answer the questions.<br>>> Other<br>>> arising issues included where we want to play within the BPO Value<br>>> Chain,<br>>> the Impact of the Political (in-)stability, the need to map our Data<br>>> Protection laws to those in the target markets are just but some of the<br>>> highlights I picked - and by all means this is NOT exhaustive as am<br>>> still<br>>> reading through the contributions.<br>>><br>>> But today we need to open the theme on Government subsidies. The<br>>> Researchers<br>>> found the S.Africa and India had elaborate subsidy provisions for the<br>>> sector<br>>> that included Tax Holidays and Exemptions, Investment Grants to BPO<br>>> operators, Training Subsidies,
One-stop shop for Corporate Company<br>>> Registrations that could be 100% foreign owned, etc. The Researchers<br>>> noted<br>>> the unique Mauritius case which had similar incentives but eventually<br>>> abolished most of them arguing that they were more beneficial to the<br>>> Operators than to the Nation.<br>>><br>>> On the Kenyan front - other than the not so succesfull Govt Bandwidth<br>>> subsidies for Operators, very little in terms of incentives was<br>>> available to<br>>> BPO Operators. It was noted that the BPO operators had to be within the<br>>> EPZ<br>>> in order to enjoy the subsidies other EPZ corporates operates - the<br>>> problem<br>>> being that most BPO operaters exist outside the EPZ area. Whats more,<br>>> BPO<br>>> operators had to pay additional charges to be registered by the CCK<br>>> (Regulator) and should be at least 20%
locally owned.<br>>><br>>> Qtn6: What incentives / subsidies should the government provide to BPO<br>>> operators? What of the clause requiring 20% Local shareholding in<br>>> foreign<br>>> companies - is it prohibitive or helpful?<br>>><br>>> Floor is open comments.<br>>><br>>> walu.<br>>> Encl: Synthesis 2:- Subsidies and Incentives<br>>><br>>><br>>><br>>><br>>><br>>> _______________________________________________<br>>> kictanet mailing list<br>>> <a ymailto="mailto:kictanet@lists.kictanet.or.ke" href="mailto:kictanet@lists.kictanet.or.ke">kictanet@lists.kictanet.or.ke</a><br><span>>> <a target="_blank" href="http://lists.kictanet.or.ke/mailman/listinfo/kictanet">http://lists.kictanet.or.ke/mailman/listinfo/kictanet</a></span><br>>><br>>> This message was sent to: <a ymailto="mailto:waema@uonbi.ac.ke"
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