India Plans High-Tech 'Smart City'

India Plans High-Tech 'Smart City'
Zone To Encourage Foreign Companies' Operations, With Few Hassles
COCHIN, India, Nov. 19, 2004
(CBS/AP) Southern India's Kerala state plans to create a 1,000-acre zone called "Smart City," where technology companies from around the world will be invited to set up operations, an official said Friday. Some of the companies lured to Smart City are likely to American. The area, outside Cochin city, will include office space, residences, schools and an entertainment complex, said Kerala's Industry Minister P. K. Kunjalikutty. It will include software developers and call centers — two of the Indian economy's fastest growing sectors. Indian programmers earn roughly one-sixth the $60,000 U.S. average. "Smart City ... will be an exclusive IT zone where foreign companies can easily set up shop without any stringent formalities of registration and licensing," Kunjalikutty said. Indian states are competing with each other to court investments from information technology companies, trying to emulate the success of the southern technology hubs of Bangalore and Hyderabad, which have spearheaded the country's IT boom. Kerala, known for its highly educated work force, has been trying to make up for lost time after India's economic boom of the past decade largely bypassed the state because potential investors were frightened away by its powerful, militant labor unions. But Kunjalikutty said his state's labor force has been changing fast, and information technology companies had not faced any union troubles. Smart City will be created and managed by Dubai's Internet City, a free trade zone backed by the Middle Eastern country's government. It is being built with an initial investment of $400 million. It was not yet clear whether Smart City would be a free trade zone, or would simply offer assistance to potential investors. Dubai's Internet City offers foreign companies 100 percent tax-free ownership, no currency restrictions, easy registration and licensing and protection of intellectual property, its Web site said. Cynthia Kroll, senior regional economist at the University of California, Berkeley, said U.S. policymakers can't afford to ignore outsourcing. "If R&D is coming out of India, will the next wave of growth bypass us entirely?" Kroll asked. "We need to pay attention to what India and China and these other countries are doing to get these new rounds of investment." American workers may be among the most productive in the world, but they also make on average $16 an hour, and benefits add another six bucks on top of that, reports CBS News Correspondent Anthony Mason. A foreign worker with comparable skills comes at a fraction of the cost. "Protecting jobs leads to job destruction, because if we try to prevent outsourcing, it'll just make American business less competitive in the world market. And that will lead to overall job destruction. So for me there's no choice here. We have to outsource," said Marc Andreesen, head of the California-based software company Opsware, which helps businesses cut costs by automating. Last March, Andreesen said he was planning to hire workers in India or Brazil. "By doing that, what I want to be able to do is get more bang for the buck out of those jobs, so that I can grow faster and so I can hire more people in the U.S.," he said. The Information Technology Association of America, in a survey last March, acknowledged that the migration of tech jobs to low-paid foreigners has eliminated 104,000 American jobs so far, nearly 3 percent of the positions in the U.S. tech industry. "The myth is that we've started this long decline into the midnight of the technology work force," ITAA president Harris Miller said. "Assuming the recovery continues, the number of IT jobs will actually increase." According to the report, savings from outsourcing allowed companies to create 90,000 new jobs in 2003, with more than one in 10 of them in Silicon Valley or elsewhere in California, researchers said. The report predicts that in 2008, outsourcing will create 317,000 jobs - 34,000 in California. The ITAA describes itself as a trade group for IT industries ranging from computers, software and telecommunications to the Internet and professional services. Its board of directors includes representatives of major IT firms including AT&T, EDS, Northrop Grumman, and Amazon.com, and its members include Microsoft and Hewlett-Packard.
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