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ICT Research & Consultancy Strategic information for decision support in info-communication business
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II
PREFACE
Konza Technology City presents a promising opportunity for Kenya to develop an alternative and complimentary path for economic development in line with Vision 2030 by exploiting ITES and IT Products in the ICT Park1. Konza also provides an opportunity as noted in the comparator countries to transform the country into a knowledge economy. Thus, this is a policy driven initiative as a tool for job creation and national transformation to launch the country to new frontiers. The first phase (20102015) commits heavy government exposure at political, legislative and funding levels as well as heavy marketing. Government can recoup this investment in later phases. The key focus areas of opportunity within the ITES are BPO, ITO, KPO and CSO as illustrated below: BPO Horizontals Most developed with local captive markets dominating - services include contact centres and digitisation ITO Emerging with software development as key area of focus targeting local and foreign markets KPO Activity in this space not significant if any and therefore provide opportunity CSO Emerging with few companies starting animation
Verticals
Banking Financial Service & Insurance Telecommunications Government developing a shared service platform, digitisation
A key strategy to realise this goal includes: To sell demand and only then sell talent and other infrastructural advantages. Availability of talent and infrastructure provides a foundation but is not sufficient to excite investors. There exists unexploited local demand, which will provide comfort to international actors To sell Konza ICT Park as a product of the Eastern African region for the world. This takes advantage of the expanded East African Community market to provide language variety e.g. French from Rwanda and Burundi and the larger market access ITES industry is people-based and thus will drive uptake at Konza by shifting people Centre of Excellence (COE) for Africa at Konza, affordable housing for 85% staff housing, mass transport system to Nairobi, low cost of space among others.
With the strong government commitment as demonstrated in the purchase of the 5000-acre land for the City, the project could help generate 15000 ITES/ electronic manufacturing direct jobs (and 45000 indirect jobs) nationally in phase 1 by 2015. Konza itself would host approximately 8000 direct jobs by 2015. Revenue generated arising from Konza ICT activities would be USD244 million annually. In phase 2, the jobs created nationally would rise to 39000 direct jobs with half of the direct jobs in Konza ICT Park. Konza ICT Park jobs are expected to generate USD607 million annually. By 2032 the national market would generate 349000 jobs (approximately 1 million indirect jobs). Konza ICT Park is expected to host the bulk of the direct jobs while the rest are in other private sector driven initiatives. Total revenue generated at Konza ICT Park is projected at USD5.4 billion by 2032. This market will initially be driven by regional demand and therefore Kenya can exploit the first mover advantage by positioning Konza ICT Park as a regional product for the world. These figures are conservative compared with comparator countries and sites of Cyberjaya (Malaysia), Cyber City (Mauritius), SmartVillage (Egypt) among others and the projections are inspired by early trends of mature markets of India and Philippines. Recurring success factors in these comparator countries that inspire the design of Konza Technology City are:
1 Note that the ICT Park is within the Konza Technology City
III
A very focused and visionary government commitment over the long term to give the private sector comfort through a proof of concept in the first phase of the project Progressive inclusion of private sector to increasingly take over some of the risks Parks are increasingly generic in design and implementation thus the differentiator is the value addition demonstrated through commitment and a superior operating environment, strategic access to other markets in the neighbourhood of the Eastern African region, market insights, access to talent, geopolitical stability and macroeconomic stability A self sustaining ecosystem within the City and its neighbourhood comprising Incubation, Science Park, Research and Development, Centre of Excellence and universities.
This is a long-term project and will be developed through a sequenced approach with clear milestones driven by a high-level champion to handhold and transition the project into the future. The government identified the need to establish Special Economic Zones (SEZs) to cater for industrial activities and requirements for agro-industrial, manufacturing, Information and Communications Technology and Small and Medium Enterprise (SME). The SEZ framework will address key factors that enhance Kenyas competitiveness as an investment destination through infrastructure provision, simplification of business regulations, value chain integration and clustering, expanded market access for SEZ goods and services, and reduced taxation. SEZ will be a vehicle to enhance investment attractiveness at Konza Technology City. This document is organised in three volumes. Volume 1: Comparative and Competitive Advantage, addresses the universe of ITES and trends in electronic manufacturing mapped against Konza Technology City. Volume 2: Market Opportunity and Magnitude of Demand, addresses the market dynamics of ITES and electronics manufacturing and Volume 3: A Comparative Analysis of SEZ policy and legal regime, which is a benchmarking analysis of similar international sites on SEZ incentive regime characteristics.
IV
CONTENTS
EXECUTIVE SUMMARY........................................................................................................................................................................2 DATA SOURCES AND PROCESS .........................................................................................................................................................4 THE IT UNIVERSE - DEFINING THE SPACE FOR ITES AND IT PRODUCTS .................................................................................5 The emerging universe of iTes as an opporTuniTy..............................................................................................................................................................................................5 Quest for the ITES development; Setting the ITES roadmap through Kenya Vision 2030 .................................................................................................5 Supporting ICT infrastructure .....................................................................................................................................................................................................................5 Supporting institutional infrastructure ..................................................................................................................................................................................................5 Challenges defining ITES ...............................................................................................................................................................................................................................6 The growing importance of ITES ...............................................................................................................................................................................................................6 ITES opportunity; mapping Kenya in the ITES space ......................................................................................................................................................................8 The nascent ITES in Kenya; a private sector response .................................................................................................................................................................... 11 elecTronic manufacTuring opporTuniTy and Trends ......................................................................................................................................................................................12 Information Technology products......................................................................................................................................................................................................... 12 Contract manufacturing and electronic assembly ........................................................................................................................................................................ 13 The Kenyan experience in electronic assembly ................................................................................................................................................................................ 13 clusTering effecT: The case for Konza icT parK.............................................................................................................................................................................................13 COMPARATIVE ICT PARK SITES OF INTEREST ............................................................................................................................. 15 disTilling lessons from comparaTor siTes: a frameworK...............................................................................................................................................................................16 Internal to the Park ....................................................................................................................................................................................................................................... 17 Industry - ITES and IT manufacturing .................................................................................................................................................................................................. 17 External - National business operating environment ................................................................................................................................................................... 17 Remote forces ................................................................................................................................................................................................................................................. 18 EVOLUTION OF COMPARATOR ICT PARKS AND LESSONS FOR KONZA ICT PARK ............................................................. 20 developmenT iniTiaTive or commercialisaTion; The moTivaTion .....................................................................................................................................................................20 insTiTuTional frameworKs influencing iTes/iT producTs .............................................................................................................................................................................20 Intergovernmental organisations.......................................................................................................................................................................................................... 20 Industry associations................................................................................................................................................................................................................................... 22 National ............................................................................................................................................................................................................................................................ 22 Generic Park features ................................................................................................................................................................................................................................... 22 THE CASE FOR KONZA ICT PARK; A SWOT ANALYSIS ............................................................................................................... 23 sTrengThs ......................................................................................................................................................................................................................................................................23 weaKnesses...................................................................................................................................................................................................................................................................27 opporTuniTies...............................................................................................................................................................................................................................................................30 ThreaTs ..........................................................................................................................................................................................................................................................................31 THE KONZA ICT PARK ADVANTAGE .............................................................................................................................................. 32 comparaTive advanTage ...........................................................................................................................................................................................................................................32 compeTiTive advanTage .............................................................................................................................................................................................................................................32 Positional advantages ................................................................................................................................................................................................................................ 32 Differentiation advantage ........................................................................................................................................................................................................................ 32 Cultural links.................................................................................................................................................................................................................................................... 33 aTTribuTes of Konza icT parK...............................................................................................................................................................................................................................33 Government support ................................................................................................................................................................................................................................... 33 Space .................................................................................................................................................................................................................................................................. 34 CONCLUSIONS AND RECOMMENDATION ................................................................................................................................... 34 ANNEX ................................................................................................................................................................................................. 35 annex 1: comparaTor siTes ....................................................................................................................................................................................................................................36 annex 2: research resources................................................................................................................................................................................................................................49 annex 3: Terms of reference ................................................................................................................................................................................................................................53
EXECUTIVE SUMMARY..................................................................................................................................................................... 56 INTRODUCTION ................................................................................................................................................................................ 57 DATA SOURCES AND PROCESS ...................................................................................................................................................... 57 defining The space iTes and iT producTs ..........................................................................................................................................................................................................58 Comparator countries/sites ...................................................................................................................................................................................................................... 60 Typical infrastructure and services......................................................................................................................................................................................................... 61 The Kenyan scene: iTes and elecTronic manufacTuring ...............................................................................................................................................................................63 1.1 supporTing insTiTuTional infrasTrucTure ....................................................................................................................................................................................................63 1.2 iTes space .............................................................................................................................................................................................................................................................63 Business Process Outsourcing services- ............................................................................................................................................................................................... 64 1.2.1 Information Technology Outsourcing (ITO) ........................................................................................................................................................................... 66 Knowledge Process Outsourcing ............................................................................................................................................................................................................ 67 Creative Sourcing Outsourcing (CSO) .................................................................................................................................................................................................. 67 1.3 iT assembly............................................................................................................................................................................................................................................................67 lessons in elecTronic assembly ..............................................................................................................................................................................................................................68 PROMISING HIGH-VALUE ACTIVITIES .......................................................................................................................................... 69 2.1 iTes invesTmenT Trends ....................................................................................................................................................................................................................................70 2.1.1 Factors shaping investor demand .............................................................................................................................................................................................. 71 2.1.2 Impact of ITES ...................................................................................................................................................................................................................................... 72 2.1.3 High value ITES and IT products................................................................................................................................................................................................... 73 2.1.4 IT products assembly ........................................................................................................................................................................................................................ 75 2.1.5 Investor characteristics/profile ..................................................................................................................................................................................................... 75 2.2 invesTor naTionaliTy and exporT desTinaTions ..........................................................................................................................................................................................76 EMERGING AUXILIARY & SUPPORT SERVICES ........................................................................................................................... 77 OVERALL MARKET POTENTIAL ...................................................................................................................................................... 78 4.1 meThodology ......................................................................................................................................................................................................................................................78 4.2 marKeT response survey ...................................................................................................................................................................................................................................79 4.2.1 Sufficient and highly trained human resource pool............................................................................................................................................................ 79 4.2.2 Buildings types ..................................................................................................................................................................................................................................... 79 4.2.3 Business relationships....................................................................................................................................................................................................................... 80 4.2.4 Access to property .............................................................................................................................................................................................................................. 80 4.2.5 Business support services ................................................................................................................................................................................................................ 80 4.2.6 Transportation and logistics support ........................................................................................................................................................................................ 81 4.2.7 Utilities..................................................................................................................................................................................................................................................... 81 4.2.8 Sustainable eco-system ................................................................................................................................................................................................................... 81 4.2.9 Amiable working environment a great lifestyle ............................................................................................................................................................... 82 4.2.10 Support to migrate to Konza ICT Park .................................................................................................................................................................................... 82 4.2.11 Incentives for investment.............................................................................................................................................................................................................. 82 4.3 QuanTificaTion of demand absorpTion forecasTs ....................................................................................................................................................................................82 4.3.1 Context.................................................................................................................................................................................................................................................... 82 Sensitivity analysis ........................................................................................................................................................................................................................................ 85 4.3.2 Short term 2011-2015 (phase 1 proof of concept, frontier bursting) ........................................................................................................................ 86 4.3.3 Medium term 2015-2020 (phase 2- private sector leadership) ....................................................................................................................................... 88 4.3.4 Long term 2020 -2032(mature market) .................................................................................................................................................................................... 88 ANNEXES ............................................................................................................................................................................................ 91 annex 1: Respondent list ............................................................................................................................................................................................................................. 92 annex 2: Companies and Kenyan interest .......................................................................................................................................................................................... 94 annex 3: Other International ITES buyer Companies ..................................................................................................................................................................... 96 annex 4: Leading outsourcing companies ......................................................................................................................................................................................... 97 annex 5: Respondent list ...........................................................................................................................................................................................................................100 annex 6: Terms of reference .....................................................................................................................................................................................................................104
VI
CONTENTS
BACKGROUND AND CONTEXT..................................................................................................................................................... 108 definiTion of special economic zones...............................................................................................................................................................................................................108 governmenT of Kenya special economic zone policy ..................................................................................................................................................................................108 Kenyas currenT siTuaTion .....................................................................................................................................................................................................................................108 global benchmarKs for special economic zones ..........................................................................................................................................................................................109 SPECIAL MANUFACTURING AND IT ENABLED SERVICES ZONES ........................................................................................ 110 philippines: The up-ayala land Technohub .................................................................................................................................................................................................110 Overview of UP-Ayala Land TechnoHub...........................................................................................................................................................................................111 UP-Ayala Land TechnoHub Incentives ...............................................................................................................................................................................................113 poland: invesT parK ..........................................................................................................................................................................................................................................115 Overview: Invest Park, Walbryzch Special Economic Zone (WSEZ) ......................................................................................................................................115 WSEZ INVEST-Park Incentives.................................................................................................................................................................................................................117 egypT: smarT village cairo..................................................................................................................................................................................................................................119 Overview of the Smart Village Cairo ...................................................................................................................................................................................................119 Smart Village Cairo Incentives...............................................................................................................................................................................................................119 china: The dalian hi-Tech zone .......................................................................................................................................................................................................................123 Background: Dalian City ..........................................................................................................................................................................................................................123 Overview of the Dalian High-Tech Zone (DHTZ) ...........................................................................................................................................................................124 Dalian Hi-Tech Zone Incentives ............................................................................................................................................................................................................126 vieTnam: saigon hi-Tech parK ............................................................................................................................................................................................................................128 Background: Ho Chi Minh City ..............................................................................................................................................................................................................128 Overview of the Saigon Hi-Tech Park..................................................................................................................................................................................................129 canada: universiTy of waTerloo research and Technology parK ........................................................................................................................................................133 Overview of the University of Waterloo Research and Technology Park.............................................................................................................................133 india: inTernaTional high Tech parK bangalore ..........................................................................................................................................................................................135 Overview of the International High Tech Park Bangalore (ITPB) ............................................................................................................................................135 International High Tech Park Bangalore Incentives .....................................................................................................................................................................136 cyber ciTy : mauriTius ............................................................................................................................................................................................................................................137 Overview of the Cyber City ......................................................................................................................................................................................................................137 Cyber City Incentives ..................................................................................................................................................................................................................................138 panama pacifico: panama ....................................................................................................................................................................................................................................140 Overview of International Business Park...........................................................................................................................................................................................140 Panama Pacifico Incentives....................................................................................................................................................................................................................141 malaysia cyberjaya flagship zone...............................................................................................................................................................................................................143 Overview Cyberjaya Flagship Zone (CFZ) .........................................................................................................................................................................................143 Cyberjaya incentives ..................................................................................................................................................................................................................................144 INCENTIVES AND INVESTOR RELATIONS COMPARISONS ..................................................................................................... 146 KEY IMPLICATIONS AND RECOMMENDATIONS TO KENYA ................................................................................................... 149 ANNEXES .......................................................................................................................................................................................... 151 annex 1: references ...............................................................................................................................................................................................................................................152 annex 2: Terms of reference...............................................................................................................................................................................................................................155 NOTES ................................................................................................................................................................................................ 156
VII
ACRONYMS
A/R BFSI BPAP BPO CAGR CCK CFZ COE COMESA CSO DHTZ EAC EPZA FDI FTE GATS GATT GOK HR ICT IFC IT ITA ITES ITH ITO KICTB KTC KPO LCD LED MOIC NIC NSI PEZA Accounts Receivable Banking, Financial Services and Insurance Business Process Association of the Philippines Business Process Outsourcing Compounded Annual Growth Rate Communications Commission of Kenya Cyber Jaya Flagship Zone Centre of Excellence Common Market for Eastern and Southern Africa Creative Services Outsourcing Dalian High Tech-Zone East Africa Community Export Processing Zone Authority Foreign Direct Investment Full Time Equivalent General Agreement on Trade in Services General Agreement on Trade and Tariffs Government of Kenya Human Resource Information and Communication Technologies International Finance Corporation Information Technology Information Technology Agreement Information Technology Enabled Services Income Tax Holiday Information Technology Outsourcing Kenya ICT Board Konza Technology City Knowledge Process Outsourcing Liquid Crystal Display Light Emitting Diode Ministry of Information and Communications Newly Industrialised Country National System of Innovation Philippine Economic Zone Authority
VIII
Public Private Partnership Special Economic Zone Semi-conductor Manufacturing Equipment Software and Technology Park of India United Nations Economic Commission of Africa United Nations Industrial Development Agency Value-Added Tax Walbryzch Special Economic Zone World Trade Organisation
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ICT Research & Consultancy Strategic information for decision support in info-communication business
Executive Summary
This is part of a three-volume report on the ICT Park component (also referred to as ITES Park or as the BPO Park) of the Konza Technology City (KTC) project. It comprises a Comparative and Competitive Analysis (Volume 1), a Demand Study (Volume 2) and a Comparative Analysis of SEZ Policy and Legal Regime (Volume 3). Volume 1 is underpinned by a benchmarking analysis of 11 similar sites internationally, out of which seven are selected in volume 3 due to its SEZ incentive regime characteristics. The study commissioned by International Finance Corporation (IFC) for the Ministry of Information and Communications of the Government of Kenya was undertaken in September/October 2010. The data sources include intensive literature review, indepth face-to-face interviews and case studies. The analysis of these data provides the foundation of the findings of this report. The specific terms of reference for this report are annexed. Comparator Parks selected for benchmarking Park International High Technology Park Ayala Technohub University of Waterloo Research and Technology Park Invest Park Smart Village Cyberjaya Cyber City Electronic Manufacturing Saigon Hi-Tech Park Dalian High-Tech Zone Special Economic Zones Panama Pacifico Aqaba Panama Jordan Government supported Government supported Vietnam China Government supported Mature market Country India Philippines Canada Poland Egypt Malaysia Mauritius Nature/Motivation Mature market Mature market Mature market Varied Government initiative Government initiative Government initiative
Konza Technology City presents a promising opportunity for Kenya to develop an alternative and complimentary path for economic development in line with Vision 2030 by exploiting ITES and IT products. Konza also provides an opportunity as noted in the comparator countries to transform the country into a knowledge economy. To realise this goal, certain actions need to be addressed at an early stage. At the outset, it should be clear this is principally a policy driven initiative. Policy and regulatory framework Enhance efforts to re-brand the country with a positive image Establish a high level inter-ministerial consultative body for efficient coordination of ICT Park initiative Reduce decision points regarding ITES/IT investment Commit to WTO/ ITA Approve SEZ policy and enact SEZ law or at the very least reform the incentive schemes in the EPZA Act Establish a single window agency to ease doing business in the ICT Park Enact data protection law and strengthen intellectual property rights laws. Facilitation Government to handhold for the first five years and commit to develop requisite infrastructure as proof of concept Work on cost structure as a low cost destination in the near term Enhance incentives as proposed in SEZ policy. Operational Position Konza ICT Park as a product of Eastern Africa Establish a proactive ICT Park management Create an entity - Konza Development Authority - to drive its development Mount a targeted high profile marketing - Sell Demand
Coordinate talent development Allow mixed use in the park for sustainability Promote an eco-system by building a Science & Technology Park, Incubation Centre and Centre of Excellence within the Park Manage local competition among government sponsored programmes Dongo Kundu should not offer ICT Park services for now in competition with Konza
Industry level Strengthen industry lobby platform to create standards and undertake self regulation To catalyse the market and enhance the opportunity for the ICT Park we propose the following strategy: - Sell demand and only then sell talent and other infrastructural advantages. Availability of talent and infrastructure provides a foundation but is not sufficient to excite investors. There exists unexploited local demand, which will provide comfort to international actors. - Shift to targeted and high profile marketing. Isolate no more than 3 countries, 3 major companies, 3 outsourcing companies and 3 services and focus national effort around them from a very high political level. - Sell Konza as a product of the Eastern African region for the world. Exploit East African Community to provide language variety e.g. French from Rwanda and Burundi and the larger market access. - Ease of doing business, competitiveness indices etc pose a very serious barrier to international investors. The country rating is not attractive for new investors and a deliberate action to improve the countrys perception and ranking is critical. In the meantime, introduce a world-class ITES player as an anchor investor to set market standards and catalyse growth of the local market. Countrys ratings do not matter to the local companies but those outsourcing from outside the country want an international player like IBM or Accenture etc to guarantee quality before they accept to outsource locally. - ITES industry is people based and thus drives uptake at Konza by shifting people Centre of Excellence (COE) for Africa at Konza, affordable housing for 85% staff housing (US$60), mass transport system to Nairobi, low cost of space ( US$4 per sq ft per year).
Quest for the ITES development; Setting the ITES roadmap throughKenya Vision 2030
Kenyas desire to exploit ITES has been consistent and marked by a high-level statement of initiatives as well as action starting with inclusion of Business Process Outsourcing (BPO), a sub sector of ITES in Vision 2030 and investment of key supporting infrastructure. Kenya Vision 2030 aims to make Kenya the globally competitive and prosperous country with a high quality of life by 2030. The achievement of this Vision is intended to firmly ground Kenyas position as the business hub for not only East Africa but also the African region. Vision 2030 is anchored on three key pillars, namely : Economic; Social; and Political Governance. The ITES sector, which encompasses the BPO, is identified as one of the six sectors to contribute to 10 per cent economic growth rate per annum. To make Kenya one of the top off-shoring destinations in Africa, the government aims to: Attract at least five major leading information technology (IT) suppliers, and at least ten large multinational companies and global BPO players to the country; and Strengthen at least five local players to become local champions through stand-alone operations or joint ventures.
The Vision 2030 therefore positioned ICT as an economic driver and sought to address the enabling environment for the sector. Key components for the enabling environment are ICT infrastructure and the institutional support infrastructure. Konza ICT Park is intended as the focal point of the concentrated national effort to exploit ICT.
In the rest of the report, ITES encompasses the activities as set out in Table 1 unless explicitly indicated otherwise.
in developed countries notably the USA, Europe and Asia have exploited ITES to outsource certain activities to build competitiveness in their markets by reducing costs, creating efficiencies and often improving quality of their production. On the other hand, countries providing the outsourced services have gained in job creation, improvement of skills, closer linkages with developed countries as well as received increased Foreign Direct Investment (FDI). ITES is growing rapidly and is expected to continue the rapid growth. While the growth projections by research organisations differ, all however agree that ITES will continue to experience rapid growth. International Data Corporation (IDC) for example estimated that worldwide offshore IT spend would rise from USD32Billion in 2010 to USD42Billion in 2013 while world wide BPO spend is expected to rise from USD119B to USD148B in the period as illustrated in Figure 1. Figure 1: Worldwide off shore IT and BPO spend projections
Source: IDC
NASSCOM, the National ITES Association of India, on the other hand projects a growth of the BPO market from the USD200Billion in 2010 to USD890Billion by 2020 as illustrated in Table 2. Table 2: BPO market projections (US$ 000)
Segment BPO Market ITES and BPO Breakdown Banking Insurance Travel/Hospitality Automotive Telecommunications Pharmaceuticals Finance & Accounts, Human Resource Others
Source: NASSCOM, Mckinsey & Company
2010 200,000,000 122,000,000+ 40,000,000 35,000,000 12,000,000 12,000,000 10,000,000 8,000,000 25,000,000 15,000,000
2020 890,000,000
This promise of a rapidly growing ITES with attendant job creation nudged Kenya to take a decision to pursue ITES as an additional growth path. Thus, Kenya desires to leverage these market opportunities by developing the ITES sector in order to play a significant role in generating employment and economic growth. This study seeks to quantify the demand2 and the features that are critical to incentivise actors in the ITES space to not only operate in Kenya but also locate in Konza. Such incentives include operationalisation of a SEZ framework.3
2 3
The quantification of demand is presented in an accompanying report V2/3 The incentive framework is discussed in accompanying report V3/3
The evolution of the ITES in terms of skill and complexity of knowledge required to accomplish an increasing range of activities provides a framework to understand the ITES space and where a country is positioned. To understand the ITES space and where Kenya fits, we categorise the services based on skills, ranging from low skills and knowledge intensity requirement, to medium or intermediate and to high-end skills and complexity. The lowest level is the low skilled services with lowest entry barriers in terms of skill, scale and the technology. Such services include data entry, call centres and general transcription services etc. In general, services at this level are routine and the process is fully scripted requiring mostly the working knowledge of the relevant language. A feature of this level of activity is few economies of scale and therefore does not necessarily need the development of other manufacturing and/or other services for its competitiveness. In this regard, the spillover in terms of high supplier linkages is low (UNCTAD, 2004). Medium skill services require advanced skills to undertake tasks that are more complex. These tasks require judgement by the worker and the interaction is usually unscripted. Thus, specialised training would be required and may offer economies of scale and linkage to other services and industry. The tasks include secretarial, data capture and processing, bookkeeping, account enquiries and specialised transcription. According to UNCTAD 2004, some of the services may require a critical mass of different skills in one location to provide a whole package. High-skill services are professional services and have the most skill intensive requirements. This spans all areas including finance and accounting, medical, legal, engineering, research, and design as well as software development. Due to their professional nature, these services require high levels of specialisation. They require agglomeration economies with different skills and enterprises interacting with each other to share work and stimulate knowledge flows. This requires a location that is conducive to this work (UNCTAD 2004). Mapping this categorisation on the Kenyan efforts to develop the ITES provides a framework to understand the current positioning and how to move forward. It also provides the framework and inputs required to move higher in the ITES value chain. The range of activities spawned by the ITES differs widely cutting across most professional services, internet related services, health, education etc. Davis et al (2002) categorises the services broadly as administrative, customer service and technical services.
Administrative services are generally back-office services to support the organisation outsourcing the services. The skill range cuts across the whole spectrum i.e. from low skill level of knowledge intensity to the high-end skill edge. Thus low end include routine administrative work like document conversion to high-end accounting and the payroll or legal services. Customer services include the front-end activities that interface with the customer. Just like administrative services, the skill level and the knowledge intensity requirement range from the low to the high-end skill and knowledge intensity. This range from the call centres services to high-end problem and dispute resolution. Technical services require highly specialised IT skills and range from transcription to high-end software development, research and development among others. Mapping the category of services offered to the skill level and the knowledge intensity required provide a framework to deduce a model to define a space that Kenya could operate from. The taxonomy of the ITES is illustrated in Table 3.
Table 3: Taxonomy of ITES Skill level and knowledge intensity Low (routine scripted) administrative Customer service Technical
Call centre; routine queries; order taking; direct mail order processing, lead generation, Public Relation, Marketing alerts, sales and marketing, emergency alerts, political campaigns Account queries; after sales support; insurance claim processing, processing of warranty card and claims; help desk
Secretarial; data capture and processing; mailing lists; credit card application processing; bookkeeping, Human resource outsourcing; record management; legal outsourcing; Benefit Administration; record and file management Accounting; payroll; electronic publishing; facilities management; management consultancy; legal services; logistics support; procurement; supply chain management; contract management; Due diligence; Medical coding; Billing and collection; Medical forms processing
Website design and management; medical records management; specialised transcription medical, financial, legal
Software development; R&D; Application hosting; technical writing; computer aided design; tele- medicine, engineering design; digital animation; data mining;
A feature to be noted is that highly complex tasks have increasingly higher margins. As illustrated in Table 4, the margins for BPO are lower than that of KPO. This is a motivation to migrate to high-end value services.
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Table 4: Differentiators BPO and KPO Parameters Expertise Resource Pool Impact on core business Nature of work Billing rates Margins Impact on client business Dependence on IT /Telecom Scalability
Source: THOLONS
BPO Process specific Graduates Low-Medium Commoditized (Industrialized and repetitive activities) Low-Medium 25-35% Low-Medium High High
KPO Domain specific along with analytical, interpretation and judgmental capabilities Professionals Doctors, Lawyers, Bio-technology professionals, MBAs, etc. High -impact on top line Customized Medium-High 40-45% High Medium Medium
Private sector entrepreneurs responded and entered the market to exploit the opportunity partly responding to the government initiative or responding to the international evolution. As early as 2007, heightened interest and the nascent steps in the early years are illustrated in Figure 3.
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From this position at the time of a 2007 study by Summit Strategies, many of these companies have closed down despite the continuing effort of the government to improve the operating environment for the ITES4. This study takes into account and learns from this experience and a range of studies carried out by the local as well as international consultants to help develop a model for future growth of the sector. The quick scan of published literature indicates that Kenya is making an entry at the low level. This has its challenges that include stiff competition at this level and therefore low margins.
Attachment B
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4 A more detailed discussion on the challenges of the local efforts on BPO is discussed in the accompanying report addressing quantification of demand.
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Countries taking advantage of the ITA framework manufacture or assemble the IT products as discussed in the following section.
Lessons in assembly
In all these instances illustrated, the following issues were some of the contributory factors to discontinuance of electronic assembly initiatives: - branding was an issue - the brands were unknown - the focus of the local market was inadequate to create a sustainable business - the taxation regime favoured completely assembled units. These issues will need to be addressed for assembly to be a promising activity in Konza.
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it provides a 360 degree view of the sector, and easy to zone the activities within Konza. By being a Greenfield, the project moves away from legacy planning constraints and therefore will be custom built. In our quick overview of the comparator sites (discussed in the following sections), we came across Greenfield sites that have been developed ground up. This is notably the case of the Malaysia MSC and HITEC city in India and recent projects in China among others. The initial finding is that in promoting such projects, governments have to be very heavily involved in high speed or dedicated transport facilities between the site to the main cities. Secondly, the government has to consider and provide a set of incentives to encourage investors to do business in comparator countries and particularly to decide to locate to Konza. Comparator countries have used Special Economic Zone (SEZ) framework to provide the necessary incentives for growth. SEZ Bill in Kenya has been developed in this context and is now ready for presentation to parliament. This study illustrates lessons from comparator IT Park sites and the SEZ countries and using the lessons develops recommendations for Konza ICT Park. Our working hypothesis is to position Konza as a product of Eastern African region for the world. The following aspects inspire our working hypothesis: Egypt is positioned to serve the Middle East region while South Africa is serving most of Southern Africa as well as Sub Saharan Africa. Konza could seek to carve a space for Eastern Africa and indeed Sub Saharan Africa and for the world Studies and in particular a 2008 study by Summit Strategies on BPO phenomena in 15 Anglophone countries reported that countries that were successful in BPO activities adopted an inside-out approach. Such countries built their BPO industry from in-shoring as a foundation for off-shoring. The framework inspires Nigerias BPO development policy promulgated in 2008. The Kenya governments effort to support local outsourcing is a move in this direction Previous studies on successful IT Parks report an advantage of operating as a constellation of ICT Parks. These constellations can be in country (Egypt) or regional (Internet city) and are effective in providing redundancy or time difference advantages. This is to be explored for Konza Being a Greenfield project it is feasible to create a lifestyle ground-up, building on the best practice from Africa and the world. Unique value proposition to attract regional as well as global investment. This working hypothesis provides a foundation for the study and is tested through primary and secondary data collected and the subsequent analysis.
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India
28 ha
Philippines
37 ha
Within Quezon
USD138M
Partnership between University & Ayala Land Partnership University & Private Sector Private (Invest Park) PPP, govt 20% private sector 80% Under PPP arrangements Govt through Business Parks Mauritius Ltd
University of Waterloo Research and Technology Park Invest Park Smart Village
Canada
49 ha
USD 210M
Poland Egypt
Cyberjaya
Malaysia
2894 ha
Cyber City
Mauritius
USD100M
Electronic Manufacturing Saigon Hi-Tech Park Dalian Software Park Special Economic Zones Panama Pacifico Panama 1113 ha In the suburbs of Panama City (15 min drive) Part of Aqaba City USD700M Private (London & Properties) PPP Vietnam China 17km from HCM Suburbs of Dalian USD300M USD62M Private Private (Dalian)
Aqaba
Jordan
USD281M
The selection of the ICT Parks was concluded after a global scan of such initiatives and the final list is intended to provide a wide range of experiences. The considerations include the following: - Evolution in the global market place - thus some of the Parks are relatively old having been conceived in mid 1990s and therefore provide needed information on typical Park evolution from conceptualisation to operationalisation. Some of the other Parks included in case studies have recently been established and therefore provide an inspiration to understand to what extent they have taken on board the experiences of the older Park sites Geographical spread - the selection is spread across the continents and thus different time zones and therefore whatever advantage that could be related to time zones is taken into account National population size - to take into account the national dynamic, the team selected countries with large populations as well as those with low populations. This addresses the national dynamic that could be influenced by the population and whether the population size influences the activity of the ICT Park
- -
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- -
Language - while English predominates in the ITES sector, the team selected countries that reflect a wide range of national languages to understand how they were dealing with the language issue. Vietnam for example provides useful lessons in this regard. Level of national development - the comparator sites include developed as well as the developing countries, and finally, Different political and social orientations to understand how political and social orientation influences planning and execution of the ICT Parks under varying situations.
The diverse range of choice provides a rich framework to understand the dynamic of ICT Parks and is used to benchmark and provide insights on the way forward for Konza. The details of each of the sites is described in detail in the annex.
All the ICT Parks reviewed have a management team that have under their control a set of tools to ensure ease of doing business within the Park, while all the countries have enacted a set of an incentive framework to make the site(s) attractive and finally, the location provides opportunity to be exploited. The parameters for analysis are therefore set out along these lines.
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Incentives-All comparator countries have a range of incentives - tariff and non-tariff - to encourage investment. Without exception, all have a Special Economic Zone law in place and specifically the comparator Park site operate under the SEZ framework. The range of incentives is described in the annexes for each site. Economic performance - The national economic performance in comparator countries influences the success of ICT Parks. The Parks take advantage of government efforts to grow the economy. It is only after the maturity of the Park and generally the ITES that the Parks contribute to the economy through job creation arising from export of IT products, software and services. Some of the economic considerations include; Economic linkages - Backward and forward linkages to the economy in comparator countries were found important to ensure sustainability of the Park. Without the linkages, the Park activities are weakly anchored in the economy. Almost all the comparator Parks have incubators within the Park to nurture new business. Local ITES market - While ITES and electronic manufacturing is export-led business, there was a notable effort to grow the local ITES market. In India for example, up to 30% of ITES business is local. Labour - ITES is a people business and highly qualified and motivated staff is required. Access to the labour pool and the training institutions to produce the necessary skilled labour is critical. All the sites are located near a growing pool of skilled workers. While academic institutions are ideal, investors also had their own specialised training facilities. Infrastructure - The Park has to be serviced by the national infrastructure and therefore high-class infrastructure is critical. This includes ICT and physical infrastructure.
Remote forces
These are features outside the control of the Park and the national government and include location, climatic conditions, and global socio-economic trends among others. Comparator countries took advantage of these features in the following ways: Climatic conditions - Extreme climatic conditions such as cold, very hot or natural phenomena are not under the control of the state. Very hot temperatures imply very high costs of cooling data centres. Yet a lot of sun provides an opportunity to tap green energy using solar technology. Google Inc although not part of our study is keen to exploit solar energy as part of the green agenda. The extent to which a Park exploits such features could be a differentiator. Location - Location of a country and consequently time zones are features outside the control of the Park or the national government. The differentiator is how these attributes are packaged for the benefit of the country. Most of the comparator sites used time zones as a differentiator. This is addressed in a later part of the report International socio-political dynamic - These are factors that the comparator country has no control over. A case in point is political direction in the USA which is the largest market for outsourcing. None of the comparator countries has influence on its politics especially as relates to job creation and the possible impact on outsourcing.
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Table 7: Benchmarking Konza against the comparator sites Kenya rating Internal to the ICT Park Infrastructure Certification of Park site ITES Industry Supportive associations N/A N/A Weak Comments Not yet developed Not applicable National association to support industry wide growth weak
ICT Sector
Strong
ICT infrastructure well developed and provided competitively like comparator sites
N/A
None operational however if incorrectly positioned will have to compete with private sector initiative at a very early stage e.g. Tatu City.
External
Climatic Location
Good National business hub Site has challenges which are discussed in the report.
Weak
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Evolution of comparator ICT Parks and lessons for Konza ICT Park
The trend of ICT Parks is a global phenomenon that has grown over the last two decades and evolved over time to reflect the socio-economic changes. The global phenomena since 1990s evolved from Technology Parks, to Science Parks and with the opportunity provided by ICTs in the digital economy, the trend now is ICT specific ICT Parks. The actors in the development of the ICT Parks are either purely government driven initiatives (policy driven) or purely private sector driven initiatives (market driven). While the nomenclature and models of development may have been different, the underlying principle has been common, namely to seek synergy and exploit advantages through networking of different market participants such as IT companies, universities, research and development institutes, and infrastructure service providers. The development of the ICT Parks has generally focused on either of the two routes - a development initiative to integrate and catalyse the rest of the economy towards an alternative path for development or commercialisation to generate revenue and jobs. As a development initiative, the nation reaps benefits downstream through the greater impact in national development often with the declared goal to realise a knowledge society. Government-sponsored initiatives tend to follow this route. Commercially driven ICT Parks will measure success through return on investment from the Parks notably sale of land, rental and management fees. In developed countries, most initiatives are market driven while in developing countries government play a significant role.
Intergovernmental organisations
Intergovernmental agencies with interest in the sector include:
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products. ITA also desires to achieve maximum freedom of trade in information technology products and to encourage continued technological development of the information technology industry on the worldwide basis. The objective of the ITA was therefore to bring down tariffs on IT items in stages to zero level by a specified year. The concessions evolving out of the negotiations would be in addition to those already agreed upon under the GATT. Note that all comparator countries are ITA members as illustrated in Table 8. Table 8: ITA status of the comparator countries and trade in IT products ITA country Date joined GDP per capita (US$) Total ITA trade ( Million $) - 2008 Share of exports % 0 410 4693 1170 4064 3954 1720 3571 1270 1197 835 3077 58416 21460 4542 316 169 144 250202 625 5375 11 25 34 2 0 0 3 11 43 CAGR % 1998- 2008 -0.5
Canada India Malaysia Philippines Poland Panama Jordan Mauritius China Egypt Vietnam World
1997 1997 1997 1997 1997 1998 1999 1999 2003 2003 2007
UNIDO
UNIDO is a specialised agency of the United Nations with the mandate to promote industrialization throughout the developing world. The mission of UNIDO is to help developing countries and countries and economies in transition in their fight against marginalization in todays globalised world. UNIDO mobilizes knowledge, skills, information and technology to promote productive employment, a competitive economy and a sound environment. Promoting technology-intensive SMEs in developing countries and countries in transition on the platform of Technology Parks has been a major developmental initiative of UNIDO. As part of the promotional initiatives of UNIDO, UNIDO has assisted many countries particularly in Africa to conceive and develop initiatives on ICT and technology Parks. Support of such initiatives includes Kigali ICT Park in Rwanda. The Park, housed in a building complex, was intended to focus on software development, showcase technology and production, and be a multi-disciplinary centre of excellence where research and development would be conducted.9
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Industry associations
In addition to intergovernmental agencies, industry associations work towards developing standards for the industry and working frameworks including self-regulation. Some of the leading agencies are: International Association of Science Parks - Develop and coordinate standards for Parks International Association of Outsourcing Professionals best practice in outsourcing Standards bodies Customer Operations Performance Centre standards for BPO and Telecommunications Industry Association (TIA 942) standards on Data centres
National
At national level, stakeholders in the ITES industry have established organisations to bring together actors and share information as well as develop frameworks to strengthen the sector. The bodies at national level are broadly governmental and nongovernmental. The most widely known is NASSCOM in India. Kenyan stakeholders congregate around Kenya BPO and Contact Centre Society
Governmental
These are government agencies to promote ICT Parks and the services offered by the Parks. In the case of India, Software Technology Parks of India (STPI) acts as a one-stop shop for ICT Parks.
Non-governmental
Non-governmental agencies are established by the stakeholders to lobby for an operating environment, set standards and generally improve the business climate under which they operate. NASSCOM for example represents IT/BPO/Products/ Engineering Industry with over 1300 members who include Indian companies, multinationals and captive units. Its activities include: Policy advocacy partnership with the Government Industry development research, events, forums, market development Enabling environment entrepreneurship, innovation, resource building, security initiatives, infrastructure Global trade development policy advocacy, market development, international partnership, WTO/bilateral engagements Sustainability - CSR initiatives, gender inclusivity, driving inclusive growth, green IT initiatives
10
ECA/CODIST
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Strengths
Konza ICT Park provides a range of strengths that provide a framework and inspiration to develop the Konza ICT Park. These strengths provide a building block for the country to exploit and build a sustainable ICT Park. It is worth noting that similar features are to be found in all the comparators ICT Parks to a varying degree and have formed the foundation for developing a successful and sustainable ICT Park. The strategy is to leverage the strength concurrently at the Park level and national level for success of the initiative. This report points out the need to match these strengths within the government and among the Park promoters to the opportunities that the national regional and the global market provide.
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The bpo phenomena in Kenya: Emerging flagship to drive ICT development, A case study by Summit Strategies Ltd
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With a growing population, and expanding university facilities, the graduates being produced will increase in time.
Entrepreneurial people
Kenyans are entrepreneurial and this is demonstrated by the high level of interest expressed with the entry of the BPO phenomena in the country. Tapping this entrepreneurship is an opportunity for the benefit of the Park. The young population provides candidates for long-term entrepreneurs - easy to adapt to culture/ ease of training.
Multilingual destination
With the entry of the East African Common market, Rwanda and Burundi provide the needed competence in French language. Common market framework eases labour movement across the East African Community.
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Incentive schemes
Incentive schemes include packages from the Kenya Investment Authority (KIA) and Export Processing Zone Authority (EPZA) and Institutional support to help investments in ICT - e.g. Kenya ICT board. The details are discussed in Volume 2/3.
Public Private Partnership (PPP) framework for other infrastructure now in place
In 2009, the government enacted a framework for PPP which provides a framework for government to participate with the private sector in large projects where the government feels is of strategic nature and the private sector will add value. Under this framework, the government has an opportunity to leverage private sector resources to develop infrastructure.
No legacy
The site is a Greenfield and therefore has no legacy issues for land use and the consequential planning. This has been a challenge to planning of ICTs Parks in India where it is difficult to obtain large tracks of contiguous land for the ICT Park development and has been one of the major pre-occupation for the STPI to support such development. Konza overcomes such issues and the area can be branded in line with the theme of the enterprise - i.e. ITES and electronic manufacturing.
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enhance the welfare of the people of Kenya by promoting and protecting effective competition in markets and preventing unfair and misleading market conduct throughout Kenya, in order to:(a) Increase efficiency in the production, distribution and supply of goods and services; (b) Promote innovation; (c) Maximize the efficient allocation of resources; (d) Protect consumers; (e) Create an environment conducive for investment, both foreign and local; (f ) Capture national obligations in competition matters with respect to regional integration initiatives; (g) Bring national competition law, policy and practice in line with best international practices; and (h) Promote the competitiveness of national undertakings in world markets. The Competition Bill 2009(Draft) The Bill once passed will anchor competition across all the sectors that are critical to the sustainability of the ICT Parks.
Location
The site specifically and Kenya generally has location-based strengths that can be leveraged. Firstly, being on the Nairobi Mombasa highway positions the site to convenient logistical access to the rest of the region. Konza is next to the regional railway line and in close proximity to an international airport which is a regional hub for North-South and East-West axis. Thus, the site is well positioned for logistics. This location provides a strategic location for electronic assembly and distribution to the region. The country itself is right on the equator and being 8 hours away from North America positions it to provide for a smooth handover and take over operations when offices close down in North America. The time zone is well positioned for near-shoring with Europe being on close time zone to Europe.
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branding efforts of the country under the Brand Kenya Board. Within two years, the Brand Kenya Board has moved fast to consolidate this effort and over the period the Board has developed a strategy to achieve this objective. The strategy involves: - Country audit and diagnostics - this is an intensive process to understand the country conditions and status, its problems, prevailing perceptions as well as its strengths and comparative advantages. It will seek to understand what Kenya excels in and ready to contribute to the world. - Develop the brand - this will now consolidate the brand through a concerted effort within the country and outside the country. - Communicate the brand idea to users. The process to launch a new branding for Kenya is underway and is expected to start from late 2010. Consistent branding will enhance the standing of the country among nations particularly after the unfortunate political events of 2008. Electronic transactions framework - In 2009, Kenya enacted an electronic transactions framework under the Kenya Communications and Information (amendment) Act 2009. The Act provides an enabling framework for e-commerce and most importantly, facilitates online transactions including mechanisms for confidentiality and security of such transactions. A key benefit is the recognition of digital signatures. With this framework, Kenya can potentially conduct online business. More needs to be done especially in the areas of data protection specifically but the Act provides a foundation. National long term planning - From short term to medium term planning, the country has set long-term direction and vision to transition to a middle income country. Vision 2030 developed through a consultative process is a vehicle to realise this objective. The government has established a mechanism to maintain the momentum towards the vision. The pillars to the Vision are: - Political pillar - to enhance the democratic political system that respects the rule of law and protects the right of the citizen. The new constitution promulgated in August 2010 is a fundamental component of this pillar under the Vision 2030 process - Social pillar - seeks to build a just and cohesive society with social equity in a secure environment - Economic pillar - to provide prosperity for all Kenyans. Vision 2030 provides a framework to provide a long-term direction and comfort for business planning. BPO is identified as driver in the economic pillar to help realise an economic growth rate of 10%. Konza ICT Park itself is part of Vision 2030. Political stability guaranteed by the new constitution - After 20 years of efforts to reform the national political and governance system, a new governance system was put in place through a new constitution in August 2010. This constitution entrenches fundamental systems to ensure national stability. The new system is designed to develop a politically stable country and most importantly for business, an independent and empowered judicial system to arbitrate on disagreements Supportive ICT policies - The national ICT policy guidelines provide a framework for government support to develop the ICT Park. Unequivocal government support - With the ICT Park firmly positioned in Vision 2030, the government has shown full commitment on the project by buying up land for the project.
Weaknesses
The ICT Park as envisaged, its location and the country in general exhibit weaknesses which need to be addressed. This section highlights the weaknesses and in a later section how these weakness can be transformed and converted to strengths.
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This however is not unusual. Our research noted Greenfield Parks as in the case of Malaysia Cyber Jaya Flagship Zone (CFZ) and in China. The success of these Greenfields rides on the back of governments long-term commitment to provide an alternative growth anchor. It requires huge investment by government as proof of concept and long-term commitment. Today, CFZ has achieved its milestones and is a cornerstone to repositioning Malaysia into the knowledge economy path.
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For electronic assembly and manufacturing, it is noted that all comparator countries are members of ITA. ITA commits a country to open up certain ITA lines but at the same time, ITA provides the country similar access to those markets. For Kenya, it would facilitate access to inputs needed for electronic assembly in the Park and at the same time access to markets for the assembled product. Kenya should commit to ITA as an incentive for electronic assembly. While the SEZ policy is at the discretion of the Cabinet, the law that will give effect to the policy is under the ambit of parliament. Parliament has a heavy workload with the ongoing implementation of the new constitution and in the event Parliament may not have time to address the comprehensive SEZ law, it is necessary for the Ministry of Trade to explore and introduce some enabling aspects through miscellaneous amendments as the law waits to be discussed and enacted.
Regional competition
It is noteworthy that other countries in the region have ICT Park initiatives and will play in the same space as Konza and therefore competing head on. The Government of Rwanda is promoting such a Park with the support of UNIDO. Without differentiation, this will compete directly with Konza ICT Park for regional and international business. Although other Parks are further away e.g. Smart City in Egypt and Cyber City in Mauritius as well as Coega in South Africa, it is critical that Kenya positions itself to address the global competition.
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High proliferation of decision points in government All the comparator countries have concentrated efforts to incentivise ICT Park development under one window providing for one point for clearances, approvals and incentives. Investors interviewed report that they find that they have to go to many offices for approval or to access information. This is a waste of resources and time. To be competitive, it is vital that all these support and incentive packages be under one agency i.e. one stop shop window. One agency needs to be empowered to administer the incentive programme. Additionally, to ensure an all round policy development and support and to provide linkages with other SEZ it is necessary to have an inter-ministerial organ to provide overall guidance. A way out is to formalise the inter-ministerial team that cosponsored the draft SEZ policy. Others that should be included in the inter-ministerial committee include higher education and labour. We recommend that a policy coordination organ for policy efficiency and implementation be constituted to include the following Ministers: - Trade - Finance - Information and communications - Industrialisation - Transport - Nairobi metropolitan - Lands - Higher education - Labour This will be a consultative organ to provide overall policy guidance on the ICT park initiative.
Opportunities
The opportunities come in a number of ways - the glowing global market and the local demand. These present the opportunity for Kenya to realise its objectives for job creation in line with Vision 2030. Some of the key opportunities are addressed below.
ITES advanced countries moving up the value chain and leaving space for entrants
As ITES evolves, competition in the low level BPO space has eroded margins. Those countries that pioneered in the market with the competitive edge based on cheap labour have lost that competitiveness after 10 years with entry of other players with cheaper labour offers. Conversely, the increasing incomes from pioneer countries put them out of contention due to the higher labour cost. Fortunately, such countries are able to move up the value chain to tap more lucrative market segments. As they focus on the high end, it offers an opportunity for emerging countries to tap into the market segments shunned due to low margins. This is an opportunity for Kenya to subcontract with India.
Strong Diaspora
The strong Diaspora in source countries provides a ready source of ITES jobs. What is required is a mechanism to motivate and tap into this resource.
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Brand Kenya Board has programmes to tap this resource beginning 2011
Threats
External threats are beyond the proposed Park management when established or the government. The following section highlights some of the threats and suggests mitigating strategies to manage the threats.
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Comparative advantage
The comparative advantage for Kenya stems from having a readily available well-trained workforce that is price-competitive, good language skills including accent-neutrality for English speakers. This however is inadequate and the country has to explore areas to grow competitiveness.
Competitive advantage
Scholars on the subject of competitive advantage and in particular a leading scholar Michael Porter14 postulate that a Park (or business firm) needs to build a competitive advantage in a competitive environment to maintain profitability and sustainability. The two approaches to build sustainable competitive advantages are either positional or resource based. In building a positionbased advantage, the Park will seek to position itself either on cost or differentiate itself against competition. To achieve either of these, the firm needs to review its unique resources and exploit them to place it to an advantage. All the comparator ICT Parks have built competitive advantage, which positions them to compete locally, regionally and sometimes globally. What lessons for Konza ICT Park?
Positional advantages
Outsourcing business and in particular BPO operates on labour arbitrage and therefore low cost at service delivery points is a significant advantage. Countries that want to attract that line of business have reviewed the cost structure to reduce cost of the product. The critical areas where cost advantage can be built include the following: - Land - land for building the Park is a significant cost and eventually has implications on the use of the land. Comparator countries have worked to reduce the cost of the land by a number of ways. Significantly, the government or a government agency is involved in acquiring land for the ICT Park. In India, the government or the government agency uses its legislative capacity to acquire contiguous land. The same case was noted in all the other comparator countries. With the land acquired, the government has in most cases given it out to developers at low or no cost. This is the first fundamental way to reduce cost of the overall Park operation. - Cheap space costs - following on cheap land costs, the next area of attention is to ensure cheaper construction costs to reduce rental of space use costs but retain elegance. Competitive price of space in India for example is cited as US$0.5 per square foot per month. The rental cost translates to long-term operational costs and is a major factor for consideration when deciding where to operate. In India, it was noted that the cost of the rental space in Noida and Gurgeon was a factor in choosing where to locate. - Low salary eventually translates to low operational costs. Successful BPO operations are to be found in the areas and regions with low salary or alternatively cost of living is low. Measures to ensure low salaries noted in comparator countries include low tax on salaries for staff within the Park as in the case of Aqaba Economic Zone in Jordan and Panama Pacifico. In other jurisdictions, the cost of the specialised training is borne by the State to reduce cost for the investor as in the case of Egypt. In Panama the State set a cap on overtime payments. - Finally, another opportunity to reduce cost for the operator is through a range of incentives for the investors. These include fiscal and non-fiscal incentives to facilitate competitive operation. These tools provide an opportunity for governments to leverage and influence the cost structure to reduce cost of the service or product. Comparator sites in India, Philippines and Vietnam are positioned to build a long term cost advantage. Kenya has taken the first step to acquire cheap land. The next step is to influence the construction cost structure to eventually realise a competitive price on long-term cost of use of space.
Differentiation advantage
Our face-to-face interviews and research indicate that the cost advantage cannot be sustained for long. Locations lose this cost advantage over a period of 10 years due to the increasing wealth created by the industry in the location and entry of cheaper competition in the space. To avert this challenge, some of the comparator sites have differentiated themselves to sustain an advantage. This is the case of Malaysia to differentiate as a high-end service delivery point for research and development. The
14 http://books.google.com/books?hl=en&lr=&id=H9ReAijCK8cC&oi=fnd&pg=PR15&dq=michael+porter+competitive+advantage& ots=p71AOKaU4F&sig=qmv8uRp6IQj-IE8m6VjvR-f8e-I#v=onepage&q&f=false
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differentiation exploits the resources that the country or the Park is able to exploit. Typical resources available to the ICT Park are discussed in the following section.
Cultural links
Comparator sites exploit the cultural links to their advantage: - Philippines on the cultural links with the USA - Mauritius with the multicultural links to France, India, Britain, Africa mainland and the Dutch With competition certain, Kenya has to build a competitive advantage on position and differentiation. This could be built on the proposed site attributes highlighted below.
Government support
That government support for the ICT Park is amply demonstrated by raising the funding to buy the land is not in doubt. The project is anchored in the Vision 2030 and therefore the purchase of the land is in line with that commitment. Already the Vision 2030 is a non-partisan process and therefore will be a long-term national commitment. With the Vision 2030, the government has identified ITES as a flagship for development.
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Space
The Park is set in a spacious area for example and provision of all the necessary amenities can be built to suit. Other attributes include: - Range of complimenting activities to the ICT Park - On a development corridor designated by the government under the Athi River Development Corridor and therefore can leverage government effort to develop the corridor - Near wildlife sanctuaries - Undulating terrain - Hot weather - No legacy - Nairobi-Mombasa highway and alongside it are train and fibre optic lines - Proximity to international airport
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ANNEX
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Tagline
The Smart Village Egypt was an initiative by the government to seize opportunities that ICT promised. This is a 300ha Park which is part of a constellation comprising of Cairo, Alexandria, and Damietta. The idea was muted and followed by extensive study and research in 1999 2001. The first phase was inaugurated by President Mubarak in September 2003. It benefits from Egypts geo-strategic location. The initiative is an example of a public private sector partnership with the private sector contributing 80% of the resources. The Village was planned for 20,000 people and 120 companies by 2008 and to increase to 100,000 people and 500 companies by 2012. This calls for among others a transport management system from greater Cairo to cater for the huge traffic. The tenancy of the facility is mixed. The business park hosts multinational and local companies sharing the ground with Governmental authorities and organizations, financial institutions, educational institutions and Research & Development centres. Among the multinationals are Vodafone. Also, a local operator Exceed employs 1900 people and offers contact centre services for Microsoft and others. Amenities include a 1500 square metre food complex, a full fledge Smart Village Club with tennis and squash courts, swimming pools, SPA and gymnasium, 400 meters athletics track, official size football field, and, multipurpose playgrounds totally dedicated to the fitness of Smart Village community members and their families. Other features include nursery, international school, and a five star hotel is under construction. Smart Village has dedicated 90 percent of its site to green areas. The entire facility is connected to a fibre optic link provided by the incumbent telecom operator, Telecom Egypt. Egypt is connected to the international capacity through 4 submarine cables; Aletar, the SEA-ME-WE-3 and SEA-ME-WE-4 submarine cable networks, Link Around the Globe (FLAG) Falcon and FLAG FEA.
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Mauritius is considered a safe investment destination due to its long established tradition of socio-political stability, free market economy and good governance. The country is located at crossroads of Africa and Asia with special ties to India and China. Due to historical factors i.e. being colonised by the French and Britain15, the population can fluently speak English and French. This is a strategic advantage since they are able to position themselves as multilingual. The government has improved the Doing Business16 indicators ranked number 17 overall in 2010 but emerging number one in Africa. In addition the country has a large labour pool with low labour cost. Its stability and location makes it a preference for data centre based companies. Due to the declining sugar and textile sector which was the economic backbone of Mauritius, the government considered promoting Cyber City as alternative economic resource. The Cyber City establishment comprises a commercial zone, conference centre, a cyber village, hotel and a university. There are about 150 ICT companies and about 30 call centres providing services to offshore companies (www.e-cybercity.mu/). Construction is in progress and in the last five years, 15 buildings have been built which includes Ebene Tower earmarked as the Cyber Tower and Multimedia Centre. Currently, outsourcing now brings in more income to Mauritius than tourism or agriculture. This is where our idea is to make Mauritius a cyber island to rush ahead as a services economy, says Paul Berenger, deputy prime minister and finance minister. Regarding international connectivity, the country is a landing point for the SAFE submarine cable that provides links to Asia and South Africa where it connects to the SAT-3/WASC submarine cable that provides further links to parts of East Africa17.
https://www.cia.gov/library/publications/the-world-factbook/geos/mp.html Economies are ranked on their ease of doing business, from 1 183, with first place being the best. This is a system developed by the World Bank available at http://www.doingbusiness.org/Rankings https://www.cia.gov/library/publications/the-world-factbook/geos/mp.html 17
15
16
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Tagline
Panama Pacifico is located at the Panama City which connects North and South America. Pacifico is ideal for logistical and operational hub for the Americas and the Caribbean countries. The population can speak both English and Spanish languages. The government desired to make the country competitive and promulgated Law 41 in 2004 which gives both fiscal and nonfiscal incentives for companies to locate at Panama. The International Business Park at Panama-Pacifico is a 26ha, high quality Business Park, master-planned for more than 100,000m2 of office and flex-distribution development. The International Business Park IBP, is designed for headquarters offices, call centres, offices, distribution and light assembly companies. Currently, the park employs 3500 but it is projected to employ 10,000 by 201518.
18
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Tagline
Source: The Province of Vungtau website, Intel Corp, American Chamber of Commerce in Vietnam & Ventureoutsource.com
Source: LookAtVietnam, 2009 Saigon Hi-tech Park (SHTP), with an area of 913 ha, is located 15-17km from Ho Chi Min Citys centre, Saigon Port and Tan Son Nhat International Airport. It is among the 43 industrial parks and export processing zones of the southern economic zone of the country. The park is located near HCM City National University. Tenants in the park include Intel, Japans Nidec, Denmarks Sonion, Allied Technologies of Singapore, Jabil and Datalogic which employ 10,000 workers generating revenue to US$ 1.1 billion19 According to Intel, the company has a state-of-the-art assembly test facility, with an initial investment of US $ 1 billion20 in a 46451m2 facility and is projected to employ 4000 people. The product line is semiconductor manufacturing and also a host to the marketing department for the Original Equipment Manufacturers OEM in Vietnam. In 2007, Foxconn, one of the worlds largest contract manufacturers, had applied for an investment license to invest US $5
19 20 The Province of Vungtau, http://sokhcn.baria-vungtau.gov.vn/dostbrvt/news.aspx?mnid=157&id=743 A Global Technology Revolution, available at: http://www.intel.com/jobs/vietnam/
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billion21. It plans to manufacture electronics and computer products including digital cameras, personal computer printed circuit motherboards, and music players. The venture would employ about 30,000 people. Jabil Circuit headquartered in St. Petersburg, US which is another huge contract manufacturer, plans to invest US $100 million22 to boost its operations in Vietnam. Allied Technologies located in 2005, employing 250 in metal stamping, plastic moulding, and extrusion facilities for parts Jabil uses to produce HP printers. The department of planning of Ho Chi Min City which serves the park has laid the following infrastructure: Water supply system: is supplied through two water plants for redundancy. The park also has four stand-by water tanks with capacity of 3,500 cu m. Power: Power is supplied from the national grid and a power plant of SHTP. The supply is stable with the operational two substations with maximum capacity of 40 MVA. The park management also has plans to build a stand-by gas turbine generator to deal with blackouts. Communication, telecom and Internet facilities: SHTP has good communication and telecom facilities able to supply cost effective, efficient services.
21 22
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Tagline
International Tech Park Bangalore ITPB was opened in 199823 as a Greenfield; ITPB is Indias first themed work-live-play business environment. ITPB is virtually a self-contained city spread over a 69 acres estate. Out of this, 26 acres is notified as SEZ. ITPB is housing 145 companies employing 24,000 professionals in the fields of IT & ITES, bioinformatics, software development, telecommunications, electronic and other hi-tech industries (Ascendas, 2010). Dittrich, C. 2007 outlines the meteoric rise of Bangalore to a globally integrated e-region was not a mere coincidence but resulted from a combination of favourable enabling conditions: The citys reputation as one of Asias leading locations of education and research; today Bangalore has three universities, 14 engineering colleges, and a plethora of well-reputed research institutes devoted to aeronautics and space, science, health and so forth. There are also various industrial-training institutes, including the Indian Institute of Science, the Indian Institute of Management, and the Indian Institute of Information Technology; The large number of large-scale and knowledge-based public sector industries and the numerous small-scale workshops which service them; The availability of an apparently inexhaustibly large labour pool of highly skilled, English-speaking and relatively inexpensive young urban professionals; investor-friendly government policies; a more stable and liberal socio-political environment with lower real estate prices and cost of living than in Mumbai and Delhi; and the salubrious climate of the so-called Garden City.
23 http://www.itpbangalore.com/home.html
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The establishment of the UP-Ayala Land TechnoHub, a fully integrated information technology (IT) and IT-enabled services (ITES) community situated within the University of the Philippines (UP) campus, is considered by the government as a major step in making technology the foundation of the countrys economic development. Inaugurated in November 2008, then Philippine President, Gloria Arroyo, envisions it to become like Stanford Universitys Silicon Valley, a technological centre where innovative and life-changing technological research and developments take place. Developed by the Ayala Real Estate Development Company, the techno hub is located within the campus of the University of the Philippines, the countrys premiere institution of higher education. Among the locators are HSBC, Manulife, Ayala Foundation Inc, IBM, Convergys and Pointwest. Its establishment is in line with the governments aim of creating technology hubs in strategic points across the Philippines to attract more BPOs and international hardware and software firms into the country and, simultaneously, to train youth into becoming globally competitive programmers and engineers. The techno hub is expected to link the technology industry to the academia and contribute to the improvement of the countrys IT industry via collaboration on research and development, as well as create more employment opportunities for the masses. It covers an area of 20ha located in 37.5ha UP North Science and Technology Park within the University of the Philippines campus in Diliman, Quezon City.
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Tagline
Cyberjaya was developed to affirm Malaysias status as a country of Knowledge-Based Economy. MSC-Malaysia is a dedicated corridor, stretching from the PETRONAS Twin Towers in the north to the Kuala Lumpur International Airport in the south; and encompasses Cyberjaya (the Technology Core) and Putrajaya (the new administrative capital of Malaysia)24. The project was launched by Dr. Mahathir Mohammad, the fourth prime minister of Malaysia, in 1999. Situated in 2,832 ha piece of land, the facility boasts of an intelligent city with world-class IT infrastructure, low-density urban enterprise, as well as state-of-the-art commercial, residential, enterprise and institutional developments. Conducive living with convenient amenities and facilities, Cyberjaya is host to multi-national companies, knowledge workers, enterprising businesses, students and families. The country is connected as a landing point for several major international submarine cable networks that provide connectivity to Asia, Middle East, and Europe25.
24 25 http://www.cyberjaya-msc.com/cyberjaya-town.asp https://www.cia.gov/library/publications/the-world-factbook/geos/my.html
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Tagline
Dalian is strategically located within the Liaodong Peninsula in the centre of Northeast Asia economic zone a short distance from Japan, South Korea and the Far East regions of Russia. Dalian Software Park occupies a 300ha located in Xinghai Bay in the southwest of Dalian which is a High-tech Industrial Zone. It is an integrated software park that combines research, education and production. Due to its proximity to Korea and Japan, it has developed a deep talent pool, notably in computer technologies and Japanese and Korean language skills26. This makes it a preferred destination for Japanese companies. By the end of 200927, therere over 500 enterprises in the Dalian Software Park, 41% of which are foreign-funded. Dalian Software Park realized an annual sales income of US $ 3 billion, with an export value of US $ 0.86 billion.
26 27
http://www.dlsp.com.cn/en/2009/0921/175.html http://www.dlsp.com.cn/en/2009/0921/176.html
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Source: Polish Information and Foreign Investment Agency & WSEZ Invest Park
INVEST-PARK is strategically located in an area where the labour force supply is high and low cost compared to the neighbouring countries. Of importance is the nearness to the German border where they share some dialects. This makes it easier for German companies to outsource some of the jobs to Poland since the labour cost is comparatively low. It occupies an area of 1685.5 ha of land and currently employs 30,025 people. Some of the preferred locators at this site are BPO and IT companies. Among the tenants are IBM (IBM Global Services Delivery Centre Polska Sp) and General Electric29.
28 29
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Tagline
Source: Aqaba Special Economic Zone
Aqaba Special Economic Zone ASEZ1 is a duty-free commercial, industrial, and tourism hub located at the northernmost extremity of the Red Sea. The ASEZ covers 37,500 ha in Jordans strategically located southern area, centred in the Middle East region. It offers the services of the Aqaba Port, Jordans main seaport and historically, an important transhipment point for goods destined to Iraq. It offers global investment opportunities ranging from tourism to recreational services, from professional services to multi-modal logistics, from value-added industries to light manufacturing. The enabling projects include Aqaba International School, American University of Jordan, Hospitality College and Smart City2.
1 2
http://www.aqabazone.com/?q=node/233 http://www.adc.jo/pages.php?menu_id=19&local_type=0
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The Waterloo Research Park is designed to house researchers, create new technology jobs, and generate billions of dollars in economic impact. Waterloo is considered the technology triangle of Canada. The park is developed in collaboration between the university and the private sector. Under the arrangement, the university has leased its 49 hectares of land to private companies. The value proposition for the university is to enhance Research and Development and also channel its fresh graduates to the companies for internships. The university also desires to incubate innovations; a service provided by the locators. Tenants include Google, Research In Motion, Open Text, Sybase & Agfa. One company, Open Text, which is a software development company has an office of 10498.043 m and currently employs 700 people.
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SongDo City is an example of a new city built from a Greenfield. It has the following features: - - - - - - - - premier working environments, luxury residences for 65,000 people, SongDo International School, 100-acre central park, cultural centre, Jack Nicklaus championship Golf course, 5 luxury hotels, and a Good public transport system.3
http://www.songdo.com/songdo-international-business-district/why-songdo/a-brand-new-city.aspx
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The target respondents were drawn from among: - - - - - Top 100 outsourcing companies as published by International Association of Professional Outsourcers in 2010 Kenya Investment Authority BPO/ITES Working Group in the Prime Ministers office database Kenya ICT Board Database Summit Strategies Ltd and associates databases
The target responses were 100 but selected sample size was to cater for an eventuality of a poor response rate.
In-depth Interviews
This is an interim list and we have scheduled more interviews focusing on the market demand Accenture Development Partnership African Growth Avasant BPO /ITES Working Group in the office of the Prime Minister BPO/ITES Working Group of the Prime Minister Brand Kenya Directorate of E-government Eastern Software Systems Pvt Ltd Noida India Export Processing Zone Authority Export Processing Zones Authority FIAS /World Bank Gilda Odera Peres Were Mary Kimonye Dr. Catherine Getao Anil Bhakht Mr. Joseph Kosure Margaret Waithaka Sumit Manchanda Chair Joint Secretary Chief Executive Officer ICT Secretary Managing Director/ Leader of NASSCOM Delegation to Kenya Ag CEO Manager New Investments Operations officer Jessica Long IT Strategy & Innovation lead
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Global BPO Solutions Google Horizon Contact Centers Ltd IBM USA IBM /Canada IBM /EA IBM /India Iridium Interactive Ltd - Hyderabad India Kenya Airways Kenya Bankers Association Kenya Contact Centre and BPO Society Kenya ICT Board Kenya ICT Board Kenya ICT Board Kenya Investment Authority Kenya Web Ministry of Information and Communications National Association of Software & Service Companies ( NASSCOM)- Chennai India National Council of Science and TechnologyMinistry of Higher Education Science and Technology Octaware Ontrack Systems Payoda Technologies PVT Ltd Tamil Nadu India Sameer Africa
Joseph Ochola Mbogo Mr. Joseph Mucheru Sanjay Sikka In confidence In confidence Tony Mwai In confidence Sriram Bharatam Mr. Robert Wakaba Country Leader Chief Executive Officer KPO Delivery Manager BPO services Country BPO services CEO Founder E-strategist
Raychelle Injete Victor Kyallo Eunice Mueni Kariuki Andrew Lewela Mwanyota David Mugambi Mike Terik Dr. Bitange Ndemo K. Purushothaman David Otuoma
Chair Deputy CEO Deputy CEO Project Manager BPO/ITES Senior Investment Officer MD Permanent Secretary Regional Director TN and Kerala Chief Science Secretary
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29
51
52
53
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ICT Research & Consultancy Strategic information for decision support in info-communication business
Executive Summary
This is part of a three-volume report on Demand study, Site and Benchmarking of Konza ICT Park component (also referred to as IT/ITES Park or as the BPO Park) of the Konza Technology City (KTC) project. It comprises a Comparative and Competitive Analysis (Volume 1), a demand Study (Volume 2), and a Comparative Analysis of SEZ Policy and Legal Regime (Volume 3). Volume 1 is underpinned by a benchmarking analysis of 11 similar sites internationally, out of which seven are selected in volume 3 due to its SEZ incentive regime characteristics. The study, commissioned by International Finance Corporation for the Ministry of Information and Communications of the Government of Kenya, was undertaken in September /October 2010. The data sources include intensive literature review, indepth face-to-face interviews and case studies of comparator countries and ICT Park sites. The analysis of these data provides the foundation of the findings of this report. The specific terms of reference for this report are annexed. The key message from the study is that the Konza ICT Park is a policy driven initiative as a tool for job creation, national transformation and launching the country to new economic frontiers. The first phase (2010-2015) requires heavy government commitment at political, legislative, marketing and financial levels. The Government could recoup this investment in later phases. With the strong government commitment as demonstrated in purchase of the 5000-acre land for the Park, the project could help generate 15000 ITES/ electronic manufacturing direct jobs (and 45000 indirect jobs) nationally in phase 1 by 2015. Konza ICT Park itself would host approximately 8000 direct jobs by 2015. Estimated revenues generated arising from Konza ICT Park activities would be US$244 million annually. In phase 2 the jobs created nationally would rise to 39000 direct jobs with half of the direct jobs in Konza ICT Park. Konza ICT Park jobs alone are expected to generate US$607 million annually. By 2032 the national market would generate 349 000 jobs (and approximately 1 million indirect jobs). Konza ICT Park is expected to host the bulk of the direct jobs while the rest are in other private sector driven initiatives. Total revenue generated at Konza ICT Park is projected at US$5.4 billion by 2032. This market will initially be driven by regional demand and therefore Kenya can exploit the first mover advantage by positioning Konza ICT Park as a regional product for the world. The revenue figures are conservative when compared with comparator countries and sites of Cyberjaya (Malaysia), Cyber City (Mauritius), Smart village (Egypt) among others and the projections inspired by early trends of mature markets of India and Philippines. A recurring success factor in these initiatives is: - A very focused and visionary government commitment over the long-term is to give the private sector comfort through a proof of concept Progressive inclusion of private sector to increasingly take over some of the risks through public private partnerships Parks are increasingly generic in design and implementation, thus the differentiator is the value addition demonstrated through commitment, a superior operating environment, strategic access to other markets in the neighbourhood, market insights, access to talent, geopolitical stability and macroeconomic stability A self sustaining ecosystem within the Park and its neighbourhood comprising incubation centres, science park, research and development, centre of excellence and universities.
- -
This is a long-term project and we propose a sequenced/phased approach with clear milestones. The project should be driven by a high-level champion with the responsibility to handhold and transition the project through 2012 general elections and beyond.
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Introduction
This is part of a three-volume report on Demand Study, Site and Benchmarking of Konza ICT Park. The study, commissioned by International Finance Corporation for the Ministry of Information and Communications of the Government of Kenya, was undertaken in September /October 2010.
India ITES investor conference - SSL participated in an event organised by ITES/BPO Working Group of the Prime Ministers and met over 20 ITES potential investors interested in the African and Kenyan ITES market. They had very interesting
These are carefully selected countries and ICT Parks for purposes of benchmarking and discussed in detail further in the
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insights on what works from their broad experiences. They had visited other markets in Africa and Asia and were therefore in a position to give a comparative perspective of the Kenyan ITES opportunity. This extremely rich source of primary and secondary data provides a firm foundation for analysis and the development of this Report.
Defining ITES
For the purpose of this report, we take the ITES to include and encompass the subsectors illustrated in Table 1. Table 1: Component of ITES Business Process Outsourcing Contact Centres Back Office Operations Transcription Horizontal processes Data Entry Information Technology Outsourcing Software & Applications Development Embedded Systems Knowledge Process Outsourcing Finance and Accounting Outsourcing Legal Outsourcing Creative Services Outsourcing Animation Game Development
Data Centre, Systems & Network Administration IT Project Management and Consulting E-Commerce Systems Integration IT Infrastructure Management
Digitization
Market Research and Analytics Education and Training General Consulting HR Outsourcing
Vertical processes
Leaders
Banking, Financial Services and Insurance (BFSI) Telecommunications Retail Travel and Hospitality Supply Management
Others
Life sciences, Healthcare and Pharmaceuticals, Media and Publishing, Engineering and Automotive, Marketing, Government services
This study looks at IT enabled services as those provided within the outsourcing sphere and described as the movement of internal business processes to an external company. Table 1 illustrates the general definition used in the report and the broad classification as horizontal and vertical services. Horizontal services are cross-cutting and are provided in all industry segments. Thus, contact centres are supplied to all industry segments. Vertical services on the other hand are specific to an industry and address a niche within the subsector.
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In the rest of the report, ITES encompasses the activities as set out in Table 1 unless explicitly indicated otherwise.
The study also reviews IT products in manufacturing and assembly. For purposes of this study, the products discussed in the report generally form part of the Information Technology Agreement (ITA). ITA, signed among parties in 1996, is a multilateral agreement within the WTO, which in recognition of the growing importance of ICTs in national economies aimed to expand world trade in information technology products. ITA also desires to achieve maximum freedom of trade in information technology products and to encourage continued technological development of the information technology industry on the worldwide basis. The objective of the ITA was therefore to bring down tariffs on IT items in stages and eventual elimination by a specified year. The concessions evolving out of the negotiations would be in addition to those already agreed upon under the General Agreement on Trade and Tariffs (GATT). These IT products are illustrated in Table 2 Table 2: Representative ITA products Number of HS Codes Attachment A1 112 Sample products Computers and computer peripherals: personal computers, laptops, work station, monitors, keyboards, hard drives, CD- ROMS drives, smart cards, printers, scanners, and other input/output units Telecommunications equipment: telephone sets, cordless phones, mobile handsets, pagers, answering machines, switches, routers, hubs, modems, fibre optic cables Semiconductors: microprocessors, integrated circuits, printed circuits, diodes, resistors Software: magnetic tapes, unrecorded media Office equipment: certain photocopy machines, fax machines, cash registers, adding machines, calculators, automatic teller machines Scientific and measuring devices: spectrometers, chromatographs, flow meters, gauges, optical radiation devices Other: loudspeakers, still digital cameras parts Attachment A2 78 Semi-conductor manufacturing equipment (SME): etching and stripping apparatus, vapour deposition devices, sawing and dicing machines for wafers, spinners, ion implanters, water transport, handling and storage machines, injection moulds, optical instruments, parts and accessories Computers, electric amplifiers, flat panel displays, networks equipment, monitors, pagers, CD and DVD drives, plotters, printed circuit assemblies, removable storage devices, set-top boxes
Attachment B
13
Countries taking advantage of the ITA framework manufacture or assemble the IT products
Contract manufacturing is one of the ways countries exploit ITA. This is a form of outsourcing where a firm manufactures components or products for another firm. By consolidating manufacturing from many clients, a contract manufacturer is able to build economies of scale and therefore build competitiveness on costlabour arbitrage. The contracting firm on the other hand is able to produce IT products without investing in factories. Key inputs quoted by the contract manufacturer include processes, labour, tooling, and material costs5. Countries with low labour costs, as long as they are skilled, have an opportunity to tap into this outsourcing business. At least three comparator sites namely China and Vietnam, and Bangalore provide contract manufacturing. The leading companies include Hon Hai Precision Industries (Foxconn), and Jabil noted in the comparator sites.
5 http://en.wikipedia.org/wiki/Contract_manufacturer
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The services the contract manufacturing offers are mainly printed circuit board, fabrication and assembly of complete units in consumer electronics among others. Most of the research and design for the comparators countries took place in Taiwan, Hong Kong and USA. China, Taiwan, Japan and South Korea supplied the raw materials. To compete on price implies a low margin for the manufacturer and therefore it is a volume business therefore access to a huge labour pool is critical. All the manufacturing sites were under a SEZ framework. In addition to generating export revenue for the comparator country, the contract manufacturing created jobs. Vietnam for example reported that electronic manufacturing created and sustained 300,000 jobs by 2009.
On the other hand, assembly sites include Panama, Shenzhen and Aqaba. The client companies include Dell, IBM, HP and Apple. IT Assembly is downstream business and skill requirement is lower than contract manufacturing.
Comparator countries/sites
ITES and electronic manufacturing as discussed is a fast growing sector and many countries have established or are establishing Parks to exploit this opportunity. The experiences from such countries provide lessons for Kenya to benchmark its effort in this regard. In this study, SSL has scanned globally and working with the client identified a number of Park sites as comparator sites. Table 3 illustrates the Parks sites identified and studied in detail to provide the necessary lessons for this study.
Table 3: Comparator sites for the study Park International High Technology Park Ayala Technohub University of Waterloo Research and Technology Park Invest Park Smart Village Cyberjaya Cyber City Electronic Manufacturing Saigon Hi-Tech Park Dalian Software Park Special Economic Zones Panama Pacifico Aqaba Panama Jordan Panama City Aqaba In the suburbs of Panama City (15 min. drive) Vietnam China Ho Chi Minh City (HCM) Dalian City 17km from HCM City In the suburbs of Dalian City Country India Philippines Canada Poland Egypt Malaysia Mauritius Location/Area Bangalore Manila City of Waterloo Walbrzych Cairo Cyberjaya Flagship Zone Cyber City 28Kms from Cairo 50Kms from Kuala Lumpur 15Kms from Port Louis Distance from City 18Kms from Bangalore Within Quezon City Within the University
The selection of the ICT Parks was concluded after a global scan of such initiatives and the final list is intended to provide a wide range of experiences. The criteria for selection include the following: Evolution in the global market place - some Parks are relatively old having been conceived in mid 1990s and therefore provide needed information on typical Park evolution from conceptualisation to operationalisation. Some other Parks included in case studies have recently been established and therefore provide an inspiration to understand to what extent they have taken on board the experiences of the older Parks
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Geographical spread - the selection is spread across continents and different time zones and therefore whatever influence that could be associated with time zones is taken into account National population size - to take into account the national dynamic, the Team selected countries with large populations as well as those with low populations. This addresses the national dynamic that could be influenced by the population and whether the population size influences the activity of the ICT Park Language - while English predominates in the ITES sector, the team selected countries that reflect a wide range of national languages to understand how they were dealing with the language issue. Vietnam for example provides useful lessons in this regard Level of national development - the comparator sites include developed as well as the developing countries, and finally, Different political and social orientations the selected sites help to understand how political and social orientation influences planning and execution of the ICT Parks under varying situations.
The diverse range of choice provides a rich framework to understand the dynamic of ICT Parks and is used to benchmark and provide insights on the way forward for Konza ICT Park. The details of each of the sites is described in detail in the annex of Volume 1/3.
Sabbagh K, Shehadi R, Oknayan S(2009); Next generation ICT Parks: Bridging the GCC technology gap; Booz & company
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Finance/Legal
Valued-Added Services
Travel Services
Seed Fund
Market intelligence
Recruiting
Business consulting
University courses
IP Consulting
Vocational courses
Telecom/IT Services
Infrastructure Services
Voice/Data services
Basic Infrastructure
IT services
Infrastructure Security
Public Transportation
Non-Business Infrastructure
Roads, Landscape
Infrastructure
Parking Utilities
Fig. 1 summarises the lessons learned from the comparators sites. However, for the purposes of our study, we included warehouse and incubation centres as part of the required infrastructure. All Parks have built high quality infrastructure, and progressively this infrastructure is generic and is rarely a differentiator. Atop the infrastructure are various services provided by the infrastructure. A differentiator however is the value added services that a Park provides its clients. Our research indicated that these services must derive and be linked with the national vision and competitiveness. Thus, backward and forward linkages to the rest of the country are a critical success factor.
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o Kenya ICT Board has a mandate to sell Kenya as an ITES destination o BPO/ITES Working Group in the Prime Ministers office with a mandate to coordinate government efforts on ITES o Brand Kenya Board to develop and sell a consistent positive image for Kenya
MOIC itself is setting the policy framework and the vision to propel the sector forward.
Table 4: Some actors in ITES space in 2007/8 Category BPOs and Call Centres Software/ Hardware Providers Training Consultants Individual Members (Others) Total
Source: SSL compilations
No. of Operators 29 4 3 15 51
Today, Kencall, Ken-tech Data, and Horizon Contact Centres Ltd are the three major players in ITES players providing a range of BPO services. As Kenya explores the opportunities for Konza ICT Park, the market has actors in various spaces in the ITES universe as illustrated in Table 6.
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Table 5: Kenyan ITES operator space BPO Horizontal Most developed with local captive markets dominating - services include contact centres and digitisation BFSI - mostly banking captives Telecommunications all major operators have either a captive or outsourced operation Government developing a shared service platform, digitisation
Source: SSL Team analysis
ITO Emerging with software development as key area of focus targeting local and foreign
Verticals
The volumes of services and revenue generated in Kenya (in global terms and in comparison with comparator sites) are very small and revenue was estimated at US$5 million in 20097. They nevertheless provide lessons and a starting point for the growth of the sector.
Table 6: Typical services offered Organization Kencall Ken-Tech Data Services offered Customer care, Telesales, Technical support, Customer acquisition, Web chat services and BPO Non-voice operations for local clients Finance & Accounts Services (F&A) Customer & Technical Support Services Digitization; Market Research & Surveys (KPO); Data Transcription Horizon Contact Centres Ltd Customer Contact Services, Collections, Training and Content Solutions, Finance and Accounting, Procurement, Human Resources and Payroll services, Learning & Training Outsourcing, Analytics and Data Management, IT Services, Reengineering, Quality Assurance, and Workforce Management
Source: SSL field interviews
150/1200
The total number of seats as provided in this Table is an estimate of operational seats. However, the facilities have the capacity to expand depending on the nature of work carried out.
7 McKinsey and Company, 2009
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BPO services - Captive Contact centres This is the fastest growing segment of the call centre operations in Kenya. Today, a number of banks, telecommunication companies, and financial institutions have established their own captive contact centres run and managed in-house. Some of the companies that have set up captive contact centres are as listed in Table 8: Table 7: Captive centres and capacity Sector Banking Organization Kenya Commercial Bank (KCB) Equity Bank: Barclays Bank: Standard Chartered CFC Stanbic Telecommunication Zain /Bharti Airtel Safaricom Telkom /Orange Yu (Essar) KDN Access Kenya Logistics & Supply Management Utilities DHL Kenya Airways KPLC Nairobi Water Company Manufacturing
Source: Kenya ICT Board8
Banks lead in the development of captive contact centres. One such contact centre by a leading bank offers a wide range of services as illustrated in the box below:
8 Kenya ICT Board puts the total number of direct jobs in the sector to be less than 5000, however, indirect jobs account for 10,000 which includes the captives.
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Telecommunications as a vertical ITES service is a key driver bringing on board international forces to stimulate the market. International ITES operators have come through Bharti Airtel and Essar Telecoms (trading as Yu). Additionally, one operator Telkom Kenya Ltd, is outsourcing its service to a third party operator - Horizon Contact Centres.
Recent Kenyas telecom services moves Telkom Kenya Ltd- (Orange) outsourced to Horizontal Contact Centres Ltd Essar Telecom (Yu) - outsourced to its global subsidiary - Aegis Bharti Airtel (Zain) - signed a contract with IBM, Spanco and Tech Mahindra in which it outsourced its activities to the companies. IBM will be in charge of the entire IT infrastructure of the company. Safaricom - Safaricom opened its Jambo contact centre in April 20099. The centre has a seat capacity of 1000 staff. Among some of the services offered are customer inquiries, data service, M-Pesa service, dealer service line and directory services
The impact of the telecom sector move is significant for the industry and introduces leading global ITES operators into the Kenyan market. With the entry and set-up costs covered by the telecommunications operators, we expect that the global ITES companies now in Kenya will explore other opportunities from the Kenya base thus changing the dynamics of the ITES sector in Kenya. This is an opportunity to drive marketing for Konza ICT Park and industry in general. 1.2.1 Information Technology Outsourcing (ITO) This segment is emerging and carving its space in the ITES industry. A number of companies are offering services in design, applications and mobile offering software products for the different sectors for example insurance, manufacturing and social networks. Table 9 illustrates some of the locally incorporated companies that offer software applications.
Table 8: Typical ITO actors Name Verviant Consulting Services Ltd. Virtual City Company Brief Has offices both in the US and Kenya. Their target markets are North America, Australasia, Europe and Africa2 Is a software house that specialises in supply chain solutions, knowledge management solutions and interactive solutions. The company recently won the Nokia global award for innovation3 Develops software applications for the banking industry that include Core banking solutions; Retail applications, Islamic banking, Point of sale solution, ATM Switch solution, Internet Banking Solution, SMS Banking solution, Mobile banking solution, Mobile shopping solution4 A Danish software development company with regional offices located in Nairobi5 Software developers based on Open Source and IT project management6 ()
Craft Silicon
http://www.safaricom.co.ke/index.php?id=425
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- -
Kenyan experience Yes, meagre and unsuccessful Gilgil Telecom Industries - Zebra computers MOIC - Madaraka Mecer -mecer
Telecom equipment
Semi-conductors Software Office equipment Scientific and measuring devices Others Attachment A2 Attachment B 78 13 Semi-conductor manufacturing equipment Non specific IT - includes set-top boxes
None None None None None None None Set-top boxes are of interest at University of Nairobi Fab Labs to capture the digital migration market by television broadcasting
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These assembly initiatives have not been successful yet; the market demand is expanding fuelled by the governments desire to transform the country using ICTs to a knowledge society. Some challenges have to be addressed to make IT assembly worthwhile for local or international companies to consider IT assembly in Kenya. The challenges include tariff issues, branding, expanded access etc. As discussed in the third volume of this study, Kenya could largely address these challenges if it: - Enacts the SEZ framework to facilitate provision of enhanced incentives to potential investors and expanded market access to the local market which now includes East African Community Consider and indeed commit to ITA. This opens up access to raw material as well as international markets. It is worth noting that all the comparator sites are members of ITA.
ITA products as listed in Table 2 are broad. Kenya could start with computer and computer peripherals and build a base from there. Another area the government has indicated interest is set-top boxes to take advantage of broadcasting digital migration. This is ITA Attachment B HS 13. The switch-off date for analogue transmission is 2015 globally and this is too close for Konza ICT Park to take advantage. Experiences from comparator sites illustrate a need to focus. The Saigon Hi-tech Park in Vietnam for example focuses on attracting businesses that specialise in microelectronics, and other related information technology and telecommunications accessories.
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Our analysis of comparator countries illustrates differing motivations as illustrated in Table 11.
Table 10: Orientation and continuing driver in ITES/IT space Country India Philippines High Value Activity ITO ITO, KPO Motivation Revenue/moving up the value chain Revenue Employment Malaysia Canada Mauritius Egypt Poland Vietnam China
Source: Team analysis
KPO KPO (Quantum computing and Nio technologies) BPO BPO/ITO Diverse IT Manufacturing Diverse
Employment
In this context, comparator countries tended to focus on a range of activities that delivered on what they were looking for. While job creation and generation of exports revenue cuts across all the comparator countries, some countries have additional areas of interest. These include national transformation of the country, be a leading innovator, and repositioning in new competitive space. Proceeding from this perspective, Kenyas choice of high value needs to be seen within the long-term planning framework of Vision 2030. Kenya Vision 2030 aims to make Kenya the globally competitive and prosperous country with a high quality of life by 2030. The achievement of this Vision is intended to firmly ground Kenyas position as the business hub for not only East Africa but also the African region. Three key pillars: Economic; Social; and Political Governance anchor the Vision 2030. Vision 2030 identified The ITES sector, which encompasses the BPO, as one of the six sectors to contribute 10 per cent economic growth rate per annum. To make Kenya one of the top off-shoring destinations in Africa, the Vision aims to: - Attract at least five major leading information technology (IT) suppliers, and at least ten large multinational companies and global BPO players to the country; and Strengthen at least five local players to become local champions through stand-alone operations or joint ventures.
The national Vision 2030 requires of ITES sector to: - Create jobs - this is paramount and therefore the choice of activity should be one that creates jobs. Among the ITES, BPO provides the largest number of jobs albeit with increasingly lower margins. While the investment is heavy in IT assembly, it could help create jobs to address the unemployment problem.
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Generate revenue - Vision 2030 envisaged a sector that would generate revenue through the services offered. This was intended to contribute to a national growth rate of 10%. Position Kenya as a regional business hub - regional outsourcing and electronic manufacturing for the region provide the fit to realise the Vision 2030 goal.
Comparator countries demonstrate both ITES and IT assembly could achieve either or both of these.
The growth projected to 2013 in all aspects on ITES by IDC and by NASSCOM10 by 2020 suggests a rapidly growing market for Kenya to exploit.
10 NASSCOM projects ITES growth to US$890B by 2020 from the current levels of US$200B in 2020 in BPO sector alone.
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2.1.1 Factors shaping investor demand McKinsey & Company in a 2009 report on BPO in Kenya11 presented the following criteria as the most critical factors that international investors consider when identifying a location:
Skills/Talent Availability: Availability of basic/language skills; Availability of senior management; Availability of training; Cost of labour (including escalation) Infrastructure development: Telecom bandwidth and reliability; Reliability of power sources; Availability of grade A office space; Costs of infrastructure (office, telecom, power) Operating environment: Regulatory Environment (Ease of set-up/doing business; Fiscal incentives; Regulations/ compliance; Political & Business Risk; Stable government; History of domestic conflict; Legal enforcement; Business environment Capital/Service providers: Business know-how; Size of current players; Availability of service providers as local IT, headhunters etc; Operational capacity; Financial strength.
For Konza ICT Park to be competitive and learning from the comparator sites, a number of key factors need to be addressed as described in this section.
Canada Mauritius Malaysia Poland Panama China Vietnam Kenya Jordan Egypt Arab Rep. India Philippines
30 87 1 15 30 61 30 4 127 71 30 127
11 12
McKinsey & Co (2009) Seizing the price; Driving BPO sector growth in Kenya, Kenya ICT Board Published by The World Bank Group
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Kenya ranked at number 95 globally is far behind Mauritius, Malaysia and Panama. Kenya is however ahead of Egypt , India and Philippines, all leaders in ITES. Kenya needs to work on certain areas to improve Ease of Doing Business Index. Such areas include trading across borders sub-index that is critical to make Kenya a regional hub. Other indices portray a negative picture on Kenya. One such index Corruption Perception index rates Kenya poorly and is a significant barrier.
Infrastructure development
Three submarine optic fibres initiatives TEAMS, SEACOM and EASSy in Kenya provide international bandwidth and the necessary redundancy for international connectivity as well as the quantity. Through the National Optic Fibre Backbone Initiative (NOFBI), the Government of Kenya has rolled out optic fibre across the country with a 4,500km fibre. Other operators who have distributed the fibre countrywide include Kenya Data Network (KDN), Telkom Kenya Ltd, Kenya Power & Lighting Company, Jamii Telkom, Access Kenya and Wananchi Telkom. In total, the country has slightly over 10,000 km of optic fibre built across the country. The energy sector is competitive with the expansion of the national power grid in progress including the generation of green energy (solar, wind) as a supplement.
A SEZ policy and Bill is under development and is intended to enhance tariff and non-tariff incentives.
Location
Location of a country and consequently time zones are features that investors look at when selecting location. Kenya as a country is located along the equator and thus enjoys excellent weather throughout the year. It is eight hours away from North America which positions for a smooth handover to take over operations when the offices close down in North America. The time zone is well positioned for near-shoring with Europe being on very close time zone to Europe. The Konza ICT Park is strategically located along the Nairobi-Mombasa highway and is a convenient transport location to the rest of the regions. A regional railway line passes next to the park and it is in close proximity to the Jomo Kenyatta International Airport (JKIA). 2.1.2 Impact of ITES Comparator sites and countries demonstrate the impact of ITES and manufacturing. These include job creation, revenue generation and national transformation among others. Table 12 illustrates job creation in the comparator countries and sites.
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Table 12: ITES/IT products generated jobs Start year /period Philippines India Malaysia Smart village Egypt Saigon Park Vietnam Cyber city Mauritius Pacifico Panama Intl tech park Bangalore India UP - Ayala Philippines Cyber jaya Malaysia Dalian Park China Invest Park Poland
Source: Team analysis and park websites
% CAGR 45 23 36 42
04-10 99-06 02-07 2003 2002 2001 2005 1998 2008 1997 1998 1997
2.1.3 High value ITES and IT products The high-value services that would have a positive impact on the Kenyan economy are progressively further up in the evolution chain. The study will assess Kenyas capacity to operate at the high-end by not only identifying the current providers of these services, but also making projections. Table 13 is a summary of some of the high-value ITES services Kenya could focus on in the long term.
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Table 13: High-value ITES services BPO Horizontal F& A; Accounts; Billing; Contract Management; Due Diligence; Logistics Support Services; Procurement Management; Strategy & Analysis; Supply Chain Management Medical: Medical Alerts, Coding, Billing and Collections; Medical Insurance (A/R) Collections; Medical Forms Processing; Electronic Medical Records (EMR); Health Information Technology; Online Medical Services HR: HR Payroll Management; Travel and Expenses Management; Compensation Consulting; Benefits Administration; Human Resources Management; Records and File Management ITO Application Development, Hosting Management; Customer Relationship Management(CRM); Data Warehousing; Database Development, Management; Disaster Recovery; ERP; Hardware Support; Help Desk; Network & Systems Management; Graphics Design and Application; Networking; Security; Web Development KPO Market Research: Data Processing, Market Research Data Analysis, Web Survey Analysis, Marketing Questionnaire Design Financial Market Research: Applied Investment Research, Financial Analysis, Financial Accounting Life Sciences and Pharmaceutical Research: Database Creation, Text Mining, Web Mining, Numerical Data Mining, Data Analytics Web Based Market Research: Abstract Writing, Competitive Business Analysis, Syndicated Research, Trend, Competitor Analysis, Company Profiling, Desk/Web Research CSO Digital Animation, Game Development
Legal; Legal Research; Contract Review/Drafting/ Management; Intellectual Property; Document Review/Electronic Discovery; Litigation Support; Immigration Services; Legal Transcribing Services Verticals ( local ) BFSI Telecommunications Government
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2.1.4 IT products assembly Light electronics assembly initially for computers targeting the local and regional markets. Table 14 illustrates international companies in comparator sites that have operations in Africa, and especially in Kenya. These should be the first to target due to their understanding of the African and the regional market.
Table 14: Sampled international high-tech companies with operations in Africa IT company Dell Toshiba Apple HP Panasonic Canon Sony Countrys presence Distribution done from South Africa. In Kenya, there is a Partner Account Manager. The products for the local market are overseen at Limerick Ireland No presence in Kenya. Manufacturing of the local products is done in Poland and Romania No presence in Kenya - the Kenyan market is served by Micro Conseil International of France Have a regional office for East and Southern Africa region for its Personal Systems Group. Manufacturing of the local products is done from South Africa No local office No local centre. The Kenyan market is served from South Africa (Canon South Africa (Pty) Ltd) No local centre. The local market is served from the Middle East
The region has no assembly facility and Konza ICT Park with its location for logistics will be ideal to tap into Kenya, the EAC market as well as COMESA. 2.1.5 Investor characteristics/profile The leading outsourcing companies globally as defined by International Association of Professional Outsourcers (IAPO) are summarised in table annexed. The main outsourcing companies have already established offices in the country; however, their current business might not be in line with outsourcing. IBM has a regional office serving East and Central Africa region. The company recently signed a contract with Bharti Airtel in which it will be in charge of Airtels infrastructure. In the same contract are Spanco and Tech Mahindra. The two are Indian based companies specialising in call centre and BPO services respectively. Since the country has little experience and international exposure, the entry of these companies is likely to propel it to international standard and markets. Other companies such as Tata Consultancy services and Wipro have carried out due diligence with an intention to come into the market. Accenture is currently working with the government in the provision of shared services. Unisys and Infosys, even though do not have local operations, provide services to the local banking industry. Cooperative and Barclays are some of the local banks using products from Unisys. Equity Bank, I&M Bank, United Bank of Africa and Bank of Baroda use products and services from Infosys Technologies. Hardware companies such as HP, have regional offices in the country serving East and Central Africa region. Dell has established a commercial centre for the region, although the distribution is still done from South Africa. NCR has had its offices in the country for a number of years serving the financial sector. The company specialises in ATMs and systems design. Microsoft has its regional office supporting Burundi, Eritrea, Ethiopia, Kenya, Rwanda, Somalia, Tanzania, and Uganda. Googles office in Nairobi serves the sub-Saharan region. In the services sector, CB Richard Ellis has offices in the country providing services in property management and consultancy. Another international firm, the Canadian based firm Colliers International, showed willingness to invest in Kenya. Figure 2 illustrates some of the companies that have offices in the country, some that provide services into the country and lastly, companies that are in the process of establishing local offices
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2.2 Investor nationality and export destinations Global demand for BPO services is still dominated by the United States. Table 13 presents a forecast of total worldwide spending and shows Americas (including Canada and Latin America) market taking nearly two-thirds of global BPO services demand. Even in the face of the economic downturn, industry analysts were forecasting a compound annual growth rate (CAGR) of 10.6 percent for the global industry to 2012, with global BPO spending expected to exceed US$ 168 billion by the end of 2012.
Table 13: World wide BPO spend13 (US$ Millions) Region Americas EMEA Asia/Pacific Worldwide Growth (%)
Source: IDC 2008
13
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---a full fledge Smart Village Club includes tennis and squash courts, swimming pools, SPA and gymnasium, 400 meters athletics track, official size football field, and, multipurpose playgrounds totally dedicated to the fitness of Smart Village community members and their families; nursery, international school, 5 star hotel and transport management system from greater Cairo.
Typical amenities in comparator parks: Hospitals Schools Educational institutions Day-care centres Retail and recreational facilities Amphitheatre Lagoon Hotels and hospitality facilities Residential complexes Gymnasiums and health clubs Specially designed public spaces Meeting and leisure areas Social and cultural events
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4.1 Methodology
Secondary data was collected through extensive desk and internet research guided by document interrogation guides. Part of the literature reviewed is annexed to this report. The literature review helped to present the market evolution, trends, segmentation, drivers, business flows as well as the key actors. ITES is a fast growing market and has attracted immense interest and therefore literature (which is largely descriptive), market analysis and market forecasts are available. A major challenge is comparability of data. With changing definitions, the market segmentation is just as diverse with differences in market segmentation and market shares. Not much academic literature was available to tie up variables and provide a scientific mechanism to explain the phenomena now and the projections for the future. Leading global consultancy and research firms have produced useful figures for planning and in leading ITES countries; the national lobby groups have gained mastery in data collection.
At the global level, ILO, UNCTAD, UNIDO collected data on the various aspects of ITES and IT assembly within their mandate. This study relies on this wealth of data.
Primary data on the other hand is critical to get a first-hand market response and by collating this data with the primary data help to localise and bring a Kenyan and regional perspective. Two approaches to the methodology to collect primary data involved a set of tools; firstly a questionnaire sent on email to 142 potential respondents, interview guides, and intensive face-to-face interviews. The questionnaire targeted top actors in ITES space and distributed globally. The response for email questionnaire was low despite repeated requests to the firms to respond. Table 16 is a summary of the regions selected and the number of respondents sampled from each.
Table 16: Questionnaire distribution Region 1 2 3 4 5 6 Kenya Africa Asia Latin America North America Europe Total Number 42 12 46 4 25 13 142
In addition to the questionnaire, the Team conducted over 40 incisive face-to-face interviews and where not possible, telephone interviews. The purposively selected sample included the following categories: - buyers - companies that outsource their services either as captives or third party and includes local and foreign companies. outsourcing companies - those involved in outsourcing and include international as well as locally based. Outsourcing consultants - interviewed a major company that helps international companies develop
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an outsource strategy and handholds them in the outsource process. At the time of the interview, the company was developing a strategy for Ghana to be an outsourcing destination. - IT software companies - involved in software development. Most of these were Indian companies that visited Kenya as part of an Indian delegation to explore ITES business in Africa. Other companies interviewed include foreign companies that have established base in Kenya. government agencies involved in creating the environment for business.
The full list is annexed. It is from this wealth of data that the following analysis is founded.
Motivators to do business in Kenya Talent pool - Resource pool availability, workforce size, skill, and cost, average manpower cost Real estate availability and cost Government support - Ease in legal setup, clarity on taxation Market potential - Business opportunities Strategic reach to other markets Infrastructure - Infrastructure quality, connectivity, utility reliability Support services - supply chain/transportation Geopolitical stability - Political stability (Recent social and political instability create unacceptable risk!!) Macro-economic factors (growth, currency, etc) Respondents - ITOs, National ITES lobby, real estate outsourcer Source: field survey
4.2.1 Sufficient and highly trained human resource pool ITES companies and specifically the BPO sub-sector indicated that the subsector is a people business. They require a constant supply of highly trained people. Access to such labour pool will be critical. Konza ICT Park management will need to work with academic institutions to create a linkage to supply labour. Interviews indicated that within a radius of 30 kilometres there is an existing university (Daystar University) and that there were others coming up. 4.2.2 Buildings types Residential BPO companies interviewed were clear that their subsector is a people business and need to be located at sites with the labour pool they are looking for. Thus for the BPO companies already based in Nairobi City they can only move if their labour pool is able to move. The implication for Konza ICT Park is suitable housing for staff. Industry interviews indicated that 85% of the BPO sector are agents with a relatively low income of USD300-350. Housing at the site should be affordable for that level of staff either shared or single. Cost of housing should be a major consideration. These houses should be adequate for the first teams that start operations in Konza ICT Park on day one.
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Whereas 85% of the BPO staff is of low pay, the rest are managers and thus housing for this level is different and high cost. Outside the BPO, a few KPO companies interviewed indicated that their staff are high end professionals and therefore a key consideration will be high quality housing and amenities. Business buildings These comprise workspaces for ITES services and IT assembly. In comparator sites, the ITES buildings are generally low buildings up to four floors and a lot of the space between the buildings. The design should be inspirational and allow for a lot of greenery.
IT assembly noted in the comparator sites cater for manufacturing and therefore need to be adjacent to large storage space and transport infrastructure. Space requirements, investments and jobs My clients projects tend to include: (1) Industrial projects for manufacturers and warehousers (100,000 - 250,000sq feet; 250-500 jobs; USD 10-40 million (2) Office projects for business services and IT companies (25,000 - 75,000 sq feet; 100-300 employees; USD 10 - 30 million Colliers International
4.2.3 Business relationships The responses were not conclusive but a preference on joint venture partnership particularly for ITO was prevalent. This would suggest a need to support the growth of local enterprises to form partnerships. 4.2.4 Access to property Data collected on space requirements illustrates some features: - Local as well as international companies did not wish to build their own premises. They instead indicated an intention to take long-term lease for property already developed. In the case of international companies, a preference was a built-to-suit facility. This would suggest a need to engage a master developer to develop the site. This was the trend in comparator sites. Most of the comparator sites had a master developer responsible for the property development. The space taken up depends on the size of the enterprise. One international respondent indicated that they would normally be looking for up to 23000 sq. metres and 7000 sq. m for industrial or office respectively. Other smaller ITO firms indicated space needs in the range of 100- 300 sq. metres.
Respondents indicated that Konza ICT Park management should have some of the buildings ready for occupation to move operations there. In order to compete as a low cost destination, competitive rates should be in the range of US$0.5 per square foot per month. This compares with rates in low cost destinations in comparator countries. 4.2.5 Business support services Locaters at the park need assistance in a range of services and a key differentiator of parks as noted in comparator sites is the ability of the park to provide business support services. Konza ICT Park would need to package support services to attract business. Such services include a one stop shop to facilitate business setting up, introduction to potential business partners; facilitate business opportunities by the periodic marketing of the park and its members. Presently, these services are being offered by a number of agencies i.e. Kenya ICT Board, Kenya Investment Authority and Export Processing Zone Authority.
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4.2.6 Transportation and logistics support Potential locators have a range of transportation requirements for staff as well as logistics namely: - Mass transit system between Nairobi and Konza ICT Park - heavy traffic was a very significant consideration and a dis-incentive to consider Konza ICT Park. It is imperative to build a mass transit system to Konza ICT Park to move staff between Nairobi and Konza ICT Park. All the comparator sites have built a rapid transport system to the adjacent city running on a 24/7 basis. Discussion with the Permanent Secretary MOIC indicated that the mass transport system is budgeted for implementation within the next two years. Logistics facilitation - in addition to movement of staff, goods transportation was critical. Firstly, for the massive construction to be undertaken and later to support logistics for movements of manufactured wares from IT assembly. Proximity to a railway station and being on a highway is an advantage for national and regional logistics. The rail however is too old for modern day logistics. All comparator parks have or are near high speed rail and road systems for logistics to link it to national logistics network. Park road network - navigable road systems in the park and adequate parking facilities.
- 4.2.7 Utilities
The national infrastructure is wanting and one advantage that Konza ICT Park offers is that it is feasible to focus efforts to build infrastructure comparable to comparator countries. Infrastructure for ICT parks (from our research) is no longer a differentiator; it only gives the Park a right to compete. Good infrastructure was critical to encourage local BPO companies to consider moving to Konza ICT Park. Some of the concerns were: - National commercial power is expensive, erratic and unstable and therefore creating a need for operators to invest in costly standby systems. Konza ICT Park needs to guarantee clean power. This is an attraction for local companies to move to Konza ICT Park. It is however a standard feature for comparator sites. An added feature would be green power cited by some of the key players. Water - critical for usual daily needs but also critical for the massive cooling systems for data centres that will eventually be established at Konza ICT Park. One interviewee noted that Konza ICT Park is warmer than Nairobi and therefore cooling systems are even more critical. Telecommunications - this is the lifeline of the ICT park business. ITES operators indicated that telecommunications needs to be high capacity bandwidth, cheap, low latency and stable. Three fibre optic lines run adjacent to the Park linking the park to three submarines cables and the rest of the country.
4.2.8 Sustainable eco-system Respondents stressed the need to create an eco-system either within the park or in the neighbourhood. Key components include: - Universities within the neighbourhood for a continuous production of the highly trained labour to feed the Park locators of highly trained labour. All the comparator sites are within a neighbourhood of universities producing high quality labour pool to serve the needs of the Park. Science Park - KPO, ITO and CSO specifically require higher levels of education and indeed research facilitation. A Research & Development facility within the Park is important to create synergy with the evolving knowledge services. Comparator park sites have Science parks incorporated in the Park or in the neighbourhood as in the case of Malaysia. An Incubation centre within the park will help transform ideas from the Science Park to exploitation as business. It would also help emerging entrepreneurs to sharpen their skills and to grow. Finally, a Centre of Excellence within the park will help build standards of training for the Park labour pool.
This eco-system needs to create linkage to the rest of the country and the region. Such efforts to create an eco-system within Parks were noted in comparator park sites.
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4.2.9 Amiable working environment a great lifestyle In order to attract high calibre staff, the Park environment should be amiable and inspirational. Going by comparator parks, the following features are commonplace: - - - - - - large open spaces greenery low buildings inspirational architecture leisure facilities including games and theatre high end shopping malls
These features will be critical to move ITES operators and staff from Nairobi. 4.2.10 Support to migrate to Konza ICT Park Companies based in Nairobi will have to incur huge costs to migrate to Konza ICT Park. Respondents believe the government would need to provide an incentive programme to cover migration and set-up costs. 4.2.11 Incentives for investment Incentives to invest in Kenya and Konza ICT Park specificallyhave been discussed in Volume 1 and 3 in the context of SEZ framework.
That ITES and IT manufacturing globally will continue to grow. The volumes of employment, revenue generated and space taken will continue to be huge such that over the next 20 years, Kenyan market share will continue to be very small in global terms( below 2% )but will be huge in national and regional terms. That the countries ahead of Kenya in this market segment had to undergo significant political, legal, funding and even image challenges to be able to position them to tap into this opportunity. All comparator sites and countries demonstrate one common feature - that all the initiatives were revolutionary and not evolutionary. The government of the day and indeed a champion defined a vision for an innovative park, determined the future contribution of the park and then sold the vision, marshalled political, legislative and funding resources consistently over a long time. This is how all the comparator parks developed. In the early years of the park, the government as the promoter needed to proof the concept through sheer commitment. Thereafter, private sector took interest and government was able to recoup initial cost through sale of land or rights at the park. The role of the government progressively diminished while that of the private sector increased. Government intervention going forward was to reorient and re-position the industry in right of current trends to new frontiers. Government demonstrated commitment to Konza ICT Park would be key to success. That while government efforts will be around the Konza ICT Park, and intended to attract business to Konza ICT Park, not all locators will site in Konza ICT Park for various reasons. Some locaters will prefer Nairobi City or indeed other sites in the country. Reasons cited include proximity to customers, sources of specialised labour, logistics etc. Efforts focusing on Konza ICT Park will however continue to propel national growth of ITES. In comparator sites, the government effort while revolving around the comparator sites, catalysed growth nationally outside the park. The Park ,however, for the first decade will be the largest single concentration point of ITES activity nationally. That Kenya has challenges of national image, policy, legal, etc which has been addressed in Volume 1 needs time
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to address. In this regard, growth in the first few years will be slow and once these issues are addressed, the market realise growth comparable to early years of comparator countries. This growth will be driven by local and regional demand substantially in the early years and later international markets. Kenya will therefore create new markets locally and regionally. International markets will initially be through diversion of market from regions that lose competitiveness due to cost. Over time, Kenya will build capability to compete in knowledgebased services. Typical growth rates noted in comparator markets range from CAGR 36% (Malaysia to 2007), 45% (Philippines to 2010), 23% (India between 1999-2010) and projected 42% (Smart village Egypt to 2014). This rapid growth has generated employment as illustrated in Table 14.
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Start year / period 04-10 99-06 02-07 2003 2002 2001 2005 1998 2008 1997 1998 1997 2003 2001 1999 * 1,370 * 1,400 * 1,500 * * 50,000 30,025 * 67,700 * 30,000 * 24,000 * 3,500 * 20,000 9,500 * 47,000 42 12,000 28,000 36 100,000 23 1,962,000 2,196,000 2,286,000 45 475,519 668,126 920,764 % CAGR 2008 2009 2010 2011 2012 2013 2014 2015
Philippines
India
Malaysia
Pacifico Panama
Elgazala Tunisia
CAGR for the respective parks could not be calculated since there were no beginning figures. Those countries recording high level of growth have huge marketing budgets. Egypt for example had a USD900m budget in 200814. Considering Kenyas national resource base, we estimated a lower growth rate rising to CAGR 20% in the long term. - Kenyan growth of the ITES will revolve around the telecommunications sector - telecommunication sector will be the key driver to catalyse the market followed by the BFSI. The strategy of Bharti Airtel and Essar has introduced global ITES players in the market namely IBM, Spanco, Tech Mahindra and Aegis. With the set-up costs to the Kenyan market covered by the operators, the expansion to other local and regional opportunities will be relatively easy thus changing the market dynamics for growth. Telkom Kenya, another telecom operator, has engaged Horizon Contact Centres for BPO services. These fundamentals will catalyse growth over the short term. One advantage of this strategy is that it overcomes the national image problem cited as a barrier for new international business. The unit of analysis is direct jobs created- whereas there are more variables - revenue generated, investment, locators at the park, space taken up; direct jobs variously linked as seats or full time equivalent (FTE) are a key consideration particularly in BPO which is the largest job generator. Data for direct jobs are much easier to maintain. This is the unit of analysis in this report and other variables are derived from the direct jobs. From our analysis, each direct job creates additional three to four indirect jobs15. We have used a conservative figure of three indirect jobs to every direct job created.
Each direct job in BPO generated approximately US$ 27000 US$50000 and ITO generated upwards of US$14000. We use a conservative figure of US$35000 and US$14000 for BPO and ITO respectively. Our research indicates that KPO and CSO is project-based and paid per deliverable not staff. Additionally, manufacturing data costs were unavailable. For the purpose of the study, we therefore used the ITO costing. IT assembly and/or manufacturing do not create synergistic partnership with ITES - however a Park provides the necessary world class infrastructure, incubation facilitation, science park and academia that is shared by both. IT assembly can define its own market taking into account logistics and competition.
The foregoing key assumptions helped develop the quantitative data Sensitivity analysis Our in-depth review of comparator sites and other sites globally illustrates two models that are described in Volume 1 i.e. policy driven and the commercially driven. The government drives policy driven initiatives and at some point, the government incorporates the private sector. Commercially driven Parks are primarily private sector and have an overriding profit motive. The former is a tool for national development and transformation to new frontiers, which often creates the right conditions for the commercially driven models to thrive. India and Philippines have numerous commercially driven Parks, which ride on an environment created by the policy driven initiatives. Konza ICT Park as a policy driven initiative starts off with high-level government commitment demonstrated by the inclusion as part of Vision 2030 and the purchase of 5000 acres of land. This political commitment is critical in phase 1 up to 2015 to marshal all the necessary political, legislative and financial resources to nurture the project. At the heart of this commitment is a high-level champion to guide the project through the political transition of 2012 general elections. Accordingly, the indicators are qualitative parameters of political commitment or lack of it and quantitative indicators of cost sensitivity are secondary in this phase. If this government support is sustained in phase 1, private sector will take over most of the risk in phase 2 where quantitative indicators of cost management are critical. This contention does not in any way exclude private sector contribution in phase 1, it however proposes that the government would have to underwrite the risk. Comparator sites notably Cyberjaya, Cyber City and Smart Village illustrate the huge responsibility that governments have in phase I of the project. This sustained commitment paid off after the proof of concept period ( phase 1) and the government is able to recoup some of the cost downstream. Where government commitment was not demonstrated like in Irbid in Jordan, the project failed in spite of the funding that was committed to the project.
14 15
McKinsey & Co ( 2009) pp 63 Studies by NASSCOM in India suggests 3 -4 indirect jobs in ITES and SLACCOM in Sri Lanka realised 4 indirect jobs
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Our projections incorporate the best effort government commitment to the project as the alternative is not wise to contemplate at this point. 4.3.2 Short term 2011-2015 (phase 1 proof of concept, frontier bursting) Projected national jobs created, share for Konza ICT Park and revenue is illustrated in Table 15.
Table 15: Short term projections 2011 National Konza ICT Park total BPO ITO KPO CSO IT assembly Revenue/year US$ 10,300 2012 10,609 2013 10,927 2014 13,113 6,556 5,245 459 131 328 328 203,258,958 2015 15,735 7,868 6,294 551 157 393 393 243,910,749
In the first phase, the market will grow slowly at first to reach 15000 direct jobs by 2015. Thus the sector could support an additional 45000 indirect jobs. The market growth will be propelled by BPO around telecommunications and BFSI.
Within this period some of the critical features to influence the market at the international and regional level include: - There is no significant competition at equal scale from EAC/COMESA region which provides a window of opportunity to position as a product for the region for ITES and IT assembly. Rwanda and Burundi will provide an opportunity to sell Konza ICT Park as a multilingual destination Progressive shift in cost for pioneer countries (India and Philippines) that will lose the cost advantage and therefore Konza ICT Park can position as a low cost destination to tap into that market. Kenya has to compete with other low cost destinations globally coming up ICT Park will progressively become generic with standard features and therefore Konza ICT Park will have to devise a distinctive feature to differentiate from other parks Challenge to enter in source markets for local ITES operators to source jobs directly will still be a barrier and therefore international business in Kenya will be driven by multinationals EAC common market will continue to evolve providing an enhanced opportunity.
At the industry level, - The industry platform - Kenya BPO and Contact Centre society will still be weak as to coordinate, organise and lobby for the sector. A strong lobby is important for rapid growth in ITES as noted in comparator countries. Such platforms provide policy, advocacy and often set industry standards Moves by the telecom sector notably Bharti Airtel and Essar Telecom to bring in IBM, Spanco, Tech Mahindra and Aegis will continue to be key drivers to internationalise the market and set the standards for the industry. Such companies will also be a reference point for marketing Kenya as an ITES destination and catalysing the local market
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In 2010, approximately 90% of all the ITES activity is captive, increasing confidence of the BPO sector and more companies will release non-core activity to third party ITES operators. Field interviews indicated that captive centres still work within the corporate salary structure; by outsourcing, they would save up to 40% in costs. Government will have to play a very important role. One such role is to demonstrate its commitment by for example shifting some of its offices to Konza ICT Park and secondly, be the early user of the Park for its services. In the IT assembly, government should use its buyer power to commit a major brand to assemble computers at the Park Konza Development Corporation (KDC) for Konza Technology City (KTC) is proposed to be created to lead the efforts to synchronise (and seek public funding) to build out the on-site infrastructure for phase 1 (typically considered public) and initial BPO buildings and related residential and amenities, as well as incentivising the initial move and clustering at Konza of local BPO firms and GOK ITES activities. The KDC would have to also be responsible for ensuring that SEZ legislation or alternative incentive regime is approved that allows KTC to be a competitive and attractive location for locators and developers. All these activities may require significant implementation support from external private experts. Before setting up the KDC towards March/April 2011, the client (GOK) is expected to carry out an informal market sounding of key developers and locators to reconfirm the type of market interest in Konza and whether a master developer arrangement, with some level of private investment, might not also be possible concurrent with phase 1 or at least establish at what stage that would be possible.
At the park level, this is the phase for rapid and coordinated construction such that key facilities are available on site. As discussed earlier it includes physical infrastructure, housing, utilities and amenities. Concurrently are policy and regulatory framework as well as marketing Konza ICT Park as illustrated below:
Table 16: Indicate roadmap for phase 1 Policy Qtr 1 2011 Institutional infrastructure in place high level inter- ministerial Konza ICT Park Development Corporation, Konza ICT Park management Regulatory SEZ law enacted Operational Marketing National image search for master developer concluded Budgetary request for Phase 1 funding
Government exposure in this phase is very heavy and the key outcome is proof of concept. Regarding the SEZ law slotted for Qtr 1, 2011, there is a risk that the law may not be passed for another year or two depending on draft being ready and slot available in the legislative cycle.
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4.3.3 Medium term 2015-2020 (phase 2- private sector leadership) With the success of the first phase, Konza ICT Park and the ITES industry generally will be strong to be the pivot point for increased growth of the sector. Private sector will take an increasing role and the government can recoup some of the heavy cost incurred in the first phase. The projected national jobs created, share for Konza ICT Park and revenue is illustrated in Table 17.
Table 17: Medium term projections 2016 National total Konza ICT Park BPO ITO KPO CSO IT assembly Revenue/year US$ 18,882 9,441 7,553 661 189 472 472 292,692,899 2017 22,659 11,329 9,064 793 227 566 566 351,231,479 2018 27,191 13,595 10,876 952 272 680 680 421,477,775 2019 32,629 16,314 13,051 1,142 326 816 816 505,773,330 2020 39,154 19,577 15,662 1,370 392 979 979 606,927,996
4.3.4 Long term 2020 -2032(mature market) In the long-term phase, the market is mature and the continuing role of the government would be to re-orient the sector to new frontiers taking into account the market dynamics of the day. The projected national jobs created, share for Konza ICT Park and revenue is illustrated in Table 18.
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2021 56,382 28,191 22,553 1,973 564 1,410 1,410 873,976,314 1,048,771,577 1,691 1,691 2,030 2,030 1,258,525,893 677 812 2,368 2,842 27,064 32,476 33,829 40,595 67,659 81,191 97,429 48,714 38,971 3,410 974 2,436 2,436 1,510,231,071
2022
2023
2024
2025
National total
46,985
23,493
18,794
ITO
KPO
CSO
IT assembly
Revenue/year US$
728,313,595
2026 140,297 70,149 56,119 4,910 1,403 3,507 3,507 2,174,732,743 4,209 2,609,679,291 4,209 1,684 5,892 67,343 80,811 7,071 2,020 5,051 5,051 3,131,615,149 84,178 101,014 168,357 202,028
2027
2028
2029
National total
116,914
58,457
BPO
46,766
ITO
4,092
KPO
1,169
CSO
2,923
IT assembly
2,923
Revenue/year US$
1,812,277,286
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ANNEX
Annex 1: Respondent List Annex 2: Companies and Kenyan interest Annex 3: Other International ITES buyer Companies Annex 4: Leading outsourcing companies Annex 5: Respondent list Annex 6: Terms of reference
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11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33
Export Processing Zone Authority Export Processing Zones Authority FIAS /World Bank Global BPO Solutions Google Inc Horizon Contact Centers ltd IBM - USA IBM /Canada IBM /EA IBM /India Immobia Iridium Interactive Ltd - Hyderabad India Isys Ltd Kenya Airways Kenya Contact Centre and BPO Society Kenya ICT Board Kenya ICT Board Kenya ICT Board Kenya Investment Authority Kenya Web Ministry of Information and Communications National Association of Software & Service Companies ( NASSCOM)- Chennai India National Council of Science and Technology - Ministry of Higher Education Science and Technology Octaware Ontrack Systems Payoda Technologies PVT Ltd
Mr. Joseph Kosure Margaret Waithaka Sumit Manchanda Joseph Ochola Mbogo Mr. Joseph Mucheru Sanjay Sikka In confidence In confidence Tony Mwai In confidence Michael Juhl Sriram Bharatam Paul Mwachi Mr. Robert Wakaba Raychelle Injete Victor Kyallo Eunice Mueni Kariuki Andrew Lewela Mwanyota David Mugambi Mike Terik Dr. Bitange Ndemo K. Purushothaman David Otuoma
34 35 36
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37 38 39 40
QAI ( Training) Sameer Africa University of Nairobi Fab Labs Verviant Inc. Michael Karanja Dr. Kamau Gachigi Liko Agosta
Annex 1 is a representation of the organisations and persons on the 42 supplementary in-depth interviews.
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IBM
USA
3 4
France India
Healthcare, Education Software Development, R+D/ Engineering, F+A, Telecom, Transportation, Hospitality Operations IND Software Development, R+D/Engineering, Demand Management, Mortgage Processing, Transportation, Healthcare Operations, Banking Call Centres Facilities Management, Call Centres and Mailroom Services Property Management, HR
India
6 7 8
USA DK UK
No presence No presence in Kenya. It has operations in South Africa, providing services to Citi Bank Has a presence in the country, CB Richard Ellis Limited. The Rahimtulla Tower, Upper Hill Road, P.O Box 10730, 00100 Nairobi, Kenya. http://www.cbre.co.ke/. They serve the local market in property management No presence in the countries. However, the company provides services locally to the banking sector for example, Equity, Baroda, United Bank of Africa and I&M. Their local representative is Simba Technologies No presence Has no presence in Kenya. In Africa, the company has operations in Morocco and South Africa where South African Breweries Ltd (SAB) gave it the responsibility to run their shared services No presence in Kenya. However, the company has shown willingness to invest locally No presence in Kenya. Africa operations are conducted from South Africa
Infosys Technologies
India
10 11
Capgemini Genpact
France India
Software Development F&A, Customer Service, IT Services, Sales & Marketing Analytics, Supply Chain & Procurement
12
Property Management, HR
13
94
14
NCR
USA
ATM, Software, POS, ecommerce solutions, check and document imaging, support and management services Facilities Management, HR, R&D, Healthcare, consulting IT Services, Software Development, NW Support, Healthcare, Distribution, Insurance & Manufacturing Call Centres
Have a local presence offering Computer Systems Design Services and ATM services
15
USA
Has no presence in Kenya. African operations are conducted from Egypt No presence in Kenya
16
Canada
17
SITEL
USA
Has no presence in Kenya. African operations are conducted from Morocco Has no local presence. However, some local banks such as Barclays Bank and Cooperative Bank of Kenya are using some of their products HP has a regional representative office in Kenya
18
Unisys
USA
IT Services, Software Development, NW Support, Law Enforcement and Public Safety Software Development, Network Support, F+A, HR, Payroll, Demand Management, Procurement, Insurance, General Banking, Telecommunications, Transportation, Health Care Operations Business Process Outsourcing, Custom Application Services, Engineering and R&D Services, Enterprise Application Services, Enterprise Transformation Services, IT Infrastructure Management
19
EDS, an HP Company
USA
20
HCL Technologies
India
No presence in the country. However plans to enter into the Kenyan market through the SAP Alliance Partnership
Source: www.iaop.org
95
USA
HP
USA
Motorola
USA
Aegis Spanco
Tech Mahindra
India
96
Accenture: Accenture is a global management consulting, technology services and outsourcing company that was ranked the No. 1 Outsourcing Service Provider by International Association of Outsourcing Professionals (IAOP). The company collaborates with clients to help them become high-performance businesses and governments. Their main area of expertise is in: Application outsourcing, Infrastructure outsourcing, Business process outsourcing and Bundled outsourcing.
With a staff capacity of more than 190,000 globally, Accenture global revenue was US$21.58 billion for fiscal year 2009. They are present in about 200 cities in 52 countries of Americas, Asia Pacific & EMEA. In Africa, Accenture is present in Angola, Botswana & South Africa. IBM IBMs character has been formed over nearly 100 years of doing business in the field of information-handling. Nearly all of the companys products were designed and developed to record, process, communicate, store and retrieve information - from its first scales, tabulators and clocks to todays powerful computers and vast global networks. In 1991, IBM was a $64.8 billion company, of which less than $6 billion was derived from non-maintenance services. Ten years later, the business of information technology (IT) services alone generated more than 40% of IBMs $86 billion in sales and had become the single largest source of revenue in IBMs portfolio. The Fiscal Year 2009 financial report indicates a global net revenue of US$95.8 billion. Today, IBM provides the following outsourcing services: Applications outsourcing, Business process outsourcing and IT outsourcing and hosting.
The total number of employees at IBM stands at 399,409 in 32 countries in Asia Pacific, Europe, Middle East, Africa, Latin America and North America. In Africa, IBM has offices in South Africa. Kenyan office to cater for the region was opened in 2009 which is now coordinating the Bharti Airtel IT outsourcing . IBM is ranked No. 2 outsourcing service provider by IAOP. SODEXO Sodexo is a leading provider of integrated food and facilities management services in the U.S., Canada, and Mexico. They have received numerous global awards including being ranked No. 3 outsourcing service provider. Sodexo has over 6,000 clients in the US, Canada and Mexico and serves over 10 million customers every day. Outsourcing services offered by Sodexo are: HR, Business process outsourcing and Infrastructure outsourcing.
The global net revenue of Sodexo is US$19.8 billion for fiscal year 2009 with a total of 380,000 employees spread in 80 countries of Asia Pacific, EMEA, North America and Latin America. In Africa, Sodexo is in the following countries: Algeria, Angola, Benin, Cameron, Congo, Gabon, Guinea, South Africa, Tanzania, Morocco, Namibia, Niger and Nigeria.
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TATA CONSULTING SERVICES Established in 1968, Tata Consultancy Services has grown to its current position as the largest IT services firm in Asia on the basis of its outstanding service record, collaborative partnerships, innovation and corporate responsibility. Tata is the worlds first organization to achieve an enterprise-wide Maturity Level 5 on both CMMI and P-CMM, using SCAMPISM, the most rigorous assessment methodology. As on March 31, 2010, TCS had 142 offices in 42 countries as well as 105 delivery centers in 20 countries: 18 offices in USA and Canada, 12 offices in 7 countries in Latin America, 11 offices in UK and Ireland, 22 offices in 12 countries in Europe, 18 offices in 12 countries in Asia Pacific, 7 offices in Middle East and Africa, 54 offices in 13 locations in India. TCS continues to focus on serving large global clients and growing its business in the major markets. Tata global net revenue in fiscal year 2009 was US $6.3 Billion with 160,000 employees globally. Their global expertise is in: WIPRO Wipro Technologies is amongst the largest global IT services, BPO and Product Engineering companies. In addition to the IT business, Wipro also has leadership position in niche market segments of consumer products and lighting solutions. The company has been listed since 1945 and started its technology business in 1980. Today, Wipro generates USD 6 billion (India GAAP figure 2009-10) of annual revenues. It offers integrated portfolio of services in the areas of: Consulting, System Integration and Outsourcing for key-industry verticals. IT services, Outsourcing and Business solutions
Global net revenue is US $ 5,038 million for fiscal year 2009 with 108,071 employees globally. Their global reach is in 72 development centres, Asia Pacific, EMEA and Americas. African presence is in Egypt.
CONVERGYS For 30 years, Convergys is a global leader in relationship management and provides solutions that manage client relationships, fosters improvement and adds value so as to enable organizations to improve their business performance. Headquartered in Cincinnati, Ohio, Convergys has approximately 65,000 employees in 68 customer contact centers and other facilities in the United States, Canada, Latin America, Europe, the Middle East, and Asia. In Africa, Convergys is only in Egypt. The global gross net revenue of Convergys is US$528 million.
GENPACT Genpact is a global leader in business process and technology management, offering a broad portfolio of enterprise G&A and industry-specific services. Putting process in the forefrontcoupling deep process knowledge and insights with focused IT capabilities, targeted analytics and pragmatic reengineeringthe Company delivers a comprehensive client solution. Services are seamlessly delivered from a global delivery network to meet a clients business objectives, cultural and language needs, and cost reduction goals. CB Richard Ellis CB Richard Ellis is a global leader in real estate services. Their global presence is in Asia Pacific, America and EMEA, while services offered include: Facilities management, HR and IT.
CB Richard Ellis has 132,852 employees with global revenue US$52.3Billion for fiscal year 2009.
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INFOSYS TECHNOLOGIES Infosys Technologies Ltd is a global leader in the next generation of IT and consulting with revenues of US$ 5.4 billion (Sep- 10). Their offerings include: Business and technology consulting, Application services, Systems integration, Product engineering, Custom software development, Maintenance, Re-engineering, Independent testing and Validation services, IT infrastructure services and Business process outsourcing.
Infosys has a global footprint with 63 offices and development centres in India, China, Australia, the Czech Republic, Poland, the UK, Canada and Japan. Infosys and its subsidiaries have 122,468 employees as on September 30, 2010 with a global net revenue of US$D 216,930 million for fiscal year 2009. CAPGEMINI Capgemini is headquartered in Paris, France and operates in more than 30 countries. In North America, Europe, and the Asia Pacific region, they have over 95,000 people. Their global area of expertise is: Outsourcing services, Consulting services, Technology services, Application life circle services, Business information management, Infostructure transformation services & testing services.
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100
Neusoft Corporation TeleTech Holdings, Inc. Sushma Rajgopalan Sylvia Kimani Tobias Ngeru CPA Global Limited Vidia Mooneegan Vijith Kannangara Vimal Shah Vinod Bang Vahini Naidu Yogesh Tehlan Aaron Liu Anupam Govil Mr. Andreas Kitrilakis Ceridian Corporation Smart Media Bidco Oil Company Mahindra Satyam Dept Trade & Industry South Africa Inter Globle Technologies Beyond Soft Global Equations Federation of Hellenic Information Technology & Communications Enterprises Larsen & Toubro Infotech Ltd Verve K O
service@neusoft.com solutions@teletech.com sushma@lntinfotech.com sylvia@verveko.com tobiasngeru@hotmail.com us@cpaglobal.com vidia.mooneegan@ceridian.com vijith@smart.lk vimal@bidco-oil.com vinod_bang@mahindrasatyam.com vnaidu@thedti.gov.za yogesh.tehlan@igt.in aaron.liu@beyondsoft.com agovil@globalequations.com akit@sepe.gr
Andre Varma Anupam Prakash Ashutosh Bhattacharya Drs. Bernd W.E. Taselaar Bhaskar Ramani Bipradas Basak Brad Dugard Carol Gillam Carole Wamarema Chandrasekhar Sankaran Charles Basajja C. Njuguna Cora Llamas Costas Johnson Cylina Sun Cynthia Mugi Cynthia Kahumbura Mr. Dan E. Khoo Diana Muthee Mr. Ehab Osman Elijah Migwi Call Centre Solutions Continental BPO Multimedia Development Corp Tata Business Support Services Serial and Matrix Ltd Strathmore University Bo Le Associates Qualtrack Ltd Hewitt Associates LLC HCL Technologies Limited ICT Office Mahindra Satyam Bonsai Network India Pvt. Ltd Cushman & Wakefield
andre@varma.nl anupam.prakash@hewitt.com ashutosh.bhattacharya@hcl.in bernd.taselaar@ictoffice.nl bhaskar_ramani@mahindrasatyam.com bipradas.basak@ushacomm.com brad.dugard@ca.cushwake.com carol.gillam@priceandgillam.com carol@databit.net chandru.sankaran@tata-bss.com charles@serial-matrix.com cnjuguna@strathmore.edu cora.llamas@bo-le.com costas.johnson@qualtrack.com cylina.sun@maesinfo.com cynthia.mugi@callcentresolutions.co.ke cynthia@continentalbpo.com danekhoo@mdec.com.my diana@adept-techno.com ehab@bridgetechnologies.com elijahmigwi@globalconnectbpo.com
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Esther Muchiri Mwangi Muthui Fannis Anne Fayaz Hudah Francesca Kairu Ms. Francien Schouman George Ndira Gilda Odera Grace Ngungi Gregg Wassmansdorf Geofrey Ridden George D. Sorio Henry Obare Herman Chinery-Hesse Hilary Wilfred Kirui Irene Mbobua Mariam Ahmed Jackie Nyarotho Jennifer Abelson Jeremy Mackinlay Josiane Manishimwe Joanna Golebiewska John Gikima Mr. John Higgins
Colliers International G7 Systems Cyber City Teleservices Kenya Airways Black Star Line Telkom Kenya Kenya Commercial Bank Quest Holdings Strategic Sourcing International Abelson Group Inc Patni Computers Rwanda Tel Hewlett Packard Ernest and Young Information Technology Telecommunications and Electronics Association Eon Inc Virtual City
gregg.wassmansdorf@colliers.com gridden@g7systems.com gsorio@cctll.com henry.obare@kenya-airways.com herman@bslglobal.com hkirui@telkom.co.ke imbobua@kcb.co.ke info@questholdings.biz info@ssi-bpo.com jennifer@abelsongroup.com jeremy.mackinlay@patni.com jmanishimwe@rwandatel.rw joanna.golebiewska@hp.com john.gikima@ke.ey.com john.higgins@intellectuk.org
Junie del Mundo John Muraguri Waibochi Mr. Junko Kawauchi Leandro Sanchez Mr. LEE Boon Kok Lito Tayag Lucy Mwatibo Makoto Handa Mahesh Punia Martin Gaerlan Melinda Sandlin Frances G. Meris
I Commerce Sdn Bhd Accenture Ken Tech Data NTT Communications QAI Global Services Convergys Benprise LLc Sodexo
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Mfanu Mfayela Marilyn Kamuru Beni Lopez Mukund Srinath Nicholas Nesbitt Mr. Ong Kian Yew Oliver Only C. Malabanan Phil Bond Percy Jokhi Pradeep Mukherji Peres Were Edward Quintero Mr. Sherin Shoukry D Swami Swaminathan Andrew Kimotho Smith Cameron Kishore Mirchandani Dr. Vasile Baltac Paolo C. Abad Charles N. Nduati Jonathan Chege Dr. Wilfred G. Gikaru David Gideon Kariuki The Principal Henry K.A. Mitei R. Wanja Thairu Prof. Timothy Waema Eunice Maranya Jonathan Luzuriaga University of Naiorbi Capstan Ltd Tholons Jomo Kenyatta University of Agriculture and Technology Kenyatta University Egerton University Alliance High School Kianda School Egerton University NCR Outsource Partners International Comesa Infosys First Source Avasant Cascade Global Soft Tek iGate Corporation Kencall The National ICT Association of Malaysia
mfanu@bizworks.co.za mkamuru@emanageafrica.com momentum@softtek.com mukund.srinath@igate.com nnesbitt@kencall.com oky@pikom.org.my oliver@mynairobi.com only.malabanan@xmg-global.com pbond@itaa.org percy.jokhi@firstsource.com pk.mukherji@avasant.com pwere@cascadegl.com quatrro_us@quatrro.com shoukry@comesa.int swaminathan_d@infosys.com sysadmin@kandia.com ucameron.smith@ncr.com us@opiglobal.com vasile.baltac@softnet.ro pca@sm-shoemart.com cnduati@googlemail.com dean-business@ku.ac.ke gikaru@egerton.ac.ke info@alliancehighschool.org info@kiandaschool.net mitei@egerton.ac.ke thairus@africaonline.co.ke waema@uonbi.ac.ke emaranya@capstan.co.ke jonathan@tholons.com
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Recent regional, national and local investment patterns and trends Assessment of the structure of the structure of selected industry segments Factors shaping demand of local, foreign and regional investors Impact of competing regional and international project and locations Competitive trends analysis in complimentary activity areas (foreign investment trends, technology and production trends, competitive forces, export market trends, and domestic market demand/supply trends.) Comparative site attributes of the proposed technology park and site requirements of potential industry segments. Given the distance of the site from population centers and existing infrastructure, this will also include descriptions of the elements of a self-contained community that will be required to catalyze and support investment in promising activities.
Through this analysis, the characteristics of high-potential activities should be defined, including immediate and nearterm industry and services segments for promotion, main investor markets, and likely investor nationality and investment characteristics.
Task 3: Define Possible Magnitude of Demand for the Proposed Technology Park: To facilitate the development of a marketbased SEZ focused on ICT activities, the Consultant will conduct a preliminary market survey of the different potential users of the project. The results of the survey, together with the analysis of demand absorption patterns of other SEZs, particularly those with an ICT focus, should be used to quantify the demand absorption for the proposed technology park and elaborate different scenarios with low, medium and high demand. The major work tasks to be undertaken include the following:
Identify Survey Audience: Identify the universe of prospective survey targets. Group these prospects according to nationality, size of enterprise, and industry subsector. At this point, it is expected that the consultants will concentrate on 100 firms in Africa, the United States, and selected Asian and European Union countries. Market Interviews: Upon definition of the more promising market sectors/segments, conduct interviews with representative enterprises in such segments. The interviews will concentrate on a limited, however representative number of market segments/companies in selected regions, with special focus on Europe, Middle East and Asia. A special focus will be dedicated to companies that are established in SEZs. Develop a Standardized Survey Instrument and Conduct Survey: Develop a simple questionnaire to evaluate potential demand along the following dimensions:
Industry sub-sector, export orientation and geographic origin of investment Requirements for industrial and commercial infrastructure and facilities (e.g. types and sizes of production and storage buildings commercial facilities, housing) Major utilities requirements (power, water/sewerage, telecommunications services Requirements for business support services (financial, trade, educational and others) Manpower requirements at different skill levels Transport modes and requirements
- - -
Sensitivity to lease versus purchase options, rental rates and terms Preference for joint venture, direct foreign investment, or subcontracting relationships Average demand in terms of amount of land/buildings required under different scenarios regarding political and economic conditions
The survey instrument should provide first-hand data regarding the origin, composition, and character of demand for facilities at the proposed technology park site, with particular emphasis on ICT activities, taking into account the countrys political and economic conditions and prospects.
Prepare demand absorption forecasts: Drawing upon survey results, and analyzing the space demand absorption patterns of other SEZs focused on ICT activities, the consultants will prepare a demand forecast for the proposed technology park for 20 years. The consultants will review absorption rates, occupancy levels, and growth patterns of leading competitors in developing the estimates. Annual demand absorption levels should be developed under different development scenarios, e.g. optimistic, moderate and pessimistic as well as given different levels of GoK investment. Determine implications of demand survey and market trends on proposed technology park configuration: Drawing on the survey results and findings of the market assessment, determine the major implications for project configuration and pace of development. This will include location of facilities, required infrastructure and physical facilities. The demand forecast will be an input to the development strategy for the technology park.
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ICT Research & Consultancy Strategic information for decision support in info-communication business
The specific objectives of SEZs as stated in the draft SEZ Policy are: To attract both local and foreign investments To expand and diversify production of goods and services for domestic and export markets To promote value addition To promote local entrepreneurship through Small and Medium Enterprises (SMEs) To enhance technology development and innovation To promote rural and regional industrialization by exploiting comparative advantage of local resource
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ITES Special Economic Zones India International High Tech Park, Bangalore Canada University of Waterloo Research and Technology Park Philippines Ayala Technohub, Manila Poland Invest Park Egypt Smart Village, Cairo Mauritius Cyber City Malaysia Cyberjaya Flagship Zone
Manufacturing Export Processing Zones China Dalian Hi-Tech Zone Vietnam Saigon Hi-Tech Park
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In 2009, Quezon City was noted as one of the top destinations for new businesses in the Philippines by several multinational firms in the country. With exceptional performance in developing smart infrastructure and improving other inputs necessary for a good business climate, such as peace and order and maintenance of a pool of skilled workers, Quezon City now has a competitive edge in the national and even regional arena for attracting ICT investments. A recent joint study by consultancy group, Tholons, and outsourcing media organization, Global Services, ranked Quezon City at 21 out of 50 cities considered top global emerging outsourcing cities.
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D.
Locators and Business Lines Serviced The UP-Ayala Land TechnoHub targets high-technology firms such as those in the fields of telecommunications, information technology (IT) as well as IT-enabled services and business process outsourcing (BPOs) services such as those related to advertising, financial and banking services, software and hardware development, and engineering services. The techno hubs current locators include the following: 1. Call Centers / IT-Enabled Services / BPO 2. Affinity Express BuyOnline.ph Convergys Webcast Technologies, Inc. Pointwest Technologies Manulife HSBC
Computer / Information Technology (Hardware and Software) IBM Business Solutions SeaChange
The techno hub presently houses some very interesting business incubates. Current incubators do work on the following technologies: E. Linguistic and Artificial Intelligence Software Software Development and Applications e-Learning Systems Communications Equipment and Hardware/Digital TV Broadcast Business Outsourcing Services Systems Development for Online Trading Business Intelligence Research, Development, Implementation and Support Robotic Applications
Marketing and Promotions The UP-Ayala Land TechnoHub is the product of a partnership between the University of the Philippines, and the countrys leading real estate developer, the Ayala Land, Inc. Ayala Land is very much a respected and trusted name in the industry for its ability to provide real estate solutions to many local and foreign firms. Ayala Land, Inc. touts the techno hub as a revolutionary development between the industry and the academe, where the collaboration between the two sectors produces an environment where innovative technological and entrepreneurial ideas can become commercially viable endeavours. It also offers a unique and pioneering campusstyle environment, its hi-tech and green facilities, its assortment of the most popular dining places, coffee shops, and retail stores, and its accessibility. More information about the UP-Ayala Land TechnoHub, including detailed descriptions of the parks features and leasing information, can be found in the developers website at www.ayalaland. com.ph
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F.
Fiscal Incentives Income Tax Holiday (ITH) or a 100% exemption from corporate income tax for up to 6 years and extendable to a maximum of 8 years.23 Upon expiry of the ITH, a 5% special tax on gross income and exemption from all national and local taxes. Tax and duty-free importation of capital equipment, spare parts, raw materials and supplies. Exemption from wharfage dues, export tax, imposts or fees. Additional tax deduction of 50% of manpower training expenses. Value-Added Tax Zero Rating (0% VAT) of local purchases of goods and services, including land-based telecommunications, electrical power, water bills, and building leases.24 Exemption from payment of any and all local government imposts, fees, licenses or taxes.25 Exemption from expanded withholding tax.
G.
Non-Fiscal Incentives Simplified import-export procedures. Non-resident foreign nationals may be employed in supervisory, technical, or advisory positions. Special non-immigrant VISA with multiple-entry privileges for non-resident foreign nationals including investors, officers, employees in supervisory, technical or advisory positions; their spouses and unmarried children less than 21 years of age.
III. Government Support While the PEZA provides direct incentives to attract ICT/ITES firms to locate in the UP-Ayala Land TechnoHub and other PEZA-registered zones, both the national government and local government of Quezon City support the development of ICT parks in many other endeavours. A. Establishment of the Commission on Information and Communications Technology Towards an ICT-enabled Philippine Society. The Philippine government sees the development of the Philippine ICT industry as a critical component of the countrys economic development in the coming years. Through the establishment of the Commission on Information and Communications Technology (CICT), the government takes on the specific task of [developing] the country as a world-class ICT services provider, [providing] government services to stakeholders online, [providing] affordable Internet access to all segments of the population, [developing] an ICT enabled workforce, and [creating] an enabling legal and regulatory environment. The Commission is tasked to oversee all matters related to the promotion and development of ICT systems, including policy-making, strategic planning, implementation, and regulation. Among the Commissions programs are One Million ICT Jobs, a campaign to improve market conditions and the ICT business climate in the country to attract foreign investments and increase employment opportunities, and Philippine
23 Four (4) years ITH for a non-pioneer project; six (6) years for a pioneer project; three (3) years for an expansion project. Extensions are granted if the project complies with specific criteria set by the PEZA. 24 Subject to compliance with Bureau of Internal Revenue and PEZA requirements. 25 There is no exemption from real estate tax while under the ITH. However, machineries installed and operated in the zone for manufacturing, processing or for industrial purposes are be subject to payment of real estate taxes for the first three (3) years of operation of such machineries. Production equipment not attached to the real estate are exempt from real property taxes.
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CyberServices Corridor which is a national branding campaign to make the Philippines a top destination for outsourcing and offshoring and attract ICT/ICTES investments to strategic geographic locations from Northern Luzon to Southern Mindanao. B. Establishment of the Quezon City BPO-ITES Council The local government unit of Quezon City is aggressive in making the city conducive for the ICT industry, especially in attracting BPO firms. With the support of the CICT, the government established a city BPO-ITES council with the mandate of attending to the needs of prospective locators. In 2001, Quezon City became home to a pioneering cyberpark in Eastwood City. The city now has 28 registered ICT parks under the PEZA, with the UP-Ayala Land TechnoHub being the biggest. The over-arching objective is to keep on improving the citys business climate not only by working on smart infrastructure projects and streamlining business set-up processes, but also by working actively on improving its labour pool and the citys peace and order. The Quezon City BPO-ITES Council has representations from the academe, human capital development sector, telecommunications and technology application sector, property development organizations, and ICT/BPO firms, and government organizations. C. Other Support and Initiatives Scholarship for Filipino BPO and Call Centre Workers a program by the national government to provide training scholarship opportunities for applicants who wish to work in call centres and BPO companies. The program hopes to increase and improve labour pool quantity and quality and meet the growing demand for competent call centre agents, medical transcriptionists, and other IT / ITES workers. Data Privacy Bill a bill already proposed in the Philippine Congress and currently waiting passage which aims to make outsourcing and offshoring activities in the country more secure. Medium-term Philippine Development Plan 2004-2010 wherein the National Government specifically includes the reduction of connectivity cost and development of ICT human resource as concrete objectives in its agenda. Real Estate Investment Trust Act a new law enacted in 2009 which [allows] the Philippines to participate in the globalization of the real estate investment markets thus contributing to the growth and development not only of the capital market but also the national economy through increased investment activities.26 Service Science, Management and Engineering (SSME) Curriculum a new curriculum born out of collaborations between outsourcing and offshoring players (IBM in particular) and major schools in the Philippines that aims to train and develop a critical mass of professionals for the industry.
IV. Projections and Milestones The Ayala TechnoHub has been completed and is now fully functioning. Ayala Land is building new techno hubs in other cities such as Cebu City, Bacolod City, Iloilo City, Baguio City and Cavite.
26
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to consider from an investment standpoint is the relatively low cost of labour, in comparison with similarly developed areas in neighbouring countries and even with other regions in Poland. These, coupled with a nearby harbour, are some of the location dynamics expected by investors. Milestones and Government Support The total investment placed on the WSEZ is currently (2010) valued at USD 4.3 Billion. Most of which comes from the industrial and manufacturing sectors. The growth of investment coincides with the increase in total investment in land area, which was enabled by the amendment on the Act on Special Economic Zones, enacted in 2004.
An investor considering Poland as a target destination may benefit from multiple investment incentives, in particular: Structural funds and national programmes intended for: 1. 2. 3. Investment grants and creation of new jobs Grants for research and development activities Grants for other activities related to environmental protection, training, logistics, renewable energy sources
Income tax exemptions for business activity in special economic zones 1. 2. 3. For large enterprises from 30% to 50% of eligible costs For mid-sized enterprises27 from 40% to 60% of eligible costs For small enterprises28 from 50% to 70% of eligible costs
Real estate tax exemptions (in certain communes) Technology parks offering infrastructure for high-tech and R&D companies Preferential tax allowances to purchase new technologies Preferential tax allowances for R&D centres
27 Mid-sized enterprises are those with less than 250 employees and an annual turnover less than EUR 50 million, or a total annual balance less than EUR 43 million. (Cit. KPMG Guide to SEZ in Poland, 2009) 28 Small enterprises are those with less than 50 employees and an annual turnover or total annual balance less than EUR 10 million. (Cit. KPMG Guide to SEZ in Poland, 2009)
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3. 4.
Furthermore, the entrepreneurs investing within the area of WSEZ can obtain public aid in the form of corporate income tax exemption based on new investments costs or creation of new workplaces. In case the entrepreneur benefits from public aid allocated for the new investments costs, he can obtain public aid of up to 50% of investment costs which qualifies for inclusion in the public aid in Opolskie Province and Lubuskie Province and up to 40% in Lower Silesia Province and Wielkopolskie Province. The costs qualified for the public aid include: 1. 2. 3. 4. 5. Purchase price of the ownership title or perpetual trust right to the lands Purchase price or costs of manufacturing, within ones capacity, of fixed assets, provided that they are classified, under separate regulations, as elements of taxpayers property; Costs of extension or modernization of the existing fixed assets; Purchase price of intangible assets connected with the transfer of technology through the acquisition of patent rights, licences, know-how or unpatented technical knowledge; Costs connected with lease of lands, buildings and structures, provided that the lease period shall be at least 5 years, and in the case of small and medium-sized enterprises at least 3 years counting from the expected date of new investment termination; Purchase price of the assets other than lands, buildings and structures covered by the lease, if the lease has the form of financial leasing and covers the obligation to purchase assets upon the expiry of lease period.
6.
V. Locators: About 158 companies have located in the area. These include: Toyota, Cadbury, Cersanit, Faurecia, NSK, General Electric, Metzeler, Henkel Ceresit, Whirlpool, FagorMasterccok, Electrolux, Bridgestone, Colgate Palmolive, IBM and Marcegaglia Poland.
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Business Lines Served Most of the locators are running industrial work and manufacturing. Among their lines of business are automotive, engine design and parts, glass and metalwork, electronics and communication, medical electronics and other equipment, building construction and finishing materials, household appliances and other home equipment, ceramics, packaging, rubber and plastics, and pharmaceutical products and knowledge process outsourcing.
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II.
Background: Cairo
Abounding with ancient culture yet modern, Cairo is a preferred destination for both foreigners and locals from other parts of Egypt. Among the attractions are the Nile River, museums, and historical landmarks. Also, it has good clubs, restaurants and shopping centres. With approximately 17 million in population, Cairo is the 16th most populous city in the world.33 It is Egypts most metropolitan area; it has the best infrastructure and high-technology facilities, including telecommunications, internet connectivity, and transportation networks, making it the top destination for commerce and IT operations in the country. Furthermore, the city is home to the nations and the regions best local and international universities, such as Cairo University, the American University in Cairo and German University in Cairo, all of which add approximately 133,000 graduates every year to the labour pool.34
29 30 31 32 33 34
In terms of GDP (PPP) in 2009. Source: The CIA World Factbook The CIA World Factbook Information Technology Industry Development Agency Egypt The Ministry of Communications and Information Technology Information Technology Industry Development Agency Egypt Information Technology Industry Development Agency Egypt
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b.
Area The Smart Village is located in the western suburb areas of the Cairo metropolitan area. It has approximately 3.2 sq. kilometres of land area. Currently, it has already 50 operational buildings, with a total of 0.37 sq. kilometres in office space. Another 28 buildings are under construction which will add an additional 0.19 sq. kilometres of office space.
c.
Amenities and Features The Smart Village features the most advanced ICT infrastructure in Egypt. This includes high-speed networks for data, voice and video transmission; VPN connection and VoIP capabilities; video conferencing systems; and state-of-the-art power networks that meet international standards and which provide an uninterrupted power supply to the parks locator companies. Aside from these, the park also provides very unique services for the convenience of its tenants, including: Engineering and consultancy services. The parks management provides guidance for the selection and tendering of qualified contractors for locator companies that would prefer to build their own office buildings. Facility management. Services such as building operation and maintenance, cleaning and janitorial, security and access control, are provided so locator companies can focus on tending to their core business operations. Catering and events management for onsite organisations. Business support services. Including the provision of transportation services, copy centres, and travel services.
Smart Village Cairo also features other essential amenities including, among others, a school and nursery, which are important for working parents; a Club, which features several sports facilities and a spa; restaurants and cafes; a health and emergency services center; a public library; and a hotel. d. Locators and Business Lines Serviced As of the beginning of 2010, there were approximately 120 firms present in the park with over 28,000 foreign and local professionals. The main business lines serviced are in information technology (IT) and IT products, telecommunications, business process outsourcing and contact centres, financial and banking services, and healthcare.
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Present locators include international and local firms such as,35 e. Alcatel Arab Bank Egypt Stock Exchange Ericsson Hewlett Packard HSBC IBM Microsoft National Bank of Egypt Nokia Oracle Telecom Egypt Figure 6. The HP and Microsoft Office Buildings in Smart Village Cairo.
Source: www.Smart-Villages.com
Marketing and Promotions The developer behind the Smart Village Cairo is the Smart Villages Company. Founded in 2001, the company uses a public private partnership investment model, where 80% of ownership is by the private sector and 20% is by the Egyptian Ministry of Communications and Information Technology. The company aims to lead the establishment of technology and business clusters and parks across Egypt and other key cities in the region, which will feature high-tech facilities and amenities that can attract foreign and local businesses, and through which creativity and innovation are enhanced. Smart Villages Company ensures high-quality urban planning, incorporating stylish and innovative architecture with durability and functionality. Visit www.smart-villages.com and learn more by downloading the companys electronic brochures. Prospective investors can also visit the companys media centre on the website to view Smart Villages Company newsletters and press releases.
Special tax exemptions and reductions for ICT industries; Reductions in land prices for investors; and Easing of export and import regulations.
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III.
Government Support
The protections and fiscal incentives cited above are all part of certain legislations already passed in the Egyptian government that aim to make outsourcing and offshoring flourish in the country. These laws, aside from making provisions for fiscal incentives to potential investors, also provide other forms of support: The Investment Law 8 of 1997 articulates the fiscal incentives granted to investors as well as mandates the establishment of the General Authority for Investment and Free Zones, which serves as the body of authority for managing special trade zones in the country. The Intellectual Property Law 82 ensures that patents, trademarks, and copyrights are protected by law in Egypt, and ensures that outsourcing and offshoring activities in the country are secure. The Electronic Signature Law 15 of 2004 makes electronic transactions more secure. It also allowed for the establishment of the IT Industry Development Organization, which is tasked to regulate electronic signatures and digital certificates required to conduct any electronic transactions in Egypt. The Labour Law 12 of 2003 articulates the rights and privileges of firms and employees in the land, and ensures a stable economy via smooth company-employee working relationships in the country. The Egyptian government also assigns a specific government official that facilitates interaction between company and government organizations to ensure efficient company operations. The government also provides subsidies for training potential employees in IT, communications and networks, according to investor specifications. Furthermore, it has several educational programs (e.g., EduEgypt) that specifically aim to train the talent pool in preparation for BPO and ITO work. Projections and Milestones
IV.
Construction within Smart Village Cairo is ongoing and the Egyptian government anticipates having over 500 local and international firms present in the park with more than 100,000 employees by 2014. Smart Villages Company is already planning to establish similar parks in other Egyptian cities. These include the (1) Smart Village- Damietta Business and Logistics Park and (2) Smart Village - Alexandria Business Park, which are both located in the northern coastal part of Egypt bordering the Mediterranean Sea.
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Figure 7. Map of the Peoples Republic of China. Source: The CIA World Factbook.
92nd of 182 countries in terms of the human development index (HDI). The capital is Beijing, located northeast of the country. In the last 30 years, China has evolved from being largely a closed economy to one that is very internationalized and market-oriented. Since then, it has developed a rapidly growing private sector and has very quickly established itself as a major force in the global economy. At present China has already surpassed Japan as the 2nd biggest economy in the world. From 2002 to 2007, it recorded staggering double-digit GDP growth rates. Growth mellowed down in 2008 in the advent of the global economic crisis but remained impressive nonetheless at 9.3% considering that many countries across the world struggled to avoid economic recessions.37 Estimated GDP per capita (PPP) for the current year (2010) is pegged at USD 6,600.38 Today China is increasingly becoming one of the most conducive destinations for outsourcing and offshoring, competing with Asian neighbours, India and the Philippines. Recognizing its potential, the Chinese government has been determined in the past years to shift focus from its manufacturing and industrial sectors to a more service-oriented industry. Recent estimates already show the country housing more than 3,000 outsourcing providers, garnering a 3% share of the global BPO market next to Indias 51% and the Philippines 21%.39 Its biggest international clients in terms of revenue are the United States, the United Kingdom, Japan and Korea. Key to Chinas success is its cost-effectiveness: it has a large pool of highlyskilled workers who are hireable at a very competitive labour cost. With this shift of focus to the services industry, many cities in China are emerging as outsourcing hubs. Background: Dalian City Dalian City is one of the said emerging outsourcing hubs for outsourcing and offshoring in China. A coastal city located on the southern tip of the northeastern province of Liaoning. It has a land area of about 2,415 sq kilometres, and a resident population of 6.1 million.40 As a shipping hub and an industrialized city, Dalian City posted a GDP per
36 37 38 39 40 The CIA World Factbook Tholons China Paper - Bautista, C.L., 2010 The CIA World Factbook Tholons China Paper - Bautista, C.L., 2010 Shiu On Land, ____.
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capita of approximately US$ 10,669 in 2009, clearly proving to be one of Chinas economic hot spots.41 The economic prowess of the city can be attributed to different factors. First, its proximity to two of Chinas biggest business partners, Japan and Korea, is a huge advantage, whereby being only a few hours away by plane from Tokyo or Seoul, Japanese and Korean firms can apply a more hands-on involvement in their China operations. Furthermore, the proximity (as well as Chinas history with the two countries) allows for a number of Dalians population to be fluent in both Japanese and Korean languages. This is critical not only for the two Asian countries but also for western companies who are doing business in the Japanese and Korean markets. Second, Dalian is home to around 22 colleges and universities and about 189 thousand students.42 These colleges and universities churn out thousands of students with IT degrees every year, and with the many schools for learning foreign languages around, graduates are increasingly becoming proficient not only in the Japanese and Korean languages, but also in English.
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home to 450 companies, of which 43% are foreign-funded and most of which are doing business with Japan. The park is already home to Fortune 500 companies including the likes of Accenture, Cisco, Convergys, HP, HSBC, IBM and SAP. The park is privately owned by Dalian City leading real estate developer, Yi Da Group, and is managed through its subsidiary, DLSP Company. It has approximately 3 sq. kilometres of land space, and about 0.25 sq. kilometres of office space which is already staffed by about 45,000 local and foreign workers. Total revenues from the operations in this park have grown from about US$ 30,052,591 in 1998 to around US$ 3 billion in 2008. Due to the success of this software park, a second phase is underway which will involve the construction of the following two additional parks. Dalian Ascendas IT Park A joint venture between DLSP and Ascendas, one of Asias best providers of business space solutions, Dalian Ascendas IT Park was launched in 2006. In 2007, the first office building was already completed. Since then, more than 20 companies from the BPO, software development, and consulting industries have already located in the park, employing approximately 3,000 people. The project is expected to be a fully integrated business park by 2011. Aside from office space, the park will feature a commercial area with retail and recreational stores. Dalian Tiandi Software Hub To be a complete living environment is the overall vision for the Dalian Tiandi Software Hub. The park aims not only to attract foreign investments but also to entice and retain skilled talents by creating world-class, ultra modern and trendsetting, fully-integrated neighbourhood for working and living. The hub is being made possible through a partnership between Shui On subsidiaries and Yi Da group. Dalian Tiandi features 26.5 sq. kilometres of land area with approximately 3.54 sq. kilometres of office space. Aimed to become a conducive living environment, the hub will include eco-friendly residences, international schools, hotels, restaurants, cafes, and shopping stores, and a city light rail train. Launched in 2007, completion of this latest sub-park in the DHTZ is aimed at the year 2020. b. Area Dalian City is the largest IT base in China with over US$ 2.1 billion in revenues generated from its software industry in 2006. Key to its success in the IT industry is the many IT and foreign language schools and universities available in the area that ensures a constant pool of highly skilled software developers, engineers, and other IT workers who are fluent in Japanese, Korean and increasingly, English. Located on a peninsula with a scenic view of the sea and bestowed by the United Nations Environment Program with the Global 500 award for human habitation and excellent living environment, Dalian is considered not only as one of Chinas top destinations for learning, working and living, but also as a favourite tourism spot. It features many tourist attractions, including several parks and gardens, beaches, museums, and theme parks. c. Amenities and Features Having the Dalian Zhoushuizi International Airport and the port of Dalian in its location, as well as a strategic network of highways and roads and other transportation infrastructure, the DHTZ is an accessible destination. Its being a coastal location especially makes the zone a logistically strategic spot in terms of doing business with neighbouring nations of Korea and Japan. Each sub-park in the zone comes with its own unique features, depending on what type of companies it aims to accommodate. Whereas Dalian Neusoft Park is quite focused on providing a business and educational environment, the other sub-parks aim to provide not only world-class business offices but also a new life style environment. Dalian Software Park, Dalian Ascendas IT Park, and the Dalian Tiandi Software Hub have amenities such as shopping centres, restaurants, convenience stores, coffee shops, banks, hotels, and fitness centres. Indeed, these parks are geared not just for attracting investments, but also for attractingand keepingskilled workers. d. Locators and Business Lines Serviced DHTZ is currently home to over 3,000 companies, more than 30% of which are foreign-funded. The primary industry in the zone is on IT and ITES, but manufacturing industries, especially those related to semiconductor, biotechnology and advanced equipment are also present. IT and ITES services provided include those in software development, consulting, BPO, IT services, engineering design and technical support. The Dalian Tiandi Software Hub is geared to serve companies with considerable presence in Japan and to provide services in desktop publishing, financial service
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outsourcing, embedded software development, and digital information centres.43 DHTZ boasts of housing over 60 companies belonging to the Fortune Global 500 companies. Some of the companies in the zone include:
Accenture, Avaya, BearingPoint, BT, Canon, Carrefour, Cisco, Citigroup, Convergys, Dell, DHC, Ericsson, Fidelity, GE, Genpact, Goodyear, HP, HSBC, Hitachi, Hyundai, IBM, Intel, Konica, Minolta, LG Industry, Liebherr, Mabuchi, Matsushita, Microsoft, NetApp, Nokia, NTT, Oracle, Panasonic, Pfizer, Posco, SAP, Sanyo, Siemens, Sony, Toshiba, Total, Toyota, ThyssenKrupp, Wal-Mart. e. Marketing and Promotions With Chinas and Asias leading real estate developers behind the DHTZ, including Dalian Citys Yi Da Group and Ascendas, the DHTZ is increasingly recognized internationally as a preferred destination for firms that want world-class quality business facilities and amenities. Indeed, the DHTZ is now considered the most modern and internationalized IT hub in northeast China, if not in the whole country, and has garnered national awards including, Model City for Internalization of the Software Industry and Outstanding Industry Park of China Sourcing. With its well-designed living accommodations as well as its provision of first-class amenities, the DHTZ is also recognized as an ideal environment for living and has been cited by the United Nations as one of the most liveable cities in the world. In May 2010, the local government of Dalian City enlisted the help of consulting firm, J.D. Power and Associates, and Chinese educational and career enhancement services provider, Ambow Education, to assess Dalian Citys competitiveness and capabilities through the development of a new Readiness Index. The aim of this assessment is to help Dalian improve its competitiveness as an outsourcing and offshoring centre and in turn continue to improve its image to foreign companies in the coming years.
Aside from enjoying world-class and ultra-modern facilities, firms establishing in the DHTZ are entitled to certain fiscal incentives: Firms recognized as high-tech enterprises in the DHTZ enjoy a 15% reduction in corporate income tax. Qualified software firms establishing in the DHTZ are entitled to a full 2-year exemption from corporate income tax, and a 50% reduction in the subsequent 3 years. After these 5 years, qualifying software companies can receive additional reduction to their income tax to a rate of 10%. All software companies can deduct salary and training expenses from their taxable income. Qualifying export-oriented enterprises in the DHTZ can enjoy a lowered rate of 10% corporate income tax rate after the 5-year favourable treatment described above if 70% or more of their total product value are exported in a particular year. Technically advanced enterprises can enjoy 3 more years of favourable corporate tax income rate of 10% after the first 5 years of favourable treatment. Integrated circuit companies enjoy certain incentives particular to their industry (e.g., favourable equipment depreciation policies) while also enjoying the same incentives software companies have as described above. Both companies selling software products which are developed in-house, and integrated circuit companies, are eligible for certain VAT reimbursements under certain conditions. Specific preferential tariff policies can exempt hi-tech firms from import duties and import product taxes. Importation of hi-tech equipment and instruments which are unavailable in China is exempt from duties. Exported products by manufacturing companies in the DHTZ, considered unrestricted by the government, are exempt from export duties.
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B.
Individuals
In the special economic zone of the DHTZ, individual employees of companies also receive incentives. These incentives are intended to attract and retain professionals to locate in the zone: II. Permanent residency can be granted to Chinese professionals with special skills along with their spouses and children. 40-100% of income tax can be refunded to software technicians, managers, overseas scholars and foreigners employed at software companies in the DHTZ who have a significant level of experience and labour value. Under certain conditions, experienced and urgently-needed talent from other places who are coming to work in Dalian for the first time can receive a settling-in allowance.
Government Support
Aside from fiscal incentives, the Chinese government supports the DHTZ by providing non-fiscal incentives such as educational and training opportunities for potential employees to ensure a constant supply of skilled labour. Furthermore, the government has been determined in creating initiatives that aim to entice Chinese citizens who have migrated abroad to study or work to return to China and set up businesses or take positions in local companies. For example, proponents of the Dalian Tiandi Software Hub are planning to establish an IT Talent Foundation and Scholarship in partnership with the local government of Dalian City to encourage talent and skill creation in the zone. The local government is also providing assistance and subsidies amounting to USD 15,026 per year to local colleges and universities which are engaged in pre-job training of potential IT and ITES employees, the aim of which is to construct a software talent supply and training base. In addition to recruitment incentives, the Chinese government is increasingly providing varied forms of support to Chinese people who return home to set-up businesses. In this regard, the Ministry of Human Resources, with the Ministries of Education, Science and Technology, and Finance, has developed a formal policy, Guidelines on Encouraging Overseas Chinese Students to Return to China to help guide local governments as to how to go about supporting returning potential entrepreneurs. In October 2009, the local government of Dalian City launched the Tens, Hundreds and Thousands initiative, which is a program that aims to entice highly skilled scientific and technological individuals to return to China by providing them with varying amounts of seed capital and other fiscal incentives. III. Projections and Milestones
As the industry for outsourcing and offshoring continues to grow, so does the scale of operations in the DHTZ continue to expand. Though already completed, the Dalian Neusoft Park and Dalian Software Park are both expanding with the addition of new facilities and new building to meet the growing demand for hi-tech business solutions. The completion of Dalian Ascendas IT Park and the Dalian Tiandi Software Hub is underway. Dalian Tiandi is playing a big part in Chinas quest to develop Dalian as an ultra-modern industrial base that will compete in the global market for hi-tech services. Other planned expansions include the establishment of various sub-zones, including zones on software development, research and development, information service, education and training, public services, and communication technology. The DHTZ has already made strides in making itself known as a key ITO and BPO services centre in the world. Though at present Japanese locator companies still dominate the zone, Western companies looking for cost-effective outsourcing opportunities will find the DHTZ increasingly attractive as it continues to expand and improve its incentives for both firms and prospective workers.
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are its human resources and rapidly developing infrastructure. The city has 94% literacy rate, with 30 universities and 27 vocational schools, as well as several English schools, spread out in the city. According to the Ho Chi Minh City Department of Planning and Investment, the city also has the best and most cost-effective telecommunications infrastructure in the country, as well as the most modern transportation systems.
Figure 12. Location of the Saigon Hi-Tech Park showing its proximity to downtown Ho Chi Minh City and to other industrial parks in Southern Vietnam. Source: http://www.shtp.hochiminhcity.gov.vn
53 Saigon Times, 2010
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c.
Amenities and Features Aside from basic features necessary for a high-technology park such as a world-class power supply, telecommunications and internet connectivity, water supply and treatment systems, and industrial gas infrastructure, the Saigon Hi-Tech Park also features facilities which will be key to achieving the parks goal of becoming the premier science and technology park in the country. The following are the three functional bodies of the Saigon Hi-Tech Park: 1. Saigon Hi-Tech Park Research and Development Laboratories The park features several research laboratories, including laboratories in nanotechnology, semi-conductors, precision mechanics and automation, biotechnology, information technology, and new energy. These laboratories were launched to lead scientific research and technological development within the park. Local and foreign firms and even enterprising scientists and other individuals can work with the parks laboratories in research, testing, and production of newly developed high-technology products. The establishment of the laboratories also aims to attract research talents to Vietnam and Ho Chi Minh City. 2. Saigon Hi-Tech Business Incubator The park business incubator aims to promote entrepreneurship by providing enterprising individuals an opportunity to test their technological ideas. The aim of the incubator initiative is threefold: (1) to encourage collaboration between the academe and the industry, (2) guide and help increase the survival rate of startup technology businesses, and (3) help create Vietnamese high-technology firms that can compete in the international market. The park business incubator targets the following hi-tech areas: micro-electronics, information communication technology, telecommunications, automation, nanotechnology, biotechnology, pharmaceuticals, among others. 3. Saigon Hi-Tech Park Training Centre The training centre aims to ensure a constant pool of highly-qualified workers to meet the human resource needs of investors in the Saigon Hi-Tech Park as well as other industrial parks in the city. It aims to tighten the gap between the needs of firms and the capabilities of employees, making sure that prospective workers are equipped with necessary language proficiencies and technical skills. It also supports the companies in the park by providing human resource consultations and assistance in training and recruitment operations.
d.
Locators and Business Lines Serviced The park focuses on attracting businesses that are specifically from the following industry sectors: micro-electronics; information technology and telecommunications; precision mechanics and engineering; automation; semiconductor chips; applied biotechnology in agriculture, pharmaceuticals and the environment; nanotechnology; and new and advanced materials. It is determined in hosting hi-tech manufacturing firms, service-providers (including contact centres, data centres, and software development), research and development, as well as innovative business incubates. Since its inception in 2002, the park has granted licenses to 38 projects, totalling USD 1.7 billion in capital from local and foreign investors.54 Present locators include the following global and regional giants: Intel Corporation, which has invested USD 1 billion in an assembly and testing plant in the park; Nidec Corporation, a Japanese manufacturing firm for computer parts; FPT, a Vietnamese software research and development firm; Sonion A/S, a Danish manufacturing firm; and Jabil Circuit, Inc., an electronics designing and manufacturing company.
The latest survey shows that there are 17 operational projects at the moment, with more than 10,000 workers.55 e. Marketing and Promotions To attract global hi-tech companies into the park, the Saigon Hi-Tech Park Management Board, the authority and
54 55 Board of Management of Saigon Hi-Tech Park Saigon Times, 2010
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managing body behind the hi-tech park, implements a 5 Readinesses campaign.56 The goal of the campaign is to ensure that five park features must be ready at all times for the convenience of the parks tenants and of any prospective investor. This includes the readiness of land and utilities ensuring that all basic amenities such as the property itself, the facilities, including power supply and internet connectivity are ready for use. The park also ensures that all pertinent information regarding investing, including licensing, admissions criteria, zoning regulations and constructions specifications, is readily available. In relation to this, to ensure that information reaches targeted parties, the park management collaborates with local and regional promotional agencies such as the American Chamber of Commerce, the European Chamber of Commerce, and the Korea Trade Investment Promotion Agency, as well as with overseas Vietnamese networks. Third, management ensures readiness of incentives wherein the park is authorized by the Vietnamese government to offer incentive packages that include tax and property incentives. The objective is to give prospective companies the lowest start-up and production costs available in Vietnam. Fourth, management ensures that they are ready to accommodate investors by operationalising a one-stop shop application and licensing procedure. The park is authorized to provide application guidance, review and issue business licenses and other permits to potential tenants. Lastly, management ensures a readiness of workforce wherein the park collaborates with several educational institutions to ensure that qualified, skilled personnel are available for its locators. II. Saigon Hi-Tech Park Incentives
Consistent with the parks Readiness of Incentives, the Saigon Hi-Tech Park boasts of preferential tax incentives and competitive property arrangements (e.g., renting and leasing) in the country. Qualifying companies are entitled to the following: 0% corporate income tax for the first four years, beginning from the first profit making year, followed by 9 years at 5% and 14 years at 10%. Firms also given an extension of exemption and reduction if the company expands its investment. VAT and import duty exemption for equipment and machinery, along with their spare parts, imported as fixed assets; construction materials that are imported for the construction of fixed assets which are not available locally; and other qualifying materials and supplies; VAT of 0% and export duty exemption for high-tech products; Personal income tax incentives for both local and foreign workers employed in companies in the park; Competitive land, office, and factory rentals, and other utility fees with other industrial parks in the region; as well as, Non-fiscal incentives, including: o Multiple entry visas for expatriates; o Specialized one-stop investment application service; and o On-site electronic customs clearance. III. Government Support
The Vietnamese government plays an essential role in attracting investors to locate operations within the Saigon Hi-Tech Park. It is conscious of creating a business environment where local and foreign companies can enjoy efficiency, protection, the lowest operational costs and the highest quality human resources. The World Bank ranks Vietnam 13th out of 24 countries in the East Asia and Pacific region, and 93rd for ease of doing business, out of 183 countries worldwide in 2010.57 In continued recognition of the potential economic growth Vietnam can achieve from partaking in the global hightechnology market, the development of its high-tech industry has been one of the main priorities in government agenda. Part of this development is focusing on (1) further upgrading Vietnams IT infrastructure, which is aimed to increase total revenue contribution of the IT sector to the countrys GDP and create thousands more of employment opportunities, and (2) increasing its support for educating and training IT human resources to meet the growing demand in the countrys ICT industry for skilled workers.
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IV.
In the beginning of 2010, the parks management began the development of the parks second phase. The expansion will develop the remaining 6.13 sq. kilometres of the 9.13 sq. kilometres of land area allotted to the whole Saigon Hi-Tech Park. The second phase will add a high-tech manufacturing area, an R&D and training area, and a business incubator area, among others, and is estimated to cost about USD 300 million.58 An additional line of Ho Chi Minhs metro system will also be built, connecting the park to the famous Ben Tanh Market and selected residential and commercial areas of the city. The parks expansion is estimated to be finished by 2013, and the Vietnamese government is determined more than ever to attract multinational high-technology firms to locate operations in the park. According to the parks development strategy,59 it will continue to focus on attracting investments from hi-tech corporations doing work on micro-electronics, semi-conductors and information technology. With the help of Vietnamese and Taiwanese investors, the park will also continue on developing and further improving infrastructure on telecommunications and internet connectivity, which will be key to attracting high-tech operations as contact centres, data centres, software and web applications development, and other business process outsourcing activities. Lastly, management will continue inviting top technology universities and training institutions to open branches within the park. Collaboration between academe and industry is seen as critical to ensuring a pool of qualified workers for the parks increasingly diversified tenants.
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With a population of about 12 million people, the state of Ontario is home to more than 33% of total population of the country. Located in Ontario is the city of Waterloo which is considered to be a benchmark in terms of rapid economic development through industrial and telecommunications investments. Waterloo is a city considered as a rural farming community in the early 70s to late 80s which grew as an investment hub for information technology over the last 2 decades more particularly in the last 4 years.
As of date, the park consists of 7 technology buildings with more developments coming in the pipeline. b. Area
Situated in the campus of the University of Waterloo, the UW Research and Technology Park consists of about 1.2 million square feet or about 49 hectares of land.
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c.
The park consists of a series of design districts each designed to service various lines of business. The following are the districts planned to be completed in the area: d. Gateway Features: provides access to the technology park which is unique in design The Grand Boulevard: considered as the main movement artery which will locate the buildings constructed for occupancy of tenants The Great Circle: forms the centre of the technology park and is the primary focus of initial development. The Parkside Drive Extension: Acts as the hook between all features of the IT park Locators and Business Lines Serviced
The park now consists of 7 buildings with more than 45 companies. The following companies are now located in the UW Research and Technology Parks: III. SyBase Building: iAnywhere solutions Open Text Building: Open Text Corporation The Accelerator Building: CBET, CGI, Skybound Software, Top Hat Monocle, etc. TechTown: Google, Kids and Company, PRIME, etc. Research Advancement Centre: Institute for Quantum Computing, Nanotechnology Engineering, Quantum Works, etc. InnoTech Building: Research in Motion University of Waterloo Research and Technology Park Incentives
As part of the Canada Technology Triangle, the University of Waterloo Research and Technology Park comprises various tax incentives given by the government of Ontario and is specific to the Canada Technology Triangle cluster. The following are the incentives for the park: 25-35% of refundable/ non-refundable tax incentives specifically for research and development companies.
IV. Projections and Milestones When fully completed, the research and technology park is projected to employ more than 6,000 people with US$5-10 billion in annual revenues. Construction of the park will be completed in 3 phases where current scenario is that they are finishing phase 2 of the project.
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Bangalore, the state capital of Karnataka, is located on the southern part of the Decan Plateau near the border of Tamil Nadu and Andhra Pradesh, two other south Indian States.
Comprising about 69 acres, the ITPB is the first high technology park of its kind in India which is designed to provide a complete work-live-play balance in its environment for IT and technology related businesses. III. Amenities and Features The following are the infrastructure and environmental features and amenities of the park: A dedicated power plant generating 12.5 MW. Another 5 diesel generators for emergency ensures a 3rd level of redundancy. Six of Indias leading telecom service providers have a physical presence in the IT Park, and one has an Earth station. WiFi connectivity Building Management System ensures that air conditioning, lifts, water level, fire safety and lighting are centrally controlled. 24-hour security with state-of-the-art surveillance systems and personnel trained to handle fire emergencies. Open, basement and multi-level car park, water storage and sewage treatment plant. Recreation centres: business centre, park and health club, park mall
IV. Locators and Business Lines Serviced The park currently houses over 145 companies employing 24,000 people in the fields of information technology and IT-enabled services. Services include bioinformatics, software development, telecommunications, electronics and other hi-tech industries. The following companies are now established in the park: General Motors India Pvt. Ltd.
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Affiliated Computer Services India Pvt. Ltd. ZapApp First India Corporation Paprikaas Interactive Services Pvt. Ltd. Applied Materials India Pvt. Ltd Infineon Technologies India Pvt. Ltd. IBM Global Services Pvt Ltd. Sabre Travel Technologies Societe Generale Global Solutions Centre Pvt Ltd. Avesthagen Ltd. Tata Consultancy Services LSI Research India Pvt Limited
III. Projections and Milestones The ITPB is currently fully functional. Ascendas, developers of the IT park is however open to development of its surrounding areas. To date, there is still available land located in the perimeter of the IT hub and is expected to be developed within the next 2 years.
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The CIA fact book documents the history of Mauritius as an island that was known both to the Arabs and Malay sailors in 10th century. Mauritius was first explored by the Portuguese in the 16th century and subsequently settled by the Dutch - who named it in honour of Prince Maurits van NASSAU in the 17th century. The French assumed control in 1715, developing the island into an important naval base overseeing Indian Ocean trade, and Figure 13: Map of Mauritius establishing a plantation economy of sugar cane. The British captured the island in 1810, during the Napoleonic Wars. Mauritius remained a strategically important British naval base, and later an air station, playing an important role during World War II for anti-submarine and convoy operations, as well as the collection of signals intelligence. Independence from the UK was attained in 1968. A stable democracy with regular free elections and a positive human rights record, the country has attracted considerable foreign investment and has earned one of Africas highest per capita incomes. Recent poor weather, declining sugar prices, and declining textile and apparel production have slowed economic growth, leading to some protests over standards of living in the Creole community (CIA World Fact Book). This rich history has made the country position itself as a multilingual destination and is able to attract investment and businesses from the countries that have a footprint there. The country has ties with India, China, France and Britain from which it is able to attract business.
Ebene Cyber City sits on 152 acres, which houses leading companies in BPO, Software Development, Back office operations and Call centres. B. Amenities and features
Figure 14: Ebene Cyber City
Higher bandwidth capacity of up to 100 MB is available at short notice The incumbent operator has chosen to have the Network Operation Centre (NOC) in the Cyber Tower 1 for enhanced service reactivity to any problem at very short notice The Cyber Tower 1 is an intelligent hub concept building and is unique in the region. A well established regulatory framework having passed the Electronic Transaction Act 2000, Cyber crime and Computer
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Misuse Act 2003 and Data Protection Act 2004 Stable electricity supply C. Locators and Business serviced62
From its inception in 2001, the Cyber City has attracted a number of multinational companies in the IT/ITES business. Some of the locators are: Accenture Accenture is a global management consulting, technology services and outsourcing company. Ceridian a leading BPO company which employs 9500 worldwide. In their Mauritius office, the have 390 employees offering HR services. TNT is a document scanning and back office processing solutions provider. The company is located in Mauritius due to its bilingualism that the company requires for its editing services.
Infosys has a total employee base of 49,000 worldwide. The company provides consulting and IT services to clients globally. It has located its disaster recovery centre in Mauritius HSBC is one of the largest banking and financial services organisations in the world. HSBCs international network comprises around 9,500 offices in 86 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. Orange The Company, a subsidiary of France Telecom and the leading mobile provider in France, has more than 110 million wireless subscribers and about 12 million broadband customers. It also offers digital television and computer telephony services. Hinduja provides a one-stop-shop for customers needs in Information Technology - from Contact Centre services and Back Office Processing to customized IT solutions.
Non-fiscal Incentives
Political, economic and social stability with a good quality of life. Attractive package of incentives and high level facilitation services. Cost-competitive skilled workforce, speaking both English and French.
Based on the BPML websites available at, http://www.e-cybercity.mu/en/about_bpml_clientlist.html
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Reliable telecommunication infrastructure through the SAFE submarine optic fibre cable that links Mauritius on one-side to France and on the other side to India. Pleasant living conditions in a stable democratic society where businesspeople can combine work and leisure. Fast track processing of visa, work and residence permits for expatriates. State-of-the-art infrastructure and reliable support services like logistics facilities, banking and finance, business parks, industrial facilities and ICT-enabled office premises.
III. Projections and Milestones Cyber towers 1 and 2 are complete and available for lease. Offices are rented as full floor, half floor or in standard modular size varying from 167 sq. m. to 676 sq. m. Ebne CyberCity is divided into zones and further subdivided into plots of approximately 1 acre each. Provided with water & power supply, road network, drainage system and fibre optic cable facility on the boundary, these plots of land are available for lease on a long-term basis.
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According to IFC 2009, the Panama Pacifico project is transforming the former Howard U.S. Air Force base outside Panama City into a hub for international trade, logistics, services, commerce, and industry. As principal advisor to the government, IFC recommended that a private investor develop the 2,500 hectare site through the establishment of a special economic zone (SEZ) with a modern regulatory framework and administration conducive to business and direct foreign investment. The land received SEZ status in 2005 (IFC, 2009). London and Properties are the master developers of Pacifico in conjunction with the government.
The property is built in a mixed-use; business, residential and recreational centre on 1,400 hectares.
B.
At completion, the facilities will include 1 million square meters of commercial space, 20,000 homes, 40,000 new jobs, retail centres and hotels, schools and places of worship, parks, recreational amenities and a championship golf course while of the land to remain in its natural state or to be devoted to new parks and open space (London & Properties Ltd). C. Locators and Business serviced
Pacifico Business Park has positioned itself to serve local and international companies desiring to relocate or establish a new office in Latin America as part of their global operations. Businesses served include: Corporate headquarters Back office operations Call centres
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Multimodal and logistics services High-tech product and process manufacturing Maintenance, repair and overhauling of aircraft Transfer of services to the aviation industry Offshore services Film industry Data transmission, radio, TV, audio and video Stock transfer between on-site companies Transfer of goods and services to ships, aircrafts and their passengers Sales of merchandise not manufactured in Panama Pacifico, destined for exportation, when made by multinational companies or any of its affiliates, subsidiaries or companies of the same economic group
Among the locators are: Dell established operations in Panama Pacifico in 2003, to serve U.S., Canada and Latin America customers as part of its global customer contact centre network. Singapore Airlines 3M is establishing a new distribution and manufacturing technologies centre at Panama Pacifico Caterpillar plans to establish a major operational presence close to its Latin America customers and network of independent dealers at Panama Pacifico. 3PL PanAmericana - offers international multimodal logistics services to clients around the world Howard Kids Academy North American Aircraft Services Panama Panama Aerospace Engineering The Panama Pacifico Special Economic Area Agency Radio Holland Group River Latinoamerica Industrial / Canarias Logistica The Universidad del Caribe - is a successful university in Venezuela, now establishing a campus in Panama
2. 3.
4. 5. 6.
7. 8.
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to foreign creditors, for the interest, commissions, royalties and other financial fees generated by the financing or refinancing granted to the companies of the Panama Pacifico and for the financial lease of equipment required for the development of the activities, business or operations carried out within Panama Pacifico. Labour Incentives Fixed rates for overtime (25%) and work on employees day off (50%) Flexibility to assign employees day off Companies may remain open on Sundays and holidays Foreign worker: possibility of exceeding Labour Codes percentage rule. Companies may apply for additional expat employees beyond 15% if work force does not exist locally Higher Education Training Centre Justified cause for termination for market losses and/or fluctuations Ministry of Labour on site in the One-Stop Shop. Projections and Milestones
III.
The Flex-Office buildings at the International Business Park, completed in November 2009, are already 100% leased with nine companies. The first two high class office buildings were inaugurated in April 2010, and are 85% leased, but there is still some space available. A third high class office building is scheduled to break ground in November 2010, and complete by the end of 2011 with 12,000 m2 of new space, including 300 m2 of retail for lease, and a new five-storey parking deck.
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Multimedia Super Corridor MSC Malaysia was conceptualized in 1996 and with the full support of the Malaysian government. MSC Malaysia has since grown into a thriving and dynamic global ICT hub. MSC Malaysias vision is to transform the nation into a knowledge-based society driven by the new economy. With this commitment, MSC Malaysia is determined to spearhead this transformation through ICT via industry and capacity building and socio economic development. To spearhead the development of MSC, there are a number of institutions playing different roles. Cyberview was established in October 1996. Cyberview Sdn Bhd, a government-owned company and landowner of Cyberjaya, has been mandated to spearhead the development in Cyberjaya (see http://www.cyberview.com.my). The roles of Cyberview are to ensure Cyberjaya is developed in accordance with MSC guidelines: Provision of assistance/support in coordinating joint activities with organisations in Cyberjaya Attend to all Cyberjaya land administration matters Advise the government on MSC Malaysia/Cyberjaya Build supporting amenities for the Cyberjaya community Undertake rehabilitation/maintenance work in Cyberjaya
Multimedia Development Corporation MdeC is incorporated under the Companies Act of Malaysia, and owned and funded by the Government. Their role is to advise the Malaysian Government on legislation and policies, develop MSC Malaysia-specific practises, and set breakthrough standards for multimedia operations.
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A.
Area
The development in Cyberjaya is centred on the flagship zone of about 7,000 acres. This is split into four subzones 11.6% for enterprise use, 4.5% for commercial development, 29.3% for residential use and 3.8% for mixed development. About 90% of Phase One (some 3.500 acres) of the flagship zone is laid with infrastructure. B. Amenities and Features
Local transport is provided by the Cyberjaya Dedicated Transportation System which operates 7 days a week for 24 hours.Park and Ride services provides an alternative for those who wish to park their vehicles at designated car parks and use the buses to commute to most areas in Cyberjaya. Other amenities include: C. Good broadband access and lease of dark fibre Schools and hospitals Guaranteed service provision with a financial penalty for failure World class hotels and restaurants. Locators
Major global IT companies have located in Cyberjaya through either equity stake by the Malay nationals or through direct investments. Some of the companies are: Dell HP DHL Satyam Wipro HSBC Ericsson Motorola OCBC, BMW IBM Shell IT Monster.com Vivanova Systems Some of the academic institutions that have located in this area are: Limkokwing University College of Creative Technology (LUCCT) Multimedia University (MMU) Cyberjaya University College of Medical Sciences (CUCMS)
Cyberjaya incentives
MSC status companies are both fiscal and non-fiscal. These are: Fiscal Pioneer Status - 100% exemption from taxable statutory income. This incentive is granted for a period of 5 years for the first round. A 100% Investment Tax Allowance (ITA). Eligibility for R&D grants (for majority Malaysian ownership MSC Malaysia- Status companies) Freedom to source capital and borrow funds globally
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Non-fiscal incentive No censorship of the internet High-powered implementation agency to act as an effective one-stop super shop, the MDeC Globally competitive telecommunication tariffs and service guarantees High-quality planned urban development Excellent R&D facilities, including the regions first Multimedia University Green environment protected by strict zoning. III. Projections and Milestones
The city is also expected to see a population growth over the next 10 to 15 years, with residential developments expected to reach a population of 210,000; business developments providing for up to 120,000 employees and institutional establishments providing for 30,000 students. Some of the facilities that have been completed recently are: Mahindra Satyam Malaysia Global Centre completed in July 2009 Basis Bay Data Centre completed in March 2009 Impact building completed in February 2009
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Table 1: IT- enabled services Egypt Not Clearly Defined Allowed Undefined Undefined Undefined Not Present 50% Deduction Provided Undefined Exempted 0% Undefined Undefined Exempted Free Specific to Activity Undefined Undefined Undefined Provided for Malaysian Majority owned Undefined Undefined Undefined Undefined Existing Location Dependent Existing available Existing Restricted to defined SEZ Undefined Allowed Undefined Undefined 100% - 5 Years 100% - 6 Years 30-70% -5 years 100% - 5years India Philippines Poland Mauritius Malaysia
Country
Canada
25-25%
Ownership
Undefined
Undefined
Undefined
Training Expenses
Undefined
Local Government Fees Undefined Undefined Available Existing Varying Investment rules Varying Investment rules Restricted to Defined SEZs Existing Not Fully Implemented Not Present None 40-50% Existing Existing Simplified Undefined Provided Provided; Multiple Entry Undefined
Undefined
Undefined
Exempted
Exempted
Undefined
Undefined provided
Working Permits
Subject to immigration
Undefined
Grants/ Funds
Undefined
Existing
Limitations
Location Dependent
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Table 2: Manufacturing services Country Income Tax Holiday Ownership Capital Equipment and Materials Incorporation Value Added Tax Training Expenses Local Government Fees Working Permits Import/ Export Rules Grants/ Funds Legal (IP Protection, labour, etc.) Limitations China 100% - 2 Years Not Allowed Not Allowed Eligible Provided Undefined Provided Except Under Specific Activities For Resettlement Not Fully Implemented Varying Investment Rules Vietnam 100% - 4 Years Undefined Provided Undefined Provided Undefined Provided Provided Undefined Not Fully implemented Undefined
Table 3: Special Economic Zones Country Income Tax Holiday Ownership Capital Equipment and Materials Incorporation Value Added Tax Training Expenses Local Government Fees Working Permits Import/ Export Rules Grants/ Funds Legal (IP Protection, labour, etc.) Limitations Provided Allowed For Resettlement Panama 100% Allowed Allowed Eligible Jordan
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Table 4: Recommendations for Kenya SEZ framework TYPE OF INCENTIVE Income Tax Holiday Foreign Ownership Capital Equipment and Materials Incorporation BENCHMARK 100% - 2 to 6 Years Allowed Allowed provided it is specific to services and not to be sold locally For company use, VAT is removed Subsidized by Government Exempted Provided RECOMMENDED: KENYA 100% - 4 Years (For first 50 companies) Reduce to 100% - 2 years moving forward Kenya should allow 100% foreign ownership of business It should be allowed for building equipment such as metal, cement, etc. For IT equipment, cost in Kenya is competitive, thus, materials for IT should not be exempted and bought locally Eligibility to exemption on VAT for company specific. Individuals will still have VAT In the short-term goal, Kenya should have training incentives. Timeline similar to income tax holiday Exempted from any further tax from city government of Kenya where SEZ is located Kenya to help companies establish working permits for expats as well as other foreign workers which the investor specifically requests Exemption of import/ export rules on specific goods and services not detrimental to local economy of Kenya For Resettlement Should be defined and show full implementation of the law Varying Investment Rules
Value Added Tax Training Expenses Local Government Fees Working Permits
Import/ Export Rules Grants/ Funds Legal (IP Protection, labour, etc.) Limitations
Specific to goods and services None Strong IP protection which mitigates risk factors Varying Investment Rules
Since the concept of SEZ in Kenya was established over the last 2 years, it is imperative at the starting point to attract investors to begin with. This will build momentum in which companies will now start to see the value of doing business in Kenya. Once companies see incentives given and with live testimonials, it will build the case for the new Kenya SEZ experience.
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ANNEX 1: Reference
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British Polish Chamber of Commerce http://bpcc.org.pl/en Information Technology Industry Development Agency Egypt. (2010). Why Egypt? Retrieved October 24, 2010, from http:// www.egypton.com. Smart Villages Company. (2008.) Smart Village Egypt. Retrived October 23, 2010, from http://www.smart-villages.com. Ministry of Communications and Technology. (2010.) Egypt The Investors Smart Choice. Retrieved October 24, 2010, from http://www.mcit.gov.eg/Investors_Guide.aspx. Vlam, P. and S. Enows. (2007, October 3). Cairo Richest City in Africa in 2020. Voices of Africa. Retrieved October 26, 2010, from http://voicesofafrica.africanews.com/site/list_message/7335 All Roads Lead to China. (2007, January 11). City Report: Dalian. Retrieved October 20, 2010, from http://www. allroadsleadtochina.com/2007/01/11/city-report-dalian/. Bautista, C.L. (2010, February). China in theAsian Outsourcing Market. Tholons. Retrieved from http://www.tholons.com. China Industrial Zone. (____.) Dalian Hi-Tech Industrial Zone. Retrieved October 18, 2010, from http://www.chinaindzone.com/ htm_industrial/indzone_detail.asp?indzone_id=124#main. Clubb, G. (2009, September 15). Discovering Dalians High Tech Zone. China Briefing. Retrieved October 18, 2010, from http:// www.china-briefing.com/news/2009/09/15/discovering-dalian%E2%80%99s-high-tech-zone.html. Dalian Ascendas IT Park. (2006). Park Overview. Retrived October 19, 2010, from http://www.daitp.com/parkoverview_intbuslife. html. Dalian China. (2010, March 23). Population and Employment. Retrieved October 19, 2010, from http://english.dl.gov.cn/ info/156788_192092.htm. Dalian Foreign Trade and Economic Cooperation Bureau. (2007). Why Choose Dalian. Retrieved October 20, 2010, from http:// www.investdl.org/GalaxyPortal/dalian/wjmen/Investment_Guide0.jsp. Dalian World Guide. (2010, September 30). Dalian Tourist Information and Dalian Tourism. Retrieved October 19, 2010, from http://www.dalian.world-guides.com/. J.D. Power and Associates. (2010, May 7). New Readiness Index To Be Launched in The Chinese City of Dalian To Measure Business Process Outsourcing Capabilities. Retrieved October 20, 2010, from http://businesscenter.jdpower.com/news/pressrelease. aspx?ID=2010077. Livermore, A. (2007, October 8). Dalian High-Tech Industrial Zone Shifts Into High Gear. China Briefing. Retrieved October 19, 2010, from http://www.china-briefing.com/news/2007/10/08/dalian-high-tech-industrial-zone-shifts-into-high-gear.html. Neusoft. (2008, June 17). Neusoft Park (Hekou, Dalian) Officially Opens Today. Retrieved October 19, 2010, from http://www. neusoft.com/en/news/1193/1400135459.html. OffshoreOutsourcing2China. (2008, October 15). Dalian Software Park: The Crown-Jewel in Chinas Outsourcing Industry. Retrieved October 19, 2010, from http://blog.serviceoutsourcing2china.com/?p=45. Shui On Land. (____). Dalian Tiandi. Retrieved October 19, 2010, from http://www.shuionland.com/sol/tabid/794/Default.aspx. The Right Site Team. (2009, November 10). Incentive Programs Aim at Luring Back Returnees. Retrieved October 19, 2010, from http://rightsite.asia/en/article/incentive-programs-aim-luring-back-returnees. Board of Management of Saigon Hi-Tech Park. (___.) SHTP Overview. Retrieved October 29, 2010, from http://www.shtp. hochiminhcity.gov.vn/Sites/Web/NewsDT.aspx?PostID=301&CateID=71.
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General Statistics Office (2008, July 18). HCM City hits two-decade record in FDI. Retrieved October 30, 2010, from http://www. gso.gov.vn/default.aspx?tabid=503&ItemID=7251. Guardian News. (2010, September 9). Global Competitiveness Index: The World Economic Forums Data. Guardian.co.uk. Retrieved October 30, 2010, from http://www.guardian.co.uk/business/datablog/2010/sep/09/global-competitiveness-indexdata-wef HCMC Department of Planning and Investment. (___). Saigon Hi-Tech Park. Retrieved October 27, 2010, from http://www.dpi. hochiminhcity.gov.vn/invest/html/project-SAI-GON-HI-TECH-PARK.htm. HCMC Department of Planning and Investment. (___). HCM City Macroeconomics. Retrieved October 30, 2010, from http:// www.eng.hochiminhcity.gov.vn/eng/news/default_opennew.aspx?cat_id=591&news_id=496. Runckel and Associates. (2010). Update on Vietnams Information and Communication Technologies. Business in Asia. Retrieved October 30, 2010, from http://www.business-in-asia.com/ict/vietnam_ict.html. Saigon Times. (2010, October 14). Provina Opens Training Centre at Saigon Hi-Tech Park. Vietnam Business News. Retrieved October 28, 2010, from http://vietnambusiness.asia/provina-opens-training-centre-at-saigon-hi-tech-park/. The Philippine Star. (2010, October 30). Intels Biggest Chip Plant Opens in Vietnam. The Philippine Star. Retrieved October 30, 2010, from http://www.philstar.com/Article.aspx?articleId=625628&publicationSubCategoryId=200. Venture Outsource. (2007, July 4). Saigon Hi-Tech Park and Vietnam Infrastructure. Retrieved October 30, 2010, from http://www. ventureoutsource.com/contract-manufacturing/outsourcing-offshoring/vietnam-manufacturing/saigon-hi-tech-park-andvietnam-infrastructure?page=0,0. Vietnam Briefing. (2010, May 5). Saigon High-Tech Park Expands to Second Phase. Vietnam Briefing. Retrieved October 30, 2010, from http://www.vietnam-briefing.com/news/saigon-hightech-park-expands-phase.html/. Vietnamnet Bridge. (2010, January 5). SHTP Starts Work on Second Phase. Retrieved October 30, 2010, from http://english. vietnamnet.vn/tech/201005/SHTP-starts-work-on-second-phase-907410/. Vietnam Business Forum. (2007, June 6). Electronics Production to Reach US$6 Billion by 2010. Retrieved October 30, 2010, from http://vccinews.com/news_detail.asp?news_id=10036. http://www.call-center-africa.com/ Why should your company have MSC Malaysia Status? http://www.mscmalaysia.my/topic/12073025559425
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The consultants will also conduct a comparative analysis of the Customs administration arrangements, control concepts and inspection procedures in SEZs and will benchmark those against the ones in practice in Kenya. The analysis will focus on dutyfree areas that have a common land border with a domestic customs territory, such as the Mexican-US border zones, the Subic Bay Freeport, the Chinese special economic zones, the Panama Pacifico SEZ, and will take into account the multilateral agreements concerning free zones, particularly the Kyoto Convention and the emerging framework under GATT/WTO. The analysis should focus on the merits of alternative Customs concepts, mechanisms and controls regarding the range of merchandise importable on a duty-free basis (especially consumables and vehicles); overall role of Customs in SEZ operations and Customs inspection and control procedures; technology in use in leading SEZs.
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Summit Strategies ltd ICT Consultancy and Research Landmark Plaza - 13th r, Argwings Kodhek Road P O Box 62454 -00200, Nairobi Kenya tel: +254 (20) 3673 925/2637177 cell+ 254(701)016555,722) 520090 Info@summitstrategies.co.ke www.summitstrategies.co.ke