Nishith Desai Associates

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A PRESENTATION ONMOVEMENT OF NATURAL PERSONS
UNDER THE GATS IN COMPUTER AND RELATED
SERVICESON BEHALF OF NASSCOMBY
VAIBHAV PARIKH

• Nishith Desai Associates
• Legal and Tax Counselling Worldwide
• vaibhav_at_nishithdesai.com
• www.nishithdesai.com

2
SYNOPSIS

• IT software and services sector in India An
  introduction
• Issues / constraints facing the movement of
  software professionals (natural persons)
• Necessity for freer movement of natural persons
  under the GATS
• Policy initiatives and reforms

Nishith Desai Associates
NASSCOM
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it SOFTWARE AND SERVICES SECTOR IN INDIA

• This sector accounts for
• 16 of the country's overall exports
• 500,000 jobs and
• US 1.6 billion in investments.

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NASSCOM
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DOMESTIC SOFTWARE MARKET
Sourcewww.nasscom.org
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NASSCOM
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SOFTWARE AND SERVICES EXPORTS
Sourcewww.nasscom.org
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NASSCOM
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SOFTWARE DESTINATIONS
Sourcewww.nasscom.org
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NASSCOM
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INDIAN SOFTWARE EXPORTS DELIVERY MODELS
Sourcewww.nasscom.org
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NASSCOM
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BIRDS EYE VIEW
Productized services
Services GATS
Products GATT
Mode 4
Mode 1
Mode 3
Servicized Products
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NASSCOM
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NEED FOR MOVEMENT OF NATURAL PERSONS

• Globalisation of economic-activities and
  technological developments
• Facilitation of cross-border trade in services
• Leveraging on the expertise and skill that Indian
  software professionals possesses in order to
  reach out to a global market
• Direct contact between supplier and consumer
  necessary for effective services

Nishith Desai Associates
NASSCOM
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KEY SOFTWARE SERVICES

• E-commerce solutions
• Software development
• Interactive integration services
• Application service providers
• IT enabled services

Sourcewww.nasscom.org
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NASSCOM
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POTENTIAL FOR SOFTWARE SERVICES EXPORTS

• Reasons
• Low labour costs
• High quality services
• High level of training
• On-site delivery about 50 of the total software
  earnings
• Professional service exports over 40 of total
  software service exports
• mainly in custom application development and
  maintenance, limited for other segments

Nishith Desai Associates
NASSCOM
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ISSUES / CONSTRAINTS

• Immigration related issues
• Inadequate recognition of qualifications,
  experience and training
• Differential treatment of foreign service
  personnel

Nishith Desai Associates
NASSCOM
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IMMIGRATION ISSUES

• Visa Requirements
• Prior adequate search in national markets
• Wage parity requirement
• Negates cost-based advantage of developing
  countries
• Differentiation in processing permits based on
  the level of employment
• Faster to process intra-company transferee
  permits for higher level employees than permits
  for software professionals system analysts and
  database consultants

Nishith Desai Associates
NASSCOM
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IMMIGRATION ISSUES

• Visa Requirements (contd.)
• Cumbersome procedure for issuance of work permits
• Time frame of 2 weeks to 3 to 4 months, or even
  longer!
• Quota restrictions
• H-1B visa quota Cap on economic expansion
• Restrictions on transferability and mobility
• Limitation on duration of stay
• Economic Needs, local market needs test

Nishith Desai Associates
NASSCOM
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INADEQUATE RECOGNITION

• Foreign countries find the educational and work
  experience / training qualifications of software
  engineers to be insufficient
• Eg. UK Five years of experience or graduation
  and two years of senior post-graduation work
  experience
• Eg. U.S. 3 years professional experience
• Issue Indians may be sufficiently skilled
  without satisfying the above criteria

Nishith Desai Associates
NASSCOM
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DIFFERENTIAL TREATMENT

• Tax implications on temporary foreign service
  providers
• Social security taxes in the US no tax credit
  in home country erodes the cost advantage
• Government procurement policies favour domestic
  suppliers eg. data processing
• Government approval required
• Setting up operations nature of entity and
  establishment of local offices
• Remittance of foreign exchange

Nishith Desai Associates
NASSCOM
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COMMERCIAL PRESENCE

• Restrictions on foreign direct investment
• Conditions relating to staffing and management
• Nature of incorporation
• Geographic and branching restrictions

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NASSCOM
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DRAWBACKS / LOSSES

• Loss of business opportunities
• Higher costs for the customers / consumers
• Uncertainty, delays in deputing personnel
• Difficulties in transferring between sites in
  host country
• Wage parity condition erodes cost advantage

Nishith Desai Associates
NASSCOM
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PROPOSALS OF OTHER MEMBERS

• Transparency in immigration procedures and
  policies
• Access to information concerning immigration
  procedures and conditions of entry and stay
• Determining criteria for Economic Needs Test
• Harmonization of definitions and categories in
  Mode 4, including meanings of intra-company
  transferees, executives, managers etc. and making
  commitments on entry of business visitors and
  professionals
• Undertake sectoral commitments in other sectors
• Mutual recognition agreements for qualifications
  and experience

Nishith Desai Associates
NASSCOM
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BROAD POLICY INITIATIVES/ REFORMS

• Improving the structure of GATS commitments
• Removal of existing limitations

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NASSCOM
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IMPROVING THE STRUCTURE OF GATS COMMITMENTS

• Horizontal Commitments
• Specifically include individual professionals
• Clear eligibility criteria to be determined
• Uniformity in definitions
• Further expansion to include middle and lower
  level professionals in the category of other
  persons or specialists
• Source Indias proposal to WTO

Nishith Desai Associates
NASSCOM
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IMPROVING THE STRUCTURE OF COMMITMENTS

• Sectoral Commitments
• Developed countries to make commitments in all
  sub-sectors for computer and related services.
• Source Indias proposal to WTO

Nishith Desai Associates
NASSCOM
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REMOVING EXISTING LIMITATIONS

• Visa requirements
• Transparent visa application procedures
• Simplify application procedures
• Less stringent norms for entry and stay
• Remove labour conditions for specialty
  occupations (US)
• Remove labour market test requirement for all
  specialists (Australia)
• Establish guidelines for wage parity
• Impose conditions to prevent exploitation of
  foreign workers
• De-link temporary visas from permanent visas

Nishith Desai Associates
NASSCOM
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REMOVING EXISTING LIMITATIONS

• Clear criteria for the Economic Needs Test
• Social Security and Totalisation issues
• Bilateral agreements
• Exemptions from contributions for professionals
  of developing countries
• Recognition of work experience and qualifications
  of IT professionals

Nishith Desai Associates
NASSCOM
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WAY FORWARD

• Liberalization of Mode 4
• Amendments in domestic regulations
• Formation of international and bilateral
  agreements and treaties
• GATS Visa Debate already initiated

THANK YOU
Nishith Desai Associates
NASSCOM