..| .. |
July 1-15, 1999 My CT Almanac Column |
|
|
HARDWARE MANUFACTURING Grab the Hard Opportunity
Manu Parpia
An opportunity which can mean large number of jobs, significant investments and a transformation in the skill level of labour. Manufacturing of IT hardware has been the power house that has driven South East Asian countries. The stories are the same, whether in Taiwan and Korea or in Singapore, Thailand, Indonesia and the Philippines. It has also transformed Southern China. One reason for ignoring this revolution is perhaps our fascination with intellectual property. It is true that intellectual property has great value and typically this is associated with the software industry. However, this industry in India is by and large a service industry wherein the intellectual property resides only with the customers. While some organisations are trying to change this, we are long away from owning intellectual property in a significant manner and are most likely to remain so for atleast the next 5-10 years. As I have mentioned, our neighbours have shown the way: today Singapore exports almost $100 billion worth of IT hardware products. The export of computer and computer peripherals from the Philippines is in excess of $2 billion per year (it was less than India's exports of this item just three years ago). China exports more than $25 billion worth of IT products. These are all manufacturing activities which have created several million jobs in their respective countries. It is important to note that these jobs employ semi-skilled labour in large numbers, thus bringing benefit to a wide cross section of society. The growth has also resulted in major investment being made both in terms of the factories to manufacture computer hardware and factories to manufacture components used by IT assembly units. All of this has lead to phenomenal growth rates in GDP, leading to increase in prosperity in these nations. The good news is there is no end in sight. While the global PC market alone has now crossed 100 million PCs per year, there is a growing plethora of devices using IT, be they personal organiser or interactive Web TV or telecommunication devices. The business model for all of these devices is very clear-outsource the manufacture. Once we are recipients of the manufacturing largesse we automatically get benefits in terms of technology, know-how transfer and the opportunities to start doing design work here in India. Given the proven success of our neighbours, it is high time we introspected that after all what is preventing us from tapping this opportunity? but then, the answer to this question is pretty simple. It is nothing but our processes and procedures which govern the inflow and outflow of goods to and from India. In a world that demands just-in-time delivery we insist on a 24 hour cooling period for air exports. In a world that demands lower transaction costs we insist that all LCs should be accompanied by a certificate of origin which typically costs $100 and involves delays. In a world that demands same day turn around, ports and officials observe many holidays. The list is long but the good news: it is finite, it is identifiable and is correctable. Indeed the IT Task Force on hardware has specifically highlighted many of these areas and the government in its recent Exim policy has attempted to address some of them, But what is required is a complete change in mindset. Let me illustrate what I mean. If we are asked to name a process or procedure involving inflow and outflow of goods which is designed to either speed up the process or reduce the transaction cost. The answer is none. All our processes and procedures are designed to "prevent misuse" and thereby hinder the movement of goods. We must also take care to understand that if we do not boost the manufacturing of IT products then the impact of the balance of trade is likely to be severe. If PC demand goes up to 10 million PCs per year, and assuming all are imported at $500 each, the net impact of this alone would be $5 billion. Associated devices and peripherals networks are likely to be more than double the figure. Together, the impact of specialised hardware and software on the balance of trade in the next 5 years will be $20 billion per year. It is heartening to note that the Union Government has identified hardware and software as two sides of the same coin but for some reason, whenever we flip it, it seems to come up "software". It is high time we realised that we can create millions of employment opportunities and add several billions of dollars to the investment base in this country-as fast and effectively as our neighbours have done. The writer is the managing director of Geometric Software Solutions Co. Ltd, Mumbai |
|
Issue Contents Write to us Subscriptions Syndication INDIA
TODAY | BUSINESS
TODAY | INDIA TODAY PLUS | TEENS TODAY © Living Media India Ltd |
 |
 |
It is heartening to note that the government
has identified hardware and software as two sides of the same coin but whenever we flip
it, it seems to come up "software". It is time we realised that products can
create million of jobs. 
Today it is very fashionable to focus on
software and generally applaud India's prowess in the software arena. It is more or less
taken for granted that India is not a viable source for manufacturing of IT products. I
personally believe that this ignores a phenomenal opportunity. 
