- 0 - turning chile into the nearshore platform of choice for indian its companies presentation to...
TRANSCRIPT
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Turning Chile Into The Nearshore Platform of Choice For Indian ITS Companies
Presentation to
January 15, 2007
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OUR OBJECTIVES FOR THIS MEETING
Learn firsthand about HCL
Quickly summarize for you Chile’s advantages as a place to do business
Explain why Chile stands out as a offshoring platform in its region
Share some interesting news
Discuss how we can move forward –the real reason for us being here
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AGENDA
The Chilean Business Environment
Chile: The Nearshore Platform of Choice
HCL and the Chilean Nearshore Opportunity
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AGENDA
The Chilean Business Environment
Chile: The Nearshore Platform of Choice
HCL and the Chilean Nearshore Opportunity
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CHILE'S BUSINESS ENVIRONMENT STANDS OUT IN LATIN AMERICA AND BEYOND
The most stable and competitive economy in Latin America• Ranked 1st by WEF in World Competitiveness Index 2005• Ranked as Best Place to do Business by Economist Intelligence Unit 2005
- 4th among emerging countries and 19th in global ranking• Lowest country risk in the region
Strong, transparent institutions and regulatory framework are an example for the region• Ranked 1st by Transparency International in Corruption Perception Index
- tied with U.S. in 20th place in global rankings- followed by Uruguay (28th) and Costa Rica (55th)
• Ranked 1st by World Bank among Latin countries in “Ease of Doing Business”- and 28th worldwide
Positioned as a gateway to the world• Free trade agreements with strong intellectual property protection• Low tax burden and extensive network of double taxation treaties• Favorable foreign investment regime (DL 600) in force since 1974
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CHILE AT A GLANCE
Population: 16.3 M
GDP: US$ 145 B
GDP per capita: US$ 8.9K
Annual inflation: 2.6%
Unemployment: 8%
Adult literacy rate: 96% Corporate tax: 17%
Tariffs • General 6%• Hardware 0%• 95% of imports pay no tax
- FTAs
Sources: World Bank, EIU, IMF, A.T.Kearney 2006
Vital Statistics (2006)
Time zone alignement
Overnight flights to the U.S.
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CHILE: A GLOBALLY COMPETITIVE, HIGHLY DYNAMIC AND TRANSPARENT BUSINESS ENVIRONMENT
GDP Growth Rate
(CAGR %, 1986-2006)
Australia
Canada
Chile
Costa Rica
Czech Republic
Hungary
I reland
Mexico
Phillipines
Russia
0
1
2
3
4
5
6
7
3.75 4.75
Uruguay
Argentina
Brazil
Chile
Global Competitiveness Index
(WEF 2006)
Circle size
proportional to score
in EIU survey on
Best Place to Do
Business 2006-10
Index 0.0 – 3.3
Index 3.4 – 6.7
Index 6.8 – 10.0
Sources: WEF, TI, World Bank
Color coding indicates corruption levels index
(TI CPI index, 2006)
Integrar con Best place to do business EIU
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CHILE’S FAVOURABLE BUSINESS CLIMATE IS REFLECTED IN MODERATE TAX BURDEN AND FLEXIBLE LABOR LAWS
Source: World Bank (www.worldbank.org) 2006
Brazil Mexico Chile
Number of tax payments
per year
Man hours required
to file taxes
Total tax rate (% of profits)
49
10
23
552
2,600
432 37.1
71.1
26.3
Difficulty of hiring
Rigidity of work hours
Difficulty of firing
Overall index
33
67
33
40
60
20
40
20
0
38
42
24
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Web of trade agreements provides access to 90% of OECD economies
Source: www.ideaincuba.cl/new_inc/CONTENT/bio4.htm
Web of double taxation agreements covers XX% of OECD economies
CHILE IS A GATEWAY TO THE WORLD OFFERING MAJOR ADVANTAGES TO GLOBAL PLAYERS
Canada USA
Mexico
El Salvador
Panama
Uruguay Paraguay Argentina Brazil
Iceland
European Union
Norway
Switzerland Lichtenstein
South Korea
Japan
China
Brunei
New Zealand
Singapore
India
In negotiation
Spain Portugal UK France Netherlands Switzerland Ireland Italy
Norway Denmark Sweden Finland
Poland Croatia Hungary Czech Republic
Russia
South Korea
Malaysia China
New Zealand
South Africa
Cuba
Mexico
Canada USA
Argentina Brazil Ecuador
Peru Venezuela Paraguay
In negotiation
OJO Hay cosas que corregir y completar
Australia
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A “FOREIGN INVESTOR FRIENDLY” ENVIRONMENT
Legal framework guarantees foreign investors a full bill of rights• Inhibits government from adversely changing legal environment• Over USD 75 B invested under DL 600 regime
- 89% of that since 1990• Chile second after Singapore in 2005 FDI inflows as % GDP ??
Simple to set up and run a business • No joint venture requirements
- foreign companies may have 100%-owned subsidiaries• Minimal bureaucracy and no bribes involved• It takes less than a month to start a business
- no Latin American country does it faster
“Most companies don´t know how easy it is to do business in Chile”
Country Manager, Evalueserve
Easy to repatriate capital and dividends• May enter most of the funds invested as a loan• Can repay loan without any obstacles or taxes
OJO Hay cosas que validar
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Personal safety
(homicides /100m hab.)
UNDP Human Development IndexLow High
Miami
Santiago
Buenos Aires
Montevideo
Monterrey
Bogota
Sao Paulo
Rio de Janeiro
60
50
40
30
20
10
0
CHILE OFFERS A UNIQUE QUALITY OF LIFE AT A VERY REASONABLE COST
Source: América Economía Magazine (www.americaeconomia.com), 2006, UNDP (www.undp.org), 2006, Mercer Human Resource Consulting (www.mercer.com), 2005
Tokyo Dearest
Moscow
Stockholm
Madrid
Miami
Boston
Mexico City
Sao Paulo
Santiago
Asunción Cheapest
Mercer Cost of Living Index 2005: Chile among lowest in the world
1
4
18
46
57
70
95
114
128
144
Rank
Personal safety and overall quality
of the environment are big benefits
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IMAGES OF SANTIAGO
OJO Hay cosas que corregir y completar
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IMAGES OF CHILE
No incluida para aligerar
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“Increasing productivity also means innovation… I want this to be a country that not only exports copper, but also mining software; not only fruit, but also techniques to pack and preserve foods; not only salmon, but also vaccines to prevent diseases in fish. The public sector will increase its spending on research and development by 50%. Our goal is for our country to spend more than 1% of GDP on research and development by its Bicentennial in 2010. We will increase our efforts to make Chile a platform for the export of services.”
Michelle Bachelet, President of Chile,
State of the Nation Address 2006
STRONG GOVERNMENT COMMITMENT TO TURN CHILE INTO A GLOBAL IT SERVICES PLATFORM
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AGENDA
The Chilean Business Environment
Chile: The Nearshore Platform of Choice
HCL and the Chilean Nearshore Opportunity
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A NEARSHORE BASE IN LATIN AMERICA HELPS INDIAN OFFSHORING LEADERS RESOLVE KEY CHALLENGES
U.S.A. India
Growing concerns about over-dependence on India due to geopolitical risks
Mounting restrictions for work permits to Indian nationals for security reasons
Ample access to IT professionals at costs soon comparable to India’s
Chile is on same time zone as Eastern U.S. during much of the year and 3 hours away from the U.K. during remaining months
Easy overnight flights to the U.S and direct flights to Europe
Chile has declared the development of nearshore facilities a national priority
Chile
Rising labor costs and attrition rates due to breakneck pace of IT industry growth
create need for alternate talent pools
Increased customer interaction required in higher value-added IT services that
Indian offshoring firms are targeting
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A.T. KEARNEY RANKS CHILE AMONG THE 10 MOST ATTRACTIVE COUNTRIES FOR SERVICES OFFSHORING
6
5
4
3
7
2
8
1
0
India
Brazil
Mexico (#17)
Singapore
Philippines Thailand
CzechRep.
Malaysia
China
Canada
Chile
People
Environment
Cost
Source: A.T. Kearney Global Services Location Index (2003, 04, 05), EIU Offshoring Rankings, in CEO Briefing: Corporate Priorities for 2005 (2005)
Gap between India and Chile shrunk 40% between 2003 and 2005
Economist Intelligence Unit also ranks Chile 1st in Latin America among future leaders in global offshoring
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CHILE’S LABOR COSTS ARE COMPETITIVE
Source: Mercer Human Resource Consulting (www.mercer.com), 2006
Annual Compensation in US$ ‘000
Cash compensation Mandatory employee-paid benefits
Data Entry Clerk
Brazil
Chile
Costa Rica
MexicoArgentina
2
4
6
8
10
Argentina
Brazil
Chile
Costa Rica
Mexico
Junior Programmer
10
15
20
5
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Availability of finance skills 1st
Absence of Brain Drain 2nd
Attitudes toward globalization 2nd
Credibility of managers 2nd
Availability of qualified engineers 3rd
Labor market conditions 7th
Education in finance 8th
Information Technology skills 11th
Standards of university education 11th
Overall Position 19th
Source: International Institute for Management Development (www.imd.ch), 2005; The Times World University Rankings (2006)
CHILE OFFERS TOP TALENT FOR OFFSHORE OPERATIONS
IMD’s World Competitiveness
Yearbook ranks Chile high among 60
countries
Autonomous University of México
Catholic University of Chile
University of Buenos Aires
University of Chile
University of Sao Paulo
Universidad Austral
Federal University of Rio de Janeiro
Catholic University of Peru
State University of Campinas
Torcuato di Tella University
Adolfo Ibañez University
Times World University Rankings: Chile’s
Universities Among Best in Region
1
2
3
4
5
6
7
8
9
10
11
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CHILE’S NETWORK OF HIGHER LEARNING INSTITUTIONS
SPANS THE ENTIRE COUNTRY
COMPLETAR
OJO Hay cosas que corregir y completar
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CHILE’S TELECOM INFRASTRUCTURE IS LEADING EDGE
EMERGIA Submarine Arica to Valparaíso Land-based Valparaíso to Argentina 40 Gbps (1,92 Tbps)
GLOBAL CROSSING Submarine Lurín to Valparaíso Land-based Valparaíso to Santiago-Argentina 40 Gbps (1,28 Tbps)
SILICA NETWORKS Santiago to Argentina: 2,5 Gb
2,5
0.62
7,5
0,1
2,5
5,0
5,6
12,6
12,5
15,0
15,0
2,5
Chile ranks 11th worldwide in mobile phone penetration, with 62 subscribers per 100 inhabitants
100% digital
Chile leads in Latin America with 28 subscribersand XX broadband connections per 100 inhabitants
Optical fiber networks
270 Mbps
Satellite networks
Microwave networks
140 MBps
Mobile networks
Fixed telephony
Internet
Source: Subtel, Chilean Ministry of Transport and Telecommunications
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DOMESTIC DEMAND IS AGAIN EXPANDING RAPIDLY
Source: ACTI AG, 2005
Annual sales ($M)
05009590
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Hardware Software Services
500+ IT companies active in Chile
Over 75,000 people employed
Size distribution (# employees)
• 50 or more 12%
• 10 to 49 44%
• Less than 10 44%
Larger players may well be strong partners
and SMEs provide access to top talent
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A RECORD OF SUCCESS AS AN OFFSHORE BASESome Representative Examples
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OJO Hay cosas que corregir y completar
Banco Santander established a regional offshore center for IT services in 200X
• Focus on software development and maintenance
• Serving 10 BSCH banks in 10 countries
• Invested some US$ 8M to get it up and running
Experience proved highly successful
• Chilean GM led the process
• Quickly achieved high productivity and quality standards
- CMMi 5 by 2005
• Costs 60% lower than in Europe
Developing into a major player Chile’s IT industry
• Over 500 employees
• 2005 exports of US$ 60M
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OJO Hay cosas que corregir y completar
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Our Long Term Agenda
To turn Chile into the “nearshore platform of choice” within Latin America
• Best academic center for IT professionals within the region
• Most attractive place for Latin IT professionals to live and work
- as well as non-Latin offshoring professionals
• A highly cosmopolitant, vibrant offshoring hub
• A strong web of partnerships between global and Chilean firms
To generate 100,000 offshoring jobs within 5 years
Te reach US$ 5,000 million in offshoring ITS/BPO/KPO exports by 2012
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AGENDA
The Chilean Business Environment
Chile: The Nearshore Platform of Choice
HCL and the Chilean Nearshore Opportunity
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MANY WIN:WIN OPPORTUNITIES FOR CHILE AND HCL
HCL nearshore facility in Chile serving U.S. and Latin American clients
HCL product development partnerships with Chilean companies
• New products/services/capabilities to feed your offshore clients
HCL commercial partnerships
• New clients developed in partnership with Chile’s companies
- across all of Latin America
Easier access to both the U.S. and the EU markets
Staying at parity or better with HCL’s leading competitors in building a
global business model
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CHILE’S GOVERNMENT IS PREPARED TO HELP YOU SET UP YOUR NEARSHORE OPERATIONS
Single point of contact within public sector for Indian ITS firms CORFO
• Full range of information and investment support services
• Well developed set of incentive programs for offshoring operations
- pre-investment studies
- support during early project stages
- personnel training
- fixed assets and long term leases
- investments in R&D
Three specific CORFO support programs to help offshoring firms in Chile
• Support for immigration of foreign IT professionals
- visas, rellocation expenses, tax credits
• Internationally competitive incentives for industry-specific expenses
- recruiting, training and purchase of specialized assets
• Ad hoc regulatory relief and enhancements
- facilitation of customs procedures and data security guarantees
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CIVIL SOCIETY AT LARGE ALSO READY TO SUPPORT YOUR ACTIVITIES IN CHILE
ACTI as your industry association in Chile• Negotiating collaboration agreement with NASSCOM
CPC as the umbrella business organization in Chile• Actively pursuing initiatives to turn Chile into an offshoring platfom
Leading universities ready to develop tailored programs• Catholic University is designing a new undergraduate engineering program
- and wants your input• Adolfo Ibañez University´s new Engineering School keen to collaborate• Network of regional universities can train the required professionals
- University of Chile´s Engineering School may champion the effort
Technical institutes eager to meet your specific needs, including• INACAP tailored technical training programs (eg. with Caterpillar)• DUOC’s successful English-language courses
Pro Innovation Forum is a major champion of your industry and stands behind you
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CHILE IS RESPONDING TO SPECIFIC REQUIREMENTS EXPRESSED BY INDIAN OFFSHORING FIRMS
New visa regime for Indian businessmen
Exemption from limits on the hiring of foreign nationals
Program to support immigration of IT professionals from other countries
1400 L-1 visas available for Chilean professionals to work in the U.S. under
Chile / USA Free Trade Agreement
• 90% currently go unused
Free trade zone in Northern Chile interested in offshoring tenants
Offshoring one of the major thrusts in new public/private Digital Agenda 2.0
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SUGGESTED NEXT STEPS
Reflect on any issues raised by HCL and take appropriate action if required
Support your in-depth country assessment process
Follow-up meetings in Santiago or abroad
HCL can apply to the relevant incentive programs from CORFO
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How can we move
forward?