Nishith Desai Associates Legal and Tax Counselling Worldwide vaibhav@nishithdesai

1. A PRESENTATION ONMOVEMENT OF NATURAL PERSONS UNDER THE GATS IN COMPUTER AND RELATED SERVICESON BEHALF OF NASSCOMBY Nishith Desai Associates Legal and Tax Counselling Worldwide vaibhav@nishithdesai.com www.nishithdesai.com VAIBHAV PARIKH

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

3. 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. Nishith Desai Associates NASSCOM

4. DOMESTIC SOFTWARE MARKET Source:www.nasscom.org Nishith Desai Associates NASSCOM

5. SOFTWARE AND SERVICES EXPORTS Source:www.nasscom.org Nishith Desai Associates NASSCOM

6. SOFTWARE DESTINATIONS Source:www.nasscom.org Nishith Desai Associates NASSCOM

7. Delivery 1999-00 2000-01 2001-02 (Projected) Onsite 57.4% 56.1% 47.3% Offshore 34.7% 38.6% 48.6% Products and unclassified 7.9% 5.3% 4.1% Total (US$ Billions) 2.65 6.2 7.7 INDIAN SOFTWARE EXPORTS: DELIVERY MODELS Source:www.nasscom.org Nishith Desai Associates NASSCOM

8. BIRD’S EYE VIEW Productized services Services GATS Products GATT Mode 4 Mode 1 Mode 3 Servicized Products Nishith Desai Associates NASSCOM

9. 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

10. ISSUES / CONSTRAINTS • Immigration related issues • Inadequate recognition of qualifications, experience and training • Differential treatment of foreign service personnel Nishith Desai Associates NASSCOM

11. 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

12. 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

13. 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

14. 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

15. 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

16. BROAD POLICY INITIATIVES/ REFORMS • Improving the structure of GATS commitments • Removal of existing limitations Nishith Desai Associates NASSCOM

17. 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: India’s proposal to WTO Nishith Desai Associates NASSCOM

18. IMPROVING THE STRUCTURE OF COMMITMENTS • Sectoral Commitments • Developed countries to make commitments in all sub-sectors for computer and related services. Source: India’s proposal to WTO Nishith Desai Associates NASSCOM

19. 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

20. 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

21. 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