What is ETCA and the impact on our IT industry

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ETCA has suddenly become the focal point of social media jokes and serious discussions alike. Although it has been seen in many lights by different parties, an agreement of such nature and its impact on us cannot be taken lightly. This is our attempt to break down the effects of this agreement. Which is easier said than done since no one seem to have a reliable copy of the said draft document.

For those of you who are lost, the Indo-Lanka Economic and Technology Cooperation Agreement better known as ETCA (formerly CEPA) is a trade agreement that our government is set to sign with India. It’s a trade agreement that’s attracting large amounts of controversy in the IT industry. This is because according to initial reports it could permit the free movement of IT professionals across borders. These reports have sparked fears that we will soon see a mass exodus of Indian workers coming to Sri Lanka and competing with us for jobs.

Photo credits: Huffington Post
Photo credits: Huffington Post

To date, neither government has released the ETCA draft or any document pertaining to the agreement. What is floating around the internet are merely documents of unofficial nature which may or may not be accurate. Therefore, it’s really difficult to gauge the impact of such an agreement. Therefore, we take this discussion on the assumption that Indian and Sri Lankan IT professionals can go across borders to find jobs and also businesses can set up shop in either country.

Impact on employees

The best case scenario for the agreement would be that each person wanting to work in either country should get a work permit, where in theory a skill shortage requirement may need to be presented for the work permit to be acquired. But given the nature of the process, it’s almost a given that this work permit thing would not act as an effective control.

So how would it affect our employees? India with its massive population has IT professionals from all skill sets and skill levels. However, the chances are that cream of the crop and even the mid-level professionals may already be employed happily in all the large tech firms that have set up shop in India and also in large Indian owned companies. What is left are the unemployed lot that does not cut it.

Photo credits: Erbenlab
Photo credits: Erbenlab

In our opinion, it would be really difficult for them to be competitive in our mainstream tech job market. However, their low cost would make them attractive to certain companies that carry out outsourcing operations like customer support and even call center work. They may also be a good proposition for companies to fill entry level programming jobs. This would, of course, mean that fresh graduates and other hopefuls for these job categories would be threatened.

However, we feel that this may not be such a nightmare scenario as we seem to this it is in some cases. In the example of call centers, India is already a hotbed for them. The only reason we already have them in Sri Lanka should be due to a differentiator that only we can provide. We do think that it is our friendly Sri Lankan attitude and accent rather than anything else. This is something that the Indians can’t fill. But looking at the entry level programmer issue does not have such a favorable outlook. There are some jobs such as product support that may actually be a good fit for organizations. This would threaten our entry level programmers, mainly fresh graduates.

Impact on employers

Our guess is that should employers want to bring Indians, they would go for a mixed approach where they mix 1 or 2 Indians with a local team to keep the costs in check. This may seem like a rather viable solution for companies, but it could hurt the IT sector in the long run because the next generation of youngsters who want to be IT professionals would be discouraged from being so. In theory, this could lead to a strategic decline in interest in our IT industry. Also, since the Indians would most likely work for less, there is a very real chance that the salary scales would also go down. All these would ultimately result in making the IT profession unattractive for the next generation.

Another aspect of this is the clash of perceptions. Most tech companies we know go for a quality over quantity policy in their businesses. In fact, this is our main differentiator in the IT sector as well. The few foreign companies that have operations here did not select us solely because of relatively cheap engineers, but also because of our quality. The level of skills we expect to get from India would push these standards down. As mentioned earlier, it would be the bottom crop who would be coming here and there is a very good chance that this would tarnish the image of our Industry as a whole.

This is not to say there are no advantages for local businesses. This influx of workers from India could easily fill low-level jobs thereby freeing up local talent to much higher levels of works such as R&D. However, there really aren’t any strict measures to stop any employer from doing this already. With our industry competing globally, any employer can virtually hire Indians (any foreigners for that matter) to work in such roles. If there is an actual shortage of skilled labor, then all an employer has to do is simply prove this to the Board of Investment before getting approval to bring foreigners to fill this labor gap.

Impact on businesses planning to come to Sri Lanka

Assuming that Indians are also getting a chance to set up businesses here, the impact of that needs to be discussed as well. With our middle-class booming, opportunities are ripe for local entrepreneurs to exploit. We are seeing more and more startups setting up shop and the ECTA is an immediate threat to them.

India is way ahead of us in this race. India with its large middle class has some very good startups that have now grown with enough money to expand and with well-established business models. If they come down here, our local startups would face an unfair fight. This is especially true for business offering products. Indian companies will have a huge price advantage thanks to economies of scale because the same products would be offered in India and Sri Lanka to a much larger customer base, where the Sri Lankan business would only be offering them in Sri Lanka to a much smaller customer base. Indians would have a much better chance to undercut our prices and still stay profitable.

Uber India and Zomato are two examples of businesses that have setup operations in Sri Lanka (Photo credits: TechInAsia)
Uber and Zomato are two examples of businesses that have setup operations in Sri Lanka (Photo credits: TechInAsia)

However, as it stands there’s nothing stopping Indian businesses from coming to Sri Lanka and setting up here. If any foreign investor approaches the Board of Investment and shows a keen interest in investing in Sri Lanka, he’ll be given permission to set up operations and X amount of visas to bring foreigners. In fact, we have already seen the Indian businesses such as Uber and Zomato set up operations here and hire Sri Lankans to manage them. All the ETCA does is simplify the process even further.

Impact on Sri Lankan businesses

Again if we look at this from a much higher level, it may not be bad as it sounds. This means that our businesses would have to find a differentiator that should appeal to the customers. There is a considerable segment in our market who would pay more to buy a Huawei or a mid-range Samsung phone rather than a cheap Micromax.

Likewise, our businesses would have to bring their A game which would drive our country forward in the long term. Right now it’s too easy for a business to palm a few local officials and set up an agreement with their local competitors to even go as far as price fixing. Why do you think we are seeing so many deals sites with so many discounts? Because the profit margins are way too high. A foreign competition might just be what’s needed to stem this trend. Just like what happened to mobile phone charges when Airtel came down. We still enjoy good rates thanks to the price drops that came when Airtel entered the market.

Also, there is no better motivator to improve yourself than being challenged and threatened. Most of our business and in some cases individuals like to sit comfortably playing in their comfort zones. This is something that inhibits growth. This threat or competition might just be the kick in the back we need to dust ourselves and put our game faces on as a nation.

The opinions of the industry

In its current form, the vast majority of professionals in the IT industry is strictly against ETCA. You don’t have to look far across social media to find Facebook groups such as Protect Sri Lankan ICT or Protect Sri Lankan IT. There’s even a Change.org petition asking the Prime Minister not to sign it. However, if we look at what industry leaders are saying then it’s a more silent picture.

Thus far only the Computer Society of Sri Lanka has clearly stated that they are completely against the agreement. Speaking to the media, Dr. Dayan Rajapakse – the President of the CSSL has reiterated this stand, stating that if we open up our borders to Indians then it would lead to unfair competition and Sri Lankans losing jobs.

On the other hand, SLASSCOM has adopted a moderate approach, releasing the statement below.

Photo credits: SLASSCOM
Photo credits: SLASSCOM

Then there is the ICTA which has officially maintained silence regarding this matter. However, Muhunthan Canagey –CEO of ICTA has commented on the issue with the statement welcoming the signing of the ETCA.

I would like to really know, do you really think the signing of ETCA will affect IT jobs in Sri Lanka? Are we Sri Lankans so inferior that we are so threatened to ensure doors are to be closed for IT professionals from India to come and join teams in Sri Lanka? Don’t you all think that in a world where software code is being developed all around the world and being delivered through the Internet, protecting IT professionals coming and working face to face with local teams is bad and will destroy us? Anyway, the work can be outsourced online.

Look at Silicon Valley, what has got them there? It is the culture to embrace the best minds for the development of great products. Why do some Sri Lankan IT professionals feel so insecure? Is it because they want to be some dons in a small pond or they have really not seen the real world?

Sometimes many IT professionals talk big but when it truly comes to being challenged by diversity they become mice.

Just imagine the success of large companies such as Google and Microsoft have made some top persons of Indian origin as the head of their organization today; do those founders or IT professionals have such narrow-minded approach like some of our so called professionals? Their thought process is what has allowed them to get to where they are, and for Sri Lanka to remain where we are.

It’s time we start embracing globalization if we want to build world class companies who can compete in quality and scale else we would have to lag behind.

It is important for supporting local startups and if we do not open out there is no way our local startup communities would be able to be entrepreneurs and build companies that will actually bring in value for the country and place Sri Lanka on the world map.

We spoke with a few other industry leaders as well. However, they declined to comment stating that until an official draft of the ETCA agreement becomes available they would not make an official stance.

What are your thoughts on the ETCA agreement? Should we welcome it or fight it to the fullest? Let us know your thoughts in the comments below.

11 COMMENTS

  1. Recently Hon.Minister Dr.Harsha de Silva said that Mode 4 will not be allowed in ETCA.

    But the government is acting and saying things which are mostly applicable if only mode 4 is allowed.

    For an example Indians will find employment in SL companies (with no branches in India) with mode 4.

    Does anyone knows anything about this confusion?

    Mode 4: natural persons who are either service suppliers (such as independent professionals) or who work for a service supplier and who are present in another WTO member to supply a service

  2. How ECTA is supposed to increase the competitiveness of the Sri Lankan IT sector

    From what I can gather, the main idea is to lower price through lowering the development cost (including the salaries) and thus to make your product or service more competitive.

    This also has to do something with the demand and supply theory. Idea is to allow the Indians to come here (which in other words would increase the supply) and reduce the demand (which is lowering of the average salary).

    Now I have seen certain people claiming that Indians are not a threat for them since they themselves are very talented. Because of that, Indians will not be able compete with them in anyway (which is not really the point).

    what they need to consider is that “high salary” (that they usually demand and get) is a relative value. “high salary” is relative to the “average salary”. And the “average salary” is affected by the expected pay of the majority workforce.

    If lot of people suddenly enter the job market with lower expectations about the salary, then the “average salary” will decline. Which means the “high salary” will also have to decline.

  3. Article is largely composed of opinions, assumptions guesswork such as:

    “In our opinion, it would be really difficult for them to be competitive in our mainstream tech job market”

    “Our guess is that should employers want to bring Indians, they would go for a mixed approach where they mix 1 or 2 Indians with a local team to keep the costs in check.”

    “Assuming that Indians are also getting a chance to set up businesses here…”

    I see no substance here. And the article lacks a by line. It is very difficult to take this seriously.

  4. Hahaha, Sri Lankan Quality, its all rubbish, your countrys PISA score says it all, you are just above chimpanzee grade in intelligence, do you fools even know what you are dealing with, do you know the level of programming in India, R&D labs in Bangalore like Microsoft, Mu Sigma, GE, Cisco, Cypress, Akamai, are working on next generation technoligies, we have long gone past the regular internet, we are implementing thinking machines, man machine cybernetics, sensor fusion, self organizing databases, swarm networks, shit that you sub humans have not even heard of, India exported 150 billion us dollars of software in 2015, Bangalore city alone accounted for US 50 billion dollars, and you pygmies are gloating about the 700 million all of Sri Lanka exported, I am amazed at your frog in the well attitude, you are talking about Sri Lankan quality, even our Tier 3 colleges produce better programmers than your Universities, forget about call centers, what a joke hahahahahahahahahahahahahahaha! Thank you, a good laugh in the morning is good for health
    http://www.ft.com/cms/s/0/7b774116-2964-11e5-acfb-cbd2e1c81cca.html#axzz40JHkUoZ2

  5. Raj,
    Please firstly think about your country(India),you mentioned many kind of things.sooo much fantastic developments… Haaaa has haaa …..but unfortunately you peoples don’t have toilet facilities around 75% of total population,We don’t wants to that kind of shiting people moving to Sri Lanka.Firstly make the sanitization facility to the people and leave the ICT developments what you mentioned.

  6. Yap definitely Mahesh, I agree to you.
    Your in high technology and high capacity with programming and other computer geniuses. But it clear for any child, India has hiddn ajenda. We are Sri Lankans we dont want to be another Nepol. We will be staying as frog in well. Please let us to be as it is. Thankyou.

  7. Before Muhunthan commenting about the developers in Sri Lanka as a person in charge of an important firm in Sri Lanka he should know how to leverage the IT industry in Sri Lanka. ICTA in Sri Lanka just an organisation which does nothing effectively to the industry. They just organise events without proper planning and just spending millions. A good example was the B2B event held in Kandy few years ago. We were there representing our company from morning to evening the total amount of people visited the exhibition was not more than 50. And I am asking from the head, can you tell us what are the steps you have taken to improve the technical knowledge or other skills of our developers? There are many ways you can do and you do nothing just delivering comments sitting in your room.

    Of course you are in a big position now and you don’t want to worry about the entry level guys. Do you really understand the difficulties an entry level person facing in this industry? As a degree holder from the local university I know the difficulties and struggles which many of my friends have faced. Few of them left the industry because they couldn’t go more than that. And specially many of our undergraduates are facing issues with the English languages. At least are you doing something about this?

    Before making trade agreements our country should improve the local quality by helping the companies and workers. Do not compare with Silicon Valley. Because we have a long journey to reach there.

  8. Why are people overlooking the chances for Sri Lankan to take up jobs in Bengaluru and Indian universities? I think Sri Lanka needs to integrate with India if it’s ever going to increase it’s economic power and growth. If you want to see what happens when you don’t integrate, you only have to look at what happened to North Korea’s years of isolation.

    Singapore is heavily integrated with China and Chinese people, hence its liberalism and open-door policies – Chinese people dominate the private sector of South-East Asia.

    Sri Lanka needs to do the same with South India and India. At this rate, Pakistan will become more integrated with India than Sri Lanka.

    Sri Lanka should ask India to provide reservations for Sri Lankans in Indian universities and institutions, if Sri Lankans are quite concerned about the deal being unbalanced.

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