World Export Development Forum

Discussion brief for the Export Strategy-Maker

Export Development in the Digital Economy

Promoting e-Competency: Incentives and support services

The Bangladesh Scenario
(Not edited by ITC)

by A.S.M Quasem
Bangladesh Employers’ Federation
New Age Group of Companies

e-mail: chairman@newage-group.com

The world, over its entire span of civilization, has come across periods when advent of particular technology had tremendously changed the way of life of human being. First such change came with the Agricultural Revolution when people learned the methods of organized cultivation. Millenniums later, the invention of steam engine revolutionized the industries giving birth to the concept of mass production. It took another couple of hundred years to witness invention of user-friendly computers and development of Tele-com technology and specially the advent of Internet that ushered in the third revolution in our way of life building our unprecedented capability to access, manipulate and store data and converting them into useful information. This new revolution has set in the Digital Era and the Internet is the workhorse of this information age, the Steam engine of digital progress.

The concept of economy in the digital age is knowledge based that is radically different from the conventional economy which is based on physical assets and wealth. The twin process of IT revolution and globalisation of trade and commerce has made it all the more important for the third world countries to enhance the knowledge base of their people about the new components of the digital world: the computers, the Internet, the cyberspace, the new technologies of telecommunication and the lot. Without this knowledge, it will be impossible for them to face the global competition. Therefore, we need to develop our e-competency at an accelerated pace to face this new challenge.

To dwell in the digital age we need computers, telephones, high-speed telecom network, connectivity equipment like modems etc., and computer literate human resources. Promoting e-competency in a country is directly dependent upon steps the country takes to make computers available at a cheap price, ensure adequate telephones lines for the users, invest in telecom networks both through satellite and marine cables and draw up appropriate plans for spreading computer literacy and human resource development.

The Bangladesh Scenario:

By the end of this year, the computer population in Bangladesh is expected to reach 500,000. This includes 100,000 computers that are estimated to be commissioned in the current year. The recent withdrawal of import duty and Vat from Computer hardware and software has helped enhancing the proliferation of computer usage in the country.

The tele-density in Bangladesh is one of the lowest in Asia, with a mere 0.5 lines per 100 people. In terms of phone connectivity, Bangladesh Telephone and Telegraph Board (BTTB) charges are one of the highest in the world, approximately US$500 for normal single telephone line connection. Out of the total telephone connections of 602,986 lines (including cellular lines), 1,41,520 lines are analogue. The over all plan is to transform these analogue lines into digital by the year 2001. At the same time, the Government plans to ensure one line for every hundred people within the shortest possible time and take this number to 4.0 by the year 2010. The task of extending the network is largely the domain of the state owned Bangladesh Telephone & Telegraph Board (BTTB). However, the mobile phone sector has been opened up to the private operators and one such operator, the Grameen Phone are planning to provide extensive services to the rural inhabitants over the next four years using wireless technology and utilizing the railway fibre-optic lines for their cellular network.

Presently BTTB has limited Packet Switch Data Network (PSDN) service available in the six major cities and towns of Bangladesh capable of servicing about 200 subscribers. Currently mostly the Banks, local UN offices and the major NGOs utilize 80 of these connections. BTTB also provides digital Data Network (DDN) for corporate networking and software export and data entry. BTTB plans to expand in the near future the DDN to all 64 districts, expand the Internet Backbone to 2 Mbps immediately and increasing it from 2 Mbps to 8 Mbps within 2001 and bring all ISPs to a single platform accessing internet bypassing PSD.

BTTB at the moment does not have any surface gateway to the international communication network. It accesses the international network through four Satellite Ground Stations. However, Tyco Submarine Systems Ltd, a wholly owned subsidiary of Tyco International Ltd signed a Memorandum of Understanding on March 20, 2000 with the BTTB to design, manufacture and install an undersea fiber optic cable system to be known as the Bangladesh-Singapore Submarine Cable System. Scheduled for completion in 2002, the system will connect Bangladesh and Singapore and will be approximately 3,200 kilometers in length. This system will enable Bangladesh to link into some of the major undersea cable systems that land in Singapore and give Bangladesh worldwide connectivity. The supply contract for the project will have an approximate value of $150 million U.S. dollars.

The current regulatory framework for telecommunication and Internet is still a grey area. The Government owned BTTB is still reluctant to open up the telecom sector totally for private sector competition. One of the problems is that there is no independent regulatory body. BTTB regulating the sector has a significant impact on the country’s telecom policy. To overcome this constraint, a move was taken with World Bank assistance to set up ‘Bangladesh Telephone Regulatory Commission’ (BTRC), an independent regulatory authority for the telecom sector. A WB consultant initially prepared the draft, which was reviewed in a brainstorming session in December 1998. However, subsequently, interested quarters in the Government launched a witch-hunt and indiscriminately chopped the draft act in order to ensure absolute enslavement. The situation has aggravated to such an extent that besides declining further payments, the donor has rather demanded refunding of US$1.5 million, so far disbursed to kick off the project.

To facilitate Internet connections, there are about 28 Internet Service Providers (ISPs) providing Internet services to about 100,000 customers. Most of these service providers started with VSAT having 64 Kbps bandwidth. However, with increase in competition for quality of service, some of them have already upgrades to 2 Mbps bandwidth while the others are following suit. So long BTTB had enjoyed the monopoly of supplying these VSAT services at an irrationally high price. In April this year, the Government has taken a decision to deregulate VSAT allowing an ISP to take VSAT connection from any VSAT service provider from around the world at competitive prices.

IT education in Bangladesh is gaining momentum. Computer courses are being introduced at all levels of secondary, higher secondary and degree courses. All public and private universities are introducing computer science departments. The phenomenon is demand driven, as there is a massive urge amongst the students to gain IT education and become computer literate. It is interesting to note that the private universities produce almost 50 % more computer science graduates than the national universities. The number of computer science students getting admitted each year in the various universities and colleges are still nominal as can be seen from the following figures:

Computer science:

Public universities: 512
Private universities: 745

Science graduates:

From Universities: 4,678
From colleges 78,228

Since the number of computer graduates is small compared to the need of the country, the Government has set up a special fund for producing computer professionals from the science graduates. Under this programme, the five national universities will be responsible to produce 300 computer professionals every year. Some polytechnic institutes are conducting trade courses on computer technology producing a good number of IT technicians.

Bangladesh Computer Council (CC) conducts short duration professional efficiency enhancement training programmes in IT. BCC has started its standard IT training programmes also in the divisional headquarters. The Bangladesh Institute of Communication and Information Technology (BICIT) has been included in the Annual Development Programme of the Government in 1999-2000 fiscal year. This institute will impart standard IT education; training, standardization and certification of IT related course curriculum and products. The aim of setting up of BICIT has been to produce high-class programmers and IT trainers and to steer other IT manpower development activities required by the nation.

In addition to the above formal educational facilities, numerous training centres, some at local initiative and some with foreign franchise are sprouting regularly to cater to the hunger of students at large to become computer literate. The numbers these centres turn out each year are estimated as under:

Training Centres	Kind of training imparted
With foreign franchise	Computer literacy & basic programming	10,000
Local: Govt and Govt affiliated	Computer literacy	5,000
Local Private	Computer literacy, Basic programming & Professional programming	1,000
Local: Small scale	Computer literacy	10,000

In addition, many software companies have started developing their own manpower through extensive training. One concern in the mushroom growth of training centres is regarding the quality of the education they impart. The variation in the quality is noticeable and presently there is no mechanism to assure uniform quality.

The JRC committee recommendation and its implementation:

Information Technology was declared as a thrust sector some years ago. In 1997, a committee headed by Dr. Jamilur Reza Chowdhury was formed to identify the inhibiting factors obstructing the proliferation of IT related business in Bangladesh. The report produced by this committee, popularly known as the JRC Report embodies concrete recommendations in the areas of fiscal measure, human resource development, infrastructure and marketing. The report recommended both short term and long-term measures to be taken by the Government for proliferation of IT.

The Government gave serious consideration to these recommendations and a large number of these recommendations have already been implemented. The import of computer hardware and software are now tax free, VSAT has been deregulated, high speed DDN has been introduced and copyright laws has been drafted and is waiting to be passed as an act in the next session of the Parliament. Recently, a MOU has been signed for establishing an optical fibre submarine cable linking Bangladesh with Singapore.

Details of the JRC committee recommendations and their current status of implementation are given in the attached annexure A.

The IT Policy:

Bangladesh Government pursues a trade friendly IT policy, the salient features of which are:

IT declared a thrust sector.
Government speedily implementing the recommendations of JRC report.
Waiver of all taxes and duties from import of computer hardware and software.
Tax holiday for Software and IT service industries.
Export over Internet or other electronic media recognized under sales contract or agreement without any need for LCs.
Simplified tax-free export earning remittance procedures with 40% retention in FC.
Special funds allocated by Government for extending collateral free loans to IT entrepreneurs.
100% remittance of profit and capital gains for foreign investors without any approval.
Deregulation in acquisition and use of VSAT to facilitate faster, cheaper and higher bandwidth connections and to encourage more widespread Internet use.
T&T Department’s implementation of DDN (Digital Data Network) in country. High-speed (upto 2 mbps) surface link in Dhaka and three other major cities of the country.
Decision to link to global highway through submarine cable link within next two years.
IPR laws approved by the President and awaiting Parliament approval.
Decision to establish IT village in Dhaka and High-tech Park in the outskirts of Dhaka.
Government sponsored marketing missions to sell Bangladeshi IT services abroad.
Government very supportive of Private Sector initiatives and closely work with industry associations such as BASIC and BCS.
Decision to take appropriate steps for spreading computer education in the secondary, higher secondary and graduation levels.

e-Commerce prospects in Bangladesh:

E-commerce demands availability of PCs, connectivity to Internet, web pages, and appropriate payment facilities. It also requires fast data transmission facilities and an extensive tele-com network.

E-commerce is still to gain prominence in the developing countries. According to AMI Business Consultancy in Hong Kong, the USA and Canada account for 62% of the Net users worldwide, and the entire Asian continent accounts for only 12% of the total. Among many factors, high cost of telecommunications and the age-old habit of Asian shoppers were two main factors hindering retail e-Commerce development in this continent. Asian shoppers like to bargain and this option is not possible in online shops.

Trends show that B2B e-commerce will have the most significant impact on e-Business. A single large company, GE, now does more electronic trade with its suppliers than all the retail commerce on the Internet combined.

E-commerce needs supportive framework to regulate e-business. These are not currently in place in Bangladesh. These frameworks include Legal Framework, Payment Systems Framework and Macro-economic Policy Framework: both Fiscal and Monetary. Payment through credit cards is not a ubiquitous practice in Bangladesh even for local transactions. For foreign transactions through credit cards, the main inhibiting factor is the Exchange Control Regulations of the central bank. The Laws of Contract Need modification to cope with e-business. The Evidence Law is required to be modified keeping in mind the cyber-nature of the available evidences in such transactions. The International Chamber of Commerce (ICC) is presently engaged in framing rules to facilitate e-commerce. Once it is completed, hopefully it will become the international standard for transacting e-business like their UCP600 that regulates all inter bank physical transactions.

Another problem in e-commerce is relating to security. In the cyber-world, it is necessary to be absolutely sure about the authenticity of the trading partner before one passes on high security information like credit card numbers etc. Countries that are taking e-commerce seriously have taken measures to tackle security problems. Singapore Government has passed an Electronic Transaction Act in 1998 aiming to authenticate a person’s identity and to ensure the integrity of the electronically transmitted documents. We can perhaps take lessons from these happenings.

With its current inadequate tele-net infrastructure, poor computer literacy, non-existent legal framework to support e-business, age old exchange control regulations, Bangladesh has a long way to go to the enter the digital era as far as e-commerce is concerned. We are perhaps not the lone members with such predicaments. Perhaps for this reason, Mr Huang Homing, President of Hewlett Packard, Taiwan, said that it would be another twenty years before the global e-commerce industry can be considered mature.

Annexure A
Information technology action plan of Bangladesh

Recommendations made by the JRC Committee and its current status of implementation:

A. FISCAL

RECOMMENDATIONS	CURRENT STATUS
1. Exempt all Duties & Taxes	Already implemented; duties and taxes on software were withdrawn in January, 1998; all duties and taxes on hardware (including peripherals and UPS) were withdrawn in the 1998-99 budget.
2. Tax Holiday for 10 years	Already approved in the meeting held on 4.1.98 under the Chairmanship of Finance Minister; tax holiday allowed for 5 consecutive years.
3. Provide a 15% Domestic Price Preference for locally developed software.	Accepted; modality of implementation being worked out
4. Allow export of Software and Data Processing services through Sales Contract, instead of Letters of Credit.	Already implemented
5. Reduce interest rate to the level of other export sectors	Already implemented. Creation of a Tk. 1 billion fund was announced by the Finance Minister in the FY2000-2001 budget; out of this 50% would be used for equity participation in IT projects.
6. Allow Special Customs Bonded Warehouse facilities	With complete exemption from duties and taxes, the difficulties have been reduced. There is no need for Customs Bonded Warehouses.
7. Create a Special Fund for giving interest-free loans to teachers and students	Under consideration; being discussed with banks
8. Create a Venture Capital Fund of at least Tk.10 Crore at Export Promotion Bureau	Details of venture capital fund being worked out. A 5 crore taka fund for working capital support has been created at EPB; details of disbursement have been finalized.
9. Create a Market Promotion Fund to be administered by EPB for meeting the expenses of promoting Bangladesh as a potential source of Software and Data Processing Services to the overseas markets.	Part of EPB fund is going to be used
10. Create a special fund for supporting industry oriented IT research and development activities, to be administered by BCC.	Details being worked out

(The recommendations in italics refer to short term priority actions).

B. HUMAN RESOURCE DEVELOPMENT

RECOMMENDATIONS	CURRENT STATUS
1. Upgrade the BCC to the level of a Division, to be managed by professionals	Not accepted yet. Efforts are on way to activate BCC as a promotional body. (During the last two years, several Indian States and Union Govt. have created separate Ministries for IT)
2. Ask BCC to produce within 1999 at least 1,000 'Trainers'.	The responsibility has now been given to Universities. Five Universities (viz. BUET, DU, RU, KU and SUST) have been asked to produce 30 trainers per year and a fund of Tk. 15 crore has been committed by the Finance Minister. The PCP is awaiting Planning Commission approval.
3. Introduce 'Basic Computer Skills' as a Compulsory Subject for all students at Graduation level.	Being discussed with different universities
4. Increase number of seats for computer related degrees/diplomas in all Institutions (Universities, Colleges, BITs, Polytechnics)	Universities, BITs and Polytechnics increasing the number of seats. Each of the four BITs (viz. Dhaka, Chittagong, Rajshahi and Khulna) have admitted 60 students in 1999 to the 4-year Comp.Science and Engg. degree programme. However, adequate fund allocation is yet to be made and in the absence of GOB approval, the BITs are having difficulty in recruiting teachers to temporary positions. Several colleges and institutes are offering 4-year BSc degree programmes in Computer Science under National University.
5. Review course curricula every two years and update, where necessary	Being discussed with different institutions
6. Empower BCC to develop a national examination and certification system.	Under consideration. Outline of the 4 tiers of examination has been prepared. A Committee appointed by BCC is reviewing the quality of computer training institutes.
7. Introduce compulsory education in Computer Studies at School and College levels.	Under consideration
8. To strengthen BCC and make it responsible for imparting higher level special need-based training to the IT Professionals graduating from the Universities.	BCC preparing a scheme. Training programmes on advanced programming already started.
9. Strengthen linkage between the software firms and educational institutions	Efforts initiated

(The recommendations in italics refer to short term priority actions).

C. INFRASTRUCTURE

RECOMMENDATIONS	CURRENT STATUS
1. Enact Copyright Act as required under the WTO Charter.	The Copyright Act enacted by the Parliament in July, 2000 includes provisions for software copyright protection. Implementation would start soon.
2. Set up low-cost high-speed data and voice communication link with the USA and the UK.	BTTB and MOPT working on improving existing links. .BTTB setting up a fibre optic link within the country.An MOU has been signed with Tyco on 20 March,2000 for setting up a submarine fibre optic link with Singapore (details not available). MOPT has agreed to consider favourably application from Grameen Phone to use the Bangladesh Railway Fibre Optic Network for data communication (almost all the railway stations can be connected easily to Internet).
3. Set up an Internet Node in the country.	Slow progress. The MOPT has been allowed to administer the " .bd" domain name in May 1999. No progress has been made.
4. Make Internet connectivity available at affordable rate.	The requirement of setting up all VSATs through BTTB approved Vendors has been withdrawn in March, 2000. As expected, the prices have come down. Instead of paying around US$8,000 per month for 64 Kbps connectivity, user has to pay US$3,500 per year to MOPT for license (fixed for all bandwidths) and around US$2,000 per month to the vendor for 64 Kbps connectivity..
5. Make Video Conferencing facility available through VSAT.	The liberalisation of VSAT use (see 4 above) should allow private operators to set up VSATs with high bandwidth and use it for videoconferencing.
6. Allow Private Sector to set up own Satellite Communication links.	Accepted. License has to be obtained from MOPT. No voice communication allowed.
7. Create separate Cells at selected ports so that goods are cleared within 24 hours.	Not accepted yet.
8. To create a Central Resource Center at BCC.	Not implemented yet.
9. Encourage firms involved in software development and data processing services to form an association in line with e.g. NASSCOM.	An association named Bangladesh Association of Software and Information Services (BASIS) already formed.
10. Assign one Assistant Director of EPB for this sector on a full time basis.	Being discussed with EPB
11. Set up an Information Technology Village (ITV) at a suitable place on Tongi-Ashulia Road near Dhaka, equipped with all necessary facilities.	The Tongi-Ashulia site has been abandoned, since it is designated as Flood Retention area in the Dhaka Flood Control Scheme being implemented by BWDB. A 46-acre site has been allocated in Mahakhali (but the site is occupied by squatters.).A number of proposals have been prepared by BCC, but yet to be approved by Planning Commission. A 284-acre site has been committed by GOB in Talibabad (Kaliakoir) for Hi-tech Park. A private sector IT Village has been set in the Grameen Bank Building at Mirpur (10 floors, each floor having around 10,000 sft area).
12. Ask BTTB to set up ISDN/ HDSL / ADSL Lines all over the country, and a fibre optic backbone.	Being discussed with BTTB and MOPT. BTTB has set up DDN facilities in exchanges in Dhaka City and two other exchanges outside Dhaka. The approved tariff is too high.
13. Set up a Communication Hub in Bangladesh.	Being discussed with BTTB and MOPT
14. Form a Standing Committee to formulate and implement policies, strategies and action plans for promotion of export of Software and Data Processing Services.	Already implemented. A committee has been formed at EPB. Several other committees are also working on implementation of recommendations.

(The recommendations in italics refer to short term priority actions).

D. MARKETING

RECOMMENDATIONS	CURRENT STATUS
1. Arrange meetings/seminars in selected locations in USA with a concentration of IT Professionals of Bangladeshi origin (e.g. Silicon Valley, California, USA) to inform them about the incentives being provided by GOB and mobilize their support to help Bangladeshi entrepreneurs.	Informal contacts made with NRBs in USA. The Report has been well publicized and many of the Bangladeshis are familiar with the measures taken by GOB. The TechTransfer 2000;North America Conference held in Atlantic City, New Jersey from 28 to 30 April , 2000 was attended by a large number of NRBs working in IT field. Around 30 participants from Bangladeh attended. TechTransfer2000:Bangladesh would be held at BUET on 23-24 December,2000. Another NRB (AABEA) initiative SBIT2000 would be held on November 11-12 at Santa Clara and is likely to be attended by high profile speakers from Silicon Valley companies, GOB representatives and Bangladeshi software companies.
2. Ban use of all pirated Software in all organizations, both in the public and private sectors.	The enforcement of the Copyright Act should lead to gradual elimination of use of pirated software..
3. Encourage all public sector organisations to replace the manual system of documentation and records by Computerised system through the use of locally developed Customized Application Software.	No action taken
4. Send Marketing Missions to North America / E. U. consisting of Members from IT Associations and EPB, on a regular basis.	EPB is planning to send marketing missions to USA later this year and Europe in early 2001.
5. To create a Database of all major organizations / institutions engaged in out-sourcing of Software and Data Processing Services, to be made jointly by EPB and Bangladesh Computer Samity (or Software Association, when it is formed), and to maintain a Home Page in the INTERNET.	No action taken
6. Explore the possibility of obtaining business on sub-contract basis from other countries.	Bangladeshi entrepreneurs have already contacted some software firms in India , UK, Germany, Holland and USA.
7. Empower EPB to ensure regular participation in all major International Exhibitions / Fairs for IT products and services.	EPB is organizing participation in COMDEX in USA and CEBIT in Germany. Several Bangladeshi firms are participating.
8. Ask the concerned Trade Associations to organize International Exhibitions / Fairs in Bangladesh.	Bangladesh Computer Samity organized a Software Exhibition in August 2000. BASIS is planning to organize Software Expo later this year.
9. Ask EPB to set up permanent Liaison Offices in the USA and the UK.	No action taken
10. Ask BCC to create a Database of Bangladeshi IT Professionals.	No action taken
11. Encourage IT industry members to take steps for ISO-9000 and SEI certifications.	No action taken
12. Produce sufficient skilled IT professionals for export.	No action taken

(The recommendations in italics refer to short term priority actions).

Annexure B
Information Technology action plan of India

The Government of India, recognising that the impressive growth the country has achieved since the mid-Eighties in Information Technology is still a small proportion of the potential to achieve, has resolved to make India a Global IT Superpower and a front-runner in the age of Information Revolution. The Government of India considers IT as an agent of transformation of every facet of human life which will bring about a knowledge based society in the twenty-first century. As a first step in that direction, the following revisions and additions are made to the existing Policy and Procedures for removing bottlenecks and achieving such a pre-eminent status for India.

The revisions and additions are aimed at accomplishing the following basic objectives:

i) Info-Infrastructure Drive: Accelerate the drive for setting up a World class Info Infrastructure with an extensive spread of Fibre Optic Networks, Satcom Networks and Wireless Networks for seamlessly interconnecting the Local Informatics Infrastructure (LII), National Informatics Infrastructure (NII) and the Global Informatics Infrastructure (GII) to ensure a fast nation-wide onset of the INTERNET, EXTRANETs and INTRANETs.

ii) Target ITEX - 50: With a potential 2 trillion dollar Global IT industry by the year 2008, policy ambiance will be created for the Indian IT industry to target for a $ 50 billion annual export of IT Software and IT Services (including IT-enabled services) by this year, over a commensurately large domestic IT market spread all over the country.

iii) IT for all by 2008: Accelerate the rate of PC / set-top-box penetration in the country from the 1998 level of one per 500 to one per 50 people along with a universal access to Internet / Extranets/ Intranets by the year 2008, with a flood of IT applications encompassing every walk of economic and social life of the country. The existing over 600,000 Public Telephones / Public Call Offices (PCOs) will be transformed into public tele-info- centres offering a variety of multimedia Information services. Towards the goal of IT for all by 2008, policies are provided for setting the base for a rapid spread of IT awareness among the citizens, propagation of IT literacy, networked Government, IT-led economic development, rural penetration of IT applications, training citizens in the use of day-to-day IT services like tele-banking, tele-medicine, tele-education, tele-documents transfer, tele-library, tele-info-centres, electronic commerce, Public Call Centres, among others; and training, qualitatively and quantitatively, world class IT professionals.

I. INFO-INFRASTRUCTURE DRIVE

With a target of 30 percent of annual growth rate from the 1998 level of Fibre Optic backbone of 75,000 route kilometres, VSATs of aggregate capacity of over 300 Megabit Per Second, Satellite Transponders of aggregate capacity of more than 3000 Megahertz and in the corresponding 'last mile' Wireless Communication as well as Data Communication based value added services, the Data and Multimedia Info-Infrastructure Policies are liberalised as under:

(1) INTERNET access nodes will be opened by DoT and authorised ISPs at all District Headquarters and local charging areas by 26th January 2000. As an interim measure, and till nodes are provided in all local charging areas, access to nearest INTERNET access nodes will be on local call rates with effect from 15th August 1998. ISPs will be responsible for ensuring that this facility is not misused for telephone traffic.

(2) Voice & Data Communication is permitted for IT Software Development and IT Services on dedicated or leased circuits, but no telephone traffic is permitted. Surcharge on 64 Kbps and higher capacity circuits for voice-cum-data applications is withdrawn with effect from 15th August 1998.

(3) Doubling of the lease rental charged by DOT for high speed data circuits leased by Closed User Group (CUG), Licensees of Basic Service, Cellular Service and other Value Added Services and users shall be reduced to single normal lease rental charge.

(4) Requests made by public sector Software Technology Park (STPs) or Private Sector STPs or IT promotional organisations approved by the Government for release of bandwidth shall be acted upon by the VSNL by intimating INTELSAT within two weeks of receipt.

(5) Setting up of Central call centres by IT Service Providers shall be permitted for which DOT and other Basic telecom Service Providers will make available bandwidth.

(6) Intelligent Network (IN) Services including free phone and premium Service (e.g. 1-800 and 1-900) Services shall be introduced by DoT by 31 December 1998 in several cities over an Intelligent Network (IN) Platform.

(7) For setting up ISP Operations by companies, there shall be no license fee for first five years and after five years a nominal license fee of one rupee will be charged.

(8) The monopoly of the VSNL on International Gateway for INTERNET shall be withdrawn and authorised public/government organisations will be allowed to provide INTERNET Gateway access directly without going through VSNL Gateways. Private ISPs are allowed to provide such Gateways after obtaining Defence clearance. Suitable monitoring mechanisms will be put in place to take care of security considerations.

(9) The Railways, Defence, State Electricity Boards, National Power Grid Corporation as well as organisations like ONGC, GAIL and SAIL who have rights of way shall be allowed to host fibre optic backbone. These organisations shall be allowed to provide service to the public based on this backbone by having an interface with the existing or new public networks, but without necessarily having to go through DOT network.

(10) Networks such as NICNET, STPs, as well as private networks shall be allowed inter-connectivity without necessarily having to go through the DoT's INET network.

(11) Providing access to INTERNET through authorised Cable TV shall be permitted to any service provider without additional licensing.

(12) The 'last mile' linkages shall be freely permitted either by fibre optic or radio communication for IT application enterprises, IT promotional organisations and ISPs. In case of radio linkages, coordination by the Wireless Adviser will be observed to avoid frequency interference.

(13) The radio frequency band in the range of 2.4 - 2.483 GHz shall be open as 'public wireless’ for any Government organisation or PSU or Private Sector Company to set up Spread Spectrum based non-interference type Wireless data/multimedia communication equipment subject to a maximum of 4 Watt EIRP; WPC will periodically issue a district-wise directory of two or three selected sub bands of 10 MHz each for each of the districts on the criteria of least congestion and reserve these sub bands maximally for the exclusive use of Spread Spectrum Communication as above. The use of the band will be on the basis of non-interference, non-protection and non-exclusiveness. Private sector, Public sector and Government operators shall bilaterally obtain Defence Clearance for location, the area covered and the frequency sub-band: The Private Sector Units will be required to obtain MHA clearance directly; The security agencies shall convey their decision within 30 days of application failing which the application would be deemed to have been cleared from the security angle; If cleared, the Private and Public Sector operators shall be required to obtain a registration and automatic license directly from WPC by producing the copies of security clearances; the Government operators will directly register with WPC; WPC will be empowered to monitor the violation of the above conditions and impose penalties on defaulters in three stages: Written warning, monetary penalty and debarring for two years. A Public Wireless Technical Audit Unit comprising a representative each from the Defence, DOT, NIC and from NASSCOM for the limited purpose of representing private user interests, shall monitor the implementation of the above policy.

(14) Data communication requirements for Electronic Commerce (EC/EDI) shall be met by DoT in a liberal framework by assigning the highest priority under their priority classification if the EC/EDI requirement is certified by authorities in Government authorised by the Ministry of Commerce.

(15) Public TeleInfo Centres (PTIC) having multimedia capability specially ISDN Services, Remote Database Access, Government and Community Information systems, Market Information, Desk Top Videoconferencing, TeleInfo and INTERNET/Web Access Services shall be permitted and encouraged by the Government. DoT and other Basic Service Providers, Value Added Service Providers and authorised IT promotional organisations shall be permitted to promote these services on non-exclusive basis. No license fee will be charged for operating these services and the usual tariff, where applicable, will be payable by the PTIC Service providers/franchisees. Efforts will be made by DoT and other Service Providers to upgrade STD/ISD PCOs to convert them into these powerful PTICs for which ISDN or other digital facilities shall be provided on priority without necessarily having to make additional investment on this account.

(16) DOT shall take suitable action to delicense Multimedia services, including FAX, provided by PCOs.

(17) To enhance the pace of PC and INTERNET penetration in remote and far-flung areas in the country, the Defence Services shall enable provisions of connectivity for civilian applications to their communication backbone.

(18) Existing Software Centres by themselves may not be able to fulfil the high targets now set for the IT industry by the year 2008. International experience has shown that hi-tech industries flourish essentially in the rural hinterland adjacent to cities with modern telecom and communication infrastructure and top class hi-tech educational/research institutions. India will promote such 'Hi-tech Habitats' in the rural hinterland adjacent to suitable cities. For this purpose suitable autonomous structures will be designed and progressive regulations will be framed to facilitate infrastructurally self-contained self-financed Hi-Tech Habitats of high quality. Initially, five such Hi-Tech Habitats shall be planned and implemented in the rural hinterland of the cities: Bangalore, Hyderabad, Pune, Delhi and Bhubaneswar. It is estimated that progressively 50 such Hi-Tech Habitats can be viably set up by empowering the State Governments to autonomously nucleate them within a technologically progressive and administratively liberal set of guidelines to be prepared by a special Working Group on Hi-Tech IT Habitats to be set up by the Task Force.

II. TARGET ITEX-50

For creating a congenial ambiance for exporters of IT Software and IT Services (including IT enabled services) to reach the export target of US $ 50 billion by the year 2008, the following incentives shall be provided:

(19) (a) Definition: "IT Software" means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine falling under heading 'IT Products', but does not include 'non-IT products'. 'IT service' is defined as any service, which results from the use of any IT software over a system of IT products for realising value addition. The term 'IT Industry' shall cover development, production and services related to IT Products. The term 'IT Software' shall be substituted in place of 'Computer Software' in all notifications.

(b) Finance Ministry (CBEC) shall introduce a new classification called, 'Information Technology (IT) Products' including Computer, Digital/Data communication and Digital/Data Broadcasting products, by recognising the progressive technological convergence of these three categories and in line with the classification list in Attachment A (Section I and Section II) of the WTO (ITA) Agreement and, additionally, Data Communication equipment.

(c) IT Software shall be entitled for zero customs duty and zero excise duty.

(20) A revised Notification giving the following new schedule for the Government of India acceding to the WTO-ITA Ministerial Declaration of 13 December 1996 at Singapore shall be issued by the Ministry of Finance:

In Attachment A, Section I and II of WTO-ITA:

(a) Duty shall be brought down to zero by 1 January 1999 on the following items: Parts & components excluding populated PCBs in HSN 8473.30, all storage devices in HSN 8471.70, ICs above Rs. 1000 in HSN 8542, Stepper Motors in HSN 8501.10, Colour Graphic Display Tube in HSN 8540.40 and Deflective components for Colour monitor in HSN 8504.

(b) Out of the 217 items listed in ITA-I, 94 items which were proposed earlier for zero duty by 1st January 2000 shall now be advanced to 1st January 1999.

(c) The remaining items earlier proposed for zero duty by the 1st January 2003/2004/2005 shall now be advanced to 1 January 2002.

Concomitantly, the following schedule will be adopted:

(d) • Duty on Capital Goods for the manufacture of items in (c),

wherever applicable, becomes zero by 1 January 2000.

• Inputs/raw materials for the manufacture of the items in (c), wherever applicable, becomes zero by 1 January 2001

• Dual-purpose items will be taken care of, wherever applicable, by allowing duty drawback benefits or by treating the supplies to the IT industry as deemed export.

• Zero excise duty is concomitant with zero Customs duty with in-phase reduction.

Additionally, other suitable supportive measures shall be taken to encourage Indian hardware industry to become globally competitive in the light of the revised WTO-ITA schedule.

(21) Customs duty on import of CD-ROMs or Optical Disc Media or Magnetic Media containing text , data or multimedia as content shall be charged only on the media and not on the contents.

(22) Imported IT Products shall be permitted to be taken out of bonded offices or out of Electronics/IT Units under EOU/EPZ/STP/EHTP Schemes after a period of 2 years from the date of import if these are donated to recognised educational institutions, Government organisations and registered charitable hospitals, etc., as defined in the Clause 9.19 of the Handbook of Procedures (Volume I) of the EXIM Policy through a customs notification.

(23) IT Software and IT Services companies, being constituents of the knowledge industry, shall be exempted from inspection by Inspectors like those for Factory, Boiler, Excise, Labour, Pollution/Environment etc.,

(24) With technological advancements in Wide Area Computer-Communication networks, which have brought about 'Virtual Technology Parks' in which IT Software and IT services are developed through online integration of software and services subsystems from widely separated locations in the country, the concept of physical bonding has become obsolete. Accordingly, Software developers/exporters are exempted from Customs bonding at various export promotion schemes including STP/EOU/EPZ, etc. The export obligation shall be the same value as given under the EPCG Scheme. Existing bonded units under the various Software Export Promotion schemes will also be considered under the above scheme.

(25) A clarification shall be issued by CBEC that Service Tax is not applicable on computer software development industry.

(26) The Ministry of Civil Aviation shall issue the following notifications/ amendments in the regulations:

• Export shipment time for air cargo will be reduced to less than 24 hours.

• "Known Shipper" will be introduced to avoid delays on account of cooling off period.

• Cargo companies and other associated agencies to allow consolidation of export air cargo.

(27) Section 80 HHE of the Income Tax Act provides for income tax exemption to profits derived from software and services exports. This section shall be amended as follows:

• The existing formula will be so changed that tax on profits shall not have any relation to domestic turnover.

• The definition of software and export turnover will be changed so as to include IT services exports.

• The benefits of this Section for income tax exemption to profits from exports will be extended to supporting IT Software & IT Services developers.

(28) IT software and IT services shall be deemed as manufacturing activity for the limited purpose of applicability of Section 10 (15) (iv) of the Income Tax Act.

(29) IT Software and IT Services shall be exempted from withholding tax through amendments in the 'explanation' of Section 9 of the Income Tax Act.

(30) For individuals buying IT products including computer, the expenditure shall be deductible under Section 88 of the Income Tax Act.

(31) No gift tax shall be charged for the giver or Income Tax for the receiver on PCs upto Rs. 30,000 of the original purchase price.

(32) For any investment made in IT products and IT software 100 % depreciation shall be allowed in two years for which Ministry of Finance shall take suitable action.

(33) As the traditional method of asset-based funding of working capital would not meet the adequate and timely requirements of fund of the software sector, a differential and flexible approach shall be adopted by giving special dispensation towards working capital requirements of this sector in view of the unique nature of the industry. Accordingly, RBI shall issue, by 15th August 1998, new guidelines with regard to working capital requirements for the IT software and services sector, which would be based on simple criteria such as turnover. Banks shall be advised to give 25 percent of the contract value for 18 months, with the first six months as term loan (without collaterals) and from the 7th month onwards annualised Cash Flow Statements shall be accepted instead of collaterals.

(34) IT software and services industry shall be treated as a Priority Sector by banks for the next five years. This would help to meet the requirements of IT software and services exports, and also the IT industry and applications within the country. Major banks will be advised to create specialised IT financing cells in important branches, where IT Software and Services units are sufficiently large in number. Performance in this dimension will be monitored by the Ministry of Finance.

(35) Against the present estimate of Rs. 400 crores of working capital for the industry, the amount shall be increased to around Rs. 1200 crores by the year 2000 subject to the broad criteria of pro-rata increase for the prospective requirements 24 months ahead as compared to the actuals of the current requirements at any given time. As quantitative targeting is not appropriate, a system will be put in place which would enable substantial increase in working capital provided by the banks.

(36) Bank lending to IT Software and Services exporters shall be made eligible for RBI refinancing with sufficiently low interest rates.

(37) The banks shall be allowed to invest in the form of equity in dedicated venture capital funds meant for IT industry as part of the 5 percent of increment in deposits currently allowed for shares.

(38) Banks/FIs like ICICI, IDBI, UTI and SBI shall set up joint ventures with Indian or foreign companies for setting up of at least four different venture capital dedicated funds of a corpus of not less than Rs. 50 crores each to cater to the credit need of the industry. Such venture capitalists may be allowed to set off losses in one invested company and profit in another invested company during the block of years for the purpose of income tax.

(39) The Company's Act shall be amended to facilitate issuance of Sweat Equity to employees. A new definition No. (66) will be added after definition No. (65) in Clause 2 as under:

"(66) Sweat Equity means equity allotted to promoters, Directors or employees for providing any intellectual property or value addition to the Company".

(40) Ministry of Finance shall include IT software and IT service sector while issuing general guidelines for dual listing of companies, as well as while considering two-way fungability for ADRs/GDRs.

(41) • Dollar Linked Stock Options to employees of Indian Software companies was announced in the 1998 Budget and detailed guidelines on this have been issued by DEA, Ministry of Finance. This shall be modified in accordance with the definition of IT Software and IT Services given under (19)(a) and (b) above.

• Employee Stock option schemes for stock listed in India would also be encouraged. Also, clarification shall be issued that income tax is applicable only at the time of sale and not at the time of excise of option.

(42) Recognising the high velocity of business, high degree of competition and fast technological obsolescence faced by the IT software and IT service exporters, RBI shall be maximally accommodate the following:

(a) A blanket approval for overseas investment for acquisition of software/IT companies across the board for software exporters with previous three years cumulative actual export realisation in excess of US $ 25 million to be given up to 50 % or US $ 25 million, whichever is lower, out of the cumulative actual export earning of the previous three years. This is subject to submission of a certificate of software industry by appropriate authorities.

(b) For FERA approvals beyond this limit, RBI would set up a mechanism for expeditious processing of applications from this sector. This shall be announced by 15 August 1998.

(c) For overseas ventures, a dispensation shall be given for allowing the capitalisation of both goods and services; RBI shall accordingly notify this in consultation with Commerce Ministry by 15 August 1998.

(d) As the present allowable limit of 70% of the contract amount for expenditure abroad does not provide flexibility for utilisation for the purpose of general corporate objectives or for business growth purposes, RBI shall permit IT exporters to freely spend upto 5% of the export proceeds abroad (out of the total 70%) for miscellaneous/sundry purposes to give full flexibility. Also, a new list of allowable expenses under the 70% limit would be worked out by RBI in consultation with NASSCOM.

(e) RBI shall issue revised EEFC guidelines to eliminate restrictions on staggered remittance, second and higher generation subsidiaries and also to allow 20% of the EEFC balances for the use on the following:

i) Advance remittances for downloading software (upto US $ 1 lakh per transaction).

ii) Purchase of equipment and related expenditure

iii) Miscellaneous expenses not detailed in EEFC guidelines (upto 5%) of EEFC balances. Such EEFC accounts shall be permitted for making payments from offshore branches of Indian banks directly.

(f) Use of International Credit Cards (ICC) abroad for a variety of purposes required by the IT Software and IT Services sector shall be permitted, the detailing of which will be carried out by RBI and notified by 15 August 1998, in particular:

i) All payments currently made under Exchange Earnings Foreign Currency (EEFC) Account shall also be allowed to made through International Credit Cards (ICC). Advance payment for IT software and IT services shall be permitted to be done through ICC for which RBI will issue a notification. Notification shall be issued that ICC may also be used for paying for IT Software and IT services purchased over INTERNET or EXTRANET and also for registering domain names.

ii) RBI shall issue a modified and simplified SOFTEX form required for IT Software and IT Services export by 15 August 1998.

(43) In the EPCG scheme a system of self-declaration shall be introduced with 100% post-checking subject to punitive penalty for default.

(44) The value limit for import of IT Products including personal computers shall be reduced from Rs. 1.50 lakhs (c.i.f) to Rs. 70,000 (c.i.f).

(45) Private and public organisations providing IT infrastructure shall be included for duty exemption for importing capital goods. Such service providers, in view of such capital goods imported, shall undertake the export obligations as provided for import of capital goods in the EPCG Scheme.

(46) The India Brand Equity Fund Scheme operated by the Ministry of Commerce shall be made available for Software companies with lower interest and longer interval.

(47) On-site IT Services should be made easier by combating Visa regulations of the recipient countries through a planned diplomatic strategy by the Ministry of External Affairs and the Indian Missions abroad for which MEA will create a suitable dedicated structure. This will also include signing of totalisation agreements, wherever necessary so as to maintain the competitive advantage of Indian companies.

(48) Returns from package software development shall be increased by enabling Indian Marketing companies to set up wholesale companies abroad. They shall also be given maximum flexibility in organising the marketing of package software from India through INTERNET.

(49) For benchmarking our country with our emerging competitors, a study shall be conducted at Government cost once in two years by internationally reputed consultancy companies.

(50) Restrictions on the location of IT software and IT Services (including IT training) companies in residential areas shall be removed.

(51) To enable organisations and companies to identify, explore and plan strategies for Large Niche Markets like Y2K and Euro, nationally and corporate wise, all applicable provisions shall be made applicable on higher priority basis. Through MOC and DOE funds 'India Pavilions' shall be set up in several major IT exhibitions around the world through the initiative and coordination of ESC and NASSCOM.

(52) Recognising the catastrophic effect of the Y2K problem for solving which a few hundred billion dollars are being spent around the world, an immediate investment of Rs. 700 crore as corpus funds shall be mobilised to control the crisis in critical Government, Public and Private organisations and services; efforts to sensitise such organisations in the country facing the crisis shall be taken up by the Government immediately including issuance of Government orders for strict compliance in a time bound manner; a High level empowered Task Force with respresentatives from the Government, Industry Associations, Banks and Financial Institutions, Defence Services, Utility and other Public Service organisations, Railways, among others, shall be constituted by the Government of India.

(53) • 'Mega Web sites' shall be created on INTERNET for promoting marketing and encouraging Indian Software products and packages under multiple initiatives.

• Creation and hosting of websites on servers located in India will be encouraged.

(54) Under DEPB Rupee trade arrangement, IT Software, IT Services and IT product export to Russia shall be permitted with promotional support given by the Electronics and Software Export Promotion Council (ESC), STP, etc.

(55) All promotional and liberalisation policy instruments available to IT Software and IT Services shall be made available to IT enabled services including the Information Content Industry by classifying IT enabled Services as tantamount to IT Software and IT Services.

(56) For promoting Indian Software Packages (system as well as application software) users shall be given fiscal incentives for buying Indian packages. A special screening mechanism will be worked out for identifying the more promising packages developed in India and giving consistent support by the Government as well as the industry for ensuring acceptance in international markets.

(57) Private STPs shall be encouraged to be set up by combining the provisions under (4), (7), (8), (12) , (13), (24), (43), (45), (54) and (55), among others.

III. IT FOR ALL BY 2008

For enabling a proactive drive for 'IT for all by 2008', the following new policy instruments shall be devised and activated.

'Operation Knowledge'

Recognising Information Technology to be a frontier area of knowledge, and also a critical enabling tool for assimilating, processing and productivising all other spheres of knowledge, the Government shall launch 'OPERATION KNOWLEDGE'. The aim of this national campaign will be to universalise computer literacy and also to spread the use of computers and IT in education. 'OPERATION KNOWLEDGE' shall be developed into a comprehensive policy within the next three months. However, the following initiatives shall be taken for the immediate implementation of some of its key objectives:

(58) The Government shall soon launch three schemes -- Vidyarthi Computer Scheme, Shikshak Computer Scheme and School Computer Scheme -- to enable every student, teacher or school respectively desirous of buying computers to do so under attractive financial packages. These schemes will be supported by a suite of initiatives such as lowering the cost of PCs, easy-instalment bank loans, computer donations by IT companies and other business houses, bulk donations of computers by NRI organisations, large-volume bargain price imports, multi-lateral funding, etc.

(59) Computers and Internet shall be made available in every school, polytechnic, college, university and public hospital in the country by the year 2003.

(60) All universities, engineering colleges, medical colleges and other institutions of higher learning in the country as well as Research and Development Organisations shall be networked for a supplementary programme of distance education for improving the quality of education before year 2000.

(61) The seven national level institutions (IITs, IISc.) shall be encouraged to triple their output of students in IT by suitably restructuring the programme.

(62) A National Council of IT Education comprising experts from both the industry and the academicia, shall be set up for defining courses and their content in the light of rapid developments taking place in Information Technology. The Council will also initiate a 'Teach the Teachers' (3T) programme for upgrading on a regular basis the IT knowledge and skills of teachers.

(63) An IT Course Module shall be made a compulsory component of all Degree Courses within a short period.

(64) The setting up of Indian Institutes of Information Technology (IIIT) shall be implemented with urgency to make up for the lost time. Hi-tech institutions like the Indian Institute of Information Technology (IIIT) will be given the Deemed University status without insisting upon the mandatory three-year stipulation.

(65) The Government shall promote the pairing of our Universities with centres of excellence in IT in developed countries.

(66) Specific courses shall be launched in association with the Software Industry and IIMs to provide Project Management skills and develop specialised courses on Software Marketing.

(67) The concept of SMART Schools where the emphasis is not only on Information Technology in Schools, but also on the use of skills and values that will be important in the next millennium, shall be started on a pilot demonstrative basis in each State.

(68) An Institute for Computer Professionals of India shall be set up on the pattern of the Institute of Chartered Accountants of India; the Institute will be nucleated by NASSCOM with initial financial support from the industry and the Government. The Institute will be given the responsibility as an Accreditation Body for IT Education and Training Programmes with full Government recognition in addition to the DOEACC Programme of the Department of Electronics.

(69) To enhance the knowledge base of IT related education at all levels the Government shall establish Information Technology, System Engineering and IT Security Institutes from within existing manpowr of the Armed Forces. The Centres of Excellence in IT Software and System Engineering in the Defence Services will be utilised to the national advantage.

(70) Virtual Institutes in different parts of the country shall be set up to achieve excellence in distance education.

(71) The talent and expertise of IT-trained ex-servicemen shall be utilised for IT penetration in rural India and Government will fully support this offer of the Armed Forces. A Plan will be prepared and implemented for utilising the services of the large number of IT literate defence personnel retiring every year for propagating the IT culture at sub-district levels.

(72) A 'National Qualification Framework' shall be established for computerised online objective system of knowledge acquisition; An 'Educational Credit Bank' shall be implemented for giving flexibility to integrate credits earned in different institutions/systems towards the eligibility for diplomas and degrees.

(73) A specialised sub-committee of this Task Force shall coordinate the setting up of National and State level Digital Libraries Projects.

(74) A pilot project under the aegis of the National Task Force on Information Technology shall be launched in some lead districts, which have already attained universal lite

Promoting e-Competency: Incentives and support services

The Bangladesh Scenario (Not edited by ITC)

The Bangladesh Scenario
(Not edited by ITC)