Despite a late start, Pakistan's information technology entrepreneurs and the government are hoping to make it big in the global marketplace for outsourcing of IT-enabled services. How have other countries succeeded and where does Pakistan stand?

Naween A. Mangi spoke from New York to Ron Hira, professor of public policy at the Rochester Institute of Technology, and Rafiq Dossani, senior research scholar at the Walter H. Shorenstein Asia-Pacific Research Center at Stanford University.

Software exports, call centres and medical transcription firms have become all the rage over the last three years. Young entrepreneurs are returning after years spent working at major tech firms in the US to start up their own ventures and the government is forecasting that IT will be the next big thing in Pakistan's economy.

So far, the numbers tell a less-than-compelling story. In 2004, although the software and IT enabled services business was worth $300 million, (including hardware the figure is $600 million), exports and outsourcing made up for just $33 million of that. By comparison, India logged $12.8 billion in software and services exports in 2004.

Still, the Pakistan Software Export Board, a federal body set up to promote outsourcing, forecasts that the business will grow by at least 45 per cent annually for the next five years. A lot of that growth will come from call centres and business process outsourcing which last year made up one-fourth of total exports. In the next ten years, the PSEB aims to be at the top of the class of tier two global IT companies.

But as experts and practitioners agree, Pakistan will need more than ambitious aims to meet that goal. Prof Ron Hira, whose new book Outsourcing America assesses the impact on the US job market, says the outsourcing industry is set for rapid growth in the next few years and if done right, developing countries like Pakistan could benefit from the boom.

Hira is an expert who has testified before the US Congress on the implications of outsourcing. "Pakistan isn't on the map yet," he says. "India dominates what most people think about [when it comes to outsourcing]."

Rafiq Dossani, an expert on outsourcing and a senior research scholar at Stanford University says there are several reasons for that. First, is the poor quality of infrastructure.

"When the Internet tanked recently, that created a really bad perception that the country has not thought through even the most rudimentary aspects," Dossani says. "Deregulation in this area is too limited." He says that while voice services have benefited from the deregulation, data services are still uncompetitive.

He says there are too many stumbling blocks since bandwidth is more expensive than in other countries. "The costs are outrageous at four or five times what they should be," he says.

Dossani identifies the thin segment of English speakers as a second hurdle in the way of a flourishing outsourcing industry in Pakistan. "Of the 30 per cent of the population that lives in urban Pakistan, one tenth speak English that's good enough to work at a call centre," he says. "And of those five million or so, only about one million are available to come into this field as the rest are working elsewhere."

Then, he says poor marketing also holds the industry back. "You just don't see the trade body [in Pakistan] working like India's Nasscom to project a positive image," he says. "The Pakistani diaspora has done well and there is a great need to better use that network."

He forecasts that the outsourcing business in Pakistan can be at least $1 billion in size but says this is only possible if alliances are formed with countries like India and China.

"The Philippines has done well by understanding that it cannot reach critical mass on its own and therefore forming alliances and pitching themselves as a second location to offset country risk," he says. Dossani also says Pakistan has the advantage of a highly skilled group of entrepreneurs which "is the reason why the tiny industry does exist."

Hira adds that since Pakistan entered into the industry late, playing catch up is an inevitable need. However, the sector can take advantage of the circumstances in other countries. "India has done a lot of things right," he says. "They have been successful at not just attracting foreign investment but also building their own companies and leveraging the large Indian diaspora," Hira says.

"India is also so talked about that people are comfortable doing business there. But since wages are rising, Pakistan can use that as an entry point." He says that while countries like India have accumulated critical mass and scale, others are distinguishing themselves in different ways.

Eastern European wages are slightly higher than Pakistan and companies in that region have specialized in near-shoring by targeting the European market. Russia, meantime, is aiming at the U.S. market in both services and manufacturing while the Philippines and Malaysia are targeting services.

"The question really is how you separate yourself from the pack," Hira says. "You can compete on price to a certain extent but you have to offer something more to distinguish yourself."

He says U.S. companies are now moving from pilot stage outsourcing to full deployment which indicates both the success of the pilot projects and the rapid growth that is likely to come in the outsourcing market for the next few years. "There will continue to be a backlash from U.S. workers, but by and large there has not been any real policy movement to restrict outsourcing so there is still a large opportunity," he says.

Hira admits that the extent to which a growing outsourcing industry ties into the broader economy in terms of job creation remains unclear but he says, other advantages emerge. "In India, for example, it remains unclear that they've been able to link the benefits [from outsourcing] back in, but the big benefit is that they have created world class management which can then move into other sectors."

Therefore, Hira recommends that Pakistan take a long-term vision not for the next three or five years but for the next two decades. "Right now you can try to pick up the low hanging fruit and absorb the excess demand but don't just think about attracting the individual company to come [to Pakistan]," he says. "Think about how this will fit into the larger set of skills for your country so that you can differentiate yourself much later down the road."

China has a large and growing elderly population, but to be old in China-particularly in the countryside-is to be vulnerable. In the country's rural areas there are few clinics and hospitals, and health insurance is virtually nonexistent. Compared with elderly Chinese living in urban areas, those in rural areas have a shorter life expectancy and a poorer quality of life.

Further, little academic research has focused on the health needs and health status of China's elderly. It is with the goal of addressing this deficit that Pengqian Fang, a trainee with CHP/PCOR's China-U.S. Health and Aging Research Fellowship, recently returned to China from Stanford. Fang is seeking to document the health disparities between China's rural and urban elderly population, and to use his findings to propose healthcare assistance programs for the elderly in rural areas of China.

Fang spent a year at Stanford studying health-services research concepts and methods and developing his research project.

In the project, which Fang refined with guidance from CHP/PCOR faculty, Fang will conduct a detailed survey of the health status, health needs, and healthcare utilization of elderly people in rural and urban areas of China, through in-home interviews in three Chinese provinces with different geographic and socioeconomic characteristics: Guizhou (in southwest China), Hubei (in central China), and Guangdong (in the southeast).

He will conduct the project in collaboration with the health departments of the

three provinces, and with support from Tongji Medical College in Wuhan, where he

is director and associate professor of healthcare management.

Fang's study will be among the first of its kind in China. Such research is needed, Fang explained, because China's elderly population (of whom 70 percent reside in rural areas) is growing steadily, and in the coming years its members will require medical services at increasing rates. According to the country's 2000 census, China has 132 million people over age 65, making up more than 10 percent of the population; the over-80 population, which numbers 10 million people, is increasing by 5.4 percent a year; and about 20 percent of all elderly people in the world live in China.

The elderly in China's rural areas face particular challenges in getting high-quality, affordable healthcare services, Fang explained. There are few clinics and hospitals in rural areas, and there is no government-sponsored health coverage for the elderly (like the United States' Medicare program) anywhere in China. All of these factors put China's rural elderly in a vulnerable position, especially those with disabilities or serious illnesses.

"This research will show the disparities that exist, and it will encourage a dialogue about policies to help rural elderly people in China," Fang said.

Fang plans to conduct his survey in the first half of 2005, analyze the data in the summer and fall, and return to Stanford in November 2005 to present the results. In each of the three provinces studied, the research team will recruit 500 households and will conduct interviews with all individuals age 65 and over who reside there, for an estimated final sample of 2,500 people.

The respondents will be asked for a variety of information, including their income and education, insurance status, health status, daily activities, social activity, mental health, utilization of healthcare services, and accessibility and affordability of medical care. The researchers will also interview community healthcare workers-including physicians, nurses, and administrative staff-to seek information on the health needs of the elderly and the barriers they and their healthcare providers face.

The China-U.S. Health and Aging Research Fellowship, administered jointly by

CHP/PCOR and the China Health Economics Institute (Beijing), aims to improve

healthcare quality and efficiency in China through an exchange program in which

selected Chinese health services researchers come to Stanford to study for six months to a year, and then return to China to conduct an original research project. The fellowship is funded by the National Institutes of Health's Fogarty International Center.

"I have learned very much from Stanford and this program," Fang said. "The classes I attended have given me very useful ideas." He noted that since health services research is still a young field in China-about ten years old-"we learn a lot from the United States, like how to ask the research question, how to get a grant, how to design a study."

One aspect of Stanford that particularly impressed Fang was its emphasis on interdisciplinary collaboration.

"This is a very good feature-the close relationship between different fields," he said. "In my country we are more focused on one narrow field."

Fang said he is interested in establishing research collaborations between Stanford and Tongji Medical College-an idea that he and CHP/PCOR's leadership will be exploring in the coming months.

There is much to admire about the U.S. healthcare system's emphasis on innovation and technology, Fang said. Still, he said, "I don't hope for China to follow the U.S. health system," with its heavy reliance on free-market principles. For one thing, "medicine here is very costly." He cited a personal example of how he fractured his arm in a minor bicycle accident, and how his emergency room visit for the injury, along with a follow-up physician appointment, cost more than $1,000. "I was surprised it cost so much," he said.

A review of the fellowship program conducted by officials at the China Health Economics Institute last fall concluded that it has been successful and valuable. Leaders at the institute said the trainees' Stanford experience has enhanced their intellectual abilities, their knowledge of research methodology, their leadership capacity, and their ability to collaborate internationally.

For over five years the war in Chechnya has occupied a central and neuralgic place in Vladimir Putin's political agenda. In unleashing a renewed military campaign in September 1999-abrogating the cease-fire agreement that had terminated the earlier 1994-1996 war launched by then president Boris Yeltsin-President Putin sought to win American and Western acquiescence in, if not support for, Russia's military campaign by framing the conflict as a war on international terrorism.

However, far from extinguishing the conflict, or confining it within the territory of Chechnya, these policies have contributed to the spread of violence and instability far beyond the borders of the Chechen republic. Instead of pursuing strategies that would address the larger socioeconomic crisis of the predominantly Muslim regions of the Northern Caucasus, marginalize extremists, and win broad support from the population of the region, the brutality of Russian military forces and their local allies in the war in Chechnya and the repressive actions of the security services in neighboring republics have fanned the flames of hostility to Moscow and created conditions for the spread of radical Islamist ideologies and the recruitment of new adherents across the Northern Caucasus.

President Putin has treated the problems facing Russia as a product of state "weakness" and has called for strengthening Russia's unity and state power in response. Ostensibly in order to better combat terrorism, he has introduced a series of measures aimed at strengthening Russia's political unity and executive power at the expense of political pluralism, freedom of information, and civil society development. But by weakening or undermining Russia's fragile and weakly developed system of institutional checks and balances on central power, and reducing the transparency and accountability of official behavior, these policies may well be exacerbating rather than mitigating the challenges facing Russia today.

What began as a secular conflict over the political status of Chechnya has progressively been transformed into a wider struggle involving more radical fighters from other Muslim republics with an avowedly Islamist agenda that now threatens to destabilize the broader region of the Northern Caucasus. The past few years have also seen a rising tide of terrorist actions directed against local authorities and security services in other republics of the Northern Caucasus as well as against the Russian government and population more broadly, including terrorist acts aimed at targets in the city of Moscow itself.

From the dramatic seizure of some 800 hostages in a Moscow theater in October

2002, in which 129 hostages died from the effects of a lethal gas used by Russian security services in a bungled rescue operation, to the September 2004 horrific siege of an elementary school in Beslan, Southern Ossetia, in which over 300 civilians died-over half of them children-these episodes have not only challenged the official assertions that the war could be confined to Chechnya alone but have dramatized the inability of the Russian government to adequately protect the security of its population.

The inept and chaotic handling of many of these terrorist attacks has brought into stark relief the poor performance of the security services, the incompetence of local officials, serious intelligence failures, and above all widespread official corruption. In the Beslan episode, to take just one example, the siege was carried out by some thirty-two terrorists, of several different nationalities, who were apparently able to bribe their way across a series of checkpoints to enter the republic and to utilize weapons and explosives stored on the site beforehand. The local authorities and the federal security services proved incapable of coordinating their actions to control the situation, and the Moscow-appointed president of the republic proved completely inept. Indeed, the most courageous and effective actor was Ruslan Aushev, the former president of Ingushetia, a figure removed from power by Moscow for resisting pressure for more coercive policies.

The Putin government has used these events to justify a series of measures which

are ostensibly intended to more effectively combat terrorism but which appear to

have little relation to the real terrorist threat. First, it has refused to seek a political solution to the conflict in Chechnya and has deliberately sought to undermine possible negotiations or international mediation and to delegitimize potential negotiating partners by demonizing a broad array of Chechen political figures within the country and abroad as "terrorists."

Conflating Chechen resistance with international terrorism, President Putin has explicitly refused to distinguish between more moderate figures and extremists and has exaggerated their ties to international terrorist organizations like Al Qaeda.

Domestically, the Russian government has used security concerns to justify ever greater restrictions on freedom of information, on civil rights, and on the role of nongovernmental organizations, particularly those engaged in the defense of human rights. The military and the organs of law enforcement have been given an ever freer hand, rarely if ever held accountable for their abusive behavior and atrocities against civilians.

Refugee camps in the neighboring republic of Ingushetia were closed and the international non-governmental organizations providing medical care and humanitarian assistance to refugees there were compelled to depart. The mass media have largely lost their independence and editors and journalists have been dismissed or attacked for expressing critical views.

A whole series of measures aimed at further centralization of political power and the strengthening of the executive branch have eroded the already fragile elements of federalism and separation of powers in the Russian political system. The autonomy and political influence of regions and republics has been sharply reduced. Parliament, now dominated by a single pro-presidential party, no longer acts as an independent check on executive power, and liberal political parties and their leaders have been marginalized. Most recently, the popular election of regional governors was abolished in favor of their appointment by Moscow, and a discussion is now under way of bringing even local government under tighter central control by eliminating the election of mayors as well.

Moreover, a high proportion of President Putin's appointees to key positions in

the regions are drawn from the military and security services, selected for their presumed loyalty to the president but often lacking political skills or understanding of local conditions. But the substitution of appointed for elected officials does not necessarily guarantee either loyalty or competence.

In the absence of a competitive party system in which political parties help create a web of ties between the central government and local populations, Putin's centralizing measures could well widen the chasm between state and society.

This growing emphasis on centralization, unity, repression, and secrecy is arguably exacerbating rather than mitigating the problems and making state power even more dysfunctional. In Chechnya and in the broader Caucasus region the brutality as well as the corruption of Russian military and security forces and their local allies-and their extensive reliance on torture, mass roundups, indiscriminate executions, disappearances of civilians, and simple extortion-has embittered many toward Moscow and made it increasingly difficult to win "hearts and minds" and build popular support. Indeed, the lack of transparency, and the difficulty of holding Russian officials accountable for abusive behavior, has led unprecedented numbers of Russian citizens frustrated by the unresponsiveness of their own government to seek redress at the European Court of Human Rights in Strasbourg.

Lacking a positive agenda for ameliorating socioeconomic conditions in the Northern Caucasus, the expanding operations of security forces across the Northern Caucasus, the closure of mosques, and the wave of often indiscriminate arrests have served to drive Islam underground and facilitated the spread of extremist ideologies. Without a coherent and sustained program of economic development that would create employment, housing, and education and offer alternative opportunities to an impoverished and alienated population, particularly young males, and absent a serious effort to eliminate corruption, these trends are likely to worsen.

Russia under Putin is facing a somber future.