Canada update – amidst TFWP reforms

Sep 2012

Gagan Sabharwal

NASSCOM

Indian IT-BPO industry revenue crossesUSD 100 billion

INDIAN IT-BPO INDUSTRY

Note: 1) Exports (IT services, software products, OSPD, ER&D, BPO, hardware); Domestic (Hardware, IT services (incl. ER&D), S/W products, BPO)

E: Estimate

Source: World Bank, NASSCOM

• Total revenue: ~USD 101 billion

• Relative to India’s GDP: ~7.5 per cent

• Relative to merchandise exports: ~25%

• Value add: 60-70 per cent

• Exports CAGR: 17 per cent for last 5 years

• Domestic CAGR in USD: ~10 per cent – reflects impact

of variable rupee

4147 50

59

69

22 22 2429 32

6.4%6.7% 6.5%

7.1%7.5%

FY2008 FY2009 FY2010 FY2011 FY2012E

Exports Domestic Percentage of GDP

USD billionIT-BPO revenue aggregate

1

India-Canada total Trade

Indian exports Indian imports Trade Deficit

2.11

2.15

2.11

0.04

3Apr 8, 2023

Source: Statistics Canada

• India currently runs trade deficit

of more $400Mn with Canada

annually

• Trade between two nations is

expected to cross $15bn post FTA

India-Canadian Trade 2010

(In USDbn)

India Canada

1.63

1.53

• India and Canada are both similar

sized economies

• But India has a massive growing

middle class population

Size of the India and Canadian economy GDP

(In USDTr)

Source: CIA Worldfactbook

4

US; $36.3UK; $10.1

Others; $10.9

Canada; $1.5

Indian IT-BPO exports and

Canada’s share (FY11 in USD bn)

• Indian IT BPO companies get less

than $2bn as revenues from

Canada

• Post FTA we believe India will

struggle to keep deficit in check

Industry’s exports and Canada share

IT-BPO Export revenues*

(USD billion)

FY2011 FY2012E

33.539.8

14.2

15.9

11.3

13.0

IT Services BPO S/W prod and Engg

59

68.7

Source: NASSCOM * Excluding Hardware

Changes in the trade visas categories

LMO visa (April – Aug’13 )• ALMO suspended - visas for trusted

companies withdrawn

• Removing 5-15% salary discount

• Customers made to certify that they are not displacing any local worker’s in the next 2 years while awarding the outsourcing contract

• Increased authority to suspend and/or revoke work permits and LMOs ; Sweeping powers like premises inspection without notice and look back years

• New forms, with questions regarding impact of the foreign hire on the Canadian labour market

• A non-refundable processing fee of $275

• Advertising period extended from 2 weeks to a minimum of 4 weeks

ICT visa (Aug-Sep’13)• Wage indicator: e.g. minimum wage

hiked to $90,000 p.a. Vs $50,000 (comparable number)

• Experience: for both related (job-specific) and company experience aspects. E.g. increasing min experience to 5 years instead of 1 year committed at GATS

• Extent of specialized knowledge workers: limiting number of Specialised workers can a company have by putting in arbitrary caps

• Outplacement ban: limiting ICTs assigned to third- party work sites

Sep’2010 – Software pilot project visa stopped

Canada Chapter

• Currently has 20+ member companies in current form

• Many associate members helping us with SME viz. Green & Spiegel, B&M, Deloitte, IDC, etc.

• Not just Indian companies there is fair representation of Global & Canadian MNC’s

• We are reaching out to more companies that leverage Indian talent to be part of chapter

• Chapter id nasscomcanada@nasscom.in has more than 35 participants on the list

Name Organisation

Akhilesh Tripathi TCS

Andrew Shnuriwsky Infosys (Chair)

Gagan Sabharwal NASSCOM

Prasad Ganguli HCL

Rahul Petkar Polaris

Samarendra Bhattacharya Cognizant

Srivastava Kuppala

MSatyam & TechM

Nominated Canada Country Council

Council id : Canadacc@nasscom.in

Outreach program implemented by NASSCOMOrganisation About org TO Title From DFAIT Ministry John Baird Minister EAMCIC Ministry Chris Alexander Minister Minister SibalHRSDC Ministry Jason Kenney Minister Minister SibalCommerce Dept Ministry Simon Kennedy Deputy

MinisterCommerce Secretary

CIC Ministry David Manicom Dir General NASSCOMHRSDC Ministry Alexis Conrad Dir General NASSCOMHRSDC Ministry Steven West Program

DirectorNASSCOM

Industry Canada IT Ministry Alan Beaudoin Dir General NASSCOMITAC IT Association Karna Gupta President NASSCOMCIBC Indo-Canada Council Peter Sutherland President NASSCOMCCCE CEOs Forum John Manley President and

CEONASSCOM

ICCC Indo Canada Chamber Naval Bajaj President NASSCOMCFIB SMB Association of

100K co'sDan Kelly President NASSCOM

IOCC India Ottawa Chamber Chandrakanth Arya President NASSCOMCERC Canadian Employee

Relocation CouncilStephen Cryne President NASSCOM

Markham Mayor City Frank Scarpitti Mayor NASSCOMIndo-Canada FTA Commerce Ministry Don Stephenson Chief

NegotiatorNASSCOM

GR/PA/PR mgmt- Hill & Knowlton hired to manage

Govt relations & Public Advocacy

- Creation of Coalition with CERC

leading

- Meetings with Govt stakeholders

like CIC, HRSDC, Commerce, and

Parliamentarians organized in

Ottawa

- Joint representations lodged for ICT

consultation

Briefing of CEO’s for India-Canada CEO forum in Toronto

Perception Vs. Reality Canada Tech sector

Companies in Canada are not brining Indian tech workers to replace locals

HRSDC approved LMO applications during last five years

Year Total entries

India’s share

India’s ranking

Percentage

2012 213,516* - - -

2011 190,842 6,859 8 4%

2010 179,179 7,817 7 4%

2009 176,800 6,385 8 4%

2008 190,766 7,468 7 4%

Year Total positions approved

India’s share

India’s ranking

% of tech visas

2012 202,510 12,210 4 4.6%

2011 151,055 7,545 4 3.8%2010 140,485 5,910 5 4.1%

2009 131,645 5,250 5 2.7%

2008 204,400 - - -

Entries of foreign workers on ICT visa

Source: HRSDC

• Indian tech workers are not flooding the market in Canada

• India gets 2-4% of the total work permits issued and this number is too

small to have any meaningful impact on population of 40Mn

• Philippines (24%) and Mexico (12%) account for every third work permit

issued

Source: CIC

There is no unemployment in Canadian tech sector

  Feb-13 Mar-13Feb to Mar 2013

Mar 2012 to Mar 2013

Professional, scientific and technical services

1,326.70 1,337.00 10.3 27.6

• Rate of below 4% depicts shortages

in the marketplace

• In Mar’13, Canada lost 55,000, Vs.

whereas tech sector added 10K

jobs in ‘Professional, scientific and

technical services’

• The data from Statistics Canada

clearly shows IT jobs are thriving

despite downturn Source: Statistics Canada

2.2%unemployment in the

ICT sector in Canada

7.2%unemployment rate in

in Canada

Tech sector consistently adding jobs in the labour market

11

Goods-producing sector

Manufacturing Agriculture Construction Forestry, mining, oil & gas1

Accommodation & food services

Prof, scientific and technical services

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Employment change by sectors (inK’s)

2006 2008 2010 2012

Only sector that has been steadily

adding jobs since 2006

Source: Statistics Canada

Brining in foreign workers does not depresses wages in the tech sector

Overall Rank

Job 

Growth in # of

employees(2006-2012)

Change in salary

(2006-2012)

Projected job openings for every person

looking in 2020

Median annual salary (2012)

25 Software engineer 34% 8% 0.77 $79,997

28 Computer engineer 19% 14% 1.02 $75,005

Source: http://www.canadianbusiness.com/companies-and-industries/canadas-best-jobs-2013-ranking/

• IT jobs continue to thrive despite the downturn and high

unemployment headline number

• Core IT jobs figure in Top 50 Canadian jobs ; and salary

raise are decent given the backdrop

Companies do not use TFWP for undercutting local workers

13

Source: ICTC report

Companies use TFWP to fill skill shortages in the local marketplace

• As per Canadian Immigration law, each

employer has to pay prevailing

minimum wage (PLV) to foreign

workers,

• Besides PLV, companies also need to

pay for air travel & visa costs (for

family), attorney costs, relocation costs,

education costs of the accompanying

children, etc. while employing foreign

workers

• Contracting foreign workers to work in

Canada is very expensive proposition

Vs. local hires if available with right

skill set and if job is for longer

duration / if not permanent

Demand for IT skills in Canada

14Source: ICTC report

As per ICTC report Canada will need about 110,000 ICT workers by 2016

Long term supply chain-STEM course registration declining

15Apr 8, 2023

Full-Time Enrolment in Mathematics and Computer and Information Sciences 1992/93 to 2009/10 Statistics

Canada,

16

Eu

rop

eA

sia

No

rth

Am

eri

ca

11Netherlands

83

75Japan

207

222U.S.

23

24Canada

40

41U.K.

39

37Italy

55

53Germany

11

Eu

rop

eA

sia

No

rth

Am

eri

ca

2

9

5

3

7

38

54U.S.

Canada

13U.K.

12

14Italy

16

18Germany

Netherlands

27

35Japan

•Working age population of the

Canada will stagnate

•Whereas the economy would have

grown by 15% (at an average of

1.5% a year)

• Shortfall will need to be filled by

attracting skilled workforce

Long term - Demographic trendIncreasing imbalance in the Global workforce

Source: UN population prospects, 2004; McKinsey Global Forces Research

2008 2020

Working age population Non-working population

Why can’t companies hire locally?

• Companies have no option to bring in foreign workers if the jobs are of shorter durations (1-3) years ; it is not ethical to hire and fire workers while catering to short durations projects

• In competitive times customers expect productive/ skilled / experienced resources with JIT (Just-in-time) concept as soon as the project is awarded

• Each company has its proprietary framework for resources to deliver on projects that differentiates them from the competition and it is impossible to find such a resource [locally]

• Hiring locally and investing about 12 months for training on proprietary framework and techniques is really not an option for short duration projects

• Besides there are inherit shortages in the local marketplace that deters companies to hire locally even for longer duration projects

As per ICTC report Canada will need about 110,000 ICT workers by 2016 and supply will not match

What should Govt of Canada be doing?

NASSCOM Canada chapter will be happy to partner with Govt on all these objectives

Short term

• Instead of curbing TFWP Govt should be considering ways and means of –

• Tweaking policy to be able to attract ‘best and brightest’ to Canada to keep the torch of innovation high

• Should remove hurdles for the economy to acquire skills in the short term through immigration or trade visas

Long term

• Promoting STEM courses amongst student community to ensure long term supply for the knowledge sector

• Provide grants and scholarships for STEM graduates

• Encourage community programs that promote tech courses amongst the younger generation

ICT visa consultation

Coalition of business – response to ICT consultation

No. Organization

1 CERC

2 Canadian Council of Chief Executives

3 The Canadian Chamber of Commerce

4 NASSCOM

5 Canadian Manufacturers & Exporters

6 Aerospace Industries Association of Canada

7 MAGNA INTERNATIONAL INC.

8 Fluor Canada Ltd.

9 Electro-Federation Canada

10 Canadian Steel Producers Association (CSPA)Karna

11 ITAC - Information Technology Association of Canada

12 Canadian Association of Railway Suppliers

Key highlights

• The current regime of ICT category is efficient and provides business with predictability

• Changes as proposed by CIC are unnecessary and ill conceived

• Will negatively impact Canada’s economy and disrupt business operations in many Canada’s key industries

• Changes will convey a clear message to trading partners that Canada is not prepared to comply with its international trading agreements

Thank you