World Bank in Action – Act of Justice or Economic Stratagem

Satyam Computer Services, Wipro, Megasoft Consultants Ltd, and another 3 major software exporters from India are on WB’s list of debarred companies. According to news agencies, it is due to inconsistencies in their financial representations, charges of bribery and lack of proper documentation of invoices. Satyam alone has been banned for eight years.
There is little doubt that South Asia, esp. India has emerged as a major exporter on the IT scene, owing to its cost effectiveness and HR ‘deposits’. WB’s decision couldn’t have come at a better time, as India’s software and services exports were expected to rise 21 to 24 percent to around $50 billion in the year to March 2009, moderating as a downturn in the U.S. economy crimps outsourcing demand.
The fifty billion figure is a heavy amount to lose to imports, for any economy, US or otherwise.
Does this course of action imply a shift in the US IT sector policies, or is it really a co-incidental act of justice, simultaneously administered against 3 of the top software exporters of India.
Furthermore, how do you feel this will impact the global IT/outsourcing scenario, accompanied by recession sinking its fangs into the West.
Will this move have the desired effect? Or will India find better business elsewhere? Most importantly, will other nations capitalize on the situation at hand, and look towards capturing major stakes on the IT scene?
Related links:


  • IT in India and the sub continent is going through something very much like the “dot com bubble” experienced here in the US during the later part of the 1990’s. Salaries have shot up, revenue has shot up, companies have appeared suddenly with managers who got giddy. We see the effects now.
    Here in the US, we are experiencing a very difficult period. We may see government incentives to hire locally and long term I think we will see improvements in an educational system that suffered in the past administration. Those improvements will improve our local labor supply. The economic downturn reduces local labor costs by about 25%.
    All this makes things much more competitive. I personally believe that quality and reliable delivery will be more important than price. You mentioned “cost effectiveness”. I think this is limited thinking and the focus has to be on quality. When the dust has settled it will be about how good your team is more than where it is, and that is true for all of us.
    I recently had a discussion with your colleagues at Ephlux about the reliability of your infrastructure, a common concern. The next day we had a massive snow storm and our power was out for 20 hours. It was a week for people in nearby towns. This puts things in perspective doesn’t it?
    We live in complex times. This makes for opportunity for those who think on their feet. Remember, Apple and Microsoft were both founded and flourished in the opportunities created by the last major US down turn in the 1970’s. There were scandals then, major upsets, lots of unemployment and some people built some very large companies on what remained.
    The short answer to your question is, Maybe in the short term, no in the long term. There is plenty of work for everyone who is talented and hard working.

  • This kind of acton harks back to the late 1800s, when pushback against increasing globalization set the stage for the nationalistic thinking that gave us World Wars I and II and the Great Depression.
    If the West should batten down its hatches against perceived cheaper foreign competition (which I admit can be painful), there is a very real risk of an East-West armed conflict somewhere down the road.
    I have no way of knowing whether there are actual financial irregularities in the Indian IT providers, but your post indicates an odd series of coincidences that have transpired to sideline them at just the moment the West is seeking to regain its footing in what has become an extremely lucrative area of endeavor–and one which knows few effective barriers to international intercourse, among them the availability of capital.
    I’m not comfortable with it at all. Maybe it’s time to investigate the investigators?

  • Well the World Bank has never been a friend to the poor in economic bad times . In his book “Globalization and Its Discontents” Nobel Laureate Joseph E. Stiglitz describes how loans were forced upon South American countries during their economic boom of the 80’s.
    During the 90’s these countries had to give up all their GDP to the World Bank in order to pay interest on loans they did not want in the first place.
    This is a pivotal time for India and the World Bank as India is moving into position to be the new debt slave of the World Bank.

Leave a Reply