18th of September 2012 by Vlad Solodovnik, Sales and Marketing Analyst
We, The Citizens of the World, Compete
“Designed somewhere, made in China” phenomenon surprises no one, but it does illustrate that majority of businesses are global and are becoming more so. Global market is most evident in IT industry, where companies and knowledge workers are least constrained by borders. And the trend is spreading to industries outside IT, no matter now little visibility it gets now. In an environment when any type of work can be potentially outsourced, countries and regions that best position their workforce win.
Ukraine’s Advantage and Challenge
One of Ukraine’s most promising “knowledge economy” exports is software development. Ukrainian IT Community often discusses (sample article in Russian) the pros and cons of emigrating, illustrating that for qualified software developers leaving for developed countries is an expected career milestone. Unlike the low-skilled labor, these highly paid professionals do not mainly leave for higher salaries, but for better quality of life offered by “soft” and “hard” infrastructure. This problem is neither unique to Ukraine, nor too mysterious to try solving.
Barriers that Can Be Overcome
The biggest obstacle to living up to developing countries’ potential is a vicious cycle in which poor infrastructure causes brain drain, while lack of qualified workforce prevents its creation. “Infrastructure” in this sense is a broader term combining “hard” infrastructure (modern real estate, transportation, water and electricity) and “soft” infrastructure (education, healthcare, police, legal systems – even persistent culture and values).
Industrial-era practices suggested public-private partnerships in the form of industrial parks, where government offers tax holidays and infrastructure in exchange for investments and jobs. However, places like China, South Korea, Hong Kong, Singapore, Taiwan and Dubai – all in their own way – overcame “the development trap” by providing more than just free (or cheap) land, no (or low) taxes and access to cheap labor. Adapted, their ideas may apply elsewhere.
New Growth Models Emerge
When growth is slow, budgets in deficit and investors risk-averse, the old growth model stalls. New ideas are needed to jumpstart economic development at as little cost and lowest risk to the government as possible. Some places are doing just that – they outsource country’s economic development to global industry leaders on extreme scale.
Take Honduras. Radically sidestepping all of the country’s infrastructure disadvantages and bringing out its low cost advantages the small Central American country signed private companies to build and run city-states virtually independently from Honduras. According to one government advisor, “it is easier to create something new that will be healthy and safe than to go and deal with the serious problems that exist across the whole nation.”
These new cities will not be walled-off enclaves: citizens of Honduras will be free to travel to, work and live there. However, inside will be the hallmarks of a developed nation: world-class infrastructure, Western legal system, own “soft” infrastructure including police, schools and hospitals. There are many unresolved questions about how the arrangement will actually work, but if it is successful many more locales will be tempted to copy relevant parts of the public-private cooperation model.
Let thousand flowers bloom
Ukraine is preparing with own technology campus projects that aim to help knowledge industry overcome mostly the “hard” infrastructure problem. To continue rapid growth requires many more of such and more ambitious developments. Knowledge economy is global business, and global competition is tough and ever increasing. Being world-class in no longer an advantage – it’s a requirement to participate. This is good news for world-beating professionals, and a challenge to economies everywhere. How are you preparing?
ciklum, innovation parks ukraine, knowledge economy, knowledge outsourcing, nearshore software development, outsourcing eastern europe, outsourcing ukraine, software development outsourcing, technology parks ukraine
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