Telecom is UAEs Achilles heel!

Richard Dean

DUBAI: After years of paying the price of petty corruption, unreliable infrastructure and laws that allow for high staff turnover, outsourcing firm Netlink is planning to buck a trend by moving from India to the United Arab Emirates.

Dubai, the UAE's trading centre, is setting up the Dubai Outsourcing Zone (DOZ) in 2005 to lure businesses away from high-cost Western countries.

Luxury lifestyles, modern infrastructure, a multinational talent pool and low taxes all add to the UAE's lustre compared to outsourcing kingpin India.

But many businesses doubt whether Dubai will be able to compete with India or cheaper Middle East countries when it comes to costs, especially telecommunications.

"Dubai will own its share of the pie. But will it be a major force in the region? I'm not sure," Todd McGregor, regional vice president and general manager of META Group Inc Middle East, told Reuters.

India's huge, cheap, but well educated English-speaking workforce has attracted companies from around the world. It has created almost a million jobs in software and back-office work in a $12.5 billion industry growing at 30 percent a year.

Dubai is attracting thousands of skilled workers from less affluent countries in Asia and the Middle East, lured by the promise of higher wages and a comfortable way of life.

Kito de Boer, managing director of McKinsey & Co. Middle East, said his company considered Dubai as a destination for its own outsourcing facility that employs 200 people in India.

But Dubai's competitive advantage of a better lifestyle paled before telecommunication costs that are 60 percent higher than India's, he said.

"We did a cost comparison -- India versus Dubai," de Boer said. "Dubai lost out on telecommunications costs."

STEEP CALLING COSTS

IT giant Oracle Corp. said high telecommunications costs were blocking any plans to expand its 35-member Middle East and Africa call centre in Dubai.

Husam Dajani, Oracle's senior vice president for Middle East and Africa, said it was cheaper to telephone neighboring Gulf state Qatar from Ireland than from Dubai.

"The environment in Dubai is very competitive," he said. "Income is tax free which means we can save substantially on wages... but telecommunications costs are our main inhibitor."

In mid-2004, the UAE said it would end the monopoly of Etisalat, the majority state-owned telecommunications provider, paving the way for cheaper rates.

But the government did not set a timetable, or specify which services would be deregulated, which is likely to dim the prospects of the proposed Dubai Outsourcing Zone.

The state-owned zone will be tax-free and offer foreign investors full ownership.

DOZ is a sister development of Dubai Internet City, an industry cluster and home to such firms as Hewlett-Packard, IBM and Electronic Data Systems Corp. -- three of the world's leading outsourcing operators.

McKinsey's de Boer said Dubai might struggle to be price competitive on "low-end" outsourcing such as call centres, but it could succeed as a niche operator in "high-end" outsourcing such as technical drawing and medical second opinions, staffed by middle-income professionals.

"These high-end things are not quite so telecom capacity intensive, they are people intensive. They are much more sensitive about the environment they are in."

Netlink CEO Akash Arora agreed. "Can I attract international staff to live in India? It is very difficult. But people want to come and live in Dubai and the UAE."