World On Brink Of Surge In Offshore Provision Of Services: U.N.

GENEVA (AFP) - Multinational companies are on the brink of shifting more services to cheaper locations abroad as the trend towards "offshoring" in the sector reaches a "tipping point," a UN report said.
The UN Conference on Trade and Development (UNCTAD) warned the predominantly industrialized countries which are the source of Foreign Direct Investment (FDI) that it would be "short-sighted" to resist the trend by forcing corporate service jobs to stay at home.
"It may well mark the next stage in the evolution of the international division of labour," the agency's 2004 World Investment Report said.
The report pointed out that economists regard the offshore provision of services, such as locating western airline reservation centres or computing services in India, as "the cutting edge of the shift in global economic activity."
But UNCTAD emphasized that the trend was still at an early stage, and countered the current perception of job losses in the United States and in western Europe due to "outsourcing" to the developing world.
"Even among the world's 1,000 largest companies, some 70 percent have still not offshored any business processes to lower cost countries," the report said.
However, UNCTAD estimated that investment in offshore "business processing" would expand from 1.3 billion dollars in 2002 to 24 billion dollars by 2007, although it would not necessarily all flow to developing countries.
"This is essentially a north-north phenomenon. There is a myth that essentially offshoring is done to developing countries, this is not true," said Carlos Fortin, the agency's deputy secretary general.
"Most of the offshoring in the world takes place among developed countries and privileged locations are Ireland, Canada and Israel," he told journalists.
Ireland still leads the global market for offshore services related to information technology with a 25 percent share of the market, according to the report.
"India is also an important location, but it is the only one in the developing world," Fortin added.
Fifty percent of telephone call centres shifted abroad went to developing countries during 2002 and 2003, the report said.
Overall investment in offshore industrial plants and services accounted for only 32 billion dollars of the global total of 720 billion dollars in foreign direct investment, UNCTAD said.