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May 14, 1998


Bomb, bomb boomerang!

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Severe anti-nukes sanctions could rebound
dangerously into the heart of Silicon Valley.

Priya Ganapati in Bombay

Given the spurt in Indo-American trade, especially in the information technology industry, it is obvious that the Clinton administration's anti-nukes sanctions will hurt both nations.

What is not obvious is the extent of damage the US IT industry will suffer.

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The Clinton administration announced on Wednesday sanctions to punish India for detonating underground nuclear devices. They stop all foreign aid except for humanitarian purposes, ban military sales and export of technology with military uses, prohibit American banks from lending to India's government and stop loans and loan guarantees from federal agencies like the Export-Import Bank.

Dewang Mehta, executive director of the National Associations of Software and Service Companies, is, however, quick to clarify that the sanctions would affect only government and semi-government agencies and India's hyper growth software industry would emerge unscathed.

He assured Rediff that he has been talking to US Congressmen throughout the day and has the impression that there is going to be "absolutely no effect on the software industry".

Bob Cohen of the Information Technology Association of America told the Washington Post that most US sales to India of information technology involve software.

This is normally sold commercially and probably wouldn't fall under the sanctions, he said. The ITAA represents leading technology companies, including IBM, Electronic Data Systems, AT&T, Microsoft and Oracle.

Cohen also said the sanctions are not likely to interfere with India's growing software development industry, which sells services to US companies, including fixing software to cope with the year 2000 problem.

But Cohen's and Mehta's boldness is in sharp contrast with other experts who are shying from estimating the damage to the US industry.

However, it is unanimous that any severe interpretation of the sanctions will hurt the US software industry badly and this will deter aggressive diplomatic offensive.

Willard Workman, vice-president international of the US Chamber of Commerce, warns in an interview to The New York Times: "The number of companies here at the Chamber that have an interest in India has tripled in the last year and a half. Given the breadth an immediacy of the sanctions the impact will be significant."

He went on to say that it appears imports from India will not be affected and yet companies with operations in India could be affected if they cannot bring in parts.

This leads to an irony where the sanctions may actually strengthen Indian software exports to the US against the imports the industry makes.

Many US computer companies now do software development in India where engineering and programming labour is cheap. Another irony is that the sanctions may strengthen this trend if US immigrant labour comes under pressure.

The Silicon Valley could see a shortage of high-tech workers if Indian citizens are forced to leave.

Over 3,500 Indians work for San Francisco Bay Area software companies, claims Indus Entrepreneurs, an organisation of Indian professionals.

Many have temporary visas that are good for three years and can be renewed for another three.

The sanctions involve all non-humanitarian funds from the United States to India. However, some are worried that US officials may decide that workers who send money back to India are violating the economic sanctions ordered by US President Bill Clinton.

Mehta, however, calls such concerns wild speculation.

But Elisa McGovern, associate director of the American Immigration Lawyers Association in Washington DC does not seem to think so. "That kind of broad interpretation could lead to revoked visas," she fears.

"I don't think we've come across a situation of this magnitude before,'' she was quoted as telling the San Francisco Chronicle. "We won't know how the government will act until we have implementation regulations for carrying out the president's order.''

Sadique Iman of the Indus Entrepreneurs, which represents 700 Indian workers, said it is unlikely that action will be taken against temporary employees.

"Let's not forget that Indians are a million strong in the United States, a force to reckon with. They're extremely resourceful and extremely wealthy.''

But southern California immigration lawyer Darryl Weiss predicted that some Silicon Valley companies might be forced to move part of their software design operations outside the United States in order to find enough qualified engineers.

"Silicon Valley companies depend on the Indian talent,'' Kanwal Rekhi, a prominent Valley entrepreneur of Indian background is reported to have told the San Jose Mercury. "And most of that comes over the wire.''

And if worse comes to the worst, the Indian industry seems to be mentally prepared. R Sivakumar, director of Intel's India Technology Centre told Rediff "If sanctions had been imposed on us 15 years ago, I am speaking only of the software industry, then it may have had some effect. But today, India is a major player in the field of (software) technology and no unilateral decision can just be handed down to us to accept."

Another senior industry analyst from New Delhi, who did not want to be quoted, said "If they stop us from doing business in the US, we will stop Compaq and AT&T from doing business in India. We can survive them."

- With additional UNI reports from San Francisco

Nuked for good?
Experts discuss the threat of sanctions against the world's fastest growing IT industry.

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