The secrets about Bangalore
- Published March 21st, 2007 in Economics
Bangalore is a city in India that’s striving to become the next Sillicon Valley (it already is the Sillicon Valley of the Middle East). One may argue — and most people, including me, start with this reasoning — that the main reason for this to have happened was the cheap labor and the math skills of the Indians.
Notwithstanding with those two factors, there’s really one thing that influenced the course of the happenings. It’s the simplest form of capitalism, perhaps more decisive than the cheap labor. Taxes.
The Government of India has cut taxes for at least ten years to all the companies that move to Bangalore. To my understanding, this is a vital issue for countries like Portugal. Saying that we need to provide further academic resources and diplomas to our citizens is not enough — it would probably lead all the people out of the country where they have better conditions and better salaries.
What we actually need to do is get rid of those 25th April phantoms that avoid any kind of economic reasoning and, for once, think economically: “How the hell can we bring companies to our country if in the USA they have better conditions, if on Ireland/Dublin they pay 10% of taxes or less, etc..?”. The answer is simple: provide them with even more tempting conditions.
I know we’re not into the pioneering stuff but for once in our lifetime, can we please do something revolutionary and not another attempt to copy-cat the others (usually bad copies, actually). If someone from the Portuguese Government ever reads this stuff (my logs showed a lot of IPs from gov.pt and they were not from the Department of Justice — which excludes some P* usual readers :-)) then please hold your pants on and do something for our country. We need it.
Having companies paying labor work and zero taxes is better than having zero companies paying zero taxes and zero labor work. Can’t you get it?
Actually, that is not quite true. If it was mostly a matter of taxes no companies would be based in Britain, where corporation tax is virtually the same as in Portugal or the rest of europe.
Lower taxes to attract investment simply leads to a downward spiral where companies move investment to the low taxation country “du jour” - it happened in Europe, Asia and just about everywhere. Bangalore has been growing due to a huge pool of readily available, and yes, cheap, educated labour.
Nuno,
I don’t question the fact that the cheap, educated labor does not make a difference — it does.
What I do believe is that the main reason Bangalore is growing so fast right now boils down to taxes. Labor is quite implicit. No company would move to a country where there are no compatible organic assets (aka educated people). This happened to Ireland — they recovered by dropping their taxes.
Portugal can try educating its citizens as much as possible but if there’s no attractive for companies to move there than you’ll keep seeing a lot of Portuguese people moving out of the country.