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The Huaqiao International Service Business Park is currently the only Provincial-level development zone that focuses on the modern service industry in China. Since its establishment in 2006, it has stuck to the general requirement of “integrating with Shanghai, facing the world and serving Jiangsu” and put into full play the advantages of Shanghai in location, Jiangsu in policy and Kunshan in costs. The Business Park, through 8-10 years of efforts, strives to build itself into an international satellite business city with a construction area of 10 million square meters, an output of 100 billion yuan and a business and service workforce of 300,000.
From three years of efforts, rapid progress has been made in the Business Park in terms of service outsourcing, enterprise headquarters, logistics and exhibition, and business service, especially in financial service outsourcing. Currently, a number of financial service outsourcing enterprises from home and abroad have begun operations here and a preliminary value chain for financial service outsourcing has been set up, which has laid a solid industry foundation for Huaqiao to become a nationwide or even world-class base for financial service outsourcing. Recently, the General Office of the State Council republished its “Letter on Promoting the Development of Service Outsourcing Industry” to the Ministry of Commerce, and put forward policies encouraging this sector, which has provided powerful policy support for Huaqiao International Service Business Park, to speed up the development of the financial service outsourcing industry and build itself into a pioneer of the financial service industry in China.
I. Accelerating industry integration and building an industry chain for financial service outsourcing
1. Focusing on Capgemini and other leading enterprises, launching R&D into financial software, developing consultancy and management businesses and raising the level of financial service outsourcing.
2. Actively developing financial BPO, with China Date Group, Yuanyang Data Company, Fujian Star Computer Group, Shanghai Tangram Call Center and Shanghai YinZhi Investment Administration Co., Ltd as the focus and aggressively expanding the scale of the financial service outsourcing industry.
3. Developing financial service outsourcing and the IT infrastructure business with Centrin Data Systems as the major focus, and strengthening the financial service outsourcing industry. Within 3 years, the aim is to introduce a number of renowned enterprises from home and abroad to the financial service outsourcing industry base, with a workforce up to 50,000 and an output of 10 billion yuan.
II. Seeking innovation for development and striving to be a pioneer of financial services in China
(I) Striving to become a state-level service outsourcing training and employment promotion center
The training and employment promotion center for the service outsourced workforce in the Business Park is currently one of the biggest and best equipped carriers for software services and outsource training, it offers the services of talent training, reserves and employment guidance. As a bridge between outsourcing enterprises and universities, this center, taking employment as its key business, sets up manpower models according to specific posts, joins universities, training agencies and enterprises in forming a unified employment channel, this enables the center to realize the target of talent training while at the same time solving the employment problem for students and that of the enterprises in recruiting desired staff. The administrative council of the center, jointly formed by the administrative committee, investors and training agencies, takes care of daily operation and administration work. The first phase, which involves 80,000 square meters, was put into operation on October 28, 2008, and is equipped with 4,000 computers for training, with a capacity of 5,000 trainees, and can accommodate up to 3,500 people. By February, this center had trained more than 2,000 people. At present, it is striving to become a state-level training and employment promotion center for the service outsourcing industry.
(II) Establishing a bonded area for service outsourcing In order to improve the international competitiveness of our service outsourcing enterprises, we plan to establish a bonded area for service outsourcing in areas where this industry is concentrated within the Business Park, impose the supervision model “within the border but with no tariffs,” and grant relevant favorable policies:
1. Enjoying same tax cuts or tax exemption as enjoyed by imported equipment;
2. In undertaking international offshore service outsourcing, foreign customers can entrust their own equipment (like bank databases) to outsourcing enterprises in the Business Park, this kind of “entrusted equipment” with no transference of property right, can be dealt with according to the same approach taken by the customs regarding “charge-free equipment”;
3. The offshore outsourcing business done within the area can enjoy zero tax in reference to the practice of export processing area.
4. A green channel for visa applications of foreign staff working in this area will be built.
These innovative measures will undoubtedly boost the rapid development of China’s service outsourcing industry.
First, slashing costs for enterprises. Since most IT equipment used in the outsourcing industry is imported, according to China’s current policy, this equipment cannot enjoy tax cuts or exemptions, high import tariffs will increase the costs of service outsourcing enterprises, and will impede China’s process of undertaking industry transformation. The favorable policies of cutting or eliminating taxes on the equipments within the bonded area will greatly slash the costs of the enterprises.
Second, improving customs clearance efficiency. The advanced equipments used in high end service outsourcing projects need frequent upgrading, the current management rules on imported equipment makes a lot of domestic subcontractors unable to undertake service outsourcing orders that require quick response, which has affected the healthy growth of our service outsourcing industries. The practice of “within the border but with no tariffs” can dramatically reduce the time spent on customs clearance.
Third, ensuring safe operation. International contractors always pay great attention to the operating environment of their subcontractors, and have very high requirements for safety and stability. However, IPR protection regarding the service outsourcing industry and market competition mechanisms in China is not yet complete. The establishment of the bonded area will ensure the operating safety and allay the fears of contractors.
(III) Setting up an industry fund for financial BPO
The Business Park has cooperated with Ashe Capital Management Ltd in setting up a financial BPO fund, with the aim of accelerating BPO industry integration with equity investment, and boosting BPO industry upgrade with international mergers and acquisitions.
The first function of the fund is to turn passive business promotion into active business promotion, effectively expand business promotion channels, and attract world renowned brands and professional talents through mergers, acquisitions and management within the BPO industry.
The second function is to effectively attract capital (according to the relevant agency, the leverage capability of the fund can be as high as 1:60), this can provide necessary capital supply chains for upstream and downstream BPO enterprises from home and abroad, and achieve industry upgrade and reasonable allocation of resources.
The third function is that it can reach better economic results: firstly, it is a good opportunity for international mergers and acquisitions since now the international market is in a depressed state; secondly, the slashed costs of BPO enterprises from shifting toward domestic market can turn into immediate economic results; thirdly, in the mainstream Pre-IPO investment projects, enterprises can successfully go public after reorganization and reach considerable economic results.
The scale of the fund can reach up to 1 billion yuan with 200 million yuan from the government, and 800 million yuan gathered from domestic and overseas markets by professional fund managers. At present, various preparation work for the fund has concluded, so that the fund will be put into official operation in the near future, and will become the first financial BPO fund in Jiangsu province.
(IV) Establishing a permanent venue for the “Annual Summit on Financial Service Outsourcing”
It is suggested that one summit on financial service outsourcing is convened every year, and that the venue is the Business Park. With the wisdom of scholars and experts from home and abroad as well as industry elites, in-depth exploration and study on theories regarding financial service outsourcing, practical application in this industry and market status will take place at this summit. In the meantime, the summit will make use of the trend of increasing service outsourcing to set a specific theme and reach a consensus among authorities in the financial industry to create an opinion leader and increase the fame and influence of the financial service outsourcing industry.
The Business Park is within the “Shanghai Half-hour Economic Circle,” and enjoys a boosting effect from the city; with distinctive characteristics and considerable scale, Huaqiao is striving to build itself into a pioneer area in the financial service outsourcing industry. Therefore, Huaqiao will become the perfect candidate for a permanent summit venue.
(V) Involving enterprises with advanced business models into the group of enterprises with advanced technical services
Considering the industry features of service outsourcing, the Zone suggests that service outsourcing enterprises cut costs through technical innovation; improve output through optimizing business process; create new jobs through specific training; and increase international competitiveness using enterprises with advanced technical services. With this type of enterprise, although educational background of the workforce is low and proportion of their offshore outsourcing business may not be able to reach 70 percent, advanced business models are of great significance in boosting the development of service outsourcing, increasing international competitiveness and increasing employment.
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