ExploringGlobalFrontiers - KPMG

IT ADVISORYExploringGlobalFrontiersTheNewEmergingDestinationsADVISORY

IntroductionEgidio ZarrellaGlobalPartner-in-Charge,ITAdvisoryGlobe trotting is a familiar term today, not only to an avid traveler, but also to growing ITand BPO enterprises. Rapid Gross Domestic Product (GDP) growth in developing countriesin the last few years has been a motivating force for globalization. Countries in thedeveloping markets are offering lower cost destinations for outsourcing services, and alsoaccess to their markets which have high growth potential.A favorable business environment, access to a good supply of talent, good quality of lifeand lower costs are some of the factors that are being sought out by IT-BPO companiesinvesting in emerging locations.As the existing favorite locations start to become saturated, newer cities are emerging,offering “new and improved” incentive packages and talent, that is better geared for theoutsourcing industry. Our choice of 31, though dominated by cities in developingcountries, also includes some onshore or near-shore developed city-country pairs, that webelieve may also be valid competitive alternatives to the existing favorite locations suchas Bangalore and Chennai.Some of these destinations are hot tourist spots, and therefore, are more visible on theworld map. Then there are other locations which are relatively unheard of, but are seeingtraction as they have historically had a good education system and are working onimproving their infrastructure.Governments keen to get a piece of the outsourcing pie, are offering various incentiveprograms to bring IT-BPO business to their countries. Some cities are also becomingactively involved, independently promoting their capabilities and available programs. Tocreate a “unique selling point”, specific services such as accounting, research anddevelopment, and animation are being promoted.The options available are immense, and “the world is my playground” is an appropriateexpression in the outsourcing industry today. However, it is imperative for enterprisescomparing the alternatives to consider the risks and rewards associated with theemerging locations versus the more established locations. A “one-size-fits-all” strategymay not be appropriate with location selection. Companies should consider their needs,and align their vision with what different locations offer when considering their locationassessment strategy.©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

The Importance ofSelecting an optimum location for a new investment is a critical issue in all industries, regardless of the size of the company, or the typeof operation that it is planning to establish. Being in the right location is as important for the automotive or electronics OriginalEquipment Manufacturer (OEM) that is considering where to establish a new billion-dollar manufacturing plant, as it is for thebiotechnology start-up considering where to locate its clinical trials or development operations. Although the specific criteria may varyacross companies and industries, the overall process for selecting a new location tends to be similar, and this process has been refinedover the years.Within the IT-BPO industry, the approach to selecting locations has developed its own set of processes and practices. To start with, thereseems to be a strong focus on workforce availability and costs, often at the expense of other factors. This is not surprising given theimportance of skills and salaries to IT-BPO operations. The availability of skilled employees is critical to the success of a new softwaredevelopment center or BPO delivery facility. Similarly, a labor pool that is large enough to accommodate the anticipated levels ofworkforce turnover and future growth is essential for companies planning to establish operations of significant scale.However, even the best workforce cannot compensate for inadequate telecommunications infrastructure that require companies toinvest millions of dollars in dedicated lines and redundancies. Similarly, some cities with a large and affordable skill pools, lack moderncommercial real estate required to house sophisticated IT operations. Local political conditions and business practices in some locationsmay make setting up and running a business a costly and frustrating experience. A large number of graduates in itself does not imply theavailability of adequate skills, as the quality of education systems and level of graduate preparedness among universities and collegescan vary tremendously, even within the same city or country. Although these and other factors are considered to varying degrees in mostlocation analyses, their importance and potential impact on costs and ease of operations is often underestimated.A large number of location studies usually compare entire countries, brushing over the significant differences among cities within largeand diverse countries such as India, Russia, Brazil or even the Ukraine. While the country level ranking may provide a convenient startingpoint for further analysis, using them as a basis for making strategically important location and investment decisions may be risky.Location decision making within the IT-BPO sector has also become characterized by a rapidly changing landscape, and a quest todiscover new locations where competitors have not yet ventured, and the labor market remains unexploited. Examples abound of citiesthat have been moved from being virtually “untapped” to “saturated” in a few short years, as companies enter to benefit from theavailable and affordable workforce. As word spreads, “crowding-out” sets in, with tightening labor markets, rapidly rising costs andstrained infrastructure leading some companies to set out in search of new opportunities. While similar phenomena exist in othersectors, this has been repeatedly demonstrated in the IT-BPO sector’s search for new offshore or near-shore locations in recent years.In general, while companies in the IT-BPO sector have high expectations for investment locations, they often underestimate the processneeded for getting to the right result.1©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Location SelectionThere are few “short-cuts” to finding the right location, and although all eventualities cannot always be considered in advance, a basiclocation analysis should adhere to the following basic principles in order to increase the probability of yielding the optimal result.NeedsRequirements should be accurately defined and articulated in a manner that reflects the company’s requirements. What skills do weneed? How can our requirements be measured to some degree of accuracy? Are we considering all the important aspects of ourbusiness? How can we choose location criteria that anticipate changing conditions in the investment environment or our ownbusiness?PrioritiesDefined needs should be weighted to reflect the specific preferences of the company. This requires a process that is bothmethodologically sound while generating consensus from key stakeholders regarding project priorities. Simply scoring criteria on ascale of 1 to 10 or using “off-the-shelf” weightings that reflect the preferences of other companies do not adequately capture anindividual project’s specific situation and requirements.CompromiseExpectations regarding project deliverables should be realistic. Companies tend to want the “perfect” location – skilled labor, lowcosts, state-of-the art infrastructure and an accommodating government and business environment. The bad news is that the perfectlocation does not exist – there are always trade offs, and companies must be clear about how much of “factor A” (say costs) they arewilling to give up for a little more of “factor B” (say ease of doing business). Expectations regarding timing should also be realistic.Site Visit:In the age of online databases and freely available country rankings, it is easy to underestimate the difficulty of obtaining reliable andaccurate data. There are no online databases comparing the graduate output of various universities across India. Neither is there areliable source of labor cost information for IT programmers in central and eastern European cities. Information of this type can onlybe obtained through thorough primary research, which involves gathering accurate data through conversations with people on theground that are familiar with the relevant investment conditions. Do not underestimate the value of a site visit and conversations withother experienced business people conducting business in that location. For example, local business groups, professional associationsand chambers of commerceLocation Specific DataFinally, the analysis should always focus on cities and not countries. Although country level information may be helpful with respect tofactors such as business regulations, tax and overall industry size, the real factors affecting the ability to set up and operate abusiness vary significantly at the city level. As indicated above, using country level data to compare countries such as India or Russiais unrealistic and blurs the often immense differences in costs and conditions between cities. Even within countries as seeminglysmall or homogenous as the Philippines, labor costs can vary significantly across cities. One reason why so many studies tend tocompare countries rather than cities is that accurate information on cities is simply more difficult to find.©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.2

Executive SummaryThe31citiesinouranalysisare“emerging”inthattheyarelesserknownalternativestothemoreestablishedorrecognizedcitiesforIT­BPOoperationsinthethreeregions• SouthandNorthAmerica(AMERICAS)• Asia,India,JapanandAustralia(ASPAC)• Europe,MiddleEastandAfrica(EMA)Tosomedegree,allofthecitiesinthisreporthavebeen“discovered”bysomecompanies,yetthereisavaluepropositionfornewentrants.Advantages offered by the Emerging CitiesTheadvantagesofferedbythe31citiesvaryconsiderably,evenassomecommonthemespanout.Lower costsAlmostassumedinanyIT-BPOlocationselection,eachofthe31citiesofferarelativecostadvantagetomajoroutsourcingmarkets,butthesizeofthearbitragevariesgreatly.Typically,thecitiesindevelopingcountriessuchasVietnam,ChileorRomaniaofferalargercostadvantage.ThecitiesintheUnitedStatesofAmerica(US),CanadaorAustraliaarecomparativelymoreexpensive,butstillhavearelativecostdifferentialwiththelargercitiesintheircountries.Size of workforceThepopulationvariessignificantly–withPortLouis(Mauritius)beingthesmallestamongthe31cities(populationof130,050 1 )andCairo(Egypt)beingthelargest(18millioninthemetropolitanarea 2 ).However,thesizeoftheworkforceavailabletotheIT-BPOindustrydependsonavarietyoffactors–suchas:• Theproportionofgraduates,Cluj-Napoca(Romania)isastudenttownwithalargenumberofcomputergraduates 3• Competitionavailablefromother/competingindustries-thecallcenterindustryfacescompetitionfromthetourismindustryinsomecities• In-migration-Calgaryreceiveslargein-migrationfromothercitiesinCanada 4 .Wehavehighlightedtheopportunitiesaswellasconstraintsofvariouscitiesintheindividualprofilescontainedinthispaper.Quality of talentThequalityandnatureofthetalentpoolvariesacrossdifferentcities.Gdansk(Poland),forinstancehasalargenumberofresearchanddevelopmentinstitutions.TheuniversitiesinCampinas(Brazil)areknownhubsforinnovation,producingalargenumberofpatents 5 .Ahmedabad(India)producesalargenumberofaccountinggraduates.ThetalentpoolinCairohasaninherentserviceorientation,onaccountoftheboomingandlong-standingtourismindustryinEgypt.Linguistic and cultural similaritiesTypically,thenear-shoreemergingcitieshavestronglinguisticsimilaritiesandculturalcompatibilitywiththenearbymarkets.TheCentralandEastEuropeancitiesaretoWestEurope,astheLatin3©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMG1 Mauritius Government, Central Statistics Office estimates, 20072 Government of Egypt, Census estimates, 20063 Cluj Property and Investment, 20084 Statistics Canada, Census estimates, 20065 Rosana Ceron Di Giorgio, From University to Industry: Technology Transfer at Unicamp in Brazil, IP Handbook of Best Practices, 2007

AmericancitiesaretoNorthAmerica.However,therearesomeinterestinganomalies.BuenosAires(Argentina)cantapbothNorthAmericanandEuropeanbusinessduetolinguisticsimilaritieswithbothregions(Spanish,PortugueseandEnglish).Similarly,accentsimilaritieswiththeUSmeanthatcitiesinthePhilippinesarewellsuitedtoservetheUSmarket.Dedicated infrastructure for IT-BPO companiesDedicatedbuildingsorcomplexesforIT-BPOcompaniescompletewithbasicinfrastructureandfacilitiessuchaspowerandtelecommunicationareavailableorbeingconstructed,inmostofthe31cities.Somecitieshavegoneastepfurtherandsetupareasforpromotingspecializedservices–forinstance,theGujaratInternationalFinanceTech-City 6 inAhmedabad(India)andtheTunisFinancialHarbor 7 inTunis(Tunisia)aretobededicatedforfinancialservices.Changsha(China)hasa“CartoonCity”tohouseanimationcompanies 8 .Quality of LifeThisparametervariesacrosscities,withsomecitiessuchasBrisbane(Australia)orCuritiba(Brazil)globallyrecognizedasgreatplacestoliveandwork.Insomeoftheothercities,thereareissuessuchasairpollutionortrafficcongestionduringpeakhours.However,theoverallbusinessenvironmentmaynotnecessarilybeaffected.Government Support and IncentivesThegovernmentsaretakingactiveinterestinmarketingtheircitiestoIT-BPOcompanies.Competitivemonetaryandnon-monetaryincentivessuchasquickerclearances,facilitationwithrealestateandrecruitmentaresomeincentivesonoffer.Forinstance,inGuadalajara(Mexico),thetimetakentosetupbusinesshasgonedownconsiderablyinrecentyears.PortLouis(Mauritius)provideseasyworkpermitstoencourageexpatriatestoworkintheotherwisesmallcountry.Othereffortsincludeencouragingtechnicaleducation(suchasinSantiago,Chile 9 )orthestudyoflanguages(suchasEnglishintheChinesecities)tobetterpreparethetalentpool.6 http://giftgujarat.in, GIFT website, December 20087 http://www.gfh.com/en/our-business/tunis-financial-harbour.html, Gulf Finance House website, December 20088 http://www.greatdreams.com.cn/english/body.asp?NewsID=476, Great Dreams website, December 20089 Ministry of Education, Higher Education in Chile: Aiming for Quality, March 2005©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.4

North and South America (AMERICAS)Thenear-shoreadvantage,linguisticandculturalaffinity-withthekeymarketsofNorthAmericaarethetopdriversforcitieswithintheAmericasregion.TheLatinAmericancountriesareleveragingthelanguageadvantagetoprovidecallcenterandback-officeservicestoNorthAmericancompanies.ThecitiesintheUSandCanadaareemergingasonshorealternativesforNorthAmericancompaniesandaretypicallytappedforhigher-valueaddingservices.Byandlarge,infrastructureiswelldevelopedintheAmericascitiesandthequalityoflifeisgood.Thehigh-techorInformationandCommunicationsTechnology(ICT)sectorisaccordedprioritybythelocalgovernmentsinmostcities.City**IT services Call center Back-officeservicesResearch anddevelopmentEngineeringservicesOther servicesBuenosAires CreativeservicesCampinas Curitiba Calgary Winnipeg Santiago Guadalajara Queretaro Boise IndianapolisSource: KPMG, Exploring Global Frontiers, February 20095Asia, India, Japan and Australia (ASPAC)Mostofthe10emergingcitiesintheAsia-PacificaretierIIorIIIcities*inthe“veteran”suppliercountriesofIndia,China,MalaysiaandthePhilippines.TheoneexceptionisHoChiMinhCityinVietnam.Thecityisanimportanteconomiccenter,andlooksbetterpoisedtoleveragetheoutsourcingopportunity,whichVietnamhassofarstruggledtoleverage.TheAsiaPacificcitiesbyandlargeofferlowercosts,goodtalentpoolswithlowerattrition,andbetterqualityoflifethanthetierIcities.TypicallyabletoprovidealargerangeofoutsourcingservicesincludingIT,BPOandKnowledgeProcessOutsourcing(KPO),mostoftheAsiaPacificcitiesarealsoabletoofferrelativescalabilityinoperations.MajormarketsservicedaretheUS,UKandJapan.City**ITservicesCallcenterBack-officeservicesResearch anddevelopmentEngineeringservicesOther servicesBrisbane AnalyticsChangsha AnimationandgamingHangzhou Ahmedabad Jaipur Nagpur Penang DavaoCity IloiloCity AnimationHoChiMinhCity Source: KPMG, Exploring Global Frontiers, February 2009* For definition please refer “Glossary & Key Terms” section.** The tables are based on KPMG analysis of the services offered by vendors and shared services already operating in the city. The analysis does not imply thatthese services will also be offered from the city going forward, but only that there is a greater probability of them being offered from the city in the near future.©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Europe, Middle East and Africa (EMA)TheemergingcitiesintheEMAregionaregainingprominenceduetothegrowingregionalmarketinEurope.Linguistic,geographicandculturalaffinitywithEuropearethekeydrivershere.Amajorityofthesecitiesidentifiedarecountrycapitalsorimportanteconomiccentersinthecountry.Eventhoughsomeoftheeconomiesaregoingthroughpoliticalinstability,higheconomicgrowthandimprovementinthebusinessclimateinthelastfewyearsisseeingforeigninvestmentpourinrapidly.TheEMAcitiesarecapableofofferingarangeofservicesinITandBPO,andresearchanddevelopment.City**IT services Call center Back-officeservicesSofia Research anddevelopmentZagreb Cairo EngineeringservicesOther servicesPortLouis DisasterrecoveryBelfast Gdansk DatamanagementCluj-Napoca ResearchRostov-on-DonBelgrade Tunis Lviv Source: KPMG, Exploring Global Frontiers, February 2009Location Selection of Emerging CitiesAlthoughthe31citiesinthisstudycompriseattractiveinvestmentlocations,their“emerging”statusinitself,impliesacertaindegreeofriskforpotentialinvestors.Forinstance,thecity’sinfrastructuremaybelessdeveloped,orbusinessesmaybesubjectedtoadegreeofpoliticaluncertainty.Companiesmustdecidehowmuchofthisrisktheyarewillingtoacceptinreturnforaccesstoworkforceandotheradvantages.Secondly,thechoiceofcitiesinthisstudyisnotintendedtobecomprehensive.Thecitiesinthisstudyrepresentattractivealternatives,butthereareundoubtedlymanyothercitiesthatmayalsooffersimilaradvantagestoIT-BPOinvestors.Thisalsoincludesthe“establisheddestinations”,andcompaniesshoulddefinitelyconsiderthetradeoffsandrelativebenefitsofinvestinginoneofthe“established”locationsrelativetothe“emerging”,suchasthoseprofiledinthisstudy.Ultimately,thereisno“one-size-fits-all”solution,andthechoiceoflocationshouldreflectthespecificrequirementsofeachcompany,andbebasedonaprocessthatisadequatelyrobustandsystematictoreflecttheimportanceofthelocationdecision.** The tables are based on KPMG analysis of the services offered by vendors and shared services already operating in the city. The analysis does not imply thatthese services will also be offered from the city going forward, but only that there is a greater probability of them being offered from the city in the near future.©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.6

Americas

AMERICASTheUSrepresentsthemajorityofoutsourcingdemandfromtheAmericasregion.TheearlytechnologyhubsintheUS(SiliconValleyandSeattle)–thatdevelopedinresponsetoearlyservicessourcingdemandarenow“established”andsmallercitiesintheUShavestartedtoemergeasonshorealternatives.SeveralcitiesinCanadaarealsobeingexploredduetothetime-zoneandgeographicalproximity.LocationsintheUSandCanadatypicallyoffergreaterservicematurity,butrelativelylowercostarbitrageopportunities.OtherlocationsintheAmericasregionhavedevelopedas“nearshore”outsourcingalternatives.Whilethesecanberegardedas“offshore”,theyareclosertothebuyersintheUSthanlocationsinAsia.IncountriessuchasMexicoandBrazil,thefirstwaveofsourcingledtosomecitiesbecoming“established”,andTierIIorIIIcitiesarenowbeingexplored.IncountriessuchasArgentinaorChile,outsourcingactivityisstilllimitedtoTierIcities.MostsuppliercountriesintheAmericasareabletoofferalarge,educatedlaborpoolforthesourcingindustry,andarecapableofprovidingmorescalabilitythanEuropeancities.Further,mostlocationsaretypicallyabletoofferarangeofservicesintheIT,BPOaswellastheKPOspace.TheSouthAmericanlocationsadditionallyoffermultiplelanguageskills.CitiesinMexico,ArgentinaorChilearecapitalizingontheirsizeablebilingualworkforcetoofferoutsourcedservicestobuyers.Spanish-basedservicesareofferedfromMexicoandChile,andPortuguese-basedservicesareofferedfromBrazilandArgentina.Thegovernmentsinthesecountriesarealsoaggressivelypromotingandincubatingthelocalservicesindustry,andgearingthemupforlargerexports.Asforotherregionscoveredinthisreport,thecitiesprofiledfortheAmericasregionarenotintendedtoprovideacomprehensivelist,however,shouldofferarepresentativesampleoftheoptionsavailableintheregion.Numerousotherlocationscouldalsohavebeenincludedandtheselectionofcitiesisintendedtoprovideaflavouroftheoptionsavailablewhenonedecidestolook“beyondthefrontier”.9©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

AMERICAS - Table of ContentsBuenos Aires13CampinasCuritiba1719CalgaryWinnipeg2325Santiago29GuadalajaraQueretaro3335BoiseIndianapolis3941©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.10

BuenosAiresCity Introduction•BuenosAiresisthecapitalofArgentinaandalsothecountry’sfinancialandcommercialcenter•BuenosAiresisamongthemostpopulouscitiesintheworld 1 .Quick factsGeographicLocationTime Zone GMT -0300ClimatePopulation 1 12,600,000Literacy rate 2LanguagesMajor industriesBuenos Aires can be reached in about 11 hours by air fromNew York, Paris or MadridPleasant climate with four seasons – spring, summer, falland winter. The average temperature is 18 degrees Celsiusand average annual rainfall is 114 cm96 percentSpanish, English, PortugueseFood processing, tourism metal works, automobile, textiles,chemicalsSources: 1 Indec National Ministry of Economy (2007)2 Buenos Aires Herald (2007)Key drivers for the city to emerge as a favorable IT-BPOdestination• Buenos Aires has a large talent pool and a number of reputededucational institutions, capable of supplying workforce to the IT -BPO industry• Argentina’s cultural closeness and linguistic similarity with Europeis an advantage, as it allows the country to additionally tapbusiness from markets in Europe• Spanish is the official language, but Portuguese and English arealso spoken in the city, which can be used to provide multi-lingualservices• The city can serve US markets effectively as Argentina lies in thesame time-zone as the East US• The IT-BPO industry (high-tech sector in general) is growing rapidlyand has been prioritized and encouraged through incentives by thegovernment• The country’s cost competitiveness increased significantly after thedevaluation of its currency Peso in 2002, which brought downprices to below half their 1990s’ levels 2 .Current IT-BPO scenario in the city Development of the current IT-BPO industry 3Key IT-BPO companies (Services offered)IBM (IT services)Hewlett Packard (ITservices)TeleTech (Call center)Tata ConsultancyServices (IT services)Latin3 (Creativeservices)Sabre (IT services)Sources: Company websites of IBM, HP, TCS, Teletech, Reuters•ThegrowthofArgentina’sIT-BPOindustryduringthetechnologyslowdownwasadverselyaffectedbytheeconomiccrisisof2001-02•However,inthelastfewyears,alargenumberofmultinationalcompanieshavesetupoperationsinBuenosAires,includingMicrosoft,IntelandMotorola•TheIT-BPOindustryhasbeengrowingrapidlysincethen,makingitoneofthefastestgrowingsectorsintheeconomy.Industry Profile – Size and Specifics•ThetotalexportofIT-BPOservicesfromthecityin2007isestimatedatUSD228million 3•BuenosAireshasabout49percentofthemorethan1000registeredIT-BPOcompaniesinArgentina 4•TheprominentservicessourcedfromBuenosAiresincludesoftwaredevelopment,callcenters,back-officeoperationssuchasdataprocessing,andcreativeservicessuchasdesignandmediaservices.1 WorldAtlas.com, List of biggest cities in the world, December 20082 New York Times, Peso's Devaluation Gives Argentina Cost Advantages, October 20023 www.cessi.org.ar/main_en.htm, CESSI Argentina website, 20074 ProsperAr, Software & IT Services in Argentina, 200813©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•BuenosAireshasgoodeducationalinstitutionsincludingArgentina’sbiggestuniversity,theUniversityofBuenosAires,whichenrollscloseto50,000studentseveryyear 1 .Thecityproducesalargepooloftechnical,ITandengineeringgraduates•Thebraindrainfollowingthecountry’seconomiccrisisisseeingsomereversalwithgrowthsettlingin,andthiscouldbeapotentialsourceoftalentfortheIT-BPOindustryinthecity•Englishlanguageskillsofthepopulationarebecomingstronger,aseducationinEnglishisbeingencouraged.AlargenumberofprivatecoursesinEnglisharealsoavailable•ThecityhaslowerattritionratesandemployeeturnovercomparedtomanyotheremergingIT-BPOdestinations.Infrastructure•Office space (IT Parks): BuenosAiresisexpectedtohaveadditionalClassA*officespaceof70,000sq.mts.in2008.However,vacancyratesareonthedeclineonaccountofhighdemand,leadingtorisingsaleandleaserates 2•Power supply: PowertariffsaresignificantlylowerthanthoseintheUS.However,somescheduledandunscheduledoutagesarewitnessed•Telecom Infrastructure: Argentinahasexpandedandmodernizeditslocaltelecommunicationsnetworks,withover15millionnewlinesduringthelastdecade,leadingtoimprovedconnectivity 1•National and International connectivity: BuenosAiresiswellconnectedwithcitiesinArgentinabyroadandrail.Ithasthreeairports,withtwoofthemservingcitiesinArgentinaandneighboringcountries.TheEzeizaInternationalAirportconnectsBuenosAirestodestinationsintheUSandEurope•Upcoming projects: TaurusInvestmentHoldingshasplannedatechnologyparknearBuenosAireswhichisexpectedtoaddmorethan2787sq.mts.ofofficespace 3 .A“TechnologyDistrict”isalsobeingplannedbythegovernmentintheParquedelosPatriciosareaofthecity 4 .State / city specific incentives for IT-BPO over and above country level incentives, if any 5•TheSoftwareLawestablishesthatsoftwareproductionistobeconsideredasaproductivetransformationactivityandaccordedthesamepriorityandincentivesasotherindustrialactivities.Someoftheseincentivesinclude:-Lowerturnovertaxratesandexemptionfromprovincialtaxes-Benefitsinmunicipalfees-Accesstofinancingwithpreferentialterms-Discountsonservicessuchaselectricity,gas,waterandcommunications.Quality of life•Cost of living: ThecostoflivinginBuenosAiresisoneofthelowestamongglobalcities.TheannualCostofLivingIndex(2008)byMercerranksBuenosAires138among143countries 6•Crime rate: ThecrimerateinBuenosAiresisquitehigh,withcrimesagainstproperty,burglaryandkidnappingcommon.Estimatesindicatethatcloseto200,000unregisteredfirearmsexistinthecity 7•Pollution levels: AirpollutionlevelsinBuenosAiresarequitehigh,especiallyindenselypopulatedareasandduringpeakbusinesshours•Ease of commuting: Trafficistypicallyheavy,butfastmoving.ThepublictransportsysteminBuenosAiresoffersmultipleoptionsincludingasubwaynetwork,morethan100buslinesandataxifleet,availablethroughouttheday•Availability of Hotels: BuenosAireshasarangeofinternational,luxuryandbudgethotelsthatcatertothetourismindustry.Thehotelindustryhasseencapacitycreationoverthelastfewyears,witholderhotelsbeingrenovatedtocatertothegrowingdemandfrombusinessandtouristtravelers.Risk: City specific•Catastrophic risks: Thecityispronetofloodingduringheavyrains 8 .BuenosAiresliesinseismiczonewithlowearthquakerisk•Political risks: Thecityhaslowpoliticalrisk.TheriskofamilitarycoupinArgentinahasalsogonedownovertheyears•History of disruptions: Therehavebeennomajordisruptionssincetheeconomiccrisisin2001.However,demonstrationsfordomestic,economicandpoliticalissuesarecommoninBuenosAires 9 .1 ProsperAr, Software & IT Services in Argentina, 2008 6 Mercer, Annual Cost of Living Index, 2008-092 US Equities, Report on Buenos Aires, Second quarter 2007 7 OSAC, Argentina Crime & Safety Report, 20073 www.new-taurus-website.com/DeerfieldBeachfirmplanningBuenosAiresTechnologyPark.HTM, 8 World Bank - Hazard & Risk Management in Argentina, November 2006February 20079 OSAC, Buenos Aires Country Council Report, 20074 www.buenosaires.gov.ar/areas/produccion/distrito_tecno/ingles/michetti.php, December 2008* For definition please refer “Glossary & Key Terms” section.5 www.invertir.gov.ar/frontend/contenido/subpagina.php?subpaginaId=58, December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.14

Brazil

BrazilCountry SnapshotSize of the country 8,547,403 sq. kms.Population 183.9 million (2008)CapitalBrasiliaCurrencyBrazil Real (BRL)1 USD = BRL (average) 1.84 (2008)Main macroeconomic indicators 1 :• GDP in PPP: USD 1,836 billion (2007 est.)• GDP per capita in PPP: USD 9,690 (2007 est.)• CPI: 4.5 percent (2007 est.)• Unemployment rate: 9.3 percent (2007 est.)• FDI stock per capita: USD 1,315 (2007 est.)Sources: www.eiu.com, www.cia.gov, www.gocurrency.comPolitical Structure 1TheFederativeRepublicofBrazilisaPresidentialdemocracy.ThePresidentiselectedforaperiodoffouryearsandactsastheHeadofStateaswellastheHeadoftheFederalGovernment.Thereare26autonomousstatesand1federaldistrict,eachwiththeirownlegislature.Individualstatesseektoattractinvestmentsbyofferingadhoctaxbenefitsandinfrastructuresupporttospecificcompanies,negotiatedonacasebycasebasis,leadingtovaryinginvestmentclimatesindifferentstates.Business and Investment ClimateForeign Direct Investment (FDI): BrazilreceivedUSD34.6billionofFDIin2007,slightlylowerthantheCentralBank’sprojectionofUSD35billion,althoughupsignificantlyfromUSD18.8billionin2006 2 .GDP growth: TheBrazilianeconomyisforecasttogrowbyanannualaverageof4.1percentin2008-11,whichislowerthanthe4.5percentrateregisteredinthepast4years,butarounddoubleitslong-termaverage(1981-2007)of2.2percent 1 .Inflation: EIUprojectsyear-endinflationin2008at6.8percent,andyear-endinflationtodeclineto4.6percentin2009.2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BB / StableBBB- / Stable / A-312546Sources: www.eiu.com, World Bank, Standard & Poor’sRecifeIT-BPO Scenario in the countryBrazil,apartoftheBrazil,Russia,IndiaandChina(BRIC)nations,hasbeenemergingasakeyIT-BPOdestinationwithexportsofUSD800millionin2007employingmorethan1.7millionpeople 3 .GlobalcompanieslikeAccenture,ATOSOrigin,BT,EDS,HSBC,IBM,Intel,Microsoft,Sun,TCS,Unisys,haveset-upcentersinthecountry.TheBrazilianassociationofinformationtechnologyandcommunicationcompanies(BRASSCOM)isthecentralassociationfortheIT-BPOindustryinBrazil.SomeemergingcitieswithinBrazilareCuritiba,Campinas,SaoLuis,Teresina,Fortaleza,Natal,Canoas,CaxiasdoSul,apartfrommoreestablisheddestinationslikeSaoPaulo,RiodeJaneiroandRecife.Government Incentives 3BRASSCOMexpectsBrazil'sITservicesexportstoreachUSD5billionanddevelop100,000newITprofessionalsby2011,withthesupportoffederalandlocalgovernments,byprovidingincentivesfordevelopment.TheProductiveDevelopmentPolicybythegovernmentannouncedareductionof50percentonthepayrollSocialSecuritytaxpaidbyIT-BPOcompanies.Besides,federalincentivesallowforareductiononlaborchargesandincometaxesforeducation,innovationandresearchanddevelopment.Emerging DestinationEstablished DestinationRio de JaneiroCampinasSao PauloCuritiba1 www.eiu.com, various pages, December 2008;2 Brazzil Magazine, Foreign Direct Investment in Brazil Doubles in 2007 to US$ 35 Billion, 28th January 20083 http://www.brasscom.org.br, various pages, December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.16

CampinasCity Introduction•CampinasisoneofthemajorcitiesinthestateofSaoPaulo•Itisanimportanteconomic,transportationandtelecommunicationshub.Quick factsGeographicLocationTime Zone GMT -0200ClimatePopulation 1 1,100,000Literacy rate 2LanguagesMajor industriesSituated in south-east Brazil, Campinas can be reachedfrom Brasilia in about an hour and 30 minutes by airMild climate, with mostly sunny days and two majorseasons – summer and winter. The average temperature is22.4 degrees Celsius and average annual rainfall is 138.2cm95 percentSource: 1 Campinas Government (2007)Portuguese, English, SpanishAutomotive, electronics, telecom equipment, petroleumrefining, food processing, pharmaceuticalsKey drivers for the city to emerge as a favorable IT-BPOdestination• Campinas has a number of educational institutions capable ofsupplying a talent pool, especially qualified in engineering andtechnology sectors• The city is a hub for R&D activities. The University of Campinas hasproduced the largest number of patents in Brazil 1• The talent pool available in the city is well suited for providing ITservices such as application development and maintenance,support and hosting• There is adequate IT-BPO infrastructure due to the presence oftechnology parks, reliable power and telecom• The city offers a good quality of life and is looked at as a lesscongested alternative to Sao Paulo city• The city can serve US markets effectively as it lies in a similartime-zone as Eastern US• A number of IT-BPO companies setting up centers in Campinas arealso looking to exploit opportunities in the large domestic marketfor IT services in Brazil.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)IBM (IT services) Nortel (R&D center)Net.2Net (IT services) Ci & T (IT services)Development of the current IT-BPO industry•TheregionaroundCampinasisknownastheBrazilian“SiliconValley”duetothepresenceofalargenumberofresearchcenters,universities,high-techindustriesandmultinationalcompanies 2•IBMwasoneoftheearliestcompaniestosetupoperationsinthecity 3 .TheTechTownwasbuiltintheareasurroundingtheIBMofficeinCampinas 3•ActMinds,ajointventureof10ITcompaniesinthecityreportsUSD10.5millioninserviceexportsin2007 4 .ACS (Call center services) Softway (IT services)Sources: Company websites of IBM, Softway, University ofCampinas websiteIndustry Profile – Size and Specifics•TheprominentservicessourcedfromCampinasincludehosting,applicationsupportanddevelopmentandcustomization.1 Rosana Ceron Di Giorgio, From University to Industry: Technology Transfer at Unicamp in 3 www.inova.unicamp.br, University of Campinas website, various pages, December 2008Brazil, IP Handbook of Best Practices, 20074 www.actminds.com, ActMinds website, various pages, December 20082 NaiGlobal, Global Market Report (Campinas), 200817©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Campinashasalargenumberofeducationalinstitutionsaswellastechnicalschools,includingtheUniversityofCampinas(Unicamp)offeringcoursesinengineeringandtechnology.TheUnicampproduces1,935graduateandpost-graduatestudentseveryyear 1 andisalsorankedastheinstitutionproducingthehighestnumberofpatentsinBrazil 2•Englishlanguageskillsarelimited,buteducationandtraininginEnglishisbeingencouraged.Spanishisalsotaughtasasecondlanguage•ThecityhaslowerattritionratescomparedwithlargercitiesinBrazil,especiallySaoPaulo.Infrastructure•Office space (IT Parks): Duetohighoveralldemands,vacancyratesareverylow.Campinashasarelativelysmalleramountofconventionalofficespace,butclaimstohavethelargestnumberofbusinessincubatorsandindustrialparkswheremostcompaniesarelocated 3•Power supply: Thereistypicallynomajorpowersupplyinterruptioninthecity.Limitedandnon-scheduledinterruptionmayoccurduetostormsandlightning,mostlyinsummer•Telecom Infrastructure: Fiberopticnetworkforvoice,imageanddatacommunicationisavailableinCampinas,providedbyTelefonicaorEmbratel 4 .Telecomfacilitiesareprovidedasasharedserviceinmostindustrialparks•National and International connectivity: CampinasislinkedtoothertownsandcitiesinSaoPaulostateviahighways.TheViracoposInternationalAirportcaterstodomesticandinternationalpassengerandcargoflights•Upcoming projects: AScientificandTechnologicalParkhasbeenplannedinCampinas,andisintendedtobeahubforR&Dactivitiesandalsoofferincubationfacilitiesfortechnologycompanies 5 .State/ city specific incentives for IT-BPO over and above country level incentives, if any 6•Reductioninthetaxrateonservicestotwopercent•ReductionintheamountofAnnualRealEstatetaxfrom30to50percent•Exemptionfromfeesandemoluments.Quality of life•Cost of living: ThecostoflivinginCampinasisslightlylowerthanthatinSaoPaulocityintermsofhousing,transportandfood•Crime rate: ViolenceandcrimeratesarehighinCampinasandincluderobbery,kidnappingandcargotheft.TheCampinasgovernmenthaspartneredin2006withBoschandhasputinplaceasecuritysystemwitharound270closecircuitcamerastokeepthecrimerateincheck 7•Pollution levels: TheelevatedtopographyofCampinasandcoolwindsthroughouttheyearhelpkeeptheairclearofpollutants.Airpollutionlevelsinthecityarelow• Ease of commuting: Trafficjamsarecommonduringpeakhoursinsomepartsofthecity•Availability of Hotels: Campinashas1five-starhotelandseveralotherfour-starhotelsinthecity,withatotalofabout3,900rooms 8 .Risk: City specific•Catastrophic risks: Somepartsofthecityarepronetofloods,especiallyinthesummer 9•Political risks: Thepoliticalsituationinthestateandcityisstable,withoutanymajoreventsoverthepastthreeyears.Themayorwasre-electedforthesecondfour-yeartermin2008 6•History of disruptions: ThestateofSaoPaulowitnessedcriminalattacksagainstthepoliceandsomeciviliansinMay2006,whichledtoseveralcasualties 10 .1 Topuniversities.com website, December 2008 4 www.technopark.com.br/ingles/tech-e.html, December 20082 Rosana Ceron Di Giorgio, From University to Industry: Technology Transfer at Unicamp in 5 www.inova.unicamp.br, University of Campinas website, December 2008Brazil, IP Handbook of Best Practices, 20073 NaiGlobal, Global Market Report (Campinas), 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.18

CuritibaCity Introduction•CuritibaisthecapitalofParanastate,andanimportantcultural,politicalandeconomiccenter•ItisconsideredtobetheecologicalcapitalofBrazilasithasthelargestgreenareaperinhabitant 1 .Quick factsGeographicLocationTime Zone GMT -0300ClimatePopulation 1 1,790,000Literacy rate 2LanguagesMajor industriesSituated in southern Brazil, Curitiba can be reached by airfrom Brasilia in about an hour and 30 minutesTemperate climate characterized by four distinct seasons –spring, summer, autumn and winter. The averagetemperature in summer is 21 degrees Celsius and 12degrees in winter. The annual average rainfall is 150 cm96.0 percentSources: 1 Brasscom Brazil, 20082 Liveable MegacitiesPortuguese, Spanish, EnglishAutomotive, food processing, tourism, furnitureKey drivers for the city to emerge as a favorable IT-BPOdestination• Curitiba produces a qualified technical talent pool of about 19,500every year for the IT-BPO industry 2• Measures to improve the English language skills of the workforceare being taken, potentially making the talent pool suited for bilingualservices• The city provides good infrastructure including a dedicatedtechnology park for IT-BPO companies, and reliable power andtelecom• The city is known within Brazil as a “model city” and offers goodquality of life due to its effective public transport and floodmanagement system• The city can serve US markets effectively as it lies in a similartime-zone as the East US.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Development of the current IT-BPO industry•IBM,Dell,HPandXeroxwerethefirstfewcompaniestosetupIT-BPOoperationsinCuritibaWipro Technologies (BPOservices)Accenture (IT and BPOservices) •SeveralcompaniessuchasExxonMobil,PhillipMorris,BristolMeyersSquibb,Accenture,Sadia,HSBC,DamovodoBrasil,SiemenshavecustomerservicecentersinCuritiba.HSBC Global Technologies(IT services)Cinq Technologies (ITservices)Atos Origin (IT services)Exxon (Shared servicescenter)Sources: Accenture website, BRASSCOM, Offshoring TimesIndustry Profile – Size and Specifics•ThecombinedIT-BPOexportsofthecityareestimatedatUSD202,566 3•Curitibahas791registeredplayersand281,025peopleemployedintheIT-BPOsectorin2008 4•ServicesofferedfromCuritibaincludeITInfrastructureoutsourcing,softwaredevelopmentoutsourcing,technicalsupportoutsourcing,systemimplementationadvisory,R&Dservicesandenterpriseapplicationservices•BPOservicesofferedfromthecityincludefinanceandaccounting,ordermanagement,customercareandhumanresources.1 \ ICLEI, Orienting Urban Planning to Sustainability in Curitiba, Brazil, 2003 3 Foreign Trade Secretariat, Trade balance, 20072 www.brasscom.org.br, Brasscom website, December 2007 4 Ministry of Labor in Brazil, January 200819©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•CuritibahasreputededucationalinstitutionssuchasUniversidadeTecnologicaFederaldoParana,UniversidadeFederaldoParana,PontificiaUniversidadeCatolicadoParanawith61,084studentsenrolledinuniversitieseveryyear 1•ThedemandfortechnicaltalentinCuritibasurpassesthecurrentsupply,however,thecityistakingseveralinitiativestobridgethisgap•CuritibaisalsotakingmeasurestoaugmentthesupplyofEnglish-speakinglabor.Thecitycurrentlyaddsabout19,500engineersandnon-technicalgraduatestoitstalentpooleachyear 2•Attritionlevelsintheindustryarealsolower,ataround5percent 2 .Infrastructure•Office space (IT Parks): CuritibaTecnoparque(Technopark)covering5millionsq.mts.ofspacehasbeendevelopedtoattractpublicandprivatetechnologyinstitutions,technological-based,R&Dcompanies,aswellasuniversities 1•Power supply: Powersupplyisreliableexceptforrareoutagesduringheavyrainsinthecity.ThestateofParanaisanimportantpowergeneratingcenter,withItaipubi-national,ontheParanaRiverbeingthelargesthydroelectricpowerplantinLatinAmerica 3• Telecom Infrastructure: Curitibahasagoodnetworkoffiberopticinfrastructureforreliabletelecomservices•National and International connectivity: CuritibaiswellconnectedtoothercitiesinBrazilthroughhighways.ThecityhasanInternationalAirport(AfonsoPenna),whichhasdailyflightstoSãoPaulo,RiodeJaneiroandotherimportantcitiesinBrazil.State / city specific incentives for IT-BPO over and above country level incentives, if any 3•ThestateofParanaoffersanarrayoftaxincentivesandbenefitstoassistbusinesses,particularlysmallandmicrobusinesses,anddomesticandforeigncompanieswishingtostartorexpandoperations,including:-ExemptioninthecollectionofValueAddedTax(VAT)basedontheturnoverofthecompany-VATcreditsforexportorientedcompanies.Quality of life•Cost of living: CuritibaisoneofthestatecapitalswithinBrazilwithalowcostofliving.ItisalsoregardedasamodelcityintermsofurbandevelopmentwithinBrazil•Crime rate: Crimeratesarehigherinsomepartsofthecitythanothers•Pollution levels: Thereisnoproblemofairpollutioninthecity.Innovativeprograms,suchas“AllClean”and“GarbagethatisnotGarbage”havebeenintroducedtokeeppollutionlevelslow 4•Ease of commuting: PublictransportationinCuritibaiswellplanned,withanextensivesystemofbusesincludingexpress,inter-district,direct,feedingandconventionalbuses.AlargeproportionofCuritibacitizensusepublictransport 5•Availability of Hotels: Curitibahasseveralluxuryhotels,includinginternationalchains,aswellasbudgethotels.Risk: City specific•Catastrophic risks: FloodingwasaseriousproblemfacedbyCuritiba.However,overthelastdecade,thegovernmenthasputafloodmanagementprograminplacewithfundingfromWorldBank 6•Political risks: Thepoliticalsituationisstable,andtherehavebeennosignificantchangesinlegislation•History of disruptions: Therearenorecentinstancesofdisruptionsinthecity,exceptsomeminorincidentsofrivalryoversoccer.1 www.brasscom.org.br, various pages, December 2008 4 ICLEI, Orienting Urban Planning to Sustainability in Curitiba, Brazil, 20032 Ministry of Labor in Brazil, January 2008 5 ICLEI, Public Transport system in Curitiba, 20033 investimentos.desenvolvimento.gov.br, Brazil investment website, December 2008 6 APFM, Flood Management in Curitiba Metropolitan area, January 2004©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.20

Canada

CanadaCountry SnapshotSize of the country 9,093,507 sq. kms.Population 33.2 million (2008)CapitalOttawaCurrencyCanadian Dollar (CAD)1 USD = CAD (average) 1.07 (2008)Main macroeconomic indicators 1 :• GDP in PPP: USD 1,263 billion (2007 est.) 1• GDP per capita in PPP: USD 38,351 (2007 est.) 1• CPI: 2.2 percent (2007 est.) 2• Unemployment rate: 6.0 percent (2007 est.) 1• FDI stock per capita: USD 12,218 (2007 est.) 1Sources: www.eiu.com, www.cia.gov, www.gocurrency.comPolitical Structure 1Canadaisaconstitutionalmonarchy,withthegovernor-general(alwaysofCanadiannationalityandappointedinOttawa)actingastherepresentativeoftheBritishcrown.Inpractice,theCanadianHouseofCommonsissovereign.Canadaisafederationof10provinces,eachwithsubstantialpowers,and3territories.AtthefederallevelaretheCommons,themainseatoflegislativepower,andthenon-electedSenate,whichplaysonlyamarginalrole.FederalandprovincialgovernmentsinCanadaofferawidearrayofinvestmentincentives,whichmunicipalitiesare,onthewhole,prohibitedfromdoing.Provincialincentivestendtobemoreinvestor-specificandaresubjectedtoinvestmentsinthegrantingprovince.Business and Investment ClimateForeign Direct Investment (FDI): FDIhasrisenby73percentin2007toUSD108.7billion,over2006 1 .EIUexpectstheexceptionallystableoperatingenvironmenttomakeCanadaanattractivedestinationforinvestment.2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)AA / StableAAA / Stable / A-1+Sources: www.eiu.com, World Bank, Standard & Poor’s84GDP growth: TheCanadianeconomyhaspostedhealthygrowthatanannualaverageof2.9percentin2006-07,butgrowthslowedsharplyinthefourthquarterof2007andcontractedinthefirstquarterof2008 1 .EIUexpectsGDPgrowthatanaverageofaround1percentfor2008and0.9percentin2009 1 .Inflation: AccordingtoEIU,theaverageannualrateofinflationisforecastat3.0percentin2008.Therateisexpectedtoslowto2.3percentin2009astheworldeconomyslowsdown.IT-BPO Scenario in the countryThegeographicproximitytotheUnitedStatesishelpingCanadatoemergeasanear-shoredestinationfortheIT-BPOindustry.TheIT-BPOexportsofCanadawereUSD13.7billionin2007 3 .Currently,theIT-BPOindustryemploys257,448professionals 4 .TheInformationTechnologyAssociationofCanada(ITAC)isfocusingondevelopmentoftheIT-BPOindustryinCanada 4 .TheCenterforOutsourcingResearchandEducation(CORE)provideseducationandinformationaboutoutsourcing 5 .CompaniessuchasCognos,CrystalDecisions,Hummingbird,Capgemini,CGIGroupandX-Wavehaveset-upbaseinCanada.CitieslikeCalgary,WinnipegarecomingupintheIT-BPOsectoralongsidefewotherestablishedlocationslikeVancouver,Ottawa,Toronto,MontrealandQuebecCity.CalgaryWinnipegVancouverTorontoEmerging DestinationEstablished DestinationOttawaGovernment incentives 2TheCanadiangovernmentoffersmanyincentivestoorganizationssettingupIT-BPOcentersinthecountry,including:•LowestpayrolltaxesamongG7 6 countries 7•Taxcreditsforexpendituresinwages,materialsandequipmentfororganizationsinvolvedinR&D•Tenpercenttaxcredittoorganizationshiringapprenticesforthefirsttwoyears 4 .1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008; 5 www.core-outsourcing.org, CORE website, December 20082 Bank of Canada estimates, 2007 6 G7 is the group of seven industrialized nations, United states of America, Canada, United3 Invest in Canada, 2007/08 editionKingdom, France, Germany, Italy and Japan.4 www.itac.ca, Information Technology Association of Canada, December 20087 investincanada.gc.ca, Invest Canada website, December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.22

CalgaryCity Introduction•CalgaryisamajorurbancenterintheprovinceofAlberta•ThecityisWesternCanada’stransportationanddistributionhub,andisalsoCanada’senergycapital.Quick factsGeographicLocationTime Zone GMT - 0700ClimatePopulation 1 1,230,000Literacy rate 2LanguagesMajor industriesSources:Situated in Western Canada, by air, Calgary is about threeand half hours away from TorontoMild climate with large variations in temperature and fourseasons – spring, summer, autumn and winter. The averagetemperature is maximum 10.3 and minimum -2.6 degreesCelsius. The average annual rainfall is 37.2 cm99 percentEnglish, FrenchMining, oil and gas, manufacturing, technology, finance,aerospace, transportation, logistics1 Calgary Economic Development2 CIA 2007 (Literacy rate for Canada; literacy rates for individual cities werenot available)Key drivers for the city to emerge as a favorable IT-BPOdestination• Calgary has several educational institutions providing qualifiedtalent for the IT-BPO industry• Calgary has the highest rate of population migration into the cityamong Canadian cities, thereby providing a larger talent pool 1• English is the official language, but there is a sizeable Frenchspeaking population which is able to provide outsourced servicesin French• The city offers good infrastructure including reliable power,telecom and transport facilities and a good quality of life to itsresidents• The government in Calgary has been a key enabler for the IT-BPOindustry by providing tax breaks, incentives and substantialresearch funding• The city’s established oil and gas industry is attracting outsourcingcompanies to leverage outsourcing opportunities in the oil and gassector• Calgary’s proximity and cultural affinity with the US, coupled withits relative cost advantage allows it to tap the near-shoreoutsourcing market.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Development of the current IT-BPO industry•Overthelast10years,theICTsectorhasbecomeamajorcontributortothestrongeconomicgrowthinCalgaryIBM (IT services)SAP (IT services)Fujitsu Consulting (ITservices)TCS (IT services)•TheITindustryrepresentsoverhalfoftheICTcompanieslocatedinthecity.Industry Profile – Size and Specifics•TheIT-BPOexportofAlbertaprovinceexceededUSD2.2billionin2007 2•Calgary’sITindustryemploysabout20,000workers,withabout1,543ITcompaniesoperatingfromthecity 3Hewlett Packard (ITservices)JDA Software (Softwaredevelopment)Sources: SAP company website; Calgary EconomicDevelopment website•WebandInternetrelatedservices,softwaredevelopment,systemintegrationandrelatedservicesaretheprominentITservicessourcedfromCalgary•Thecityalsooffersback-officeservicessuchasfinanceandhumanresourcesoutsourcing.1 www.ccat.org, Calgary Advanced Technology website, December 20082 Alberata Economic Development, Calgary ICT profile, 20063 www.calgaryeconomicdevelopment.com, Calgary Economic Development website, December 200823©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Calgaryhasayoungandeducatedtalentpool,withmorethan10,000peoplegraduatingperyearfrompost-secondaryinstitutions 3 .ProminenteducationalinstitutionsaroundCalgaryincludetheUniversityofCalgary,SAITPolytechnic,AlbertaCollege,TheUniversityofAthabascaandDeVryInstituteofTechnology•Thecityhaswitnessedhighesttotallaborforcegrowthat33.8percentoverthepast10years(1998-2007)duetoin-migration 1•SalaryratesinCalgaryarelowerthanthoseintheUScitiesmainlyduetopubliclyfundedhealthcare.SalariesforasoftwareengineeraremoderatelylowerthanlevelsinToronto 1 .Infrastructure•Office space (IT Parks): Calgaryhasnearly3,000,000sq.mts.ofdowntownofficespace;withlowvacancyrates 2 .Asignificantamount(around90,000sq.mts.)isexpectedtobeaddedby2011 2•Power supply: ElectricitycostsinCalgaryarelowercomparedtoTorontoandcitiesintheUS 2 .TheCalgarygovernmenthassigneda20­yeargreen(wind)electricitysupplyagreementwithpowersupplyingcompany,ENMAXforpurchasing75percentofitsrequirements,securingfuturesupply 3•Telecom Infrastructure: Calgaryhasanextensivefiberopticinfrastructurealongwithsophisticatedvoiceandtransfertechnology.Thecityiswellservedbyhigh-speedinternetserviceproviders•National and International connectivity: Thecityhaswellintegratedair,railandroadinfrastructureandprovidesaccesstoAsia,Europe,andtheUS.SeveralAmericancitiescanbereachedinlessthanfourhoursbyairfromCalgary•Upcoming projects: Long-termrealestatedevelopmentisbeingplannedinCalgary.AuroraBusinessPark,a1.1millionsq.mts.businessparkbyCorporatePropertiesandBuildingsbusinessunit,approvedin2007,islikelytobecompletedin20to25years 4 .Anotherpark,theLincolnBusinessParkisscheduledtobecompletedinthenext10years 4 .State / city specific incentives for IT-BPO over and above country level incentives, if any 5•ThecityofCalgaryderiveslargebenefitsduetoalowtaxregime.TheprovinceofAlbertahasnomunicipalorprovincialsalestax.AlbertaalsohasoneofthelowestprovincialcorporatetaxratesinCanada•Inventorytax,machineryandequipmenttaxandpayrolltaxarenotleviedintheprovinceofAlberta•Albertaissubjecttoaflatincometaxrateof10percent,whileallotherCanadianprovincesworkonaslidingincomescale.Quality of life•Cost of living: RapidexpansionoverthelastfewyearshasledtoariseinthecostoflivinginCalgary.However,thecostoflivingisstillrelativelylowcomparedtothatinTorontoandVancouver.Calgary’sgoodqualityoflifeattractsmorethan11,000peopleannuallyfromotherprovinces(citingrecordsfrom1997to2006) 6•Crime rate: Calgaryisarelativelysafecity.Accordingtoa2008surveyofcrimein100CanadiancitiesbyMaclean'sMagazine,Calgaryranks33inthecountry• Pollution levels: Calgaryhasundertakennumerousinitiativestowardsreducingcorporategreenhousegasemissions.Calgaryhasbeenratedasthecleanestcityinanenvironmentalexaminationof215globalcities 7•Ease of commuting: CalgaryTransit,thepublictransportationcompanyinCalgary,operatesanextensivesystemoftransitbusesandlightrailtransit•Availability of Hotels: TheEconomistmagazinein2006,rankedCalgaryasthesecondbestcityintheworldforbusinesstravel.Calgaryhasvariousoptionsforbusinesstourists,fromhigh-endfive-starhotels,includinginternationalchains,tobedandbreakfasts,hostelsandmotels.Risk: City specific•Catastrophic risks: Calgaryhaswitnessedinstancesoftornadoesandfloods,whichcouldpotentiallycausesubstantialpropertydamage.CalgaryEmergencyManagementhasundertakenvariousmeasurestodealwithsuchincidents 8•Political risks: Albertahasbeenconsideredtobepoliticallystable.Pastgovernmentshavebeenelectedwithlargemajoritiesandhavebeenkeptinpowerforalongtime.1 www.ccat.org, Calgary Advanced Technology website, December 2008 5 www.alberta.ca/, Alberta State Government website, various pages, December 20082 www.calgaryeconomicdevelopment.com, Calgary Economic Development website, December 2008 6 Statistics Canada, Labour Force Survey for Calgary CMA, 20073 http://www.enmax.com/Corporation/Media+Room/Current+News+Releases/2006+News+Releases 7 www.mapleleafacademy.com/calgary.htm, Maple Leaf Academy website, December 2008/ENM AX+Begins+Construction+on+Taber+Wind+Farm.htm, ENMAX website, 18 May 2006 8 aema.alberta.ca, Alberta Emergency Management website, December 20084 Calgary.ca, Invest in Calgary website, December 2008 24©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

WinnipegCity Introduction•WinnipegisthecapitaloftheCanadianprovinceofManitoba,anditslargestcity 1•LocatedinthegeographicalcenterofNorthAmerica,WinnipeghasbecomeoneofCanada'skeyinternationaltransportationcenters.Quick factsGeographicLocationTime Zone GMT -0600ClimatePopulation 1 719,200Literacy rate 2LanguagesMajor industriesSituated in southeast Manitoba, Winnipeg can be reachedin about two hours by air from TorontoContinental climate characterized by four distinct seasons.The average summer temperature is 25.4, while that inwinter is -12.9 degrees Celsius. The average annual rainfallis 41.6 cm while the average snowfall is 110.6 cm99 percentEnglish, FrenchAerospace, Transportation, Biotechnology and HealthResearch, Agri-business and Food Processing, FinancialServices, EnergySources: 1 Census metropolitan area (CMA) of Winnipeg, 20082 CIA 2007 (Literacy rate for Canada; literacy rates for individual cities werenot availableKey drivers for the city to emerge as a favorable IT-BPOdestination• Winnipeg has a quality education system in place, which facilitatesthe availability of a talent pool for IT-BPO companies• Winnipeg has a sizeable bilingual workforce with communicationskills in English and French• The city offers IT-BPO companies good infrastructure, quality officespace, technology parks and government incentives• Winnipeg is one of the best cities in terms of overall businesscompetitiveness within Canada• The city is well suited for housing a sourcing contact center andproviding customer management services• The geographical proximity to the US and compatible time-zone isanother advantage for the city• It is centrally located within Canada which provides access totalent from other cities in Canada.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)IBM (IT and BPO services)Emerging InformationSystems (Softwaredevelopment)Momentum Healthware(IT services)Hewlett Packard (IT andBPO services)Convergys (BPO services) Protegra (IT services)Development of the current IT-BPO industry•WinnipeghousesalargenumberofcustomercontactcentersforCanadiancompaniessuchasAirCanada,CanadaPost,CanadaRevenueAgency,andRoyalDirect(RoyalBank)•TheICTsectorrepresentsthreepercentofthetotalworkforceofWinnipeg,slightlybelowthenationalaverageoffourpercent 2 .Industry Profile – Size and Specifics•TheICTexportsofManitobain2007wereUSD185million 3•TheprovinceofManitobahasover1,500companiesoperatingintheICTsector,withnearly80percentofthesefirmslocatedinWinnipeg 2•Nearly40percentoftheworkforceintheICTindustryinWinnipegwasengagedinSources: Convergys company website; Destination Winnipeg computersystemsdesign,R&D,andinformationservices 3website•Winnipegofferscontactcenterandsoftwaredevelopmentservicesespeciallyfocusedonfinancialandbusinessmanagementsolutions,customizede-learningprocesses,integratede-paymentsolutionsandfinancialplanning.1 www.canada.travel, Canadian Travel and Tourism website, December 20082 Destination Winnipeg, ICT Profile of Winnipeg, 20073 www.gov.mb.ca, Government of Manitoba website, December 200825©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources• WinnipeghasanumberofinstitutionsprovidingIT-relatedcourses,includingtheUniversityofManitoba,theUniversityofWinnipeg,andtheCanadianMennoniteUniversity,andtwotechnicaltraininginstitutions,theRedRiverCollegeandWinnipegTechnicalCollege.Closeto10,000studentsgraduatefrompost-secondaryeducationalprogramseveryyearinWinnipeg 1• About4,500studentsareenrolledinFrenchlanguageschoolsand17,600intheFrenchImmersionprogramintheprovince 2• Winnipegoffersahighlycompetitivewageratestructure 3 .Averagesalarieswereat95.5percentofthenationalaveragein2008 4• TheIT-BPOindustryinthecityhasanaveragejobtenureofmorethan100months 5 .Infrastructure•Office space (IT Parks): OfficerentsinWinnipegareamongthemostaffordableinCanada,withvacancyratesforclassAofficespaceat6.6percent,andforclassBofficespaceat8.9percentin2007 6 .Thecityhasapproximately30industrialparkswithsizesrangingfrom27to240hectares,andlargeparcelsoflandavailableforindustrialdevelopment 5•Power supply: Winnipeghasreliablepowersupply.ThecostofpowerinWinnipegisalsolowercomparedtoothermajorcitiesinCanada 3•Telecom Infrastructure: MTSAllstreamandShawCommunicationsInc.providetelecommunicationsservicesinWinnipeg 3 .BasicbusinesstelephoneserviceratesareamongthelowestinCanada•National and International connectivity: WinnipegisconvenientlylocatedontheTransCanadaHighway.Thecityiswellconnectedbyair,roadandrailwayandaccessiblewithmostotherCanadiancities.Winnipeg’sairportisundergoingre-development.Anewairportterminalisunderconstructionandisplannedforcompletionby2010 7•Upcoming projects: AnumberofindustrialparksarespringingupinruralmunicipalitiesjustoutsideWinnipeg,forinstancetheBrooksideIndustrialParknorthofthecity.Someoftheexistingrealestatepropertiesarealsobeingredeveloped.State / city specific incentives for IT-BPO over and above country level incentives, if any 5•TheprovinceofManitobaprovidesR&Dnon-refundabletaxcreditof20percentappliedagainstcorporateincometaxpayable•TheICTindustryinWinnipegalsobenefitsfromnumerouscollaborativeeffortsthatbridgetheprivate,publicandeducationalsectorsonissue-specificinitiatives.Quality of life•Cost of living: The2007familyexpenditureperhouseholdsurveybyStatisticsCanadaranksWinnipegamongthemostaffordablelocationsinCanada.ThecostofhousinginWinnipegisthelowestaccordingtoa2007comparisonof10cities,includingCalgary,TorontoandVancouver,conductedbytheCanadianRealEstateAssociation•Crime rate: WinnipeghasoneofthehighestcrimeratesinCanada.Cartheft,homicideandbreakingin-and-enteringaresomeofthemajorcrimeswitnessedinthecity 8•Pollution levels: Winnipeghaslowpollutionduetovastforestsandtreessurroundingthecity.Besides,thegovernmentisactivelytakinginitiativestoreduceemissionlevelsandplanstointroducediesel-electrichybridbusesinearly2008 9•Ease of commuting: WinnipegTransitandDowntownSpiritofferfreeandeasybustravelinWinnipeg.Mostpeoplecommutetoworkin20minutesorless 1• Availability of Hotels: AccommodationinWinnipegrangesfromfour-starhotels,includinginternationalchains,toaffordablemotels.Risk: City specific•Catastrophic risks: Winnipegwitnessedfloodsin1997,duetoexcesssnowfallandextremetemperatures 8 .ThecityhasintroducedtheRedRiverFloodwayExpansionProject,duetobecompletedby2010,toincreasefloodprotectionforitsresidents 9•Political risks: Lowpoliticalriskwithastablegovernmentwithintheprovinceandthecity•History of disruptions: TherearenorecentinstancesofmajordisruptionsinthecityofWinnipeg.1 Destination Winnipeg, ICT Profile of Winnipeg, 2007 5 www.gov.mb.ca, Manitoba Government website, December 20082 http://www.pch.gc.ca/pc-ch/publctn/info/mb-eng.cfm, December 2008 (The French Immersion 6 CB Richard Ellis, Real estate in Winnipege, Third Quarter 2007program provides instruction in most subject areas7 http://www.waa.ca/airportredevelopment, Winnipeg Airports Authority website, December 2008in French and offers students a chance to become functionally bilingual)8 Winnipeg.ca, Official city of Winnipeg website, December 20083 www.destinationwinnipeg.ca, Destination Winnipeg website, December 20089 www.infc.gc.ca/index_e.shtml, Infrastructure Canada website, December 20084 Robert Half Salary Guide, Canada, 2008 26©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Chile

ChileCountry SnapshotSize of the country756,946 sq. kms.Main macroeconomic indicators 1 :Population 16.6 million (2007)CapitalSantiagoCurrencyChilean Peso (CLP)1 USD = CLP (average) 509.44 (2008)• GDP in PPP: USD 230.9 billion (2007 est.)• GDP per capita in PPP: USD 13,910 (2007 est.)• CPI: 4.4 percent (2007 est.)• Unemployment rate: 7.0 percent (2007 est.)• FDI stock per capita: USD 5,512 (2007 est.)Sources: www.eiu.com, www.cia.gov, www.gocurrency.comPolitical Structure 1Chilefollowsapresidentialsystem,basedonthe1980constitution.TheCongresshasanupperhousecomprising38members,electedforaperiodof8yearsandpartlyrenewedevery4years;andalowerhouse,with120memberswhoareallelectedevery4years.Chileisdividedinto15regions,eachofwhichisheadedbyarepresentativeappointedbythePresident.Everyregionisfurtherdividedintoprovinces,withaprovincialgovernoralsoappointedbythePresident.Independentregionsprovideincentivestoattractinvestmentsinrelativelybackwardareaswithinthecountry,andtherefore,theinvestmentclimatemayvaryindifferentregionstothatextent.Business and Investment ClimateForeign Direct Investment (FDI): In2007,thecountryattractedFDIworthUSD14.5billion,representing8.8percentoftheGDP.TheFDIrose143percentfromthe2006figureofUSD5.96billion 2 .GDP growth: Chile’sGDPgrowthin2007was5.1percent.TheEIUhasforecastGDPtogrowby3.9percentin2008andby2.8percentin2009 1 .2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)A / StableA+ / Stable / A-14024Sources: www.eiu.com, World Bank, Standard & Poor’sSantiagoInflation: In2007,theinflationwasat4.4percent.TheEIUexpectsinflationtograduallyfallfromits2007levelsin2008and2009toreachabout3percent 1 .IT-BPO Scenario in the countryAccordingtotheresearchfirm,BusinessMonitorInternational,in2007,Chile'sITservicesmarketwasestimatedtobearoundUSD700million 2 .Themajorityofdemandisdomesticandledbythelargecompanies.AccordingtoChileanAssociationofInformationTechnologyCompanies(ACTI),thecountry’sITindustryemployscloseto75,000peopleandhasmorethan500activeITcompanies 3 .SomeofthemultinationalcompanieswithdeliverycentersincludeCitigroup,Shell,GE,andJPMorgan.Chilecurrentlyhasatalentpoolofcloseto85,000engineersandapproximately10,000engineersareaddedeveryyear 3 .Presently,themainconcentrationofITactivitywithinChilecanbefoundinthecapitalcity,Santiago.SomeofthelargeITcompaniesfromthecountryincludeSonda,AtosOrigin,EDS,TCS,IBMandAccenture.Government incentives 4TheChileanEconomicDevelopmentAgencyrunsaprogramcalledInvestChile,whichprovidesvariousincentivesforinvestmentinthehightechnologyfields.TheincentivesareequallyavailabletolocalandforeigninvestorsforinvestmentswithaminimumvalueofUSD1million.Theseinclude:•Co-fundingofpre-investmentstudies,start-upexpenses,R&Dandinvestmentsinfixedassets•Grantsforthedevelopmentofhumanresources.Emerging Destination1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008 3 Chilean Association of Information Technology Companies2 Business Monitor International and US Commerical Service website 4 Chilean Economic Development Agencyhttp://www.buyusa.gov/chile/en/121.html©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.28

SantiagoCity Introduction•Santiago,thecapitalandlargestcityinChile 1 ,ishometomorethanathirdofthecountry’spopulation•ItisalsoanimportantfinancialcenterinChileaswellasinSouthAmerica.Quick factsGeographicLocationTime Zone GMT -0400ClimatePopulation 1 5,822,316 2Literacy rate 1LanguagesMajor industriesLocated in central Chile, Santiago can be reached fromNew York in about 10 hours and 30 minutesMild, Mediterranean climate with two pronounced seasons– summer and winter. The average temperature is 14degrees Celsius. The average annual rainfall is 38.1 cm95.7 percentSpanish, EnglishFinancial services, trading, machinery and electronicequipments, food processingSources: 1 Instituto Nacional de Estadísticas (2002)2 Data for Santiago Urban AgglomerationKey drivers for the city to emerge as a favorable IT-BPOdestination• Santiago offers a large pool of graduates, as well as professionalsfrom IT-related courses for the IT-BPO industry• The city has good infrastructure for IT-BPO services includingreliable telecom, extensive public transport and technology parks• The government of Chile provides financial and other support forthe high-tech industries and setting up an IT-BPO business in Chileis fairly easy• A large number of companies source Spanish language call centerand BPO services from the city• English language skills in the population are improving, whichpoints to future potential for sourcing multi-lingual services fromSantiago 2• The city is well suited for near-shore business due to a similartime-zone and cultural affinity with the US• Santiago offers significant cost advantage in terms of competitivewage-rates, and lower operating and living costs compared withother cities in the Americas.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Tata Consultancy Services(BPO services)Experian (Softwaredevelopment and ITservices)Accenture (IT and BPOservices)Shell (Call center)Yahoo (Knowledgecenter)Citigroup (Softwaredevelopment and ITservices)Source: Chile Economic Development AgencyDevelopment of the current IT-BPO industry•SantiagohaswitnessedrapidadvancementininformationtechnologyandBPOservices,asnumerouscompanieshavesetuptheirsharedservicehubsandcustomercontactcentersinthecity•CompanieslikeCitigroup,BHPBilliton,Shell,EvalueserveandTCShavesetupoffshorecentersinSantiago•ThecityhaslargepresenceinSpanish-basedcustomersupport.Industry Profile – Size and Specifics•ThecombinedIT-BPOexportsfromthecityareestimatedtobeapproximatelyUSD300to350million 3•Therearemorethan130IT-BPOcompaniesinSantiago 3•TheprominentIT-BPOservicessourcedfromSantiagoincludeITservices,customersupport,financeandaccounting,humanresources,marketingandtechnicalsupport.1 Instituto Nacional de Estadísticas (2002) 3 http://www.hightechchile.com/opportunities/global_services/business_processes_(bpo)2 Invest Chile: Publication on Skilled Human Resources29©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Therearemorethan10largeuniversitiesinandaroundSantiago,includingtheUniversityofSantiago,oneoftheoldestpublicuniversitiesinChile.Around10,000freshgraduatesareaddedtotheexistingtalentpooleveryyear 1•GovernmentpromotionofITrelatedcareershasincreasedenrollmentfortechnicaleducationthree-foldinthelastdecade.In2006,closeto50,000studentswereenrolledintechnologyrelatedcourses 2•Englishlanguageproficiencyisaverage.ThegovernmenthasbeentakinginitiativestoimproveEnglishlanguageskillsincludingobligatoryEnglisheducationfrom5thgradeinschools 3 .IthasdevelopedaNationalRegisterofEnglishSpeakers,withemploymentqualificationsofmorethan38,000ChileanswithcertifiedEnglishlanguageskills 4 .Infrastructure•Office space (IT Parks): SantiagofacesashortageofclassAofficespace,withvacancyratesaslowas0.25percentin3Q2008 5 .However,morethan360,000sq.mts.ofclassAofficespaceiscurrentlyunderconstructionandlikelytoenterthemarketbetweentheendof2008and2010 5•Power supply: Chilecurrentlyfacesshortageofpowersupply,howeverelectricitycostsareatparorlowerthanmostLatinAmericancities 6 .ThereareinitiativestoincreasethepowerproductioncapacitythroughconstructionofLiquefiedNaturalGas(LNG)terminalsandhydroelectricdams,whichareexpectedtoimprovethepowersituationby2012 7•Telecom Infrastructure: Santiagooffersqualitytelecominfrastructureandhighspeedconnectivity.ChileconnectstoLatinAmericaandtherestoftheworldviathreeinternationalfiberopticnetworks(morethan80Gbps)andsatelliteservices 3 .Chilealsoscoreshighonpenetrationoftechnology(mobilephones,internetconnections)amongstLatinAmericancountries•National and International connectivity: TheinternationalairportatSantiagooffersdirectconnectivitytomajorlocations,intheUSandEurope•Upcoming projects: TheUniversityofChileisbuildingaTechnologyParkovera1,000hectarespace,includinga9,000sq.mts.InnovationandBusinessCenterandanincubator 3 .State/ city specific incentives for IT-BPO over and above country level incentives, if any 6•Agrantofupto60percentoramaximumofUSD30,000tocoverpre-investmentstudiesforhightechcompaniesinvestingUSD500,000ormore•Thisgrantistopartiallyfundthecostofpre-feasibility,location,duediligenceorothersuchstudiesrequired,priortotheconsolidationoftheinvestment.Quality of life•Cost of living: Santiagooffersagoodqualityoflifeandnumerousoptionsforlow-costhigh-standardhousingandschooling•Crime rate: AccordingtoastudybyAmericaEconomia(basedon2004data),SantiagohasoneofthelowestratesofviolentcrimeinLatinAmerica•Pollution levels: Santiagohashighairpollutionduetotheconcentrationofindustryandalargenumberofvehicles.Further,thecityislocatedinavalleywithgeographiccharacteristicsthatdonotsupportthedispersalofairpollutants•Ease of commuting: Thecityoffersafairlymodernandextensivetransportsystemcomprisingawell-linkednetworkofMetro,busesandtaxis.TheMetrosysteminthecityiscurrentlyunderexpansion•Availability of Hotels: Thecityhasnumerouslodgingoptionsrangingfrompremiumhotels,includinginternationalchains,tobudgetaccommodation.Risk: City specific•Catastrophic risks: Chileislocatedinanactiveseismiczoneandhashadahistoryofearthquakes,whichhasledtolossoflifeandpropertyinthepast 8•Political risks: Thegovernmenthastakenmeasurestoincreasetheefficiencyofthepublicadministrationandtoensuretransparencyingovernance,whichhasledtoafairlystablepoliticalstructure•History of disruptions: Civildisturbancesoccurinfrequently,withafewinstancesofdomesticviolenceinthelastfewyears 6 .1 Americas Society and Council of the Americas website 5 CB Richard Ellis, 3Q 20082 Ministry of Education, Chile 6 http://www.hightechchile.com/incentives_and_serviceshttp://www.mineduc.cl/index0.php?id_portal=17 www.bloomsburyminerals.com/chileanpowersupply.pdf3 Foreign Investment, Chile website 8 OSAC Chile 2008 Crime & Safety Report4 www.apec.org/etc/medialib/apec_media_library/downloads/workinggroups/hrdwg/mtg/2005/pdf.Par.0050.File.v1.1©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.30

Mexico

MexicoCountry SnapshotSize of the country 1,964,375 sq. kms.Population 105.7 million (July 2007)CapitalMexico CityCurrencyMexican Peso (MXN)1 USD = MXN (average) 11.25 (2008)Main macroeconomic indicators:• GDP in PPP: USD 1347.1 billion (2007 est.) 1• GDP per capita in PPP: USD 12,390 (2007 est.) 1• CPI: 3.4 percent (2007 est.) 2• Unemployment rate: 3.7 percent (2007 est.) 1• FDI stock per capita: USD 2,400 (2007 est.) 1Sources: www.eiu.com, www.cia.gov, www.gocurrency.comPolitical Structure 1TheUnitedMexicanStatesisafederalrepublicwhosegovernmentisbasedonapresidentialsystem.Thepoliticalsystemispresidential,bicameralandfederal(31states).ThePresidentiselectedforanon-renewablesix-yeartermandappointsthecabinet.Mexicohas31statesdividedintomunicipalities,andtheFederalDistrict(MexicoCity).MosttaxesinMexicoarefederal;therefore,stateshavealimitedopportunitytooffertaxincentives.However,Mexicanstateshavebeguncompetingaggressivelywitheachotherforinvestments,andmosthavedevelopmentprogramsforattractingindustry.Business and Investment ClimateForeign Direct Investment (FDI): Mexicoreceivesthesecond-largestinflow(afterBrazil)ofFDIofanycountryinLatinAmerica.FDIinflowstotalledUSD24.7billionin2007,upfromUSD19.2billonin2006 1 .GDP growth: Mexico'sGDPrecordedagrowthof3.2percentin2007.TheEIUexpectsMexico'sGDPtogrowslowlyto1.9percentin2008and0.9percentin2009(previously2.3percentand1.6percent) 1 .2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BBB / StableBBB+ / Stable / A-25648Sources: www.eiu.com, World Bank, Standard & Poor’sCiudad JuárezGuadalajaraMonterreyQuerétaroMexico CityInflation: FollowinganupwardtrendinJanuary-August2008,consumerpriceinflationabatedinthefirsthalfofSeptember2008to5.43percentowingtoeasingfoodprices 1 .TheEIUanticipatesinflationtoreach7.1percentin2008and5percentin2009.IT-BPO Scenario in the countryTheproximitytotheUSmarket,low-costqualifiedpersonnel,andaccesstotheLatinAmericanmarketaresomeoftheadvantagesforMexicoinIT-BPOsector.TheIT-BPOexportfor2007wasUSD12.3billion 3 .Currently,theIT-BPOindustrycomprisesnearly500,000ITprofessionals.Inadditiontothis,closeto65,000newITprofessionalsaregraduatingfromuniversitiesortechnicalschoolseachyear 3 .CompanieslikeGetronics,Unisys,IBM,TCS,Softtek,ManhattanAssociateshavebasesinMexico.MexicoITisaninitiativeexecutedbytheNationalChamberofElectronics,TelecommunicationsandInformationTechnologies(CANIETI),anindustryassociationofleadingITcompaniesinMexico,andissupportedbytheMexicanMinistryofEconomythroughtheProgramfortheDevelopmentoftheSoftwareIndustry(PROSOFT) 3 .ThemainobjectiveoftheinitiativeistopromoteMexicointheITspaceandasaworldclassnearshorealternative.SomeofemergingcitiesinIT-BPOsectorincludeQueretaroandGuadalajarawithotherestablishedlocationslikeMexicoCity,JuarezandMonterrey.Government incentives 3IT-BPOcompaniesestablishedinMexicocanreceivecashgrantsofupto50percentofthetotalcostoftheirprojectandtaxcreditofupto30percentofthetotalR&Dexpense.Emerging DestinationEstablished Destination1 EIU www.eiu.com, various pages, December 2008 3 Mexico IT/ Select, Mexico (the figure includes USD 7.2 billion worth of hardware exports)2 CIA Factbook - https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html http://www.mexicoit.net/index.php?option=com_content&view=category&layout=blog&id=11&Itemid=12©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.32

GuadalajaraCity Introduction•GuadalajaraisMexico’ssecondlargestcity,andthecapitalofthestateofJalisco 1•KnownastheMexicanSiliconValley,Guadalajarahasalargeconcentrationofcomputerandelectronicscompanies.Quick factsGeographicLocationTime Zone GMT – 0600ClimatePopulation 1 1,600,940Literacy rate 1LanguagesMajor industriesSource: 1 Mexico-IT (2007)Situated in mid-Western Mexico, it can be reached fromcapital Mexico City by air in about an hourMild climate with two major seasons - summer and winter.The average temperature is 19.2 degrees Celsius, whileaverage annual rainfall is 98.8 cm92 percentSpanish, EnglishFood & Beverages, Textile, Tequila, Auto-parts, Agriculturalproducts, Electronics and CommunicationsKey drivers for the city to emerge as a favorable IT-BPOdestination• The city has prominent educational institutions that produce morethan 18,000 graduates in IT-related courses every year 1• The geographic proximity to the US and similar time-zone is anadvantage for the IT-BPO industry• The city can leverage its Spanish language proficiency to providecontact center services in Spanish• The talent pool in the city is also suitable for providing outsourcedsoftware and engineering design services• The city has a well-developed infrastructure of quality office space,technology parks and transport system for the IT-BPO industry• The city’s government, industry and academia collaborate onvarious sector strategies and technological research to strengthenthe high-tech cluster in the city• The state government of Jalisco has targeted improvements inadministrative processes resulting in reduced time taken to set upa business in the state.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)IBM (IT and BPO services)TCS (IT and BPOservices)Development of the current IT-BPO industry•NewopportunitiesareemergingforMexico’sSiliconValleyinmultimediaserviceslikedigitalanimation,specialeffectsandvideogames•Sofar,thereareonlysmallcompaniesinthemultimediaservicesindustryinthecitywithfewerthan20employees 1•Alargenumberofengineeringdesigncentersarealsolocatedinthecity.Hewlett Packard (Sharedservices center)Intel (Design center)Perot Systems (IT andengineering services)Teletech (BPO services)Industry Profile – Size and Specifics•ThecombinedICTexportsofthecityareestimatedatUSD16billionin2007 2•TheITclusterinJaliscohasmorethan70internationalcompaniesandover3000employees 2Sources: Company websites of IBM, HP, TCS, Perot; CRMToday article•TheprominentIT-BPOservicessourcedfromGuadalajaraincludesoftwaredevelopment,embeddedsoftware,ITservicesespeciallyfirmwaredesignandtestingandmultimedia.1 Mexico-IT http://www.mexico-it.net/index.php?option=com_content&view=section&layout=blog&id=1&Itemid=32 Information Technology Institute of Jalisco presentation www.ijalti.org.mx/Ijalti-Presentation.pdf33©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•GuadalajaraisacenterforeducationinJalisco,producingmorethan18,000ITgraduatesperyear 1 .ProminenteducationalinstitutesinthecityincludeUniversidadPanamericana,ITESO,UniversidaddeGuadalajara,MonterreyInstituteofTechnology(ITESM)andtheUniversidadAutonomadeGuadalajara(U.A.G)•Thecityhasgoodavailabilityoftrainedtechnicalandengineeringtalent.GuadalajaraisrankedhighforavailabilityofskilledlaborinMexico,especiallyforelectronicsandtechnology 1•GuadalajarahasastableworkforceandlowerattritionratescomparedtolargercitiesinMexico.Infrastructure•Office space (IT Parks): Guadalajaraisexperiencingaboominconstructionofofficespace.Thevacancyrateiscurrentlyabout14percent 2 .Thereisagrowingtrendinthedevelopmentofmixed-useprojectsthatintegrateoffice,residential,andhotelcomponents•Power supply: Powersupplyisnotalwaysreliableandcompanieshavetheirowngeneratorstomitigatethesituation.PowerisrelativelyexpensiveevenwhencomparedwithsomeoftheUScities,atUSD0.24perkWh 3•Telecom Infrastructure: Guadalajaraisservicedbyadequatetelecominfrastructuresupportedbyopticalfibernetwork.TelmexistheprincipalproviderinJaliscostate.GuadalajaraisplanningtosetupWorldwideInteroperabilityforMicrowaveAccess(WiMAX)infrastructure,toprovidemoreconnectivityandhigher-speedInternetaccess 3•National and International connectivity: GuadalajaraprovidesaccesstothePacificNAFTAcorridor,connectingmajorUSandCanadiancities 4 .ThecityisalsowelllinkedwithMexicoCityandwithMexico’scentralandnorthernmarketsbyarailroadnetwork.TheMiguelHidalgoInternationalAirportlocatedinGuadalajaraservesnumerouslocalandinternationaldailyflights,includingdirectflightstoLosAngeles,Houston,Dallas,Chicago,SanFrancisco,andPortland 4•Upcoming projects: ThesecondphaseoftheSoftwareParkinCiudadGuzman,whichwilladd2,396sq.mts.ofspace,islikelytobeoperationalby2008 5 .State/ city specific incentives for IT-BPO over and above country level incentives, if any 6•Completeexemptionfrompayrolltaxfornewcompaniesand50percentdiscountonpayrolltaxesforcompaniescreatingnewjobs•Statecontributionfortrainingprogramsforemployeesattechnicalandprofessionallevels•SpecialincentivesforR&Dprojects.Quality of life•Cost of living: Mexicancities,ingeneral,haveacostadvantageovercitiesintheUS 7 .ThequalityoflivinginGuadalajaraisalsoregardedasgood,withinMexico•Crime rate: Crimeisledbydrugcartelsinthecity.Under-reportingofcrimeincidencestothepoliceisaproblem,thereforeofficialcrimeratesarenotveryreliable 8•Pollution levels: AirpollutionlevelsinGuadalajaraarequitehighduetoalargenumberofvehiclesontheroad.JaliscohasapollutionstandardIndexnamedÍndiceMetropolitanodelaCalidaddelAire(IMECA)whichregulatesthequalityoftheair,andhelpsputmeasurestocontrolpollutioninplace 9•Ease of commuting: Guadalajarametropolitantransitsystemincludesmetrotrains,localbusesandelectricbusroutes.However,increasingnumberoftrucksandcarsonthemainroadsiscausingtrafficcongestioninthecity•Availability of Hotels: Guadalajarahasawelldevelopedhotelinfrastructurerangingfromfive-startobudgethotels,includinginternationalchains.Risk: City specific•Catastrophic risks: GuadalajaraliesinseismiczoneIIandisanearthquake-proneregion,thoughnomajorearthquakehasoccurredsofar 8 .Thecityissurroundedby10volcanoes,ofwhichoneisactive.Floodingiscommoninsomepartsofthecityduringheavyrains.Cyclonesarealsocommon 8• Political risks: Lowriskwithstablepoliticalclimate.TherulingpartyinJaliscostatehasbeeninpowersince1995•History of disruptions: GuadalajarawitnessedminorriotingduringthesummitofEuropeanUnion(EU)andLatinAmericanleadersin2004.Therehavebeennomajorincidencesofriotinginthelasttwoyears.1 Mexico-IT http://www.mexico- 6 IDC report on investment opportunities in Jaliscoit.net/index.php?option=com_content&view=section&layout=blog&id=1&Itemid=37 ProMexico http://www.promexico.gob.mx/wb/Promexico/invest_in_mexico2 CB Richard Ellis, October 20088 Mexico 2008 Crime & Safety Report: Guadalajara3 Guadalajara Reporter Article http://guadalajarareporter.com/content/view/22538/49/9 SIMAT website, Mexican government4 Team Nafta website: http://www.teamnafta.com/index.php/Market-Profiles/guadalajara.htmlhttp://www.sma.df.gob.mx/simat2/ingles.php?opcion=15 IJALTI presentation - www.ijalti.org.mx/Ijalti-Presentation.pdf©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.34

QueretaroCity Introduction•Queretaro,formallyknownasSantiagodeQueretaro,isthecapitaloftheMexicanstateofQueretaro•Itwasrankedasoneofthetop10NorthAmericancitiesofthefuturebytheFDIMagazinein2007-08.Quick factsGeographicLocationTime Zone GMT -0600ClimatePopulation 1 877,837Literacy rate 1LanguagesMajor industriesQueretaro, located in central Mexico, can be reached fromMexico City in about two hours by roadHot and dry in the summer, and mild during the winter. Theaverage temperature is 22 degrees Celsius, while theannual average rainfall is 96.6 cm95.8 percentSpanish, Otomi, EnglishAutomotive, metals, chemicals, consumer goods, apparels,food processingSources: 1 Mexico IT, Mexico Site Selection Website (2007)Other sources: Queretaro Incentive Travel PlannerKey drivers for the city to emerge as a favorable IT-BPOdestination• Queretaro has a trained talent pool, and also attracts professionalsfrom neighboring areas in Mexico• The city can also serve as a Tier II alternative or spoke centers tocompanies in Monterrey and Mexico City• The talent pool in Queretaro is well suited for technical servicesand Spanish contact center services• The 2004-09 development plan for the city aims to strengthen theairport, highways and industrial infrastructure 1• The government is taking initiatives to bring in administrativederegulation and simplification which has effectively shortened thetime taken to set up in the city• The city’s proximity to the US offers a near-shore advantage andsignificantly lower costs of operation 2 .Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Development of the current IT-BPO industry•QueretaroranksfourthinMexicointermsofITsectorexportstrailingonlytheFederalDistrict,NuevoLeon,andJalisco 3Hildebrando (IT and BPOservices)Eidon (Softwaredevelopment)•ThestategovernmentisfocusingonmakingthestatealeaderinembeddedsoftwareandcontactcenterservicesinMexico.Praxis (IT services)NIIT (IT services)Kio Networks (ITservices)Triara (Data centerservices)Sources: Company websites of Hildebrando, Praxis, SouthAmerican Business Information articleIndustry Profile – Size and Specifics•ITexportsofthestateofQueretaroamountedtoUSD17.7millionin2007 3•Therearemorethan60IT-BPOcompaniesoperatinginthecity,withcloseto3,800employeesinsoftwaredevelopmentandafurther6,200incontactcenterservices 1•TheITservicesprovidedfromQueretaroincludeembeddedsoftwaredevelopment,ITconsulting,datacenters,infrastructuremanagement,applicationdevelopmentandtesting•QueretaroalsooffersBPOserviceslikecontactcenters,datamining,marketanalysis,financeandaccountingservices,andloanapplicationprocessing.1 Queretaro Government presentation2 ProMexico website3 Queretaro Economic Yearbook, 200735©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Queretaro’seducationalinstitutesproducemorethan2,000technicalgraduatesand1,500ITgraduateseveryyear 1 .TheNationalAutonomousUniversityandNationalPolytechnicInstitutearetwoofthemostprestigiousuniversitiesinQueretaro.AnotherimportantschoolistheMonterreyInstituteofTechnology’s(ITESM)Queretarocampus•Vocationaleducationisfocusedonautomotive,aerospaceandIT,anduniversitiesandhighschoolsintheregionhaveenteredintotechnicalrelationshipagreementswithcompaniesinandaroundthecitytodeveloptalent•TheproficiencyinEnglishiscurrentlyrelativelylimited,whichcanrestrictthetalentpoolforbi-lingualservices•QueretarohaslowerattritionratesthanthoseinotherdestinationsinMexico.Amajorityoftheworkforceislocal.Infrastructure•Office space (IT Parks): Queretarohasfivemajorindustrialparkswhichhousetheforeigncompaniesoperatinginthecity.Apartfromtheindustrialparks,landtoconstructofficebuildingsisavailableandexpansionorrefurbishingofexistingrealestateisalsocommon•Power supply: Powersupplyisnotuninterrupted,butQueretarohasfewerpowerfailuresthanothercitiesinMexico.Companieshavetheirowngeneratorstomeettheshortsupply 2 .•Telecom Infrastructure: Thecityoffersfiberopticinfrastructureandhighbandwidthcommunicationfacilities.Telmexistheprincipalproviderinthecity•National and International connectivity: QueretarohaswellmaintainedtollroadsconnectingtomajorMexicancities.ThelinkagetotheNorthAmericanFreeTradeAgreement(NAFTA)Highway,enablesaccesstothebordercitiesoftheUS.TheQueretaroInternationalairportoffersdomesticandinternationalflightstoAmericanandMexicancities•Upcoming projects: TheconstructionoftheParqueMicroindustrialSantiagostartedinDecember2007,toofferoptionstosmallcompaniestoinstallorrelocate.Thisparkisexpectedtobeoperationalin2009 3 .State/ city specific incentives for IT-BPO over and above country level incentives, if any 4•TheStateofQueretaroprovidescompleteexemptiononStatePayrollTax•QueretarohascreatedaspecialprogramtopromoteICTIndustry,namedQSoft.Thisprogramprovidesincentivesfordevelopmentofproductiveprojects,aswellasfortrainingandcertificationemployeesinspecifictechnologiesandplatforms•TheGovernmentofQueretaroprovidesapreferentialrateinpaymentofrightsinthePublicRegistryandassistanceininfrastructurethroughtheconstructionofspecialworks.Quality of life•Cost of living: ThecostoflivinginQueretaroismuchlowerthanthatinotherlargercitiesinMexico.QueretarowasrankedthirdinReformanewspaper’s“ThirdNationalQualityofLifeinMexicoSurvey”•Crime rate: QueretaroisregardedasthethirdsafestcityinMexico,withlowcrimerates 5• Pollution levels: Beingamajorindustrialcenter,somepollutioniswitnessed,especiallyinthecongestedareasofthecity•Ease of commuting: Queretarohasagoodroadnetwork,highercomparedtothenationalaverage.However,trafficcongestioncanbeanissueintheindustrialareas•Availability of Hotels: Thecityhasmorethan14hotelsofthefour-starandabovecategory,includinginternationalhotelchains 6 ,andanumberofbudgethotels.Risk: City specific•Catastrophic risks: QueretaroliesinseismiczoneIIwithlowearthquakerisk.However,thecityispronetofloodsduringtherains.Inthelastfewyears,Queretarohaswitnessedminorfloods•Political risks: Thereisrelativepoliticalstabilityinthestate,andtherulingpartyisreasonablypro-business•History of disruptions: Thecityhasnotwitnessedincidencesrelatedtocivilunrestorterrorism.1 Mexico-IT 4 Team Nafta http://www.teamnafta.com/index.php/Market-Profiles/queretaro.htmlhttp://www.mexico-5 Queretaro state government presentationit.net/index.php?option=com_content&view=section&layout=blog&id=1&Itemid=3www.queretaro.gob.mx/sedesu/DESECO/FOMIND/contenidos/whyqueretaro.pps2 Queretaro Real Estate website6 VisitMexico.com3 Municipio de Queretaro www.visitmexico.com/work/sites/Visitmexico/resources/LocalContent/6333/9/queretaro_cg.pdfhttp://www.municipiodequeretaro.gob.mx/modules.php?name=News&file=article&sid=1310 36©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

United States ofAmerica

UnitedStatesofAmericaCountry SnapshotSize of the country 9,161,923 sq. kms.Population 301.6 million (2007)CapitalWashington, DCCurrencyUS Dollar (USD)1 USD = USD (average) 1.00Main macroeconomic indicators: 1• GDP in PPP: USD 13,808 billion (2007 est.)• GDP per capita in PPP: USD 45,851 (2007 est.)• CPI: 4.5 percent (2007 est.)• Unemployment rate: 4.6 percent (2007 est.)• FDI stock per capita: USD 6,950 (2007 est.)Sources: www.eiu.com, www.cia.gov, www.gocurrency.comPolitical Structure 1UnitedStatesisaConstitution-basedfederalrepublic.ThePresidentiselectedbypopularvoteviaanelectoralcollegeforuptotwofour-yearterms.Thelegislatureisbicameralandconsistsof100senatemembersand435membersofthehouseofrepresentatives.Administratively,thecountryisdividedinto50statesandonedistrict.Statescanofferindependentincentivestoinvestorsandtheinvestmentclimatecandifferamongstates.Business and Investment ClimateForeign Direct Investment (FDI): FDIintotheUScontinueditsupwardtrend,reachingUSD199.3billionin2007,upfromUSD183.6billonin2006 1 .GDP growth: Aftersubstantialslowingin2007,GDPgrowthislikelytoweakenfurtherin2008.TheEIUexpectsgrowthtoslowto1.8percentin2008,hitbythedownturninthehousingmarket,thefinancialcrisisandtheweakeningofthelabormarket.Growthislikelytocontinuetoweakensharplyin2009,to0.6percent.Inflation: TheEIUexpectstheUSaverageconsumerpriceinflationtoeasein2009fromitsrecenthigh.TheEIUforecastthatconsumerpricesmayrisebyanaveragerateof4.4percentin2008andbyjust2.6percentin2009.2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)AA / StableAAA / Stable / A-1+Sources: www.eiu.com, World Bank, Standard & Poor’s30IT-BPO Scenario in the countryTheUSisonethekeymarketsforoutsourcingdemand,andisalsothelargestserviceprovidercurrently 2 .ThecombinedspendingonIT-BPObytheUSisestimatedtobeUSD1.07trillionin2007 2 ,accountingfor45percentoftheglobalITspendingandabout66percentoftheglobalBPOspending 2 .TheInformationTechnologyAssociationofAmerica(ITAA)isthehigh-techindustryassociationworkingtomaintainAmerica’sroleastheleadingsourceforinnovation.ItrepresentsandenhancesthecompetitiveinterestsoftheUSinformationtechnologyandelectronicsindustries.Government incentives 3MoststatesintheUShaveanEconomicDevelopmentAgencywithextensivefundsavailableforinvestmentincentivesthatincludetaxbreaks,traininggrants,landpurchaseassistanceandotherbenefits.Thereisstrongcompetitiontoattractthebestcompaniesanddiscretionaryincentivesareoftendecidedonacase-by-casebasis.SeattleBoiseSan JoseIndianapolisNew YorkCalifornia region(Silicon Valley)Emerging DestinationEstablished Destination1 EIU www.eiu.com, Economist Intelligence Unit website, various pages, December 2008 3 FDI Magazine2 IDC estimates IDC Predictions 2008: The Hyper-Disrupted IT Industry Takes Root http://www.fdimagazine.com/news/fullstory.php/aid/187/Labyrinth_of_incentivesUnited_States.html 38©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

BoiseCity Introduction•BoiseisthecapitalofIdahostate•ItisalsoIdaho’slargestcityandthecenterofcommerceandpoliticsforthestate 1Quick factsGeographicLocationTime Zone GMT -0700ClimatePopulation 1 567,640Literacy rate 2Boise is situated in a wide river valley at the foot of Rockymountains, and can be reached from Seattle by air in aboutan hour and 30 minutesClimate is tempered year-round by air from the PacificOcean, with three seasons: summer, autumn and winter.The annual average temperature is 10.5 degrees Celsius.The average annual rainfall is 30.7 cm and annual averagesnowfall is 54.1 cm99 percentKey drivers for the city to emerge as a favorable IT-BPOdestination• Boise has a number of reputed education institutions, including theBoise State University that produce a technical talent pool• An incentive system and easy funding has promoted a largenumber of start-ups in Boise. This has helped create a culture ofenterpreneurship and an injection of talent and ideas into the city• Kiplinger Personal Finance magazine named the city of Boise as thefourth best city in the country to “Live, Work and Play” for 2008 2• Companies locating in Boise have the benefit of onshoreoperations combined with a lower cost of living compared withother cities in the US 3 .LanguagesEnglishMajor industriesDefense equipment manufacturing and related services,Forestry, Computer components / systems, TourismSources: 1 CIA 20062 CIA data for U.S. (literacy rates by city are not available)Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Hewlett Packard (ITservices)SCP Global Technologies(BPO services)Synoptek (IT services)Microsoft (IT services)MobileDataforce (ITservices – mobilesoftware)Keynetics Inc. (R&Dservices)Sources: Company websites of Microsoft, Synoptek, BoiseValley Economic PartnershipDevelopment of the current IT-BPO industry•Boise’shightech 4 industrystartedinthe1970swithcompanieslikeHewlettPackardandMicronTechnologysettingupbaseinthecity•ThecityplanstotakeadvantageoftheonshoretrendtakingplaceintheUSnow•Boiseisbuildingitssoftwareindustrybyencouragingstart-upsandentrepreneurship•Microsoftacquiredalocalsoftwaredevelopmentfirm,ProClarityin2006.Industry Profile – Size and Specifics•Therearecloseto34,081hightechworkersemployedinBoise’sindustry 5•Thecityischaracterizedbysmallandmediumenterprises.AccordingtotheIdahoDepartmentofCommerce,theBoiseareahasaround400softwareandinformationtechnologycompanies6•ServicesofferedfromBoiseincludeembeddedsoftwareandfirmwaredevelopment.1 City of Boise website http://www.cityofboise.org/CityGovernment/AboutBoise/ 4 High-tech includes high-tech manufacturing, communications services, and software andcomputer-related services2 City of Boise News Releasehttp://www.cityofboise.org/Departments/Mayor/NewsReleases/2008/page30377.aspx 5 Boise, Idaho: An Overview of the High-Technology Economy in the Treasure Valley. WhitePaper written by Heike Mayer, Ph.D., Assistant Professor, Urban Affairs and Planning Program,These rankings are based on growth in population, jobs and income; overall cost of living and Virginia Tech - Alexandria Center (February 2008)the number of quality jobs in technology, education, and professional and technical services6 Idaho Department of Commerce http://idahosea.org/Member_Companies/3 http://www.industrytoday.com/article_view.asp?ArticleID=F31039©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•ThecityishometoinstitutionssuchasBSUCollegeofEngineering;ITTTechnicalInstitute 1•Boisehasahigherrateofnumberofstudentsgraduating(37percent)comparedtothenationalaverageof27percent 2•ThetotalnumberofgraduatespassingoutannuallyoutoftheBoiseStateUniversityisabout6,500.Thecityhoweverfacesatalentshortage.In2007,theBSUgraduatedjust28studentswithcomputer-sciencedegrees 3 .Infrastructure•Office space (IT Parks): Thereis1.9millionsq.mts.ofofficespaceinBoiseandthecityhasavacancyrateof9percent 4•Power supply: IdahoPower,thecompanythatsupplieselectricitytoBoise,nolongerhasapowersurplus,andwouldneedtoadd1300MWtomeet"current"demand 3 ;expectedtobeaddedafter2012 3•Telecom Infrastructure: TimeWarnerTelecom(nowTWTelecom)providescompletevoice,dataandnetworksolutions,withnearly100routemilesoflocalfibernetworkinthecityofBoise 5•National and International connectivity: BoisehasseveraldirectairconnectionstocitiessuchasDenver,Phoenix,Seattle,Chicago,LosAngelesandSanFrancisco.Thecity’sairporthasbeennewlyrenovated•Upcoming projects: BoiseWaterCooler,abusinessdevelopmentcenter,isbeingsetuptoprovideofficespaceandoffersupportservicestostart-upbusinesses.TheWaterCoolerhasroomforeightsmallbusinesses,additionalcubiclespaceformorethan15people,andspacefortrainingandmeetings 3 .State/ city specific incentives for IT-BPO over and above country level incentives, if any 6•BusinessesthatinvestaminimumofUSD500,000innewfacilitiesandcreateatleast10newjobsaveragingUSD40,000annually,plusbenefits,mayqualifyforavarietyofincentives.Qualifyingcompaniesreceive:-AnenhancedInvestmentTaxCreditof3.75percentuptoUSD750,000or62.5percentoftaxliabilityinany1year-NewjobstaxcreditstartingatUSD1,500andclimbingtoUSD3,000perjob-A2.5percentrealpropertyimprovementtaxcredituptoUSD125,000inany1yearalongwitha25percentrebateonsalestaxpaidonconstructionmaterialsforthenewfacilities-Uponrequestfromthecompany,therespectivecountycommissionersmayalsoauthorizeafullorpartialpropertytaxexemption.Quality of life•Cost of living: The2008costoflivingindexinBoiseis89.0,whichislessthantheUSaveragetakenat100 1•Crime rate: AccordingtoFBIstatistics,Idaho’scrimerateisthelowestintheWest.Therateofseriouscrimeis21.3percentlessthanthenationalaverage 7•Pollution levels: Pollutionlevelscanbehigh.Beingavalleycity,Boisefacesaproblemofwinterinversion,whichleadstopollutionandsmogbeingtrappedclosetotheground•Ease of commuting: ValleyRideprovidesregionalpublictransportandfixed-linebusserviceinBoise.Citytaxis,whichcanalsobebookedonline,areavailableinBoiseforlocalcommuting.Averagecommutingtimeisabout18minutes 6• Availability of Hotels: Thereareseveralhotels,includinginternationalhotelchains,andmotelsavailableinBoise.Risk: City specific•Catastrophic risks: ThecityofBoiseisexposedtowildfire 8 risksasitislocatedclosetotheBoiseNationalForest•History of disruptions: InAugust2008,awildfiredestroyed10housesanddamagednineothersinSoutheastBoise 9 .1 http://www.city-data.com/city/Boise-City-Idaho.html 6 Starting A Business In Idaho Publication 2007 - 2008 by Idaho Department of Commerce C.L.2 Kiplinger Personal Finance magazine http://www.estech.org/?pageName=Why"Butch" Otter, Governor3 Idaho Statesman article7 Visit Idaho website http://www.visitidaho.org/about/relocation.aspx4 Office Market Trends Boise – Grubb and Ellis Research 20088 The term “wildfire” is used for uncontrolled fire that destroys forests and many other types of5 Red Orbit news articlevegetation, as well as animal specieshttp://www.redorbit.com/news/technology/76995/time_warner_telecom_improves_city_of_bo 9 Fox News article (25 August 2008)ise_voice_and_data/index.html 40©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

IndianapolisCity Introduction•IndianapolisisthecapitalofthestateofIndiana,andthetwelthlargestcityintheUS 1•Thecityhasastrongreputationinsportsactivities,andhashostedseveralinternationalsportingevents.Quick factsGeographicLocationTime Zone GMT -0500ClimatePopulation 1 797,268Literacy rate 2LanguagesMajor industriesSituated in east-central US, it can be reached from NewYork by air in about 2 hours and 30 minutesTemperate weather, with no pronounced dry or wet season.Summers are warm, while winters are frigid and humid.The average temperature is 11.3 degrees Celsius, whileaverage annual rainfall is 101.6 cm99 percentEnglishFood and allied products, chemicals, electronics, medicaland optical goodsSources: 1 FBI 20072 CIA data for the country (data not available at the state or city level)Key drivers for the city to emerge as a favorable IT-BPOdestination• A number of reputed universities located around Indianapolis offercourses in information technology, creating a ready talent pool forthe IT-BPO industry• The city offers a variety of incentives to the IT-BPO industry. In a2008 study, KPMG has ranked it the city with the third most costeffective tax structure 2• Indianapolis is located most centrally among the top 100 marketsin the US 3 , giving it access to talent from other cities• Indianapolis offers well developed infrastructure including power,telecom, roads and a good quality of life for its residents• The city is suited to leverage the outsourcing potential in the lifesciences industry, due to presence of a large number of lifesciences companies in the region• Companies locating in Indianapolis have the benefit of onshoreoperations combined with lower costs compared with other ITcenters in the US, especially the Silicon Valley area.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Development of the current IT-BPO industry•ThetechnologyindustryinIndianapolishaswitnessedsustainedgrowthoverthelastfourtofiveyears,andhasseenpositivejobcreationSoftware EngineeringProfessionals, Inc. (ITservices)Interactive Intelligence(ICT services)•Theaverage"technology"workerinthecityearnsapproximately54percentmoresalarythantheaverageprivatesectorworker 4•Indianapolisisahubofentrepreneurialactivity,withalargenumberofsmallandmediumsizedICTcompanieslocatedintheregion.Exact Target (IT services)Defender Direct (ITservices)Source: Indy Partnership websiteHP (IT services)Tata ConsultancyServices (IT services)Industry Profile – Size and Specifics•Thereareabout2000informationtechnologyfirmsintheIndianapolisregion 4•Around28,500peopleareemployedinthehigh-techindustryinIndianapolis 4•Computersystemsdesignandrelatedserviceswasthelargesthigh-techindustrysectorin2006,followedbytelecommunicationsservices•IndianapolisispredominantlyfocusedonICTandtechnologyrelatedservices,withrelativelylowertractioninBPOservices.1 Indianapolis University http://www.uindy.edu/aboutuindy/indylinks.php 4 Indy Partnership presentation, 2007 (The Indianapolis region is a 10-county area including2 KPMG “Competitive Alternatives 2008” study Boone, Hamilton, Hancock, Hendricks, Johnson, Madison, Marion, Monroe, Morgan and3 Cybercities 2008: An Overview of the High-Technology Industry in the Nation's Top 60 Cities Shelby counties)41©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•LargeandrenowneduniversitiesliketheIndianaUniversity,PurdueUniversity,RoseHulmanInstituteofTechnology,IvyTechCommunityCollegeandtheUniversityofIllinoisaresituatednearIndianapolis.Mostoftheseuniversitieshavecoursesforcomputerstudiesandinformationtechnology•Morethan1,350studentsgraduateinIT-relatedcourseseveryyearfrominstitutionsinandaroundthecity 1•Additionally,theIndianapolisregionwasestimatedtohavearound63,900underemployedworkersin2007,22percentofwhomhadinformationtechnologyskills 2 .Infrastructure•Office space (IT Parks): TheofficemarketinIndianapolissawvacancyratesof16.2percentinthecentralbusinessdistrict(CBD)andsubmarketareas 3 .Theaverageofficerentalratesfornon-CBDareasareamongthelowestwithinstatesintheUS.Thecitycurrentlyhasfivecertifiedtechparks,includingtheIndianapolisLifeSciencesResearchCommunityandIndianaBusinessIncubators•Power supply: PowersupplyisreliableandcostsaboutUSD0.06perkWh 1• Telecom Infrastructure: Oneofthecountry'seightmajorfiberopticcablespines–Internet2-runsthroughtheRegionandishostedbytheIndianaandPurdueUniversities•National and International connectivity: FourinterstatehighwaysconvergeinIndianapolis.AnupgradetotheIndianapolisInternationalAirportwascompletedinNovember2008atacostofUSD1billion 4•Upcoming projects: ThePurdueTechnologyCenter,expectedtoopeninfall2008,isbeingbuilton16hectaresofland.ThePurdueResearchPark,createdinpartnershipwithHolladayProperties,Inc.isbeingbuiltona31-hectaresite 5 .State/ city specific incentives for IT-BPO over and above country level incentives, if any 6•In2003,theIndianastatebroughtinseveraltaxchanges,includingthephase-outoftheinventorytax,eliminationofgrossincometaxandincreasedresearchtaxcredits.PermissionsforbusinessesintheStatecanbeobtainedonline•Severalincentivescanbeavailedsubjecttocertainkeycriteria/requirementsbeingfulfilled.Theincentivesinclude:-Phaseinofrealpropertytaxobligationoveronetotenyearperiod-CreditavailabletoabusinessengagedinmakingqualifiedmediaproductionsinIndiana-RefundabletaxcreditsbasedonexistingandadditionalpayrollforjobsretainedandcreatedinIndiana.Quality of life•Cost of living: ThecostoflivinginIndianapolisislowerthanthenationalaverage,especiallyonparameterssuchascostofgroceries,utilitiesandhealthcare 7•Crime rate: Crimerateisquitehigh,with12incidentsofviolentcrimeforevery1000people 8 .Incidencesofcrimeagainstpropertyweremuchhigher,at63forevery1000peoplein2007inthecity 8•Pollution levels: Airpollutionishigh.AirQualityIndex(percentageofdayswhenairqualitywasrankedasgood)was58.1percentinIndianapolis 9•Ease of commuting: Therearenomajorcongestionissuesinthecity.However,thecitylacksamassrapidtransportsystem.Afour-railsystemforthecityhasbeenproposed•Availability of Hotels: Indianapolishasbudgetaswellasluxuryhotels,includinginternationalchains.TheIntercontinentalGroupopenedits121-roomhotelinOctober2008.Risk: City specific•Catastrophic risks: Indianapolisispronetofloodsandtornadoes.ThecityparticipatesintheNationalFloodInsuranceProgramunderwhichfloodplainmanagementpracticesareimplemented,andpropertyownersareabletoinsureagainstfloodlosses 10•Political risks: Therehasbeenstabilityduringthelastdecadewiththerulingpartycompletingitsterminpower•History of disruptions: Thecityhashadahistoryofdisruptionsonaccountoffloodandtornadoes.Howeverthecivicadministrationhasadisastermanagementprograminplacetotacklethesedisruptions.1 Indy Partnership presentation, 2007 6 Indiana Economic Development Corporation2 The Indianapolis, Indiana Area Labor Availability Report, September 2007 7 ACCRA, 2007 Annual Average Data on Cost of Living3 Colliers Turley Martin Tucker and Cushman Wakefield Alliance 2Q 2008 8 FBI Crime Rate Index 20074 Midwest Construction http://midwest.construction.com/features/archive/BestOf2008_35.asp5 NewsAndTribune website:http://www.newsandtribune.com/local/local_story_066122747.html9 Best Places to Retire 2007:http://money.cnn.com/magazines/moneymag/bpretire/2007/snapshots/PL1836003.html10 US Department of Homeland Securityhttp://www.fema.gov/news/newsrelease.fema?id=46811 42©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Asia Pacific

AsiaPacific(ASPAC)isoneofthemostdynamicandfastestgrowingregionsintheworld.Duetoitsdiversity,itdefiesalmostanykindofstereotypesandcomparisons.TheriseoftheASPACregionasaservicessourcingdestinationisledbytheIndiansuccessstory.Overthelastfewyears,otherAsianlocationssuchasChina,Australia,Malaysia,SriLanka,VietnamandthePhilippineshavebeenleveragingtherelativecostadvantagetoattractcustomersandhavemanagedtogainthespotlightontheglobalIT-BPOmap.RealizingthegrowthpotentialoftheIT-BPOindustry,TierIIcitiesintheASPACregionhavenowjumpedonthesourcingbandwagonandarebeingprojectedasspecialistdestinations,andtheserviceprovidersaredevelopingcapabilitiesinvariousservices.Overandabovetheincentivesofferedbythecentralgovernmentofthecountries,provincialgovernmentshavealsostartedprovidingincentivestocompaniesthatwishtosetupoperationsintheiradministration.Besidesofferinglowercosts,goodtalentpool,andbetterqualityoflife,TierIIcitiesintheASPACregioncanalsoofferscalability.MostoftheASPACcountrieshaveayoungpopulation,andthereforetheworkingageratiosarerelativelyhigh.AlthoughpartsoftheASPACregionlargelycatertotheEnglishspeakingmarket,citiesinChinasuchasChangshahaveKoreanandJapaneselinguisticcapabilities,andcitiessuchasAhmedabadservealargeIndiandomesticmarket.MostoftheTierIIcitiesintheASPACregionhavethebenefitoflearningfromthesuccessstoriesofthelargecitiesintheirrespectivegeographiesandhavethepotentialtoemulatethissuccess.45©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

ASPAC - Table of ContentsBrisbane49ChangshaHangzhou5355Ahmedabad 59Jaipur 61Nagpur 63Penang67Davao CityIloilo City7173Ho Chi Minh City77©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.46

Australia

AustraliaCountry SnapshotSize of the country 7,682,400 sq. kms.Population 20.4 million (2007)CapitalCanberraCurrencyAustralian Dollar (AUD)1 USD = AUD (Average) 1.20 (2008)Main macroeconomic indicators 1 :• GDP in PPP: USD 762 billion (2007 est.)• GDP per capita in PPP: USD 37,234 (2007 est.)• CPI: 4.5 percent (2007 est.)• Unemployment rate:4.4 percent (2007 est.)• FDI stock per capita: USD 14,036 (2007 est.)Sources: www.eiu.com, www.cia.gov, Gocurrency.comPolitical Structure 1Australiaisaconstitutionalmonarchy,withtheGoverner-generalactingastherepresentativeoftheBritishcrown.Thelegislatureconsistsofafederalparliamentcomprisinga76-memberSenate(upperhouse)anda150-memberHouseofRepresentatives(lowerhouse).Eachofthesixstatesinthefederationhasitsowngovernment,withagovernorandabicamerallegislature,apartfromQueensland,whichhasaunicamerallegislature.Currently,theLaborPartyhasalargemajorityintheHouseofRepresentatives.Thenextfederalelectionistotakeplacein2010.Thecountryisadministrativelydividedintosixstatesandtwoterritories,thegovernmentsofwhichmayofferdifferentinvestmentincentivesthatpromotetheireconomiesandencourageFDIintheirownright.Business and Investment ClimateForeign Direct Investment (FDI): FDIinflowstoAustraliain2007wereUSD31billion 2 upfromUSD24billionin2006 3 ,accordingtotheAustralianBureauofStatistics.GDP growth: AccordingtoEIU,theannualGDPgrowthisexpectedtoaverage2.2percentin2009-10,downfromanaverageof3.3percentin2003-07.2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BBB/ NegativeAAA/Stable/A-1+Sources: www.eiu.com, World Bank, Standard & Poor’s93Inflation: Inflationratewas3.6percentin2007andisexpectedtobeabovethe2-3percentrangetargetedbytheReserveBankofAustralia(thecentralbank)in2008and2009 1 .IT-BPO Scenario in the countryAustraliaisoneoftheimportantdestinationsforInformationandCommunicationTechnology(ICT)servicesinmanyareas,includingsoftwaredevelopment,systemsintegrationandwirelessnetworking,e-commerce,smartcardsandcomputergames.In2005-06,thepackagedsoftwareandcomputerservicesindustryinAustraliawasworthUSD18billion.InAugust2006,therewere168,000peopleemployedintheIT-BPOindustry 4 .ThegovernmenthasasignificantfocusontheICTindustryandhascommittedUSD380millionover10years(to2011)toestablishandoperateacentreofexcellenceforICTresearch(NationalICTAustraliaorNICTA),researchtrainingandcommercialization.AdelaideMelbourneEmerging DestinationEstablished DestinationBrisbaneSydneyCanberraGovernment incentivesTheResearchandDevelopmentTaxConcession,administeredbyAusIndustry(divisionoftheDepartmentofInnovation,industry,scienceandresearchoftheAustraliangovernment),allowscompaniestodeductupto125percent,andincertaincircumstancesupto175percent 5 ,ofqualifyingexpenditureincurredonResearchandDevelopmentactivities.CertainICTcompaniesthatarenotyetmakingprofithavetheoptionoftakingthetaxconcessionasataxoffset,whichcanprovidecashtofundtheirResearchandDevelopmentactivities.1 www.eiu.com, various pages, December 2008 4 www.austrade.gov.au, December 20082 www.fdimagazine.com/news/fullstory.php/aid/2153/Australia_FDI_inflow_doubles.html, FDI 5 www.ausindustry.gov.au, December 2008Magazine, 20073 www.business.nsw.gov.au, Department of State and Regional Development website,December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.48

BrisbaneCity Introduction•BrisbaneisthecapitalcityofQueenslandandAustralia'sthirdlargestcity,afterMelbourneandSydney 1•Itisapopularbusinessandtouristcenter.Quick factsGeographicLocationTime Zone GMT + 1000ClimatePopulation 1 1,857,594Literacy rate 2LanguagesMajor industriesSituated on the east coast of Australia, it can be reachedby air from Sydney in about one hourSub-tropical climate with hot summers and clear mildwinters. The average summer temperature is 24.8 degreesCelsius, while winter average is 15.6. The average annualrainfall is 115.2 cm52.6 percent**English, Chinese, ItalianTourism, Oil Refining, Mining, Financial Services,Construction, HealthSources: 1 Australian Bureau of Statistics (2007)2 2006 Australian Census** Persons aged 15 years and over with a qualificationOther sources: Population statistics: Queensland Govt, Office of Economic and StatisticalResearch, 2007; Invest Brisbane websiteKey drivers for the city to emerge as a favorable IT-BPOdestination• Brisbane has a large talent pool, with a higher proportion ofgraduates than the national average. It attracted over 40,000international students in 2006 2• The city is home to renowned universities known for their qualityof education and research and development• Brisbane is recognized for its engineering talent and has a highernumber of ICT graduates per capita than any other Australianstate 3• More than 16 percent of households speak a language other thanEnglish 4 , thus providing a multi-lingual workforce• The Queensland Government promotes the growth of the ICTindustry through its “Smart ICT Strategy” that extends support tothe ICT industry for raising capital, export enhancement, researchand development, and business development 5• Brisbane offers cost advantages over cities like Melbourne andSydney in Australia, with 10-15 percent lower employee costs onan average 6 .Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Oracle (Softwaredevelopment services)Red Hat (Engineering andsupport services)HCL TechnologiesApplication Development &Maintenance services(ADM)IBM (BPO services)Microsoft (IT services)Technology One (ITservices)Sources: Company websites of IBM, Microsoft, HCL,Technology One, IT News AustraliaDevelopment of the current IT-BPO industry•TheInformationandCommunicationsTechnology(ICT)industryisakeygrowthsectorwithinQueensland’seconomy•BrisbaneisgainingrecognitionasahubforgamingdevelopmentinAustralia•LowercostswithinAustraliaandaccesstocreativetalenthasattractedleadinggamingcompaniessuchasSony,ElectronicArts,NintendoandMicrosofttoBrisbane 3 .Industry Profile – Size and Specifics•TheICTrevenueofBrisbanewasUSD23.6billionin2007.Therewerecloseto5,600companiesemploying77,300employees 3 .TheIT-BPOindustryisakeycomponentofBrisbane’sICTindustry•TheICTindustryisfragmented,withmediumandlargeICTbusinessesaccountingforasignificantproportionofemploymentandsales,co-existingwithalargenumberofmicroandsmallbusinesses•TheprominentIT-BPOservicessourcedfromBrisbaneincludesoftwaredevelopment,customercare,engineeringservices,gamedevelopmentande-securityservices•Thecityalsocaterstothedomesticmarketforsoftwaredevelopment,especiallyfortheminingindustryinAustralia.1 Population statistics, Queensland Government, 2006 5 Government of Queensland, Working in ICT in the Queensland Government, the Smart State,2 www.brisbane.qld.gov.au, December 2008 20073 www.investbrisbane.com.au/Sectors/ICT.aspx, December 2008 6 Australian Census 20064 BrisbaneMarketing.com, various pages, December 200849©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Brisbanehasalargeeducatedtalentpoolwithnearly140,000studentscollectivelyenrolledinBrisbane’suniversitiesin2007 1 .ThecityishometorenowneduniversitieslikeTheUniversityofQueensland,QueenslandUniversityofTechnology,GriffithUniversity,BondUniversityandTAFENetwork•Brisbaneisrecognizedforitsengineeringtalent,aslocaluniversitieshaveover18,000studentsenrolledininformationtechnologyandengineeringrelatedtertiarystudies 1 .BrisbanehasalargernumberofICTgraduatespercapitathananyotherAustralianstate 1•Attritionlevelsarerelativelylowerthanthoseinthelargercities,SydneyandMelbourne 2 .Infrastructure•Office space (IT Parks): Brisbaneiscurrentlyexperiencingtightvacancyratesforcommercialofficespace.However,theadditionofnearly600,000sq.mts.ofnewofficespaceisexpectedby2012 3 .Brisbane’srentalcostsingeneralarelowerthanthoseinmanyothercitiesinAustralia•Power supply: PowersupplyisabundantandreliableinBrisbane,withnooutages.Energexwasthemonopolypowersupplieruntil2007,whentheretailmarketforpowerwasopeneduptoprivatecompetitiontoallowmorechoicetoretailconsumers•Telecom Infrastructure: Brisbanehasanetworkofhighcapacitytelecomlinkswhichprovidetelecominfrastructureforbusinesscenterslocatedinandaroundthecity•National and International connectivity: Brisbaneisstrategicallyplacedatthejunctionofmajornationalandregionalroadnetworks.Brisbanealsooffersanextensivenetworkofdomesticandinternationalflightswithalmost30airlinescollectivelyoperatingmorethan2,700domesticandinternationalflightsperweek 2 .State/ city specific incentives for IT-BPO over and above country level incentives, if any•TheQueenslandGovernment’sInnovationProgramoffersaportfolioofgrantswithoverUSD3billioninvestedtodate,targetedatinnovativeandresearchorientedprojects 2•Rebateofstatebasedtaxesandduties 4 :-Refundsofupto100percentofpayrollandlandtaxesdirectlyrelatedtotheproject,incurredandpaidbythebusinessovertheearlyyearsofoperation-RefundsinpartorinfullofQueenslandStampDutyincurredandpaidinrelationtotheestablishmentoftheproject.Quality of life•Cost of living: CostoflivinginBrisbaneisrelativelylowerthanincitieslikeSydney,MelbourneandPerth 5•Crime rate: Brisbaneisconsideredtobearelativelysafecity;withlowcrimerates•Pollution levels: ThequalityofairinBrisbaneisgenerallygood,andAustralianNationalAirQualitystandardsarerarelyexceeded 6 .ItisalsoregardedasoneofthegreenestcitiesinAustralia 1•Ease of commuting: Brisbanehasanextensivepublictransportsystemincludingsuburbanelectrictrains,BrisbaneCityCouncilbuses,privatecoachcompaniesandferries.However,alargenumberofcommuterspreferpersonalvehicles.Trafficcongestionandshortageofparkingspacearewitnessedduringpeakbusinesshours•Availability of hotels: Brisbanehasqualityhotelinfrastructure,includinginternationalhotelchains,sincetourismisasignificantpartofthecity’seconomy.Risk: City specific•Catastrophic risks: Brisbaneisoccasionallysubjectedtonaturaldisasterslikebushfires,floodsandseverestorms•Political risks: Lowpoliticalrisk,asthestateofQueenslandhashadastablepoliticalclimateforthelastfewyears.1 www.investbrisbane.com/Sectors/CreativeIndustries.aspx, December 2008 4 www.investqueensland.com.au/dsdweb/v3/documents/objdirctrled/nonsecure/pdf/33386.pdf,2 www.investqueensland.com.au/dsdweb/v3/guis/templates/content/gui_cue_menu_iq.cfm? Queensland Investment Incentives Scheme, 2007id=30223, December 2008 5 www.qut.edu.au/about/lifebris/living.jsp, December 20083 BrisbaneMarketing.com website, various pages, December 2008 6 www.brisbane.qld.gov.au/BCC:BASE::pc=PC_2838, December 2008 50©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

China

ChinaCountry SnapshotSize of the country 9,561,000 sq. kms.Population1,330 million (Jul ‘08 est.)CapitalBeijingCurrencyRenminbi / Yuan (RMB)1 USD = RMB (Average) 6.92 (2008)Main macroeconomic indicators 1 :• GDP in PPP: USD 7,238 billion (2007 est.)• GDP per capita in PPP: USD 5,480 (2007 est.)• CPI: 6.7 percent (2007 est.)• Unemployment rate: 9.2 percent (2007 est.)• FDI stock per capita: USD 326 (2007 est.)Sources: www.eiu.com, www.cia.gov, Gocurrency.comPolitical Structure 1Chinaisasocialistrepublicruledbyasingle-party,theChineseCommunistParty(CCP).Thereare22provinces,andfourmunicipalitiesdirectlyundercentralgovernmentcontroland5autonomousregions.Theseelectlocalpeople'scongresses,andareadministeredbypeople'sgovernments.Investorclimatevariesdependingonthepoliciesofthelocalgovernment,whichusuallyoffersitsownsetoffiscalsubsidiesandtaxrefunds.Business and Investment ClimateForeign Direct Investment (FDI): FDIintoChinatouchedUSD82.66billionin2007 1 ,anincreaseof13.8percentover2006.Grossfixedinvestmentgrowthislikelytobelowerin2008-12,partlyowingtohigherrealinterestrates 1GDP growth: China'sGDPgrew11.9percentin2007;howeveraccordingtoEIUrealGDPgrowthmaymoderateto9.8percentin2008and8percentin2009,largelyowingtotheweakeroutlookfornetexports 1Inflation: China’sinflationisdeceleratingafterreachingan11-yearhighof8.8percentinFebruary2008 1 .EIUexpectsconsumerpriceinflationtoaverage6.7percentin2008.Averageinflationislikelytomoderateto3.8percentin2009-10,owingtolowfoodpriceinflation 1 .2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BBB /StableA+/Stable/A-1+8327Sources: www.eiu.com, World Bank, Standard & Poor’sTianjinEmerging DestinationEstablished DestinationBeijingDalianXi’an JinanHefei NanjingChengduShanghaiWuhan HangzhouChangshaShenzhenIT-BPO Scenario in the countryItisestimatedthatthereareatleast8,000-10,000firms 2 operatingintheITsoftwareandservicessectorinChina.China’soffshoreoutsourcingrevenuegrewmorethan40percentin2007toreachUSD2.3billion 3 .TodevelopChina’scapabilitiesasanoutsourcingbaseforITsoftwareandservices,theMinistryofCommercehasimplementedthe‘Thousand-Hundred-TenProject’,withatotalfundinganticipatedtobeinexcessofUSD1billion 4 .Theprogramhasaheavyemphasisonprovidingtraininganddevelopmenttoitspersonnelforemploymentinservicesoutsourcingjobs.TheMinistryhaslaunchedaprojecttodevelop13citiesforservicesoutsourcingacrossthecountry.Thesecitiesare:Shanghai,Dalian,Xi’an,Shenzhen,Chengdu,Beijing,Tianjin,Nanjing,Wuhan,Jinan,Hangzhou,HefeiandChangsha.Government IncentivesTheChinesegovernmentprovidesinvestmentincentivesintheformoftaxbenefits,includingvalueaddedtax,customsandincometaxbenefits.Inthepast,foreign-investedenterprisesbenefitedfrompreferentialtaxratesandcouldobtainarebateof40percentontaxespaidonincomeifprofitswerereinvestedinChinafor5years 5 .Whereprofitsarereinvestedinhightechnologyorexport-orientedenterprises,aforeigninvestorcouldreceiveafulltaxrebate.However,inMarch2007,theNationalPeople'sCongresspassedanewCorporateIncomeTaxLaw,whicheliminatedmanyofthetaxadvantagesthathadbeenenjoyedbyforeigninvestors 5 .1 www.eiu.com, various pages, December 2008 4 www.chnsourcing.com/download/qbswp/China%20Outsource%20Strategy%201000%202 NASSCOM December 2008 100%2010%20Final.pdf, Temasys International Strategy Paper, 20073 China Software Industry Association and Chinasourcing Alliance Whitepaper, June 2008 5 US Department of State, 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.52

ChangshaCity Introduction•ChangshaisthecapitaloftheHunanprovinceofChina•Itisakeytransporthub,withadiverseeconomicandindustrialbase.Quick factsGeographicLocationTime Zone GMT +0800ClimatePopulation 1 6,530,000Literacy rate 2LanguagesMajor industriesSituated in South Central China, on the Xianjiang River, itcan be reached by air from Shanghai, Hong Kong andGuangzhou in about two hoursMoist subtropical monsoon climate with four distinctseasons – spring, summer, autumn and winter. The averagetemperature is 18 degrees Celsius. The annual averagerainfall is 93.6 cm83.0 percentChinese, EnglishEngineering, Automobile, Chinese Traditional and BiologicalMedicineSources: 1 KPMG Study: Changsha Investment (2007)2 Changsha government (2000)Other sources: China Travel Service website; Invest Changsha websiteKey drivers for the city to emerge as a favorable IT-BPOdestination• Changsha is one of the 13 cities identified by the Chinesegovernment as hubs for services outsourcing in China 1• Companies located in Changsha’s “Hi-Tech Zone” benefit fromvarious incentives and grants offered by the Hunan provincialgovernment• Changsha produces nearly half of China’s animation and cartoons 2 ,and is poised to become a hub for outsourced animation services• The city is a key higher education and research base in centralChina for engineering, computer software, electronics andinformation technology• Changsha has well established training infrastructure with over 30training institutions in the city 3• Changsha offers a comparative cost advantage over the largercities in China. Office rentals in Changsha are a fourth of rentals incities like Shanghai 4 .Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Microsoft (Mobileanimation center)IBM (IT services)Chinasoft (ADM services)Hunan ShanmaoCartoon (Animationand cartoon productionservices)Intel (Animationcenter)Perot Systems (BPOservices)Development of the current IT-BPO industry•SeveralenterprisessuchasMicrosoft,IBMhaveenteredChangshabyformingstrategicpartnershipswithlocalfirms•TheHunanprovincehassetasideaboutUSD56milliontobolsterthelocalanimationindustry 5•TheChangshagovernmenthelpscompaniestargetoffshoreoutsourcingmarketssuchastheUS,Europe,Japan,SouthKoreaandHongKong,andsolicitdomesticbusinessintheYangtzeRiverDeltaandPearlRiverDeltaareas 6 .Industry Profile – Size and Specifics•ThecombinedIT-BPOexportsoftheHunanprovinceisestimatedatUSD1.65billion(2007) 5Sources: Perot Systems website, Invest Changsha website •Thecityhousesabout700serviceoutsourcingenterprises 3•ServicesofferedoutofChangshaincluderesearchanddevelopment,ITservicesandanimation•Therealsoseemstobetractioninthehealthcaremedicalcodingandbillingoutsourcingsegment,withlocalcompaniestryingtoacquirethesebusinessesfromtheUSandEuropeanmarkets.1 www.china50bizalliance.com/Trips/ChinaSeptember2008/tabid/349/Default.aspx, China 50 4 KPMG Changsha Investment Environment Study, 2008Business Alliance, 20085 China Post, China Marches into Outsourcing, April 20082 RedNet.cn, Changsha fertile land for budding entrepreneurs, June 2008 6 info.hktdc.com/alert/cba-e0809d.htm, December 200853 3 www.csinvest.gov.cn/jjcs_fwwb.asp, December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Changshahasbeenknownforitseducationalsystemandthecityboastsofhavingadvancededucationalfacilities 1 .Thecityishometorenownedinstitutes,suchastheNationalUniversityofDefenseTechnology,CentralSouthUniversity,HunanUniversity,andHunanNormalUniversity•Thecityhas48highereducationalinstitutions 2 withapproximately108,000freshgraduatesannually.Theavailabilityofalargetalentpooliswell-suitedforscale-drivenIT-BPOoperations 2•TheproficiencyinEnglishisaverage,butthecityhasalargenumberofprivateEnglishlanguagetraininginstitutes,topreparepeopleforserviceoutsourcingjobsthatrequireEnglishasamedium•Attritionlevelsareabout10percentinTierIIcities(suchasChangsha)incentralChina,relativelylowerthanthoseinotherTierIcitiesinChina 3•JuniorsoftwareengineersinthecitycanbehiredforUSD170toUSD250amonth,whichisathirdoftheratesinTierIcitiessuchasBeijingandShanghai 4 .Infrastructure•Office space (IT Parks): TheChangshaHigh-techZone(CHTIDZ)concentratesover70percentofthesoftwaredevelopment,serviceoutsourcingenterprisesinHunan 3 .Changsha’sCartoonCityof75,000sq.mts.accommodatescompaniesinvolvedinprovidingservicessuchasanimation,digitaltechnology,gamingandmedia. 5•Power supply: Changshagovernmenthasbeeninvestingheavilytomeettheelectricityneedsofthecity 2•Telecom Infrastructure: ThereareseveraltelecommunicationoptionsinChangshaincludingfixedline,mobileandbroadbandservices 2 .ChinaTelecomisthemajorcorporationprovidingtelecomservices•National and International connectivity: TheHuanghuaAirportofChangshahasover40internationalanddomesticairrouteswithdirectflightstoBeijing,Shanghai,Guangzhou,Shenzhen,HongKong,Bangkokandothercities 2•Upcoming projects: TheChangshagovernmentplanstoinvestaroundUSD352millioninbuildingalarge-scalenationalcomicsandgamesindustrybasewhichisscheduledforcompletionby2010 6 .State/ city specific incentives for IT-BPO over and above country level incentives, if any 7•ServiceoutsourcingcompaniesthatsetupheadquartersorregionalheadquartersinChangshaareexpectedtobeawardedfinancialsubsidiesonayearlybasis.ThosewitharegisteredcapitalofoverUSD14.6millionmayreceiveUSD732,000insubsidies•Companiessettingupindesignatedoutsourcingzonescanenjoyatwo-yearwaiveroftaxes.TheycangetasubsidyofaboutUSD700peremployeefortrainingandhiring•“Fortune500”orChinesetop100enterpriseswhoconductresearchorproductioninindustriessuchasIT/communication,equipmentmanufacturingandadvancedmaterials,orsetupheadquartersorregionalheadquartersinCHTIDZ,aretobegivenaone-offindustrysupportgrant.TheamountofthegrantistobeUSD70,500to141,000consideringbrandreputation,investmentscaleandproductionvolume.Quality of life•Cost of living: RentinhighendofficebuildingsindowntownChangshaistypicallyaroundUSD7persq.mt.permonth,almostafourthofrentalsinShanghai.However,accordingtotheNationalDevelopmentandReformCommissiondata,thecostofnewhousingsurged10.1percentonanaverageinChangshain2007 8•Crime rate: ChangshaisconsideredtobesaferthanotherprovincialcapitalsinChina 9•Pollution levels: Pollutionlevelsarecurrentlyquitehigh.Toreducepollutants,theprovincialgovernmenthasplannedtolaunchanemissionstradingscheme,thatfinesthedistrictsthatgooverthequotasassignedfordust,carbondioxideandwaterpollution 10•Ease of commuting: ThemeansoftransportationinChangshamainlyincludepublicbusesandtaxis.From2009to2010,about1000coachesofEuropeanemissionstandardarescheduledtobeputintooperationannually 11•Availability of Hotels: Changshahaseightfive-starhotels,includinginternationalchainsandseveralthreeandfour-starhotels 2 .Risk: City specific•Catastrophic risks: Changshahaswitnessedfloodsovertheyears,whichhavecausedsizablepropertydamage.However,investmentsmadebyHunangovernmentalongwithassistancefromAsiaDevelopmentBankareexpectedtohelpmitigatethepotentialrisksoffloods 12•Political risks: ThepoliticalsituationisstableinChangsha 13 .1 CSinvest.gov.cn, December 2008 9 Changsha Daily, Giant Police keep watch over Changsha's streets, 19 October 20062 KPMG Changsha Investment Environment Study 2008 10 Reuters, China's Changsha city plans local emissions trading, 5 August 20083 Premier BPO Press Release, 17 October 2007 11 Hunan government, 2009 Will See Double Deckers Reintroduced in Changsha, 11 October4 LA Times, China marches into outsourcing, 8 April 2008 20085 www.greatdreams.com.cn/english/body.asp?NewsID=476, Hunan Great Dreams Cartoon 12 Environment News Service, China Struck by Fifth Typhoon, 500000 Evacuated, 25 July 2006Media Limited Company, December 2008 13 ADB’s Hunan Flood Management Sector Project Report, 20066 info.hktdc.com, various pages, December 20087 CSinvest.gov.cn, December 20088 Ministry of commerce©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.54

HangzhouCity Introduction•HangzhouisthecapitaloftheZhejiangProvince•ItisanimportanttransporthubinSouthCentralChina,knownnationallyforitshistoricalandculturaltraditions.Quick factsGeographicLocationTime Zone GMT +0800ClimatePopulation 1 6,700,000Literacy rate 2LanguagesMajor industriesSituated in on the southern wing of the Yangtze RiverDelta. Hangzhou is 90 minutes from Shanghai by railSubtropical monsoon climate with four distinct seasons –spring, summer, autumn and winter. The averagetemperature is 16.5 degrees Celsius. The annual averagerainfall is 145 cm91.9 percentChinese, EnglishTextiles, Electronics, Telecommunications, High-tech,Chemicals, MedicineSources: 1 Beijing 2008 website2 Hangzhou government statistics (2000)Other sources: China Travel Services, China Highlights website; China Today websiteKey drivers for the city to emerge as a favorable IT-BPOdestination• Hangzhou is among the 13 cities identified by the Chinesegovernment as hubs for service outsourcing in China 1• About 18,000 students graduate annually in IT-related courses fromeducational institutions in Hangzhou 2• The city aims to become a hub for financial services outsourcing.Financial services contributed about 43 percent of Hangzhou'soffshore service outsourcing contract value in the first 3 quartersof 2008 2• Hangzhou is an established industrial base, and had foreign tradeamounting to USD 43.4 billion in 2007 3• The administration of Hangzhou has invested in steadyinfrastructure improvements over the last few years• Hangzhou provides a lower cost alternative with affordable talent,despite being located very close to Shanghai.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Trapeze (Research anddevelopment services)Netease (IT productdevelopment)Symbio Group (ITservices)TCS (ADM services)Infosys (ADM services)Sunyard SystemEngineering (IT services)Development of the current IT-BPO industry•TheelectronicsandinformationindustryhasbeendevelopingrapidlyinHangzhousincethe1990s•SoftwareexportsinHangzhouhaveincreased53.6percentannuallyoverthepast6yearssince2001 2•By2006,Hangzhouwasthefourthlargestsoftwaredevelopmentcentreintermsofsalesrevenue,afterBeijing,ShenzhenandShanghai•Hangzhou’sserviceoutsourcingindustry,knownforproductinnovationandresearch,hasattractedmultinationalcorporationstosetupresearchanddevelopmentcentersinthecity.Industry Profile – Size and SpecificsSources: Company websites of Infosys, TCS, Reuters article, •About130,000employeesworkinthesoftwareandinformationindustriesinChina Tech News Hangzhou 3•Ofthoseemployed,43.9percentareinvolvedinresearchanddevelopment 3•ThecombinedIT-BPOexportsofthecityareestimatedatUSD261millionin2006 2•HangzhouStatisticsBureaushowsthatbytheendof2007,1201softwareenterpriseshadbeenrecognizedbytheHangzhoulocalgovernment.1 www.china50bizalliance.com/Trips/ChinaSeptember2008/tabid/349/Default.aspx, China 50 Business Alliance, 20082 tradeinservices.mofcom.gov.cn/en/i/2008-08-19/53759.shtml, China Trade in Services, August 20083 Shanghai Daily, Hangzhou continues to develop as key outsourcing hub in East China, 17 October 200855©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Thecityishometo36highereducationschools,includingtheZhejiangUniversity,ZhejiangUniversityofTechnologyandZhejiangNormalUniversity 1•In2007,therewere392,800studentslearninginhigher-educationschools,26,600ofwhichwerepostgraduatestudents 1•Over10,000trainedIT-BPOprofessionalspassoutoftraininginstituteseachyear 1•ProficiencyintheEnglishlanguageamongstudentsiscurrentlylow.HangzhouhasseveralEnglishlanguagetraininginstitutesforstudentsandprofessionals.Infrastructure•Office space (IT Parks): ApprovedbytheStatecounciltobeaNationalHi-techzone,HangzhouHigh-techIndustryDevelopmentZonecoversaplannedareaof85.6sq.kms. 2•Power supply: ElectricpowerinstalledcapacityinHangzhouis2.27millionKW 2 .Thecity’srapidgrowthisstrainingonitspowersupply,however,newgeneratingcapacityisnowbeingbuilttomeetthedemand•Telecom Infrastructure: Hangzhouhaswelldevelopedtelecommunicationinfrastructure,includinghigh-speedInternetservices•National and International connectivity: HangzhouXiaoshanInternationalAirportistheeighthlargestinChina,operating177internationalanddomesticdestinations,includingHongKong,Beijing,Chengdu,Xian,Guangzhou,Tokyo,Osaka,Seoul,Macau,BangkokandSingapore 3•Upcoming projects: Ascendas,anAsianbusinesspropertydeveloper,inpartnershipwithHangzhouEconomicDevelopmentArea(HEDA)planstobuilda430,000sq.mts.ITpark,whichisexpectedtobecompletedbetween2012–2015 4 .CapitalandalsointendstobuildaRafflesCityinHangzhouovera40,355sq.mts.site,whichisexpectedtobecompleteby2011 5 .State / city specific incentives for IT-BPO over and above country level incentives, if any 3•TheHangzhougovernmentgivescontinuouspolicysupporttopromotethedevelopmentofoutsourcingindustry.Thesepoliciescoveraspectssuchasspecializedfunds,enterpriseauthentication,marketexploration,talenttraining,exportandpropertyrightsprotection•PreferentialtreatmentisgrantedtosoftwareenterprisesintheHigh-techZoneinHangzhou.Thisincludessupportforstart-ups,developmentoflargeandmedium-sizedenterprises,encouragementtoindependentinnovationandstrengtheningofcooperationwithresearchinstitutesthroughestablishingspecialfunds;andrewardsforenterprisesthatgetlisted,winfamousbrandcertificatesorpassCMM/CMMIcertification•SoftwareexportedthroughcustomclearanceistoreceivesubsidiesfromUSD7,300toUSD14,650basedontheforeignreservesaswellasthenewlyincreasedforeignreservesearnedfromtheexportinthatyear.Quality of life•Cost of living: LivingcostsinHangzhouarealmostathirdofcostsinTierIcitieslikeBeijingandShanghai,whichfeatureamongthemostexpensivecitiesoftheworld 6•Crime rate: Hangzhouisarelativelysafecity,andincidencesofviolentcrimesarerelativelylow•Pollution levels: AirpollutionlevelsinHangzhouarerelativelylow.TheHangzhougovernmentisfocusingonwaystoconserveenergyandwaterandplanstomakeHangzhouanEco-friendlycityby2015.From2003to2005,Hangzhouwasrankedasexcellentintheprovincialassessmentofecologicaldevelopment 1•Ease of commuting: AsapivotaltransportationhubinsoutheastChina,Hangzhouboastswell-developedtransportationmeans.Localtransportinthecityincludebuses,taxisandthewaterbus.Eightsubwaylinesarebeingplanned,withthefirstlinescheduledtobecompletedin2008 3•Availability of Hotels: Hangzhouhas9five-starhotelsincludinginternationalhotelchains,andovera100fourandthree-starhotels 7 .Risk: City specific•Catastrophic risks: In2008,Hangzhousufferedasnowdisaster,whichaffectedalargeportionofcentralandsouthChina.Thiswastheworstwinterstorminfivedecades 8 .Thecityliesinaseismiczoneofmediumactivity•Political risks: Hangzhou’spoliticalenvironmentisstable 9 .1 www.chnsourcing.com/article/hangzhou/index.asp, China Sourcing: Charming Hangzhou, 6 Mercer, Annual Cost of Living Index 2008 (Beijing and Shanghai are ranked at 20 and 24December 2008respectively in this study)2 www.zhejiang-trading.com/news/newsview.aspx?id=33, December 2008 7 KPMG's Hangzhou Investment Environment Study 20073 info.hktdc.com, various pages, December 2008 8 www.chinatravelguide.com/ctgwiki/2008_China_Snowstorm, ChinaTravel Guide article, 20084 China Daily, Press Release, 5 July 2007 9 Benfield Hazard Research Center - Earthquakes and a brave new China, 20085 www.capitaland.com/en/files/CLNewsRel16July08.pdf, CapitaLand, 16 July 2008 * Using the following currency conversion 1 RMB = USD 0.14656©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

India

IndiaCountry SnapshotSize of the country 3,287,590 sq. kms.Population 1,147 million (2007)CapitalNew DelhiCurrencyIndian Rupee (INR)1 USD = INR (Average) 43.39 (2008)Main macroeconomic indicators 1 :• GDP in PPP: USD 3,094 billion (2007)• GDP per capita in PPP: USD 2,784 (2007 est.)• CPI: 6.4 percent (2007 est.)• Unemployment rate:7.2 percent (2007 est.)• FDI stock per capita: USD 86 (2007 est.)Sources: www.eiu.com, www.cia.gov, Gocurrency.comPolitical Structure 1IndiafollowstheParliamentarystructure,comprisingtheLokSabha(LowerHouse)containingpeople’selectedrepresentativesandtheRajyaSabha(UpperHouse).TheIndianNationalCongressandBharatiyaJanataParty(BJP)arethelargerpoliticalparties.ThecurrentrulinggovernmentattheCenterisacoalitionbetweentheIndianNationalCongressandseveralothersmallerpoliticalparties.Electionsareheldevery5years,withthenextelectionduein2009.Thereare29StateswithinIndiawiththeirownelectedgovernments.InvestorclimatevariesdependingonthepoliciesoftheStategovernment,inadditiontothoseoftheCentralgovernment.Business and Investment ClimateForeign Direct Investment (FDI): FDIinflowsintoIndiacrossedUSD25billionin2007-08overUSD19.5billionin2006-07 1 .GDP growth: RealGDPgrowth(onanexpenditurebasis)inIndiawas9percentinFY2007­08.TheEIUexpectsrealGDPgrowthtofalltoabout6.3percentinFY2008-09and6.1percentin2009-10 1 .Inflation: Wholesalepriceinflationsurgedtoa13-yearhighofnearly12percentyear-onyearinJuly2008,primarilyduetohigherfood,oilandothercommodityprices1 .TheEIUhasforecastthatinflationislikelytoaverage9.9percentin2008and7percentin2009.2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BB /StableBBB-/Stable/A-312230Sources: www.eiu.com, World Bank, Standard & Poor’sNCRJaipurAhmedabadNagpurMumbaiPune HyderabadBangaloreChennaiEmerging DestinationEstablished DestinationIT-BPO Scenario in the countryIndiaisapioneerintheglobaloffshoringindustry,clockingrevenuesofUSD40.3billionthroughexportsinFY2008,employingcloseto2millionpeople 2 .Therearecloseto1200IT­BPOserviceproviders,includingglobalvendorssuchasIBM,Accenture,HP,CSCandlargeIndianvendorssuchasInfosys,TCS,Wipro,Genpact,WNSandEXLService.AsidefromBangalore,Mumbai,NationalCapitalRegion(NCR),Chennai,PuneandHyderabad,whicharenowregardedas“emergeddestinations”,severalsmallerTierIIandIIIIndiancitieshavethepotentialtoattractIT-BPOinvestments.TheSoftwareTechnologyParkofIndia(STPI)Scheme,initiatedin1991,offeredfiscalandotherincentives,promotedsoftwareexportsandlentacompetitiveedgetotheITsector.ThisschemeisexpectedtoendonMarch31,2010 3 .IndiahasrecentlyseentheemergenceofSpecialEconomicZones(SEZs)schemethatprovidessimilarincentivestoexportingcompanies(notlimitedtoIT-BPOcompanies).IT-BPOcompaniesareexpectedtomovefromtheSTPIschemetotheSEZschemepost2010.Government incentives 2TheIndiangovernmentprovidesavarietyofincentivestoIT-BPOindustry,including100percentforeignequityparticipationincompanies.AsonSeptember2008,theincentivesinclude:•IncometaxexemptionuptoMarch31,2010toExportOrientedUnits/SoftwareTechnologyParkunits•Customsdutyexemptionforimportofsoftware,andonimportofhardwarefor100percentexportorientedprojects•Completepass-throughmechanismwithsinglepointtaxationforventurecapitalfunds•SpecialconcessionsforResearch&Development.1 www.eiu.com, various pages, December 2008 3 Business Standard, Extension of STPI scheme short-term step, 10 April 20082 KPMG Analysis, various pages from www.nasscom.in NASSCOM website, December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.58

AhmedabadCity Introduction•AhmedabadisthelargestcityinGujaratstate,located30kmsfromGandhinagar,whichisthecapitalofGujaratState 1•AhmedabadistheculturalandcommercialcenterofGujarat.Quick factsGeographicLocationTime Zone GMT +0550ClimatePopulation 1 5,808,378Literacy rate 2LanguagesMajor industriesSituated in Western India, it can be reached by air fromMumbai in about an hourExtreme and dry weather with three seasons – summer,monsoon and winter. The average temperature ranges from23 to 43 degrees Celsius. The average annual rainfall is93.2 cm79.9 percentGujarati, Hindi, EnglishGems and Jewelry, Engineering, Textiles, Chemicals &Petrochemicals, PharmaceuticalsSources: 1 Ahmedabad Collectorate September (2008)2 KPMG Analysis (2007)Other sources: Ahmedabad Collectorate; IIM Ahmedabad websiteKey drivers for the city to emerge as a favorable IT-BPOdestination• The city has a large pool of qualified human resources, especiallywith Finance and Accounts related background. Ahmedabad alsoproduces a large number of Chartered Accountants• Some of India's finest education institutes are located in andaround Ahmedabad• The city has relatively lower proficiency in the English languagecompared with that in Tier I cities. However, the government istaking initiatives to address the problem• The state government is setting-up an International Finance TechCity dedicated to offering services to the financial sector• The city offers a cost advantage in terms of approximately 30percent lower compensation levels and rentals compared with thepremier IT-BPO destinations like Mumbai, Bangalore and NCR 2 .Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)TCS (IT services)Mphasis (Call center)Azure (BPO services)Patni (IT services)Aegis (Call center) Motif (BPO services)Development of the current IT-BPO industry•GujaratstartedwitnessingincreasedactivityinIT-BPOsectorinthelate1990s.ThesectorisdominatedbymidtosmallsizedthirdpartycompaniesandiscurrentlynothometoanylargesizedcaptiveBPO•Ahmedabad-Gandhinagar 3 andVadodaraarethemajorhubsthataccountfor98percentofthestate’sIT-BPOexports•ThecityalsocaterstothedomesticIndianmarketforvoiceprocessesespeciallyforthetelecomsegment.Industry Profile – Size and Specifics•ThecombinedIT-BPOexportsofAhmedabad-GandhinagarisestimatedatUSD82.1million(2007–08) 4Sources: Company websites of TCS, Mphasis, Azure, Patni, •Therearemorethan350outsourcingcompaniesoperatinginthecityofAhmedabad 4Aegis and Motif•TheprominentIT-BPOservicessourcedfromAhmedabadincludeITServices,CustomerCareandFinance&Accounting.1 www.ahmedabad.com/history.php, December 20082 www.gujaratglobal.com/nextSub.php?id=1091&cattype=NEWS, December 20083 KPMG CII, Gujarat - Riding the Indian offshoring boom, January 200859 4 www.gnr.stpi.in/home/stp_units_status.asp, STPI Ghandinagar, December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Ahmedabadhasalargetalentpoolwithmorethan173,000studentsenrolledincommerceandartsstreamsin2006-07thatcansupporttheIT-BPOindustry 1 .Thecityishometorenownedengineeringandmanagementinstitutes,includingtheIndianInstituteofManagement(IIM)inAhmedabad•Thecityproducesalargenumberofcharteredaccountants.However,currentlymostprefertorelocatetootherlargercitiestofindjobsinthefinancialsector•AlthoughemployabilityinAhmedabadislowerthanthatinTierIcities,effortsarebeingundertakentoimprovecurrentskill-setsespeciallyrelatedtoproficiencyinEnglishlanguage•AttritionlevelsarelowerthanthoseinotherTierIandTierIIcitiesinIndia.Althoughthereiscompetitionfromotherindustries,alargelaborpoolisavailable,andhiringiscurrentlynotconsideredverydifficult.Infrastructure•Office space (IT Parks): Ahmedabadhaswitnessedasupplyadditionofapproximately27,870sq.mts.inthesecondquarterof2008 2 .Also,severalsatelliteareassuitableforofficespacearecomingupinthecity.However,overall,vacancyratesarelowduetohighdemand•Power supply: ThestatehasbeenrankedsecondinIndiainthepowersectorperformanceratingreport(2006)byCRISILandICRA 3 .Powersupplyisgenerallyreliable,withonlyisolatedinstancesofpowerfailures,butthecostofelectricityisrelativelyhighascomparedtoTierIcitiesinthecountry• Telecom Infrastructure: Ahmedabadhasastrongtelecombackbone,withthestateofGujarathavingthelargestoperationalopticalfibercablenetworkinthecountryofmorethan69,845kms 4•National and International connectivity: AhmedabadisontheGoldenQuadrilateral 5 mapprovidingforgoodintercityroadconnectivity.Itisalsowellconnectedbyairtotherestofthecountry.AhmedabadinternationalairporthasdirectconnectivitytoselectlocationsintheMiddle-East,South-eastAsiaandsomedestinationsinEuropeandtheUS•Upcoming projects: TwoITSpecialEconomicZones(SEZs)havebeennotifiedwhicharespreadacrossapproximately40hectares.GujaratInternationalFinanceTech-City(GIFT)isbeingdevelopedasaglobalfinancialhubonapproximatelytwohundredhectaresoflandnearGandhinagar,about4kmsawayfromtheinternationalairport 6 .PhaseIofGIFTisscheduledforcompletionbyMarch2010 6 .State / city specific incentives for IT-BPO over and above country level incentives, if any 7•ExemptionfromElectricityDutyfor10yearsfromthedateofrenderingservices.Also,ITandBPOunitsaretobeconsideredeligibleforexemptionfrompowercuts,ensuringreliablesupply•SingleWindowMechanismforvariousapprovalsundervariousStateLaws•Financialassistanceat50percentoffixedcapitalinvestmentinland,buildingsandinfrastructurefacilitiesuptoamaximumofUSD560,000areavailableforcompaniesplanningtoset-upoperationsinITparks.Quality of life• Cost of living: CostoflivingisrelativelylowcomparedtoTierIcities.Costofhousingis40-70percentcheaperascomparedtoMumbai 8 .However,higheconomicgrowthinrecentyearshasledtoariseinthecostoflivinginthecity•Crime rate: Thecityisconsideredtobeasafeplacewitharelativelylowcrimerate•Pollution levels: MassiveuseofCompressedNaturalGas(CNG)vehicleshashelpedcheckthepollutionlevelswithinthecity•Ease of commuting: Ahmedabadhasgoodroadnetworkresultinginlowertraffic•Availability of Hotels: Thereisahealthysupplyofqualityhotelaccommodation,includinginternationalhotelchains,inAhmedabadroundtheyear.Risk: City specific•Catastrophic risks: AhmedabadwasaffectedbytheearthquakethatstruckthestateofGujaratin2001 9 .ThecityliesinZoneIIIofseismicactivity,whichisamoderateactivityzone 9 .Typicallyafairlydryregion,AhmedabadwitnessedfloodsowingtounprecedentedheavyrainsinJuly2005 10•Political risks: Politicalriskisrelativelylowinthestateastherehasbeenastablegovernmentatthehelm,withthecurrentgovernmentre-electedforasecondfive-yearterminthe2007stateelections 11•History of disruptions: Thecityexperiencedwidespreadcommunalviolencein2002 12 .Also,Ahmedabadwitnessedaspateof17lowintensitybombblastsinJuly2008whichdisruptednormallife13 .1 KPMG CII, Gujarat - Riding the Indian offshoring boom, January 2008 7 www.gujaratindia.com/policies/it_policy_2006-2011.pdf, December 20082 Cushman & Wakefield, Ahmedabad office space, September 2008 8 KPMG Analysis3 mpra.ub.uni-muenchen.de/9502/, Munich University Library, December 2008 9 www.gujaratplus.com/news/archives/arc58.html, December 20084 www.trai.gov.in/Default.asp, Telecom Regulatory Authority of India, various pages, December 10 www.indiatogether.org/2005/jul/gov-vadodara.htm, December 20082008 11 The Times of India, Gujarat win will change India politics, 23 December 20075 www.vibrantgujarat.jp/district_profile/pdf/Ahmedabad.pdf, December 2008 12 The Times of India, Gujarat communal violence finds mention in UNDP report, 15 July 20046 giftgujarat.in/about_gift.htm#background, December 2008 13 Hindustan Times, Sixth chargesheet filed in Ahmedabad bomb blasts, 12 January 2009 60©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

JaipurCity Introduction•JaipuristhecapitalofthestateofRajasthanandthefirstplannedcityofitstimeinIndia•Itisknownas“PinkCity”duetothecolorofitsprominentbuildings,andisamongthemostpopulardomesticandinternationaltouristdestinationsinIndia.Quick factsGeographicLocationTime Zone GMT +0550ClimatePopulation 1 2,796,000Literacy rate 1LanguagesMajor industriesSituated in North-western India, it can be reached fromNew Delhi by air in about 30 minutesClimate is dry and extreme, with three seasons – summer,monsoon, winter. The minimum and maximum temperaturesvary from 8 to 48 degrees Celsius. The average annualrainfall is 55.6 cm70.6 percentMarwari, Hindi, EnglishGems and jewelry, tourism, granite tiles, handloom, brassand marble works, textile, apparel, woolen carpets.Sources: 1 Rajasthan Government website(2006)Other sources: Rajasthan government website; Jaipurhub.comKey drivers for the city to emerge as a favorable IT-BPOdestination• Jaipur has a large pool of qualified human resources, especiallyengineering graduates, with 64 engineering colleges located in andaround the city 1• Due to its proximity to the National Capital Region (NCR) 2 ,companies are considering Jaipur as a supporting location tocreate a hub-and-spoke model• The new “Mahindra World City” Special Economic Zone (SEZ) isexpected to add about 3 million sq. mts. of office space for the IT -BPO industry 3• Jaipur offers a significant cost advantage over the NCR as well asother Tier I and II cities in India• Jaipur was ranked third in World Bank’s “Doing Business in SouthAsia 2007” Report, comparing 12 major Indian cities on acomposite parameter for ease of doing business• Jaipur’s status as one of the top tourist destinations in India givesit added visibility on the national and international map.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Infosys (BPO services)Pratham Software (ITservices)Tryst Technologies (IT andBPO services)Genpact (BPO services)Deutsche Bank (Sharedservice center)Compucom Software(Software development)Sources: Company websites of Infosys, Tryst, Compucom;EconomicTimes article, Finextra articleDevelopment of the current IT-BPO industry•CompaniessuchasGenpactandInfosysBPOsetupinJaipurin2006•CompaniesinJaipurarealsoservicingthegrowingdomesticBPOmarketinIndia•LeadingcompanieslikeInfosys,Wipro,TechMahindra,Genpact,DeutscheBankandQHTalbroshavepurchasedlandatthenew“MahindraWorldCitySpecialEconomicZone”andarelikelytostartoperationsinthefuture.Industry Profile – Size and Specifics•ThecombinedIT-BPOexportsofthestateofRajasthanwereestimatedtobearoundUSD68millionin2006-07 4 .ThemajorityofexportsfromthestateareaccountedforbyJaipur•Therearemorethan60companiesoperatingfromJaipur 4•TheprominentIT-BPOservicessourcedfromJaipurincludeITservices,especiallysoftwaredevelopment;engineeringservices,healthcareBPOservicessuchasmedicaltranscriptionandknowledgeservices.1 www.rajasthan.gov.in/rajgovt/Districtprofile/jaipur.html, December 2008 3 www.mahindraworldcity.com/Jaipur/, December 20082 The National Capital Region (NCR) is the urban agglomeration encompassing New Delhi and 4 Figures received from STPI Jaipurits surrounding areas, including portions of neighboring states of Haryana, Uttar Pradesh and61 Rajasthan, and a total area of about 33,578 sq. kms.©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Jaipurhasaccesstotalentfromcloseto777technicalinstitutionsand64engineeringcollegesinRajasthan 1 .OneoftheleadinginstitutesinIndia,IndianInstituteofTechnology(IIT)hasalsoreceivedpermissiontostartabranchinRajasthan 2 .Currently,thestategovernmentisintheprocessoffinalizingalocationfortheIIT•About20,000students 3 graduatefromtheengineeringcollegeseveryyear.Besidethelocaltalent,alargenumberofexperiencedprofessionalsofRajasthan-originworkingintheNCRregioncouldalsobetargetedtoreturntotheirhomestate•AttritionlevelsarerelativelylowerthanthoseinTierIandTierIIcitiesinIndia,especiallyascomparedwiththeNCR.Infrastructure•Office space (IT Parks): ITParksandSEZsarecomingupinthecity.Besides,thecitystilloffersplentyofofficespaceinprimeareasataffordableratesforcompaniestosetupoffices•Power supply: Rajasthaniscurrentlyapowerdeficitstate.However,powerprojectstoaddanother3180MegaWattofpowerby2012 1areunderimplementation.Thestateistargetingtoachieveself-sufficiencyinpowergenerationby2008 1•Telecom Infrastructure: Anopticfibercommunicationinfrastructureisinplacethrough-outthestate•National and International connectivity: Jaipuriswellconnectedbyroad,withprominentnationalhighwayspassingthroughthecity.JaipurisconnectedbyairtomostmajorcitiesinthecountryandhasinternationalflightstoDubai,Sharjah,BangkokandSingapore 4•Upcoming projects: TheMahindraWorldCity,Jaipur,aSpecialEconomicZone(SEZ)whichcommencedoperationsin2008isspreadover3millionsq.mts. 3 andisthelargestexclusiveIT-BPOfocusedSEZinIndia.State / city specific incentives for IT-BPO over and above country level incentives, if any 1•Singlepointofcontactforapprovalsandclearances•Upto60percentlandrebatedependingupontypeandsizeofinvestment•SelfcertificationallowedforIT&BPOcompaniesforseveralcompliances•Simplifiedlaborlawsincludingexemptionfromprovisionsrelatedtoworkingondeclaredholidays,openingandclosinghours,three-shiftoperations,andpoliciesforwomenworkers•ITandBPOunitsdeclaredasPublicUtilityServicesundertheprovisionsoftheIndustrialDisputesAct,1947•CustomizedpackagesforinvestmentbeyondINR100million(roughlyUSD2.1million).Quality of life•Cost of living:Thecostoflivingiscomparativelylowerthanmostothercities,especiallycomparedwiththeNCRregion,withpersonnelacquisitioncostsandrentalsalsomuchlower•Crime rate: Thecrimerateisrelativelylowinthecity•Pollution levels: Thegrowingnumberofvehicleshasbeenresponsibleforgrowingpollutionoverthelasttwo-threeyears,althoughpollutionlevelshavenotbeenalarmingasyet.Moreover,thecity’sdry,aridweatherdoesnotsupportthedispersalofparticulatematter•Ease of commuting: Jaipurwitnessestrafficjamsduringpeakhours.Aringroadhasbeenproposedtoeasethetrafficsituationinthecitylimits•Availability of hotels: Beingapopulartouristdestination,thereareplentyofhotels,includinginternationalchains.However,roomratesmaybehighandsupplyrestrictiveduringthepeaktouristseason(OctobertoMarch).Risk: City specific•Catastrophic risks: ThecityfaceslowriskofearthquakeasitissituatedinzoneIIofseismic(lowtomoderate)activity 5•Political risks: Politicalriskislow,withastablepoliticalandindustrialrelationsclimateoverthelastfewyears•History of disruptions: JaipurwitnessedserialbombblastsinaterrorattackinJune2008,afirstforthecity 6 .1 www.rajasthan.gov.in/rajgovt/Districtprofile/jaipur.html, December 2008 4 www.rajasthantravelguide.com/destination/rajasthan.html, December 20082 www.iitfoundation.org/?p=167, December 2008 5 asc-india.org/seismi/seis-rajasthan.htm, December 20083 www.mahindraworldcity.com/Jaipur/, December 2008 6 The Times of India, Fourth in state, this blast was most planned, 14 May 2008 62©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

NagpurCity Introduction•Nagpurisamajorindustrial,commercialandtransportationhubinMaharashtrastate,andmarksthegeographicalcenterofIndia•Itisknownas“OrangeCity”duetothelargeMandarinorangesgrowninthearea.Quick factsGeographicLocationTime Zone GMT + 0530ClimatePopulation 1 2,420,000Literacy rate 1LanguagesMajor industriesSituated in central India, it can be reached by air fromMumbai in an hour and 30 minutesExtreme weather, with three main seasons – summer,monsoon and winter. The average temperature of the city ismaximum 33 and minimum 23 degrees Celsius. The annualaverage rainfall is 120.5 cm73.7 percentMarathi, Hindi, EnglishTextiles, Steel, Coal mining, Logistics, TransportationKey drivers for the city to emerge as a favorable IT-BPOdestination• Nagpur is witnessing significant infrastructure development due tothe “Multi-modal International cargo Hub and Airport at Nagpur”(MIHAN) project• The MIHAN area is to have among other SEZs, a dedicatedinformation technology park spread over 494 hectares with thenecessary infrastructure for IT-BPO companies 1• Boeing has set up a USD 185 million Maintenance, Repair andOverhaul (MRO) Center 2 , which is likely to boost investment intothe aerospace and engineering services industry in Nagpur• Nagpur is an educational hub in central India with its manyengineering and medical colleges• The city offers significant advantage in terms of lower costscompared with Tier I and II cities in India.Sources: 1 Nagpur247.com (2007)Other sources: Nagpur city website, Nagpuronline.comCurrent IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Persistent Systems (ADMservices)ADCC Infocad (IT andengineering services)Micropro Software (ITservices)Ascent (BPO services)Development of the current IT-BPO industry•NagpurhasbeenarelativelylateentrantontheIT-BPOscene•ItiswitnessinganeconomicboomfollowingthecreationoftheMIHANproject,whichisusheringinhugeinvestments,especiallyinthelogisticsandtransportationsectors•PersistentSystems,whichstartedoperationsinNagpurin2005throughanacquisition 3 ,isamongthelargerITcompaniesinthecity 4•LeadingITfirmsarenowexpressinginterestinthecity.CompanieslikeGE,Microsoft,PatniandL&TInfotechhavepurchasedlandforITparkswithintheSEZsaroundtheMIHANarea.Fundworks (IT services) GlobalLogic (IT services)Sources: Company websites of Persistent, ADCC, Fundworkds,Micropro, Ascent and GlobalLogicIndustry Profile – Size and Specifics•ThecombinedIT-BPOexportsofthecityisestimatedatUSD25.9million(2007-08) 5•Therearemorethan90companiesoperatingfromthecity 5•TheprominentIT-BPOservicessourcedfromNagpurincludeITServices,especiallyembeddedsoftwareengineeringservicesandhealthcareBPOservicessuchasmedicaltranscription.1 www.nagpurmihan.com, December 2008 4 KPMG Analysis2 http://www.boeing.com/commercial/news/2006/q3/060829a_nr.html, August 2006 5 Figures obtained from STPI Nagpur3 http://www.persistentsys.com/Investors/Financial200607/FascinatingJourney/tabid/47/Default.aspx, 2007 63©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•NagpurisamajoreducationalhubincentralIndia.Nagpurdistricthas27EngineeringColleges,11MedicalCollegesandmorethan40graduatecollegesforScienceandCommerceeducation 1 .ThecityalsoattractsstudentsfromnearbycitieslikeJabalpur,Amravati,BilaspurandRaipur(within150kmsradius)•Englishlanguageskillsoftheworkforcearecurrentlyaverage•Althoughtalentislargelyavailable,experiencedmanagerialtalentisinrelativelyshortsupplyasstudentsprefertomigratetolargertownsaroundNagpur–suchasMumbai,PuneandHyderabad.CompaniesaremakingeffortstoattractlocaltalenttorelocatetoNagpurandinternallydeveloppeopletohandlemanagerialresponsibilities•AttritionlevelsarerelativelylowerthanthoseinTierIandTierIIcitiesinIndia.Infrastructure•Office space (IT Parks): Nagpuriswitnessingaboominconstructionofcommercialofficespace.Approximately110,554sq.mts.ofcommercialofficespaceisexpectedtocomeintothemarketby2009 2•Power supply: ThecityisahubforpowergenerationandtherearefewerbreakdownsandoutagescomparedwithothercitiesinMaharashtra(thestatehasahugepowerdeficit).Thereareseparatesub-stationsforITcompaniesandpowerforareashavingIT-BPOcompaniesisrelativelymorereliable•Telecom Infrastructure: TheSoftwareParksinNagpurofferinternationalconnectivityviasatelliteatcostscomparabletothoseinothercitiesinIndia.SeveralmajornationalInternetServiceProvidersoperateinthecity•National and International connectivity: Nagpur’scentrallocationmakesitanimportantroadwaysandrailwayjunction.Twomajornationalhighwayspassthroughthecity.Internalroadshadafaceliftrecently,whentheyweredevelopedaspartoftheupgradeandrenewalworksunderthegovernment’sIntegratedRoadDevelopmentProject•Upcoming projects: Thecitycurrentlyhasthreesoftwareparks,withanotherplannedtocomeup.Besides,aSEZhasbeennotifiedasanintegralpartoftheMIHAN.TheSEZisexpectedtohavededicatedareasforITparks,healthcare,gemsandjewelry,garmentsandtextiles,andbankingcompanies.State/ city specific incentives for IT-BPO over and above country level incentives, if any 3•SpecialcapitalincentiveforcompaniesintheNagpurMunicipalCorporation(NMC)area-30percentofgrossFixedCapitalInvestment(FCI)withaceilingofUSD50,000.RefundofOctroidutyfor100percentofFCIfor9yearsinmunicipalcorporationlimits,12yearsforotherareas•ExemptionfromElectricityDuty.Zerodowntimepolicyannouncedrecentlyislikelytobeoperationalsoon•Rebateonstampduty•ChargingofSalesTaxataminimumfloorrateoffourpercentonallITproductsandnon-ITproductsessentialforITandITEnabledServicesUnitsasapprovedbytheEmpoweredCommittee.Quality of life•Cost of living: Thecostoflivingiscomparativelylowerthanmostothercities,withpersonnelacquisitioncoststhatmuchlower.RentalsarealsolowerthanTierIcities,butlatelyhaverisensharplyowingtotheMIHANcargohub(byaround40percentaroundMIHANinthelastoneyear) 2•Crime rate: Crimeratehasremainedconstantinthecityoverthelastfewyears•Pollution levels: NagpurisoneofthegreenestcitiesinIndia,withlowpollutionrates•Ease of commuting: Nagpur’sroadnetworkhasrecentlyundergoneafacelift,resultinginlowertraffic.Thepublictransportsystemisgenerallyinadequateandunreliable.Anintegratedbusandmonorailsystemhasbeenproposedandisexpectedtobereadyby2013­14 4•Availability of Hotels: Nagpurhasveryfewluxuryhotelsandnomajorinternationalchains.SomelargehotelshavebeenplannedintheMIHANarea.Adequatestandardaccommodationisavailablethroughtheyear.Risk: City specific•Catastrophic risks: Nagpurhasnotseenanymajornaturalcalamitiessofar.ThecityliesinzoneIIofseismicactivity,withthelowriskofanearthquake 5•Political risks: Therehasbeenstabilityduringthelastdecadewiththerulingpartycompletingitsterminpower•History of disruptions: Nagpurhasnotbeenaffectedbycommunaltensions,riotingorterrorismsofar.1 www.fortunelands.com/about_nagpur.php, December 2008 4 Nagpur: City Development Plan (CDP) and City-Level Reform Agenda, March 20062 www.rediff.com/money/2007/mar/17nagpur.htm, The Great Nagpur Boom, March 2007 5 National Information Center of Earthquake Engineering, IIT Kanpur3 www.expresscomputeronline.com/20040503/newsanalysis02.shtml, Nagpur: Emergingestination for India IT Inc, May 2004©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.64

Malaysia

MalaysiaCountry SnapshotSize of the country 330,113 sq. kms.Population 27.2 million (2007)CapitalKuala LumpurCurrencyMalaysian Ringgit (MYR)1 USD = MYR (Average) 3.33 (2008)Sources: www.eiu.com, www.cia.gov, Gocurrency.comMain macroeconomic indicators 1 :• GDP in PPP: USD 359.3 billion (2007)• GDP per capita in PPP: USD 13,210 (2007 est.)• CPI: 2.0 percent (2007)• Unemployment rate:3.2 percent (2007 est.)• FDI stock per capita: USD 3171 (2007 est.)Political Structure 1Malaysiafollowsafederatedconstitutionalmonarchy.ThecountryisledbyaKingwhoappointsaPrimeMinisterandonhisadvicethecabinetischosen.Therearestategovernmentsineachofthe13states,innineofwhichtheheadofstateisanhereditaryruler.Eachstatehasitsownconstitution,acouncilofstateorcabinetwithexecutiveauthority,andalegislaturethatdealswithmattersnotreservedforthefederalparliament.Therearealsothreefederalterritories:KualaLumpur,LabuanandPutrajaya.InvestorclimatevariesdependingonthepoliciesoftheStategovernment,inadditiontothoseofthefederalgovernment.Business and Investment ClimateForeign Direct Investment (FDI): FDIinflowsintoMalaysiagrewfrom2.2percentin2003to4.5percentin2007 1 .GDP growth: RealGDPgrowthinMalaysiawas6.3percentin2007.TheEIUhasrevisedtheforecastforrealGDPgrowthto3.1percentin2009fromtheprevious4.6percent 1 .Inflation: Consumerpriceinflationislikelytobeanaverage5.4percentduring2008,upfrom2percentin2007 1 .TheEIUexpectsconsumerpriceinflationtoaverage2.4percentin2009(downfrom3.5percentpredictedpreviously).2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BBB /NegativeA-/Stable/A-22010Sources: www.eiu.com, World Bank, Standard & Poor’sPenangKuala LumpurMelakaJohorEmerging DestinationEstablished DestinationIT-BPO Scenario in the countryMalaysiaclockedrevenuesofUSD4.7billion 2 throughexportsin2007,employingcloseto365,000professionals 3 .Therearearound1400IT-BPOserviceproviders 4 .ThroughtheMultimediaSuperCorridor(MSC)project,theMalaysiangovernmentisfocusingontheIT-BPOindustrytoalargeextent.ThevisionofthisprojectistoconvertMalaysiaintoaknowledgeeconomybyyear2020 5 .TheMalaysiangovernmentisprojectingthecountryasadestinationforhigh-endservices,whicharerelativelylessscaledependent.KualaLumpur,Cyberjaya,MenaraMSC,Cyberport,Johor,KLCC,KulimHighTechPark,MelakaInternationalTradecentre(MITC),andPenangaretheIT-BPOdestinationsinMalaysia.Government incentivesTheMalaysiangovernmentprovidesavarietyofincentivestotheIT-BPOindustry,permitting100percentforeignequityparticipationincompanies.Someoftheincentivesinclude:•Investmenttaxallowanceupto100percent 2•Corporatetaxratetobecutto25percentby2009fromcurrentlevelof27percent 2•Customsdutyexemptionforimportofmultimediaequipment.OvertheyearstheMalaysiangovernmenthasintroducedlawstoprotectintellectualpropertyofIT-BPOcompanies.Also,CyberSecurity,MalaysiaanagencyunderMinistryofScience,Technology&Innovationactsasaonestopcoordinationcenterfornominalcybersecurityinitiatives.1 www.eiu.com, various pages, December 2008 4 ICT in Malaysia, The New Economic Engine of the Nation - MGCC Quarterly Sept/Oct 20072 www.outsourcingmalaysia.org.my, December 2008 5 MSC Malaysia Handbook, 20073 Gartner, Analysis of Malaysia as an Offshore Services Location, November 2007©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.66

PenangCity Introduction•Penang,alsoreferredtoas“ThePearloftheOrient”liesoffthenorthwesterncoastofPeninsularMalaysia•Itisabustlingport,aheritagecityandanindustrialbase.Quick factsGeographicLocationTime Zone GMT +0800ClimatePopulation 1 1,469,000Literacy rate 2LanguagesMajor industriesSituated by the Strait of Malacca, Penang is a 50 minuteflight away from Kuala LumpurWarm equatorial climate, with no distinct seasons. Theaverage temperature is maximum 31 and minimum 23degrees Celsius. The annual rainfall ranges between 200and 250 cm88 percentSources: 1 Tourism Penang (2007);2 Gartner (2007)English, Bahasa Melayu, Chinese, Tamil, Telugu, MalayalamManufacturing, Construction, Logistics, Tourism, RetailOther sources: Tourism Penang website, Penang Development Corporation websiteKey drivers for the city to emerge as a favorable IT-BPOdestination• The Government has a strong focus on promoting the IT-BPOindustry in Penang through initiatives such as Invest Penang,expanding the Multimedia Super Corridor (MSC) to Penang, andcreating the Software Consortium of Penang (SCoPe)• There is a talent pool of skilled English speaking developers ofmany different nationalities available in Penang, making it suitedfor multi-lingual service delivery• Although the potential to scale is limited, the talent pool is suitedto offer higher-end, relatively less scale-dependent IT-BPOservices, especially in areas such as financial services, logistics,energy and pharmaceuticals• Penang is also developing as a hub for outsourcing of Islamicbanking services, especially by banks in the Middle-East 2• Significant investments are planned to upgrade the existinginfrastructure in the city• Penang has strong engineering and manufacturing base, which canbe leveraged to offer services in these sectors.Current IT-BPO scenario in the city Development of the current IT-BPO industry 1Key IT-BPO companies (Services offered)IBM (IT services)Intel (Design center)Ideal Capital (BPOservices) Motorola (Research anddevelopment services)•PenangwasthefirststateinMalaysiatobeofficiallygrantedtheCybercitystatusinJanuary2003•Oneaspectofthesecondphaseofitsexpansionplan(2004–2010),includedtherolloutoftheMultimediaSuperCorridor(MSC)inPenang.Thishasgiventhesoftwareindustryinthestateasignificantboost•SeveralcompanieshavestrengthenedtheirpresenceinPenangthroughpartnershipswithlocalsmallandmediumenterprises,therebydrivinggrowthinthesector.Industry Profile – Size and SpecificsMoBif (BPO services)Citicorp (Transactionservices)•ThecombinedIT-BPOexportsofthecityareestimatedatUSD564millionin2007 2•InMarch2008,therewere146MSCstatuscompaniesinPenang,ofwhich81wereinSources: Company websites of IBM, Intel, Motorola, Citigroup;Call center directory, The Star articlesoftwareandsharedservicesoutsourcing 2•Thereareabout20,500professionalsemployedintheIT-BPOsectorinPenang 2•Companiesarepredominantlyengagedinenterpriseapplicationservices.However,otherservicessuchasinternetsurveillance,customerrelationshipmanagement,animationande-solutions,andpharmaceuticalservicesarealsoprovidedfromthecity.1 InvestPenang.gov.my, December 20082 www.outsourcingmalaysia.org.my, December 200867©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Penanghas33universitiesandprivatecolleges,includingthePenangMedicalCollegeandthefirst(andlargest)schoolofpharmacyinMalaysiaandUniversityofScienceMalaysia(grantedtheAPEX 1 statusin2008) 2•TheMultimediaDevelopmentCorporationhasstartedaninternshipprogramtoenhanceemployabilityamonggraduates,whichisrelativelylowerthanthatinthelargercities•PenangSkillsDevelopmentCentreisajointeffortofindustry,academiaandgovernmentprovidingskilltrainingacrossallindustries,especiallyinengineering,technicalandIT 3 .Thecenterwasestablishedin1998tomeetthehumanresourcedevelopmentneedsoftheindustry 3 .Ithaschurnedoutover100,000traineesthroughtheyears 3•Attritionlevelsareapproximately12.5percent,whicharelowerthanattritionratesinKualaLumpur 4 .Infrastructure•Office space (IT Parks): Penanghasabout260,000sq.mts.ofofficespacewithanaverageoccupancyrateof74percent 5•Power supply: PowerissuppliedtoPenangbyTenagaNasionalBhd.ElectricitysupplyhasbeenreliableinPenang.ExceptforablackoutintheislandinNovember2007afterapowertripattheTNBsubstation 6 ,therehasbeennomajorincidenceofpowerfailure•Telecom Infrastructure: TelekomMalaysiaBerhadoffersfixed-line,mobile,dataandbroadbandservicesinPenang.Partneringwiththelocalgovernment,HotgateTechnologyisrollingoutafreepublicWiFinetworkinPenangwhichisexpectedtobecompletebyDecember2009 7• National and International connectivity: PenangBridgefacilitatesthelinkbetweentheislandofPenangtoSeberangPraiontheMalayPeninsula.PenangInternationalAirportoffersconnectivitywithmajorcitiesinSouthEastAsia•Upcoming projects: AUSD5billionPenangGlobalCityCentre,launchedthisyear,islikelytobecompletedinphasesin15years.TheprojecthasappliedforanMSCstatustoattractICTcompanies 6 .State/ city specific incentives for IT-BPO over and above country level incentives, if any 1•MSCMalaysiaCybercity,Penangprovidescompetitivefinancialincentives,includingnoincometaxforupto10yearsoraninvestmenttaxallowance,andnodutiesonimportofmultimediaequipmentforMSCMalaysiaStatusCompanies•AcompanygrantedInvestmentTaxAllowancegetsanallowanceof60percentofqualifyingcapitalexpenditureincurredwithin5yearsfromthedateonwhichthefirstqualifyingcapitalexpenditureisincurred.Companiescanoffsetthisallowanceagainst70percentoftheirstatutoryincomeintheyearofassessment.Anyunutilizedallowancecanbecarriedforwardtosubsequentyearsuntilfullyutilized.Theremaining30percentofstatutoryincomeislikelytobetaxedattheprevailingcompanytaxrate•CompaniesthatreceiveMSCstatusalsoqualifyforunrestrictedemploymentofforeignknowledgeworkers.Quality of life•Cost of living: ThecostoflivingisrelativelylowerthanKualaLumpurandJohorBahru 8 .Georgetown,Penangwasratedthe10thbestplacetoliveinAsiabyECAInternationalin2006•Crime rate: Penanghasseena0.9percentriseincrimeratefrom2007.However,PenangistheleadingstateinMalaysiawhenitcomestosolvingcases,witharateof53.1percent 6•Pollution levels: TheDepartmentofEnvironmentimposesstrictregulationsonthecompaniesinPenang.However,thecitysuffersfromsmogandpollutedrivers•Ease of commuting: WiththelaunchoftheRapidPenangBusesinAugust2007,publictransportationserviceinPenanghasgreatlyimproved,andtheintra-citycommutehasbecomeeasier 9•Availability of Hotels: Penangoffersawiderangeforhotels,includinginternationalchains,forbothleisureandbusinesstravelers.Risk: City specific•Catastrophic risks: PenangIslandwashitbythetsunamiin2004,causingtheauthoritiestoimplementtsunamiwarningmeasuresalongthebeaches 10 .Theislandhasalsowitnesseda7.2magnitudeearthquakeinFebruary2008 11 .Malaysia,howeverliesinalow­seismiczone,andthereislowoverallriskofearthquakes•Political risks: ThereisanewgovernmentatthehelminPenangafteralandslidevictoryinthe2008electionsdefeatingtheincumbentpartywhichledthestatesince1969•History of disruptions: PenanghaswitnessedmorethanoneinstanceofcommunalriotsbetweentheIndiansandtheMalays.1 The university that is given the APEX status is one that has the greatest potential 7 TelecomAsia.net articleamong Malaysian universities to be world-class, and as such, would be given additional 8 Penangmyhome.comassistance to compete with top-ranked global institutions9 Penangwatch.net article2 Penang Economic Report 2007 10 PHP Lens.com article3 PSDC Website 11 TheStar.com.my article4 Silterra News5 Penang Property website6 The Star online, Penang: Rising crime, No 1 in crime-busting, September 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.68

Philippines

PhilippinesCountry SnapshotSize of the country 300,179 sq. kms.Population 91.1 million (2007)CapitalManilaCurrencyPhilippines Peso (PHP)1 USD = PHP (Average) 42.72 (2008)Main macroeconomic indicators:• GDP in PPP: USD 299.4 billion (2007 est.) 1• GDP per capita in PPP: USD 3,287 (2007 est.) 1• CPI: 2.8 percent (2007 est.) 2• Unemployment rate:7.3 percent (2007 est.) 1• FDI stock per capita: USD 218.2 (2007 est.) 1Sources: www.cia.gov, Gocurrency.comPolitical Structure 1ThePhilippineshasarepresentativedemocracymodeledontheUnitedStatessystem.The1987constitution,adoptedduringtheAquinoadministration,reestablishedaPresidentialsystemofgovernmentwithabicamerallegislatureandanindependentjudiciary.In2007,legislativeandlocalelectionswereheld.PresidentArroyo'scoalitionwonthemajorityoftheseatsintheHouseofRepresentatives,gubernatorialseats,andcitymayoralseats.Provincesaregroupedinto17regionsforadministrativeconvenience.Mostgovernmentofficesestablishregionalofficestoservetheconstituentprovinces.Investorclimatevariesbasedontheincentivesofferedbyindividualprovinces,apartfromthoseofferedbytheCenter.Business and Investment ClimateForeign Direct Investment (FDI): AccordingtotheCentralBank,PhilippinesshouldattractFDIofUSD3.2billionin2009,upfromanestimatedUSD2.6billionin2008 3 .GDP growth: RealGDPgrowthpickedupin2007,toanimpressive7.2percent.EIUhasrevisedthegrowthforecastforGDPin2009to2.3percentfrom3.9percentpreviously 1 .2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BB/ NegativeBB-/Stable/B14035Sources: www.eiu.com, World Bank, Standard & Poor’sBaguio CityDagupan CityManilaClark/ Angeles CityIloilo CityLegazpi CityBacolod CityCebu CityCagayan de OroInflation: Inviewofthelatestconsumerpriceinflationdata(9.7percentCPIfor2Q2008),theEIUhasreviseditsinflationforecastfor2008to9.6percent,from6.2percentpreviously.Inflationisexpectedtoaverage6.5percentin2009 1 .IT-BPO Scenario in the countryPhilippinesclockedrevenuesofUSD6.7billionthroughexportsinFY2008,employingcloseto480,000people 4 .CompaniessuchasAOL,Sykes,Citibank,Accenture,IBM,AMEXandCaltexwereamongstthefirsttosetupbaseinthePhilippinesaround2001-03.ThemainareasofoperationsbycompaniesoperatinginthePhilippinesarecallcenter,legalservices,webdesign,medicaltranscription,animation,financeandaccounting,andsoftwaredevelopment.AsidefromManila,emergingdestinationssuchasCebuCity,BaguioCity,BacolodCity,CagayandeOro,Clark(AngelesCity),DagupanCity,DavaoCity,IloiloCityandLegazpiCityareseveralsmallerTierIIandIIIcitieshavingthepotentialtoattractIT-BPOinvestments.TheBusinessProcessingAssociationofthePhilippines(BPAP)isanumbrellaassociationthatrepresentsorganizationsengagedinprovidingBPOservicesinthePhilippines 5 .Government incentives 6ThePhilippinesgovernmentprovidesavarietyofincentivestoIT-BPOindustry,includingafourtoeightyearincometaxholiday,otherincentivesinclude:•Taxanddutyexemptiononimportedcapitalequipment(forITparklocators)•Deductionforlaborandtrainingexpensesupto150percent•Exemptionfromwharfagedues.Emerging DestinationEstablished DestinationDavao City1 www.eiu.com, various pages, December 2008; 4 Report by ICT Division, Philippines2 www.census.gov.ph/data/pressrelease/2008/cp0712tx.html, National Statistical Office 5 BPAP websitePhilippines, July 20086 Philippines Trade and Investment Center3 Asean Affairs©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.70

DavaoCityCity Introduction•DavaoCityisconsideredasthefinancialcenteroftheMindanaoIslandinthePhilippines.Itisalsoapopulartouristdestination•In2002,itwasdeclaredasanIThubgivenitspotentialtoattractICTcompanies 1 .Quick factsGeographicLocationTime Zone GMT + 0800ClimatePopulation 1 1,147,116Literacy rate 1LanguagesMajor industriesSituated in South-eastern Philippines, it can be reached byair from Manila in about 90 minutesVarying temperature, rainfall and humidity through the year.The average temperature is 32 degrees Celsius and averageannual rainfall is up to 200 cm95.2 percentCebuano, Filipino, EnglishTourism, food processing, light manufacturing, woodprocessingSource: 1 Davao City website (2007)Other sources: Davao city website; Philippines government tourism websiteKey drivers for the city to emerge as a favorable IT-BPOdestination• Davao City is the educational hub for Davao province and has alarge number of educational institutions• Some companies are setting up training centers in the city, whichare also being utilized to train employees from companies’ otheroperating centers in the Philippines• There talent pool has good English language skills, which coupledwith cultural similarities with the US, is suited to provide voicebasedservices to the US• Companies looking at a hub-and-spoke model in the Philippines aresetting up supporting centers to their operations in Manila or CebuCity, in Davao City• The city offers an advantage by way of lower cost of living,cheaper wage rates and good infrastructure, compared with largercities within the Philippines.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)G-Com Asia Pacific (Callcenter)Sutherland (Call center)Development of the current IT-BPO industry•DavaoCityhascomeupasanattractiveoutsourcingdestinationinthelasttwotothreeyears•SomeofthecompaniesareworkingwiththeTechnicalEducationandSkillsDevelopmentAuthority(TESDA)inDavaoCityfortraining,whichincludesacomponentoncallcentertrainingfortheiremployees.Link2Support (BPOservices)Six Eleven GlobalServices (Call center)Source: Article on Zambotoday.comHubport Interactive (ITservices)Western Wats (Callcenter)Industry Profile – Size and Specifics•BPOexportsin2007-08fromthecitywereapproximatelyUSD60million 2•Therewere19BPOcompaniesoperatingfromthecity,witharound3,500employedin2007-08 2•TheprominentIT-BPOservicessourcedfromDavaoCityincludecallcenter,medicaltranscription,webandgraphicsdesign,andengineeringservices.1 www.pia.gov.ph/?m=12&sec=reader&rp=1&fi=p070621.htm&no=2&date=, December 20082 Figures received from BPAP, Philippines71©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•DavaoCityisaneducationhubinMindanaoprovince,havingmorethan40tertiaryeducationinstitutionsclassifiedasuniversities(includingtheUniversityofthePhilippines-Mindanao),colleges,andtechnicalschools.Threeoftheseinstitutionsareratedamongthetop20institutionsinthePhilippines 1•Thecityproducescloseto16,000graduateseveryyear,andattractsstudentsfromnearbyareas,thusofferingalargeanddiversetalentpool 1•Attritionislow,ascompetitionforqualifiedworkersfromothercompetingindustriesinDavaoCityislimited.Infrastructure•Office space (IT Parks): DavaoCityisexpectedtohavehealthyadditionofreasonablypricedofficespaceinthenextonetotwoyears.AlargenumberofdedicatedbuildingsandcomplexestohouseIT-BPOcompanieshavecomeuprecentlyandmoreareunderconstruction•Power supply: DavaoCityhasoneofthemoststablepowersuppliesinthecountry.Itgetsitspowersupplyfromahydro-powerplant.TheunitcostofpowersupplyisUSD0.116perKWH 1 ,whichisamongthecheapestinthecountry•Telecom Infrastructure: PhilippinesLongDistanceTelecom,orPLDT,(whichwasearlieramonopolyprovider)andGlobeTelecomarethetwolargestplayers.SomeregionallevelplayersalsoprovideservicesinDavaoCity•National and International connectivity: DavaoCityiswellconnectedtoothermajorcitiesinthePhilippinesthroughroad,seaandair.Theinternationalairportwasupgradedin2006andhasdailyflightstoSingaporeandIndonesia 2•Upcoming projects: AyalaLandisconstructinga10-hectarepropertycalledAbreeza,likelytobefullyoperationalby2011,withanexpectedinvestmentofUSD80to100million.TheBPOCentercomponentoftheproject,covering18,000sq.mts.,islikelytobereadyby2009 3 .State/ city specific incentives for IT-BPO over and above country level incentives, if any 1•InvestorsinITandBPOoperationsaregrantedtaxholidaysonlocalfeesandchargesandbasicrealpropertytax•FiscalIncentives:ExemptionfrompaymentoftheMayor’spermitfees,buildingpermitfees,businesssalestaxesandotherfeesandchargesimposedunderexistingcityordinancesforamaximumofthreeyears;andexemptionfrompaymentofbasicrealpropertytaxforamaximumoftwoyears•Non-fiscalIncentives:Investor’sAssistanceServicesintheformofassistancein:Securingbusinesslicensesandpermits,Availinglocalinvestmentincentives,Businessmatchingservices,Findingsuitablesitesforbusinessorplantlocation,Identifyingpossiblesourcesofrawmaterials,manpowerandotherproductionneedsandDatabankingservices.Quality of life•Cost of living: ThecostoflivingislowerthanthatinMetroManila 4 .Pricesoffooditemsareespeciallylower•Crime rate: Davaoisareasonablypeacefulcitywithalowmonthlycrimerateof0.8casesper10,000personspermonth 1•Pollution levels: AirpollutionlevelsarelowerthanthoseinManilaandCebu.However,certaincongestedareasofDavaoCitywitnesshighlevelsofpollution,especiallyduringpeakbusinesshours•Ease of commuting: RoadsinDavaoCitywitnesstrafficjamsinpeakhours.Morethan50,000vehiclesusethecity’sroadseveryday.However,thegovernmenthasimplementedasynchronizedtrafficlightsprojectinearly2008toeasepeakhourtraffic 3•Availability of Hotels: DavaoCityisapopulartouristdestination.Thoughthecitydoesnothaveanymajorinternationalchains,anumberofluxuryandstandardbusinesshotelsareavailable.Risk: City specific•Catastrophic risks: ThecityfaceslowriskasDavaoislargelyatyphoonfreeprovince(whileamajorityofthePhilippinesispronetotyphoons).However,mostofthePhilippinesliesonseismiczoneIVandDavaoCityfaceshighriskofearthquake• Political risks: Politicalriskislowwithastablegovernmentatthehelmofthecity.1 www.davaocity.gov.ph/doingbusiness, various pages, December 2008 4 Metro Manila or the “National Capital Region” is the urban agglomeration of about 6362 www.adb.org/Media/Articles/2006/10057-Philippines-Davao-airport/default.asp, ADB sq. kms. consisting of Manila city and the different suburban areas and urban fringewebsite, 2006around Manila city, including Quezon city and Calloocan city3 Inquirer.net, Ayala center rising in Davao City, September 2008 72©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

IloiloCityCity Introduction•IloiloCityisthecapitaloftheIloiloprovincelocatedintheWesternVisayasregion.ItistheninthmostpopulouscityinthePhilippines 1•Itwashistoricallyanimportantagriculturalcenterinthecountry.Quick factsGeographicLocationTime Zone GMT + 0800ClimatePopulation 1 418,710Literacy rate 2Situated in central Philippines, it can be reached by air fromManila in 45 minutesThe climate is pleasantly tropical with two pronouncedseasons – the rainy season and the dry season. Theaverage temperature is 26.5 degrees Celsius and averageannual rainfall is 172 cm93.8 percentKey drivers for the city to emerge as a favorable IT-BPOdestination• Iloilo City has been identified by the Philippines government as oneof the “next wave” cities for ICT services, making it eligible forgovernment funding in infrastructure development 2• The city is suited for creating supporting operations for companieswho wish to set up a hub-and-spoke model in the Philippines, byproviding a lower cost alternative to Metro Manila 3 and Cebu city• A large talent pool is available, owing to number of educationalinstitutions in the region• The city is predominantly suited for voice-based operations due tothe strong English language skills in the population.LanguagesMajor industriesHiligaynon, Tagalog, English, ChineseTelecommunications, agro-fisheries, small to medium scalelight industry.Sources: 1 Iloilo City government website (2007)2 Philippines Census (2000)Other sources: Iloilo city website, Philippines government tourism websiteCurrent IT-BPO scenario in the city Development of the current IT-BPO industry 2•IloiloCityhasseendevelopmentontheIT-BPOfrontinthelasttwotothreeyears.TheKey IT-BPO companies (Services offered)earliestcompaniestosetupwereePLDTVenturesandCallbox•AfewmoreBPOcompanieshaveexpressedinteresttosetupinIloiloCityTeletech (BPO services) Callbox (BPO services) •TheIloiloFederationforInformationTechnology,andtheBusinessProcessingAssociationofthePhilippines(BPAP)representtheIT-BPOindustryinthecity.ePLDT (BPO services)Source: ExploreIloilo.comEver Sun (ADM services)Industry Profile – Size and Specifics•BPOexportsin2007-08fromthecitywereUSD25million 4•ThereweresevenBPOcompaniesoperatingfromthecity,witharound2,600employedin2007-08.BySeptember2008,thenumberofcompanieshasgoneupto12 4•TheprominentIT-BPOservicessourcedfromIloiloCityincludecallcenter,softwaredevelopment,medicalandotherdatatranscription,animationanddigitalcontent,andengineeringdesign.1 Government of Philippines, Census 2007 sq. kms. consisting of Manila city and the different suburban areas and urban fringe2 Balita Philippines, CICT, BPAP and DTI name Iloilo city in the top 10 next wave cities for around Manila city, including Quezon city and Calloocan cityBPOs, 11 November 20084 Figures received from BPAP, Philippines3 Metro Manila or the “National Capital Region” is the urban agglomeration of about 63673©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•TheIloiloCityisamajoreducationalhubintheWesternVisayasregionofthePhilippines.Ithas6universities,morethan30collegesandtechnicalschoolsgraduatingmorethan17,000studentseveryyear 1•About9percentofthesestudentsgraduateinITcourses 2 ,makingspecifictalentavailablefortheIT-BPOindustry•Englishistaughtinalargenumberofschools.PhilippinesisthethirdlargestEnglish-speakingcountry 3 .Thetalentpoolissuitableforcallcentersduetotheirdiction,andculturalsimilaritieswiththeUS•AttritionlevelsarerelativelylowerthanthoseintheTierIcitiesinthePhilippines.Infrastructure•Office space (IT Parks): IloiloCityfacessomeconstraintintermsavailabilityofofficespacefornewentrantcompanies.However,anewcommercialandITeconomiczoneisbeingplannedbyMegaworldinIloiloCity,andmayeasetheshortagetosomeextent 4•Power supply: Powersupplyisunreliableandcompaniestypicallyhavetheirownpowergeneratorstocompensatefortheerraticpowersupply.IloiloCityiscurrentlygettingpowerfromtheVisayasgrid(sourcedfromgeothermalplants)anditsowndiesel-poweredplant,whichproduces80to90MW 2 .Recently,IloiloCityofficialsgavethenodtoacoal-firedpowerplantwhichmaybeabletosupplyanother100MWtothecity 5•Telecom Infrastructure: PLDT(whichwasearlieramonopolyprovider)andGlobeTelecomarethetwolargestplayers.SomeregionallevelplayersalsoprovideservicesinIloiloCity.Byandlarge,telecomservicesarereliable•National and International connectivity: IloiloCityisconvenientlylocatedandconnectedtomajorcitiesinthecountrybyroad,airandwaterways.TheinitiativesrecentlyundertakenincludethecreationofthenewIloiloInternationalAirportwhichstartedoperationsin2007andtheRoll-On-Roll-Offfacilityforinter-portstransport 6•Upcoming projects: UrbanpropertydeveloperMegaworldCorporationhasproposeda55-hectareIloiloBusinessParkwhichistohaveBPOoffices,residentialcondominiums,ahotel,conventioncenter,commercialandretailcenter,skillstrainingcenterandrecreationalfacilities 4 .State/ city specific incentives for IT-BPO over and above country level incentives, if any 7•Exemptionfromlocallicenses,fees,anddues:AregisteredenterpriseinIloilocityisfullyexemptfromthemayor'spermitfees,buildingpermitfees,andotherkindoflocallicenses,feesanddues,exceptregulatoryfees•ReductionofBusinessTax:Registeredenterprisessubjecttotheperiodofavailmentareentitledtoreducedbusinesstaxesbasedongrosssalesorreceiptsearnedorrealizedduringthepreviouscalendaryear.Quality of life•Cost of living: ThecostoflivingislowerthanthatinMetroManila.Pricesoffooditemsareespeciallylower•Crime rate: Thecrimeratefellfrom908crimeincidentsreportedtotheIloiloProvincialPoliceOfficein2005to543in2007 8•Pollution levels: IloiloCitysuffersfromaproblemofdustpollution,andtheWorldBankhasidentifiedthecityamongthenineareasinthePhilippineswithcriticalpollutionlevels 9•Ease of commuting: Publictransportisinadequate;cabsand“jeepneys”arethepopularformoftransport.Therecanbedelaysandcongestionduringpeakhours,thoughbyandlargecommutingisnotdifficult•Availability of Hotels: IloiloCityhasahealthysupplyofhotelaccommodationthroughouttheyear.Standardbusinessaccommodationandtouristresortscanbefoundinthecity,thoughnomajorinternationalchainsarepresent.Risk: City specific•Catastrophic risks: Iloiloprovinceispronetotyphoons.InJune2008,floodsinundatedalargeportionofresidentialareasinIloiloprovincefollowingtyphoon"Frank“andcausedheavydamage.However,disasterpreparednessandmanagementofreliefoperationsreceivesalotoffocusfromthelocalgovernment 9•Political risks: Thecityhasaconducivepoliticalclimateandseesamixofpublic-privatesectorparticipationinmajordevelopmentareas•History of disruptions: Thecityispronetofloodingtypicallyfollowingthreecontinuousdaysofrain.However,thelocalgovernmentplacesalotoffocusondisasterpreparednessandmanagementofreliefoperations.Thedisastermanagementsystemisgenerallyconsideredtobeeffectiveintheareaofdisasterresponse.1 LivinginthePhilippines.com website, December 2008 6 Iloiloviews, The Roadmap for Iloilo city, 26 March 20082 Inquirer.net, Iloilo gearing up to become ICT outsourcing hub, June 2008 7 www.tourism.gov.ph/dot/inv_bora.asp, Tourism Philippines website, December 20083 www.gov.ph, Philippines government website, December 2008 8 Sunstar, Police Bare decline in Crime Rate, 21 January 20084 Megaworldcorp.com, December 2008 and KPMG Analysis 9 World Bank, Disaster Risk Management City of Iloilo, 20075 Inquirer.net, Iloilo officials give nod to coal-fired power plant, 22 October 2007©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.74

Vietnam

VietnamCountry SnapshotSize of the country 329, 560 sq. kms.Population 86.15 million (2007)CapitalHanoiCurrencyVietnamese Dong (VND)1 USD = VND (Average) 15585.80 (2008)Main macroeconomic indicators:• GDP in PPP: USD 221.4 billion (2007 est.) 1• GDP per capita in PPP: USD 2,580 (2007 est.) 1• CPI: 24.5 percent (2007 est.) 2• Unemployment rate:5.3 percent (2007 est.) 1• FDI stock per capita: USD 494.8 (2007 est.) 1Sources: www.cia.gov, Gocurrency.comPolitical Structure 1VietnamisaSocialistRepublicwithsinglepartyrule.Theunicameral493-memberQuocHoi(NationalAssembly)iselectedeveryfiveyears.TheCommunistPartyofVietnamanditspolitburo,controltheelectoralprocess.TheAssemblyappointsthePresidentandtheCabinet.Thenextelectionisduein2012.Foradministrativepurposes,itissubdividedinto59provincesandfivemunicipalities.Manyregionalgovernmentsprovideincentives,aswellaslimits,onFDI.Business and Investment ClimateForeign Direct Investment (FDI): FDIreceivedfor2007wasUSD6.73billion,almostthreetimesasmuchasthatfor2006–USD2.36billion 3 .GDP growth: GrowthrateofGDPin2007was8.5percent 1 ,slightlyhigherthan2006growthrateof8.2percent 4 .TheEIUhasrevisedtheGDPgrowthforecastfor2009to6.9percent,from7.3percentpreviously.Inflation: Vietnamreachedthehighestinflationrate15.7percentinthelastdecadeandfoodpriceswereupby25.2percent 5 .EIUexpectsinflationtodroptoanaverageof12percentin2009.2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)B / NegativeBB / Negative / B9224Sources: www.eiu.com, World Bank, Standard & Poor’sHanoiIT-BPO Scenario in the countryVietnamclockedUSD500millioninexportsofoutsourcedservicesin2007 6 .Thesoftwareindustryaimstomaintainagrowthof35-40percenttill2010,earninguptoUSD1billionandaimstomakeitamongthetop15destinationsforsoftwareoutsourcingandexport 7 .Vietnamhasover750softwarefirmsemploying35,000people.Thelargerfirmshaveupto1,000employees 7 .ThesoftwaresectorinthecountrystartedgettingrecognitionafterIBMopeneditssoftwarecenterinVietnam.HanoiandHoChiMinhCityarethetwopopularoutsourcingdestinationsinthecountry.Government incentives 6TheVietnamesegovernmentprovidesavarietyofincentivestotheIT-BPOindustry,suchas:•Exemptionfromcorporateincometaxforfouryearsfromthedateofgenerationofthefirsttaxableincome•ExemptionfromVATandexporttaxforsoftwareproducts•Exemptionontariffforimportedmaterialsthatareuseddirectlyinsoftwareproduction.Ho Chi Minh CityTheenforcementofIPRsinVietnamoperatesinthegeneralframeworkofenforcementandthe“NationalOfficeofIntellectualProperty”playsanactiveroleinpreparinganddisseminatingthenationalpoliciesandregulationsonIntellectualPropertyRights(IPR)enforcement.TheredoesnotexistaspecialsystemforIPRenforcementinbothcivilandadministrativeproceduresandresortingtoadministrativeproceduresandremediestorepressanIPRinfringementisregardedasmoreeffectivethantakingacasetocourt.Emerging Destination1 www.cia.gov, CIA Factbook, various pages, December 2008 5 www.iht.com/articles/ap/2008/02/28/business/AS-FIN-ECO-Vietnam-Inflation.php,2 www.eiu.com, various pages, December 2008 International Herald Tribune, February 20083 www.unctad.org/sections/dite_dir/docs/wir08_fs_vn_en.pdf, 20086 www.dpi.hochiminhcity.gov.vn/invest/html/ind1.html, Department of Planning & Investment,4 www.vietnamembassy-usa.org/news/story.php?d=20070405171545, US Embassy in Vietnam, Vietnam, December 2008April 2007 7 hochiminhcity.osac.gov, December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.76

HoChiMinhCityCity Introduction•HoChiMinhCity,Vietnam’slargestcity,isamajorportandanimportanteconomiccenter 1•ItisalsoapopulartouristcenterinVietnam.Quick factsGeographicLocationTime Zone GMT + 0700ClimatePopulation 1 5,244,700Literacy rate 2LanguagesMajor industriesLocated on the Saigon River, it can be reached by air fromHanoi in two hoursTropical warm climate with two seasons – the rainy seasonand the dry season. The average temperature is 27 degreesCelsius. The annual average rainfall is 180 cm99 percentVietnamese, Chinese, English, FrenchGarments, chemicals, electronics, food processingKey drivers for the city to emerge as a favorable IT-BPOdestination• The government of Ho Chi Minh City has approved a plan todevelop the city into an IT hub by 2010, by providing variousincentives 2• Proactive measures are being taken to improve the city’sinfrastructure, including telecom, power and transport• The largest software park in Vietnam, the Thu Thiem SoftwarePark, is scheduled to come up by 2012 in Ho Chi Minh City 3• Ho Chi Minh City has a young population with 60 percent peopleunder 35 years 4• The city has a large talent pool, with 41,600 college and vocationalschool students passing out every year 5• Salaries and costs of living are lower than capital Hanoi and someof the larger cities in Asia.Sources: 1 Citypopulation.de (2007)2 Department of Planning & Investment, Ho Chi Minh City (2007)Other sources: VietnamOpenTour.com, Department of Investment and Planning, Ho ChiMinh CityCurrent IT-BPO scenario in the city Development of the current IT-BPO industry 6•TheITindustryinHoChiMinhCitydatesbacktothelastdecade,withTMASolutionsKey IT-BPO companies (Services offered)*beingoneoftheearliestcompaniesIBM (IT services)Cyrus Intersoft (ITservices)Oracle (IT services)Digi-Texx (BPO services)•HoChiMinhCity’sSaigonSoftwareParkstartedin2001wasthefirstsoftwareparkinVietnam•Despitetheearlyactivity,mostofthecompaniesinHoChiMinhCityaresmalltomediumenterprises.Thecityisyettogarnerscaleandmovetoprovidinghighervalueaddingservices.Harvey Nash (BPOservices)OutsourceIT International(Staffing services)Sources: Saigon Hi-Tech Park website, Amcham VietnamIndustry Profile – Size and Specifics 4•Vietnam’ssoftwareexportrevenuescrossedUSD500millionin2007.HoChiMinhCitycontributesbetween50and60percenttothecountry’ssoftwareexports•Over6000peopleareemployedintheIT-BPOindustryinthecity•About250to300companiesareoperatingfromthecity•ThekeyservicesprovidedaresoftwaredevelopmentandBPOservices.1 www.vietnam.com/travel/2/Ho-Chi-Minh-City-Saigon, December 2008 4 www.dpi.hochiminhcity.gov.vn/invest/html/ind1.html, Department of Planning & Investment,2 www.dpi.hochiminhcity.gov.vn/invest/html/abo4.html, Department of Planning & Investment, Ho Chi Minh City, December 2008December 2008 5 SearchCIO, Offshoring in Ho Chi Minh City promising, April 20083 Saigoninvest website, Thu Thiem Software Park Project - Ground Breaking Ceremony, July 6 Business-in-asia, The Software Industry in Vietnam, 2004200877©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•HoChiMinhCityhas30universitiesand27vocationalschools 1 ,includingnumerousbusinessschoolsandprograms•Thereisalargetalentpool,withabout262,000universitystudentsand41,600collegeandvocationalschoolstudentspassingouteveryyear 1 .HoChiMinhCityalsoattractsstudentsandworkingprofessionalsfromsuburbanareasandneighboringprovinces•Employabilityoftheworkforceisrelativelylow.However,thelargetalentpoolmaycurrentlybeabletocompensateforthis•Attritionratesarebelow10percent 2 ,relativelylowerthanthoseinotherestablishedIT-BPOlocations.Infrastructure•Office space (IT Parks): ThevacancyrateinHoChiMinhCityremainsverylow.However,overthenext12months,theofficemarketisexpectedtoseeapproximately165,000sq.mts.ofprimeofficespace 3 beingmadeavailable•Power supply: Powersupplytothecityiscurrentlynotuninterrupted,andtherearescheduledpoweroutages.Although,inthesoftwareparkareas,powersupplyismorereliable.SaigonHi-TechPark(SHTP)planstobuildastandbypowerplantusinggasturbinestoensurenon-stopsupply 4•Telecom Infrastructure: Adequatebandwidthforhigh-speedInternetaccessisavailableinthecity.Further,FTPTelecom,aVietnamesecompanyhasplannedtheAsia-AmericaGateway(AAG)project,valuedatUSD560million,expectedtoprovidea20,000kmsdirectcableroute,andbetterspeedsandtelecomreliabilitybytheendof2008 5•National and International connectivity: HoChiMinhCityisconnectedbyrail,road,riverandairtomajorcitiesinVietnam.TheTanSonNhatAirportisthelargestairportinVietnam,connectingto20countries 6 .Corridordevelopmentinvolvingthefournewsuburbancenters(ThuDuc,District12,BinhChanh,SaigonSouth)insuburbanareasofthecity,includingrailandbustransitfortheinnercityareahasbeenplanned 7•Upcoming projects: TheplannedThuThiemSoftwareParkisscheduledtocomeupinDistrictTwoofHoChiMinhCity.TheParkistocreate487,500sq.mts.ofofficespace,residentialandretailareasandatrainingcenterthatislikelytobefullyoperationalby2012 8 .State/ city specific incentives for IT-BPO over and above country level incentives, if any 1•Businessesinvolvedinsoftwareproductionandservices,bothlocalandforeigninvested,areexemptfromcorporateincometaxforfouryearsfromthedatetaxableincomeisproduced•Exportofsoftwareproductsistaxfree•Vietnamesesoftwarebusinessesattractfreeorreducedlandusecosts.Quality of life•Cost of living: CostoflivingisrelativelylowercomparedwiththecapitalHanoi•Crime rate: Violentcrimesarerare,butthecityispronetopettycrimessuchaspick-pocketing•Pollution levels: Thecitysuffersfromnoiseandairpollutionproblems,especiallyatcongestedareas•Ease of commuting: Publictransportislimited,andlocalsmostlyusetheirowntransport–intheformofmotorcycles,bicyclesortaxis.Trafficjamsarecommonduringpeakhours• Availability of Hotels: HoChiMinhCityhasmorethan18four-starandabovehotels,includinginternationalchains.However,averageoccupancyratesarehighduetoalargenumberoftourists 9 .Risk: City specific•Catastrophic risks: HoChiMinhCityisperiodicallyaffectedbyfloodsowingtoincessantrainsandrivertides•Political risks: Lowrisk,duetoastablepoliticalsysteminVietnam•History of disruptions: Asidefromunrestinthecentralhighlandsin2001and2004,politicaldemonstrationsareuncommonandthethreatfromcivilunrestinthecityisgenerallyminimal 10 .1 www.dpi.hochiminhcity.gov.vn, Department of Investment & Planning, various pages, 7 www.eng.hochiminhcity.gov.vn, Ho Chi Minh city Development Plan, December 2008December 20088 Saigoninvest website, Thu Thiem Software Park Project - Ground Breaking Ceremony, July2 SearchCIO, Offshoring in Ho Chi Minh City promising, April 2008 20083 Cushman Wakefield, Ho Chi Minh City, Second half, 2008 9 CB Richard Ellis, “Why Vietnam”, 20074 www.shtp.hochiminhcity.gov.vn, December 2008 10 OSAC, Vietnam Crime & Safety Report: Ho Chi Minh City, 20075 Trade and Business Information Center, Vietnam's FPT Telecom to boost optical cable project,February 20086 www.hochiminhcityairport.com, December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.78

Europe, Midd

le-East & Africa

Europeisprimarilycharacterizedbyitsgreatdiversity,addthecountriesofMiddleEastandAfricaintothemixandthechoiceoflocationalternativesintheEMAregioncanbecomebewilderingforthepotentialinvestor.ThedifferencesbetweenSlovakiaandSloveniaorbetweenLatviaandLithuaniamaynotseemapparentatfirst,yetuponcloserscrutinythesedifferencescouldbesignificantwhenselectinganIT-BPOlocation.MostoftheEMAregioncompriseofrelativelysmallcountriesandcitieswithspecialistskillsetsavailableinvariousdestinations,suchaslinguisticabilitiesortechnicalexpertise.InEMA,therearetheestablishedlocationsinWesternEurope,wherecitiesintheUK,Spain,Ireland,theNetherlands,BelgiumorpartsofGermanystilloffersignificantadvantages:aqualified,multilinguallaborforce,excellentinfrastructureandanattractivebusinessenvironment.Recently,locationsinthenewEuropeanUnion(EU)memberstatesenteredintothefrayandhavebecomethecentreoffocusforBPOlocationdecisions.CitiessuchasBudapest,Prague,Bratislava,BucharestorKrakowhaveestablishedasolidreputationasBPOlocations.Thesecitiesofferattractiveconditions,especiallyforcompanieslookingforagoodbaseofexperienceand“proofofconcept”atcostsbelowWesternEuropeanlevels.TheattentionofsomecompaniesinEMAhasnowshiftedtolocationsoutsideoftheEU,includingcitiesinthefastgrowingcountriesoftheMiddleEast(suchasCairoinEgypt),Africa(PortLouisinMauritiusandTunisinTunisia)andtheaspiringstatesintheBalkans(ZagrebandBelgradeinCroatiaandSerbiarespectively).Thechoiceoflocationsforthisstudyreflectsthistrend.81©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

EMA - Table of ContentsBulgaria 83Sofia 85Egypt 91Cairo 93Northern Ireland 99Belfast 101Croatia 87Zagreb 89Mauritius 95Port Louis 97Poland 103Gdansk 105Romania 107Cluj-Napoca 109Russia 111Rostov-on-Don 113Serbia 115Belgrade 117Tunisia 119Tunis 121Ukraine 123Lviv 125©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.82

Bulgaria

BulgariaCountry SnapshotSize of the country 110,910 sq. kms.Population 7.6 million (2007)CapitalSofiaCurrencyLev (BGL)1 USD = BGL (average) 1.26 (2008)Sources: www.eiu.com, www.cia.gov, www.GoCurrency.comMain macroeconomic indicators:• GDP in PPP: USD 86.4 billion (2007 est.) 1• GDP per capita in PPP: USD 11,400 (2007 est.) 1• CPI: 5.8 percent (2007 est.) 1• Unemployment rate: 8.0 percent (2007 est.) 1• FDI stock per capita: USD 4,553 (2007 est.) 2Political Structure 1Bulgariahasaunicamerallegislature.The240-memberNationalAssemblyisconstitutionallythehigheststateauthority.Itsmembersareelectedbyproportionalrepresentation.AnewconstitutionwaspassedinJuly1991.Theheadofstateisadirectlyelectednon-executivePresident,underasystemofmajorityrepresentationeveryfiveyearsforamaximumoftwoterms.AVice-presidentassiststhePresident.BulgariaisamemberofNorthAtlanticTreatyOrganization(NATO),andtheEUsince2007.Thereare28provincesinBulgaria,whichmayhavedifferentincentivesforinvestment,especiallyduetothedifferingunemploymentratesacrossthecountry.Business and Investment ClimateForeign Direct Investment (FDI): FDIin2007wasUSD8.6billion,upfromUSD8.3billionin2006.Theforecastfor2008isUSD6.3billionduetotheeconomicslowdown 2 .GDP growth: EIUestimatesrealGDPgrowthtobe6.4percentin2008,butislikelytoslowdownto3.4percentin2009andaveragearound4percentin2010.Inflation: Inflationwas6.5percentonaveragein2005and2006,andfellto5.0percentin2007.Theaverageexpectedinflationin2008is6.0percent 3 .2008 (Rating/outlook)EIU's Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BBB / StableBBB / Negative / A­34529Sources: www.eiu.com, World Bank, Standard & Poor’sIT-BPO Scenario in the countryBulgaria’sIToutsourcingmarketearnedUSD256millioninrevenuein2007 4 .Morethan400companiesareprovidingoutsourcingservices,andemploycloseto8,000people 4 .Theseincludeatleast10BPOcompanies 5 .CallcenterandsupportservicesareamongthepopularservicessourcedfromBulgaria.TheBulgariansoftwareindustryhasbeengrowingatabout30percentperannum 3 .TheBulgarianAssociationofSoftwareCompanies(BASSCOM)representsITcompaniesinBulgaria.SofiaisthecapitalandanemergingcityfortheIT-BPOindustryinBulgaria.Government incentives 3AmendmentsweremadetotheInvestmentPromotionLawin2007,toincludethefollowingincentivesforcompaniesinthehightechsector,basedonthevolumeofinvestmentmeetingcertainminimumcriteria:•Corporatetaxrateof10percentasof1.1.2007•Zeropercentcorporatetaxratein141outof264municipalitieswithhighunemploymentratesSofia•TenpercentflattaxrateonpersonalincomesasofJanuary2008•Increaseddepreciationrateto50percentforpurchasingnewproductionandtechnologyequipment,machinery,softwareandhardware.Emerging Destination1 www.eiu.com, various pages, December 2008 3 www.investbulgaria.com/BulgarianCallCentersSector.php, December 20082 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, East 4 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 2007and Southeast Europe, June 20085 DTZ Research, 2007©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.84

SofiaCity Introduction•SofiaisthecapitalofBulgaria•Thecityisthemajoreconomic,scientificandculturalcenterofthecountry.Quick factsGeographicLocationTime Zone GMT +0200ClimatePopulation 1Literacy rate 1LanguagesMajor industriesSituated at the foot of Vitosha Mountain, which is locatedin the west part of the country. Sofia is reachable withinthree hours by air from LondonModerate, continental climate with average summertemperature between 24 and 28 degrees Celsius andaverage winter temperature between 0 and – 4.9 degreesCelsius. The average rainfall is 65 cm1.22 million98.5 percent*Bulgarian, English, German, Turkish, Armenian, HebrewManufacturing, financial services, construction, trade andtransportSources: 1 Sofia Municipality website* Data for BulgariaOther sources: Guide-Bulgaria website, Bulgariancoast.comKey drivers for the city to emerge as a favorable IT-BPOdestination• Sofia’s education system is focused on technical education, andclose to half the students are enrolled in ICT-related courses 1• The IT and software industry is a key priority area for thegovernment and receives focus in terms of incentive packages andsupport to IT companies investing in the country• The city provides good standard of living within Bulgaria, with itsper capita income about double the national average 2• The similar time-zone and geographic proximity is an advantage forproviding near-shore services to Western European companies• Sofia provides a significant labor cost advantage over cities inWestern Europe. Estimates suggest that in Bulgaria, labor costsare around 10 percent of those in Germany 3 .Current IT-BPO scenario in the city Development of the current IT-BPO industry 4Key IT-BPO companies (Services offered)SAP (Software developmentcenter)IBM (BPO services)Sony (Call center)Sciant (IT services)HP (IT service center)Logicall (BPO andsupport center)•In2006,HPstartedacenterinSofiatocatertotheEMAmarkets.Thecenteremployscloseto1,200people 2•In2006,OPI,aUSbasedBPO,establisheditscenterinSofia,fornear-shoreservices.Itemploys125professionalsdeliveringF&AservicesinEnglish,Bulgarian,Dutch,French,German,Italian,Polish,Portuguese,andSpanish 5•IBMhashadaglobaldeliverycentersince2007,providingprocurementBPOservices 2•SAPemploysover470employeesandhashadacenterinBulgariasince2001 2•OutsourcingcompaniessuchasHPhavecollaboratedwithBulgarianuniversitiestoenhanceworkforceskillsandhelpensuresupplyfortechnologyinvestmentprojects 2 .Sources: Bulgaria BPO FactsheetIndustry Profile – Size and Specifics•ThemajorityoftheIT-BPOindustryinBulgariaiscurrentlyconcentratedaroundSofia.Estimatessuggestthatcloseto80percentoftheIT-BPOemployeesinBulgariaareinSofia 3•ServicesprovidedfromSofiaincludeITsupportservices,callcenter,technicalsupport,procurement,andfinanceandaccountingservices 4 .1 www.investbulgaria.com/BulgarianCallCentersSector.php, December 2008 4 InvestBulgaria Agency, Bulgaria BPO Factsheet, March 20082 Xerox Service Center, Creative and knowledge workers in Region Sofia, 2008 5 opiglobal.com, December 20083 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 200785©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Sofiahas22universitiesandpolytechnicinstitutions,whichproducealargepoolofpotentialentry-leveltechnicalgraduates.Over18,000studentsgraduatedfromuniversitiesin2005 1•ThekeytechnicaluniversitiesinBulgariahaveintroducedprogramstomeetthedemandsoftheoutsourcingindustry,includingcomputersciencecurriculaandjointresearchlabsinco-operationwiththemultinationalcompaniesinthecity 2 .AccordingtovarioussurveysinBulgaria,closeto50percentofstudentsareenrolledinICT-relatedtraining 1•AccordingtotheWorldBank,theBulgarianeducationalsystemranksfifthintheworldoveralland11inmathematics.Bulgariaalsohasoneofthehighestnumbersofinformationtechnology-certifiedprofessionalspercapitaintheworld 12•Bulgarianistheprincipallanguageforthetransactionofbusiness.About15percentofthepopulationspeaksEnglish 1 ,makingittheleadingforeignlanguagespokeninthecity.InadditionthereiscapabilityinseveralotherEuropeanlanguagesamongsttheworkforcemakingmulti-lingualservicedeliverypossible•Workforceturnoverisabout10to15percentperannum 3 .Infrastructure•Office space (IT Parks): Around65,000sq.mts.ofnewofficespacewereaddedinSofiainthethirdquarterof2008.Inthesameperiod,severalnewprojectswereinitiated,whicharelikelytoaddover218,000sq.mts.ofofficespacetoSofia’scentralbusinessarea.Sofia’svacancyrateislikelytoreach10percentbytheendof2008 4•Power Supply: ThepowersupplyinSofiaisgenerallyuninterrupted,withrareoutages 5•Telecom Infrastructure: Broadbandandinternetservicesarereliablyavailable.BulgariaTelecommunicationsCompanyisthelargestproviderinthecity 6•National and International connectivity: SofiaislinkedbyroadandrailtoothercitiesinBulgariaandEurope.TheInternationalAirportinSofiaoffersconnectionstoEurope,Africa,theMiddleEastandNorthAmerica 7•Upcoming projects: TheTechnoParkSofia,tobebuiltover6,000sq.mts.oflandwasstartedin2005.Thefirstbuildingoftheprojectisalreadycomplete,withtheprojectexpectedtobecompletedby2010 8 .State / city specific incentives for IT-BPO over and above country level incentives, if any•TherearenospecificinvestmentincentivesforIT-BPOcompanies.Quality of life•Cost of living: CostoflivingisrelativelylowcomparedtoothercitiesinEurope.AsperMercer’s2008AnnualCostOfLivingIndex,SofiaistheleastexpensiveEuropeancityforexpatriatesin97place,althoughthecityhasclimbed11placesintheoverallrankingoflastyear•Crime rate: Pettycrime,suchaspick-pocketing,iscommoninSofia.Thecityalsowitnessessomeorganizedcrime 9•Pollution levels: AirpollutioninSofia,especiallyinthecentralarea,canbequitehigh.AreportbythegovernmentinDecember2008listshealthhazardsduetoairpollutioninSofiatobehigh 10•Ease of commuting: PublictransportiswelldevelopedandincludesthreeTrans-EuropeanTransportCorridorsacrossthecity,undergroundtrains,buses,tramsandelectricbuses 7•Availability of Hotels: Thereareover70hotels,includinginternationalchains,providingalargenumberofrooms 7 .Risk: City specific•Catastrophic risks: Sofiaispronetofloods,especiallyinsummer 11•History of disruption: Demonstrationstoprotestoradvocatespecificcausesarecommon,butthesearegenerallypeaceful 9 .1 www.investbulgaria.com/BulgarianCallCentersSector.php, December 2008 8 www.technoparksofia.com, December 20082 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 2007 9 OSAC, Bulgaria Crime and Safety Report, 20073 InvestBulgaria Agency, Bulgaria BPO Factsheet, March 2008 10 www.sofiaecho.com/article/polluted-soil-air-endanger-health-in-24-cities-and-villages-in­4 www.propertywisebulgaria.com, MBL estimates, January 2008bulgaria/id_33702/catid_66, 20085 Invest Bulgaria, Bulgaria's power grid operator warns of Electricity shortage, 200811 KPMG analysis based on various news articles6 www.btc.bg/en, Bulgaria Telecommunications Company website, December 200812 www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/05/16/BUGANIS78M1.DTL&type=printable,20087 www.travel-bulgaria.com, December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.86

Croatia

CroatiaCountry SnapshotSize of the country87,600 sq. kms.Main macroeconomic indicators 1 :Population 4.4 million (2007)CapitalZagrebCurrencyCroatian Kuna (HRK)1 USD = HRK (average) 4.70 (2008)• GDP in PPP: USD 69.03 billion (2007 est.)• GDP per capita in PPP: USD 15,360 (2007 est.)• CPI: 5.8 percent (2007)• Unemployment rate: 15.1 percent (2007)• FDI stock per capita: USD 9577 (2007 est.) 7Sources: www.eiu.com, www.cia.gov, www.GoCurrency.comPolitical Structure 2TheRepublicofCroatiaisaParliamentarydemocracy.ThePresidentistheheadofstate,directlyelectedforatermoffiveyears.ThegovernmentisheadedbythePrimeMinisterandcomprisedoftwochambers,thehouseofrepresentativesandthehouseofcounties.Membersofbothchambersservefour-yearterms.Croatiaadministrativelyconsistsof20countiesand1city(Zagreb).ThecountryisanofficialEuropeanUnioncandidateandintheprocessofnegotiatingitsentryfor2010.TheEuropeanCommissionassessedCroatia'sprogresstowardsEUmembershippositivelyinitslatestreport,eventhoughitcalledforfurtherreforms.Business and Investment ClimateForeign Direct Investment (FDI): Privatizationhasbeencompletedinmostsectors,encouragingforeigninvestorstoinvestinthecountry.FDIinflowsintoCroatiaamountedtoUSD4.8billionin2007andareexpectedtoslowdowntoUSD3.7billionin2008 ¹ .GDP growth:RealGDPgrowthinCroatiawas5.7percentin2007.Itisexpectedtobe3.1percentin2008mainlyduetotheeconomicslowdownasaresultofreducedexportsandtourism ¹ .2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BB / StableBBB / Negative / A­310650Sources: www.eiu.com, World Bank, Standard & Poor’sZagrebInflation: Wholesalepriceinflationhasremainedstablebetween2and3percentinthepastyears.Itisexpectedtobeapproximately6percentin2008,and3.5percentin2009 3 .IT-BPO Scenario in the countryTheturnoverinCroatia’sITindustryisexpectedtoincreasefromUSD920millionin2007toaroundUSD1.5billionin2012 4 .TheCroatianIToutsourcingindustryisasyetnascentandearnedrevenuesofUSD32millionin2007 5 .Morethan1,200companiesareactiveintheITfield 4 ,withabout70companiesprovidingoutsourcingservices 5 inareassuchassoftwareconsultancy,customapplicationdevelopment,consultancyorcustomizationservicesandsystemintegrationservices.TheCroatianAssociationofSoftwareandOnlineEntrepreneursandtheCroatianInformationTechnologySocietyaretheassociationsrepresentingtheIT-BPOindustryinthecountry.Government incentives 6AccordingtoCroatia’snationaltradeandinvestmentpromotionagency,strategicbusinesssupportservices(includingcustomercontact,sharedserviceandsoftwaredevelopmentcenters)canbenefitfrominvestmentgrants.Thegovernmentprovides:•Taxincentivesdependingontheinvestmentsumandnumberofnewlygeneratedjobs•Employmentincentivesdependingonthelocalunemploymentrate,eligiblecostsandqualityofworkconducted•Subsidizedtrainingcostslinkedtoaninvestment.Emerging Destination1 www.eiu.com, various pages, December 2008 5 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 20072 www.vlada.hr/en, Croatian government website, December 2008 6 www.apiu.hr, Croatian Trade and Investment Promotion Agency website, December 20083 CIA Factbook, 2008 7 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, East4 Business Monitor International, 2008and Southeast Europe, June 200888©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

ZagrebCity Introduction•ZagrebisthecapitalandlargestcityofCroatia 1•ItisthecommercialandindustrialcenterofCroatia,andcontributesapproximately50percenttoCroatia’stotalGDP 1 .Quick factsGeographicLocationTime Zone GMT +0100ClimatePopulation 1 784,900Literacy rate 2Languages 3Situated in the north-west of Croatia. Zagreb is reachablewithin one to three hours by air from most European citiesMostly continental / Mediterranean climate. The averagesummer temperature is 23 degrees Celsius, while averagewinter temperature is 0.5 degrees. The average rainfall is89 cm.98.1 percent*Croatian, English, German, Italian*Major industries 4 Foods and beverages, tourism, chemicalsSources: 1 City Government, Zagreb2 CIA Factbook3 Hill International Country Report: Croatia4 Embassy of India in Croatia websiteOther sources: Croatia Tourist Information Service , Travel websites Info Croatia, Euomost/* Country levelKey drivers for the city to emerge as a favorable IT-BPOdestination• Zagreb has a large, educated workforce, especially technicallyqualified graduates• The workforce is oriented towards services due to a boomingtourism industry• The workforce speaks English as well as Western Europeanlanguages such as German, Italian and Russian, which allowsmulti-lingual service delivery• The city also serves as a base to offer services to proximal marketsin Central and Eastern Europe such as Romania, Slovenia andBulgaria.• Zagreb has a time-zone advantage suitable to provide near-shoreoutsourcing services to Western European markets• It offers a relative cost advantage over Western European cities.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)IBM (IT services)Envox (Softwaredevelopment)GISDATA’s (Softwaredevelopment and ITservices)Verso (IT services)Infodom (IT services)Siemens (Softwaredevelopment)Sources: Company websites, Croatia Trade and InvestmentPromotion AgencyDevelopment of the current IT-BPO industry•IBMsetupitsoperationinZagrebin1995andpresentlyemploys200peopletoservetheCroatianmarketandexportservicestoAustraliaandtheMiddleEast.Itsmainservicesincludeconsultingservices,marketsupport,businessinnovation,systemsandeducationservices 3•IDCservesSlovenia,Bulgaria,Romania,Serbia,BosniaandMacedoniafromitsAdriatic’sheadquartersinZagreb 4 employingresearchanalystsandICTindustryspecialistsinthecity 5•OthermultinationalplayersincludeCISCOSystemsemploying20employeesinthecity.Oracle,whichestablishedanacademicinstituteattheuniversityofZagreb;SiemensCroatiawithitsheadquartersinZagrebandEnvoxwithmorethan20employeesinthecity 5 .Industry Profile – Size and Specifics•MorethantwothirdsofCroatia’sICTcompaniesarebasedinZagrebandemployapproximately12,000peopleinthecityanditsregion 2•Keyservicesprovidedbynationalandinternationalcompaniesincluderesearchanddevelopment,softwaredevelopmentandcustomersupport•MainforeignservicedmarketsincludeBosniaandHerzegovina,Slovenia,Austria,GermanyandItaly.1 www.apiu.hr, Croatian Trade and Investment Promotion Agency, December 2008 4 www.idc-cema.com/?showproduct=34518, IDC Press release, 20082 www.apiu.hr, Croatian Trade and Investment Promotion Agency, December 2008 5 Croatia Trade and Investment Promotion Agency publication: IT and Software Development inCroatia3 www.ibm.com/employment/hr/, December 200889©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Zagreb’suniversitiesandpolytechnicinstitutionsproduceapoolofpotentialentry-levelworkforce.Morethan10,000studentsareenrolledintotechnical,mathematical,electricalengineeringandIT-relatedcourses,with1,000graduatingannuallyinITandelectricalengineering.TheUniversityofZagrebComputingCentrehasconsiderablecomputingresourcesandisthecenterofSerbia’snationaleinfrastructure¹•UnemploymentinZagrebisatabout7.4percent 2 ,andincludesgraduates,experiencedindividualsaswellasservice-orientedprofessionals.Theseconstituteanemployabletalentpoolinthecity•FiftypercentofZagreb’spopulationspeakEnglish,andalmosteveryITprofessionalspeaksEnglishandasecondforeignlanguage 3•LaborcostsinthesoftwaresectorareaboveaveragecomparedtootherCroatianindustries,andITexpertsareoneofthebest-paidspecialistsintheregion.Accordingtovarioussources,salariesinZagrebareapproximately20percenthigherthaninotherCroatianregions 4•ZagrebenjoysahighinflowofIndividualsinsearchofemployment.Infrastructure•Office space (IT Parks): Thereisanadequatesupplyofmodernofficespace(classAandB)with500,000sq.mts.currentlyavailable.Thisrepresentsavacancyrateofapproximately7percent 5•Telecom Infrastructure: Croatiantelecommunicationinfrastructurehasbeenmodernizedandliberalizedandisa100percentdigitalizednetwork 8•National and International connectivity: ZagrebisthehuboffivemajorCroatianhighways 9 .MostEuropeancapitalsareaccessiblebyrailwayfromZagreb.Zagrebinternationalairporthasflightconnectionstodomesticandinternationalcities,includingcitiesinmorethan20Europeancountries•Upcoming projects: Currently,thereareonlyafewofficebuildingsunderconstructioninZagreb,whichareexpectedtobringadditionalan80,000sq.mts.ofofficespaceinthenext2to3years 5 .State/ city specific incentives for IT-BPO over and above country level incentives, if any•TherearenospecificinvestmentincentivesforIT-BPOcompaniesinthecityofZagreb.Quality of life•Cost of living: CostoflivingisrelativelyhighcomparedtoothercitiesinCroatia.However,Zagrebranks49inMercer’s2008AnnualCostofLivingIndex,whichmakesthecitylessexpensivethanotherdevelopingEasternEuropeancapitalslikeRiga,WarsaworPrague•Crime rate: CroatiahasarelativelylowcrimeratecomparedtoEuropeanandUSstandardsandthecityisconsideredtobegenerallysafe 6•Pollution levels: Airpollutionlevelsareontheriseinthecity.However,Zagreb’sgovernmentiscarryingoutseveralenvironmentalprogramsincludingthesanitationoftheutilitywastedepotinJakusevac,anopendumpabout15kmfromZagreb,whichiscurrentlyacauseforconcernintermsofenvironmentalpollution 10•Ease of commuting: PublictransportationinZagrebisprovidedthroughtramsandbuses.Congestionduringrushhoursiscommoninthecity’scentralareas•Availability of Hotels: Thereare36hotels,includinginternationalchains,providingapproximately6,000beds 2 .Risk: City specific•Catastrophic risks: Zagrebislocatedinaseismicallyactiveregionandminortremorsareoccasionallyfelt 6 .Thecityisalsopronetofloods 7 .1 www.unizg.hr, University of Zagreb, December 2008 7 Journal of Applied Sciences and Environmental Management, Flood Risk Assessment Zagreb,2 www.zagreb.hr, City of Zagreb website, December 200820043 www.apiu.hr, Croatian Trade and Investment Promotion Agency, December 20088 Croatia Trade and Investment Promotion Agency publication: Think Profit Think Croatia, 20084 Hill International Country Report: Croatia, December 20089 www.toming.si/pdf/Zagreb.pdf, Toming Report on Zagreb, 20085 Colliers International, Second Half 200810 Environment for Europe document: Municipal environmental investments in South Eastern6 OSAC Report – Croatia Crime and Safety Report, 2008Europe: 2001 – 2005©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.90

Egypt

EgyptCountry SnapshotSize of the country 1,001,450 sq. kms.Population 81.7 million (2008)CapitalCairoCurrencyEgyptian Pound (EGP)1 USD = EGP (average) 5.19 (2008)Main macroeconomic indicators 1 :• GDP in PPP: USD 404.3 billion (2007)• GDP per capita in PPP: USD 5,320 (2007 est.)• CPI: 9.5 percent (2007)• Unemployment rate: 8.9 percent (2007)• FDI stock per capita: USD 652 (2007)Sources: www.eiu.com, www.cia.gov, www.GoCurrency.comPolitical Structure 1EgyptisanArabRepublicwithademocraticsystem.ThePresidentistheheadofstate,nominatedbyatwo-thirdsmajorityofthePeople'sAssembly,whichisthelegislativebody.ACouncilofMinisters,headedbythePrimeMinistersupervisetheworkofthegovernment.Administratively,Egyptisdividedinto26Governorates,eachheadedbyaGovernor whoisappointedbythePresident.Business and Investment ClimateForeign Direct Investment (FDI): Egyptimplementedpolicyreformsleadingtoa15-foldincreaseinFDIbetween2001and2006.Inflowsintothecountryhavealmostdoubledbetween2006and2007accountingforUSD11.6billionin2007.FDIisexpectedtobeUSD9.8billionin2008 1 ,asaresultoftheslowdown.GDP growth: RealGDPgrewby7.2percentin2007.Despitetheslowdownoftheglobaleconomy,realGDPisexpectedtogrowatanannualrateof5.7percentin2008 1 .Inflation: Inflationrateroseto23.7percentinAugust2008mainlyduetorisingfuelprices.However,itisexpectedtofalltoanaverageof9percentin2009asaresultoffallingcommodityprices 1 .2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BB / StableBB+ / Stable / B11427Sources: www.eiu.com, World Bank, Standard & Poor’sAlexandriaCairoDamiettaIT-BPO Scenario in the countryTheEgyptianICTsectorhasgrownby25percentin2007andisoneofthesectorsforeconomicdevelopmentidentifiedbythegovernment 2 .About162,500peoplewereemployedintheICTsectorin2007,anincreaseof9percentontheworkforcein2006 3 .OneofthefirstcompaniestopositionEgyptintheinternationalIT-BPOsectorwasXceed,asubsidiaryofTelecomEgyptandthelargestdomesticcallcenteroperator 4 .OtherEgyptiancallcenteroperatorswithclientsinNorthAmericaandEuropeincludeRayaContactCenter,EGroupConnectionsandC3.InternationalcompaniesoperatinginEgyptincludeOracle,Wipro,IBM,Dell,Oracle,Microsoft,AlcatelandOrangeBusinessServices 5 .Currently,mostoftheoutsourcingactivityinEgyptisconcentratedarounditscapitalcityCairo 5 ,whileAlexandriaandDamiettaarealsobeingpromotedasemergingcities.Government incentives 6TheGovernmentiseagertoattractforeigninvestment,especiallyintheICTandBPOsectors.Incentivesinclude:•Corporateincometaxexemptionsandothertaxabatements•Freerentforspecificlocations(e.g.innorthernEgyptinthesouthofCairo)•ContributiontowardspurchasesofITequipment•Trainingassistanceandsupportwithrecruitment.Emerging Destination1 www.eiu.com, various pages, December 2008 4 www.cairolive.com, Cairo Live, December 20082 www.idsc.gov.eg, The Egyptian Cabinet Information and Decision Support Center website, 5 AmCham Egypt, Ministry of Communications and Information Technology, Egypt’s ICT StrategyDecember 2008 2007 – 20103 www.mcit.gov.eg, Ministry of Communication and Information Technology website, December 6 Business Today Egypt, India Outsources Outsourcing, 20082008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.92

CairoCity Introduction•CairoisthecapitalofEgyptanditslargestcity 1•ItistheindustrialandcommercialcenterofEgypt,andapopularinternationaltouristdestination.Quick factsGeographicLocationTime Zone GMT +0200ClimatePopulation 1Literacy rate 2LanguagesMajor industriesSituated in the north of Egypt on the banks of the NileRiver. The air travel time between Cairo and London isabout 5 hours.Hot desert climate, with average summer temperaturebetween 21 and 36 degrees Celsius and average wintertemperature between 8 and 18 degrees Celsius. Theaverage rainfall is 20 cm.18.0 million71.4 percent*Arabic, EnglishTourism, textile, chemicals, leather, cement, foodproductionSources: 1 Egyptian Census, 2006. Data for Cairo Metropolitan Region2 EIU* National levelOther sources: Ministry of Foreign Affairs, Egypt governmentKey drivers for the city to emerge as a favorable IT-BPOdestination• Cairo’s workforce is proficient in Arabic and English, which makesthe city well suited to cater to the Middle-Eastern market as wellas English speaking countries• A large, young population provides a huge talent pool to recruitfrom• The workforce has a pro-Western attitude and high serviceorientation due to Cairo’s rich history and booming tourism industry• The Egyptian government is keen to support foreign investments,and provides liberal assistance to the IT-BPO industry 2• The time-zone in Cairo favors business compatibility with marketsin the Middle East, Europe and the US• Cairo offers a comparative cost advantage over cities in Europe.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)IBM (Research center)Xceed (Contact center)Oracle (Support center)Fujitsu Consulting (ITservices) Wipro (Developmentcenter)Orange BusinessServices (Support center)Sources: Company websites, Indiatimes Infotech articleDevelopment of the current IT-BPO industry•CairowitnessedincreasedactivityintheIT-BPOsectorinthelate1990’s•Currently,OrangeBusinessServices(OBS)employs1,500peopleatitssupportcenterindowntownCairosupportingclientsin18languagesincludingArabic,English,French,German,ItalianandSpanish 3•In2008,Oracleopenedaglobalsupportcenteremploying520professionalsthatprovidesupportinArabic,English,FrenchandSpanish 4 .Industry Profile – Size and Specifics•ThemajorityofEgypt’soffshoreoutsourcingrevenueisearnedfromCairo 5•ServicessourcedfromCairoincludetechnicalsupportcallcenters,softwaredevelopmentandresearchfacilities.1 Egyptian Census, 2006 4 EgyptNews.com, Oracle Egypt global support services center is officially opened, April 20082 www.amcham.org.eg/dbe/ICT.asp, AmCham: Doing Business in Egypt, 2008 5 Yankee Group Report, May 20073 www.orangepartner.com/site/enuk/news/press/93 p_inauguration_of_the_cairo_orange_labs.jsp,December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•CairoisaneducationalhubforArabicnations.TheUniversityofCairoisoneofthebiggestinAfrica,withabout2,000studentsenrolledattheFacultyofComputersandInformation 1 .TherearemanyothereducationalinstitutionsincludingtheGermanUniversitywithaFacultyofInformationEngineering,theAmericanUniversity,theNileUniversityspecializinginITandtheHigherTechnologicalInstitute,amongstothers•Cairo’seducationalsystemputsapremiumonthetechnologicalknowledge.Therearealsostate-financedITtrainingprograms,certifiedbymultinationalITcompanies•ThereisalargepoolofyoungworkforcethatspeaksArabicaswellasEnglish,providingamulti-lingualtalentpool.However,competitionforthemorequalifiedtalentishigh•Thewelldevelopedtourismsectorpresentsanalternativepoolofemployeeshavingforeignlanguageskillsandservicesectororientation.Infrastructure•Office space (IT Parks): TheEgyptiangovernmentisconstructing“smartvillages”toattractforeignICTcompanies.TheGizaSmartVillageinCairospreadover3millionsq.mts.openedin2003.Itexpectstohousemorethan120companiesemploying20,000professionalsbytheendof2008 2•Power supply: ThegovernmenthasinvestedheavilyintheelectricitygridinordertosatisfythestrongdemandinCairoandotherurbancenters.Thegovernmentisencouragingpublic-privatepartnershipstoexpandandrealizeelectricitycapacityandreliabilityeffectivelyinthenearfuture•Telecom Infrastructure: Thecountryisconnectedtotheinternationaltelecommunicationinfrastructurebythreemajorsubmarinefiberopticcables,withthetelecominfrastructureexpectedtobeextendedbyadditionalsubmarinefiber-opticcables•National and International connectivity: CairoisthetransportationcenterfortheentireEgyptiantransportationnetwork.Thecity’sinternationalairportisthesecondbusiestinAfricaandhasflightconnectionstovariousdestinationsallovertheworld 3•Upcoming projects: AnewContactCenterPark,with40buildingsisslatedtocomeupinMaadiinthesoutheastofCairo.Companiescanstartsettingupoperationsby2009whiletheParkisexpectedtobecomefullyoperationalby2012.TheGizaSmartVillageistobeexpandedbyanadditional78hectaresincluding5newbuildingstotaling10,000sq.mts. 2 CompletionofthefirstofthenewoperationalbuildingsisscheduledforMarch2009.State / city specific incentives for IT-BPO over and above country level incentives, if any•Localgovernmentiseagertoattractforeigninvestmentandprovidesbeneficialpurchaseoptionsformunicipallyownedland 2 .Quality of life•Cost of living: Cairo’scostoflivingisrelativelyhighmainlyduetoitssoaringrateofinflation.However,thecityranked101inMercer’s2008worldCostofLivingIndexandisstilllessexpensivethanothermajorAfricancitieslikeAlgier,LagosorDakar•Crime rate: Cairoisconsideredtobearelativelysafeplacetoliveandwork,withalowcrimerate 6•Pollution levels: Thecityhashighpollutionlevelsbecauseitsindustrialactivitiesarefuelledbyheavyoils–especiallymazot 4 .AcommoninitiativebyEgyptianfactoryownersandtheClimateChangeInitiativehasbeentakentointroduceanewtechnologythatenablesaswitchfromheavyoilstonaturalgas.Already,morethanafourthoffactoriesintheregionrunonnaturalgasleadingtograduallydecreasingairpollution 5•Ease of commuting: Cairohasanextensiveroadnetwork.A113kmringroadinterlinksCairowithhighwaysandothercities 8 .Furthermore,thecityhasarailandsubwaysystem.Despitethedevelopmentsofthecity’sinfrastructure,CairoisthesecondmostcongestedcityintheMiddleEast 9•Availability of Hotels: Cairoiswellknowntobeatouristdestination.Itbenefitsfromabroadsupplyofqualityaccommodation,includinginternationalchains.Risk: City specific•Catastrophic risks: Cairowasaffectedbyasevereearthquakein1992.Thecitydoesnotlieinahighseismicactivityzone,butearthquakesdooccur 6 .Further,InSeptember2008,over100peoplewerekilledbyarockslideattheoutskirtsofCairo 7•Political risks: Cairoiscurrentlyassessedasrelativelyhighriskonthebasisofrandomactsofterrorismandpoliticalviolence 6•History of Disruption: In2005,3touristswerekilledduringaterroristattackinCairo’scitycenter 6 .1 www.fci-cu.edu.eg, Faculty of Computers and Information website, December 2008 6 OSAC Egypt Crime and Safety Report, 20082 www.smart-villages.com/docs/cairo.aspx, Smart Villages Egypt website, December 2008 7 BBC News, Cairo rockslide death toll climbs, 8 September 20083 Airport Technology 8 www.investinalexandria.gov.eg, Invest in Alexandria website, December 20084 Mazot is a remnant after extraction of more valuable fuel products from crude oil 9 Survey by GulfTalent.com5 KPMG Analysis based on news research©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.94

Mauritius

MauritiusCountry SnapshotSize of the countryPopulationCapitalCurrency2,040 sq. kms.1.22 million (2007 est.)Port LouisMauritian Rupee (MUR)Main macroeconomic indicators 1 :• GDP in PPP: USD 14.27 billion (2007 est.)• GDP per capita in PPP: USD 11,300 (2007 est.)• CPI: 8.8 percent (2007 est.)• Unemployment rate: 8.8 percent (2007 est.)1 USD = MUR (average) 27.07 (2008)• FDI stock per capita: USD 89 (2007 est.)Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com,Central Central Statistics Office MauritiusPolitical Structure 2TheRepublicofMauritiushas10administrativesubdivisions.ThelegislatureconsistsofaunicameralNationalAssembly.TheMauritiangovernmentisdemocraticallyelectedeveryfiveyearsanditsconstitutionisbasedupontheBritishparliamentarysystem.ThePresidentistheheadofstateandPrimeMinisteristheheadofgovernment.FourpartieshaveformedacoalitiongovernmentnamedAllianceSociale(AS).Thenextelectionsareduein2010.Business and Investment ClimateForeign Direct Investment (FDI): FDIinflowshaveincreasedsignificantlyforthepast2yearsandaccountedforUSD339millionin2007.Comparedtothepreviousyear,FDIinflowshavemorethantripled(USD105millionFDIinflows) 3 .GDP growth: RealGDPgrewby5.6percentin2007.TheEIUforecastsGDPtogrowatthesameratein2008andin2009 1 .Inflation: Afterinflationroseto10.1percentinApril2008,itisexpectedtofalltoabout7percentin2009 1 .2008 (Rating/outlook)IT-BPO Scenario in the countryWithanaveragegrowthrateof25percentfromOctober2006toMarch2007theIT-BPOindustryisthefastestgrowingsectorofMauritius'economy.Intotal,thereare255IT-BPOcompaniesemployingabout10,000people.In2007,theIT-BPOsectorcontributedto5.7percentoftheGDP 4 .EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)Sources: www.eiu.com, World BankBB / StableNot available24 (2009)23 (2009)AmajorityofthecompaniesprovideBPOandcallcenterservicesandonefifthareinvolvedinsoftwaredevelopment 4 .InternationalcompaniesoperatinginMauritiusincludeMicrosoft,Hinduja,Oracle,InfosysandCISCO.ThegovernmenthasdevelopedanationalstrategicplanthataimsattransformingthecountryintoanICThub.Anincreaseofemploymentto29,000qualifiedpersonsintheICTsectoristargeted,includingmorethan10,000foreigners.Furthermore,thegovernmentintendstoattracttwicethenumberofforeigninvestorsby2011 5 .MostcompaniesoperateinPortLouis.TheGrandBaieBusinessPark,thenewlydevelopedRoseBelleBusinessPark,LaTourKoenigInformaticsPark,GoodlandsBusinessParkandtheTradeandMarketingCenteraresomeoftheimportantknowledgeparksofthecountry 6 .Mauritiusispositioningitselfasanattractiveinternationalfinancialservicescenterencouragingseveraloutsourcingcompanies,especiallyIndian,tosetupholdingofficesinthecountry.Port LouisGovernment incentives 4Thecountryhasaliberalfiscalregimewhichreflectsthegovernment’seagernesstoattractforeigninvestors.InvestmentincentivesforIT-BPOinclude:•Corporatetaxexemption(2optionsareavailable:0percentinthefirstyearand15percentthefollowingyearsor5percentinperpetuity)•ZerocustomsdutyonICTequipment•FiftypercenttaxreliefonpersonalincometaxforforeignITspecialists•Refundofupto75percentoftrainingcosts.Emerging DestinationFurthermore,companiesoperatinginMauritius‘ExportProcessingZonebenefitfromtaxandcustomsdutiesexemptionsaswellasregistrationfeereductions.1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008 4 Board of Investment, Mauritius 20082 The Essence of Africa.com tourism website, December 2008 5 Republic of Mauritius National ICT Strategic Plan 2007-20113 UNCTAD, World Investment Report 2008 6 www.investmauritius.com/Resources1.aspx, Business Parks of Mauritius Limited, andRepublic of Mauritius Business Portal, December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.96

PortLouisCity Introduction•PortLouisisthecapitalcityofMauritius•Itisthemainportofthecountry 6 .Quick factsGeographicLocationTime Zone GMT +0400ClimatePopulation 1 130,050Literacy rate 2Languages 3Situated in the west of the Island, it can be reached withinfour hours from JohannesburgSubtropical climate, with summer temperature rangingbetween 23 and 30 degrees Celsius and winter temperaturebetween 17 and 24 degrees Celsius. Annual rainfall rangesfrom 90 to 150 cm.86 percent*English (official language), French CreoleMajor industries 4 Sugar, textile, tourism, ICTSources: 1 Central Statistics Office Mauritius (2007 est.)2 CIA FactbookOther Sources: Travel websites* National levelKey drivers for the city to emerge as a favorable IT-BPOdestination• The cultural affinity with Europe and Asia, and the availability of abilingual workforce make Port Louis an attractive destination forEuropean and Asian customers• The city is a major tourist destination and has a good serviceorientation• Even though many Mauritian students study abroad, most of themreturn after graduating, forming an attractive talent pool for IT-BPOcompanies• Immigration by qualified workforce is encouraged by the Port Louisgovernment. Work permits are provided within a short time periodfor foreign employees• The city is considered attractive for disaster recovery centers• Supportive government policies that encourage foreign investment,and well developed infrastructure, especially in telecom, has aidedthe growth of the BPO segment• Mercer’s 2008 Quality of Living Survey has rated Port Louis as oneof the best cities in the Middle East and Africa region.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Microsoft (IT services)Oracle (IT services)Infosys (Disaster recoverycenter)CISCO (ICT services)Accenture (IT-BPOservices)Orange BusinessServices (BPO services)Development of the current IT-BPO industry•WiththeestablishmentoftheNationalComputerBoard,StateInformaticsLtd.andtheCentralInformaticsBureauinlate’80s,theIT-BPOsectorhasexperiencedrapiddevelopmentandhasbecomeveryexport-oriented•CompaniesarelookingatPortLouisasadisasterrecoverycenter 7•In1997,MicrosoftopeneditsregionalofficeinthecitytoservetheIndianOceanregion 3 .AccentureservicesitsEuropeanandUSclientsfromitscenterinPortLouis 4•AccordingtotheBPOSecretariat,byOctober2005,therewere90companiesemploying3801peopleintheBPOsector.Callcentersemployed2,071oftheseprofessionals.Industry Profile – Size and SpecificsSources: Company websites, ICT and BPO in Mauritius – •TotalinvestmentsintheIT-BPOsectoruntilMarch2007accountedforUSD47million 1National Computer Board•Over150BPOcompaniesarelocatedwithina15kmradiusofPortLouis 2•TheEbeneCyberCityParkhousesglobalplayerssuchasOrange,lnfosys,InfinityBPO,Tele-formaandHuaWeI 5•AhostofservicesareofferedoutofMauritiusincludingcall-center,financialservices,softwaredevelopment,websitedevelopment,animationandmultimediaservices,ITconsulting,e-LearningandICTtraining.1 www.investmauritius.com/Resources1.aspx, Board of Investment, Mauritius, December 2008 6 www.scar.utoronto.ca/~gwater/IAHCGUA/UGD/port-louis.html, Urban GroundwaterDatabase, December 20082 KPMG estimates based on: 'List of Operational ITES-BPO Companies as at September 2008’,by Board of Investment Mauritius3 Embassy of the United States: Country Commercial Guide Mauritius, December 20084 www.accenture.com, Accenture website, December 20087 Continuity Central News article, Mauritius recovery centre being developed, 10 December2008USD / MUR exchange rate at 20.11.2008 has been utilized for conversions5 www.allbusiness.com/real-estate/commercial-residential-property-commercial/10594708­97 1.html, Allbusiness article, 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Mauritiushasalargepoolofeducatedandyoungpeople.Almostonethirdofthecountry‘spopulationislessthan30yearsold 1•Thereareabout94educationalinstitutesinMauritius 2 .Informationtechnology,management,commerceandengineeringarethemostpopularcoursesinthecountry•Almost4,000studentsgraduateannuallyfromtheUniversityofTechnologyandUniversityofMauritiusinIT-relatedsubjects 3 .InordertoenhancetheexistingpoolofhumanresourcesthegovernmentisencouraginginternationaltertiaryeducationinstitutionstoinvestinPortLouis 1•GiventhesmallsizeofMauritius,mostgraduatescanbeavailabletoworkinthecityofPortLouis•ThecountryhasamongthehighestliteracyratesinAfricaandbenefitsfromafreeeducationsystem 8 .Furthermore,IT-BPOcompaniescanbenefitfromtheworkforce’sbilinguallanguagecapabilitiesinEnglishandFrench 1 .Infrastructure•Office space (IT Parks): TheEbeneCyberCityParkisoneofthemainlocationsforIT-BPOcompaniesandislocatedabout15minutesbyroadfromPortLouis.TheCyberCitytotals60,000sq.mts.ofspaceandincludesabusinessandknowledgezone,commercial,residentialandhotelfacilities.ThetowersinCyberCityprovidebenefitsforICTplayerssuchasfirstlayeraccesstotheSAFE 4 opticfibercableandreliableelectricalpowersupply•Infrastructure: PortLouishasawelldevelopeddigitalnetworkinfrastructureandtelecommunicationfacilities.MauritiusisconnectedtoasubmarinefiberopticcablesystemlinkingMauritiusdirectlywithEuropeandAsia 11 ,andsupportingthepositivedevelopmentoftheICTsectorinthecountry•National and International connectivity: TheSirSeewoosagarRamgolamInternationalAirportprovidesdirectflightstodestinationsinEurope(includingGeneva,ParisandLondon),Asia(includingSingapore,MumbaiandHongKong),Australia,MiddleEast,AfricaandtheIndianoceanislands(includingSeychellesandReunion) 13•Upcoming projects: Furtherinternationalfiberopticcablesarebeinglaid.Duetothehighdemand,thereareplanstobuildanothertowerintheEbèneCyberCityParkin2009.State/ city specific incentives for IT-BPO over and above country level incentives, if any•Thecountryisverysmallthustherearenolocalinvestmentincentivesprovided.However,Mauritius’CyberCityprovidestaxexemptionscomparabletotheMauritianExportServiceZones 5 .Quality of life•Cost of living: CostoflivingisrelativelyhighcomparedtoAfricanstatesgivenMauritius’locationandtheneedtoimportmanygoods.Beinganattractiveholidaydestinationandinvestmentsbynumerousforeignershavealsoledtoincreasedcostsofliving•Crime rate: MauritiushasoneofthelowestcrimeratesinAfrica 9•Pollution levels: Airpollutionisgenerallylow,butthecityfacesaproblemofwaterpollution 10•Ease of commuting: Itisconvenienttotravelbybus,carortaxiaroundtheisland.TheMauritianislandbenefitsfromadensenetworkofroads:morethan2000kmcoverthe1,865sq.kms.islandwhichfacilitateseasycommuting 12•Availability of Hotels: Mauritiusisknownasaholidaydestinationandisanattractiveplacetoworkandlive.Over1,000hotels,includinginternationalhotelchains,offergoodqualityaccommodationinMauritius.Risk: City specific•Catastrophic risks: Sincetheislandissurroundedbyreefs,itispronetomaritimehazardssuchascyclones,especiallybetweenNovemberandMay 6•Political risks: Therearenomajorpoliticalriskstobeexpected.In2007and2008,theislandwasrankedfirstintheIbrahimIndexofAfricanGovernance 7 .1 www.investmauritius.com/Resources1.aspx, Board of Investment, Mauritius, December 2008 countries considering the safety and security, human and economic development,2 Colleges and Universities directory, African Business May 1, 2008 transparency and corruption as well as human rights)3 www.investmauritius.com/Resources1.aspx, Board of Investment, Mauritius, December 2008 8 Infoplease Country profile, Mauritius, December 20084 SAFE or South Africa Far East cable is an optical fiber submarine communications cable 9 Crime and Society, San Diego State University / Mauritius Crime Survey 2004linking Melkbosstrand, South Africa to Penang, Malaysia 10 CIA The World Factbook, Mauritius, December 20085 www.e-cybercity.mu, CyberCity Mauritius website, December 2008 11 www.ifsmauritius.com/mauritius.htm, IFS Mauritius website, December 20086 www.fco.gov.uk, Foreign & Commonwealth office, UK, December 2008 12 Nation Master Transportation Statistics, 20087 MO Ibrahim Foundation Press Release (The Ibrahim ranking compares sub-Saharan African 13 SADC Investment Review 2007-08 98©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Northern Ireland (UK)

NorthernIreland(UK)Country SnapshotSize of the country14,139 sq. kms.Population 1.7 million (2007)CapitalCurrencyBelfastBritish Pound (GBP)1 USD = GBP (average) 0.53 (2008)Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com,Department of Enterprise Trade and Investment, NorthernIreland Statistics and Research AgencyMain macroeconomic indicators:• GDP in PPP: USD 2,137 billion (2007)*• GDP per capita in PPP: USD 28,431 (2007 est.)• CPI: 2.4 percent (2007 est.)• Unemployment rate: 4.1 percent (2007 est.)• FDI stock per capita: USD 21,124 (2007)**UK country levelPolitical Structure 1NorthernIrelandisoneofthefourconstituentsoftheUnitedKingdom(UK).CertainexecutiveandlegislativeresponsibilitieshavepartlybeendelegatedtotheNorthernIrelandassembly.EighteenmembersrepresentNorthernIreland’sinterestsintheUKParliamentand3membersintheEuropeanparliament.Agovernmentisinplaceconsistingbothofunionist(infavorofcontinuingasapartoftheUK)andnationalistparties(infavorofindependencefromtheUK).Business and Investment ClimateForeign Direct Investment (FDI): NorthernIrelandhasattractedover700foreigninvestorsemploying70,000people.MostinvestmentshavebeenfocusedonthegreaterBelfastarea.In2006-07,around9percentofallFDItotheUKwassecuredbyNorthernIreland 2 .GDP growth: NorthernIreland’seconomyhasgrownsteadily,itsrealGDPgrowthwas3.5percentin2007.GDPgrowthisexpectedtodropto1.8percentin2008whichismainlyaresultofthefinancialcrisisandtheUK’sdependenceonthefinancialsectorasamaineconomicdriver 2 .2008 (Rating/outlook)*EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)AA / StableAAA / Stable / A-1+Sources: www.eiu.com, World Bank, Standard & Poor’s*UK country level614Inflation: NorthernIrelandenjoysastableinflationratebasedontheHarmonizedIndexofConsumerPrices.In2007,itwas2.4percent 2 .IT-BPO Scenario in the countryNorthernIrelandhasbeensuccessfullyattractingICTinvestments.Statisticsshowthat11,200ITpersonnelworkformorethan723ICTcompanies,whereofmorethan100areinternationalinvestors 2 .Furthermore,therearemorethan70contactandsharedservicecentersinNorthernIrelandemployinganadditional10,000people 2 .LibertyITAllstate,HBOS,BritishTelecom,NortelNetworksLtd,Openwave,Skillsoft,AllenSystemsGroupandGoodrichhaveinvestedinsoftwareoperationsinNorthernIreland.MajorinternationalinvestorsinthefinancialservicessectorincludeHalifax,Abbey,HMLandNorthbrookTechnologyandCitigroup.TeletechandHCLhaveBPOlocationsandStreamInternationaloperatesatechnicalsupportcenterinNorthernIreland.Government incentives 2NorthernIreland’sgovernmentaimsatattractingforeigninvestorsandprovidescashandtraininggrantsdependingonthenumberofnewlyjobscreated.Belfast•Recentinvestmentprojectsbenefitedfrom15to25percentcapitalgrantsaccordingtoNorthernIreland’sinvestmentpromotionagency.Additionally,aroundUSD7,450toUSD22,340percreatedjobareavailabledependingonrequiredpre-employmenttraining.However,themaximumamountofcapitalgrantsprovidedis30percentofeligiblecosts•ResearchanddevelopmentcapitalspendingcanbewrittenoffagainstincomeEmerging Destination•Thereareresearchanddevelopmenttaxreliefsbetween130percent(companieswithmorethan500employees)and175percent(companiesemployinglessthan250employees)available.1 www.niassembly.gov.uk, Northern Ireland Assembly website, December 20082 www.investni.com/index/locate/doing_business_in_Northern_ireland_/attractive_support_packages.htm, Invest in Northern Ireland website, December 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.100

BelfastCity Introduction•BelfastisthecapitalcityofNorthernIreland•ItisthesecondlargestcityontheislandofIreland 1 .Quick factsGeographicLocationTime Zone GMT 0000ClimatePopulation 1 267,374Literacy rate 1LanguagesMajor industriesLocated on the east coast of Northern Ireland, it can beaccessed within an hour by air from LondonTemperate climate, with summer temperature rangingbetween 11 and 18 degrees Celsius. The wintertemperature varies between 2 and 6 degrees Celsius. Theaverage annual rainfall is 84.6 cm.99 percent*Sources: 1 Belfast City Council (2006)*National levelOther Source: Investment Belfast websiteEnglish, Irish Gaelic; Spanish and French spoken amongstudentsICT, life sciences, biotechnology, shared services, financialservicesKey drivers for the city to emerge as a favorable IT-BPOdestination• The education system in Belfast is renowned and the universitieshave good research and development facilities which supportsbusinesses and the industry• Belfast benefits from a young population (with 46 percent beingunder the age of 30 2 ), high literacy rates and a large pool of ITgraduates• Expansion in quality office space is underway and the city benefitsfrom good infrastructure• Belfast, according to a recent report by OCO Consulting, is said tohave the second highest ranking in the UK for attracting FDI 3• The city serves as a favorable near-shore destination and caters tothe UK and Western European markets• Belfast has a competitive operating cost advantage. A study byIBM indicates Belfast to be 32 percent lower on operating coststhan other UK locations 2 .Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Nortel Networks(Research anddevelopment center)BT (Software engineeringservices)HCL Technologies (BPOservices)Citi (Technology centre)Microsoft (IT services)Infotech (IT and BPOservices)Sources: Company websites, Belfast City Council Guide, newsarticle at silicon.comDevelopment of the current IT-BPO industry•Belfast’sIT-BPOsectorhasgrownrapidlyduringthepastdecade.Nortel‘ssoftwaredevelopmentcenterhasbeenestablishedsinceoveradecade,andBTwasamongthefirstcallcentersinthecity 4•In2004,CitiestablishedaTechnologyCentreofExcellenceinBelfast.HavingexpandedinJuly2008,Citiemploysmorethan850peopleinBelfast 2•In2008,Fidessa,afinancialmarketssoftwareandservicescompany,setupadevelopmentcenterfortheinternationalmarketinBelfastemploying26programmers 7•USandIndia-basedIT-BPOcompaniesareamongthemajorinvestors•HCLTechnology,TechMahindra,FirstsourceandPolarishaveinvestedUSD300millionandcreated3,500jobsinthecity 5 .OtherinvestorsareMicrosoft,InfotechandAllstate.Industry Profile – Size and Specifics•BelfasthaspositioneditselfasanattractivelocationforITandBPOcompaniesinEurope•Intotal,therearemorethan70ICTcompanieslocatedinthecityanditssurroundingareaemployingabout7,000people 6•ServicesoutsourcedfromBelfastincludeHR,Softwaredevelopment,testing,callcenterandITsupport.1 www.goireland.com, Go Ireland website, December 2008 4 www.investni.com/us_nortel.pdf, Nortel Network Business Profile, 20082 www.belfastcity.gov.uk/investinbelfastguide/belfastinbrief.asp?menuitem=belfast, 5 Economic Times, Firstsource to create 800 jobs in N Ireland, 3 May 2008Investment Belfast website, December 20086 www.belfastcity.gov.uk, Belfast City Council, December 2008101 3 www.investni.com, Invest Northern Ireland website, various pages, December 2008 7 Fidessa company website, News archive, 19 February 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•Belfasthas2universities(UniversityofUlsterandQueen’sUniversity,Belfast)educatingalargetalentpoolofalmost48,000undergraduateandmorethan7,000postgraduatestudents 1•In2006-2007,morethan18,600studentswereenrolledinIT-relatedfields 1•Givenhighstandardsofeducation,researchandknowledgetransfer,Queen’sUniversityBelfastrankshighinelectronicengineeringareas,especiallytheInstituteofElectronics,CommunicationsandInformationTechnology•LaborcostinBelfastis15percentlowerthantheUKaverage 2•Today,morethanonefifthofBelfast’spopulationislessthan16yearsold 3 .Thiscouldensuretheavailabilityofskilledentry-levelworkforceinthemedium-termandprovidesanadvantageoverWesternEuropeanlocationswhereoveralldemographictrendshaveanegativeimpactontheavailabilityofhumanresources.Infrastructure•Office space (IT Parks): TheavailabilityofgradeAofficespaceinthecitycenterfellby45percentin2007.Thereisasupplyof20,000sq.mts.thatrepresentsavacancyrateof2.7percent 4•Telecom Infrastructure: BelfastbenefitsfromareliableandfullyfibertelecominfrastructurebasedonSDHtechnologyanda100percentbroadbandcoverage 7•National and International connectivity: Belfasthastwoairportslocatedwithin20minutesdrivingdistancetothecitycenter:BelfastInternationalAirportandGeorgeBestBelfastCityAirportofferregularflightstoLondon,Manchester,Edinburgh,Paris,Berlin,NewYorkandvariousdestinationsinNorthAmericaandEurope 2•Upcoming projects: Totalnewofficecompletionsfor2009areestimatedtobe21,000sq.mts 5 .TheNorthernIrelandSciencePark,whichoffersmorethan10,000sq.mts.ofbusinessspaceforhigh-techcompaniesissaidtogoinforanexpansionplanwithinthe“ConcourseProject”.Completionisscheduledfor2010 7 .State/ city specific incentives for IT-BPO over and above country level incentives, if any•Therearenomajorinvestmentincentivesofferedonthecitylevel.Quality of life•Cost of living: CostoflivingisrelativelylowcomparedtootherUKcities.Belfast’scostofgoods,servicesandrentedaccommodationisalmost40percentlowercomparedtoDublin 6•Crime rate: ComparedtomanyothercitiesintheUnitedKingdom,Belfastisconsideredtoberelativelysafe.Inthelastfewyears,thecrimeratewentdownby8percentannually,attributedtoanincreasedpolicepresence 1•Pollution levels: Useofnaturalgasfuels,Belfast’ssmokecontrolprogramandtheclosureoftheWestBelfastpowerstationin2002havecontributedtoreducedpollutionlevelswithinthecity•Ease of commuting: Belfasthasawell-organizedpublictransportnetworkconnectingthecitycenterwiththesuburbs.ThecityplanstospendUSD154.5millionforthemodernizationofNorthernIreland’sbusiestroad–theWestlink-providingaccesstothePortofBelfast,BelfastCityCentreandBelfastCityAirport 1•Availability of Hotels: ThereisahealthysupplyofqualityhotelaccommodationinBelfast.Morethan40hotelsinthecity,includinginternationalhotelchainsprovidemorethan3,000rooms.Risk: City specific•Catastrophic risks: Thecityispronetofloods.ThelastmajorfloodswerereportedinAugust2008 8•Political risks: Finalstepstoensurepeaceinthelongrunhavebeenundertaken.Confessionalseparation(CatholicandProtestant)isstillcommonindailylife.TheIrishRepublicanArmy’s(IRA)disarmamentandacommongovernmentofCatholicRepublicansandProtestantUnionisthavegreatlycontributedtothepoliticalstabilitywithinthecountry.1 www.belfastcity.gov.uk, Belfast City Council, December 2008 5 CB Richard Ellis, November 20072 www.belfastcity.gov.uk/investinbelfastguide/belfastinbrief.asp?menuitem=belfast, 6 Mercer International, Annual Cost of Living Index, 2008Investment Belfast website, December 20087 Broadband Northern Ireland – Department of Enterprise Trade and Investment website,3 Northern Ireland Research and Statistics Agency, 2008 December 20084 Colliers CRE, Belfast Office space, 2008 8 BBC News, Thousands face Belfast flood risk, November 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.102

Poland

PolandCountry SnapshotSize of the country 312,679 sq. kms.Population 38.5 million (2007)CapitalWarsawCurrencyPolish Zloty (PLN)1 USD = PLN (average) 2.28 (2008)Main macroeconomic indicators: 1• GDP in PPP: USD 621.8 billion (2007)• GDP per capita in PPP: USD 16,310 (2007)• CPI: 4.0 percent (2007)• Unemployment rate:12.8 percent (2007 est.)• FDI stock per capita: USD 4,060 (2007 est.) 4Sources: www.eiu.com, www.cia.gov, www.GoCurrency.comPolitical Structure 1TheRepublicofPolandconsistsof16provinces(voivodships).ThelegislatureisabicameralNationalAssemblywiththelowerhouse–Sejmandupperhouse-Senat.ThePresidentistheheadofthestate,andthePrimeMinisteristheheadofthegovernment.ThepoliticalpartiesinParliamentare:civicplatform,lawandjustice,leftanddemocratsandthePolishPeople'sParty.ThenextnationalelectionsareexpectedtobeheldinOctober2010(presidential)andOctober2011(parliamentary).PolandisamemberoftheEU,NATOandOrganisationforEconomicCo-operationandDevelopment(OECD).Business and Investment ClimateForeign Direct Investment (FDI): FDIinflowsintoPolandhaveconstantlyincreasedforthelastfewyearstoUSD23billionin2007,howeverFDIisexpectedtodecreasestartingfrom2008(USD20billion) 1 .GDP growth: RealGDPgrowthinPolandwas6.7percentin2007.Itisexpectedtofalltoabout5.3percentinFY2008 1 duetotheeconomicslowdown.2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2008)Rigidity of Employment Index(2009)BB / StableA- / Stable / A-27637Sources: www.eiu.com, World Bank, Standard & Poor’sInflation: Priceinflationhasincreasedto4.3percentin2008mainlyduetohigherfoodandoilpricesaswellaspressurefromthelabormarket.EIUestimatesinflationat3.8percentin2009 1 .IT-BPO Scenario in the countryPoland’sIToutsourcingmarkettodayisthefourthlargestinCentralandEasternEuropewithamarketvalueofapproximatelyUSD310million 2 .Thereareabout400IToutsourcingcompanieslocatedinthecountryemploying7,800ITspecialists 2 .HP,IBM,Volvo,GlaxoSmithKlinearefewofthebiggestITsharedservicescentersinPoland 5 .ThelargestPolishITcompany,ProkomSoftwareSA,hasitsheadquartersinGdynia,nearthecityofGdansk.ThedevelopmentofKrakowandWroclawasestablishedIT-BPOdestinationshasledtoincreasedcompetitionforqualifiedandforeignlanguage-speakingworkforce.ThefocushasthusshiftedtoemergingcitieslikeGdanskandSzczecin.ThePolskaIzbaInformatykiiTelekomunikacjiistheassociationrepresentingtheIT-BPOindustryinthecountry. 6SzczecinGdanskWroclawKrakowWarsawGovernment incentives 3ThePolishgovernmentprovidesavarietyofincentivestotheIT-BPOindustry.However,ithasbecomemorerestrictiveandselectivewithrespecttoprovidingincentives.•TaxexemptionsarepossibleinSEZs•Customsdutyexemptiononimportedsoftware,andonhardwarefor100percentexportorientedprojects•Discretionarycashgrantsaregenerallyonlyavailableforlargeprojectswithsignificantinvestmentandemployment.Emerging DestinationEstablished Destination1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008 and Southeast Europe, June 20082 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 2007 5 www.paiz.gov.pl/index/?id=22c5a901070d1c2ad33e821d071ae97e, Polish Information andForeign investment Agency website, December 20083 www.paiz.gov.pl, Polish Information and Foreign Investment Agency website, December 20086 www.piit.org.pl, PIIT website, December 20084 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, East104©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

GdanskCity Introduction•GdanskisthecapitalofthePomeranianVoivodship(province)•ItisoneofthelargestmetropolitanareasinPolandandPoland’smajorseaport 1 .Quick factsGeographicLocationTime Zone GMT +0100ClimatePopulation 1 458,053Literacy rate 1LanguagesSituated in north Poland on the Baltic Coast, it can bereached from Warsaw in about an hour by airTemperate maritime climate, with average summertemperature of 20 degrees and average winter temperatureof 5.5 degrees Celsius. The average annual rainfall is about60 cm.99.8 percent*Polish, English, German, RussianMajor industries 2 Maritime, high-tech, logistics, tourism, petrochemicals,cosmeticsSources:1 CIA Factbook2 New World Encyclopedia* National levelKey drivers for the city to emerge as a favorable IT-BPOdestination• Gdansk has a well educated population and houses the oldest andsecond largest technical university in the Pomerania region 2• The talent pool versed in multiple languages, is suited to provideservices in English, German, Russian, etc.• The city has many research and development institutions, andthese skills are being tapped by companies to set up research anddevelopment centers in Gdansk• Progressive policies, and a good standard of living make the city anattractive place to live and work• The city is a tier II expansion option for companies with centers inthe Polish cities of Warsaw and Krakow• Gdansk has a near-shore advantage to service the Europeanmarkets due to the similar time-zone• Gdansk is to co-host the European Football Championship in 2012,due to which several infrastructure improvement projects havebeen planned 3 .Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Lufthansa Systems (ITservices)Intel Technology(Research anddevelopment center)Compuware (Researchand development center)Zensar (IT services)Development of the current IT-BPO industry•EarlymoversincludeLufthansaSystemswhichestablisheditscenterforremotemanagementinGdanskin1998.Itemploysateamofover200ITexperts 4•IntelhashadanresearchanddevelopmentcenterinGdansksince1999,employingover250engineersdevelopingsoftwareandhardwarecommunicationsolutions 5•In2006,ReuterssetupitsdatamanagementcenterinGdansktoservetheEMAregion.Thecompanyplanstoemployover2,000peopleatitscenter 5•OtherforeignITcompaniesinGdanskincludeGE,Compuware,MoellerElectric,ZensarTechnologiesandYoungDigitalPlanet.Young Digital Plan(Software development)Reuters (Datamanagement center)Industry Profile – Size and Specifics•Gdansk’soverallITindustrygeneratesUSD195million*revenue 6Sources: Polish Information and Foreign Investment Agency,Lufthansa Systems Poland, Compuware, Memorandum of the•Approximately2,000peopleareemployedinthesoftwaredevelopmentsectorintheGdansk metropolitan area city 6•KeyactivitieswithinGdansk’sITindustryincludethedevelopmentsectorintheITindustryintegrationsoftware,multimediasoftware,researchanddevelopmentandinternetservices.1 World Port Source website Port of Gdansk, December 2008 5 www.paiz.gov.pl, Polish Information and Foreign Investment Agency website, December 20082 www.euroffice-services.eu, Euro-Office Services website, December 2008 6 Statistical Office Gdansk, December 20083 www.europoland.com/e_home.php , Europoland Tourist center website, December 2008 *exchange rate at 20.11.20084 www.lhsystems.pl/english/company/index.html, Lufthansa Systems website, December 2008105©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources•GdanskishometorenowneduniversitiessuchasUniversityofGdanskandGdanskUniversityofTechnology.Approximately9,000studentsareenrolledand1,500graduateannuallyinIT,electronicsandtelecommunicationintheGdanskregion 1•RobusteconomicgrowthhasledtoanincreaseinsalariesinGdansk.Despitethisincrease,salariesarelowerthanotherPolishcitiessuchasWarsaw,WroclawandKrakow 11•AlthoughthesizeofavailableworkforceseemslimitedinGdansk,employerscandrawontalentavailableinproximalcitieslikeSopotandGdynia•ThestronginfluxofforeigninvestmenthasalsoledtoadecreaseinGdansk’sunemploymentrate.Emigrationhasalsocontributedtoareductioninworkforcesize,althoughtheexodusofPolishworkershasnowreduced•EmployersmayalsobenefitfromthePolishworkforce’sforeignlanguageskills.SpokenforeignlanguagesincludeEnglish,Russian,GermanandFrench.Infrastructure•Office space (IT Parks): Althoughnewofficespacehasbeencompleted,Gdansk’svacancyrateisstilllowat3.5percent,leadingtoannualgrowthratesforrentsupto25percent 2 .PropertypricesareamongstthelowestinGdansk,outofthe10mainPolishcities 7 .Establishedin2006,GdanskScienceandTechnologyParklocatedinthePomeraniaSpecialEconomicZoneoffersinvestorsanattractivebusinessenvironment•Telecom Infrastructure: Thetelecommunicationsnetworkhasenjoyedhighexpenditure.Modernizationofthetelecommunicationinfrastructurewasfinalizedin2003.GTSEnergis,acommunicationscarrier,connectswithopticalfibers,thelargestPolishcities,including:Warsaw,Krakow,Katowice,Gdansk,andBydgoszcz 8•National and International connectivity: GdanskLechWalesaAirport,Poland's2ndlargestairport,offersconnectionswithEuropeandestinationsandWarsaw’sFredericChopinairport(whichhasdirectflightconnectionsto55countriesworldwide 9 ).FourinternationalrailwaylinesconnectGdanskwiththemaincitiesandindustrialcentersofPoland•Upcoming projects: Theurbandevelopmentofthe“YoungCity”inGdansk’swaterfrontisexpectedtoprovide750,000sq.mts.ofusablespaceforcommercial,residential,entertainmentpurposes.ThisisPoland’slargestprojectandisexpectedtobedevelopedover12years 10 .Theroadnetworkisnotyetverydevelopedbutfournewroadtransportcorridors,includinganorth-southroutegoingthroughGdansk,areplannedandarepartiallyunderconstruction 9 .State/ city specific incentives for IT-BPO over and above country level incentives, if any•Althoughtherearenoinvestmentincentivesgrantedbythelocalgovernment,theadministrationispro-business.TheStateprovidessupporttobusinessesthatincreaseemploymentandtoexporters.Thelocalgovernmentsandnumerousspecializedinstitutionssupportinvestors 4 .Quality of life•Cost of living: CostoflivingisrelativelylowcomparedtootherPolishcities.Costofhousingisabout20percentlowercomparedtoWarsaw 3•Crime rate: AccordingtoasurveyconductedbyWprost,aPolishweekly,GdanskrankedfifthonthelistofPolishcitiesmostaffectedbycrime•Pollution levels: EUairqualitystandardsarefulfilledonaverage.SinceGdansk'sbayisseparatedfromtheBalticProperbytheHelpeninsulatheexchangeofwaterislimitedleadingtoincreasedmaritimepollution•Ease of commuting: Gdanskregionhasgoodroadandrailwaynetworkwhichfacilitatescommuting.Busesandtramsareavailableforlocaltravelwithinthecity•Availability of Hotels: ThereisahealthysupplyofqualityhotelaccommodationinGdanskaroundtheyear.Gdanskhasmorethan80touristaccommodationestablishmentsincludinginternationalhotelchains.Risk: City specific•Catastrophic risks: GdanskisoneofthemostfloodproneareasinPoland 5 ,however,it’swellprotectedwithfloodprotectioninfrastructuresuchasdikes,ditches,culverts,stormgates,pumpingstationsandstoragereservoirs•History of disruptions: InJuly2001,duetoheavyraintheembankmentofRaduniaChannel 6 wasbreachedin5places.InfrastructurelossesinGdanskamountedtoUSD500millionand300familieswereaffected 3 .1 www.gdansk.pl/en, City Hall of Gdansk website, December 2008 7 Property Focus: Investment Opportunity Gdansk, 20082 Cushman and Wakefield, 2008 8 www.gts.pl, GTS Energis website, December 20083 KPMG Analysis from News Research 9 www.paiz.gov.pl, Polish Information and Foreign Investment Agency website, December 20084 Memorandum of the Gdansk Metropolitan area, 2006 10 www.balticpropertytrust.com, Baltic Property Trust website, December 20085 www.pgi.gov.pl/pgi_en/, Polish Geological Institute website, December 2008 11 Memorandum of the Gdansk Metropolitan Area, 20066 The Radunia Channel runs parallel to the main road leading to Gdansk from the south©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.106

Romania

RomaniaCountry SnapshotSize of the country 3,287,590 sq. kms.Population 22.3 million (2007)CapitalBucharestCurrencyRomanian Leu (RON)1 USD = RON (average) 2.54 (2008)Main macroeconomic indicators: 1• GDP in PPP: USD 250 billion (2007 est.)• GDP per capita in PPP: USD 11,430 (2007 est.)• CPI: 4.8 percent (2007 est.)• Unemployment rate: 3.6 percent (2007 est.)• FDI stock per capita: USD 2,680 (2007 est.) 5Sources: www.eiu.com, www.cia.gov, www.GoCurrency.comPolitical Structure 1Romania’sparliamentarystructureisbicameralandconsistsoftheSenate(UpperHouse)andtheChamberofDeputies(LowerHouse)whichareelectedforafour-yearterm.TheSenate(upperhouse)has137seatsandtheChamberofDeputies(lowerhouse)has332.TheheadofstateisthePresident,whoservesafive-yearterm.Romaniaisadministrativelydividedinto40counties.ThecountryisamemberoftheEUsinceJanuary2007.Business and Investment ClimateForeign Direct Investment (FDI): RomaniahasbecomeaverypopularFDIdestination.FDIinflowsintoRomaniaamountedtoUSD11.4billionin2006andUSD9.4billionin2007reflectinglarge-scaleprivatizations,thecountry’smacroeconomicstabilizationandbenefitsoftheEuropeanUnionaccession.Aslargeprivatizationsarecompleted,highFDIinflowsmaydeclinetemporarily,butareexpectedtoremainatrelativelyhighlevelsinthemediumterm 1 .GDP growth: TheRomanianeconomyhasbeenexpandingandrealGDPgrewby6percentin2007.Itisexpectedtorisebyapproximately8.6percentin2008andby4.8percentin2009 1 .2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2008)Rigidity of Employment Index(2009)BB / StableBB+ / Negative / B47 (2009)62 (2009)Sources: www.eiu.com, World Bank, Standard & Poor’sCluj-NapocaBrasovEmerging DestinationEstablished DestinationBucharestInflation: Inflationisexpectedtoaverage7.8percentin2008anddeclineto5.4percentin2009.Theincreaseininflationin2008wasmainlycausedbygrowingfoodprices,risingenergycostsandrapidwagegrowth 1 .IT-BPO Scenario in the countryTherevenueofRomania’sIToutsourcingindustryin2007wasUSD416million 2 .TheIToutsourcingindustrycomprisesaround600companiesemployingcloseto12,500employees 2 .MajorinternationalplayersincludeMicrosoft,Oracle,HP,SAP,Huawei,IBM,Ericsson,AdobeSystemsandInfineon,amongstothers 3 .TheoffshoreICTindustryisconcentratedinandaroundBucharest.ThequickdevelopmentofBucharestasanestablishedIT-BPOlocationhasledtohighcompetitionandincreasingsalaries.Asaresult,secondtiercitiessuchasBrasov,andCluj-Napocahaveemergedasalternativelocations.TheInformationTechnology&CommunicationAssociation(ATIC),Employers’AssociationoftheSoftwareandServicesIndustry(ANIS)andtheMinistryofCommunicationsandInformationTechnologyaretheITassociationsofthecountry 2 .Government incentives 4•CompaniesthatinvestmorethanUSD40million(EUR30million)andcreateover300newjobscantheoreticallyobtainstateaidofupto50percentoftheirinvestmentinoutsidetheBucharest-Ilfovregionandupto40percentinthecapitalcity.However,themaximumamountofgrantsofferedamountstoUSD28million(EUR22.5million)intheBucharest-IlfovregionandUSD35.5million(EUR28.1million)intherestofRomania•Assistancewithtrainingnewemployeesispossibleforupto20percentoftheemployedpersonnel.Grantsforemployingrecentgraduatesandpreviouslyunemployedpeoplearealsoprovided.1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008 4 www.arisinvest.ro, Romanian Agency for Foreign Investment website, December 20082 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 2007 5 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, Eastand Southeast Europe, June 20083 www.atic.org.ro, The Information Technology and Communications Association of Romania(ATIC) website, December 2008108©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Cluj-NapocaCity Introduction•OneofthemajorRomaniancities,Cluj-Napocaisalsocalledthe“TreasureCity” 1•Cluj-Napoca,thecapitalcityoftheClujCounty,hashistoricallybeenoneofRomania’sacademic,culturalandcommercialhubs.Quick factsGeographicLocationTime Zone GMT +0200ClimatePopulation 1 310,243 (2007)Literacy rate 2LanguagesMajor industriesSources:Situated in north-western Transylvania in the valley of theSomesul Mic River, approximately 50 minutes by air fromBucharest.Continental climate, with average summer temperature of18 degrees and average winter temperature of -1.9 degreesCelsius. The average annual rainfall is 59 cm.97.3 percent*Romanian, Hungarian, English, French, GermanIT, financial services, food processing, textile, woodprocessing, pharmaceuticals1 National Institute of Statistics2 CIA Factbook* National rateKey drivers for the city to emerge as a favorable IT-BPOdestination• Cluj-Napoca is an important financial and university center inRomania 2• In percentage terms, Cluj-Napoca’s has the largest student inRomania 3 . The city, therefore, benefits from a pool of qualifiedpersonnel• The talent pool is versed in many languages, especially French andItalian, and is suited to provide multi-lingual services• The talent pool in the city is also suited to offer research anddevelopment services• The city has both, an established manufacturing as well as aservices industry. IT-BPO companies are tapping skills for productdevelopment and services• The city is developing as a tier II alternative for companies withcenters in Bucharest in Romania• The time-zone advantage makes the city suited to deliver near -shore services to Western Europe• The country provides a relative cost advantage over other Westand East European cities.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)SISTEC (IT services)ISDC (Softwaredevelopment)Emerson (Engineeringservices)Brinel (IT services)Sources: Company websites, Ziarul FinanciarGenpact (BPO services)Evalueserve (Researchand development center) Development of the current IT-BPO industry•Cluj-NapocaisanimportantIThubinRomania.ThecityisbeingconsideredasanalternativeoutsourcinglocationtoBucharest,duetoincreasingcompetition•In2006,Wirtek,asoftwareoutsourcingcompanybasedinDenmark,acquiredCodeWizardswhichisaCluj-Napoca-basedsoftwarecompanyspecializingintelecommunications 4•In2007Genpact,abusinessandtechnologysolutionsprovider,openeditssecondBPOcenterinRomania,atCluj-Napoca 5•In2008,Evalueserve,anIndia-basedknowledgeprocessoutsourcingcompany,openeditsfirstEuropeanresearchcenterinCluj-Napoca 5 .Industry Profile – Size and Specifics•Thereareapproximately245ITcompaniesoperatingintheClujCountyincludingover100softwarecompaniesinthecityofCluj-Napoca 6•TheservicesofferedoutofCluj-Napocaincluderesearchanddataanalytics,ordermanagement,financeandaccounting,engineeringservices,softwaredevelopmentandITservices.1 www.clujonline.com/useful_information/reaching_cluj.htm, Cluj online, December 2008 4 www.wirtek.com, Wirtek News Archive, 3 May 20062 www.proform-software.com/cj_ro_en.html, Proform Software website, December 2008 5 www.zf.ro/zf-english, Ziarul Financiar news article, 20083 Romania.org website, December 2008 6 www.e-cat.ro, Centrul de Afaceri Transilvania Business Center website, December 2008109©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources• Cluj-NapocaisanimportantacademiccenterinRomania.Thecityishometotwoprestigiousuniversities:Babes-BolyaiUniversityandTechnicalUniversityofCluj-Napocawhichhas12,000students 1 .Thelargenumberofstudents,about62,600in2007,providesasteadyinflowofpotentialentry-levelemployees 2• EmployersbenefitfromtheforeignlanguagesskillsoftheRomanianworkforce.Morethan90percentofRomanianstudentslearnEnglishinhighschool 3 .Further,alargenumberofRomaniansspeakLatinlanguageswhichareimportantprerequisitesforsupportfunctionsforItaly,SpainandFrance• ThepopulationofCluj-Napocahasdecreasedinrecentyears.ThisreflectstheincreasedconcernsthatafterRomaniaenteredtheEuropeanUnionin2007,youngskilledspecialistsmayseekhigherpaidworkinsouthernEUmemberstateslikeItalyandSpain.Infrastructure•Office space (IT Parks): In2007,theareaof“Acategory”officespaceavailableinCluj-Napocawas20,150sq.mts.Withincreasingforeigninvestment,thedemandforqualityofficespaceisalsorising.Thus,in2008,fivenewmixedrealestateprojects,includingofficespace,wouldbelaunched.Thisislikelytoadd84,000sq.mts.ofavailablespace 4•Telecom Infrastructure: Duetoincreaseddemandforhigh-qualitytelecommunication,thetelecominfrastructureiscurrentlybeingmodernized.Anetworkof64,000kmofopticalfibreiscurrentlybeingdevelopedinCluj-Napoca.TheinvestmentaccountsforanamountofapproximatelyUSD28million 7•National and International connectivity: ThecityhasawelldevelopedrailandroadnetworkandiscrossedbytheEuropeanRoadE60.Cluj-NapocaInternationalAirport,whichisthethirdlargestairportinRomania 6 ,offersdirectflightstoTimisoaraandBucharestinRomaniaaswellasvariousdestinationsacrossEuropeincludingFrance,Germany,UK,Hungary,Italy,Austria,SpainandalsotoUkraineandMoldavia•Upcoming projects: ThecityistobelinkedwithBucharestandtheHungarianborderby“AutostradaTransilvania”(RomanianMotorwayA3)whichiscurrentlyunderconstruction.The415kmhighwayisscheduledforcompletionfor2013.SeveralrealestateprojectsarebeingdevelopedinCluj-Napoca,includingtheconstructionofa10,000sq.mts.businesscenterinthemiddleofthecity.Furthermore,a26-storeybuilding(SigmaTower)with83,7632sq.mts.ofspaceisbeingconstructed 7 .ThecompletionoftheSigmaTowerisscheduledfor2010.State/ city specific incentives for IT-BPO over and above country level incentives, if any•Localauthoritiescanprovideexemptionsonlocaltaxpaymentsonlandandbuildings.Quality of life•Cost of living: Cluj-Napocaisalsoconsideredtohavehighlivingstandards.Therefore,thecostoflivingisconsideredtobehighercomparedtootherRomaniancities 5•Crime rate: ComparedtootherRomaniancities,crimerateinCluj-Napocaisquitelow.Crimeratehascontinuouslybeenfallingforalmostadecadeandrecentpollshaveshownahighdegreeofsatisfactionwiththeworkofthelocalpolice 5•Pollution levels: Airpollutionlevelsarequitehighinthecity•Ease of commuting: Thecityhasatransportationnetworkincludingtramlines,busesandtrolleybuses.However,roadsarecongestedduringrushhours•Availability of Hotels: TheClujCountyoffersapproximately6,500hotelbeds.Thereareabout30hotelsinthecityofCluj-Napocaincludingsomewesternstandardaccommodation.Risk: City specific•Catastrophic risks: Cluj-Napocaispronetofloods 5•History of Disruption: Torrentialraindestroyedhomesandaffected240familiesinCoplean,inClujcountyinJuly2008 5 .1 www.e-cat.ro, Centrul de Afaceri Transilvania Business Center website, December 2008 5 www.romtradeconsult.com, Romtrade Consult website, December 20082 www.cjcluj.ro, Consiljul Judetean Cluj website, December 2008 6 www.clujonline.com/useful_information/reaching_cluj.htm, Cluj online, December 20083 KPMG research based on local HR Agency information 7 www.clujfo.ro/en/8/proiectul-cfo.html, Cluj Fiber Optic Integrator website, December 20084 REAS, Residential market in Romania, September 2008 110©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Russia

RussiaCountry SnapshotSize of the country 17,075,200 sq. kms.Population 141.4 million (2007)CapitalMoscowCurrencyRussian Rouble (RUB)1 USD = RUB (average) 23.67 (2008)Main macroeconomic indicators: 1• GDP in PPP: USD 2,089 billion (2007)• GDP per capita in PPP: USD 14,680 (2007)• CPI: 11.9 percent (2007)• Unemployment rate: 6.2 percent (2007)• FDI stock per capita: USD 2,800 (2007 est.) 2Sources: www.eiu.com, www.cia.gov, www.GoCurrency.comPolitical Structure 1Russia'slegislativebranchisabicameralfederalassembly,itconsistsoftheStateDumaandtheFederalCouncil.TheStateDumahas450membersthatareelectedthroughoutthecountrybasedonpopulationofthedistricts.TheFederalCouncilhas176members,2eachelectedfromRussia's89territorialunits.ThePresidentiselectedforafour-yearterm.ThePrimeMinisterisappointedbythePresident,whointurnappointsthegovernment.InMarch2008,anewRussianpresidentwaselected,whiletheformerpresidenttookthepositionofPrimeMinister.Business and Investment ClimateForeign Direct Investment (FDI): FDIinflowsintoRussiaaccountedforUSD52.5billionin2007andareexpectedtogrowtoUSD60billionin2008 1 .ThestronginflowofFDIisexpectedtocontinueinthecomingyears 1 .GDP growth: RealGDPgrewby7.2percentin2007.Itisexpectedtoremainonasimilarlevelin2008andslightlydeclineto5.5percentin2009 1 .2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BBB / NegativeBBB / Negative / A­312044Sources: www.eiu.com, World Bank, Standard & Poor’sSt. PetersburgMoscowInflation: Inflationisexpectedtoaverage14.1percentin2008.Slowingdomesticdemandandfallingcommoditypricesareexpectedtohelptoreduceinflationtotheexpected11.6percentin2009 1 .IT-BPO Scenario in the countryRussia’sITmarketvolumewasaroundUSD16.3billionin2007andgrewby18percentinthesameyear 2 .Althoughhardwareisstillthemostimportantsub-sector,ITservicesandsoftwaredevelopmentmarketshareshaveincreasedsincethebeginningofthecentury.In2007,ITservicesaccountedfor28percentandsoftware17percentofmarketshare 3 .InternationalprovidersarehighlysuccessfulinRussia.However,localcompaniesarenowcatchingup.Auriga,DataArt,EPAMSystems,IBA,LuxoftandMerawererecentlyincludedinthelistofthe100bestglobaloutsourcers2008conductedbytheInternationalAssociationofOutsourcingProfessionals(IAOP).DuetohighercompetitionandrisingsalariesforqualifiedITprofessionalsinestablisheddestinationslikeSt.PetersburgandMoscow,companiesarebeginningtotaketierIIcitiesintoconsiderationwhensearchingfornewinvestmentlocations.Government incentivesTheRussiangovernmentoffersincentivessuchascompletedepreciationofresearchanddevelopmentcostswithintwoyearsfromthecompletionoftheproject.However,ingeneral,theRussianfederalgovernmenthastriedtolimittheuseofincentivesbytheindividualregions.Regionsarerestrictedtoprovidinglimitedreductionsinregionaltaxes.However,duetothestrongcompetitionamongregionsforinvestment,manyregionalgovernmentstendtoprovidesupportwithinfrastructureandsiteinvestments.Rostov-on-DonEmerging DestinationEstablished Destination1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008 3 www.russoft.org, Russoft website, various pages, December 20082 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, Eastand Southeast Europe, June 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.112

Rostov-on-DonCity Introduction•Rostov-on-DonistheeconomicandculturalcenterofsouthernRussia.•ItisatransportbaseoftheSouthandprovidesanoutlettothecoastsoftheBlacksea,theseaofAzov,andtheCaspianSea.Quick factsGeographicLocationTime Zone GMT +0300ClimatePopulation 1 1,052,000Literacy rate 2LanguagesMajor industriesLocated on the Don River, just 46 km from the Sea of Azov,approximately 2 hours by air from MoscowTemperate continental climate, with average temperatureranging from -5.3 to 23.5 degrees Celsius. The averageannual rainfall is 45.8 cm.99.4 percent*RussianLogistics, manufacturing, food and tobacco industry, timberindustrySources: 1 Russian Census (2007)2 Investment Promotion Agency of Rostov Region* National rateKey drivers for the city to emerge as a favorable IT-BPOdestination• Rostov-on-Don is a known center for technical education in Russia,and has a qualified pool of entry level workforce• Companies in Rostov-on-Don could also tap into talent available inthe neighboring cities of Bataysk and Aksay• Rostov-on-Don has been attracting a large number of internationalinvestors. The city holds third place in Russia in the size of itsforeign trade turnover 1• Several Russian IT-BPO companies are using the hub and spokemodel; and setting up centers in Rostov-on-Don, after beingheadquartered in Moscow• The cost of living as well as salaries in Rostov-on-Don aresignificantly lower than in tier I cities in Russia such as Moscowand St. Petersburg.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)USK (IT services)Gendalf (IT services)UpScale Soft (Softwaredevelopment)Optima (Softwaredevelopment)Development of the current IT-BPO industry•Rostov-on-Don’smarkethasconstantlygrownandenjoysstabledemandforITservices•Mostofthecompaniesarelocalandoffersystemintegrationservices•Althoughlocalcompanieshavelimitedfinancialresources,theyareincreasinglyexpandingintermsofterritoryandservicesprovided•In2007,IBMopenedaclientcenterinRostov-on-Don 2•UpScaleSoft,aRussiansoftwarefirm,openedanewdevelopmentcenterinRostovon-Donin2007.Itplanstoincreasethenumberofemployeesfrom35to100in20083 .Yug Integrator (BPOservices)Sources: Company websitesSoftGrad (Softwaredevelopment)Industry Profile – Size and Specifics•Thereareapproximately160companiesoperatinginthesoftwareandweb-designindustry,however,mostofthemhavetheirITsupportorsalesdepartmentsinthecity 4•Furthermore,thereare40companiesofferingsystemandnetworkintegrationservices.MajorplayersareMicom,BISandDigital 4•Currently,thevolumeofoutsourcedworkislimited•Rostov-on-Don’sITsectorturnoverisestimatedatUSD10million 4•KeyservicesintheareaincludeITsystemsolutions,callcenterandincreasinglyEnterpriseResourcePlanning(ERP)andCustomerRelationshipManagement(CRM)systemsdevelopment.1 www.donland.ru/english, Administration of Rostov-on-Don website, various pages, 3 www.upscalesoft.ru/eng, Upscale Soft Company website, December 2008;December 20084 PMR Publications - IT Market in Russia, 20082 www-03.ibm.com/press/us/en/pressrelease/24337.wss , IBM press release, 29 May 2008113©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources• Morethan55,000studentsstudyatRostov-on-Don’sSouthernFederalUniversitywithover10,000studentsenrolledinmathematicsandinformationsciencefacultiesinRostovregion 1• Accordingtosomesources,demandforexperiencedITprofessionalsisgrowingquickly.HoweverRostov-on-DonalongwithotherlargecitiesinitsvicinitylikeBatayskandAksaycanprovidealargepoolofhumanresources• AlthoughwagesinRostov-on-Donarewellbelowthenationalaverage 5 ,salariesofexperiencedITspecialistshavestartedtoincreaseduetohigherdemand.EmployeeswithEnglishlanguagecapabilitiescommandasignificantpremium• ThereisalargepoolofskilledbutrelativelyinexperiencedemployeesemployedbythelocalITcompanies.Theseemployeeswouldgenerallybeeagertoworkforinternationalemployers,althoughmanywouldrequiretraining.Infrastructure•Office space: Althoughthereareapproximately350,000sq.mts.ofofficespaceavailableinRostov-on-Don,thereisshortageofmodernhighqualityofficebuildings,especiallyinthecitycenter.Thevacancyrateis2-3percent 2•Power supply:Althoughpoweroutagesmayoccurfromtimetotime,thepowersupplyisgenerallyreliable•Telecom Infrastructure: ThereareseveralmobilephoneoperatorsandtelecommunicationprovidersinRostov-on-Don.GoldenTelecom,aproviderofintegratedtelecommunicationserviceshaspartneredwithVimpelcom,amobilephonefirm,toconstructafiber-opticcommunicationlineontheMoscowtoVoronezhtotheRostov-on-DontoKrasnodarsegment•National and International connectivity: Rostov-on-DonisaRussianlogisticscenterinternationallywellconnectedbyrail,waterandroad 6 .Rostov-on-Donairportprovidesnational(morethan90citiesinRussia)andinternationalflightsincludingflightstoFinland,Germany,Turkey,Dubai,AustriaandBulgaria 7•Upcoming projects: Bytheyear2010,300,000sq.mts.ofqualityofficespaceisplanned,includingmorethan15businesscentersthatarecurrentlyplannedorunderconstruction.Significantnewhousinghasbeenbuiltandmorethan400buildingsinthecitycenterwererefurbished.State/ city specific incentives for IT-BPO over and above country level incentives, if any•Localgovernmentsmaysupportinvestmentsbyprovidingorupgradingregionalproperty.Quality of life•Cost of living: Rostov-on-DonislessexpensivethanMoscowbyanestimated70percent 3 .ThelatestqualityoflifeindexbytheIndependentInstituteforSocialPolicyinMoscowranksRostovRegionasnumber28outof88analyzedRussianregions•Crime rate: Rostov-on-Dondoesnotfeatureamongthe50mostdangerousRussiancities 4 .Rostov-on-Don'sauthoritieshavestarteda"safecityprogramme“,whichaimsatcurbingcrimebytrackingmigrantsandforeigners,andbymakingthepolicemoreaccessible 8•Pollution levels: ThegovernmenthasalreadytakenactiontoreducethepollutionoftheDonRiverwhichisexpectedtoimprovetheenvironmentalsituationintheregion•Ease of commuting: Rostov-on-Donhasgoodroadnetworkfacilitatingcommutingfromtheoutskirtsofthecity.However,thereishightrafficcongestioninthecity•Availability of Hotels: Thereareapproximately51hotelsinthecity 9 .However,thedemandforhighqualityaccommodationisincreasingandthesupplyofdeluxehotelsisfallingshort.Risk: City specific•Catastrophic risks: Rostov-on-Donispronetofloods,especiallyduringheavyrains•Political risks: Althoughthereareisolatedallegationsoffavoritismwherekeypoliticalandbusinesspositionsinthecityandtheregionwerepresumablyoccupiedbypeopleclosetothegovernor;theoverallpoliticalsituationseemstobestable.1 www.donland.ru/english, Administration of Rostov-on-Don website, various pages, December 5 FAST update Rostov region, June 20072008 6 eng.hcmg.ru, Hermitage Construction and Management Group website, December 20082 www.russiaprofile.org/resources/business/sectors/it, Russia Profile Information Service for IT 7 Kommersant, General Information on Rostov region, 2008sector, December 20088 The BBC news, 14 August 20073 KPMG Analysis based on News Research9 www.donland.ru/english, Administration of Rostov-on-Don website, various pages, December4 NewsWeek Russia 2008 2008 114©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Serbia

SerbiaCountry SnapshotSize of the country 77,474 sq. kms.Population 10.2 million (2008)CapitalBelgradeCurrencySerbian Dinar (RSD)1 USD = RSD (average) 82.30 (2008)Main macroeconomic indicators: 1• GDP in PPP: USD 76.49 billion (2007 est.)• GDP per capita in PPP: USD 10,350 (2007 est.)• CPI: 6.8 percent (2007)• Unemployment rate: 18.1 percent (2007)• FDI stock per capita: USD 1,877 (2007 est.) 4Sources: www.eiu.com, www.cia.gov, www.GoCurrency.comPolitical Structure 1Serbiaisamultipartydemocracy.ThenationallegislatureisaunicameralParliamentwith250seats.ThePresidentiselectedbypopularsuffrage.SerbiaismemberoftheUnitedNationsandtheCouncilofEuropeaswellasanassociatememberoftheEuropeanUnion.TherelationbetweenEUandSerbiaisdifficult,reflectingissuesofco-operationwiththeInternationalCriminalTribunalforformerYugoslavia(ICTY)inTheHague,differencesoverKosovoanduncertaintyoverEUenlargement.Business and Investment ClimateForeign Direct Investment (FDI): Mostinvestmenthasbeenintheformofacquisitionsandprivatization,howeverthenumberofgreenfieldprojectsisincreasing.PredominantindustrysectorsforFDIarebanking,telecommunicationsandmanufacturing.FDIofUSD3.4billionflowedintoSerbiain2007,andofoverUSD5.6billionin2006.However,investmentisexpectedtodeclinein2009-10becauseofrecentpoliticaluncertaintyandglobalfinancialturmoil 1 .GDP growth: RealGDPgrowth(onanexpenditurebasis)inSerbiawas7.5percentin2007 1 .TheEIUexpectsthistofalltoabout6.5percentin2008.2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)CCC / StableBB- / Negative / B9439Sources: www.eiu.com, World Bank, Standard & Poor’sBelgradeInflation: GivenfallingglobaloilpricesandagoodharvestinSerbiainflationarypressureshavepeakedin2008,butareexpectedtodeclineinthecomingyears 1 .IT-BPO Scenario in the countryRevenueoftheSerbianIToutsourcingmarketin2007wasUSD132million 2 ,andisexpectedtogrowcontinuouslyforthenextyears,asthebankingandgovernmentsectorsinparticular,investinIT.Therearemorethan200companiesprovidingIToutsourcingservicesinSerbia,employingmorethan4,000employees 2 .TheassociationsrepresentingtheIT-BPOindustryinthecountryaretheUnionofICTSocietiesandtheInformationalSociety.Government incentives 3Financialincentivesareprovidedforinvestmentsintheservicessectoranddependonthetotalvalueofinvestmentandthenumberofnewjobscreated.CashgrantsamounttoaroundUSD2,500toUSD12,600pernewjobcreated.Researchanddevelopmentjobscanbeeligibleforhighergrants(USD5,300toUSD12,600foreachnewjobcreated).Eligiblecompaniescanfurtherbenefitfromcorporateincometaxexemptionsandothertaxabatements.Additionally,socialinsurancecontributionexemptionsmayalsobeprovidedonacase-by-casebasis.Emerging Destination1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008 3 www.siepa.sr.gov.yu, Investment Promotion Agency Serbia website, December 20082 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 2007 4 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, Eastand Southeast Europe, June 2008 116©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

BelgradeCity Introduction•BelgradeisthecapitalandlargestcityofSerbia.ItisalsooneoftheoldestcitiesinEurope 4•It’sthecountry’seconomiccenter,housing24percentofthepopulation 1 .Quick factsGeographicLocationTime Zone GMT +0100ClimatePopulation 1 1,710,000Literacy rate 2LanguagesMajor industriesSituated in north central Serbia, Belgrade can be reached inabout one to three hours by air from most European cities.Moderate continental climate with four pronouncedseasons. The average temperature is 11.7 degrees Celsius,while the average annual rainfall is 66.9 cm.96.4 percent*Serbian, Albanian, Hungarian, English, GermanElectronics and telecom, shipbuilding, pharmaceuticals,chemicals, textiles.Sources: 1 City of Belgrade website (2007)2 CIA Factbook* National levelKey drivers for the city to emerge as a favorable IT-BPOdestination• Belgrade has a qualified workforce with multi-lingual skills• The ICT industry is a fast-growing, priority sector in Serbia,contributing to a significant 22.8 percent of the country’s servicesector 1• The city is also a strong base for the manufacturing industry,including engineering and IT hardware, and these skills can betapped into by companies• The government offers aggressive incentives, including cash grantsper additional job created• The business environment is steadily improving, and foreigninvestment is rising, which is likely to offer early companies to setup, a first mover advantage• Belgrade’s similar time-zone is suited to near-shore service deliveryto Western Europe• The city offers a significant cost advantage within European cities.Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Microsoft (IT services)FinSoft (Softwaredevelopment)Teletrader (Softwaredevelopment)ComTrade Group(Technology center)Pamit (Softwaredevelopment)Saga Group (Systemintegration services)Sources: Infoworld.com, BusinessWeek: company overview,Teletrader.com, GoliathDevelopment of the current IT-BPO industry•TheICTsectorhasbeengrowinginBelgradeoverthepasteightyearsasthecityrecoversfromitsinternationalisolation.Theshareofsoftwaredevelopmentexportshasconstantlyincreasedindicatingthecity’sattractivenessforoffshorecompanies•In2005,MicrosoftestablisheditstechnologydevelopmentcenterinBelgradeaftersettinguptwoEuropeandevelopmentcentersinDenmarkandIreland 5•FinSoft(UK)andTeleTrader(Austria)haveover50employeesengagedinsoftwaredevelopmentinBelgrade 6•AustrianS&ThastakenoverITbankingsolutionsproviderSITOInc.Informationin2005 6 .Industry Profile – Size and Specifics•TheGDPofBelgrade’scombinedICTandengineeringsectoraccountedforUSD688million 2 in2005.Thisreflectsa22.8percentshareofBelgrade’sservicesector 1•Thereareabout2,500ICTandengineeringcompaniesoperatinginthecityofBelgrade 3 .1 Foundation for the Advancement of Economics and Center for Advanced Economic Advanced Economic Studies, December 2008Studies - Understanding Belgrade Services Sector, 2007 4 Maps of the World website, December 20082 www.zis.bg.gov.yu/onama_eng.php, Statistical Office, Belgrade website, December 2008 5 InfoWorld news article September 20053 www.soros.org/initiatives/thinktank/focus_areas/core/grantees/center_2007, Center for117 6 News article from Strategic Analysis & OSINT management, 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources• Belgradehaswelldevelopededucationalinfrastructure,withprominentinstitutionsliketheUniversityofBelgrade,theUniversityofAppliedSciencesandtheSingidunumUniversity.EachoftheseuniversitiesofferICTrelatedcourses,andmorethan10percentofthetotalenrolmentsareinICTrelatedcourses 1• Morethan14,000studentsgraduatedin2007fromBelgrade’suniversities 1 .AlargeproportionoftheworkforceinBelgradehavecompleteduniversityeducation 2• OutofBelgrade’s114,000unemployedpeople(19percent)approximately10percenthavehadhighereducation 1 .Thisrepresentsapotentiallyemployablepoolofresources•UniversitygraduatesandtheyouthspeakEnglishasasecondlanguage• AlthoughaveragesalariesarehigherinBelgradethantheaverageforSerbia,theoverallrealsalarygrowthforthecomingyearsisexpectedtobemoderate,atapproximately5percent 1 .Infrastructure•Office space: Around66,000sq.mts.ofofficespacewasaddedinBelgradeinthefirsthalfof2008,with75percentClassAspace.Around107,300sq.mts.ofClassAandBofficespaceisexpectedtobeaddedbytheendof2008,andafurther340,760sq.mts.by2010.Theoverallvacancyratewas10percentinmid2008 3•Telecom Infrastructure: Belgradehasagoodtelecominfrastructure.TelecomnetworksinSerbiaasawholehavebeenundergoingmodernizationoverthelasttwoyears.GSMwirelessserviceisrapidlygrowingandavailablethroughmultipleproviderswithnationalcoverage•National and International connectivity: NikolaTeslaAirportinBelgradehasconnectingflightstokeyEuropeandestinationsandcitiesintheUS.Thecompletionofinnercityinfrastructuredevelopmentsinprogress(newbridges,abypass,railways)islikelytomakeBelgradewellpositionedamongotherCentralandEasternEurope(CEE)countries.BelgradeiswellconnectedtoothercitieswithinSerbiathroughmotorwaysandrailways,andwithNoviSadandBudapestthroughmotorways•Upcoming projects: ConstructionoftheITParkinIndija,atownnearBelgrade,issettobeginin2008.TheparkworthUSD600million,developedbyBangalore-basedEmbassyGroup,isscheduledforcompletionby2013.Thefirst25,000sq.mts.ofbusinessspaceisplannedtobecompletedin2009.Theparkisexpectedtogrowto250,000sq.mts.withaseatingcapacityfor25,000employeesinthenext5years 6 .State/ city specific incentives for IT-BPO over and above country level incentives, if any•Co-financedemployeetrainingisacommoninvestmentincentiveprovidedatthecity-level.Quality of life•Cost of living: CostoflivingislowcomparedtootherlargeEasternEuropeancities.However,Belgrade’scostsoflivinghaveincreasedinthelastfewyears.AccordingtotheEIU,Belgradeclimbed15placesontheglobalcostoflivingindexbetween2006and2007reflectingtheoverallinflation•Crime rate: Crimeratesareregardedashigh,butthecityisnotafflictedwithasmuchstreetcrimeasinotherlargecities.Movingthroughthecitybyfoot,busortaxiisgenerallyregardedtobesafe 4•Pollution levels: Althoughpublictransportationisavailable,localstypicallyprefertocommutebycar.Congestioniscommon,leadingtoairpollution.PollutionlevelswithinthecityarehighcomparedtootherEuropeancapitalcities•Ease of commuting: Vehicularcongestionwithinthecityisaproblemduetolimitedcapacityofmajorriverbridgesandalargenumberofcars.However,ongoinginfrastructureiimprovementsarelikelytofacilitatecommutingwithinandfromtheoutskirtsofthecity•Availability of Hotels: In2003,Belgradehad36hotelswithabout5854beds,ofwhichover50percentwereinthethreeorfour-starcategory 5 .Risk: City specific•Catastrophic risks: Serbiahasexperiencedsomeminorearthquakes,andtremorshavebeenfeltinBelgradein2007aswell2008.Thecountryhasalsowitnessedlarge-scalefloodingoftheDanubeinrecentyears 7•Political risks: TheUSStateDepartmentcurrentlyratesBelgradehighforpoliticalviolence-organizedcrimeseemstobeamajorsourceforconcernasitrelatestopoliticalviolence•History of disruptions: TherewereattacksontheUSEmbassyandAmericanbusinessesinFebruary2008inresponsetoKosovo’sdeclarationofindependence 8 .SpontaneousdemonstrationstakeplaceinSerbiafromtimetotimeinresponsetoworldeventsorlocaldevelopments,e.g.recentdemonstrationsprotestingthearrestofRadovanKaradzic,wantedbytheInternationalCriminalTribunalfortheFormerYugoslavia.1 www.ci.belgrade.mt.us, City of Belgrade website, various pages, December 2008 5 Belgrade Hotel Investment Survey, 20042 www.iiwb.org, Invest in the Western Balkans website, December 2008 6 www.lbzetaproperties.com/pdf/serbia/Serbia_general_info.pdf, lbzetaproperties website,December 20083 Colliers International, 2H 20087 news.bbc.co.uk/2/hi/europe/4917820.stm, The BBC/ B92 News articles4 www.siepa.sr.gov.yu, Investment Promotion Agency Serbia website, December 20088 NYTimes article, Kosovo Declares Its Independence From Serbia, 18 February 2008 118©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Tunisia

TunisiaCountry SnapshotSize of the country 163,610 sq. kms.Population 10.3 million (2007)CapitalTunisCurrencyTunisian Dinar (TND)1 USD = TND (average) 1.17 (2008)Main macroeconomic indicators: 1• GDP in PPP: USD 75.99 billion (2007)• GDP per capita in PPP: USD 7,360 (2007)• CPI: 5.3 percent (2007)• Unemployment rate: 14.1 percent (2007)• FDI stock per capita: USD 2,539 (2007)Sources: www.eiu.com, www.cia.gov, www.GoCurrency.comPolitical Structure 2TunisiaisaRepublicwithalimiteddemocracy.Theparliamentcurrentlyhas163membersanditservesforfiveyears.InOctober2004,Tunisia'sPresidentwaselectedbyuniversalsuffragefora5-yeartermforthefourthconsecutivetime.Thenextpresidentialandparliamentaryelectionsaretobeheldin2009.Business and Investment ClimateForeign Direct Investment (FDI): TunisiahasbeensuccessfullyattractingFDIinrecentyears.In2007,USD1.6millionforeigninvestmentsflowedintothecountry ¹ .Duringthefirsthalfof2008,FDIgrewby43percentcomparedtothesameperiodoftimein2007 3 .GDP growth: GDPgrowthisexpectedtoslowto4.7percentin2008and4percentin2009 1 .Inflation: Inflationisexpectedtobe4percentin2008andislikelytodeclineto3.8percentin2009 1 .2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BB / StableBBB / Stable / A-37349Sources: www.eiu.com, World Bank, Standard & Poor’sEmerging DestinationTunisIT-BPO Scenario in the countryTheTunisianoffshoreICTindustryisconcentratedinandaroundTunis.TheICTsectorgrewonanaverageby42.5percentannuallybetween2002and2006whichismainlyduetocallcenterinvestmentsbyFrench,SpanishandItaliancompanieslikeAlcatelLucentandSagem 4 .Thereare1548computerandengineeringcompaniesinTunisia 5 .Thenumberofsharedservicescentershaveincreasedfrom14in2002to110in2007 6 .MajorforeigninvestorsareMicrosoft,Siemens,GensymandSTMicroelectronics.Tunisia’snationalindustrystrategyfocusesonICTdevelopmentasaprioritysector.Thesector’scontributiontoGDPisexpectedtoreach13.5percentduring2007-2011 5 .ITinTunisiaisthenationalplatformfortheICTindustryinTunisia 7 .Government incentives 5Thegovernmentiseagertoattractforeigninvestmentandcreatenewjobs.Corporateincometaxexemptionsandothertaxabatementsareofferedtoattractinternationalinvestors.Furthermore,thegovernmentcanassumeportionsoftrainingcosts(upto25percent),employer’ssocialsecuritycontributionsand/orsalaryfornewhires.•ThefollowingadvantagesaregrantedtoinvestorsintheITsegment:•FiftypercenttaxbreakforITinvestors•Investmentallowanceupto6percentoftheinvestmentamountforyoungprojectdevelopers•Eligibilityforupgrading:subsidyof10to20percentformaterialandof70percentfornon-materialinvestment(Softwareservices)•SpecialincentivesforVentureCapitalInvestmentCompaniesoperatingintheITsegment.Companiesfocusedontheexportmarketmaybenefitfrom100percenttaxexemptionsonexport-derivedprofitsfor10yearsandacorporatetaxrateof10percent,thereafter.Taxexemptiononreinvestedprofitsandincomeanddutyexemptiononcapitalgoodsandservicesneededforoperationsareadditionalbenefitsprovided.1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008 5 www.investintunisia.tn/site/fr/article.php?id_article=192, Invest in Tunisia website,December 20082 www.edc.ca/english/docs/gtunisia_e.pdf, EDC Economic Monitor Tunisia, December 20083 American Chamber of Commerce, Business Monthly September 20084 www.tunisiaonline.com/government/index.html, Government of Tunisia website, December 2008 20086 ITinTunisia: Le nearshoring en Tunisie, 20087 it.utica.org.tn/site/fr/article.php?id_article=9, Tunisia IT – ICT Business Portal, December©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.120

TunisCity Introduction•TunisisthecapitalofTunisia•Itisthecountry’smostimportantcommercialindustrialcenter 1 .Quick factsGeographicLocationTime Zone GMT +0100ClimatePopulation 1Literacy rate 2Languages 3Situated on the Gulf of Tunis in north of Tunisia. Tunis is atwo and a half hour flight away from ParisMediterranean climate. The summer temperature variesbetween 21 and 33 degrees, and that in winter variesbetween 6 and 14 degrees Celsius. Average annual rainfallis 57.2 cm.2.3 million74.3 percent*Arabic, French, English, Italian*Major industries 4 Textile, energy, manufacturingSources:1 Tunisia online (2007); for Tunis metropolitan area2 CIA Factbook3 Country presentation Anima Investment Network4 Tunisian Industry Portal* National levelKey drivers for the city to emerge as a favorable IT-BPOdestination• Tunis has a qualified workforce with a technical background, andforeign language capabilities•Tunis is the country’s political as well as commercial capital and isable to attract skilled personnel from other parts of the country too•The city benefits from the cultural and geographic proximity toEurope, and is an attractive near-shore destination due to thesimilar time-zone•The government plans to set up the Tunis Financial Harbor, anoffshore financial services business cluster, with an investment ofUSD 3 billion 2 , which is likely to bring in significant investmentsinto the city•Tunis is a major North African tourist destination. Medical tourismis on the rise in the city, and attracts European investments 3•Tunis provides a significant cost advantage over Europeancountries 1 .Current IT-BPO scenario in the cityKey IT-BPO companies (Services offered)Microsoft (Innovationcenter)Siemens (IT services andelectronic industry)Global Call Center(CRM, Call center)Alcatel (Software center)Teleperformance (ICTservices)AISA (IT and BPO servicesfor the airline industry)Sources: Company websites, Invest in Tunisia, Tunisair PressReleaseDevelopment of the current IT-BPO industry•TunisemergedasanIT-BPOlocationintheearly2000s.In2003,Alcatel-Lucentstarteditssoftwaredevelopmentandengineeringcenter 4•Thenumberofhighervalue-addedITservicesinvestmentprojectshavebeenontherisesince2006•Oneofthemaininvestmentprojectsin2007includedMicrosoft’sinnovationcenterintheElGazalaPoleofCommunicationTechnologiesPark 5•Microsoft’scentersupportsthedevelopmentofTunisia’ssoftwareindustrybydevelopingintellectualcapitalandstrengtheninglocalcomputerengineeringservicescompanies 5•OthermajorinvestorsincludeSiemens,Gensym,HuaweiandSTMicroelectronics.Industry Profile – Size and Specifics•ThemajorityofTunisianandforeigncallcentersaswellastheoffshoreICTindustryareconcentratedinandaroundTunis•TheICTsectorisafragmentedmarketwithmostofthecompaniesemploying10orlesspersonnel 6 ,usuallyprovidingservicesfordomesticandforeigncustomerswithinthecallcentersector•TheservicesofferedoutofTunisincludeITInfrastructure,ITtrainingADM,ERP,financeandaccounting,callcenter,CRM•ManymultinationalsoperateintheElGazalaPoleofCommunicationTechnologiesPark.Theparkhostsapproximately50companiesemploying1,300people 7 .1 www.investintunisia.tn, Invest in Tunisia website, December 2008 5 www.oxfordbusinessgroup.com/publication.asp?country=20, Oxford Business Group Report2 www.gfh.com/en/our-business/tunis-financial-harbour.html, Gulf Finance House website,Tunisia, December 2008December 2008 6 www.animaweb.org/en/pays_tunisie_en.php, ANIMA Investment Network, December 20083 www.tunisia.com/tunisia/News/Travel/Tunisia-taps-into-medical-tourism, Tunisia.com news 7 www.tunisianindustry.nat.tn, German-Tunisian Chamber of Commerce and Industry website,article; 2008 December 2008121 4 Alcatel-Lucent white paper: Bridging the digital divide, 31 August 2004©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources• Thereare3universitieslocatedinTunisthateducatemorethan95,000studentsintechnicalsubjects,commerce,technologyandengineering.ThetotalannualnumberofITgraduatesinthecountryisexpectedtogrowfromthepresent8,000to12,000in2011 1• Thegovernmenthasallocatedabulkofthenationalbudgettoeducation 2 ,andtheseinvestmentshaveaidedingeneratingaqualified,motivatedandflexibleworkforce.Entry-levelemployeesoftenlackon-the-jobexperienceandrequireadditionaltraining• Tunis’highunemploymentrate(14percent 3 )andalargenumberofyoungunemployedgraduatesinandaroundTunisrepresentanattractiveworkforcepoolforICTcompanies• IncreaseddemandandcompetitionforexperiencedICT-engineershasledtogrowingwagesforengineerswhohaveworkedinamultinationalenvironment.Infrastructure•Office space (IT Parks): Tunis’officerentsarecompetitivecomparedtomajorcitiesintheMiddleEastandNorthAfrica.However,availabilityoflargerofficespaceisstilllimited.ElGazalaPoleofCommunicationTechnologiesparkprovidesmoderninfrastructureforhigh-techandICTcompanies 4 .Theparkcurrentlyhostsanumberofcallcentersandinternetresearchcenters•Power supply: ThepowersupplyinTunisisconstantandblackoutsareinfrequent.Thecityenjoysanelectrificationrateof99.9percent 5•Telecom Infrastructure: Tunis’telecommunicationnetworkischaracterizedbycomparativelyhighcosts.However,TunisieTelecom–Tunis’telecommunicationsagencygrantspreferentialratesforcallcentersoperatinginthecity 6•National and International connectivity: Tunis-CarthageInternationalAirport,locatedsevenkmsfromnortheastTunis,hasregularflightstovariouslocationsinEurope(suchasRome,Paris,Barcelona,London)aswellasmajorNorthAfricanandMiddleEasterncities(suchasCairo,Casablanca,Jeddah) 7•Upcoming projects: TheTunisFinancialHarbour,plannedoveranareaof445hectares,istohaveabusinesscluster,commercial/residentialdevelopments,andabusinessschool 8 .SamaDubaiplanstospendapproximatelyUSD13billiononluxuryrealestatedevelopmentinTunis,buildingapartments,offices,hotelsover837hectaresofland 9 .State/ city specific incentives for IT-BPO over and above country level incentives, if any•Thelocalgovernmentiskeentoattractforeigninvestmentandcreateemployment,largeinvestorsmayreceiveadditionallynegotiated/discretionarybenefitsliketrainingcosts.Quality of life•Cost of living: CostoflivingisrelativelylowcomparedtoothercitiesinNorthAfrica.Tunisranked133inMercer’s2008AnnualCostofLivingIndex.ThecityismoreaffordablethanCasablanca,AlgiersandCairo•Crime rate: Thecrimerateinthecity,especiallyburglaryandstreetcrime,isontherise 10•Pollution levels: Thegrowingnumberofinhabitantsandvehiclesaswellasincreasinglyactiveindustrysectorshaveledtohigherpollutionlevelsinthecity.Recentlyintroducedenvironmentalmeasuresareexpectedtoimproveairandwaterqualityinthemediumterm•Ease of commuting: Tunishasanextensivenetworkofpublictransportationincludingbuses,anabove-groundlightrailsystem(Metro)andaregionaltrainline(TGM)thatlinksthecitycentertoitsclosestnorthernsuburbs.Amulti-laneroadnetworksurroundsthecity,however,trafficdensityishighandcongestioniscommonduringrushhour•Availability of Hotels: Thereareover15luxuryhotelsinTunis,includinginternationalchains.Risk: City specific•Catastrophic risks: Tunisissituatedinalow-riskseismicareawiththeprobabilityofminorseismicactivity.Thecityispronetofloods,andthelocalgovernmenthastakenupfloodmanagementprojectstomitigatetherisks.In2007,severalpeoplewerekilledduetofloodscausedbytorrentialrain 11•History of Disruptions: ThereisageneralthreatfromterrorisminTunisia 12 .In2006,12IslamicterroristswerekilledandfifteenarrestedinTunisiaforplanningterroristoperations 7 .1 www.education.tn/en/ministere/etab_s_tutel.htm, December 2008 8 Ame Info news article;2 www.tacc.org.tn, Tunisian American Chamber of Commence website, December 2008 9 UAE Interact3 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008 10 OSAC, Tunis, Tunisia Crime and Safety Report by OSAC, 20064 www.elgazalacom.nat.tn, El Gazala Pole of Communication Technologies website, December 2008 11 Reuters news article;Tunisia floods, 14 October 20075 www.unido.org, National Investment Promotion Agency of Tunisia website, December 2008 12 www.fco.gov.uk/en/about-the-fco/country-profiles/middle-east-north-africa/tunisia,6 www.investintunisia.tn, Invest in Tunisia website, December 2008;December 20087 Foreign Affairs and International Trade Canada: Doing Business in Tunisia; 200713 Foreign Affairs and International Trade Canada: Doing Business in Tunisia, 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.122

Ukraine

UkraineCountry SnapshotSize of the country 603,700 sq. kms.Population 46.5 million (2007)CapitalKyiv, or KievCurrencyHryvnia (UAH)1 USD = UAH (average) 4.98 (2008)Main macroeconomic indicators: 1• GDP in PPP: USD 322.6 billion (2007 est.)• GDP per capita in PPP: USD 6,980 (2007 est.)• CPI: 16.6 percent (2007)• Unemployment rate: 2.3 percent (2007)• FDI stock per capita: USD 791 (2007 est.) 5Sources: www.eiu.com, www.cia.gov, www.GoCurrency.comPolitical Structure 1Ukraineisademocracywithaparliamentary-presidentialsystemofgovernmentconsistingofseparateexecutive,judicial,andlegislativebranches.AnewconstitutionwasapprovedbytheVerkhovnaRada(SupremeCouncil,orParliament)inJune1996.Since2006,amajorityofdeputiesinthe450-memberunicameralparliamentformacoalition,whichthennamestheprimeminister,whointurnnominatesotherministers.TheParliamentinitiateslegislation,ratifiesinternationalagreementsandapprovesthebudget.Itsmembersareelectedforfive-yearterms.Thecountryisadministrativelydividedinto24provinces,1autonomousrepublicand2cities(KyivandSevastopol)withspecialstatus.Business and Investment ClimateForeign Direct Investment (FDI): UkrainehasseenasharpincreaseofFDIinflowsinthelast3years,reachingUSD10billionin2008 1 .FDIflowsaremainlyintothefinancialandthemanufacturingsector.GDP growth: TherealGDPgrowthinUkrainewas7.7percentin2007.TheEIUexpectsthistofalltoabout6.5percentin2008andlessthan5percentin2009duetotheglobalslowdown.2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)B / NegativeB/ Negative/ B14545Sources: www.eiu.com, World Bank, Standard & Poor’sLvivKyivKharkivInflation: Ukrainehassufferedfromtheworldwidefinancialcrisesresultinginsevereinflationandrecessionaryconcerns.InflationintheJan-Oct2008periodwas18percent,over12.8percentin2007 2 .IT-BPO Scenario in the countryICT,hightechandconsumerelectronicsareprioritysectorsofUkraine’snationalFDIstrategy.TheICTmarkethasgrownconstantlyduringthelastsixyears.TheIToutsourcingmarketaccountsforUSD544million 3 .Thereare800IToutsourcingcompaniesemploying14,000ITspecialists 3 .Since2000,theUkrainehasbecomeanattractiveoutsourcingdestinationinEasternEuropeprovidingsoftwaredevelopmentservicestoclientsintheUSandWesternEurope.Ukraineisalsoanattractivelocationforoffshore/near-shorecompanies,hometomanysubsidiariesofinternationalcompanieslikeIBMUkraine,Comarch,Microsoft,SAP,Aricent,ISMeCompany,andCiklum.Ukrainehasseveralhome-grownICTcompanies.WhereasinitialoutsourcinginvestmentfocusedonKyiv(40percentofFDIprojects 4 )companiesarenowfocusingonsecondtiercitiessuchasLvivandKharkivaspotentialinvestmentdestinations.TheUkrainianHi-TechInitiativeandITUkrainearetheassociationsrepresentingtheIT-BPOindustryinthecountry 3 .Government incentivesAlthoughthecentralgovernmentdoesnotprovideanyincentives,thelocalgovernmentsattheprovinceorcitylevelcanoffersupportandfacilitatethesettingupprocessforbusinesses.Emerging DestinationEstablished Destination1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008 4 www.oecdobserver.org, Report on Ukraine, 20082 www.ukrstat.gov.ua, State Statistics Committee, Ukraine, December 2008 5 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, Eastand Southeast Europe, June 20083 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 2007124©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

LvivCity Introduction•Lviv(orLvov)isUkraine’sseventhlargestcity 1•ItisoneofthemainculturalcentersofUkraineandaUNESCOWorldHeritagesite 2 .Quick factsGeographicLocationTime Zone GMT +0200ClimatePopulation 1 735,000Literacy rate 2LanguagesMajor industriesLocated in western Ukraine, it can be reached from capitalKyiv by air in about one hourModerate continental climate, with average summertemperature of 18 degrees and average winter temperatureof -4 degrees Celsius. The average annual rainfall is 66 cm.99.4 percentUkrainian, Russian, PolishElectronics, mechanical engineering, food processing,chemicals, tourismKey drivers for the city to emerge as a favorable IT-BPOdestination• Lviv has an educated workforce with a large number of technicalgraduates and engineers• The city has a strong position in IT services in Ukraine. It hasseveral domestic IT-BPO companies, which can be acquired orpartnered with to enter the country• Lviv’s cultural and geographical proximity with Western Europe andtime-zone advantage makes it suited for offshore delivery toWestern Europe• Lviv is to co-host the European Football Championship in 2012 1 ,which is likely to bring about improvements in infrastructure andquality of life in the city.Sources:1 Statistical office, Lviv2 KPMG AnalysisCurrent IT-BPO scenario in the cityKey IT-BPO companies (Services offered)SoftServe (Applicationdevelopment andmaintenance services)Lohika (Applicationdevelopment andmaintenance services)InterObject (Research anddevelopment center)Eleks Software (ITservices)ArtfulBits (BPO services)Intellias (Softwaredevelopment)Sources: Company websites, Businesswire news article, PressRelease - Lohika Systems, Software development in Ukraine:MafconDevelopment of the current IT-BPO industry•TheUkrainianITandoffshoreoutsourcingindustryhasstartedtoseesomeconsolidationinthelastfewyears•Induslogic(nowGlobalLogic),aUS-basedproviderofoutsourcedsoftwareproductdevelopmentservicesacquiredUkrainianoutsourcerBonusTechnologyin2006 3 .AnothercompanyEDB,aScandinavianITserviceprovider,boughtamajoritystakeinUkrainianInfopulseandMiratechinKyiv 4•TheBPOsectorinLvivisstillatanearlystageofdevelopment,buthasthepotentialtoemergeasanattractivelowercostalternativetoestablishedmarketsinHungaryortheCzechRepublic.Industry Profile – Size and Specifics•SoftwarecompaniesinLvivemployaround2000professionals 5•AnumberofUkrainianITcompanieslikeSoftServe(900employees)andEleksSoftware(250developers)havelargecentersinLviv 5 .1 International Herald Tribune, Poland and Ukraine to host Euro 2012, 18 April 2007 4 www.goaleurope.com/main.php?p=85&more=1&c=1, Consolidation in Europe, February 20082 www.lviv-life.com, December 2008 5 Munk, Andersen and Feilberg, Software Development in Ukraine, November 20083 www.investukraine.org, December 2008125©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

Human Resources• LvivhasalargeresourcepoolofqualifiedITspecialists,andrenowneduniversitiesliketheLvivPolytechnicUniversityandtheLvivNationalUniversity.TheLvivPolytechnicUniversityproducesabout15,000graduatesannually,withover1,000fromIT-relatedcourses 1• AveragesalariesforITprofessionalsinLvivarelowerthansalariesinKyviv 2• ITcompaniesinLvivsuchasSoftserve,LohikaandElekshavesetuptrainingcenterstodevelopthetalentinthecity 2 .CompetitionforITspecialistsismoderateinLviv• UkrainecurrentlydoesnotfaceathreatofemigrationofqualifiedprofessionalstohigherwageEuropeanUnion(EU)countries,asitisnotanEUmemberanditsworkforceissubjectedtostrictEUvisaregulations.Infrastructure•Office space (IT Parks): TheofficemarketinLvivisstilldeveloping.Theestimatedadditiontoofficespaceisaround120,000sq.mts.by2012 3 .Vacancyratesarecurrentlylow•Telecom infrastructure: AlthoughpenetrationofICThasimprovedinrecentyears,therearesomeproblemsinthereliabilityandqualityoffixedtelecominfrastructure.Telecominfrastructureimprovementsaremainlyinmajorregionalcenters,howeverthereisalagintermsofpenetrationtolocalnetworksandexchanges.Mostinvestmentsintothegrowingmobilesectorareprivate•National and International connectivity: Lvivairportservesdomesticandinternationalflights,mostfrequentservicesaredailyflightstoandfromWarsawandKyiv,connectionswithToronto,Manchester,Frankfurt,andairportsinRussia,CaucasusandMiddleAsia•Upcoming projects: AfewtechnologyparkshavebeenproposedaroundLviv.TheLvivAirlineplanstoconstructatechnologyparkonitsland 4 .State/ city specific incentives for IT-BPO over and above country level incentives, if any•Twospecialeconomiczonesarefunctioningintheregion:SEZ“Yavoriv”and“Kurortopolis“Truskavets”.Investmentprojectsinthesezonesbenefitfromtaxprivileges 5 .Overandabovethis,thelocalgovernmentdoesnotofferformalinvestmentincentives.Companiesmayseektheadministration’ssupportwithpropertyandotheraspectsrelatedtoestablishingoperationsinLviv.Quality of life•Cost of living: Costofliving,asidefromhousing,islowincomparisontootherlargeEasternEuropeancities.HousingcostsarecomparativelyhighinUkraine.Thepriceofsecondaryhousingsoaredbyover20percentin2007,whereastheprimarymarketisstilldeveloping 3•Crime rate: ThecrimerateismoderatecomparedwithotherEasternEuropeancountries•Pollution levels: Sinceexhaustfiltersarenotyetrequiredforcars,airqualityinLvivisnotuptowesternEuropeanstandards•Ease of commuting: Ukraine’sinfrastructureisstilldeveloping,butiscomparabletothatinPoland,BulgariaandRomania.AloantothetuneofUSD140millionhasbeengrantedbytheEuropeanBankforReconstructionandDevelopmenttobeusedtodevelopthecity’stransport(road,railwayconnections,airportterminal)andcommunicationinfrastructure,asaresultofLvivhostingtheEuropeanFootballChampionshipsin2012 6•Availability of hotels: LvivisawelldevelopedtouristcenterinUkraine,withgoodtourisminfrastructure.Accordingtotheregionalstateadministration,thereareplanstobuild20newhotelsby2012tohostvisitorstoLvivduringtheEuropeanFootballChampionships 7 .Risk: City specific•Catastrophic risks: LvivprovincewashitbyafloodinJuly2008causingdamagetosomebridgesinthearea 7•Political risks: ThepoliticalsituationinUkrainehasbeenunstableoverthelasttwoyearsduetoanimositybetweenitstwopoliticalfactions.Thisriskislikelytocontinueandmayimpacteconomicspendingandinvestmentdecisionsofthegovernment 8•History of disruptions: LvivwashitbyahurricaneinJune2008,whichrootedout3,000treesanddamagedabout100carsandseveralbuildings 9 .1 Munk, Andersen and Feilberg, Software Development in Ukraine, November 2008 6 KyivPost news article, EBRD approves EUR 100m loan for Lviv transport project, 23 December2 Mafcon, Software development in Ukraine, November 200820083 CB Richard Ellis, June 20087 Zik News, Flood kills 22 Ukrainians, 28 July 20084 www.investinpoland.pl, December 20088 Ukraine Today website and Economist Intelligence Unit, December 20085 www.rada.com.ua/eng/RegionsPotential/Lviv, December 20089 RedTram news, Hurricane in Lviv, 24 June 2008©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.126

Concluding Kumar ParakalaGlobalHeadofSourcingAdvisoryAs our study indicates, a wide range of choices are available for companies in many partsof the world. Although the basic advantages offered by these cities may be the same –for instance, lower costs, qualified talent and aggressive incentives. The nuances amongthese offerings and their combination makes each city’s offerings unique, even in case ofcities within a country.It is interesting to note that even though a large talent pool may be available in many ofthe cities, the skills and expertise vary. Some cities may have workforce qualified fortechnology-driven tasks, while others may have workforce suited for high-end knowledgeprocesses. Similarly, talent suited for call centers may vary across cities due to languageskills – the workforce in Cairo speak Arabic and English, while those in Santiago speakSpanish and English. Changsha is becoming a center for animation and is well positionedto support the animation industry. Port Louis, even in a small country like Mauritius, maynot have a large skilled labor pool, however, is considered as a good disaster recoverylocation.Accordingly, each of the 31 cities in our analysis has different offerings, and willtherefore appeal to a different set of companies depending upon their priorities andstrategies. At the same time, the range of options may also bring in potentially higherrisks for companies that need to be balanced with the potential benefits.We believe that companies need to ask some key questions before weighing their optionsand arriving at their shortlist of locations, including:• How will the location fit in with the overall business strategy?Does the company require its offshore operations to be in a specific geography, basedon its market entry strategy, existing facilities or future requirements?• What are the key criteria for location selection?What is the relative importance of priorities for the company? For instance, is thecompany willing to settle for a higher cost in return for a better talent pool?• How best can the company evaluate locations based on the defined priorities?How can a shortlist be drawn up based on costs, operating factors and other relevantcriteria?• How can project risk be minimized?How best can a company avoid risks such as selecting a sub-optimal site, missingopportunities for incentives, or project delays?The task does not end once the location is selected. The company should then put inplace a comprehensive plan to optimally leverage the opportunities and advantagesoffered by the location and implement any necessary risk mitigation strategies. Havingsaid this, we hope that our study will be valuable in your location selection exercise.We wish you all the success in this exciting journey!127©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.

AbbreviationsTermDescriptionTermDescriptionADMApplication Development and MaintenanceITInformation TechnologyBPOBusiness Process OutsourcingITOInformation Technology OutsourcingCEECentral and Eastern EuropeKPOKnowledge Process OutsourcingCRMCustomer Relationship ManagementMNCMultinational CorporationEOUExport Oriented UnitMWMegawattERPEnterprise Resource PlanningNATONorth Atlantic Treaty OrganizationEUEuropean UnionOECDOrganization for Economic Co-operation and DevelopmentFDIForeign Direct InvestmentUSUnited States of AmericaGMTGreenwich Mean TimeUSDUS DollarICTInformation and Communications TechnologyVATValue Added TaxExplanation of Key TermsTermGDP in PPPGDP per capita in PPPCPIFDI stock per capitaReal GDP / Real growth rate ofGDPEIU's Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business RankRigidity of Employment IndexNear-shoringOffshoringShared ServicesSoftware Park, or Technologypark, or IT ParkTier I, II and III citiesClass A and B office spaceDescriptionGross Domestic Product in Purchasing Power Parity. GDP is defined as the total market value of all final goods andservices produced within the country in a given period of time (usually a calendar year). Purchasing power parity(PPP), mainly used for comparison is an adjusted exchange rate based on the relative cost of living and inflationrates between countriesGDP in PPP divided by the country's current populationConsumer Price Index. The CPI is a measure of the average price of consumer goods and services purchased byhouseholds. The percent change in the CPI is a measure of inflationCumulative stock of inward Foreign Direct Investment (FDI), divided by the current population of the countryReal GDP is a macroeconomic measure of the size of an economy adjusted for price changes and inflation. The realgrowth rate is the growth rate adjusted for price changes and inflationThe Economic Intelligence Unit's Sovereign Risk Rating assesses the probability of whether a a country may defaulton its debts. It indicates the risk of a build-up in arrears of principal and / or interest on foreign- and / or localcurrencydebt that is the direct obligation of the sovereign or guaranteed by the sovereign, going from C (lowest) toAAA (highest). For more information, please visit www.eiu.comStandard and Poor's rating measures the obligor's capacity to repay foreign currency obligations, with “AAA” beingthe highest, and “C” being the lowest. For more information, please visit www.standardandpoors.comThis World Bank study published annually ranks economies on their ease of doing business, from 1 to 181, rank 1being the most conducive business environment. The rankings are from the Doing Business 2009 report, covering theperiod April 2007 to June 2008. For more information, please visit www.doingbusiness.orgPart of World Bank's Doing Business Report, the index denotes the difficulties that employers face in hiring andfiring workers, on a scale of 0 to 100, with higher values representing more rigid regulations. For more information,please visit www.doingbusiness.orgOffshoring to a nearby country, that is easily accessible and is located in the same or a neighboring time zoneOutsourcing processes / activities to a shared service / external service provider in a country other than theoriginating countryOften, used interchangeably with the term “captive”. The consolidation of common functions, systems, processes andpersonnel across several business units into an internal service bureau, managed as an independent organizationA building or complex constructed especially for technology companies. Typically, these parks would have high-speedbroadband connectivity, reliable power supply and ready office space. In some countries, these parks are also specialeconomic zones that offer financial benefits or incentives for companies who set up officesTypically, country capitals and metro cities as being the Tier-I category cities, smaller cities such as state capitalsand bustling towns are defined as Tier-II, while upcoming cities and/or semi-urban centres are defined as Tier-III.Class A space is typically refered for buildings that have excellent location and access, attract high quality tenants, andare managed professionally. Building materials are high quality and rents are competitive with other new buildings.Class B buildings have good locations, management, and construction, and tenant standards are high. Buildings havevery little functional obsolescence and deterioration.©2009KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.KPMGandtheKPMGlogoareregisteredtrademarksofKPMGInternational.128

AcknowledgementsThisresearchreportwouldnothavebeenpossiblewithoutthecommitmentandcontributionsofthefollowingindividuals:KPMG Sourcing LeadersAlanBuckle(Global),EgidioZarrella(Global),KumarParakala(Global),KalpanaRamakrishnan(US),MarkBownas(Hungary),BrettHall(Singapore),ShamusRae(UK),ViralThakker(India),JehilThakkar(India),AndreasDressler(Germany),HartleyPowell(US).KPMG Report development teamNimishThaker(India),ShaileshNarwaiye(India),ArpitaBedekar(India),AditiMehra(India),KunalJain(India),FranziskaHerzig(Germany),ElzbietaBogatko(Germany),PranavDesai(India),NandiniMehta(India),NishaFernandes(India).Report Review and other activitiesHemanthSundararaj(US),AndreaWang(HongKong),AnoopVijaykumar(India),KartikRamakrishnan(India),SaurabhMathur(India),BobGeorge(India),SidharthTewari(India),JitenGanatra(India),RohitD’Almeida(India),PhilipSallick(Australia).Additional help provided by key individuals to gather the data. Withouttheir help our report would not have been completed.DennisGao(China),DannyLe(China),TaihaiWoon(Malaysia),TamMinhPham(Vietnam),TommyWoo(Vietnam),ReginaldNery(Philippines),JoseCCatequista(Philippines),JohnNaas(Canada),SameerGupta(US),LuizCabral(Brazil),HamiltonHamamoto(Brazil),CarolineHausen(Brazil),CristianGarrido(Chile),ClaudiaVillegas(Chile),HumbertoSalicetti(Chile),HugoGarcia(Mexico),CarlosLopez(Mexico),AndresBehar(Argentina),BorisDurou(Argentina).

ContactsEgidio ZarrellaGlobal Partner-in-ChargeIT AdvisoryHong Kong+852 2847 5197egidio.zarrella@kpmg.com.hkKumar ParakalaGlobal Head of Sourcing AdvisoryGlobal Chief Operating Officer, IT AdvisorySydney Australia+61 2 9355 7820kparakala@kpmg.com.auKalpana RamakrishnanAMERICAS LeaderSourcing AdvisoryLos Angeles, United States of America+1 714 850 4355kramakrishnan@kpmg.comMark BownasEMA LeaderSourcing AdvisoryBudapest, Hungary+36 1 8877 122Mark.bownas@kpmg.huBrett HallASPAC LeaderSourcing AdvisorySingapore+65 6411 8335bretthall@kpmg.com.sgViral ThakkerIndia LeaderSourcing AdvisoryMumbai, India+91 22 3983 6233vthakker@kpmg.comShamus RaeUK LeaderSourcing AdvisoryLondon, United Kingdom+44 20 76943056shamus.rae@kpmg.co.ukAndreas DresslerGermany LeaderGlobal Location and Expansion ServicesBerlin, India+49 30 2068 4398adressler@kpmg.comJehil ThakkarIndia LeaderGlobal Location and Expansion ServicesMumbai, India+91 22 3983 6232jthakkar@kpmg.comHartley PowellAMERICAS LeaderGlobal Location and Expansion ServicesCharlotte, United States of America+1 704 335 5583whpowell@kpmg.com

kpmg.comTheinformationcontainedhereinisofageneralnatureandisnotintendedtoaddressthecircumstancesofanyparticularindividualorentity.Althoughweendeavortoprovideaccurateandtimelyinformation,therecanbenoguaranteethatsuchinformationisaccurateasofthedateitisreceivedorthatitwillcontinuetobeaccurateinthefuture.Nooneshouldactonsuchinformationwithoutappropriateprofessionaladviceafterathoroughexaminationoftheparticularsituation.©2009KPMGInternational.KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.PrintedinIndia