Despite a late start, Pakistan's information technology entrepreneurs and the government are hoping to make it big in the global marketplace for outsourcing of IT-enabled services. How have other countries succeeded and where does Pakistan stand?

Naween A. Mangi spoke from New York to Ron Hira, professor of public policy at the Rochester Institute of Technology, and Rafiq Dossani, senior research scholar at the Walter H. Shorenstein Asia-Pacific Research Center at Stanford University.

Software exports, call centres and medical transcription firms have become all the rage over the last three years. Young entrepreneurs are returning after years spent working at major tech firms in the US to start up their own ventures and the government is forecasting that IT will be the next big thing in Pakistan's economy.

So far, the numbers tell a less-than-compelling story. In 2004, although the software and IT enabled services business was worth $300 million, (including hardware the figure is $600 million), exports and outsourcing made up for just $33 million of that. By comparison, India logged $12.8 billion in software and services exports in 2004.

Still, the Pakistan Software Export Board, a federal body set up to promote outsourcing, forecasts that the business will grow by at least 45 per cent annually for the next five years. A lot of that growth will come from call centres and business process outsourcing which last year made up one-fourth of total exports. In the next ten years, the PSEB aims to be at the top of the class of tier two global IT companies.

But as experts and practitioners agree, Pakistan will need more than ambitious aims to meet that goal. Prof Ron Hira, whose new book Outsourcing America assesses the impact on the US job market, says the outsourcing industry is set for rapid growth in the next few years and if done right, developing countries like Pakistan could benefit from the boom.

Hira is an expert who has testified before the US Congress on the implications of outsourcing. "Pakistan isn't on the map yet," he says. "India dominates what most people think about [when it comes to outsourcing]."

Rafiq Dossani, an expert on outsourcing and a senior research scholar at Stanford University says there are several reasons for that. First, is the poor quality of infrastructure.

"When the Internet tanked recently, that created a really bad perception that the country has not thought through even the most rudimentary aspects," Dossani says. "Deregulation in this area is too limited." He says that while voice services have benefited from the deregulation, data services are still uncompetitive.

He says there are too many stumbling blocks since bandwidth is more expensive than in other countries. "The costs are outrageous at four or five times what they should be," he says.

Dossani identifies the thin segment of English speakers as a second hurdle in the way of a flourishing outsourcing industry in Pakistan. "Of the 30 per cent of the population that lives in urban Pakistan, one tenth speak English that's good enough to work at a call centre," he says. "And of those five million or so, only about one million are available to come into this field as the rest are working elsewhere."

Then, he says poor marketing also holds the industry back. "You just don't see the trade body [in Pakistan] working like India's Nasscom to project a positive image," he says. "The Pakistani diaspora has done well and there is a great need to better use that network."

He forecasts that the outsourcing business in Pakistan can be at least $1 billion in size but says this is only possible if alliances are formed with countries like India and China.

"The Philippines has done well by understanding that it cannot reach critical mass on its own and therefore forming alliances and pitching themselves as a second location to offset country risk," he says. Dossani also says Pakistan has the advantage of a highly skilled group of entrepreneurs which "is the reason why the tiny industry does exist."

Hira adds that since Pakistan entered into the industry late, playing catch up is an inevitable need. However, the sector can take advantage of the circumstances in other countries. "India has done a lot of things right," he says. "They have been successful at not just attracting foreign investment but also building their own companies and leveraging the large Indian diaspora," Hira says.

"India is also so talked about that people are comfortable doing business there. But since wages are rising, Pakistan can use that as an entry point." He says that while countries like India have accumulated critical mass and scale, others are distinguishing themselves in different ways.

Eastern European wages are slightly higher than Pakistan and companies in that region have specialized in near-shoring by targeting the European market. Russia, meantime, is aiming at the U.S. market in both services and manufacturing while the Philippines and Malaysia are targeting services.

"The question really is how you separate yourself from the pack," Hira says. "You can compete on price to a certain extent but you have to offer something more to distinguish yourself."

He says U.S. companies are now moving from pilot stage outsourcing to full deployment which indicates both the success of the pilot projects and the rapid growth that is likely to come in the outsourcing market for the next few years. "There will continue to be a backlash from U.S. workers, but by and large there has not been any real policy movement to restrict outsourcing so there is still a large opportunity," he says.

Hira admits that the extent to which a growing outsourcing industry ties into the broader economy in terms of job creation remains unclear but he says, other advantages emerge. "In India, for example, it remains unclear that they've been able to link the benefits [from outsourcing] back in, but the big benefit is that they have created world class management which can then move into other sectors."

Therefore, Hira recommends that Pakistan take a long-term vision not for the next three or five years but for the next two decades. "Right now you can try to pick up the low hanging fruit and absorb the excess demand but don't just think about attracting the individual company to come [to Pakistan]," he says. "Think about how this will fit into the larger set of skills for your country so that you can differentiate yourself much later down the road."

In the post-9/11 world there is an urgent the need for Americans to understand the Muslim world, and vice versa. Yet precisely when they should be visiting Muslim countries, Americans are kept at home by fears of terrorism. War zones aside, those fears are overblown. It is time their government and their media helped would-be American travelers gain a more realistic understanding of the typically minor risk of anti-U.S. violence that awaits them in the Muslim world.

Recently my wife and I spent a week strolling the streets of Beirut and traveling by bus in its hinterland. The trip was a fool's amusement in the scary light of official and media images of the Middle East as a dangerous place. Yet everywhere we went we felt welcomed.

I own a t-shirt that spells out "CANADA" in large letters beneath a maple leaf. Before leaving California I thought, only half-facetiously, of bringing it along. I'm glad I left it behind. The Lebanese we met were hospitable not hostile.

I am not advising naivete; Lebanon's horrific civil war in the 1970s, 80s, and 90s destroyed much of this city. Washington intervened. More than 200 American soldiers died in a building shrunk to rubble, apparently by Hezbollah -- a self-described Party of Allah that the U.S. still considers a terrorist organization. Beirut became a synonym for mayhem.

Echoes of Beirut's frightening reputation were heard this year in a series of bombings that killed nearly two dozen Lebanese, including Prime Minister Rafiq Hariri in February, scholar-journalist Samir Kassir in May, and opposition politician George Hawi on 21 June, only two days after we had left the country.

An American visitor's initial impressions of Beirut today are ambiguous. Inspiring confidence are the relaxed atmosphere at the new, ultra-modern, and just-renamed Rafiq Hariri Airport and, seen through taxi windows, the attractively renovated downtown area. But then one's taxi skirts the burned-out hulk of the St. George Hotel and, alongside it, behind police tape and armed guards, the twisted carcasses of cars -- detritus from Hariri's assassination.

This juxtaposition of alarm and assurance has become the unnerving natural condition of American travel to and in Muslim or mostly Muslim countries. Survey research shows approval of the United States among the world's billion-plus followers of Islam near an all-time low. The U.S. is viewed unfavorably by 58 percent of Lebanese, according to a just-released Pew Research Center opinion poll. Lebanon and other Muslim-majority societies account for more than half of the 29 countries to which the State Department discourages American travel. Yet in these mainly Muslim destinations the odds that a prudent American tourist will become a casualty of terrorism remain infinitesimal.

I went to Lebanon to do research, to lecture at the American University of Beirut, and to help celebrate the 100th anniversary of my high-school alma mater, the American Community School. For decades, Arab sons and daughters have vied for entry into these and comparable institutions elsewhere in the Middle East, including the American University in Cairo. In Lebanon, in the upland village of Deir al Qamar, I found a small photo shop whose owner had proudly posted a sign identifying himself as a "U.S.A. GRADUATE, BOSTON."

These signs of American popularity must seem incomprehensible to Americans fearful of Muslim wrath. But what really makes no sense is the apocalyptic vision of the Muslim world that America's media tend to purvey, a vision that encourages would-be travelers to stay in Indiana and skip Indonesia.

Overseas Muslims in my experience have a split-level view of America. Most of them dislike -- some detest -- U.S. policy while simultaneously admiring the freedom and openness that Americans, at their best, represent. Many Americans feel the same way. Meanwhile, security concerns have encircled U.S. embassies with enough protective barriers and identity checks to make diplomacy resemble self-imprisonment.

As relaxed interactions at the official level have become a casualty of the war on terror, people-to-people contacts have become more vital than before. The fewer Americans Muslims meet, the less contested will be the image of the U.S. as a cruel montage of Guantanamo and Abu Ghraib.

A task force ought to brainstorm ways of overcoming unrealistic fears of travel. The Bush administration has acknowledged the need to win Muslim hearts and minds abroad. It is time to win back overfearful American hearts and minds as well.

Fifty years ago, in April 1955 in Bandung, Indonesia, the country's then-president Sukarno hosted a meeting that became a global icon of anti-colonial solidarity. The 29 African and Asian states represented at that first Bandung Conference swore their support for sovereignty and self-determination. Their priority was on national not individual freedom. The final declaration mentioned human rights. But it ignored the danger that foreign colonialists might be replaced with indigenous dictators. Democracy, corruption, and good governance were issues for the future.

This year in Indonesia, from 18 to 24 April, some 87 delegations, including 40 heads of state or government and more than 100 ministers, celebrated the "golden jubilee" anniversary of the Bandung Conference. In a series of summit, ministerial, and other meetings they sought to "reinvigorate the Bandung spirit" and forge "a new Asian-African strategic partnership" for the 21st century. The week climaxed on 24 April on the same day and in the same hall where the original conferees had launched the "Bandung spirit" of solidarity against imperialism half a century before.

Some of the leaders gathered for the celebration -- Bandung II -- were content to repeat the nationalist pieties of the past, or to redirect them from European colonialism to American unilateralism as the enemy of the day. But the current president of Indonesia, Susilo Bambang Yudhoyono, known as SBY, struck a different note. His theme was not independence but introspection, not sovereignty but self-reform. He gently urged his fellow rulers to replace the old dogma of national liberation with a commitment to "good governance" as the latest and highest priority for developing countries -- in effect, self-reform as the new spirit of Bandung. At that moment, in Blitar, East Java, where he is buried, the nationalist firebrand Sukarno must have rolled in his grave.

"Good governance" did not and will not become the buzzword of Bandung II. The only other speaker who mentioned it, to my knowledge, was Singapore's prime minister Lee Hsien Loong. Fewer voices were raised in favor of self-reform than were aimed at American unilateralism. North Korea's Kim Yong Nam was among the latter. So was "Comrade R. G. Mugabe," as Zimbabwe's dictator called himself.

An Iraqi delegate, unable to insert in the ministers' communique a paragraph supporting his country's embattled transition to democracy, told me privately and bitterly, "The spirit of Bandung has not changed at all." In his view, most of the conferees in Bandung II preferred the odious sovereignty of Saddam Hussein to the induced democracy that followed, just as the leaders of the anti-colonial movement had tolerated tyrants in their ranks.

Yet SBY's speech did not fall on wholly deaf ears, and Iraq is not a good test case. More than a few delegates in Bandung supported democracy but opposed democracy-by-invasion. In developing countries, as representative government has spread, so has the desire to make it less corrupt and more effective. Over time, a new Asian-African agenda could give more prominence to democratization, religious moderation, the rule of law -- and honest, accountable governments as means to these ends.

But even if this does not happen, even if SBY's challenge is forgotten, the prestige of successfully hosting Bandung II already has strengthened his otherwise vulnerably "American" position inside a country whose future will help tip the balance of extremism and moderation in the Muslim world.

SBY is John F. Kennedy-esque: tall, handsome, young for a head of state, and able to project a democratic vision for Indonesia. A retired army general, he received American military and civilian training, including a master's in management from Webster University. No president before him has had more American exposure. This background will be in the spotlight when he pays his first presidential visit to the United States at the end of May.

Indonesia is the largest Muslim society, the third-largest democracy, and a tropical archipelago where defenders of the Bush administration are as scarce as snow. Indonesians will appreciate SBY's American experience if it enables him to deal with the world's only superpower in ways that help Indonesia. But if he is seen as too enamored of supposedly "American" values, he will create an opening for his political opponents.

In Bandung on the last day of the commemoration, crowds lined the streets, smiling and waving at the VIPs. Through the closed windows of air-conditioned limos and busses, the VIPs waved back. Compared with the week's grand abstractions -- sovereignty and self-reform -- this third spirit of Bandung was fleeting and local. But unless Asian-African solidarity becomes more than a slogan, or the vision of a better-governed Indonesia comes true, it may have been the most real.

As part of a new initiative on Greater China, SPRIE has selected two outstanding young scholars as the inaugural SPRIE Fellows at Stanford for research and writing on Greater China and its role in the global knowledge economy. Xiaohong (Iris) Quan and Doug Fuller, from the University of California, Berkeley and MIT, respectively, will join the SPRIE research team for the 2005-2006 academic year.

The primary focus of the program is the intersection of innovation and entrepreneurship and underlying contemporary political, economic, technological, and/or business factors in Greater China (including Taiwan, Mainland China, Singapore). Topics of particular interest include, but are not limited to, university-industry linkages, globalization of R&D, venture capital industry development, networks and flows of managerial and technical leaders, and leading high technology clusters in Greater China. Industries of ongoing research at SPRIE include semiconductors, wireless, and software.

SPRIE Fellows at Stanford will be in residence for at least three academic quarters, beginning in fall 2005. Fellows take part in Center activities, including research forums, seminars, and workshops throughout the academic year, and will present their research findings in SPRIE seminars. They will also participate as members of SPRIE's team in its public and invitation-only seminars and workshops with academic, business, and government leaders. Fellows will also participate in the publication programs of SPRIE and APARC.