International Trade in Services.pdf - DSpace at Khazar University

244 International Trade in Services
security issues. Corporate procedures and ethics are paramount to ensure data privacy.
12 Leading IT service companies make the issue of data privacy and security a
key priority since it is generally a requirement to attract foreign clients in the first
place. A survey by Booz Allen Hamilton (2006) finds that information security is
one of the three most important factors for U.S. companies in selecting an outsourcing
partner. The survey also indicates that concerns about information security
are related to the lack of trust in legal and regulatory environments. A country
with a trusted legal and regulatory framework for data privacy and security issues
may thus have a comparative advantage relative to other emerging markets.
In conjunction with legislation, there are several types of standards and guidelines
that companies can adopt and conform to, including International Organization
for Standardization–International Electrotechnical Commission 15504
(software process improvement and capability determination), International
Organization for Standardization 17799 (for best practices in information security),
International Organization for Standardization 27001 (for information
security management systems), and COBIT (control objectives for business and
related technology). However, the combined efforts to ensure high standards in
the supply of IT services do not come cheap. Thus, Pai and Basu (2005) cite estimates
in a TowerGroup study that show the costs of effective international
outsourcing increasing by 7–9 percent in IT services for efforts to ensure due
diligence and 3–5 percent for efforts at good risk management.
Despite the investment of service suppliers in robust systems, there is some fear
that future legislation could erect barriers to crossborder supply. As a precaution
against potential protectionism, more than 300 Indian IT-enabled service companies
and IT service companies have established subsidiaries in Singapore, where
they would be able to route data in case India were to be burdened by trade
restricting legislation (Aron 2005). To counteract misuse during data handling,
policy makers can establish a penal code for companies or individuals breaching
the rules on data privacy. Equally important is the establishment of a penal code
that protects intellectual property rights and the undertaking of initiatives to
combat software piracy. Proper law enforcement is equally important for those
countries that have enacted legislation.
What Issues Warrant the Attention
of Stakeholders
The preceding discussion touches on a number of issues that merit the attention
of policy makers as they advance the trade integration agenda for IT services.
Table 7.4 shows a checklist of questions that might help structure the reflections
and ensure a comprehensive approach to the removal of binding constraints and