SP

O-Z

WL7

58-2

0080

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Dev

elop

men

t of I

T an

d IT

ES

O

ffsho

ring

–O

ppor

tuni

ties

for C

ount

ries

The

Wor

ld B

ank

and

Inte

rnat

iona

l Fin

ance

C

orpo

ratio

n –

Glo

bal I

nfor

mat

ion

and

Com

mun

icat

ions

Tec

hnol

ogie

s D

epar

tmen

t

info

Dev

Don

ors’

Mee

ting

19 J

une

2008

This

repo

rt is

sol

ely

for t

he u

se o

f clie

nt p

erso

nnel

. N

o pa

rt of

it m

ay b

e ci

rcul

ated

, qu

oted

, or r

epro

duce

d fo

r dis

tribu

tion

outs

ide

the

clie

nt o

rgan

izat

ion

with

out p

rior

writ

ten

appr

oval

from

McK

inse

y &

Com

pany

. Thi

s m

ater

ial w

as u

sed

by M

cKin

sey

&

Com

pany

dur

ing

an o

ral p

rese

ntat

ion;

it is

not

a c

ompl

ete

reco

rdof

the

disc

ussi

on.

CO

NFI

DE

NTI

AL

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WL7

58-2

0080

325 1

CO

NTE

NTS

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ITE

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ntry

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I des

ign

prin

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done

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SP

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WL7

58-2

0080

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*In

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add

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mar

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offs

horin

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dust

ries

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cKin

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data

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Pote

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illio

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ES

TIM

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S

Oth

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exp

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, FY

*** 2

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10.4

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rent

si

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~115

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ress

able

m

arke

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SIZE

OF

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RK

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PR

OJE

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RR

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WL7

58-2

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IT S

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ilipp

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ploy

men

t:Th

e P

hilip

pine

s ra

pidl

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owin

g B

PO

sec

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s ‘0

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n ye

ars

IT-IT

ES in

In

dia

has

grow

n fro

m a

nas

cent

sec

tor t

o re

pres

entin

g m

ore

than

5%

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atio

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GD

P

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2007

1998

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% o

f GD

P

•Exp

orts

: Las

t yea

r Ind

ia’s

IT-IT

ES

sec

tor

cont

ribut

ed o

ver $

30 b

illion

of t

he n

atio

n’s

expo

rts

$ bi

llion

1.8

1998

31.9

2007

•Em

pow

erm

ent o

f wom

en:W

omen

ac

coun

t for

65

perc

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tota

l pr

ofes

sion

al a

nd te

chni

cal w

orke

rs in

the

Philip

pine

s

SP

O-Z

WL7

58-2

0080

325 4

Mod

el in

puts

and

out

puts

THE

LOC

ATI

ON

REA

DIN

ESS

IND

EX C

OM

PAR

ATI

VELY

ASS

ESSE

S C

OU

NTR

Y C

OM

PETI

TIVE

NES

S IN

TH

E IT

/ITES

SEC

TOR

Sour

ce:M

GI;

Team

ana

lysi

s

Loca

tion

read

ines

s in

dex

Wha

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mod

el d

oes

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o

•Id

entif

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e sp

ecifi

c pr

ojec

ts a

nd th

eir t

imin

g th

at c

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impr

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ctiv

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s of

a c

ount

ry•

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cast

mac

roec

onom

ic o

r soc

ial f

acto

rs•

Ana

lyze

intra

-cou

ntry

var

iatio

n in

attr

activ

enes

s

Purp

ose

of th

e m

odel

Inpu

ts:

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ntry

spe

cific

da

ta o

n –C

ost

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ent p

ool

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risk

s–V

endo

r la

ndsc

ape

–Bus

ines

s en

viro

nmen

t–Q

ualit

y of

in

frast

ruct

ure

Out

puts

: •

Ove

rall

inde

x sc

ore

on

read

ines

s fo

r IT/

IT

ES

offs

horin

g•

Inde

x va

lues

on

all 6

inde

x di

men

sion

s•

Can

pro

ject

fo

rwar

d us

ing

exch

ange

rate

, G

DP

and

infla

tion

assu

mpt

ions

•Eva

luat

e re

adin

ess

of

the

coun

try

for I

T/IT

ES

of

fsho

ring

•Pro

vide

initi

al in

sigh

ts

into

whe

re g

aps

exis

t so

that

pol

icie

s ca

n be

pr

oper

ly ta

rget

ed

•Est

imat

e th

e po

tent

ial

impa

ct th

at a

dditi

onal

in

vest

men

tin

infra

stru

ctur

e or

pol

icy

chan

ge c

ould

hav

e on

co

untry

read

ines

s

SP

O-Z

WL7

58-2

0080

325 5

CR

ITER

IA U

SED

IN T

HE

LRI M

OD

ELC

riter

iaSu

b cr

iteria

•M

arke

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urity

•E

mpl

oyee

s in

IT -

ITE

S in

dust

ry a

s a

% o

f tot

al e

mpl

oym

ent i

n se

rvic

es s

ecto

r •

IT-IT

ES

siz

e (d

omes

tic +

exp

orts

) as

a %

of t

otal

siz

e of

ser

vice

sG

DP

•P

rese

nce

of a

n in

dust

ry a

ssoc

iatio

n•

Ris

k pr

ofile

•R

egul

ator

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ks

•C

ount

ry in

vest

men

t ris

ks•

Dat

a pr

otec

tion

•Ta

lent

•Av

aila

bilit

y•

Suita

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y•

Willi

ngne

ss•

Acc

essi

bilit

y•

Trai

nabi

lity

Det

ail/e

xpla

natio

n•

Cos

t•

Labo

r cos

t•

Infra

stru

ctur

e co

st

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orpo

rate

tax

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ther

ince

ntiv

es

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age,

bon

us, b

enef

its, t

rain

ing

Cos

t•

Tele

com

, rea

l est

ate

and

pow

er s

uppl

y•

Tax

rate

, Tax

hol

iday

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aini

ng s

ubsi

dies

, Dut

y ex

empt

ions

, Tra

inin

g in

cent

ives

, oth

ers

•E

nviro

nmen

t•

Gov

ernm

ent s

uppo

rt

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sine

ss a

nd li

ving

env

ironm

ent

•A

cces

sibi

lity

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ving

Env

ironm

ent

•G

over

nmen

t pol

icy

tow

ards

fore

ign

inve

stm

ent,

Flex

ibilit

y of

la

bor l

aws,

cor

rupt

ion,

bur

eauc

ratic

bur

den,

Fle

xibi

lity

of

regu

latio

n•

Ove

rall

busi

ness

env

ironm

ent,

com

patib

ility

of b

usin

ess

ethi

cs•

Tim

e di

ffere

nce

to, t

rave

l tim

e, F

requ

ency

of d

irect

flig

ht

•A

ttrac

tiven

ess

of li

ving

env

ironm

ent,

Mur

ders

/ R

apes

per

ca

pita

, HIV

/ A

ids

per c

apita

•Q

ualit

y of

in

frast

ruct

ure

•Te

leco

m a

nd n

etw

ork

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eal e

stat

e

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ansp

orta

tion

•Po

wer

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tal i

nter

natio

nal v

oice

traf

fic, U

ptim

e of

end

-to-e

nd

netw

ork,

EIU

conn

ectiv

ity ra

ting

•To

tal i

nven

tory

of c

lass

a s

pace

s, V

acan

cy ra

te o

f cla

ss

A/B

spa

ces

•R

oad/

Rai

l net

wor

k pe

r cap

ita•

Pow

er o

utag

es in

day

s, P

eak

dem

and

/ P

eak

supp

ly

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tabi

lity

of la

ws

and

regu

latio

n, T

rans

pare

ncy

and

fairn

ess

of le

gal s

yste

m, B

urea

ucra

cy

•M

acro

Eco

nom

ic S

tabi

lity,

Cap

ital f

reed

om, C

urre

ncy

fluct

uatio

ns•

Pro

tect

ion

of in

telle

ctua

l pro

perty

•To

tal n

umbe

r of g

radu

ates

in fi

eld

or fi

elds

of i

nter

est

•Q

ualit

y of

the

avai

labl

e gr

adua

tes

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the

indu

stry

attr

activ

e co

mpa

red

to o

ther

job/

care

er o

ptio

ns?

•Is

the

tale

nt c

lose

to fr

om jo

b ce

nter

s an

d w

ould

peo

ple

mov

e•

Are

ther

e sh

ort c

ours

es w

hich

can

incr

ease

sui

tabi

lity?

SP

O-Z

WL7

58-2

0080

325 6

Sour

ce:L

RI M

odel

; Tea

m a

naly

sis

Cos

tTa

lent

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Ove

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2.1

2.2 2.5

2.2

3.1 4.

4 4.7

4.3

•Key

are

as o

f tal

ent a

nd c

ost a

re fa

vora

ble

•Ind

ones

ia is

per

ceiv

ed to

be

a hi

gh ri

sk c

ount

ry

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the

abse

nce

of a

larg

e of

fsho

re in

dust

ry in

Indo

nesi

a, th

e IT

/ITE

S in

dust

ry is

not

mat

ure

•Hig

hest

pot

entia

l in

data

pro

cess

es w

hich

requ

ire g

ener

alis

t ski

lls•L

ack

of la

rge

pool

of a

naly

sts

and

MB

As

limits

the

oppo

rtuni

ties

in k

now

ledg

e se

rvic

es•W

ith a

larg

e en

gine

er p

ool,

ther

e is

sco

pe to

bui

ld th

e IT

ser

vice

s in

dust

ry

BPO

ser

vice

s

Infr

astr

uctu

reEn

viro

n-m

ent

Ris

ksM

atur

ity o

f in

dust

rySe

rvic

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e

3.7

3.9

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3.1 3.5

3.7

3.5

Dat

a pr

oces

ses

Voi

ce p

roce

sses

Kno

wle

dge

serv

ices

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ervi

ces

3.0

13

45

62

Inde

x sc

orin

g: 1

= m

ost a

ttrac

tive

5 =

leas

t attr

activ

e

IND

ON

ESIA

ATT

RA

CTI

VE O

N C

OST

AN

D A

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MEN

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E TA

LEN

T PO

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ISK

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RE

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WL7

58-2

0080

325 7

Sour

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odel

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1.5 2.

1

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4.5 4.8

4.7

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ser

vice

s

Infr

a-st

ruct

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Envi

ron-

men

tR

isks

Mat

urity

of

indu

stry

Serv

ice

line

3.86

3.44

4.20

3.22

3.34 3.64

3.50

Dat

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ses

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ce p

roce

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serv

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ervi

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13

45

62

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e

KEN

YA’S

CO

STS

AR

E LO

W, H

OW

EVER

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ER A

REA

S W

ILL

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O B

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DD

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take

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lativ

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nive

rsity

gra

ds, m

ay li

mit

pote

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sect

or•I

nfra

stru

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e qu

ality

is a

n im

porta

nt c

once

rn

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take

away

s•K

enya

doe

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ry w

ell o

n co

st•L

ow ta

lent

poo

l sco

re re

flect

s re

lativ

e pa

ucity

of u

nive

rsity

gra

ds, m

ay li

mit

pote

ntia

l of t

he

sect

or•I

nfra

stru

ctur

e qu

ality

is a

n im

porta

nt c

once

rn

SP

O-Z

WL7

58-2

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HO

W IN

DO

NES

IA A

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OM

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ITH

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ER C

OU

NTR

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eam

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corin

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tive

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t attr

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eIn

dia

US

2.2

3.03.

73.

6

Know

ledg

e

2.03.

13.

53.

5

IT

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rall

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1.43.

93.

4

1.0

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2

3.7 1.

63.7

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12.

71.

04.4

4.5 1.

63.34.

74.

8 1.13.

84.

34.

7

3.3 1.

53.0

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2.3

1.6

1.5

4.8

4.8

3.7

3.5

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2.1

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2.1

1.5

1.5

2.5

2.2

Cos

t30

%

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and

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58-2

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igh

unem

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illing

to

mov

e to

find

w

ork

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omm

unic

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atch

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w•

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lity

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ith fe

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ant

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re p

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Gen

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ness

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nabl

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lity

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w in

In

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lish

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uage

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e st

uden

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re u

sed

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ctor

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10

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ever

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indu

stry

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view

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good

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optio

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adua

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willi

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join

th

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IN K

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portu

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ndon

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ctor

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cept

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petit

ive

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e m

ediu

m to

long

term

the

coun

try n

eeds

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prov

e la

bor s

uita

bilit

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r the

poo

l alre

ady

grad

uate

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ove

qual

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ants

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nd o

f the

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ket

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mm

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ext s

teps

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age

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coun

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ap to

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mic

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ncre

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year

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ya’s

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capt

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portu

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iffic

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verc

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l

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in th

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enya

can

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ctiv

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com

pani

es

prim

arily

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essi

ng in

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ture

qua

lity,

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risk

perc

eptio

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petit

ive

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e m

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long

term

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coun

try n

eeds

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nd w

ay to

ad

dres

s ta

lent

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l iss

ue–

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ease

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ing

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univ

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ty s

ourc

es–

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side

r oth

er s

ecto

r str

uctu

res

e.g.

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omin

g th

e E

ast A

frica

regi

onal

hub

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&O

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nd n

iche

mar

ket

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ever

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en th

e hi

gh p

oten

tial i

mpa

ct o

f the

sec

tor t

o ec

onom

ic d

evel

opm

ent i

n K

enya

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mm

end

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ext s

teps

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age

with

the

coun

try to

:–

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ine

the

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ent t

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inin

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tner

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priv

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rdin

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educ

atio

nal r

efor

ms

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end

for o

ther

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nds

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in tr

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ther

cap

acity

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l & re

gula

tory

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rm•R

efor

m re

gula

tion

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IP la

ws

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leco

m d

ereg

ulat

ion

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oing

bus

ines

s”fa

ctor

s–

Land

and

title

refo

rm

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hnic

al a

dvic

e•A

dvis

e on

gov

erna

nce

issu

es

Infra

stru

ctur

e•P

rovi

de in

dust

ry n

eces

sary

tool

s e.

g.–

Rea

l est

ate

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ild IT

par

ks–

Band

wid

th –

lay

cabl

e–

Tran

spor

tatio

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impr

ove

road

s,

build

airp

orts

–Po

wer

•Adv

ice

•Fun

ding