Brain Gain - Industry Trend or Event

Industry Standard, The, August 7, 2000 by Leslie Pappas, Monika Halan, Daniel Helft

For decades, people have left developing countries in search of better lives and careers in the United States. Now some of the best opportunities are back home.

JAMES LIANG WAS ONE OF CHINA'S most promising whiz kids. He won the country's first national computer programming contest at the age of 13, and entered Fudan University's "genius class" just two years later. Liang epitomized a new breed of computer-savvy youth, which the government hoped would help build a modern China.

Then he left for America. At age 19, Liang saw better opportunities abroad: specifically, a full ride at Georgia Tech. Later he found a job in Silicon Valley working for Oracle. For years, people like Liang have left their countries in the developing world to seek a better life in the West, creating a crippling exodus of talent popularly known as the brain drain.

But now Liang has come home. Today, he sees the greatest opportunities in the land of his birth. "China is at the point where the Internet is just going to explode," he says. He has moved back to Shanghai and teamed up with three classmates to run Ctrip.com, an online-travel agency.

Liang is not alone. "The majority of dot-coms in China have been started by returning overseas students," says Luo Hui, deputy director for China's Ministry of Science and Technology. Liang's partner Neil Shen, who earned an MBA from Yale and worked for eight years as an investment banker on Wall Street and in Hong Kong before launching Ctrip in April 1999, thinks he knows why: "In this sector, a brain is the most important factor for a company's success."

From Beijing to Bangalore to Buenos Aires, the lure of the Internet is pulling longtime expatriates back to their homelands -- and convincing young graduates to stay. In some cases, the reasons behind this "brain gain" are economic - technology professionals who struck it rich in Silicon Valley are finding their money goes a long way back home. For some, building the Net for their countrymen is almost a duty; for others, it's the chance to be a bigger fish in a smaller pond. Developing countries are accelerating the migration, sweetening the rewards for high-tech workers by pushing development in their technology sectors, cutting taxes and loosening immigration laws.

India is a vivid example. Since the U.S. and the U.K. first opened their doors to Indian professionals in the 1960s, India has lost its best and brightest to the West. Government-subsidized schools churned out thousands of brilliant scientists and engineers, but India offered few opportunities after graduation. Young people had little choice but to become babus (government bureaucrats) or escape abroad.

The old trends are now changing. Since the state's telecom monopoly launched the Net in India in 1996, longtime emigres have begun trickling back to take part in India's Internet revolution.

Prakash Gurbaxani is one of them. He was working in Silicon Valley in the late 1990s and had already spent 13 years in various technology management jobs in the United States. The Internet hysteria unleashed by Netscape's blockbuster IPO in 1996 was creating lots of demand for executives like him, especially in India, where he was CEO material. India was "a gold mine of opportunities," says Gurbaxani. So when Microland, a leading Bangalore-based technology services company, asked him to head their newly formed media division in 1997, he packed his bags.

After running Microland for three years, Gurbaxani ventured out on his own earlier this year and created a Web services firm called 24/7 Customer.com. His experience and connections in Silicon Valley and the economics of India gave the company an edge. Gurbaxani raised $3 million in initial funding from U.S.-based investors including Banyan Venture Partners and entrepreneur Ram Shiram, a former VP at Netscape and Amazon.com. The money goes a long way in India, where relatively modest wages for programmers let companies develop technology at a fraction of what it would cost in the U.S. And the entrepreneurial skills and spirit imported by returnees like Gurbaxani is starting to ripple through the economy as they mentor and invest in other startups trying to get off the ground.

Returning expatriates are part of an increasing flow of senior talent back to developing countries, but they are not putting an end to the world's brain drain. While 1,500 Indians with valuable overseas experience returned last year to fill senior-level jobs, more than 30 times that number abandoned junior positions in India for the U.S. In fact, some argue that the Internet is actually increasing the brain drain as countries around the world vie for high-tech labor. Europe, for example, will have openings for 1.7 million technology workers within two years; the U.S. will need 1.6 million in the next year alone. To fill the gap, governments in industrialized countries are raising immigration quotas and making it easier for tech workers to obtain visas. The U.S. Congress doubled the number of high-technology visas it issues two years ago, for example, and is expected to increase the number again this year. Increased salaries, stock options, tax breaks and business incentives are lavished on technology profess ionals as they arrive in the U.S. and Europe.