Gates warns against shutting out Asian rivals

LONDON (01/26/2004) - At a conference that began with widespread saber-rattling over the threat China and India pose in taking jobs away from more developed nations, Microsoft Corp. Chairman Bill Gates encouraged attendees of the U.K. government's Advancing Enterprise Conference to take a more global view of these countries' growth.

"What is happening is fantastic for them," Gates said in his keynote address Monday afternoon, citing advances in health care and education made possible by the countries' growing economies.

Gates's enthusiasm for India's and China's evolution was not shared by all attendees of the London conference, however.

Business and government leaders, like U.K. Chancellor Gordon Brown, expressed concern earlier in the day that the combination of lower costs and educated workforces could make these countries formidable foes.

In fact, Brown warned that 5 million American and European jobs could be outsourced to China and India by 2015.

Brown encouraged local businesses to strengthen their ties with U.S. and European trading partners to keep from losing ground to these new Asian rivals.

Emphasizing the government's focus on traditional partners, Brown also announced Monday that Gates was receiving an honorary knighthood for his contributions to enterprise and employment in the U.K.

But when the software titan took the stage -- introduced as Sir William Gates -- he took an optimistic view of India's and China's growing strengths as outsourcing and development centers. Although he cautioned Western businesses to take a hard look at where they need to focus their energies in order to compete, he warned them against turning away from free trade.

"All developed countries need to think about what's going on in China and India and what the advantages are ... but we can't shut them out," he said.

Gates encouraged developed countries to focus on innovation and the protection of intellectual property to stay competitive.

And although he appeared to welcome these countries' development with open arms, Gates said that Microsoft would continue to concentrate its research and development (R&D) efforts at its headquarters in Redmond, Washington.

Microsoft has two additional research centers, one in Cambridge, England, and the other in Beijing.

But the company plans to keep the core of its research at home, even though outsourcing could cut costs by 20 percent, Gates said.

Microsoft plans to compete with innovation, and in this vein, Microsoft's R&D budget has been increased to US$6.9 billion per year, Gates said.

While Gates was bullish on the ability of developed nations to keep up with lower-cost rivals by introducing new products and services, he conceded that the argument that global development is good for everyone was a "tough sell."

"But I'm optimistic," he said.

The Advancing Enterprise Conference runs through Monday.

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