The Diasporas Come Home

The brain drain that has fed skilled immigrants into the US economy for decades is now reversing to the long-term benefit of India and China, according to a survey of hundreds of professionals returning to their native lands to launch businesses.

The study, titled "The Grass is Indeed Greener in India and China for Returnee Entrepreneurs," quantifies what had been expected from the dual blows of overly -stringent US immigration policies in the wake of the 9/11 bombings and the 2008-2009 global financial crisis. Conducted by the Kansas-based Ewing Marion Kauffman Foundation in association with Harvard University, the study estimates that 150,000 professionals have returned to India and China each over the past two decades, with the numbers expected to grow.

The respondents cited "economic opportunities and favorable conditions for starting a business back home and the speed of professional growth" as the leading motivations for returning home. Family ties also played a significant role in the decision of the returnees.

According to Vivek Wadhwa, a senior research associate in the Labor & Worklife Program at Harvard University and one of the five co-authors of the report, most returnees are convinced that the entrepreneurial advantages are better in their home countries where they can benefit from "lower operating costs, heightened professional recognition, greater access to local markets and a better quality of life than they could attain in the United States."

The survey's other findings:

*More than 60 percent of Indian and 90 percent of Chinese respondents cited economic opportunity as important in motivating the return home. The returnees took pride in contributing to economic development in their home countries.

*The entrepreneurs are strikingly similar to their US-based counterparts: They are overwhelmingly male and most are bootstrapping businesses with personal savings and funds from family and friends. Their businesses are small, relatively new, and focused on fast-growing, low-barrier-to-entry markets in IT and the service sectors.

*Fifty-six percent of Indians and 59 percent of Chinese said their quality of life was better or equal to what they had experienced in the United States. In China, 76 percent ranked access to local markets as very important. In India, 64 percent did.

*Salaries were the only advantage the respondents attributed to the United States. Sixty-four percent of Indian respondents said their salaries were better in the US than at home. Forty-three percent of Chinese respondents said US salaries were higher while 20 percent stated they were about the same.

"It's hard to put a date on when this reverse brain drain began, but it accelerated when we went into recession because these emerging economies were not really impacted," Robert Litan, VP, Research and Policy at the Kauffman Foundation was quoted as saying at the report's launch.

"At the same time, the US economic downturn has diminished opportunities for these high-skilled professionals, recent economic and political reforms in their home countries have expanded the appeal of entrepreneurship there," Litan said. "The lesson for the United States is that regions that support entrepreneurship will remain important hubs in today's global economy."

However, the survey's results also indicate that while the returnees' migration back to their home countries produces a "reverse brain drain" in the United States, these entrepreneurs maintain close relationships with US-based colleagues, family, friends and sources of business information. The data suggests a two-way "brain circulation" with potential benefit to both the United States and these emerging economies.

According to Wadhwa, entrepreneur-turned-academician, the trend isn't a brain drain "but a hemorrhage," "Whether we call this a "brain drain" or "brain circulation," it doesn't matter. "It is a loss for America. Innovation that would otherwise be happening here is going abroad."

Wadhwa says the fact that large numbers of those Chinese and Indian entrepreneurs who have returned home remain pleased with their decisions years later and are broadcasting those feelings back to other Indian and Chinese entrepreneurs who remain here, is ominous for Silicon Valley's economic future.

Interestingly, in China these returnees are called 'sea turtles' -- well-educated and experienced nationals who migrated to pursue opportunity in places like Silicon Valley only to swim back years later to launch new innovations and enterprises at home.

A few India-based entrepreneurs feel the US economic downturn has indeed considerably diminished the charm and opportunities for high-skilled professionals across America. At the same time, they feel, the recent economic and political reforms in their home countries have expanded the appeal of entrepreneurship here.

However, others are convinced that the reverse migration is not something that should unduly worry US planners. "Pervasive corruption and an investor-unfriendly bureaucratic culture in India create a disenabling environment in India. This will ensure that talent flight takes place and people seek opportunities abroad," says Sushil Arora, an Arlington-based Indian IT entrepreneur.

Many observe that abysmal salaries for talented but low-paid IT workers in India will always make them seek greener pastures.

"I'd say that those who are returning are probably those who have achieved a certain level of professional success and financial security, says Chennai-based software engineer Ravi Sitaraman, an IIT Madras alumnus, "The younger lot is still quite enamored of America as the land of opportunities and dreams."

Vineet Saxena, who has just returned from the Silicon Valley to establish a start-up venture with an American friend in Bangalore, India's IT hub, explains that, "Silicon Valley has been the creative laboratory for generations of spunky immigrant entrepreneurs. So it will continue to attract talent and entrepreneurial energy."

So what pushed him to make the shift? "For me, it's purely a family thing," he says. "I've been away for 24 years. My parents are old and I need to spend time with them in their twilight years. Plus, my kids are keen to get back to their roots and make their own decisions about where they'd like to spend the rest of their lives – here or America. I want to give them that opportunity."

Fuelling the trend is the returnees' hot pursuit by eager investors and major corporations who have set up shop in India and China's emerging economies. Both face a serious shortfall of home-bred managers with global experience. And increasingly, multinationals are wooing these returnee entrepreneurs with irresistible compensations.

The US Senate seems to have realized that by shutting out immigrant entrepreneurs, it is discouraging startups and, consequently impacting job creation. US Sens. Richard Lugar and John Kerry had proposed legislation to target thousands of such international entrepreneurs who are stuck in an immigration limbo. The visas are to be granted to foreign students or to H-1B holders if they can raise at least $20,000 from a US investor. (Foreign students in the US get a year after graduation to acquire a work visa, which in most cases is the employer-funded non-immigrant H-1B visa).

However, Indian visa applicants are finding it increasingly tough to get H-1B visas or even secure extensions. "This is a logistical nightmare for H-1B employees who have homes, assets, liabilities and families in the US," says Saxena. "You can't do much about the global downturn but the US government can at least look into this if it wants to retain overseas entrepreneurial talent."

After China, India has the world's largest diaspora, estimated at 25 million of which nearly half (or 12 million) are settled in America. Per the UNESCO Institute for Statistics, 153,000 Indian students were abroad in 2007, making India second after China for tertiary students overseas.

Neeta Lal is a New Delhi-based senior journalist – neetalal@hotmail.com