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Monday, June 16, 2003

Silicon’s sheen may never return
Lisa Baertlein

SILICON Valley’s one-time boomtown capital has a small army of unemployed engineers, caverns of empty office space and a message for potential employers with a bit of wanderlust: Do you know the way to San Jose?

The city, the largest to have sprung from the fruit orchards that became California’s famed technology hub, has lost thousands of workers due to business failures and layoffs at major employers such as Cisco Systems Inc.

Only recently, it averted a new crisis by putting together a plan that helped keep eBay Inc. from defecting. Instead, the Web auctioneer announced in April that it would more than double its Silicon Valley real estate holdings.

Having side-stepped the potential loss of nearly 2,000 more jobs, San Jose’s development czar hopes to turn the city’s slack market for property and people into a selling point.

"People who couldn’t be in the Valley three years ago now can," says Paul Krutko, San Jose’s economic development director, who wants prospective employers to view his city’s unemployment rate of nearly 10 per cent—well above the national average of 6 per cent — as an opportunity to hire eager, educated workers.

Home prices in Santa Clara County also eased in April, though — at an average price of $ 4,95,000 — they remain three times more costly than the national average.

That hangover from the Internet boom has hampered San Jose’s recruitment efforts and Krutko says the city plans to add 3,000 affordable housing units over the next two years.

His crusade is getting a boost from San Jose’s major technology names, including Adobe Systems Inc., eBay Inc., BEA Systems Inc. and WebEx Communications Inc., whose advertising dollars are paying for a magazine promotion that talks up the area’s strengths.

As people flocked Silicon Valley for its concentration of talent and capital, it became one of the most expensive places to run a business. That, in turn, helped spur Silicon Valley clones in northern Virginia, southern California, Taiwan, India, Israel and elsewhere.

But while government development efforts bolstered those far-flung high-tech centres, such programmes had little to do with Silicon Valley’s own spectacular rise in the sixties and seventies, when defence contractors and the chipmakers that gave the valley its name turned then-cheap farmland into business parks.

But now technology workers have scattered as US companies shed workers and ship work offshore. A recent UCLA study forecast that California will lag the nation in recovery with tech jobs not returning to Silicon Valley even if business conditions improve.

Start-up capital, which poured almost $33 billion into the Bay Area in the boom year of 2000, has dried up. In 2002, San Francisco start-ups drew just $7 billion in such funding, according to the tracking firm VentureOne.

San Jose’s neighbour Santa Clara just weeks ago learned that 3Com Corp. is moving its executive team to Massachusetts as part of a broader consolidation effort.

Ron Garratt, Santa Clara’s assistant city manager, says the city’s total general fund has fallen nearly 15 per cent, from around $140 million in late 2000 to about $120 million.

Three-quarters of that lost tax revenue can be linked to corporate failures and downsizing, he says.

Garratt, who has worked in Silicon Valley local government for nearly two decades and weathered such fiscal crises as the Savings & Loan debacle of the late 1980s, says the region's current problems are the worst he has seen.

"This is entirely different. This is much scarier," Garratt says. "Next year may be a more difficult budget year than this year ... We don't see any quick resolutions. We don't see these buildings filling up. We don't see these hotels filling up."

Indian IT professionals rejoice!
Vasantha Arora

THE US has assured India that its plea for a "totalisation agreement" would be considered to ensure social security benefits for Indian professionals who have worked in America.

Addressing a press conference here, visiting Indian Commerce and Industry Minister Arun Jaitley said US Trade Representative Robert Zoellick gave him the assurance when he raised the issue with US officials.

Besides Zoellick, Jaitley met Commerce Secretary Bob Evans.

The agreement, if signed, could help thousands of IT professionals who pay social security taxes while they live and work in the U.S. but are unable to derive the benefits once they leave the country.

The minister explained that many of the IT professionals who come to the USA on H1-B visas face a handicap in terms of social security deductions. The duration of their H1-B visas are for three years and another extension for three years, which makes it a total of six years.

But under US rules they are entitled to the benefits only if they work for 10 years.

IT and other professionals contribute $500 million per year to the Social Security Administration, but they don't get back any of the benefits once they return home.