Europe needs more immigration or outsourcing, says Infosys chairman

Europe needs to embrace either immigration or outsourcing to overcome the huge challenges of its ageing population – and it is currently doing neither, according to one of Asia’s leading businessmen.

Nandan Nilekani, co-chairman of Infosys, the Indian outsourcing company, said that Europe was currently ducking the ways of solving its demographic problem, perhaps its main long-term test.

“Europe has a very difficult quandary: when you have an ageing population, either you import your workers or you export your work. It is immigration or outsourcing. If you do neither, you have a challenge,” he told the Financial Times.

The comments by Mr Nilekani, the inspiration behind “The World Is Flat” book title used by Thomas Friedman, play into a rising fear in Europe about the implications of its ageing population. But they also underline the growing confidence of Asian companies to speak about issues outside their borders.

A report last week by the European Commission showed how the continent’s working-age population would peak next year before starting a decline that would have big budgetary and economic impacts.

By 2060 the ratio of working people to those aged over 65 will be two to one, against four to one currently.

Vladimir Spidla, the European Commissioner for social affairs, warned that the current recession should not deflect governments from acting: “In dealing with the short-term challenges of the economic crisis, we must not forget the long-term challenge of ageing ... We need to emerge from this crisis with more and better employment opportunities for older people.”

The report forecasts that the annual number of immigrants to the European Union will more than halve in the next 50 years. That could put a strain on many European countries that are facing low birth rates. Already there is anecdotal evidence that the economic crisis is causing immigrants to return home from countries such as Spain.

Outsourcing has been embraced by many companies in Europe but there is still widespread public concern over it, as well as mixed results in the manufacturing sector. Several companies have started moving work back from low-cost countries in recent months to western Europe including Zumtobel, the Austrian lighting group, that last week closed its Romanian factory and transferred the work to the UK and Austria.

Mr Nilekani said Europe had to face up to decisions that were “easy economically but difficult politically”. He pointed to the need to get fresh capital to plug a likely gap in pensions and pointed to India as a possible source for that.

Talking of Europe’s overall need to open up, he said: “The politics and getting acceptance of it are going to be a huge challenge.”