SPECIAL ECONOMIC ZONES UNDER FIRE

CASE DETAILS
O The concept of free zone - Export Processing

Zone (EPZ) -emerged during the 1960s

O The basic objectives of these zones were to

promote exports and employment opportunities

O Various concessions offered by the

Government
O A conscious attempt on the part of policy

makers to replicate such models in many regions, especially in countries such as China.

CASE DETAILS
O SEZs in China vs India
O Key concerns in Indias SEZ policy.

State/Union Territory Andra Pradesh Tamil Nadu Karnataka Maharastra Gujarat Kerala Uttar Pradesh West Bengal Rajasthan Haryana Chandigarh Madhya Pradesh Odisha Punjab Goa Chhattisgarh Delhi Dadra and Nagar Haveli Nagaland Puducherry Uttarakhand Jharkhand

Number of operational Special Economic Zones (June 2012)

36 28 20 18 13 7 6 5 4 3 1 1 1 0 0 0 0 0 0 0 0 0 116 77 62 119 53 29 35 24 11 49 2 17 10 8 7 3 3 2 2 2 2 1

Number of SEZs formally approved (June 2012)

Evaluate critically the salient features of Indias SEZ policy.

O Location and size of SEZs O Displacement , Compensation &

Rehabilitation
O Land acquisition & Impact on communities O Goods and Service Tax O Lack of coordination O Shifting of existing manufacturing units to

SEZs

Key differences in the approach to develop SEZs in India vis--vis China

India
Introduction Scheme on SEZ was introduced in 2000 Largest SEZ being developed by Relience at Navi Mumbai is only 5000 hectares Can be set up by the public, private or joint sectors SEZs in India are across the length and breadth

China
First SEZ was set up in 1980 with an eye on luring dollars back into China Chinas largest SEZ is the one at Shenzhen which is 49,300 hectares Developed mostly by the government

Size

Investors

Location

SEZs are strategically located; mostly on the coastal areas Incentives depend on various conditions

Tax incentives

Incentives are offered to all SEZs

SEZs are likely to cause more harm to India rather than benefit the society as a wholeDiscuss

Positive Impact
O Employment generation
O Contribution to respective States GDP O Creation of world class self contained

infrastructure
O Increase in States revenues from VAT

(Value added tax), Property taxes, Stamp Duty etc

Negative Impact
O Shrinking Agricultural Area
O Inadequate compensation to farmers O Decrease in crop production- leading to water and

food crisis
O A substantial loss of revenue- with manufacturing

and service moving to these tax free havens

O Fertile lands being used for establishing industrial

units

Conclusion
O SEZ can become a dangerous tool
O A well defined strategy required for SEZs

to be successful
O Rehabilitation and resettlement schemes

must be formulated so that the process of industrialization is not hampered

Explore the SEZ strategy used by any four developing countries and carry out a critical evaluation. Suggest a strategy for your own country to promote export production.

BANGLADESH
O There are currently eight zones. Businesses

from 32 countries have so far invested in the existing zones. O The primary objective is to provide special areas where potential investors would find a congenial investment climate, and location free from cumbersome procedures. O In 2010, FDi magazine ranked Chittagong EPZ as one of best competitive special economic zones in the world.

PHILLIPINES
O As of 31 May 2010, there were more

than 200 Ecozones in the Philippines O Business establishments operating within Ecozones from all taxes O Business establishments are only required to pay five percent (5%) of their gross income to the national government.

O Activities Eligible for PEZA Registration

and Incentives include but are not limited to (1) Export Manufacturing; (2) Information Technology Service Export; (3) Tourism; (4) Medical Tourism; (5) Agro-industrial Export Manufacturing; (6) Agro-industrial Bio-Fuel Manufacturing; (7) Logistics and Warehousing Services

RUSSIA
O Russian legislation outlines four types of

special economic zones: Industrial and development zones Technological implementation zones Tourist and recreational zones Port zones. O Russia has two industrial and development zones, four technological implementation zones ,seven tourist and recreational zones and three port SEZs

JAMAICA
O Designed to encourage foreign investment

and international trade O Businesses operating within these zones have no tax on their profits, and are exempted from customs duties on imports and exports (capital goods, raw materials, construction materials, and office equipment) and import licensing requirements. O Companies outside of the zones can apply for free zone status as Single Entity Free Zones

Strategy For India

O Expansions of the Port SEZ
O Increased investment in Medical Tourism

SEZ
O Proper implementation of the SEZ policy