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Last decade witnessed a greater focus towards development of Special Economic
Zones (SEZs) among developing nations. In pursuit of higher growth rates and a
major share in export markets, establishing SEZs looked quite promising when
Chinese economy achieved tremendous progress by implementing the same.
Inspired by the Chinese Success story, several countries, including India, Brazil, Iran,
Jordan, Kazakhstan, Pakistan, the Philippines, Poland, Republic of Korea, Russia,
Ukraine, UAE, Peru etc, took no time in establishing SEZs.
Eventually, the evolution and need for establishing SEZs by these nations has come
up not only with the intention of following China but also for the reasons mentioned
^Ê Rapid growth of employable population
^Ê irowing competition among developing nations like India, China, Brazil,
Russia etc. in exports and attracting FDI
The above challenges demand highly supportive business environment, which has
been evolved into a format named as ͞   è


In simple terms, an SEZ can be defined as
The liberalized economic laws (in India) include
Ê Duty free procurement (import/domestic) of goods
Ê Exemption from minimum alternate tax
Ê 100% IT exemption on export income
Ê Exemption from CST , State sales tax & other levies and Service Tax
Ê Single window clearance for central and State level approvals
The above mentioned will be applicable to SEZ units as well as SEZ developers. Till
2007, as per the estimates of World Bank, major projects to the tune of 3,000 are
being developed in 120 nations all over the world.


Looking at the attention the SEZs are grabbing, some basic questions pertaining to
their need may arise. Like, why is this mad rush for establishing SEZs? Is it just for
achieving higher growth rate or something else? What motivated them to take up
such initiative at the cost of heavy loss in revenues? An articulated study revealed
the following facts.
In any nation, the underlying principle of creating an SEZ remains the same though
there may be a variation in their objectives. It is to attract huge Foreign Direct
investment (FDI) for developing Infrastructure & Indus try thereby giving a boost to
employment generation and exports.
If we look at the Indian Scenario, SEZ policy has been framed with the following
^Ê ieneration of additional economic activity
^Ê Promotion of exports of goods and services
^Ê Promotion of investment from domestic and foreign
^Ê Creation of employment opportunities
^Ê Development of infrastructure facilities
Of all the objectives, the charming feature for which SEZs are boasted is their might
in job creation. Let us discuss how far it is true in reality

Along with liberalization, SEZs created considerable employment levels. The reports
and stats from the ministry of commerce and reputed institutions express a positive
stance. Some significant excerpts from them are as follows:
Source: CIA World Fact

Ê When the Kandla zone became operational, it had only 70 employees. Now
over one lakh people work in 946 units in different SEZs,
Ê More jobs, to the tune of 1 lakh are expected due to multiplier effect.
Ê Most of the jobs are from EPZs which turned into SEZs.
Ê Proposed SEZs are yet to deliver.
Irrespective of these achievements, a strong opinion which is being felt by the critics
is ͞Indian SEZs failed to deliverè. The reasons supporting their argument cannot be
simply overruled. Because,
Ê Acquisition of fertile land made many farmers jobless. @@@    

                So the net
effect of creating jobs remained neutral.
Ê Ineffective land acquisition and rehabilitation policy earned the wrath of the
land owners as they were not reasonably compensated.
Ê Heavy dependence on private reality majors didn͛t yield the desired results.
Very few SEZ projects were materialized and most of them were either halted
or de-notified.
Ê No concrete Vision as it has been planned in China and Dubai. The
government succeeded in providing the supportive environment but failed to
locate the markets and identify the right players.
Ê Strong allegations and criticisms on SEZs as Reality projects than the engines
of growth as bragged by the government.
Ê Meant for skilled people. The firms operating in SEZs require people with
specific competencies. On account of this, people losing the land for SEZs
cannot be accommodated in those firms as they cannot match those
competencies being bucolic.
Ê Confined to few sectors, mainly services. Though Indian economy is majorly
relied on services, in the long run the reliance may not be sustainable. The
recent impact of recession on services sector was high and it calls for
diversified concentration of the industries.
These situations may lead to ambiguity on SEZs prowess in generating expected
employment levels. Also, the sustainability of the SEZ model becomes questionable,
which calls for an immediate review of the existing policy.

No one doubts the capability of SEZs in Job creation, until unless they don͛t hurt the
sentiments and livelihood o f people. But how and when is being given due attention
by stressing the sustainability factor. Here the government literally failed to meet the
expectations of the people, which are not far from reality. They can be achieved
when there is,
Ê Strong infrastructure in existence.
Ê If the export units have sustainable export potential
Ê If they are located near demand centers.
Ê Exports supported by healthy domestic consumption
Ê If there is backward and forward linkage to SEZs
If the above measures are executed with an apt strategy, SEZs can clearly win the
confidence of the people and can retain their tag of growth engines & employment

Realising the capability of SEZs in job creation, the onus is on the government to
make them fruitful, which enhances the scope for providing livelihood to the
unemployed. Hence, it is essential to devise a concrete framework in developing
SEZs, which may include the following guidelines:
Ê Setup basic amenities first ʹ Roads, Water Facility, Electricity etc.
Ê Identify and select potential companies and develop ready -to-use
infrastructure matching their needs. @@    
Ê Reality companies should remain as contractors for iovernment but not the
independent developers of SEZ.
Ê Adopt phase-wise development rather than going for all at a time.
The successful SEZs in China, Petro-Chemical hub in Singapore and Jebel Ali Free
Zone Area (JAFZA) in UAE are the eventual outcomes of the above laid framework
with their governments taking an active role in their accomplishment. Similarly,
Indian government could follow this proactive approach rather than depending
heavily on private participation.

cw "#$%w"
SEZs act as a catalyst for growth but, retaining and maintaining consistent growth
rates is a gigantic task to any nation. Because an economy cannot compromise on its
revenues for a longer period. In addition to that, firms always look for greener
pastures to increase their top & bottom lines. To strike a balance between the two
the following initiatives look significant.
AÊ Firms operate as long as the SEZ environment is economically viable. Hence,
SEZ policy needs to be consistently reviewed.
AÊ Expand the portfolio by focusing on other sectors
AÊ Develop and train human resources as per the timely requirements of SEZs
AÊ Undertake periodic reviews to assess and monitor the performance of SEZs.
AÊ iive due importance to primary sector, which is a major source of
When the above initiatives achieve fruition, a nation can flourish to the maxi mum.

SEZs can ensure strong employment, but shouldn't give room for
oÊ Pareto optimality : Supporting firms at the cost of farmers
oÊ Rural-Urban divide : Economic disparity between employees in villages and
oÊ Urban dwelling : Rural population targeting cities for high-paid jobs instead of
opting for jobs in villages
The policy makers should minimize the above issues, if not nullify.
º e aut or is an Alumnus of Indian Institute of Foreign ºrade , currently working
wit PEC Limited, a PSU under Ministry of Commerce.

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3. Ê http://www.thehindubusinessline. com/2006/09/01/stories20060901031009
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7. Ê͛s_Rep
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14. ÊLabour file journal (Special Economic Zones: Their impact on Labour), Vol 6,
Nos 4-5, July-October 2008 (Article- pages 25-27)