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The Impact of
SEZs
deemed to be foreign territory for the purposes of trade operations, duties and tariffs
Chinas first SEZ at Shenzen alone attracted over $ 30 billion in direct investment.
In countries like China, UAE & Malaysia, these zones havefocal points for foreign investments attracted over 20% of foreign direct investment contributed to country exports helped improve competitiveness of local industry, creation, local skill up gradation & technology absorption from FDI. job
In the year 2000 government of India formulated SEZ Policy and SEZ Act came into force in 2005
Over 234 companies received formal approval, 162 companies received in-principle approval to set up SEZs. The Indian government is expecting an investment to the tune of Rs.53,561 crore (USD 13274 million) and an additional job creation for 15,75,452 in SEZs by December 2009.
Incentives
For developer: Income tax exemption for a block of 10 years in 15 years For units: 100% Income Tax exemption for first 5 years, 50% for next 5 years and 50% of the ploughed back export profits for next 5 years Exemption from indirect taxes; excise, sales, services tax, etc. Freedom to raise ECB with out any maturity restrictions
FDI Policy
According to the current policy, FDI is not permitted in the following sectors Certain sectors, namely: Atomic energy; Lottery business/gambling and betting; Agriculture (excluding floriculture, horticulture, seed development, animal husbandry, pisciculture and cultivation of vegetables, mushrooms, etc.) Plantations (excluding tea plantation) Retail Trading (other than single brand retail)
up to 74/51/50% in 112 sectors under Automatic Route 100% in some sectors Up to 51% under Automatic Route for 35 Priority Sectors
Pre 1991
1991
1997
2000
2000-05
2006
India can be the test bed for developing solutions for the poorest nations.
GERARD KLEISTERLEE , PHILIPS
India is handling the most sophisticated projects in the world. I am impressed with the quality of work
Automatic Route
General Rule
No prior permission required Inform Reserve Bank within 30 days of inflow/issue of shares
There are two routes for FDI in India Automatic Route FDI is permitted under the automatic route for all items/activities except the following Where the foreign collaborator has an existing venture/tie-up in India in the same field. There are certain exceptions investment by a Venture Capital Fund registered with SEBI; existing joint venture has less than 3% investment by either party;
FDI in SEZ
Government has allowed 100% foreign direct investment under the automatic route in manufacturing sector in SEZ. The manufacturing sector covers all units except Arms, ammunition and explosive. Atomic substance Narcotics and hazardous chemicals Distillation and brewing of alcoholic drinks Cigarettes, cigars and tobacco substitutes
The country's special economic zones have attracted foreign direct investment of over Rs 10,900 crore in the last three years, Minister of State for Commerce and Industry Jyotiraditya Scindia said (2005-08)
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However, export from the SEZ during the financial year 2008-09 has been to the tune of Rs 99,689 crore registering 50 per cent growth over the year-ago period
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The aim is to enhance foreign investment, provide an internationally competitive & hasslefree environment for exports, boost industrial investment
persuading the private sector to build social infrastructure that the states cannot afford
E.g.
1. Reliance has announced to develop 10,000 hectares of prime land adjacent to Gurgaon. 2. Reliances ambitious 14,000 hectares twin SEZs project near Mumbai is in fact going to be the second largest SEZ project in the world.
The government hopes that the SEZs will bring in billions of dollars in investment and create over a million new
India already has 11 functioning SEZs- 7 set up by the central government and 4 by private/joint/state sector. These 11 SEZs are functioning inKandla, Surat, Cochin, Santa Cruz, Falta, Chennai, Vishakhapatanam, Noida, Indore, Salt Lake (Kolkata) and Jaipur. Two others at Jodhpur & Moradabad are ready for operation.
The SEZ Act has brought in foreign direct investment. Nokia, Flextronics, Ascendas, Foxconn Tech, Apache Software and Brandix (a Sri Lankan textile company) have already invested in India because of SEZs. In the first year of SEZs, investment to the tune of $3-5 billion has been committed
FDI- 100% permitted under automatic route SEZ can be established either by the Central Government, State Government or any other entity
SPECIAL ECONOMIC ZONES- Fuelling Indias Economic Growth- Cont Duty-free imports of capital goods and inputs for production for Export Liberal access to foreign exchange Encouragement to FDI Simplified, one-stop approvals Generous tax concessions esp. in early years Flexible Labour Laws Limitations on sales within the country Better Infrastructure (Power, Transport & Communications)
In the Philippines FDI flows increased from 30 percent 1997 to over 81 percent in 2000 (UNCTAD, 2003).
In Bangladesh, $103 million of the $328 million of FDI inflows were registered in EPZs In Mexico FDI increased from 6% in 1994 to 26% in 2000 in China, SEZs account for over 80 percent of cumulative FDI
As in the year 2005 the GDP in China was at $2.2 trillions compared to India at $700 billions In Foreign Trade 2005, China owned $1.4 trillions compared to $230 billions for India. In Foreign Exchanges Services 2005, China had $820 billions and India at $147 billions. With regards to Foreign Direct Investments $60 billions compared to India at $5 billions. as in 2005, China had
Many agencies are engaged in doing similar activities relating to FDI -- such as FIPB, DIPP, FIIA, IC, SIA, and so on," the study said Bureaucratic delays, discretionary interpretation, vested interests, bias and subjective practices are retarding the pace of FDI in India, it said. Specific sectors include private banking where RBI approval is required for FDI beyond 5 per cent. The study said despite these impediments, India remains an attractive destination for its high returns in foreign investment at 20 per cent, compared to China (13 per cent) and Thailand (12 per cent).
Comparing India and China, Fingar said though both countries are most sought after FDI targets of multinationals, "their success story is quite opposite". "While others (including China) seek to move from attracting FDI in manufacturing and assembly-line operations to the service sector, India is doing just the opposite, from success in the service sector to the manufacturing, such as SEZs," she said. SEZs would be complementing India's success in the service sector, she said, adding the boom in retail and service sector of IT and IT-enabled services and BPOs had a 'knock on' effect on the real estate