Economic Zones

Whats Special About Special Economic Zones
Introduction to Economic Zones

Export else perish these are the words of first Prime Minister of India Pt. Jawaharlal Nehru. India being a continent like country ha ing !" states# more than $""" languages and world second largest man power ha ing di ersified natural conditions right from %ain &orests of 'erala# Ice Mountains of (imalaya# %unn of 'uch to producti e land of )ramahaputra has great potentials of world class export worthy products from arious industries like *griculture# Engineering# +hemicals# ,oftware-s# .ems and Jewellry# Pharmaceuticals# )io technology and many more. /uring last fifty years# mostly ours exports ha e been less than our imports and the balance of trade been unfa orable. In $00"1$00$ India had faced real pressure on the balance of payment. /uring this period# exports had stagnated and there was a crisis in foreign reser es which lead to an emergency situation in India. 2iberali3ation policy was announced in June $00$. It is the precious gift of /r Manmohan ,ingh to the people of India at a time when the country was in the grip of unprecedented economic crisis and political turmoil. 4ne of the areas in which this policy focused on was on increasing India-s export. *nd the trickle down effect of these reforms has lead to the ad ent of ,E5 In this age of .lobalisation# there is a need for e ery nation in the world to perform well economically. 6ith the impro ements in science and technology and the raising standards of li ing worldwide# ensuring economic de elopment assumes primary importance in the policies of e ery nation. 6hile stri ing for economic de elopment# e ery nation takes steps necessary for the implementation of its ambitious plans. )ut more often than not# these plans cannot be affected successfully throughout the nation. 7here are always shortcomings in these economic plans. E ery nation wants to gi e its industries ample facilities for efficient production of goods and ser ices and in order to make them globally competiti e in terms of price and 8uality. ,ome of these facilities can be used by all industries throughout the
nation. )ut sometimes# some facilities cannot be gi en on account of reasons like the geographical extent and the possibility of misuse. For Example: If a country wants to gi e subsidi3ed power to a specific industry# it cannot do so throughout the nation as keeping a check on whether the subsidi3ed power is going to the right people or not is a (erculean task. 7hus# in order to gi e the industry certain added ad antages# the go ernments of arious nations come up with special schemes and subsidies mostly related to customs duties. 7hese schemes pro ide an upward thrust to the nation-s products in the global markets on account of lower prices 9 better 8uality. ,uch schemes# if implemented directly# are not allowed by the 674. 7his has resulted in many nations coming up with such schemes in an indirect manner. 4ne of the most popular ones is to set up a special area demarked for the purpose of industrial growth. :arious facilities can be offered in this area without the fear of them being misused and also# no resistance from 674 ;or any other trading partner 9 nation< is encountered on account of the scheme not being a national policy# but only limited to a small area demarked for the purpose. 7his is where the concept of =Economic 5ones- comes in.
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Types of Economic Zones

/epending on the facilities pro ided# the le el of go ernment control exercised# the type of industries allowed in the 3one# and the type of acti ities allowed in the 3one# they are classified into many types by different countries. * few common types are as follows? &oreign 7rade 5one ;&75< @ 7hese are designated sites where special customs procedures are applicable. 7hese procedures allow domestic acti ities in ol ing foreign trade to take place as if it were outside the nation-s borders# thus relie ing them of the +ustoms of the land. For Example: Miami &oreign 7rade 5one# &lorida ;A,*< Export Processing 5one ;EP5< @ 7hese are the most common types of 3ones. *nd are similar to the &75s of A,* in many respects. Established for the purpose of promoting exports# these 3ones concentrate on pro iding the exporters with all facilities of production in one place and also relax the customs procedures for the foreign trade acti ities of the units in the 3ones. For Example: Noida Export Processing 5one ;NEP5<# Attar Pradesh ;India< &ree 5one ;&5< 7hese are the 3ones in countries mainly like the A*E. ,uch 3ones gi e total exemption from all taxes and duties le ied on profits to the units existing in them# besides other financial benefits and incenti es. For Example: /ubai @ Jebel *li &ree 5one ;J*&5<# /ubai ;Anited *rab Emirates< ,pecial Economic 5one ;,E5< @ 7hese are an extension of the EP5 scheme with added benefits and fewer bureaucratic hassles. )ut these 3ones do not restrict themsel es to export promotion only. 7hey pro ide all facilities and infrastructure necessary for the de elopment of the industries in the region. 7hey are normally huge in si3e and hence are suitable for mass1production of commodities# which can be sold domestically# as well as internationally. For Example: ,hen3hen ,pecial Economic 5one ;,hen3hen ,E5<# +hina !
7he same 3ones are also referred to as &ree Economic 5ones ;&E5< in the 'yrgy3 %epublic and as &ree 7rade 5ones in many other *sian countries. Essentially# the core concept of all these 3ones is the sameB i.e. to treat the designated 3one as a foreign territory for the purposes of customs procedures and to also gi e them certain added incenti es and infrastructure facilities# which are not a ailable to ordinary units operating within the country.
1.1 A permanent solution for corruption: Special Governance Zone (SGZ)
In the 9th International Anti-Corruption Conference in South Africa held from 1015 December 1999, Shang Jin Wei, Ad i!or to the World "an# !ubmitted an action plan for the e!tabli!hment of a ne$ concept% the concept of S&'! (Special &o ernance 'one!)* It ad ocate! e!tabli!hing a !pecial go ernance +one (S&') $ithin a countr, a! an entr, point for an e entual nation-$ide anti-corruption program* A S&' i! an encla e $ithin $hich comprehen!i e reform! can ta#e place* It i! geographicall, limited !o that an, unpredictable negati e con!e-uence! can be contained* According to the plan, reform mea!ure! can ea!il, be e.plored and fine-tuned $ithin !mall manageable +one! before tr,ing their implementation nation$ide* /nce !ucce!!ful, it! e.perience can !er e a! a model for the re!t of the countr,* 0he World "an# (and other international in!titution!) can pla, an important role e!peciall, at the initial !tage of the program* 0he S&' idea reflect! a fundamental belief that the -ualit, of public go ernance in man, de eloping and tran!ition economie! can be !ignificantl, impro ed and corruption can be dra!ticall, reduced* 0he propo!al i! de!igned to achie e !e eral ob1ecti e!2 to !tart the reform program $ithin an area !mall enough to contain unpredictable con!e-uence!, to e.periment and fine-tune ariou! component! of the anti-corruption program in practice, and b, the po$er of e.ample, to build momentum to implement a nation-$ide go ernance-impro ing program* 0here are a fe$ ba!ic principle! for !ucce!!full, operating a S&'* 3ir!t, $hene er po!!ible, a fair mar#et mechani!m !hould be u!ed to allocate re!ource!, to produce and4or procure public good!, to cut red tape, and to reduce the need for permit! and licen!e!* 0hi! $ould limit the opportunitie! for go ernment official! to ta#e bribe! (and to be offered bribe!)* 0he re$ard for ci il !er ant! to deli er -ualit, !er ice and not to ta#e bribe! !hould be rai!ed* At the !ame time, the penalt, for ci il !er ant! for poor performance and for ta#ing bribe! !hould al!o be rai!ed and fairl, applied*
Genesis of Chinese Special Economic Zones

Chinese Economic Reforms
(istorically# +hina has adopted an inward1looking strategy to its economic de elopment. ,uccessi e +hinese go ernments thought that the economy could grow purely through self1reliance. (owe er# there are always limitations to what a country can do by itself# for example limitations in raw materials# natural resources# technology# etc. 7hese can hold back the growth of an economy and certainly +hinaDs economic growth lagged far behind much of the rest of the world up to the $0E"Ds. )y contrast# countries like the A,* were achie ing significant economic growth in this period because they were practising foreign trade policies# which facilitated free trade. *ny shortages in the domestic economy# for example oil in the A,* or Japan# wheat in the ,o iet Anion or cars in India could be compensated for by imports. &oreign trade# then# could help to aid economic growth. 7he export trade is also ital. Not only can exports be a means of paying for imports# but they also help to earn foreign exchange. ,ince $0E0# the +hinese go ernment has recognised the importance of exports as a means of fostering economic growth. Economic policies and special incenti e programmes ha e been introduced to increase exports. Establishment of ,E5s 6hen it decided to reform the national economic setup in $0EF# the +hinese go ernment embarked on a policy of opening to the outside world in a planned way and step1by1step. * decision was made in $0EF to permit direct foreign in estment in se eral small Gspecial economic 3onesG along the coast. ,hen3hen# 5huhai and ,hantou in .uangdong Pro ince and Hiamen in &uIian Pro ince# and the entire pro ince of (ainan were# under this policy# the first fi e ,pecial Economic 5ones to be established. 7he aims of the establishment of the ,E5s were to earn foreign exchange# to enhance employment# to attract foreign in estment and to accelerate the introduction of J
technology and management expertise. 7he fi e ,E5s established were ,hen3hen# 5huhai# ,hantou in .uangdong pro ince# Hiamen in &uIian pro ince and (ainan Island. In order to attract foreign in estors and de elop foreign trade# the fi e ,E5s offered similar packages of fa ourable incenti es to foreign firms. 4ne of the most attracti e points of these packages was that income tax was fixed at the rate of $J per cent# lower than that in other parts of +hina. 4ther ad antages gi en were tax exemptions# land use rights# and banking and finance pri ileges# which were a ailable to firms operating outside the ,E5s. Incenti es +hina lacked the legal infrastructure and knowledge of international practices to make this prospect attracti e for many foreign businesses# howe er. In later years steps were taken to expand the number of areas that could accept foreign in estment with a minimum of red tape# and related efforts were made to de elop the legal and other infrastructures necessary to make this work well. Many other non1financial ad antages were pro ided inside the ,E5s. &irms were pro ided relati ely free1market en ironments with minimal go ernment inter ention. 7his means that pri ate and Ioint1 enture enterprises were free to hire their own workers. 7hey were also free to set wages to reflect market conditions. )onuses could be awarded to workers for outstanding performance. 7he common threads of these reforms are the search for efficiency and an assumption that management of the economy by large go ernmental bureaucracies is unlikely to produce this result. Performance Primarily geared to exporting processed goods# the fi e special economic 3ones are foreign1oriented areas# which integrate science and industry with trade# and benefit from preferential policies and special managerial systems. 7hey ha e summed up their rich experiences in absorbing foreign in estment and de eloping foreign trade for +hina to open up to the international market. In recent years# the special economic 3ones ha e led
the country in establishing new systems# upgrading industries and opening wider to the outside world# ser ing as national models. In $000# ,hen3hen-s new1and high1tech industry became one with best prospects# and the output alue of new1and high1teach products reached F$.0F billion Luan# making up C".J percent of the city-s total industrial output alue and coming out in front in the country. +hina has so far created $>C export1processing 3ones. ,ome $F million were employed in firms with foreign in estment alone# and many millions more in +hinese1owned 3one enterprises. ,hen3hen has become a window of the country to the outside world and a platform for reform measures# along with Hiamen# 5huhai and ,hantou. 4pen +oastal +ities In the period between $0FC1 FJ# +hina further opened $C coastal cities *ll and of three these coastal regions to foreign in estment. places pro ide tax treatment and other ad antages for the foreign in estor. 2aws on contracts# patents# and other matters of concern to foreign businesses were also passed
2.1 China's '99 Kunming World Horticultural expo was opened on April 30. This picture shows a scene built b !handong "ro#ince.
in an effort to attract international capital to aid +hina-s de elopment. 7he largely bureaucratic nature of +hina-s economy# howe er# poses inherent problems for foreign firms that want to operate in the +hinese en ironment# and thus the policies to attract foreign capital ha e had to e ol e continually in the direction of presenting more incenti es for the foreigner to in est in +hina. ,ince $00># the ,tate +ouncil has opened a number of border cities# and in addition# opened all the capital cities of inland pro inces and autonomous regions. In addition# $J free trade 3ones# !> state1le el economic and technological de elopment 3ones# and J! new1 and high1tech industrial de elopment 3ones ha e been established in large and
medium1si3ed cities. *s a result# a multi1le el# multi1channel# omni1directional and di ersified pattern of opening# integrating coastal areas with ri erine# border and inland areas has been formed in +hina. *s these open areas adopt different preferential policies# they play the dual roles of =6indows- ;in de eloping the foreign1oriented economy# generating foreign exchanges through exporting products and importing ad anced technologies< and of =%adiators- ;in accelerating inland economic de elopment<. *ll these efforts of the +hinese go ernment were fruitful and resulted in the success of the concept of ,pecial Economic 5ones ;,E5s<. 7he most prominent amongst the +hinese ,E5s is the ,hen3hen ,E5. 7he growth of ,E5s in +hina has been explained
2.3 China's Special Economic Zones ear up for !"#$ future
In recent ,ear!, the Chine!e S5'! ha e been focu!ing on impro ing the o erall economic -ualit, and on de eloping high-tech indu!trie! and other economie! $ith !pecial feature!* Compared $ith other part! of China, the S5'! !till hold an edge in utili+ing dome!tic and o er!ea! re!ource! and mar#et! and in adapting them!el e! to international common practice! to boo!t economic de elopment* 5.pert! !a, that impro ing o erall economic performance i! a nece!!ar, choice for the S5'!, a! China $ill face fiercer competition after it! entr, into the World 0rade /rgani+ation* It i! the onl, $a, for them to reali+e moderni+ation* 0o hit the goal, anal,!t! !a,, the S5'! !hould gi e national treatment to o er!ea! in e!tor! for more funding $hile ma#ing effort! to open up o er!ea! mar#et! for their o$n companie! product!* ", changing the pa!t practice of offering preferential policie! to o er!ea! in e!tor! in certain field!, the S5'! ha e lifted all re!triction! for them* According to official!, the e.pan!ion of reform in the S5'! $ill focu! on !,!tematic inno ation!, including ad1u!tment! in the o$ner!hip !tructure, and tran!formation of function! of go ernment department! in accordance $ith international common practice!*
with the example of ,hen3hen ,E5 in the following +hapter.
Windo to the World! Shen"hen SEZ

Shenzhen The Village 4nly twenty years ago# ,hen3hen was a small fishing illage located in +hinaDs southern pro ince of .uangdong. 7oday# after two decades of rapid economic expansion# the city enIoys the highest income per1capita among the !J maIor +hinese cities at A,M >>J per month. *t close to A,M !#""" per year the income per capita is approximately four times the national a erage. 7his coastal city# which shares a border with (ong 'ong# has become one of +hinaDs most prosperous cities a eraging an economic growth rate of !C percent between $0F" and $00F. Now that +hina is being accepted into the 6orld 7rade 4rgani3ation# ,hen3hen may be the 8uintessential model for the central go ernment to follow when taking its nation# gripped in authoritarian rule# and preparing it to operate in an increasingly open market en ironment. Formation of the SEZ 7he city of ,hen3hen was founded in $0E0 and a year later was established as +hinaDs first special economic 3one ;,E5< by +hinese leader /eng Hiaoping. 7he special economic 3ones were implemented by the +ommunist go ernment as a irtual laboratory for experimentation with a free market economy. 7he ,E5s operate under an entirely different economic premise than that of the mainland# specifically# with an emphasis on exporting and creating an attracti e en ironment for foreign direct in estment through fa orable tax incenti es. Influence of Hong Kong 6hen the ,E5 was first established# the maIority of the new businesses that settled in ,hen3hen were (ong 'ong1based enterprises drawn to the 3one to take ad antage of# among many other things# the abundance of cheap labor and the customs1free industrial 0
en ironment. ,ince this time# the economic border between ,hen3hen and (ong 'ong has grown increasingly ague. (ong 'ong dollars flow freely in ,hen3hen and many residents of (ong 'ong in est in the ,hen3hen stock exchange. The cultural border has eroded o#er the ears as well. With the proximit that !hen$hen en%o s to Hong Kong& the population is able to pic'(up Hong Kong ba!ed radio and tele i!ion !ignal!* 0ho!e in Shen+hen $ho !pea# Cantone!e can recei e ne$! and other content that i! re!tricted on the mainland* 6e!ident! of Shen+hen are therefore, able to percei e $orld e ent! from a more ob1ecti e point of do+en or more cro!!ing ie$ than the one pre!ented b, the communi!t go ernment7! ne$! outlet!* Currentl,, there are a enue! bet$een 8ong 9ong and Shen+hen either b, land or b, !ea* According to the Shen+hen :unicipal 3oreign In e!tment "ureau, at the end of 199; 8ong 9ong $a! engaged in 1,0<; pro1ect! in Shen+hen accounting for o er <; percent of the total pro1ect! underta#en* 6emar#abl,, 0ai$an $a! the !econd leading pro1ect forum $ith 119 or ;*5 percent of the total pro1ect!* Troubled Time E en with its unprecedented track record for growth# things ha e at times been less than perfect for ,hen3hen. In $0F"# ,hen3henDs appeal as a ,E5 made it an attracti e area for entrepreneurs and fortune hunters# but by $00># se enteen hundred special economic 3ones had been established. 4 er time ,hen3hen was not as uni8ue as it had once been. &ortunately# in that same year ,hen3hen was the first +hinese city to be gi en legislati e authority in the way of a Municipal PeopleDs +ongress. 7o a small degree this ga e the city a le el of control o er local policy which was not seen anywhere else. *dditionally# the few years leading up to the return of (ong 'ong to +hina can be described as a time of o er exuberant expectation. 7he extraordinarily hot ,hen3hen stock market in $00K goes a long way in illustrating this point. 7he people of ,hen3hen were under the impression that when (ong 'ong reIoined +hina in the middle of $00E# (ong 'ong residents would spill into the city buying up property as well as goods and ser ices $"
from companies listed on the ,hen3hen stock exchange. In estors# including small indi idual in estors who laid out their modest sa ings# began pouring money into the stock exchange. 6hen the time finally came for (ong 'ong to reunite with the mainland# the conclusion was anticlimactic. Many of the anticipated benefits simply did not occur# and while some experienced asset appreciation others lost their entire sa ings.
!oing Hi"Tech 0echnologicall,, Shen+hen did not mature a! fa!t a! !ome had originall, anticipated* 6ecentl,, that trend ha! changed* 0he goal of ma#ing Shen+hen one of China7! mo!t pre alent high-tech center! i! definitel, polic,, progre!! Shen+hen7! being reali+ed* $ith a made 0he highl, in combination of fa orable economic coupled being high educated $or# force, e.plain! the technolog,
indu!trie!* In 199; nearl, a third of all Chine!e indi idual! holding a doctorate degree re!ided in Shen+hen* Additionall,, 10 percent of all re!ident! are e!timated to be college graduate! $hile le!! than half of one percent of the national population ha! obtained a college degree* In 199; Shen+hen $a! re!pon!ible for appro.imatel, half of China7! information technolog, output, and the Internet indu!tr, i! no$ beginning to gain international e.po!ure* / er!ea! in e!tor!, !uch a! ID& and =acific >enture Capital Co*, are !tarting to channel mone, into the Shen+hen Internet indu!tr,*
2.2 An exhibition being held in !hen$hen !)* to showcase new technologies
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According to a release +rom the ,inhua -ews Agenc in mid(.arch o+ this ear& !hen$hen has /00&000 1nternet users in the cit and o#er 20 companies o++ering 1nternet related ser#ices. 3urthermore& an estimated 40 percent o+ these 1nternet users are said to be using e(commerce to bu goods. Additionall & an impressi#e list o+ multinational 1T corporations that are increasingl 1ntel to name a +ew. Future !ro#th 7o belie e that ,hen3hen can maintain this le el of sustained growth fore er would be irrational. *s the cost of labour grows higher and other areas of +hina begin to adopt more market1oriented policies# businesses will ultimately begin migrating to other parts of this man ast nation. 7his assumption is supported by the shear si3e of +hina and the ears. The onl 7uestion remaining is at what speed will the central magnitude of natural# as# well as human resources that ha e remained untapped for so go#ernment allow this to occur. The wealth will ine#itabl begin to spread& but that does not mean !hen$hen will +ade into China's bac'ground. The wealth generated in this cit o#er the last twent ears has gi#en rise to a burgeoning ser#ice sector and is home to has become a regional +inancial one o+ China's two stoc' mar'ets. The cit being drawn to !hen$hen including .icroso+t& 15.& 6ucent Technologies& Compa7 and
center. At the end o+ /999 there were /00 +inancial institutions operating in !hen$hen emplo ing an estimated 30&000 pro+essionals. According to the !hen$hen .unicipal 3oreign 1n#estment 5ureau& at the end o+ /999 there were 438 pro%ects in#ol#ing +oreign direct in#estment in excess o+ 9!: /0 million per pro%ect& /09 pro%ects in#ol#ing amounts in excess o+ 9!: 30 million per pro%ect and /0 pro%ects currentl underwa in#ol#ing o#er 9!: /00 million per pro%ect. Tran $ortation I ue A ma%or dilemma that China& as well as its trading partners +ace& is how to e++ecti#el access and deli#er goods and ser#ices to a large percentage o+ the population that is geographicall isolated +rom the ma%or economic hubs in $>
China. !hen$hen is #er important in this respect. ;#er the ears& the cit has de#eloped an ad#anced in+rastructure that is now well poised to assist in alle#iating the burden that this problem presents. The cit possesses 0 harbors and /< cargo doc's and is home to the Huangtian 1nternational Airport& which is the +ourth largest airport in China. Additionall & both the 5ei%ing(Canton =ailwa and the 5ei%ing Kowloon =ailwa con#erge in !hen$hen. Ta'e the +act that !hen$hen alread has the in+rastructure in place to be considered a regional distribution center& and its continuous ad#ancement in both the +inancial and technolog sectors& one can see that as China enters the WT; and the global econom & it will loo' to !hen$hen as a road map +or the +uture. %chie&ement Alread & 20 o+ the world's >00 top enterprises ha#e ta'en root in !hen$hen. Coupled with the rapid de#elopment o+ its export(oriented econom & the cit achie#ed an export #olume worth 9!:<8.2 billion in /990& amounting to one( se#enth o+ China's total& topping the list o+ China's big and medium (si$ed cities +or six consecuti#e ears. ;utput #alue o+ the cit 's high and new billionA in /990& technolog products was worth 8>.>< billion ?uan @9!:4.09 ma'ing up 3>.2 per cent o+ the cit 's total industrial output. The 1nternational Architecture Association awarded !hen$hen this ear&
mar'ing the +irst urban planning award in China and Asia. !hen$hen's educational& scienti+ic and cultural underta'ings ha#e also achie#ed one success a+ter another. Computer hardware& so+tware and phone(related products made up 40 per cent o+ the cit 's total high(tech exports. Asian mar'ets recei#e 80 per cent o+ these goods. -orth America gets <8 per cent and )urope gets about /0 per cent. And 3/ per cent o+ !hen$hen's high(tech exports were +rom !tate(owned enterprises. Wholl +oreign(+unded enterprises shipped out 30 per cent& and %oint #entures made <0 per cent o+ the exports.
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!hen$hen has become one o+ the world's most important manu+acturing bases +or high and new technolog & namel electronics. Cit 's encouragement o+ local enterprises to update technolog and protect their intellectual propert rights has sharpened !hen$hen's competiti#e edge.
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#uture of Shen"hen $e%t & 'ears

7he guideline and goal for the next J years is to follow /eng HiaopingDs theory on building socialism society of +hinese characteristicsB take Ghold on to the opportunity# deepen the economic reform# open up further# promote de elopment# and keep stability of the societyG as the guideline. &ocus on establishing market economy and mechanism# optimi3e economic structure# made the city functional better# build new and high technology industrial de elopment 3one# regional information center# trading center# distribution center# and turn ,hen3hen into a modern# international city. In more detail# ,hen3hen is going to? $. Expedite the maIor proIects of infrastructure construction. Infrastructure construction is what a city based upon to exist and de elop. In the coming fi e years# in order to impro e ,hen3henDs in estment en ironment# fi e networks are to be built? public transit network# water supply network# flood pre enti e network# power supply network# telecommunication network. >. 6iden the range of structural adIustment of industryB enhance the 8uality of economic growth and economic efficiency. Increase the input and establish production base to support leading industries. Encourage the merge of production and capital. *dIust organi3ational structureB strengthen e8uity management# 8uality assurance# and financial management. Put emphasis on making use of up to date technology. Introduce new agricultural technology# increase alue add and economic efficiency on agricultural products. !. /e elop the ser ice industry igorously# perfecting the functionality as an
international city. /e eloped ser ice industry symboli3es a modern international city. 6e are to speed up the de elopment of the ser ice industry# and turn ,hen3hen into a financial center# information center# trading center and distribution center. $J
'on truction of the (egional Financial 'entre In ite more global banks and financial institutions to open office in ,hen3henB /e elop offshore business of domestic banksB broaden the co erage and internationali3ation of our security industry# increase the radiation power of ,hen3henDs financial institutions. 'on truction of (egional Information 'entre As a hub o+ domestic and international mar'et& !hen$hen boasts the uni7ue ad#antage in de#eloping in+ormation industr . We are going to strengthen the corporation with world's leading in+ormation ser#ice organi$ations& exploit in+ormation sources in con%unction with these organi$ations to +orm a wide connecting& highl e++icient in+ormation networ'.
2.) 'hina* S$ecial Economic Zone gear u$ for +T,- future 1n recent ears& the Chinese !)*s ha#e been +ocusing on impro#ing the o#erall economic 7ualit and on de#eloping high(tech industries and other economies with special +eatures. Compared with other parts o+ China& the !)*s still hold an edge in utili$ing domestic and o#erseas resources and mar'ets and in adapting themsel#es to international common practices to boost economic de#elopment. )xperts sa that impro#ing o#erall economic per+ormance is a necessar choice +or the !)*s& as China will +ace +iercer competition a+ter its entr into the World Trade ;rgani$ation. 1t is the onl wa +or them to reali$e moderni$ation. To hit the goal& anal sts sa & the !)*s should gi#e national treatment to o#erseas in#estors +or more +unding while ma'ing e++orts to open up o#erseas mar'ets +or their own companies products. 5 changing the past practice o+ o++ering pre+erential policies to o#erseas in#estors in certain +ields& the !)*s ha#e li+ted all restrictions +or them. According to o++icials& the expansion o+ re+orm in the !)*s will +ocus on s stematic inno#ations& including ad%ustments in the ownership structure& and trans+ormation o+ +unctions o+ go#ernment departments in accordance with international common practices.
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Impact of SEZs on Chinese Economy

7he fa ourable impact of the ,E5s on the economy of +hina is fi efold? 7hey attract foreign in estment 7hey help the growth of the export industry 7hey earn foreign exchange 7hey pro ide employment opportunities 7hey help the indigenous economy impro e its le el of technology
7hese points are discussed below in detail? $. &oreign In estment @ 7he preferential treaties of the ,E5Ds ha e attracted foreign in estors to in est a huge amount of money in +hina. &or instance# (ainan and Hiamen ha e attracted in estments mostly from 7aiwan. )y June $0FE# a total foreign in estment of M>.$> billion had been made in the fi e 3ones# amounting to one 8uarter of the total foreign in estment in +hina during this period. 7he most marked success was registered in ,hen3hen. )y the end of $0FK# it accounted for M$.C billion through more than C""" economic cooperation agreements. 4ne significant factor is that the in estment has not been confined to the export industry# but has permeated other sectors such as infrastructure construction# commerce# tourism and real estate. >. .rowth of Exports @ *s all fi e ,E5s are coastal cities# they are con enient for ocean transport routes and help to promote the export industry. Preferential policies ha e encouraged foreigners to set up export1 oriented factories in the territories. &rom $0FJ to $0FE# an annual a erage real growth rate of F!N was recorded for exports from the fi e $E
3ones. ,hen3henDs exports# for example# grew at an a erage rate of E"N during this period. *t the same time the proportion of the ,E5sD industrial products that went to export had risen to J!N by $0FE. !. &oreign Exchange @ 7he establishment of the ,E5s has opened a way for +hina to increase its trade with foreign countries. 7hey not only enhance trading acti ities such as foreign in estment and tourism but also help +hina to earn foreign exchange through these acti ities. C. Employment 4pportunities @ ,ince the beginning of the open1door policy# small1scale pri ate businesses ha e been allowed to coexist with state enterprises. 7his has increased employment opportunities for local people and raised the le el of economic acti ity. *lso# many state workers sense that going into business on their own may pro ide greater income potential. 7hey generally adopt an attitude commonly known in +hina as GI )u 5ho Er )u ,huG# which# loosely translated# means =refusing to work and refusing to relax-. Many prefer to work for Ioint1 enture firms for higher wages. ,o the a erage income in ,E5s now ranks as the highest in +hina. J. Impro ement in 7echnology @ In theory ad anced technology and know1how will also flow into the country as a result of foreign in estment. In turn# with increasing exports the force of international competition may bring greater pressure on +hinese firms to adopt more efficient work practices. It is perhaps 8uestionable how much benefit the wider +hinese economy has reaped from these in estments. 7he technology# patents and know1how remain firmly the property of# and are controlled by the parent companies. It may howe er be the case that in the long run the work culture and practices adopted by foreign companies could ha e some wash1back effect o er wider economic practices in the country.
In conclusion# the establishment of the ,E5s has helped to increase the export trade# which in turn has helped to impro e the +hinese economy. Preferential treaties ha e been offered in the fi e ,E5s to attract foreign in estment. * large amount of foreign in estment has occurred not only in the export trade# but also in infrastructure construction# commerce and tourism. &oreign companies ha e been encouraged to set up $F
factories in the territories and the export industry has grown. Jobs opportunities ha e been pro ided for locals as factories need labour and the a erage income of the people has increased. In addition# ad anced foreign technology has been brought in with the inflow of foreign in estment. *ll these factors ha e contributed to the growth of the +hinese economy. It remains to be seen if these 8uantitati e ad ances# in which the ,E5s ha e played an important role# are matched by commensurate ad ances in the 8uality of life for the maIority of +hinese people.
3.1 %ot all roses & 'n(ante) *+pro)ucts of SEZ )evelopments About ?< million people, 90 per cent of $hom are $omen, $or# in e.port proce!!ing +one! $orld$ide, often earning lo$ $age! in poor $or#ing condition!, the International @abour /rgani!ation (I@/) !aid* 0he Anited Bation! agenc, al!o !aid that the indu!trial +one!, $hich import and proce!! material! before e.porting them again, $ere huge emplo,ment generator! but often lac#ed meaningful lin#! $ith the dome!tic economie! around them
,ietnamese e-ample
0he rapid !ocio-economic de elopment in !outhern >ietnamC! Dong Bai =ro ince recentl, ha! been attributed to it! !ucce!!ful Indu!trial 'one! (I'!), $hich ha e re!ulted in impre!!i e 1ob generation and e.port figure!* :ore than ;0,000 1ob! ha e been generated b, the I'! o er the pa!t fi e ,ear! and more than ASD?*< billion in e.port re enue! ha! been earned b, enterpri!e! operating $ithin them* 0otal re enue! for the I'! during that period topped DE*< billion, contributing D1<F million to the State budget, nearl, D1 billion in e.port receipt! 0hroughout the countr, mo!t of the pro1ect! in the I'! focu! on !ector! that i! e.pected to pro ide -uic# return! on capital !uch a! motorbi#e and electronic! a!!embl, and other indu!trial con!umer good!* @ittle attention ha! been paid b, in e!tor!, to #e, indu!trial !ector! !uch a! engineering, electronic! and chemical production and food proce!!ing* 3urthermore, nearl, ;0 percent of foreign-in e!ted pro1ect! u!e ob!olete machiner, and e-uipment, re!ulting in product! of lo$ competiti ene!! aimed at dome!tic con!umer!, Another problem $a! that the occupanc, rate of the I'! remain! lo$ $ith onl, !ome E1 percent of the total land area let to in e!tor! at pre!ent*
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Current Scenario
6(I2E celebrating the >"th anni ersary of +hinaDs four earliest ,pecial Economic 5ones ;,E5s< on *ugust >K# the cities of ,hen3hen# Hiamen# 5huhai and ,hantou# and (ainan Pro ince mapped out de elopment blueprints for the new century. *nalysts belie e that by setting the goals for moderni3ation# the ,E5s are still leading other parts of the country in de elopment as they were >" years ago. 7wo decades ago# local authorities in ,hen3hen# encouraged and supported by senior +hinese leaders including /eng Hiaoping# were determined to bla3e a trail for +hinaDs reform and opening1up dri e. ,hen3hen has then become a window of the country to the outside world and a platform for reform measures# along with Hiamen# 5huhai and ,hantou. 7o ensure successful reform and opening up in the ,E5s# +hina introduced a wide range of special preferential policies. *s the opening1up dri e swept other parts of the country# the preferential policies were applied to more regions. 7he saying that special economic 3ones are no longer special pre ails in the country. (owe er# the ,E5s ha e not lost their itality. *nd obser ers say that the ,E5s still shoulder a historical mission today. In recent years# the ,E5s ha e been focusing on impro ing the o erall economic 8uality and on de eloping high1tech industries and other economies with special features. +ompared with other parts of +hina# the ,E5s still hold an edge in utili3ing domestic and o erseas resources and markets and in adapting themsel es to international practices to boost economic de elopment. 6hile fully expanding economic co1operation with multinationals# ,hen3hen is tightening ties with (ong 'ong# and Hiamen and (ainan with 7aiwan. In ,hantou# efforts ha e been made to attract o erseas +hinese# one of the maIor channels of o erseas in estment to the +hinese mainland. Experts say that impro ing o erall economic performance is a necessary choice for the >"
,E5s# as +hina will face fiercer competition after its entry into the 6orld 7rade 4rgani3ation. It is the only way for them to reali3e moderni3ation. 7o hit the goal# analysts say# the ,E5s should gi e national treatment to o erseas in estors for more funding while making efforts to open up o erseas markets for their own companiesD products. )y changing the past practice of offering preferential policies to o erseas in estors in certain fields# the ,E5s ha e lifted all restrictions for them. *ccording to officials# the expansion of reform in the ,E5s will focus on systematic inno ations# including adIustments in the ownership structure# and transformation of functions of go ernment departments in accordance with international practices. 7he go ernment should also simplify procedures to make it easier to get businesses up and running and gi e a bigger role to the market# while impro ing ser ices# experts say. *t the same time# efforts must be made to impro e the social security system and the financing system# and ha e intermediary organs operating according to standards. 7he forthcoming J" years will be an important historical period in +hinaDs dri e to reali3e moderni3ation and make the +hinese nationDs long1cherished dream of building a powerful +hina come true. Experts are confident that ,hen3hen# 5huhai# ,hantou# Hiamen# and (ainan will set the pace in +hinaDs dri e toward moderni3ation.
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(e)innin) of Economic Zones in India

7he policies of 2iberalisation# pri ati3ation and globalisation ;2P.< that were introduced in $00$ remo ed the highly complex system of controls pre ailing in post1 independent India. Now# in the new market scenario# it became ery important to become competiti e in terms of price# but also 8uality# time# ser ice# etc. India has always paid more attention to its exports# because they earn re enue. 7o increase them# the idea of Export Promotion 5ones ;EP5< was concei ed. 7hese were areas where import substitution was not followed and all inputs for any manufacturing process were allowed to be imported freely. ,uch 3ones were established to promote trade and to de elop a specific industry by pro iding it with the entire infrastructure it needs. E ol ing +oncept 7his initial concept was called EP5 ;Export Processing 5one< and was introduced first in 'andla# .uIarat. 7he Indian manufacturer was nowhere in terms of international standards of either 8uality or price. ,o# to make him globally competiti e# the go ernment had to pro ide some incenti es to him. Most of these incenti es could be used by almost e ery producer e erywhere. )ut# there were special incenti es which# when gi en# could result in a ery low cost of production for the manufacturer and there was a risk then that the goods could then end up being sold in the domestic market instead of being exported. ,o# the go ernment established special 3ones where people could come in# establish their factories# procure ;buy domestically or import< whate er they would re8uire for production# produce locally and then export these goods. &or such a situation# there needed to be precise control o er e ery importer and all his actions# which could lead to any harm to national interest. 7o pre ent all this# EP5s were established# which were land1locked areas# under constant sur eillance by the customs authorities and security personnel of the 3one. 7hese 3ones would regulate all the material coming into and going out of the 3one and thus# keep a check on the manufacturers- actions.
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EP5s worldwide 7hus# EP5s were set up with the aim of boosting export1oriented in estment and for eliminating the constraints imposed by India-s trade and industrial policies. *s a concept# EP5 dates back to $0K>. ,ome of the first EP5s were founded in Puerto %ico in $0K># Mexico ;$0KC<# 'andla ;$0KJ<# 7aiwan ;$0KK<# ,outh 'orea ;$0E$<# Philippines and Malaysia ;$0E><. 7he EP5 set up in Mauritius is not based on geographical and locational ad antages but is more a functional concept. Most of these countries ha e had a good and fulfilling experience by setting up EP5s. EP5s ha e helped promote an export1oriented industriali3ation strategy with increasing alue1additions in domestic production. ,tudies ha e shown that countries where EP5s function ha e had excellent performances on the trade front. 4f the FJ" EP5s worldwide# a large number of them operate in de eloping countries. 7he world o er# it has been obser ed that processing exports ha e outperformed others. In fact# most *sian and 2atin *merican countries ha e excelled in trade only due to the processing trade. 7he .o ernment of India had established se en EP5s o er a period of time. 7hese were? $. 'andla &ree 7rade 5one ;'*&75<# 'andla# .uIarat @ $0KJB >. ,anta +ru3 Electronic Export Processing 5one ;,EEP5<# ,. +ru3# Maharashtra @ $0ECB !. +ochin Export Processing 5one ;+EP5<# +ochin# 'eralaB C. &alta Export Processing 5one ;&EP5<# &alta# 6est )engal @ $0FCB J. Madras Export Processing 5one ;MEP5<# Madras# 7amil NaduB K. Noida Export Processing 5one ;NEP5<# Noida# Attar Pradesh @ $0FJB E. :isakhapatnam Export Processing 5one ;:EP5<# :isakhapatnam# *ndhra Pradesh. 'andla was the only &ree 7rade 5one in India and was the first 3one to be established in India.
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6hile the ,anta +ru3 Electronics Export Processing 5one ;,EEP5< was meant exclusi ely for the exports of electronics and gems and Iewellery# all other 3ones were multi1product 3ones. $""N foreign e8uity was welcome in E4As and EP5s.
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Shortcomin)s * +ro,lems of E+Zs

*ccording to an *udit %eport conducted on EP5s and &75s in $000# ,EEP5 earned only A,M $.>J bn. net foreign exchange in the past F years. 7he reasons for this were attributed to the following causes? &ailure to elicit full commitment from people as they stay far away from their place of work. Insufficient comprehensi e and well1knitted internal and backup infrastructure. (igh dependence on outside infrastructure created and maintained by different agencies lacking co1ordination. 7he result? under achie ement of actual potential. 2imited possibility of impro ing connecting infrastructure to enhance the performance of existing EP59&75. Share of EPZ units in Total Exports
160000 140000 Rupees in Crores 120000 100000 80000 60000 40000 20000 0 95-96 96-97 Year 97-98 98-99 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% EPZs share in Total Exports
Total Exports EPZ Share
..1 The abo#e graph shows that the )"*s ne#er reall contributed a substantial amount in the national exports. Also& the share o+ )"* unit exports in total exports was more or less at the same ratio o#er the 3 ears +rom 98(94 to 90(99.
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For example: 4n $>th March $00C# a memorandum was submitted to ,hri 5afar ,aifullah# +abinet ,ecretary# .o ernment of India regarding the problems of EP5s and E4As. 7he /e elopment +ommissioner# ,EEP5# ,antacru3 Electronics Export Manufacturers*ssociation ;,EEM*<# and the ,EEP5 .ems O Jewellery Manufacturers- *ssociation# ,EEP5 submitted this memorandum in association with the &ederation of Indian Export Processing 5ones Industries *ssociation. 7he main problems highlighted in this report were? Inconsistencies in go ernment regulations @ 7he Import 7rade +ontrol and Exchange +ontrol %egulations ha e changed o er time to benefit EP5 units# but the customs regulations were still go erned by the notification issued at the time of formation of the 3ones. 7his resulted in a situation wherein certain acti ities permitted by the EHIM policy could not be undertaken# as the same were not permitted by the customs regulations. +ustoms working O procedures @ 7he units in the 3one were allowed to work E days a week to maximi3e exports# but the +ustoms department worked only J days a week# resulting in the units ha ing to wait for > days to get clearance for their acti ities. *lso# there was still a lot of red1tapism left while dealing with issues like returning of export goods# return of reIected components# de1 bonding of capital e8uipment# waste disposal Modes of transportation @ +ourier was not recognised as an appro ed mode of transportation and hence any goods recei ed by courier had to be notified and duty had to be paid on them. *lso# there were problems with the formation of 7rade Anions# multiplicity of bonds# fax copies not accepted by customs# hassles in sub1contracting# /7* sales regulations# etc. 7hese# and many other such tri ial matters were barriers in the proper working of the units in the 3ones. 4 er a period of time# some of these hassles were done away with. )ut
>K
there was ne er a situation when the units in the 3ones were really satisfied with the procedures. 7he experience of Export Processing 5ones ;EP5s<# which were duty1free encla es# has not been up to expectations. E en with flexibility to sell J" per cent of exports in /7* at concessional rates of duties# most EP5 units ha e failed. 7he eight EP5s together contributed barely !.E per cent of the country-s total exports. In fact# other than ,antacru3 Electronic EP5# the other se en EP5s together contributed to only about $.C$ per cent of the country-s exports. 7here is a ery strong iew in the re enue department that the dismal performance of the EP5 units does not Iustify the re enue sacrifice or re enue leakage inherent in the schemes. In their eyes# the EP5s ha e failed. 7hese shortcomings were responsible for the recent makeo er of these EP5s into ,E5s. 7he transition process is co ered in the next +hapter.
..2 Customs pro*e /harat Shah's e-port units for )iamon) smu lin
In Januar, ?001, S55=' cu!tom! conducted a !toc# ta#ing of t$o unit! from Jan G1, ?000* " > Star and " > Je$el! (both o$ned b, "harat Shah) $ere probed for !u!pected diamond !muggling* 0he follo$ing $a! found2 Diamond! $orth ?F*?9 cr (<G<G0 ct!) of " > Je$el! $ere found !hort, allegedl, $ere !muggled out of S55='* Cu!tom! dut, demanded, therefore, i! 6! 1?*5E cr " > Je$el! had al!o !uppre!!ed the fact! of di!po!al of capital good! $orth 6! 5;*GE la#h to one S" H0 International @td, S55=', $ithout permi!!ion of cu!tom!* 0he cu!tom! dut, foregone $a! 6! G9*G1 la#h* 0hat i! ho$ the total dut, demanded i! 6! 1?*9E cr Sure!h :ehta, a partner in both companie!, had !ho$n po!!e!!ion of ?G diamond! of ?<*E? ct!, alued at 6! G9*FG la#h, for $hich he could not !ho$ legal import document!* " > Je$el! e.ported diamond! $orth 6! ?< cr !tudded in 1e$eller,, bet$een 199; and 3eb ?000, but could not !ho$ ho$ the, had procured the!e* 3urther, another unaccounted lot of diamond! of " > Je$el! $eighing 10FG1*G9 ct! and alued at 6! E*0G cr, $ere found $ithout corre!ponding
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document! to !ho$ legal po!!e!!ion* In the ca!e of " > Star, $hich had no production !ince 199<, cu!tom! dut, of 6! ?*5< cr i! demanded becau!e of !hortage of ;F0E*5 gm! of gold and ;EE*1F ct! of diamond! re ealed in the !toc# ta#ing*
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Chan)e to SEZs
E-I. +olicy chan)es
%ealising the failures and shortcomings of the EP5 ,cheme in India# the +ommerce Ministry decided to impro e the existing situation. 7he changes and fine1tuning done in the existing EP5s was to no a ail and was not yielding the re8uired results. *n Indian delegation headed by the then /irector1.eneral of &oreign 7rade# Mr. N.2. 2akhanpal isited A*E and saw the Jebel *li &ree 5one ;J*&5<# /ubai and &uIairah &ree 5one ;&&5< there. 7his was the birth of the idea of ha ing similar 3ones in India. 7oying with the idea of &ree 7rade 5ones 9 &ree 5ones *fter the delegation came back# it submitted a report on the findings of the isit. 7he report recommended that the /e elopment +ommissioners of each 3one ;in India< should be ested with all the authority regarding their respecti e 3ones# thus making them the ultimate local authority on all issues# as is the case in A*E. *lso# like their A*E counterparts# the Indian /+s should be re8uired to prepare a )usiness .uide. 7he report also stated that the &ree 5ones in A*E accounted for all duty1free raw material# ensuring it was used for export. E en in the case of /7*# they would ensure that it was after payment of full customs duty on the alue of the finished goods. 7he commerce ministry then decided to con ert all existing EP5s into &75s with ,EEP5# Noida and 'andla being con erted that year# and the rest to follow. %educing role of +ustoms *ccording to the proposed policy# the role of customs was to reduce and the new 3ones would be exempt from all customs department rules and regulations from July $# $000. *fter the proposed con ersion of the units to &75s# the role of the customs department officials was to be confined to working outside the units# gi ing them total operational flexibility# as proposed in the re ised export and import policy ;$00E1>""><. 7he &75s would ha e been outside the customs ambit with checks only at the entry and exit points by customs officers.
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Ander the new scheme# &75s would be permitted to sell J" per cent of their production in the /7*# subIect to payment full customs duties. 7his means the remaining half alone needed to be exported. )ut# according to ministry officials# for their own sur i al# the units would ha e to find markets for their entire production# as /7* sale will pro e rather prohibiti e. 7he Indian labour laws ere to apply to &75s though the commerce ministryDs ultimate obIecti e is to make these inapplicable. 7he practice the world o er is to exempt &75s from the pur iew of labour laws. *rri al of ,E5s 7he plans for the &75s got shel ed e entually. Mr. Murasoli Maran# the Minister for +ommerce O Industry# suggested the setting up of ,pecial Economic 5ones in India# similar to the ones in +hina. 7his decision to set up ,E5s was the highlight of the EHIM Policy. 7he decision was commendable# but it did not take into account se eral things. 7he initial proposed ,E5 ,cheme was not a maIor impro ement o er the existing EP5 ,cheme at that time. )asically# almost all the features of the original ,E5 ,cheme already existed in the form of incenti es a ailable to EP5 units. The ma/or ad0anta)e for SEZ units that they had to no as achie0e only positi0e net forei)n e%chan)e earnin) as a
percenta)e of e%ports 1$#E+23 here as E456E+Z units ith in0estment of less than Rs & crore in plant and machinery had to achie0e minimum stipulated $#E+. Inade8uate extra facilities o er EP5s 7he relaxation for ,E5 units was significant but not sufficient enough to sway the decision of the entrepreneurs in fa our of setting up units in ,E5. 7he maIor ad antage for E4A9EP5 units was that they could sell upto J" per cent of their exports in the /7* at half the rates of customs duties# whereas ,E5 manufactures could sell in /7* only on payment of full duties. /7* sale was a ery important option for E4A9EP59,E5 units# as the international markets are not always booming or lucrati e.
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7rading units in ,E59EP5 were not allowed to sell in /7*. Ideally# so long as the trading unit paid full import duties on /7* sales# there should ha e been no restrictions. Anmet expectations 7he commerce minister had announced that the EP5 at ,EEP5# 'andla# +ochin and :iskhapatnam would be con erted to ,E5. 7he transitional arrangements for existing EP5 units who did not want to opt for ,E5 scheme was that they had to con ert into E4A or de1bond. In either case# they had to mo e out of EP5# which was difficult for existing units. 7he industry felt that the go ernment needed to make ,E5s an attracti e destination for entrepreneurs. 7he most oft1repeated re8uest was that the go ernment should treat ,E5 as foreign territory for all purposes. 7here was also a feeling that the supplies from /7* to ,E5 must be treated as physical exports and that all the customs notifications should apply to sales from ,E5 to /7* as they apply to physical imports. *mendments 7he existing EP5s were con erted to ,E5s and acti ated on $ st No ember >""". *lso# proposals for the establishment of new ,E5s were cleared. 7his was followed by some notifications being issued which made the necessary changes in the ,E5 ,cheme. 7he most prominent among them was the declaration of ,E5s as foreign territory. 7he &inance Ministry declared the area under the ,E5s as Pforeign territoryD for the purpose of duties and taxes. 7his means that goods supplied to the ,E5 from the /omestic 7ariff *rea ;/7*< will be treated as PdeemedD exports and goods brought from the ,E5 to the /7* will be treated as PimportedD goods. 7hus# was e ol ed# the present concept of ,E5s in India.
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+resent SEZ Concept

7he facilities a ailable to ,E5 units are as follows? Customs related:

No license re8uired for import. Exemption from custom duty on import of capital goods# raw materials# consumables etc. Exemption from +entral Excise /uty on procurement of capital goods# raw materials etc. from the domestic market. Exemption from +ustom9Excise duty on import9domestic procurement of goods for setting up of units in the 5one ,upplies from /7* to ,E5 will be treated as deemed exports. %eimbursement of +entral ,ale 7ax ;+,7< on inter1,tate purchases. %eimbursement of duty paid on &urnace oil as per /rawback rate notified by /.&7. ,E5 units ha e to be a net foreign exchange earner. No pre1determined foreign exchange earning or minimum performance re8uirement. *ccess to domestic market. ,implified +ustom procedure. 7rading acti ity for exports permitted. &ast track clearance of imports and exports. Job working9sub1contracting facilities for exports# including for Iewellery units. &acility to subcontract part of production abroad In1house +ustom clearance. %eady infrastructure. /uty free goods to be utili3ed within the appro al period of J years.
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Performance of units to be monitored by a committee consisting of /e elopment +ommissioner and +ustoms. No separate documentation re8uired under +ustoms and EHIM Policy. Export defecti e goods etc. without .% wai er
Investment related:
$""N &/I permissible for units in ,E5s in manufacturing sector barring few sectors. No +ap on foreign in estment for ,,I reser ed items. Exemption from industrial licensing re8uirement for items reser ed for ,,I sector.
Foreign exchange related:
Profits allowed to be repatriated freely without any di idend1balancing re8uirement. $""N of foreign exchange earnings can be retained in EE&+ account. External commercial borrowing shall be subIect to usual procedure. &acility to reali3e and repatriate Export proceeds within $> months.
Tax related:
*ttracti e tax holiday upto >"$" as per ,ection $"* of the Income 7ax *ct.
Labour Laws: 7he labour laws of the land will apply to all units inside the 5one. (owe er# the respecti e ,tate .o ernments may declare units within the ,E5 as public utilities and may delegate the powers of the 2abour +ommissioner to the /e elopment +ommissioner of the ,E5.
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%ole of ,tate .o ernments ,tate .o ernments will ha e a ery important role to play in the establishment of ,E5. %epresentati e of the ,tate .o ernment# who is a member of the Inter1Ministerial +ommittee on pri ate ,E5# is consulted while considering the proposal. )efore recommending any proposals to the Ministry of +ommerce O Industry ;/epartment of +ommerce<# the ,tates must satisfy themsel es that they are in a position to supply basic inputs like water# electricity# etc. 7erms and +onditions for establishment

4nly units appro ed under ,E5 scheme would be permitted to be located in ,E5. 7he ,E5 units shall abide by local laws# rules# regulations or bye1laws in regard to area planning# sewerage disposal# pollution control and the like. 7hey shall also comply with industrial and labour laws as may be locally applicable.
7he ,E5 should ha e an area preferably of $""" hectares. ,uch ,E5 shall make security arrangement to fulfill all the re8uirements of the laws# rules and procedure applicable to such ,E5. 6here er the ,E5s are landlocked# an Inland +ontainer /epot ;I+/< will be an integral part of ,E5s.
7he main differences between the EP5 and ,E5 ,chemes are? No minimum Export Performance ;EP< or Net &oreign Exchange earnings as Percentage of exports ;N&EP< is needed in an ,E5# as for EP5 units. Monitoring of performance of ,E5 units by a +ommittee headed by /e elopment +ommissioner and consisting of +ustoms. /uty to be reco ered in case of failure to achie e positi e N&EP under +ustom *ct in proportion to shortfall unlike in EP5. Anlimited /7* sales on full duty. &or EP5# only J"N of exports No linkage with positi e N&EP for domestic sale for ,E5 units. In EP5 sales are subIect to achie ement of N&EP. /uty free material to be utili3ed o er fi e years unlike in EP5 where it is one year. !C
,ubcontracting facility a ailable to ,E5 Iewellery units# which is not a ailable to EP5 units. *ll imports on self1certification# unlike in EP5# where attestation of /e elopment +ommissioner is re8uired for import of +apital .oods. No routine examinations by +ustoms of export and import cargo in ,E5. $""N &/I through *utomatic %oute a ailable to manufacturing ,E5 units. In EP5# &IP) appro al re8uired. Procedural simplification for operations like record keeping# inter1unit transfer# subcontracting# disposal of obsolete material# waste and scrap. 4ther facilities like tax holiday# retention of E"N of export earnings in EE&+ *ccount# etc. are common for both EP5 and ,E5.
,alient features and schemes of an ,E5 in India Anits set up in ,E5s which will operate under a single purpose bond# can import or procure goods from the /7* duty1free for manufacture of goods and ser ices# trading# production# processing# assembling etc and exports thereof. .oods can be sold in the /7* only if the unit achie es the Net &oreign exchange Earning as a Percentage of exports ;N&EP< annually and cumulati ely as specified in the EHIM Policy. * trading unit has to achie e a turno er of M$ million in fi e years. Penal action can be taken on default. /7* sales are# howe er# banned for goods that ha e been imported both as scrap as well as for repair. 7rading units in the ,E5s also cannot sell goods in the /7*. ,E5 units can import and export through port# airport# land customs station# I+/# +&,# courier mode and post parcel. ,oftware de elopment units can import and export through data communication and telecommunication links.
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7he norms for procurement of goods from domestic sources by ,E5 units will be the same as those laid down for the EP5 units. In respect of imported and domestically procured cargo# goods will be assessed on the basis of documents pro ided by the units and there will be no physical examination. (owe er# customs authorities may examine such cargo when there is specific information regarding clandestine remo al.
Exports will be permitted on the basis of self1certification by the units and there will be no routine examination of the consignment by the ,E5 custom authorities. *t the gateway port# the ,E5 cargo will be subIect to the examination procedure as per instructions in force.
,E5 units will ha e to maintain financial year1wise accounts of all forex inflow by way of exports and other receiptsB all forex outflow on account of payment of di idend# royalty# fees etc and sale in the /7*. Anits can also undertake Iob work for the /7* without payment of duty. Pro isions ha e also been made for temporary remo al of goods into the /7* and to other ,E5# ,7P# and E4A 3ones. Inter1unit transfer of goods amongst ,E5s will not be subIect to customs scrutiny. /uty remission will be a ailable on destruction of goods within the ,E5s. Anits ha e also been permitted to dispose obsolete goods on payment of the applicable customs duties.
In case of imports# the )ill of Entry with specially stamped endorsement as G,E5 +argoG is filed with the *ssistant +ommissioner9/eputy +ommissioner of +ustoms in the ,E5 for assessment. &or procurement of goods from domestic sources by ,E5 units# +71! certificates are issued to the units and against such +71!B the goods including capital goods are procured from /7* without payment of duty. In both cases# i.e. both in respect of imported and domestically procured cargo# the goods are assessed on the basis of documents furnished by the units. .oods are not examined physically and =out1of1charge- is gi en after erifying the marks and numbers on the packages only.
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6hen the import consignments are re8uired to be transshipped to a ,E5 located at a station away from the place of import# the same is allowed under normal transit procedure. 7he unit files the )ill of Entry with the *ssistant +ommissioner9 /eputy +ommissioner of +ustoms in1charge of the ,E5 on the basis of the transit document.
In case of exports# the ,hipping )ill along with rele ant documents is filed with the +ustoms authorities in the 5one. *s in the case of imports# the ,E5 export cargo is not examined in routine and export is allowed on the basis of self1 certification by the units. 7he units# after self1examination of the consignments# are re8uired to submit the shipping bills to the *ssistant +ommissioner9/eputy +ommissioner of +ustoms for Glet exportG order. *fter obtaining the Glet exportG endorsement on the shipping bill# the consignment is taken to the gateway port for export. *t the gateway port also# the ,E5 export consignment is not examined in routine. (owe er# whether at the 5one or at gateway port or during transit of such cargo# the +ustoms authorities can examine the consignments when there is a specific information9intelligence. &or this purpose# the orders of the *ssistant +ommissioner9/eputy +ommissioner of +ustoms are re8uired to be obtained.
Su,7contractin)8
7he ,E5 units are allowed to sub1contract part of the
production process abroad. *ppro al for sub1contracting abroad is accorded by the )oard of *ppro al. 7he goods sent for Iob1work abroad are to be returned to the unit for final processing9manufacturing before exports. 7he unit is re8uired to execute a suitable bond for sub1contracting goods abroad and is re8uired to account for the goods including waste9reIects in the manner as prescribed by the +ommissioner of +ustoms9 +entral Excise in this behalf. 7he ,E5 units are also allowed to undertake Iob1work for export on behalf of /7* units. 7his is subIect to the condition that the finished goods are exported directly from ,E5 units and export documents are made in the name of the /7* unit. 4n export of such goods manufactured by ,E5 unit on behalf of the /7* unit# the /7* unit is entitled to refund of duty paid on the inputs by way of brand rate of duty drawback. !E
7he ,E5 units are allowed to remo e the moulds# Iigs# tool# fixtures# tackles# instruments# hangers# patterns and drawings without payment of duty to the premises of the sub1contractors subIect to the condition that such goods are brought back to the unit on completion of the Iob work within the period specified in this behalf.
Gem and 9e ellery units in SEZ8 .enerally speaking# sub1contracting is not allowed to gem and Iewellery units. (owe er# the gem and Iewellery units in ,E5 are allowed to take out gold9sil er9platinum for sub1contracting subIect to the condition that goods# finished or semi1finished# including studded Iewellery# containing 8uantity and purity e8ual to the gold9sil er9platinum so taken out are brought back to the 5one within !" days. It is to be noted that diamonds# precious or semi1precious stones are not allowed to be taken out for sub1contracting. 7he gem and Iewellery units are also allowed to recei e plain gold9sil er9platinum Iewellery from /7* in exchange of gold9sil er9platinum of e8ual 8uantity and purity. 7hese units are# howe er# not eligible for any wastage or manufacturing loss against the Iewellery recei ed from /7* after processing or against exchange of gold9sil er9platinum. 7he /7* units undertaking Iob work or supplying Iewellery against exchange of gold9sil er9platinum are not entitled to deemed export benefits. 7he gem and Iewellery units are also allowed to sub1contract part of the production or production process through other units in the same ,E5 subIect to records being maintained by both the supplying and the recei ing units. &urther# the gem and Iewellery units in ,E5 are allowed certain other facilities as mentioned below? 1i2 7aking out the items of gem and Iewellery into /7* temporarily without payment of duty for the purpose of display and return thereafterB 1ii2 Personal carriage of gold9sil er9platinum Iewellery or precious or semi1 precious stones or beads and articles as samples up to A,M $#""#""" for export promotion tours and temporary display or sale abroad subIect to the condition that !F
the exporter would bring back the Iewellery or the goods or its sale proceeds within CJ days from the date of departure through normal banking channelB 1iii2 Export of Iewellery including branded Iewellery for display and sale in the permitted shops setup abroad# or in the showroom of their distributors or agents pro ided that items not sold abroad within $F" days# shall be re1imported within next CJ daysB 1i02 %emo al of parts O tools of machine temporarily without payment of duty for the purpose of repair and return thereof. 102 7aking out gem and Iewellery manufactured in the ,E5 to the retail outlets or showrooms set up in the departure lounge at international airports for sale to a tourist# as defined in the )aggage %ules# $00F# lea ing India. 10i2 ,ale of gem and Iewellery manufactured in the ,E5 to a foreign1bound passenger and transferring the same to the retail outlets or showrooms set up in the departure lounge or +ustoms warehouse at international airports for being handed o er to the said passenger for the purpose of export. 10ii2 %emo al of moulds# tools# patterns# and drawings into the /7* for Iob work without payment of duty and to be returned to the unit thereafter. &or a ailing of the abo e mentioned facilities# prior permission of *ssistant +ommissioner 9 /eputy +ommissioner is re8uired. In case of gem O Iewellery units# scrap# dust or sweepings generated in the unit is allowed to be forwarded to the .o ernment Mint or Pri ate Mint for con ersion into standard gold bars and return thereof to the 5one subIect to the obser ance of procedure laid down by the +ommissioner of +ustoms. 7he said dust# scrap or sweepings are also allowed clearance into /7* on payment of applicable customs duty on the gold content in the said scrap# dust or sweepings. ,amples of the
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sweepings9dust are taken at the time of clearance and sent to mint for assaying. 7he assessment is finali3ed when the reports are recei ed from the mint. Inter75nit Transfer8 Inter unit transfer of goods amongst units in a ,E5 does not re8uire any prior permission# but the supplying and recei ing units are re8uired to maintain proper accounts of the transaction :uty Remission on :estruction of Goods8 * pro ision has been made in the notifications that duty would not be le ied on capital goods# raw materials# components# waste or scrap etc. if these goods were destroyed in the presence of the +ustoms authorities. 7his pro ision# howe er# does not apply to gold# sil er# platinum# diamond# precious stones and semi1 precious stones. 7he officers super ising destruction are re8uired to ensure that goods are destroyed fully rendering them unfit for further use and gi e certificate to that effect. *fter destruction of capital goods# raw materials# components# waste or scrap etc.# if the remains ha e scrap alue# the unit in /7* on payment of duty applicable to scrap can clear the same :T; Sale8 7he facility of /7* sale is a ailable to the ,E5 units. Ander the ,cheme# finished goods including by1products and ser ices and waste9scrap9remnants9reIects etc. can be sold in the /7* on payment of applicable duty and in accordance with the Export1Import Policy in force. (owe er# where such finished goods ;including reIects# waste and scrap materials< are not excisable# duty e8ual in amount to that le iable on the inputs imported9indigenously procured under the notifications and used for the purpose of manufacture of such finished goods# which would ha e been paid but for the exemption under the said notifications# is payable at the time of clearance of such finished goods. In case of ser ice sector ,E5 units# the rendering of ser ices in /7* is allowed subIect to the condition that the unit has achie ed the positi e N&E# cumulati ely# as specified in the Policy. 7his would mean that ser ice units would not be eligible for making /7* sale if the N&E is C"
not positi e cumulati ely at any point of time. &urther# if any of such ser ices are taxable under pro isions of +hapter : of &inance *ct# $00C# then rendering of such ser ices in /7* would re8uire payment of ser ice tax as per the pro isions of &inance *ct# $00C. 2e y of +entral Excise /uty on .oods Produced or Manufactured by ,E5 Anits and +leared into /omestic 7ariff *rea? In terms of section ! of the +entral Excise *ct# $0CC# the excise duty le iable on goods manufactured in an ,E5 unit and cleared into /omestic 7ariff *rea is an amount e8ual to the customs duty le iable under section $> of the +ustoms *ct# $0K> or under any other law for the time being in force on like goods produced or manufactured outside India# if imported into India. 7hus# the duty is worked out exactly in the same manner as applicable to imported goods. .aintenance of ;ccounts? * ,E5 unit is re8uired to maintain proper account in the format con enient to it and financial year1wise# of all foreign exchange inflow by way of exports and other receipts# all foreign exchange out flow on account of imports# payment of di idend# royalty# fees etc.# consumption and utilisation of the materials and sale in the /7*. 7he units are re8uired to submit regularly 8uarterly statement to the /e elopment +ommissioner and the +ustoms in this regard in the format prescribed at *ppendix $K( of the (and )ook of Procedures. .onitorin) of acti0ities of SEZ units8 *ll acti ities of the ,E5 unit# unless otherwise specified# are through self1 certification procedure and are monitored by a +ommittee comprising /e elopment +ommissioner and +ustoms. 7he /e elopment +ommissioner in charge of the 5one heads the +ommittee. 7he +ommittee is also re8uired to see that wastage 9 manufacturing loss on gold9 sil er9platinum Iewellery and articles are within the o erall percentage prescribed in *ppendix1C$ of the (andbook
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;:ol1$<. In case of higher wastage9manufacturing loss# the +ommittee is re8uired to satisfy itself of the reasonableness of the same. +enal action in case of default8 7he +ustoms officials posted in ,E5s are not supposed to isit the units for erification of records or e en otherwise in routine. (owe er# in case of specific information9intelligence which# prima facie# show that there is fraud# collusion# mis1declaration# suppression of information etc ha ing a bearing on the export performance of the unit or where there is specific information regarding clandestine9unauthori3ed remo al of goods into /7* etc# the +ustoms officials can isit the units for erification of records# goods etc. so as to initiate proceedings under +ustoms *ct# $0K>. 7he *ssistant +ommissioner9/eputy +ommissioner may keep a watch on the export performance of the units and in the e ent of non1achie ement of positi e N&E within the stipulated periodB action can be taken against the units for reco ery of the duty and interest. ,o far as utili3ation of imported9indigenously procured goods is concerned# the same may be utili3ed within the period of fi e years. In case of failure to utili3e the imported 9 indigenously procured goods within the period of fi e years# the unit is liable to pay duty on the said unutili3ed goods along with the interest at the rate of >CN per annum from the date of importation or procurement of the said unutili3ed goods till the date of payment of such duty. ,E5 is an e ol ing ,cheme and more features would be added as re8uired.
<.1 Structure * Role of Trade 5nions in China
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* study of +hinese trade unions will be interesting. +omparison with Indian labour laws almost certainly makes it clear that Indian ,E5s will not enIoy same le el of labour cooperation that their +hinese counterparts enIoy. +hinese trade unions are organi3ed on a broad industrial basis. Membership is open to those who rely on wages for the whole or a large part of their income @ a 8ualification that excludes most agricultural workers. In theory# membership is not compulsory# but in iew of the unionsD role in the distribution of social benefitsB the economic pressure to Ioin is considerable. 7he lowest unit is the Enterprise Anion +ommittee. Indi idual trade unions also operate at the pro incial le el# and there are trade union councils that coordinate all union acti ities within a particular area and operate at county# municipal# and pro incial le els. *t the top of the mo ement is the *ll1+hina &ederation of 7rade Anions# which discharges its functions through a number of regional federations. In theory# the appropriate trade union organi3ations are consulted on the le el of wages as well as on wage differentials# but in practice their role in these and similar matters is insignificant. 7hey do not engage in collecti e bargaining @ not at all surprising# since their principal duties include assisting the party and promoting production. In fulfilling these tasks# they ha e a role in enforcing labour discipline. &rom the point of iew of the membership# the most important acti ities concern the social and welfare ser ices. 7hus# it is the unions that look after industrial safetyB organi3e social and cultural acti itiesB pro ide ser ices such as clinics# rest and holiday homes# hostels# libraries# and clubsB and administer old1age pensions# workersD insurance# disability benefits# and other welfare schemes.
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SEE+Z SEZ
,EEP5 ;,antacru3 Electronics Export Processing 5one< was formed in $0EC exclusi ely for electronics. ,EEP5 was established on land leased by the .o ernment of India ;Ministry of +ommerce< from MI/+ for a period of 00 years. MI/+# in turn had taken this land on lease from the Maharashtra .o ernment. MI/+ and the .o ernment of India together de eloped the basic infrastructure needed for such an EP5 to exist. 7he .o ernment of India did all the funding and MI/+ cleared the land# laid the roads# pro ided ade8uate water supply and arranged for an uninterruptible power supply source. 7hus# ,EEP5 was finally established basically for the electronic industry as go ernment had identified it as a strategic sector and wanted rapid growth in it. In $0FF1F0# seeing the potential of the .em O Jewellery industry# this industry was also made a part of ,EEP5.
Infrastructure #acilities at SEE+Z

7he Philosophy while landscaping ,EEP5 was to ha e Mother Nature li e in harmony with industrial manufacturing and technology. *ll set in a sophisticated infrastructure catering to all basic needs of industry. Inexpensi e &actory ,pace or 2and *t ,EEP5# plots are gi en on lease for a period of !" years# at rates fixed from time to time. 7he initial rates were %s. $"91 per s8. metre per annum for an ,/& plot. Entrepreneurs can construct their own buildings on these plots. &or this purpose the ,EEP5 administration will obtain all necessary permissions and clearances. *lso# ,tandard /esign &actories ;,/&s< are a ailable on a J1year renewable lease basis at the rate of %s. KJ" per s8. metre per annum plus Municipal 7axes ;$"N<. 6hen an entrepreneur begins production in the ery first year of obtaining the ,/& shed# he is entitled to a concession of J"N of the lease rent in the first year# C"N in the second year and >JN in the third year. *gain the space allotted to an entrepreneur
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inside the ,/& shed is based on his export proIections. *ll internal partitions# air conditioning# electrical wiring# etc. are to be carried out by the entrepreneur. Aninterrupted Power 7he generating stations of western Maharashtra ensure uninterrupted supply of power at the rate of %s. C.EC per unit. ,EEP5 is exempt from the payment of taxes on the purchase of power or on its sale. 7he units are also allowed to generate and9or sell their own power without any obligation to pay taxes. *bundant 6ater 7he 5one has an assured supply of C.JJ million litres of water a day at the rate of %s. >$ for e ery $""" litres. (i17ech +ommunication &acilities 7he most important facility that lures software enterprises to ,EEP5 is the hi1tech KC')9$>F')9>JK') line# that enables these companies to communicate and ideoconference o er the satellite to any of the branches around the world. * telephone 9 telex connection is gi en to ,EEP5 units on priority basis. *de8uate 6arehousing and &orwarding &acilities * large warehouse called an Inland +ontainer /epot ;I+/< is situated within ,EEP5 for storing at ery nominal rates. 7his the central warehouse for all the units inside ,EEP5. *lso +learing O &orwarding facilities are a ailable here. is
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In15one +ustom +learances ,EEP5 has its own ports of entry with a fully dedicated customs wing similar to that at the Mumbai Port. ,ince this customs wing is solely for the clearances within ,EEP5# the procedures for clearing incoming and outgoing consignments are simple and ery fast. *lso# there is no need for the same to be carried out either at the airport or the docks. 7his facility at ,EEP5 is pro ided specially keeping in mind the delay and trouble that occurs to the exporter while obtaining clearances. 7his speedy and efficient system is a ailable to all the units within ,EEP5 at no extra cost. 7he number of pending cases with this +ustoms department is also less# as they ha e to cater only to the EP5 units. Miscellaneous &acilities ! Industrial +anteens Exclusi e %estaurant .ymnasium +on ention +entre +ommunications +entre 4ptical fiber telephone exchange with a capacity of C""" lines installed within the 5one +omplex &oreign Post 4ffice +rQche for working women-s children C )anks @ ,tate )ank of India# )ank of India# PunIab National )ank# +entral )ank of India
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Nominated agencies like MM7+ and banks authori3ed by %)I for supply of precious metals +learing *gencies @ M9s *ir freight P t. 2td.# M9s 2ee and Muirhead# M9s 7ulsidas 'himIi P t. 2td
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SEE+Z * :e0elopment
*ncillaries 7he proximity of a ailable spares# components and raw materials affords 5one units the ad antages of lower freight costs and lower in entory le els. 7he feedback necessary for effecti e 8uality control on supplies will be 8uicker# easier and simpler# as the supplier will be almost next1door. * %egional 7esting +entre of the /epartment of Electronics ;E%72< located Iust outside ,EEP5 pro ides facilities for meeting the e aluation needs of manufacturers and designers of electronic products. 7ransport /ue to the huge workforce in ,EEP5 and lack of residential areas nearby# the employees need to be transported e eryday to large distances. 7he transport industry has de eloped to a huge extent in this area because of this need. /e elopment of the land 6ith the establishment of ,EEP5# the surrounding area has increased in land alue. 7here has been an increase in demand for residential housing near ,EEP5. 7here ha e also been a number of ancillary industries springing up to ser e the needs of the ,EEP5 +ommunity. Many fast food Ioints# small shops and industries near MI/+# communication centers# banks# etc. ha e de eloped in this pre iously underde eloped area. * residential colony has been constructed for the ,EEP5 authority near ,EEP5. 7here is access to many more regions due to the presence of a )us ,top exactly at the entrance9exit gate of ,EEP5.
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General Information on SEE+Z

*ccording to the *nnual %eport of ,EEP5 for the year $0001>"""? 7he .o ernment of India has so far in ested %s. CE crores on the de elopment of ,EEP5. Employment in ,EEP5 in $0001>""" stands at C>#""" employees# up from >C#""" in $00J10K. Number of operational units increased from $JK to >>! during the same period. *t present# there are E ,tandard /esign &actories ;,/&s<# ! .em O Jewellery +omplex )uildings and $C self1built factories. 7otal built1up area is >#KJ#$J$ s8. mtrs. /uring $0001>"""# ,EEP5 registered >K.!CN growth.
.rowth of Electronics Industry ;India O ,EEP5<? $00"10C 7he electronics industry has always played a significant role in India-s exports. In recognition of the catalytic role electronics plays in global de elopment# the industry has been accorded the status of a priority area in the new industrial policy. * significant mo e was made with the establishment of an Export Processing 5one exclusi ely for electronics at ,EEP5 ;,antacru3 Electronics Export Processing 5one<# Mumbai in $0EC.
/.1 Comparison o+ electronics exports o+ !))"* and 1ndia@ <00/A
=>>1 =>>1 =>>1 =>>1 =>>1
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.rowth of .ems O Jewellery Industry ;India O ,EEP5<? $00"10C *nother industry that has recorded a significant growth in recent years is the gem and Iewellery industry. In fact India has established its place on the world map along with such centres as *ntwerp and 7el * i for gem and Iewellery processing and exports. 7o cataly3e growth of this sector# the .o ernment along with the apex trade bodies# has set up a number of training institutes specialising in imparting the re8uisite skills for gem and Iewellery processing and manufacture. In fact# a special gem and Iewellery complex was set up in $0FE1FF inside ,EEP5# entirely dedicated to exports.
/.2 Comparison o+ gems B %eweller exports o+ !))"* and 1ndia @/999( <003A
=>>@ =>>= =>>1 =>>> 1???

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Aatest Bappenin)s at SEE+Z

,EEP5 is full in terms of capacity# when taking &,I into account. )ut# the .o ernment of Maharashtra has granted double the existing &,I in respect of space utili3ed for software acti ity. *ccordingly# an I7 7ower with a built1up area of ! lakh s8. ft. is being constructed besides the lake to accommodate I7 units. Maharashtra .o ernment had earlier agreed in principle to transfer $$ hectares of land adIoining ,EEP5 for further de elopment of the 5one. Now# due to the doubling of the &,I# there is no need for the additional space according to it. Plans for an expansion through ,EEP5 RR are underway. )eautification of the 5one was carried out recently in association with some of the 5one units. &acility of >C (rs. *7M in ,EEP5 ,er ice +entre by :L,L* )ank 2td. 7he newly constructed ,/& :II has been bought o er by a company for further leasing. *n ambulance is stationed at ,EEP5 for >C (rs. ,er ice. 7here are proposals to impro e the physical and telecommunication infrastructure. *dministrati e Impro ements? ,trengthening of computeri3ation with additional (ardware O ,oftware Packages. 7raining and familiari3ation of staff with the use of computers. +omputeri3ing basic work in arious sections. %ationalisation of work allocation amongst officers. Promotional Measures? ,EEP5 web site is being renewed Preparation of ,EEP5 brochure :isit of &oreign /elegations? :isited :ietnamese Presidents +hinese /elegation
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$a0i .um,ai 7 City of the =1st Century Introduction

Na i Mumbai is a modern township spread o er an area of around !J" s8. km.# and been planned# designed and de eloped by +I/+4. +I/+4 has de eloped high18uality infrastructure facilities in the Na i Mumbai area including housing complexes# industrial infrastructure# business districts# road O railway linkages# educational and recreational facilities# etc. 7he township has been de eloped as a series of nodes with high18uality housing infrastructure a ailable at most nodes. &urther# social infrastructure for the township has also been de eloped in terms of hospitals ;>>"" beds capacity<# gardens ;$EJ nos.<# community centres ;>" nos.< and o er F" playgrounds. 4ther infrastructure like fire stations# police stations# etc. is also in place. Na i Mumbai is well connected to Mumbai both by wide roads and mass rapid rail systems. 7ra el time from MumbaiDs central business district at south Mumbai aries from CJ minutes ;water transport< to K" minutes ;road9rail transport<. IndiaDs busiest domestic and international airport +hatrapati ,hi aIi International *irport 1 is Iust 0" minute dri e from Na i Mumbai. 7he township is also well connected to other parts of the state through railway and road networks. In terms of rail infrastructure# Na i Mumbai has six rail corridors and an independent mainline rail terminal connecting the city directly to other parts of the country. ,e eral national and state highways pass through the township. IndiaDs first expressway 1 the Mumbai1Pune Expressway as well as the 'onkan %ailway# that connects +entral India to North 'arnataka and .oa# passes through Na i Mumbai. 7hese linkages enable ready access to other industrial areas in Pune# 7hane# :api# Nagothane# 'alyan# )hiwandi# Nashik# J>
/ombi ili# *mbernath# %asayani and others. In terms of sea linkages# Na i Mumbai has access to one of IndiaDs largest seaports 1 JNP7 that lies within the boundary of Na i Mumbai. In addition to the existing infrastructure# se eral new proIects are on the an il. 7hese include a proposed new international airport# which is to be located at Na i Mumbai ;estimated proIect cost around A,/ > billion<. 7he airport has already been appro ed by the ,tate .o ernment and is in ad anced stages with respect to +entral .o ernment appro al. 4ther proposals include the proposed sea1link between Mumbai and Na i Mumbai which will land in the ,E5 ;estimated proIect cost around A,/ $.J billion<. 7he de elopment of these planned facilities is likely to be accelerated on account of demand generated due to the ,E5 ProIect as well as fiscal incenti es offered by the ,tate .o ernment. 7he township has ade8uate power and water facilities. 7he total installed power generation capacity in Na i Mumbai is around 0K" M:* with a planned capacity of o er $J"" M:* by >"$". 7here is ade8uate water supply for the region as well. +I/+4 has de eloped its own dams in the area 1 with an existing capacity of $J" M2/ and a planned capacity of around CKJ M2/ by >""J. In terms of li ing standards# Na i Mumbai scores o er Mumbai on account of the low le el pollution# de congested residential areas and high proportion of open spaces and green belts. In comparison to Mumbai# the township has significantly lower li ing costs# owing mainly to the optimal land and infrastructure costs. +urrently# Na i Mumbai has a population of around $.> million people# which is proIected to reach > million by >""F. NM,E5 is spread o er an area of approximately C#!EE hectares ;around CC s8uare kilometres<# and comprises of four 3ones# /ronagiri# 'alamboli# Alwe and the regional park 3one ;%P5< of $#FJ" ha. In addition# !"" hectares of land adIacent to the port is proposed to be contributed by JNP7. +I/+4 has already ac8uired the land in the 3ones of /ronagiri# 'alamboli and Alwe. 2and in the %P5 area has not been ac8uired. J!
NM,E5 is the only new ,E5 in India where the land ;except the %P5 area< is in possession of the proIect sponsor. 7his significantly reduces the possiblity of any regulatory delays on account of land transfer and impro es time to market for the ,E5. +ertain 3ones in the ,E5 area like /ronagiri and 'alamboli ha e been partially de eloped. 7he existing de elopment includes basic infrastructure such as access roads# master water supply and sewerage network# and a few commercial and residential complexes. (owe er# no de elopment has commenced in the Alwe 3one. 7he %P5 is proposed as a green belt and no industrial acti ity is en isaged in this 3one. 7his 3one could be utilised for recreational acti ities and proposed infrastructure in the 3one includes a club house# golf course and other recreational facilities amenities.
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NM,E1)est positioned ,E5 in India

*n analysis of NM,E5Ds strengths and the a ailable opportunities brings out the attracti eness of NM,E5 as an in estment destination for potential tenants and in estors. 7he analysis has been conducted by the Ernst O Loung led consortium on the basis of factor considerations ;a ailability of raw material# labour# infrastructure# policy incenti es# and competition from international and local ,E5s# etc. Stren)ths Infrastructure Proximity to international and domestic transportation infrastructure.
JNP7# which is adIacent to NM,E5# is IndiaDs largest and most modern seaport pro iding necessary linkages to the international markets. &urther# the ,E5 is in proximity to Mumbai Port# which is also a maIor port in the country.
+hhatrapati ,hi aIi International *irport at ,ahar# is K"90" minute away. &urther# the second Mumbai International *irport is planned to be set up by >"$"# which will gi e a boost to air1cargo1linked industries. 6ell1connected road and rail linkages 1 National (ighways ;N(!# C# F# 0 O $E< link the area to the rest of the country.
6ater transport# linking south Mumbai to NM,E5 is expected to boost accessibility to the area.
6ith con enient rail# sea# road and air linkages# NM,E5 is best placed to create a world1 class trans1shipment hub in Na i Mumbai. 7his would di ert a lot of existing traffic from Mumbai and nearby areas to the ,E5# increasing a enues to earn additional re enues
+ro%imity to .um,ai and $a0i .um,ai Proximity to international and domestic transportation infrastructure
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Jawaharlal Nehru Port# which is adIacent to NM,E5# is an efficient container port pro iding necessary linkages to the international markets. &urther# the ,E5 is in proximity to Mumbai Port# the largest port facility in the country. +hhatrapati ,hi aIi International *irport at ,ahar# is K"90" minute away. &urther# the Na i Mumbai International *irport is expected to be set up by >""E1"F# which will gi e a boost to air1cargo1linked industries 6ell1connected road and rail linkages 1 National (ighways ;N(!# C# F# 0 O $E< link the area to the rest of the country. 6ater transport# linking south Mumbai to NM,E5 is expected to boost accessibility to the area. 6ith con enient rail# sea# road and air linkages# NM,E5 is best placed to create a world1class trans1shipment hub in Na i Mumbai. 7his would di ert a lot of existing traffic from Mumbai and nearby areas to the ,E5# increasing a enues to earn additional re enues
+ro%imity to .um,ai and $a0i .um,ai ;ccess to tradin) centres 7 Mumbai is a regional and national trading centre for many products ;e.g. gems and Iewellery ;ccess to cheap and sCilled manpo er7 Na i Mumbai is located on the Pune1 Mumbai17hane knowledge corridor# and has access to skilled manpower from reputed national and international educational institutes including engineering and technical colleges# management institutes# etc. &urther labour costs in the region are significantly lower than those in other de eloped countries# thereby pro iding outsourcing opportunities ;ccess to social infrastructure 7 +I/+4 has de eloped the residential areas in Na i Mumbai and )elapur region. 7hese residential units are ready for occupation ;ccess to hu)e ur,an marCets 7 Mumbai# Na i Mumbai and Pune# with a population base of approximately $J million are within the catchment area of the ,E5.
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;ccess to finance 7 NM,E5Ds proximity to Mumbai# the commercial centre and financial capital of the country# will pro ide unlimited access to capital# for the units located in NM,E5.
Infrastructure a0aila,ility 7he Na i Mumbai region has ade8uate power generation capacity 6ater from +I/+4Ds own dams is a ailable in plenty Internal infrastructure such as water supply pipelines and internal roads# etc.# has already been de eloped within /ronagiri 3one Existence of international and national transport infrastructure along with the significant internal infrastructure that is already de eloped pro ides a head1start to NM,E5 as compared to other local ,E5s
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CI:C4 as co7promoter +I/+4 is a premier town planning O de elopment agency in India# and has established itself as an excellent infrastructure pro ider o er the years. +I/+4 has been instrumental in the de elopment of Na i Mumbai. +I/+4 is a special planning authority for a number of other urban areas in Maharashtra. /ue to its long1standing experience in township de elopment and the success of the Na i Mumbai township proIect# +I/+4 has been in ited by se eral other Indian states to pro ide consultancy ser ices on city9township de elopment. /ue to its expertise in town planning as well as its success in Na i Mumbai# .oI has appointed +I/+4 as the nodal agency for the planning# de elopment and marketing of NM,E5. +I/+4Ds presence as a co1promoter to the proIect would pro ide NM,E5 with an existing administrati e setup that would help implement the proIect effecti ely# as well as pro ide easy access to a 8uasi1go ernment body that would facilitate the interaction between NM,E5 and the .oM. +ro%imity to other industrial areas Proximity to well1de eloped industrial areas such as *mbernath# )elapur# /ombi li# 'alyan# Nasik# Nagothane# Pune# 7hane# 7aloIa# etc.# pro ide excellent linkages with support industries and suppliers of intermediates# to the units that would come up within NM,E5. .iscellaneous
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+limatic conditions are fa ourable in Maharashtra for growing fruits# egetables# flowers which ensure abundant supply to agro1based industries MaharashtraDs long coastline of E>" km and ri er length of !>"" km could be le eraged to boost the exports of marine products
4pportunities Industrial units in India are increasingly looking out for industrial estates and integrated facilities# where infrastructure facilities are on par with international standards. 7here is an increasing trend among unorgani3ed sectors to mo e to integrated facilities in order to get cluster and common infrastructure benefits. ,uch industries include .ems O Jewellery# )iotech# Information 7echnology# toys and leather. 7hese sectors can reap the benefits of clustering. NM,E5 will be catering to the specific needs by building speciali3ed encla es for these sectors 7here is an increasing trend worldwide for de eloping trans1shipment facilities in order to achie e transportation efficiencies. JNP7 has the potential and is also being positioned as a trans1shipment port. .i en NM,E5Ds access to airports# road O rail networks as well as JNP7# there is significant opportunity for NM,E5 to position itself as a transshipment hub ,e eral infrastructure facilities like the airport proIect# sea1link proIect# water transport terminals# extension of railway network# etc.# are planned to be de eloped in order to cement NM,E5Ds position as a leading industrial township
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;dministration of SEZ
7he o erall administrati e responsibility for the ,E5 shall est with the designated /+ of the ,E5. 7he /+ shall function as a 8uasigo ernment body# and shall perform all the functions as laid down in the (andbook of Procedures# :ol. $. *s per the ,E5 policy# powers of se eral state departments# including +ommissioner# O central the Pollution go ernment 2abour +ontrol
+ombined board appro al
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)oard and many with the /+# thus
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,E5 policy O EHIM %ules &EM * %ules

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others shall
Ministry of +ommerc e
est
making the /+
,tate .o ern ment

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2abor 2aws /e elopment +ommissioner ,P: )oard
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7enants
5pcomin) SEZs in India

6ith the announcement of the pre ious two successi e EHIM Policies fa ouring the establishment of ,E5s# most of the states ha e decided to be a part of the ,E5 re olution. 7he details of the maIor ,E5s and their stages of completion are gi en below?
+ositra SEZ Gu/arat

7his is the most hyped ,E5 proIect in India these days. 7he location is the Port of Positra ;near Pipa a in Jamnagar<# .uIarat and the expected area co ered will be around >"" s8uare kilometres. 7hose in ol ed in de eloping the island city1state of ,ingapore will undertake the designingB master planning and detailed engineering of Positra ,E5. ProIect /escription 7he proIect is considered to be the first of its kind in the world# as similar ,E5s across the world including the ones in +hina# (ong 'ong or Mauritius are owned and run by the respecti e go ernments. 7he Indian proIect is expected to become operational in three years.
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In the first phase# to be completed by >""! at a cost of %s C" billion# the central business district co ering C" s8uare km will be set up alongside the roads# railways and airport. 7he second phase will co er construction of the seaport and Ietties# while in the third phase entertainment facilities and de elopment of the outer periphery of the 3one for chemical industries would be undertaken. *ll the companies and ser ices inside the 3one will ha e to adhere to a minimum Euro II standards1these are en ironmental norms for industries which are located in coastal areas. A,P 7he uni8ue alue proposition of P,E5# according to its promoters# is a powerful I7 infrastructure# complete with an in13one optic fibre cable backbone and data storage centres. 7he ,E5 is positioned as world-s first digitised economic 3one. 7he whole idea is to build a global class and globally competiti e infrastructure to gi e a tough competition to other ,E5s in this part of the world such as ,hen3en# ,hintou# 7inIiang# Jebel *li and 7aiwan. &inancing 7he .uIarat Positra Port Infrastructure 2td ;.PPI2< e8uity pie has already been car ed up between the ,'I2 ;JC per cent<# the .uIarat .o ernment ;$$ per cent<# the Jurong 7own +orporation and the ,umitomo +orporation ;$" per cent each< and three &IIs ;J per cent each<. *s per original proIections# the e8uity was to the tune of %s $#>E> crore while long1term debt was marked at %s !#$F" crore. 7he remaining %s $#>"" crore was to be raised through -lease depositsD from those units who planned to set up shop at the ,E5. 7he total in estment in the economic 3one plus the proIect cost ;which is direct in estment< is pegged at M> billion or around %s 0#>"" crore. 2atest /e elopments 7(E %s J#KJ>1crore Positra ,E5# being put up by the .uIarat Positra Port Infrastructure 2td ;.PPI2< is now faced with the task of relocating its Ietty site to 4kha# >"1odd km
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away from the originally mooted site at Positra. 7he cost o erruns may be to the tune of %s J"" crore as the .PPI2 will now be forced to undertake construction of a breakwater# a !1C km1long trestle to the offshore Ietty site and considerable amount of dredging at 4kha.
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$an)unery SEZ Tamil $adu 7amil Nadu is going to house the country-s first greenfield ,pecial Economic 5one ;,E5<. 7he ,E5 will be set up at Nangunery and be de eloped by the state go ernment and the 7amil Nadu Industrial /e elopment +orporation ;7NI/+< in collaboration with some pri ate companies# the main promoter being *d anced 7echnologies Manufacturing and *ssembly +ity ;*7M*+<. 7he ,E5 will be totally pollution1free and geared to attract hi1tech in estments to boost exports. )esides the industrial area# the Nangunery ,E5 will include a golf course# modern recreation centres including mo ie halls and multi1cuisine restaurants# battery1operated buses# upmarket schools# glit3y retail arcades and a hi1tech hospital. It will target big software companies including the A,1 based Intel# ,un Microsystems and +isco# among others.
;tchutapuram7Ram,ili SEZ ;ndhra +radesh

7he exact site for this 3one has not yet been finali3ed. In fact# 'PM. +onsulting has been hired to recommend the location and cost of the ,E5. 7he consultant was appointed to help the state go ernment in selection of site# outlining the role of the state go ernment in the proIect and also in suggesting policy changes re8uired to be effected in the present laws. 7he initial in estment for the proposed special economic 3one in *ndhra Pradesh has been pegged at %s $#FK" crore. 7he 3one is proposed to be located on the east coast in *tchutapuram1%ambili area. 6hile part of the base infrastructure is likely to be pro ided by the go ernment# the proIect has been will be implemented entirely through pri ate initiati e.
Bassan SEZ 7 DarnataCa

'*%N*7*'* plans to set up special economic 3one with an area of >#""" acres at (assan. *s per the plan# the state go ernment is to pro ide infrastructure and the union go ernment would take care of excise# customs and taxation. 7he +entre has cleared the proposal. (ence# the Infrastructure /e elopment +orporation of 'arnataka ;I/ec'< has
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been asked to gi e a detailed proIect report ;/P%< on the proposed ,pecial Economic 5one ;,E5< at (assan.
.undhra SEZ Gu/arat

*fter the earth8uake# the go ernment has announced special tax incenti es for in estors in .uIarat. It is to a ail of these benefits that the *dani group proposes to de elop the Mundra port as a special economic 3one at a cost of %s J"" crore. 7he .uIarat go ernment will shortly re8uest the +entral go ernment to sanction this proIect proposal. 4nce the Mundra ,E5 proposal is appro ed by the +enter# the state go ernment will ac8uire the necessary land and hand it o er to *dani for de eloping industrial parks with complete infrastructure facilities. 7he Mundra ,E5 will accommodate only exporting units.
Gopalpur SEZ 4rissa

7atas ha e finally got a permission to set up a ,E5 in .opalpur after their plan to set up a $"1mn steel plant did not materiali3e. 7he proposed ,E5 will be built on the !#J""1acre land that 7ata Iron and ,teel +ompany had originally purchased to set up the steel plant. 7he group has already spent %s$.Jbn to buy land for the steel proIect and to rehabilitate the displaced owners. 7he 4rissa state go ernment has granted the proposal to build ,E5 after its mo e to de elop .opalpur# the only deep1water port in eastern India. It has been reported that *dani Exports# part of the %s.!J bn *dani .roup# has already signed an agreement with the state go ernment for the de elopment of the port. 7his would be a build1own1operate1transfer scheme for a concession period of !" years. 7atas reportedly came up with the idea after the 4rissa go ernment started de eloping the .opalpur port which can easily cater to big cape1si3e essels o er $>"#""" tonnes. It would help any industry that wants to focus on olumes# as they would need such big
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cape1si3e essels to enIoy the freight ad antage. 7isco plans to de elop the ,E5 with infrastructure facilities and then lease it out to potential in estors.
4ther SEZs
PunIab is assessing the iability of setting up a ,pecial Economic 5one ;,E5<. 7he likely choice of location is 2udhiana or any other suitable place the industry may suggest. .oa has decided to ask 7ata +onsultancy ,er ices ;7+,< to study arious aspects of its proposal to set up a special economic 3one ;,E5< in the port town of Mormugao in south .oa. 7he state go ernment was exploring the possibility of ha ing tourism and hospitality sectors along with industrial growth as the main focus of the ,E5.
2ist of ,E5s appro ed for establishment ;F.$<
$ame of the SEZ Positra ,E5 Nanguneri ,E5 )hadohi ,E5 'anpur ,E5 'akinada ,E5 Paradeep ,E5 .opalpur# ,E5 'ulpi ,E5 Indore ,E5
$ame of +romoter .uIarat Positra Port Infrastructure 2imited# *hmedabad 7amil Nadu Industrial /e elopment +orporation# Madras ,ecretary# ,mall ,cale Industries O Export Promotion# .o t. of AP# 2ucknow Principal ,ecretary ;Industries<# .o t. of *P# (yderabad ,ecretary ;Industries<# .o t. of 4rissa# )hubhaneshwar Principal ,ecretary# +ommerce and Industries /ept# .o t. of 6est )engal# 'olkota Principal ,ecretary# +ommerce and Industries /ept# .o t. of Madhya Pradesh# )hopal
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'urrent de&elo$ment on SEZ *fter suffering ceaseless bashing from the skeptics for years# special economic 3ones ;,E5s< ha e finally caught the fancy of India-s Inc. In estment worth %s $"""" crore ha e been lined up for the next three years and ,E5s fe er has caught all categories including pri ate sector companies. P,As# state go ernment and foreign in estors. &rom MN+s like Nokia and (ewlett Packard# to domestics giants like %eliance Energy# 6ipro# %eliance Industries and Mahindra# states like Jharkhand# and P,As like MM7+ and +ochin Port 7rust are busy finali3ing ambitious in estment plans# +ommerce and industry minister 'amal Nath. (ad 8uoted that the in estment are flowing in industries# like telecom# I7# software# auto ancillaries# gems# and Iewellery# textiles# handicrafts and electronics. 0ri&ate ector1 2u 3 2EE 4ueue in de&elo$ment of SEZ

%eliance Energy has ac8uired $""" hectares in .ha3iabad for multi1product ,E5 I7 maIor 6ipro has committed an in estment of %s $E$" crores in se en locations. 6ipro-s ,E5 are to be located in (yderabad# +hennai# Pune# )angalore# 6est )engal and Noida ;AP<. 7he biggest ,E5 in estment of the I7 maIor is earmarked for +hennai at %s CJ" +rore. (P is in esting %s !""" crore in an I7 ,E5 in )angalore. Nokia is pumping in %s KEJ crore in ,riperumbudur near +hennai for telecom e8uipments well as ser ices. %eliance industries has committed %s J""" crore for a petro product ,E5 at Jamnagar in .uIarat Mahindra has lined up %s !"" crore in separate proIects in 7amil Nadu +ochin Port 7rust has obtained permission from the go ernment to in est %s F"" crore in a port based ,E5 which will be located close to Puthu ypeeen or :ailarpadam in 'erela . Maharashtra *irport /e elopment +ompany has sought permission for a $!"" hectare ,E5s in Nagpur.
*nd many more ,E5 ha e been lined up to be opened in the country
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State !o&ernment in&e tment in SEZ
,tate .o ernment of Jharkhanad is planning to in est %s $$JK crore in $>"" hectare facility in %anchi. (aryana ,tate Industrial /e elopment +orporation has obtained appro al of in esting %s >""" crore in .urgoan AP ,tate Industrial /e elopment +orporation is planning an in estment of %s >$"" crore in 'anpur *P ,tate Industrial /e elopment +orporation has obtained a permission to in est %s >""" crore in :isa ,tate Industrial /e elopment +orporation khapatnam *s many as JJ ,E5s ha e been appro ed so far and more application are coming in
0S5 60ublic Sector 5nit 7 In&e tment in de&elo$ment of SEZ
MM7+ ;Mineral and Metal 7rade +orporations< Is setting up a warehouse ,E5 at (aldia in 6est )engal. 4N.+ is working with .uIarat ,tate Industrial /e elopment +orporation for multi1purpose ,E5 at /aheI at a cost of %s >0C crore /elhi Metro (as been allowed to set up a %s $E" crore ,E5 at ,hastri Park in /elhi
Conclusion
Exports from Special Economic Zone
Zone $an%la SEZ SEEPZ-SEZ &o!%a SEZ 'a%ras SEZ (o"h!n SEZ )alta SEZ *!sa+hapatna, SEZ S-rat SEZ .a!p-r SEZ /n%ore SEZ 'an!+an"han SEZ Total 2003-2004( s. !n "rores# 1018.82 7832.81 1534.17 1037.96 298.91 825.34 435.67 869.9 2004-2005( s. !n "rores# 1060.14 8298.59 4266 1376.91 462.99 569.15 579.27 1539.72 5.27 55.02 95.54 18309
13853.58
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Importance of a SEZ
,E5s attract foreign in estment resulting in the fusion of ad anced technology# thereby impro ing standards of 8uality and efficiency in products offered in the export market. (igh employment and technology tranferthrough the &/I ,E5s continue to be efficient ehicle for increased exports. It can bring a double digit growth. 6ith its preferential fiscal policies it helps to create Iobs and reduce regional disparity. Migration of capital labor and technology across geographical boundaries would reduce disparity at all le els and lift the economy to higher le els of growth. ;nalysis of the SEZ Scheme in India 7he decision of the Anion Minister for +ommerce and Industry Mr. Murasoli Maran to set up ,pecial Economic 5ones in India based on the successful +hinese models to attract foreign in estment and boost exports is a mo e in the right direction. . )ut the obIecti es of this mo e will be met only if certain essential conditions are met. ,imply designating certain areas won-t do the trick. 7he success of the ,E5s hasn-t come merely from wishing it. 7he following fundamental factors can be identified as influencing +hina-s success# and it is these that India should bear in mind when working out the plans for its ,E5s?
Community Support
7he +hinese ,E5s ha e enIoyed support from the +hinese communities in (ong 'ong# 7aiwan# and elsewhere. In fact# nearly E" per cent of all foreign in estment in ,hen3hen is from (ong 'ong Iust as most in estments in 5huhai are from 7aiwan. 7his pro ided the bedrock on which ,hen3hen was able to build and the early momentum that made its task of attracting other foreign in estors easier. India-s proposed ,E5s would need a similar initial push# and that could come only from the ast expanse of Indians worldwide. India should try and reach out to the successful
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industrialist families abroad. 7his community has not been gi en the importance it deser es# and as such has been ignored till now. 7here are many successful patriotic Indians who want to do their bit for the country. 6hen such alumni can donate huge funds to institutes like II7# they would surely be interested in any such enture# which would help de elop their nation. Strate)ic Aocation * AinCed Gro th *lmost all the +hinese ,E5s and E7/5s are located in# around# or not too far from pro incial capitals# economic strongholds# or transport hubs. In fact# the entire initial bunch of $C E7/5s that +hina established in $0FC in ol ed existing coastal cities# such as /alian# 7ianIin# ,hanghai# and .uang3hou. )eing close# the 3ones and the cities nourished one another and created an irresistible dynamism for growth. 7he lesson here is simple? ,E5s won-t succeed if they remain isolated encla es out in the boondocks# simply as collections of factory buildings and sheds. 7he best example is the Na i Mumbai ,E5 which is strategically located. Na i Mumbai is well connected to Mumbai both by wide roads and mass rapid rail systems. 7ra el time from MumbaiDs central business district at south Mumbai aries from CJ minutes ;water transport< to K" minutes ;road9rail transport<. IndiaDs busiest domestic and international airport +hatrapati ,hi aIi International *irport 1 is Iust 0" minute dri e from Na i Mumbai.
Scale * .a)nitude * ery important factor in the success of +hina is the scale and magnitude of special economic 3ones. 7he fi e largest such 3ones in +hina @ ,hen3en# 5huhai# ,antou# 5iamen and (ainan @ exported M >K billion in $00C# almost >> per cent of the total exports. 7he Indian +ommerce Minister said 7aking the si3e into consideration# I propose to consider them ;Positra of FF" hectares and Nangunery ,E5 of $"$> hectares< as our countryDs two first ,pecial Economic 5onesDD. (e further said? 6e expect that the minimum si3e of the ,pecial Economic 5one shall be C""1J"" hectares or moreDD. ;4ne s8uare km consists of $"" hectares<.
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It would ser e little purpose if such tiny areas were being considered for the establishment of ,E5s in India. 7he first four ,E5s set up in +hina in $0F" had areas as follows? ,hen3en with !>F s8 kmsB 5huhai with $>$ s8 kmsB ,hantou with >!C s8 kmsB and Hiamen with $!$ s8 kms. +hina subse8uently set up two more ,E5s @ Pudong with J$F s8 kms and (ainan ;a whole island and a pro ince< with !C#""" s8 kms. India cannot e en dream of replicating the +hinese success if it goes in for ery tiny ,E5s. 7he proposal to allow tiny ,E5s in India would perhaps imply that the concept of the +hinese ,E5s has not been understood. 6hile the small EP5s operating in India# ranging from C" hectares to !"" hectares# are meant only for export1manufacturing# the +hinese ,E5s permit foreign in estments in a whole range of economic acti ities @ hence the appellation =Economic- 5one 1 such as industrial production# agriculture# commerce# tourism# housing# etc. 7his would ob iously imply that one should look at ,E5 si3e similar to a taluka9district or e en a pro ince. 7he ,E5 concept en isages multi1sectoral foreign in estments bringing about all1round regional de elopment while promoting foreign capital inflow# export production# technology transfer and employment generation. * large chunk of %aigarh district ;Maharashtra< forming the hinterland to the Nha a1 ,he a Port ;Mumbai< could make an ideal ,E5. *lso# the whole of .oa ;!E"> s8 kms< can be another ideal ,E5. 6e should look at the landmass where foreign corporates would be attracted to come and in est in exporting industries as well as in hotels# resorts# agriculture# telecommunications# power1generation# etc. %ecently companies like %eliance Energy and Mahindera and Mahindera are ac8uiring more $""" hectares of land to de elop ,E5s. In India# as per norms prescribed for ,E5s# the area has to be around $#""" to >#""" acres. Naturally ad antage went to states like .uIarat# Maharashtra# 7amil Nadu etc. Now the go ernment is considering reducing the si3e of ,E5 to benefit more states. If this is the way location and si3es of ,E5s are going to be decided in India# we should be ready for another potential failure in the go ernment-s string of export promotion measures.
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+onsidering all the implications of si3e on the success of an ,E5# this factor has to be gi en due consideration and all decisions related to it ha e to be based on obIecti e facts and figures# and not otherwise. Ae)al ;utonomy * Aa,our Aa s 7he +hinese ,E5s ha e their own legislature and can enact their own laws and regulations# including labour laws. 7he ,E5s are marked by decentralised administration. 7he ,E5s are administered by P*,E5 ;the Pro incial *dministration of ,pecial Economic 5ones<. 7his effecti ely ensures the in ol ement of the pro incial administration in the management of the ,E5s. 7here are also some special pro isions for industrial relations applicable to the industries and other entures in the +hinese ,E5s. &oreign companies in the +hinese EP5s enIoy tremendous flexibility in terms of labour laws. Employment is contractual# the wages @ subIect to a minimum between $>" per cent and $J" per cent higher than state enterprise wages @ are fixed by the companies themsel es# and retrenchment is permitted. 7hese apart# the go ernor of the ,E5s in +hina has enormous powers# including the right to appro e proIects in ol ing in estments up to M !" million# and grant concessions and incenti es to foreign players. (owe er# in India# the EP5 management has been astly +entre1dri en. /espite the freedom from import and export licensing as well as tariffs# our EP5 enterprises ha e been ha ing a difficult experience with the customs administration. 7he +entral go ernment should in est customs responsibility and powers in the de elopment commissioners manning the ,E5s if unnecessary red tape and harassment to the 3one1 exporters ha e to be minimi3ed. *dditionally# India has a large labour force and if we were to mo e o er to capital1 intensi e industries there will be more unemployment. )ut the need of the hour is to accelerate growth# which can come only if we re erse our operating stance from that of a labour1intensi e industry to that of a capital1intensi e industry.
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In India# the only ray of hope for units in ,E5s is that the /e elopment +ommissioner of the 3one ;who is appointed by the +ommerce Ministry< will double up as the 2abour +ommissioner. 7his is expected to minimi3e the time taken to settle labour disputes. 7hatDs small comfort# gi en the countryDs rigid labour laws. 7he issue of simplification of labour laws for ,E5s was left unanswered by Mr. Maran in the EHIM Policy. 6ithout this authority for independent economic management# ,E5s will remain a cripple# always depending on pro incial or federal support and# therefore# e er susceptible to political influences. Infrastructure and #acilities E ery nation re8uires a good infrastructure to for a consistent growth and de elopment. It is said that when Anited Nation of *merica became independent the first thing which they de eloped was their infrastructure. +hina is ahead i.e. is growing fast then India because it has first1class infrastructure in place. %ecently one of the important agenda in India-s planner is to de elop its infrastructure and progress in the construction of the ,E5s is one of the ways towards it. *s ,E5 does not concentrates only on de eloping industrial estates but endea ors in the de elopment of township. *ll +hinese ,E5s and E/75s ha e superior logistic support and transport and communication links. * maIor contributor to +hina-s success is its in estment in the infrastructure. 7he +hinese go ernment has spent M ! billion in the infrastructure alone in Pudong O it is committed to spending ECC billion in infrastructure in $00J1>""C. *s opposed to this# a paltry few billions were proposed to be spent on infrastructure in India# in the Anion )udget of $0001>""". In fact# a maIor part of +hina-s post1open door infrastructure spending has gone into creating# strengthening# and expanding these links to bring the 3ones closer to ports# airports# and railheads as well as to maIor cities across the country.
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Mo ing o er to /ubai# the Jebel *li &ree 7rade 5one# famous for its state1of1the1art technology and logistics# has fuelled economic growth of /ubai. 7he &75 contributes almost a 8uarter of all outbound trade from the Anited *rab Emirates. ,tructuring India-s ,E5s along the lines of o erseas ,E5 models can be risky. &or# the ground conditions are astly different in India. ,o# India should take care to ensure free flow of financial and fiscal concessions in these Indian ,E5s. &or instance# in Jebel *li &ree 7rade 5one there is an uninhibited free flow of capital and profits. 7here are no currency restrictions there# nor is there any corporate or personal income tax. 7he ,harIah *irport-s International &ree 5one has the biggest air cargo hub in 6est *sia and *frica. *part from no import restrictions# this &75 allows $"" per cent ownership and repatriation of funds. India has a complicated market structure and if it wants to set up ,E5s like those in the rest of the world# it will ha e to put in place the logistics of market structure and functioning. ,E5s function independent of the rest of the market and differ in their market policies. 7hese 3ones should in fact function in an en ironment free from complex and irksome regulations and high tariff rates. 7o facilitate such wrinkle1free functioning of ,E5s# the Indian go ernment will ha e to integrate the arious departments in ol ed such as customs# sales tax# en ironment and pollution control. ,uch integration is possible only if a forward1thinking foolproof policy is put in place and no tinkering is done thereafter. 6ithout such a logistical framework# Iust setting up ,E5s will not work. E entually# nothing pleases an in estor more than de eloped infrastructure and a working en ironment that-s free of bureaucratic hassles.
Go0ernment ;ttitude
EC
7he attitude of the +hinese go ernment has been marked by strong determination and commitment when it comes to liberali3ing# e en though it is in selecti e areas. 7here ha e been no half1hearted steps in any direction. 7here has also been no lagging behind# when it comes to taking steps to ensure success of its endea ors. 7his is e ident especially from the proacti e measures taken by the go ernment in matters related to ,E5s. E en India has had a series of EP5s in the past. )ut today# they ha e lost their rele ance and are in no way better off despite all the policy announcements and liberalisation measures. 7hey ha e become non1operati e blocks. *ll this is because# In India# there is little con ergence of obIecti es and strategies between the union and state go ernments. *s such# policies are short1li ed and lack long1term ision. 7here is dilly1dallying in implementation of policies. 6ith a change of go ernment at the centre# there is a change in stance and perception of policies resulting in a lot of confusion among the exporters. 7here is then no initiati e on their part to increase olumes. India has good economic ad isers but sadly enough their policies only gather dust. * &ree 7rade port was to be set up in 7uticorin# .oa and *ndaman Nicobar islands according to a suggestion. 7en years ha e passed and the policy1makers ha e forgotten the issue. +hina used a different exchange rate system in the initial years to kick1start in estments. * unified exchange rate was introduced only in $00C. * recommendation to do the same thing was gi en in the %auna8 ,ingh +ommittee %eport ;$0FJ< that recommends a different exchange rate# or currency# for ,E5s ;following the argument that an under alued currency would boost exports<. 7he Indian go ernment was not e en willing to consider this recommendation for reasons unknown. ,E5 was created to set up a special encla e where companies could ha e incenti es and infrastructure to focus on exports and a oid the reams of red tape they usually face. Instead# the New *ct could end up merely pro iding a new and lucrati e tax shelter for corporate India# with little impact on export growth. *nd the go ernment could lose aluable tax re enue in the process.
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2et us discuss the pro ision of the New *ct
The 8e# %'T 299.

)xporters will continue to get corporate tax exemptions well be ond <009C /00D +or > ears& >0 D +or the next +i#e ears a+ter that on the pro+its ploughed bac' +or in#estment 1+ the units are relocated to an !)* exporters can claim capital gains tax exemptionE such units will be eligible +or tax brea's e#en i+ the arenFt reall +resh capacities -o limit on sales +rom an !)* unit within 1ndia& though the exporter has to pa custom dut . All imports into the !)* are dut (+ree !)* units can raise +unds +rom the international mar'et through external commercial borrowings o+ up to : >00 million a ear. /00D +oreign direct in#estment allowed +or !)* manu+acturing units 9nits can in#est or ma'e business pa ments o#erseas out o+ export earnings with +ew restrictions. "an#! $hich !et up off !hore ban#ing unit! in the S5'! can get income ta. e.emption! for that operation for 10 ,ear!
*ccording to *rdhana *garwal an associate professor at the department of business economics in /elhi Ani ersity who has researched the impact of ,E5 is of the opinon that in India # companies who shift to an ,E5 purely take ad antage of tax benefits# *nd when the tax benefits expire they shift out. In past Indian companies ha e been making such use of indirect tax holidays gi en by arious states like (imachal Pradesh or union territory like ,il assa for years. 4nce a
EK
company uses up the sales or excise tax benefits in one states it simply shutsthe unit and shifts it to another state where it can get those benefit all o er again Experts are skeptical about whether the *ct will actually promote exports. &or instance# Nokia which is setting up a plant in ,riperumbuerur ,E5 for manufacturing handsets and telecom e8uipments # has no plans of exporting from there as now. )ut the act pro ides no concession on the labor laws# which is fully be applied in the ,E5s 7he Indian go ernment always takes a ery short1term iew and caught in its fiscal mess has no better option but to stall the proIect. 6ith too many windows in the administrati e setup# complications are bound to arise and misunderstandings will take place. Anless and until an o erall liberal framework is designed to look into monetary# trade# fiscal# taxation# tariff and labour policies# all other efforts will go waste. To sum up SEZ ill ,e the launch pad for future economic )ro th and ha0e come to stay
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Economic Zones

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Whats Special About Special Economic Zones

Introduction to Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Types of Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Genesis of Chinese Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

with the example of ,hen3hen ,E5 in the following +hapter.

Whats Special About Special Economic Zones

Windo to the World! Shen"hen SEZ

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

2.2 An exhibition being held in !hen$hen !)* to showcase new technologies

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

#uture of Shen"hen $e%t & 'ears

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Impact of SEZs on Chinese Economy

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

(e)innin) of Economic Zones in India

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Shortcomin)s * +ro,lems of E+Zs

Total Exports EPZ Share

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

+resent SEZ Concept

Whats Special About Special Economic Zones

Foreign exchange related:

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

7he ,E5 units are allowed to sub1contract part of the

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Whats Special About Special Economic Zones

Infrastructure #acilities at SEE+Z