Special Economic Zone

Suneel Gupta Associate Professor GHS-IMR,Kanpur

It all started with the export processing Zones (EPZ). As these are serving only a limited purpose, the exim policy proposed the setting up of Free Trade Zones (FTZ). Although not much was achieved on this front, it was envisioned to set up Special Economic Zone (SEZ) an advanced version which is thriving in China. The concepts of EPZ/ FTZ/SEZ find their roots in the widely believed philosophy that wealth starts growing at some point and spreads out. Worldwide their many such zones and most of them are concentrated in the developing countries. The EPZs were created with a view to bypass the complicated and time consuming regulations of the Industrial policy. In addition their exits some special or no tarrif and taxes for the firms operating from the EPZs.

However as the policy frame work has been changing the EPZs are unable to serve the purpose and find it difficult to attract the attention of potential investor. Thus there is need to restructure the EPZs so that they become more capital intensive

Another concept that finds close link with EPZs is free port, where the regulatory bottlenecks for the export items will be eased out. On the other hand The FTZs serve as where houses where the Imported items, for re-export are stored and no tariffs will be imposed on these items. The is an advanced version of EPZs and FTZs and for its implementation, the macro economic policies and labour laws have to be revamped.

FTZs in Dubai, Known for state-of-art Logistic, has triggered The development of Dubais economy.The Sharjah Airport International Free Zone has the biggest air cargo hub in West Asia and Africa.The zone allows 100% ownership and repatriation of funds with no currency restrictions. There is no Corporate or personal income tax, nor any import duties.

1950- Success of Ireland Shanon Free Zone 1962- Puerto Rica 1964-Mexico 1965- Kandla 1966-Taiwan 1971-South Korea 1972- Philippines and Malaysia There are 850 EPZs worldwide.

A FTZ is essentially a bonded warehouse facility to store Imported goods ultimately designated for re-export without payment of duties.

SEZ: Lesson from China

Why did Kandala,the first free trade zone of its kind in Asia, fail while Chinas Shenzen ,a late entrant, succeed? What explain the fact that Shenzensa GDP now stands at nearly $21 bn, annual foreign trade at nearly $65 bn, while Indiass annual trade stands approximately at $ 70 bn? The answer are not so far seek.

Unwavered approach of China. In India, the Special Economic Zones (SEZs) are the latest mantra for boosting exports. Though India embarked on a liberal route in the early 1990s, its policies for promoting export have hardly paid off. All it has to show after a decade and a half of export processing zones (EPZs) export oriented units (EOUs), and other measure is a measly 0.8 percent share of the worlds exports. Besieged at every stage by structural and attitude barrier, Indias trade promotion policies still remain a uncelebrated dream

The Indian commerce minister, Murasoli Maran Says is quite insignificant for country of our size and capabilities He was completely sold on, the idea of SEZ he spelt out the SEZ as the principle vehicle for export promotion in future. SEZ began in in China in 1979, singling out southern coastal province of Guangdong and Fijian for special treatment.

Chinas first brush with globalization begin with Shenzen, bordering Hong Kong, where it established its first SEZ in 1979. In just 20 years, this small fishing hamlet acquired the status of a global manufacturing centre housing 10 million Chinese and an accumulated FDI at nearly $35 bn

SEZ . . . .the Context Post WTO

The world after 1990s What will make FZs relevant now?

Todays Choice zone vs. zone not nation vs. nation

Industry international production focus Multilateral equalopportunity MFN trade All countries are lowering barriers to compete for foreign trade and investment Regions are forming closed economic groups

Policy: national treatment of free zone goods

3 Concept of V i.e facilitationVelocity Volume and therefore Value

Capital: private ownership (service standards)

As per Kyoto Convention SEZ, Zones having the common features like
Areas enclosed by a fence or wall with supervised entry and exit points Import and export from these zones do not attract customs duties and other taxes applying to domestic activities All activities taking place inside the zones are considered to be outside the customs territory of the host country

Therefore SEZ is bundle of . . .

What is Special Economic Zone?

EOU
Cluster of EOUs & Bonded Area

Trading

Dry Port & Duty Free Enclave

ICD
Model Industrial Township Excellent Infrastructure Superior Governance Facilitative Environment

EPZ

FTZ

Integrated Infrastructure

Free Port

Special Economic Zone

Specifically delineated, duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties & tariffs

A designated duty free enclave and to be treated as foreign territory for trade operations and duties and tariffs.
The challenge is to provide Indore SEZ with first World infrastructure in a third World settings.

Special Economic Zone ( as defined by EXIM Policy)

Warehousing Hub
Special Economic Zone ICD Trading HUB
Model Industrial Township

Excellent Infrastructure

Strategic Location and Connectivity

Superior Governance

Facilitative Environment Real Inventory ValueCrossdocking & Time Bar Manage- Added ment Services Consolidatio coding n Centers Material Handlin g Facility Management

SEZ offer..
The various components of the Hub, seamlessly integrate the different elements of the supply chain

Raw Material Suppliers

Inbound ManuTransportation facturing

Inventory Outbound Customers Deployment Transportation Customers

Integrated Information Systems

SEZ offer..
INFRASTRUCTURE

Air Cargo Terminal Multi-Purpose Terminals Cross Docking & Consolidation Centres Central Distribution Centres Distriparks Cold Storage Leasing of Warehouses & Yard Space Transit back up & Warehouses

SERVICES

Warehousing Transport & Distribution Bar Coding, Fumigation, Quality Assurance & Control Inspection & Surveying Pick & Pack and repackaging Inventory Management Single Point Custom Clearance

SERVICE PROVIDERS

TECHNOLOGY

Transporters - Inbound & Outbound 3PL Providers Freight Forwarders Consignees Trade custom agencies Hauliers

Electronic Data Interchange (EDI) Computer Integrated Terminal Operations System Track & Trace Systems Vehicle Scheduling & Transportation Systems Inventory & Warehouse Management Systems

Positra: Indias first PSEZ

PSEZ will have an industrial park, business park, amusement park, theme park, residential area. More importantly ,it will have its own power plant, port and airport-initially domestic which later be scaled to international level. Paramount Studios of Hollywood, Universal Studio, Qwest, Delloitte & Touche is providing the consultancy support and zone is spread over 200 sq km area

A market network in London, headed by Gerard Rees, will market the zone to global investor. Sea King Infrastructure Ltd, the principal promoters, will invest 35% in the equity, Sumito Corp. of Japan, Jurong town corporation of Singapore and government of Gujrat are promoter. The payback period is estimated to be seven years and return on capital is 18 percent. The first Phase of project will cost Rs 5,630/ crore financed (loan) component is Rs 3480/ cr. Equity component is Rs.1400/ cr. And first phase will be completed by 2003

Proposed SEZ in India

Positra ( 880 hectare) Navu Mumbai ( 30 sq km) Bhadoi Kupri Paradeep Kakinada Nanguneri (1,012 hectare)

Present status of SEZ

150 SEZ are already approved and another 240 SEZ application 85 are in for IT and ITES 14 for pharma and Biotechnology 9 for textile and apparels 10 for multi product SEZs

Union commerce ministry claims that their an additional investment 100000 Crore mainly through FDI. 500000 additional jobs will be created through SEZ

Large Multi product SEZs

Developer Kakinanada, Andra Gujrat Adani port Area (Hectare) 1134 2658

Gujrat Industrial Dev. Corp Mundra SEZ,Gujrat

Essar Hazaria,SEZ

1768
1082 1100

Maharastra Industrial Dev. Corporation

1010

Large Scale Specific SEZS

Developer Reliance Infrastructure Claridges CPL,Infra,TN MIDC-5 Type Petro & petrochem Multi service Pharma Agro + Auto +Textile +Pharma Area 440

210
200 383 +200 +210 +208