chapter: 3 review of literature 3.1 introduction...
TRANSCRIPT
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CHAPTER: 3
REVIEW OF LITERATURE
3.1 Introduction
3.2 Review of literature
3.3 Summary
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CHAPTER: 3
REVIEW OF LITERATURE
3.1 Introduction
Special Economic Zone (SEZ) or Export Processing Zone (EPZ) as
defined by the World Bank and United Nations Development Organisation is an
industrial area that constitutes an enclave with regard to customs tariffs and
commercial code in force in the host country and are intended to provide an
internationally competitive duty free environment and quality infrastructure for the
exports at a low cost.
In this chapter, the researcher will review the main literature that deals with
the concept of the Special Economic Zones (SEZs) in order to assess their impact
on the economy. The researcher found the literature that evaluated both positive
and negative effects of the SEZs on the economy as well as properly explained the
concept of the SEZ. Although the literature does not cover all the criteria of the
SEZ, it lays ground for the analysis of SEZs. Therefore, the chapter deals with both
internal as well as external studies
3.2 Review of literature
Unido, (1980): export processing zone (epzs) in dev eloping contries
The aim of this study is to review the development of EPZs by comparing
and studying different stages of development of EPZs in Asia. It then examines the
objectives of the host country in establishing this EPZs While doing so; the study
assesses the impact of the EPZs in terms of their economic and social
consequences in the host country. The main finding of this study were: 1. EPZs
have succeeded in attracting foreign direct investment, 2. In the long term, success
of EPZs relies on the education and human resources policies in the host country,
3. Qualifying the employees and transfer of technology are primarily limited to the
nature of the production process used by the investors and the lack of complex
production processes.
Humilton and svenson, (1982): on the welfare efeect s of a duty – free zone
The aim of this study is to extend Hamada’s work and to examine his results
regarding the welfare effects on the host country from establishing FZs and
whether incentives relocate domestic production when the duty free zone is
opened toward the domestic economy. Hamiliton and svensson show that
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hamada’s conclusions regarding the relative importance of FDI in the FZs and in
the domestics economy was incorrect. The study of Hamilton and svensson is
based on a Standard H – O framework. According to its conclusions, if FDI is
subject tariff in a small – open economy it is indeed welfare reducing no matter
where it is located. However, FDI in an established FZs reduces welfare relatively
more than the same amount of FDI in the DZ.
David k.y.chu, (1982): tje costs of four special ec onomic zones to china
This study analyses the capital costs of establishing SEZs in china. It shows
that there are two kinds of cost combined together when the counter established
SEZs. The first one relates to the construction of infrastructure and the second to
the urban development of SEZs. It then shows that most of the capital cost of
establishing SEZs is largely the responsibility of the country (Chinese government
in this case). In the end, the study shows that the gain from establishing SEZs
should not be assessed by its financial rewards, as there are other non-monetary
benefits of SEZs.
Michael oborne, (1986) : china’s special economic z ones
The study aims to assess the effects of establishing of the SEZs on china’s
national economy. The study provides a review of the policy context and reforms,
traces foreign trade and foreign direct investment performances, and then
evaluates the SEZs in china. Furthermore, it examines the future role of SEZs in
the light of china’s experience. The study shows that SEZs were established as
part of the new “open door policies” that took place in the 1970s. The main findings
of this study are that there was an increase in foreign direct investment in, SEZs
and at the same time, there was an increase in the infrastructure cost.
Peter Warr, (1989): Export Processing Zones: The Ec onomics of Enclave
Manufacturing
The study examines the effects on the host country. it finds that establishing
EPZs is important for attracting foreign investment ( while at the same time they
are not useful for the domestic economy). The study indicates that gains from
technology transfer have not been realized because the EPZs are generally
isolated from the domestic economy and the EPZ companies have contributed little
to the tax revenues. Finally, the study concludes that establishing these zones
could be extremely costly to the host country.
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Kai Yuen Tsui, (1993): Welfare and Optimal Incentiv e Package of Export
Processing Zones.
The study assesses the impact of EPZ on the host country. The main
finding of this study shows that benefits to the host country depend on the
bargaining power between the government and the investors.
Joachim Ahrens and Astrid Meyer – Baudech, (1995): Special Economic
Zones In Central And Eastern Europe: A Shortcut Or Round About Way
Towards Capitalism?
This study tries to assess the experience of developing countries in
establishing special economic zones (SECS) in order to apply in to central and
eastern European countries (CEE) as an instrument to accelerate the economic
restructuring and reform in these countries. Then it shows that if the authorities do
not prove a strong commitment to implement market economy policies, the SEZS
in CEE countries will not benefit the economy. In the end, the study shows that the
experience of some countries like Poland (1989), Hungary (1982), Bulgaria (1988),
and USSR (1990), in establishing SEZS is constrained by political and social
issues and should be solved by introducing an adequate economic and political
framework. The study refers it the Chinese model to be followed by CEE countries.
Manwer osreer, (1996): A theoretical study on the f ree zones, experience of
South Korea, Hong Kong, Singapore and Egypt.
The objective of the study is to examine the experience of some countries in
establishing free zones (FZs) and their role on the host country. The main results
of this study were: 1) there are various definitions for the FZs, 2) there are different
types of FZs, 3) the success of establishing FZs depends on conducting feasibility
studies by the countries and 4) there is a social impact on the host country from
establishing FZs. In the end, the study gives many recommendations such as: a)
conducting a few studies before establishing the FZs, b) the country should draw
on and benefit from the experience of other countries, and c) flexibility and
decentralization of managing and operating the FZ is very important to ensure the
benefits from it.
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Zwena Ryal,(1997): free zones and development, stud y in industrial export
zones the case of Tunisian, Morris island and Alger ia.
This study tries to review the experience of some African countries in
establishing industrial export zones (IEZ) in their economies. It then tries to
determine the reasons behind the success and failure of these zones by clarifying
their concept from a theoretical point of view. While doing so, the study found that
establishing IEZS by developing countries should be combined with a national
strategy and a commitment from the government. In the end, the study concludes
that establishing IEZs is costly to developing countries.
Jamil Taher, (1998): an assessment of free economic zone in Arab countries:
performance and main features.
This Study Assesses And Examines The Establishment Of Free Economic
Zone In Arab Countries In Terms Of Promoting Exports, Employment Creation,
And Enhancing Foreign Trade. The Main Conclusion Of This Study Is That The
Free Zone In Arab Countries Must Compete On The Basis Of Quality For The
Services Offered And The Goods Produced In These Zones.
Jenkins, Esquivel and Larraine (1998) have arrived conclusions in their study on
selected Latin American countries. Their empirical result that
employmentgeneration is the major benefits from EPZs. In developing nations with
relatively high levels of unemployment EPZs, might represent an efficient
mechanism for reducing the economics and social burden of large pools of
unemployed people. EPZs can have significant net positive effects on the host
economy since wages paid to people employed in EPZ firms tend to be much
higher than their opportunities cost.
Madani (1999) provides a detailed account of the arguments for and against SEZs
/ EPZs through here empirical study using a cost-benefit approach expanded along
the lines of a social accounting framework and incorporating evidences from large
number countries. While arguing that both the neo-classical and new growth
schools fail to capture exactly the linkages and externalities of SEZs / EPZs. She
finds that, “under propitious circumstances and good management, EPZs generally
achieve two basic goals of creating employment and increasing foreign exchange
earning”. She also argued that the question of revenue loss on account of fiscal
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incentives would arise only when an entrepreneur locates those units in place
without such as incentive.
Wei Ge, (1999): the dynamics of export processing z one.
This study uses a monopolistic pricing and develops a dynamic framework
to measure the role of export processing zones on the host country. It suggests
that EPZs may serves as an effective policy tool in achieving greater economic
openness and growth implemented properly by the host country.
Claus knoth, (2000): special zones and economic tra nsformation: the case of
the people’s republic of china.
This study aims to review and analyze the Chinese experience in
establishing SEZs during the transformation process, in order to measure their
impact on the host country. The study uses a theoretical model as well as empirical
analyses to examine the effects of SEZs on the economy. The study admits that
using mathematical and theoretical model are not of too much help for a
comprehensive analysis of the impact of the SEZs on the host country. In the end,
the study gives some recommendations to policy markers that should be taken into
account if a country decides to establish a SEZ. The main recommendations drown
from this study were: a) the country should determine its aims from establishing
SEZs, whether these aims are short or long terms, b) the location decisions of the
zones, whether these zones will be established in backward areas or forward
areas, c) the availability of high skilled labor in the country, and d) the planned of
tax incentive offered to the investors.
M. Tekere, (2000): Export Development And Export – Led Growth Strategies:
Export Processing Zone And The Strengthening Of Sus tainable Human
Development.
This study aims to review the role of establishing EPZs in Africa. In indicates
that most zones in Africa have failed in achieving the objectives of establishing
successful EPZs due to the following: 1) the lack of government commitment it the
program that lead to reversals of the objectives, 2) the high cost of infrastructure
development of the EPZs, 3) government bureaucracy, 4) the poor selection of
location that led it a failure to attract investments, 5) the lack to continue with
further trade reforms, and 6) the poor management and inadequate promotion of
EPZs. The study concludes that EPZs are not a viable strategy for economic
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development in African countries. Today, EPZs are no longer viewed as a solution
towards the development of exports for African in view of trade liberalization
policies, regional trade integration, and new multilateral trade regimes.
Caleb Mireri, (2000): The Impact of Export Processi ng Zone Development on
Employment Creation in Kenya.
This study analyzes the experience of EPZ in Kenya by comparing the
situations of workers inside and outside the EPZ. According it this study, there are
negative results from establishing the EPZ such as: the insecurity of the workers
due to the fluctuation in the number of enterprises operating in the EPZ. The
employees inside the zones could be worse off than those who work outside the
zones with respect to the wages paid inside and outside the EPZ. In addition, the
situation is worse in the zones because most companies deliberately block trade
union activity. In the end, the study shows other problems concerning the
employees such as the lack of opportunities for training and promotion, racial
discrimination, risks of industrial accidents and pollution.
Robert D. Sinclair, (2001): Export Processing Zones : An Ingredient for
Successful Liberalization.
This study tries to examine the impact of foreign direct investment in EPZs
on the economy before and after opening the economy to liberalization
(transformation process). Using the neoclassical growth model, the study
measures the impact of EPZs on the growth rates of pre-capita income by
including unemployment and intermediate goods in the model. The study found
that EPZs contribute around 0.50 percent to the per capita growth of the economy.
The study concludes that an expansion of establishing EPZs in the country will
lead to an increase in national income.
Nguyen Ngoc Ninh, (2001): An Evaluation of Export P rocessing Zones in
Vietnam’s Industrialization Process.
This study analyzes the roles of the export processing zones (EPZs) in
Vietnam during the development process of its economy by using a descriptive,
analytical framework. It then compares EPZ development in Taiwan, Korea,
Malaysia and china to draw lessons for the Vietnam economy. In the end, the
study shows that there are direct and indirect benefits for the country from
establishing EPZs in Vietnam.
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Albera G. Sehweinberger, (2003): Special Economic Z ones (SEZ) In
Developing And / Or Transition Economics: A Policy Proposal.
This study tries to analyze the role of establishing SEZs in the host country
with respect to taxes. The main finding of this study shows that establishment of
SEZs accompanied by appropriate tax policies, will lead to an increase in
government revenue. This revenue may be sed to finance other investments in
infrastructure or other public goods.
Chang woon Nam and Doina Radulescu, (2004): Type of Tax Concessions for
Attracting Foreign Direct Investment in Free Econom ic Zones.
This study tries to measure the net present value of free economic zones
(FZEs). It compares the tax incentive effects with inflation and without inflation. It
then analyzed the effects of incentives offered to the foreign investors in the FZEs.
In the end, the study concludes that imposing a lower corporate tax rate in the FEZ
can be preferable. In addition, the study shows that using free depreciation as a
tax concession when inflation is zero guarantees a higher net present value to the
investor rather than when using an investment tax allowance and accelerated
depreciation
Chi-Yung Ng, John Whalley, (2004): Geographical Ext ension Of Free Trade
Zones As Trade Liberalization: A Numerical Simulati on Approach.
This study tries to examine the impact of the size of the free trade zones
(FTZ) on the welfare of the country. The study compare between the FTZ and the
local economy based on the differential tariff rates between these two areas. It is
shows that the welfare costs of imposing geographical restrictive schemes are
substantially larger than the cost of imposing national tariffs. The welfare impacts
of trade liberalization through a geographical expansion of FTZs will likely be larger
than the liberalization through conventional national tariff reductions.
Aradhna Aggrawal (2005) examines the performance of Export Processing Zones
(EPZs) of South Asian countries in her working paper entitle, “Performance of
Export Processing Zones: A comparative Analysis of India, Srilanka and
Bangladesh. This study aims at analyzing the factors that are crucial for the
success of the zones. It covers three South Asian countries, namely India, Srilanka
and Bangladesh. The study explores different aspects such as the quality of
governance, incentive packages and infrastructure facilities offered by the zones. It
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examines the determinants of investment and export performance empirically
within the theoretical framework provided by the new growth theories.
Neutralization of dis-incentives, infrastructure and good governance, along with the
overall investment climate in a country are found to contribute to the success of its
zones. This paper makes recommendations that call for the removal of red tape
and bureaucracy better.
Aradhna Aggrawal (2006) discusses the pros and cons of the controversial SEZ
policy in the article entitled, “Special Economic Zones: Revisiting the Policy
Debate” published in Economic and Political weekly. The article describes the
economic rationale for SEZs, examines India’s experience with EPZs / SEZs, and
discusses the context in which SEZ is being promoted in the country, reviews the
arguments for and against SEZs, analysis what went wrong from the prospective of
the promoters of the scheme. The article discusses Indian experience with SEZ
policy. The article analyses the contribution of SEZ in attracting FDI, promotion of
exports, technology transfer etc. The article also makes comparative analysis of
various arguments for against SEZ viz. relocation, revenue loss, land acquisition,
loss of agricultural land, misuse of land for real estate, etc.
Metri Fayez Al Mdant (2006): The Fiscal and Economic Impact of Qualifying
Industrial Zones: The case of Jordan.
This thesis investigates the fiscal and economic impact of Qualifying Industrial
Zone (QIZs) on the Jordanian economy. The study assesses costs and benefits of
establishing such zones in Jordan. Fiscal as well as economic issues are
investigated to clarify the impact of QIZs on the host country.
The most important effects resulting from the establishment of QIZs are on
employment and poverty. According to this analysis, QIZs contribute positively to
the welfare of the poor in the country by increasing employment opportunities for
unemployed and unskilled persons. Tax incentives are one of the main negative
effects of the QIZs on the local economy, as they do not have much influence
investors and thus are a waste of resources. The thesis also provides guideline to
the government regarding policies to preserve Jordan’s QIZs in the future.
Shaveta Gupta (2006) throws light on the basis of SEZs and the issues they face
in India in her article, “Special Economic Zones – A smoldering issue”. In the article
the author discussed need for SEZs in the country, features of SEZs, procedures
and requirement to set up in India, performance of SEZs in India, etc. The authors
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also discussed factors affecting the performance if SEZ in India and impact of
SEZs. In discussing impact of SEZs, she discussed both positive and negative
impact of SEZs. The positive impact is in terms of low-cost production, emerging
employment opportunities and recognition at global level. The direct negative
impact on labour, because the labour law is not applicable in SEZs. The other
impact can be seen from the opposition of those whose land is being acquired for
setting up of these zones.
Ram Krishna Ranjan (2006): Special Economic Zones: Are they good for the
country?
The research paper analyses SEZ policy in terms of export performance,
FDI inflow, employment generation and overall physical and financial infrastructure
building. This paper tries to investigate whether having these policies are good for
the country or not, SEZs are a large variant of Export Processing Zones (EPZ),
thus performance of EPZ has also been discussed briefly.
The research paper notes that after the failure of EPZs, a significant change
has been made in the rules / regulations and a new package of fiscal an non fiscal
incentive is also being offered to developers and units. According to Finance
Ministry, the government has to forego about Rs. 90,000 crore in direct and indirect
taxes over the next four years on account of SEZs. Despite so many incentives,
performance of these privileged enclaves over the last five years indicates failure
of this scheme.
Aradhna Aggrawal (2007) in her working paper entitled “Impact of Special
Economic Zones on Employment, Poverty and Human Development,” published
from Indian Council for Research on International Economic Relations, examines
the impact of Special Economic Zones (SEZs) on human development and poverty
reduction in India. For the study, the primary survey based data were generated
through interviews of entrepreneur and workers across the three largest SEZs:
SEEPZ, MADRAS and NOIDA. The analysis reveals that employment generation
has been the most important channel through which SEZs lend themselves to
human development concerns, in India. Employment generation generated by the
zones is remunerative. Wage rates are not lower than those prevailing outside the
zones. Besides working conditions, non monetary benefits, incentives packages
and social security system are better than those providing outside the zones,
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particularly in the small informal sector. The role of SEZs in human capital
formation and technology upgradation is found to be much better.
Erlend Reigstad (2007): Special Economic Zones: Policy, Review and
Implications for India.
The thesis deal with Special Economic Zones (SEZs) the first part of the
thesis explains definitions, history and features of Special Economic Zones. The
thesis also explains possible advantage and costs to the host country. The second
part of the thesis applies the first part on the cost of India. This results in some
specific advice, implications for the SEZ policy of India. These include using SEZs
as laboratories to find beneficial general economic policies and SEZ policies.
E.A. Sharma (2007) highlights the fact that the central and state governments
benefit the rich at the expenses of the poor in this article. “Help the rich, Hurt the
poor: case of Special Economic Zones, published in EPW, May 20 2007. He points
out that the recent twists and turns in the Special Economic Zones policies have
merely exposed the ruling elite’s utter ignorance of ground realities of our country
and the strong influence that the industrial houses and real estate continue to
exercise over government policies. SEZs displace on a large scale. The
displacement is both physical and occupation. The rehabilitation packages
announced by the state lack credibility, as there are thousands of families
displaced by previous projects still awaiting compensations payment.
Ngo Trung Thanh(2008) has conducted his study to analyse the impact of
Industrial Zones on rural employment in Nam Son Commune, Que Vo District of
Bac Ninth Province. This study found that the zone failed to deliver employment to
recovery households because of the week cooperation among the local authorities,
the enterprises in the Que Vo industrial zone, and the farmers. Besides, the study
concluded that the recovery process created an unequal treatment between the
farmers and the enterprises. The compensation for agricultural land recovery and
other assistance failed to generate alternative employment of recovery household
in Nam Son. Low wages, hiring strategy and age requirements of the enterprises
and the lack of transparent information of recruitment blocked farmers to be
employed by enterprises in Que Vo industrial zone. The policy implications
presented in the study are to encourage enterprises to contribute to employment
training for the recovery households and to create an opportunities for them to
contribute a share for the enterprises.
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Jona Aravind Dohrmann (2008) in his introductory article describes the salient
features of the Indian embodiment of the model Chinese SEZ, how it evolved and
what the various steps are in making Indian SEZ function from submitting an
application and receiving a Letter of Approval for the establishment of an SEZ for
getting the authorized operations and particular nits sanctioned. The policy makers
are deliberately attempting to leave the path their political forefathers trod in
occupying the “commanding heights”. But in view of stiff opposition from the
peasants affected by these projects from political agents finishing in troubled
waters and from the business world, the erstwhile liberal SEZ policy is in danger of
becoming more and more regulated. It is argued that this need not have been the
case to such an extent had the ministers concerned made up their minds to
formulate a comprehensive displacement and rehabilitation policy preceding the
land acquisitions to establish SEZs. The Indian legal system, which by and large is
viewed as stable and reliable has proven to be volatile in this case.
Mohammad Ali Sarlak and Asghar (2008) Hastiani Abolhusani have studied e-
business barriers in Iran’s Free Trade Zone. The used Delphi method to conduct
their study and chose 25 members for their Delphi panel, who were given
outcomes of literature review. The result of four rounds of Delphi panels declared
five main barriers for implementing-business in the regions including Infrastructural
barriers, Property right issues, Mistrust in E-payments, financial barriers and
shortage of IT skills. It was found that infrastructural barriers played a key role in
explaining non-adoption of e-business by firms. They concluded that to implement
e-business in the Iranian free zones and special economic districts, there are some
infrastructure requirements such as high speed internets, wide internet band,
proper laws and regulations so that small and medium size enterprises (SMEs)
could utilize e-business.
Saeed Khan (2008): India’s SEZ Economic performance , Social /
Environmental Impacts.
The paper discusses various issues relating to India’s SEZs, such as
background of SEZ, SEZ and Indian experience, SEZ regime, Indian context, the
SEZ act, the land acquisition act role of SEZ in Indian Economy, opposition of SEZ
and how it affecting India, etc. The paper notes that the SEZ is the need of today’s
economy to support India’s target of becoming developed nation. The physical
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exports done in the year 2007-08 were Rs. 66637.682 crores from these SEZs. As
per Commerce and Industry Minister Kamal Nath, the FDI would be in excess of
$35 billion for this fiscal year. The creation of SEZs provided employment to
around 3.5 lac persons. Though, SEZ policy adopted by India to support economy
in a big way, the conversion of fertile land into industrial land may create food
crises in near future. The use of the wasteland available in India (around 552692
sq.km.) for SEZ development will ensure that the farmers are not displaced from
their farmland, the development not concentrated near cities and the fertile land
will continue to be used for agricultural use.
The World Bank Group (2008) studies performance of Special Economic Zones
worldwide in the research paper. This paper examines 30 years of experience in
zones, reviewing development patterns and economic impacts of zones worldwide.
The experience shows that while zones have been effective in addressing
economic growth and development objectives, they have not been uniformly
successful, successes in East Asia and Latin America have been difficult to
replicate, particularly in Africa and many zones have failed. Moreover, since the
onset of zone development in developing countries, concerns have been raised
about the impact of zones on employment, the environment and related social
factors.
The experience of the zones suggests that maximizing the benefits the
zones depends on the degree to which they are integrated with their host
economies and the overall track and investment reform agenda. In particular, when
zones are designed to pilot legal and regulatory reforms within a planned policy
framework, they are more likely to reach their objectives.
An Assessment of Potential Costs and Benefits of SE Zs in India: A Study for
the Department of Commerce Government of India, 200 9
This study on the SEZ policy in India examines the current debate
surrounding the economic aspects of the policy. The main conclusions are that
there is a broad consensus amongst all stakeholders, including political parties that
the SEZ policy is to stay. The study found that the expected benefits of SEZs
outweigh expected costs.
The study also highlighted that there appears to be no problem regarding
land acquisition for SEZs and the issues of rehabilitation. A positive development is
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that there is a broad political consensus for having a comprehensive rehabilitation
and resettlement plan for those whose livelihood will be affected by land
acquisition.
D. Gopinath (2009): Contemporary approaches to Econ omic Development:
The Special Economic Zone Programme.
The paper points out that the development of Indian economy can be linked
its recent advocacy of ‘effective’ local economic development policies, particularly
in attempting to create ‘new economic spaces’ as a model for economic
development. In this regard, in 2005 the Indian Central Government passed the
Special Economic Zone Act: to attract foreign and domestic investment, to boost
export earnings to generate local employment and to make improvements to
infrastructural services. As a result, new challenges have emerged. At one end,
there is a reduced role for central government intervention in economic
development as a result of shifts from an earlier central government directed policy
mechanism to this contemporary approach in SEZ policy where state governments
as well as private investors are increasingly seen as important partners in
economic development. On the other hand, not only have the number of
sanctioned SEZs exceeded the expectations of policy makers, but also that there
is now an uneven distribution of SEZ investments across the country that only a
stronger central government can possibly address.
Jadhav Prakash B. and Manjaramkar (2009): Special Economic Zones : Present
problems and Future Prospects of Farmers in Naded Sub-Division, Dist-Naded
(Maharashtra).
The study has been conducted in Naded sub division selecting 4 villages
named Gopalchawdi, Babhulgon, Tuppa and Kakandi and 5 samples from each
village total 20 samples whose land has been acquainted under SEZ project. The
paper notes that most of the farmers are not totally aware about SEZ projects, their
major portion of land i.e. 1 to 5 acre, 6 to 10 acre and 11 to 15 acre is going to be
acquisited under SEZ and most of them are becoming landless. Farmers are not
ready to give their land for SEZ projects as they are not getting appropriate price
for their land, no employment guarantee to family member and they have to face
problems of displacement.
They are also perspectivising the problems they would have to face in future
because of SEZ such as short-age of water, water pollution, air pollution shortage
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of food products, land barren, increase of dependent persons in family,
displacement etc. problems of rehabilitation they are against SEZ projects.
Jaivir Singh (2009) in his paper attempts to isolate the content pertaining to labour
law from the overall law applicable to SEZs. Upon an initial reading of the law it is
found that there is no apparent difference between the regime affecting labour
within and outside the SEZs. However upon closer inspection, documents
associated with the articulation of the ongoing SEZ policy show that the regime of
labour governance in SEZs is oriented towards the non-implementation of the
existing law. While it is widening accepted that labour laws are generally poorly
implemented in contemporary India, the envisioned labour regime in SEZs has
been consciously structured to promote the non-implementation of laws. One of
the key devices to enable this regime is to place the implementation of labour laws
in the office of the Development Commissioner rather than the Labour
Commissioner. The other device is to mitigate the impact of labour laws in SEZ to
exploring certain provisions of the Industrial Disputes Act that enable Indian states
to label old economic activity in a SEZ as a ‘public utility service’, which in turn,
acts to curtail the ability of workers to strike and therefore lower the bargaining
strength of labour in a SEZ. This regime obviously generates a series of social
costs.
Geeta Das (2009): Special Economic Zones in India Lessons from China.
This book describes and examines the policy initiatives to SEZs in India. It
also presents a comparative view of the economies of India and China with focus
on SEZs as vehicles of faster economic development. The book presents an
analytical deduction for conclusion, whether development of Special Economic
Zones in India by emulating strategies adopted by China for the development,
would help achieve faster growth. IT logically sump up Indian options for managing
sustainable development in the light of lessons from Chinese experience.
Madhumita Dutta (2009) examines the government claims that the special
economic zones will bring in investment, increase exports and economic activity
and create employment in her articles, “Nokia SEZ: Public price of Success”. The
Nokia SEZ is considered as a one of most successful SEZs of India in terms of
increasing exports and generating employment. But, the article highlights the fact
that a closer look at the figures indicates that Nokia’s investment is entirely paid by
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public subsidy, much of the production is sold domestically, employment
generation is below projections and workers are short changed.
Nareshkumar Sharma (2009) presents a report of a conference at the Indian
Institute of Advance study on Special Economic Zones published in EPW, May,
2009. The conference is conferred around three themes: (1) SEZs and economic
development, (2) SEZ and distributive implications and (3) SEZ and the legal
issues.
The presentations at the conference and subsequent discussions raised
serious doubts over desirability of SEZs from various aspects. SEZs can lead to
some serious consequences. Struggles on the land issue are already surfacing in
different parts of the country. There are theoretical grounds and empirical
evidences to suggest that at the worst the SEZ policy can lead to serious and
adverse consequences including social conflict, civil strife and breakdown of
democratic institution. It is also likely to lead to increased inequalities and possibly
shrinking of economic space for the ordinary people by making their production
more un-remunerative.
Jin Wang (2010) Studies the benefits of Special Economic Zones on the basis of a
unique database of Chinese municipal economic statistics from 1978 to 2007. He
uses the database to evaluate the impact of a Special Economic Zone experiment
aimed at attracting foreign direct investment. Guided by a conceptual framework,
he finds that the Special Economic Zone Policy : 1) Increase per capita foreign
direct investment by 58%, mainly in the form of foreign invested and export
oriented industrial enterprises, 2) does not reduce domestic investment and
domestically owned capital stock and 3) increase total factor productivity growth
rate by 0.6 percentage points. The results suggests that creating Special Economic
Zones not only brings capital, but also more advanced technology and provide
important policy implications for many countries.
Malini Tantri (2010) in her article, “Import Depending of Special Economic Zones,”
published in EPW, September 2010, analyses the trends in the import intensity of
exports of 7 (Seven) conventional SEZs from 1986-87 to 2007-08. In absolute
term, the value of exports of these special enclaves has increased from Rs. 976
crore in 1986-87 to Rs. 21,176 crore in the year 2007-08, an increase of about 21
times. On the other hand, imports for the same period increased sustainably from
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Rs. 624 crore to Rs. 15,833 crore an increase of almost 25 times. Two major
factors were found responsible for the steep increase in the import intensity of
SEZs exports in the current SEZs period: First, changes in the sectored
composition of exports towards highly capital intensive and high value products
such as electronics and gems and jewelry industries, accounting for almost 41%
and 37%, respectively of the total export for 2007-08. Therefore, the government
thus needs to follow a cautious approach in promoting SEZs under different
sectors and redefine the current fiscal incentives to prevent reallocation of
investment from domestic trade areas to the SEZs.
M. Vijaybhaskar (2010) analyses in his paper published in Economic and Political
weekly, entitled ‘Saving Agriculture Labour from Agriculture: SEZs and Politics of
Silence in Tamil Nadu’ that Tamil Nadu has been one state where despite the
mushrooming of a large number of SEZs over the last few years, there has been a
relative luck of systematic resistance to SEZs in general, and land acquisition in
particular. This paper offers a few plausible explanations for this phenomenon of
non-resistance. The paper points out that there are structural reasons for the
willingness of farmers to give up their land and move away from agriculture. The
long history of anti-caste politics of the state has also produced a broad based
desire to move away from agriculture and simultaneously, opened up more
avenues for social mobility. The paper also argues that by following a policy that
offers more generous composition for land acquired, while allowing little room for
negotiation, landowners face powerful incentives to avoid legal contestation.
Further on active negotiation by local political actors and farmers has pushed the
state government and private developers in offering better prices. In at least one
case, local resistance has ensured that the private SEZ developers and firms
honour their commitment on the offer of employment to villagers who have sold
their land.
Preeti Sampat (2010) explore some legal and political strands in the scheme of
Special Economic Zones in India with Specific reference to an immediate fallout of
serious concern and contestation the imminent displacement of thousands of
people and livelihoods in the countryside where large SEZs are slated to come up.
He examines the issues emerging from the peasant resistance to SALIM SEZ in
Nadigram block in West Bengal, to SEZ in Goa and ethnographic material from the
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Mumbai SEZ area of Raigad district in Maharashtra to offer a synaptic picture of
the controversies around SEZs in India.
Srinivasan Romani (2010) present report on his visit to the coastal areas
adjoining the Mundra port in the Kutch published in EPW entitled “Development
and Displacement: Resentment in the Kutch, February 20, 2010. The report
reveals discontent among fisher folk, traders and pastoralists over the creation of a
special economic zone in the area. Apart from environmental concerns, the
traditional livelihoods of residents in the area have also been affected by the new
industrial projects, leading to organized protests, as witnessed in Bhadreswar
village.
Siddhartra Mitra (2010): special Economic Zones in India: White Elephants or
Race Horses.
This paper looks at the policy of special economic zones in India and their stability
for fulfilling the goals of export promotion, employment generation and
maintenance of the tempo of economic growth. On the basis of economic theory
and history the paper concludes that absorption of agricultural labour is necessary
for sustained economic development of a developing country. “Special Economic
Zones” constitute a medium for such sustenance. However, the SEZ policy in India
has suffered from permission being granted for far too many sub-optimally sized
SEZs or for others to serve as appendages to mega cities already from
overcrowding infrastructure and a size which for exceeds the optimum. The
present ceiling on SEZ size at 5000 hectares does not facilitate the full exploitation
of economics of scale in service oriented SEZs and should be scrapped. There are
other ways of minimizing present unrest during the process of land acquisition for
SEZ development. For example, the state can assume the role of a passive
provider of a legal framework, information and incentive packages. The onus of
land acquisition would be entirely on negotiations between prospective SEZ
entrepreneurs and owners of agricultural land. Mutually beneficial transactions will
automatically result if possible for any exists.
S.K. Khatik and R.V. Saxena (2010) highlight the fact that India needs massive
investments in manufacturing, infrastructure development and in its productive
capacities. It also needs to promote exports of goods and services aggressively in
such a highly competitive global market place. These were the aims for which the
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Government of India model the Special Economic Zones (SEZ) Policy in April 2000
which was further concretized through SEZ act 2005 and SEZ Rules 2006 policy.
SEZs became controversial because the state acquired lands from framers and
sold it to industry. This is not set to change. Government will not acquire lands in
future. Many companies have offered employment to one member of displaced
farmer’s family and in a few classes’ even shares.
Malini Tantri (2011) Special Economic Zones in India: Are these Enclaves
Efficient?
This paper, along with an analysis of the issue of efficiency of the SEZs
within the framework of stochastic production frontier technique has tried to
address the questions raised regarding economic utility of SEZs. Although the
efficiency scores of these enclaves have improved over the years, specifically with
the introduction of the SEZ policy (2000-01), it is for below the threshold level as
identified in the literature, thus, indicating a larger scope for improvement in
efficiency of the existing enclaves of the seven conventional SEZs, Santacruz SEZ
relatively better than others operating on the same production frontier in terms of
performance. Besides, one also can observe the emerging contradiction between
better export earning zones and efficient zones, which might as well prove a
challenge to the policy makers. On the determinants side, besides policy
intervention large geographical area accompanied by clustering of units is found to
have impacted positively the efficiency scores of these enclaves.
Vidya Bhusan Rawat, Mamidi Bharath Bhusan and Sujatha Surepally (2011)
provided a brief overview of the controversies surrounding SEZs at the national
level, but its main contribution is to provide an in-depth view of the history and
inputs of one SEZ, the “Formulations SEZ” in Polepally, Andhra Pradesh. The aim
in doing so has been to go beyond the rhetoric that surrounds the issue and to
examine realities on the ground in a way that can only be done through a focused
case study. To this end, the report described the process of land acquisition in
Polepally, including issues of consultation consent before setting out the results of
a detailed survey on the impacts of land acquisition on affected households.
In their study, they find that around 1150 acres of land was acquired for the
SEZ, from the three villages, Poplepally, Gundlagadla Tharda and Mudireddipally,
while forming households in Gundlagadda Thanda and Mudireddipally lost an
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estimated 300 and 150 acres respectively documents made available to SDF from
the offices of the local revenue office reveal that in Polepally a total of 693 acres
were acquired from 393 families of 22those 160 families lost land that was allocated
to them under the previous land reform programme of the government. Such lands
are known as “assigned lands”. Under government rules, such land reform
beneficiaries receive only taken compensation as the land is considered still to be
owned by the government. The great majority of those who lost “assigned land”
were from Scheduled Castes, Scheduled Tribes and Backward Communities. The
remaining 179 land loser families lost “assigned land” for which they held formal
table. The caste backward of these families is unclear, but they were mostly small
and marginalized farmers. Those families received compensation related to market
value. It seems evident that the authorities targeted those who belonged
vulnerable communities probably for two main reasons. Firstly to minimize any
strong resistance to land acquisition and secondly reduce compensation costs as
the majority of the land losers had “assigned lands” as beneficiaries of previous
land reform programmes and received lower compensation.
Douglas Zhihua Zeng (2011): How Do Special Economic Zones and Industrial
Clusters Drive China’s Rapid Development?
The working paper notes that the special economic zones and industrial
clusters have made crucial contributions to China’s economic success. Together
with the numerous industrial clusters, the special economic zones have contributed
significantly to gross domestic product, employment, exports and attraction of
foreign investment. The special economic zones have also played important roles
in bringing new technologies to China and in adopting modern management
practices.
This study briefly summarizes the development experiences of China’s
special economic zones and industrial clusters (their formation, success factors,
challenges and possible areas or measures for policy intervention), based on case
studies, interviews, field visits and extensive reviews of the existing literature in an
attempt to benefit other developing countries as well as the broader development
community.
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Abdul Raheem (2011): Impact of Special Economic Zone on Human
Development and Poverty Reduction: An Indian Experi ence.
This paper examines impact of special economic zones on human
development and poverty reduction in India. The paper concludes that the
employment generation, both direct and indirect, has thus far been the most
important channel, through which SEZ have impacted on human development and
poverty reduction in India. India’s SEZs are not dominated by assembly type
operations. ‘Value addition’ component and hence employment generation
potential of zones is rather large. Even though their contribution to national
employment has been limited, they have contributed significantly to employment
generation at the regional level. Due to stagnation, their ability to absorb surplus
labour has been declining. This is manifested in the declining employment
elasticity of exports. It can only be reversed if fresh investment is attracted to
SEZs.
The relationship between poverty and employment lies in the extent to
which income generated from employment permits workers and their dependants
to obtain goods and services necessary to meet minimum needs. Poverty
reduction thus calls for the creation of remunerative, regular and good quality jobs
in the labour market. SEZs, if promoted vigorously can therefore act as an initiator
in the process of human development and poverty alleviation in India.
The researcher has reviews the main literature regarding the concept of
SEZ. But, an important point to be noted here is that no comprehensive research
has been undertaken as yet, for SEZs in Gujarat and Surat Special Economic
Zone. In this context, this can be considered as a pioneering research. The
research examines the relevance of the concept of SEZs with Surat Special
Economic Zone. The research helps in analyzing that how far the concept of SEZ
is relevant to the Surat SEZ by studying various issues.
The research helps in designing the policy relating to SEZs as the study
examines the various issues of the units operating in the Surat Zone viz.
importance of incentives availability, infrastructural problems, labour related
issues, marketing of the products, employment, growth, margin on sales, market
share etc. Thus, the study provides a useful guidance in designing the
appropriate policy for the units of the SEZ.
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3.3 Summary
The chapter reviews main literature with the concept of the SEZ. The
researcher has used both external as well as internal studies. The chapter
highlights positive and negative aspects of the SEZ. The chapter not only proved to
be useful the researcher for better understanding of the concept of SEZ, but also
provide a platform for further research in this field. The chapter -4 deals with the
research methodology of the study.
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