The use of special economic zones (SEZs) to encourage development in China is well-known. Incentives for local and foreign investors to locate in these zones may include steady electrical and water supplies (not always a given in LDCs), better transportation (especially access to ports and airports), tax benefits, and so on. Like the rest of Asia, India looks upon the Chinese example with a mixture of envy and loathing. While the rest of the world is familiar by now with India's prowess in service sectors--business process outsourcing, engineering consulting, call centres, legal and medical transcription, and what else have you--the government of Manmohan Singh is keen on manufacturing playing a larger role in India's economic resurgence. From Bloomberg:When Boston Red Sox co-owner Martin Trust first visited the southern Indian village of Achyutapuram three years ago, a pot-holed road ran through the stretch of bare land dotted with thatched huts.The rest of the article correctly notes that India has dabbled with SEZs as long ago as the mid-sixties. For a number of reasons, though, dedication to the programme has not been sustained through the years. More importantly, characteristic problems with SEZs such as expropriation of land claimed by farmers and, down the road, inegalitarian income distributions compared to regions excluded from SEZs are larger concerns in a democratic country such as India. Whereas an authoritarian regime like the Communist Party isn't really subject to scrutiny of this sort in China, the ruling Congress Party in India can ill afford to be perceived as pro-bourgeoisie. Aside from that issue, the rise of Indian SEZs is also making for some colourful cultural contrasts as women of modest means and demeanour are now making thongs for Victoria's Secret (cue up a silly Sisqo tune):That didn't deter Trust from investing $12 million in a special economic zone being created there by Brandix Lanka Ltd., which makes lingerie for Victoria's Secret. His bet may now be paying off as workers finish constructing roads, a power plant and helipad, and companies including Quantum Clothing Group, a U.K. supplier to Marks & Spencer Group Plc, sign up to build factories in the 1,000-acre industrial site.
The change ``is startling,'' said Trust, 73, who is also founder and president of Brandot International Ltd., a Salem, New Hampshire, investment firm with stakes in 18 textile and apparel companies in seven countries including China, Israel and Mexico. ``It's an inviting place for any investor.''
India's economic zones are finally taking root after more than four decades, laying the foundation for Prime Minister Manmohan Singh's plan to increase manufacturing to a quarter of the economy by 2012 from 17 percent now. That's vital for a nation that needs to find jobs for the 150 million people who will join its workforce in the next 10 years.
There is ``real momentum'' behind the zones, said Alastair Newton, senior political analyst at Lehman Brothers International in London. ``Governments, both at the central and state level, realize they have the potential to create good, long-term employment.''
While farmer resistance continues in some states, including West Bengal, Haryana and Goa, India now has 42 zones, including the original eight, creating an estimated 176,000 jobs in the past two years, the Commerce Ministry says.There have been fatal clashes already over the creation of more SEZs such as in West Bengal:Another 229 zones are under construction and an additional 210 proposals await final government approval, according to the ministry, which forecasts the zones will attract $75 billion in investment by 2013 -- almost a third of India's industry.
To convince local villagers that it's serious about creating employment in Achyutapuram, Sri Lanka-based Brandix set up a trial factory close to its zone that currently employs about 1,500 local women. Ladies ``who never had proper clothes are today making thongs for Victoria's Secret,'' said Reshan Wickramasinha, chief executive officer at Brandix India Apparel City Ltd.
Kanak Mahalaxmi, 19, says her life ``has changed dramatically'' since she got a job as a sewing operator a year ago. ``We just finished building a brick house after living in a thatched one all our lives,'' said Mahalaxmi, who earns 2,500 rupees ($59) a month. ``We just bought our first television set as well.''
Were it not for the evidence of death, the scene in this outpost of West Bengal is that of the perpetual rural idyll, with glowing green rice paddies, jute-thatched roofs and children splashing in the village pond.However, last week, in a clash with police that cost 14 lives, the villagers of Nandigram district won a victory that threatens to derail the biggest push for economic and industrial development since India won independence 60 years ago.
It came after six months of resistance against government compulsory purchase plans on the villagers' land to make way for a 10,000-acre industrial park meant for an Indonesian chemicals giant.
The same thing is happening in a number of other locations where plans for SEZs have been slowed down such as the state of Goa, India's smallest by land area:
India's controversial special economic zone (SEZ) policy continues to go through various twists and turns. The latest setback came on December 31st 2007, when Goa became the first Indian state to scrap all of its existing SEZ projects. On a more positive note, the central government has recently taken steps to ease the acrimony surrounding SEZs by reviewing its policies on land acquisition.Thus, PM Singh has had to rethink the process of SEZ implementation:Protests against SEZs, largely because of issues relating to land acquisition, have been vociferous in several Indian states--most notably in West Bengal. The agitation recently spread to the tiny state of Goa, best known for its balmy beaches and hordes of tourists. As of December 2007 Goa had just seven SEZ projects, of which three had been formally approved and officially "notified", meaning that the central government had acknowledged their eligibility for all the applicable incentives under India's SEZ Act. However, opposition to the SEZ policy from political parties and other local organisations simultaneously reached a crescendo late last year, threatening to disrupt the state's crucial tourism industry.
The groundswell of opposition found its formal expression in the report of a task-force set up by the state government (and headed by the chief minister). While preparing recommendations for a long-term regional plan, the task-force argued that SEZs are detrimental to Goa's overall interests because land is being speculatively acquired for product-specific SEZs, crowding out genuine entrepreneurs who are not merely seeking government incentives. The task-force also concluded that local people rarely have the skills to benefit from the employment opportunities SEZs provide. Instead, it claimed, SEZs attract migrants from other states, putting pressure on Goa's already strained resources.
The central government's Board of Approvals only gives the green light to SEZs supported by state governments, so all seven of Goa's SEZs must have had the backing of the state government. But Goa's government now seems to have changed its stance, perhaps sensing the vehemence of opposition from local people and political parties. The chief minister's decision to scrap all of Goa's SEZs is unprecedented; while opposition to SEZs in other states is also widespread, it has mainly been targeted at specific zones.
SEZ is an instrument of economic policy and it has come to stay. But in the process of implementation, we have been exposed to certain problems that cannot be dismissed. It is the strength of our democracy. If we find there are some flaws in our policy, we can set in motion a mechanism to redress those gaps in our policy.In the meantime, yet more protests are being held over these SEZs and the government intends to bolster the provision of social services in these zones to counter its critics. Sometimes, the Congress Party probably wishes India was under an authoritarian regime. In a world where SEZs are an instrument of national development, perhaps "market socialism" may have a leg up.
