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  • 1. Special Economic Zone Suneel Gupta Associate Professor GHS-IMR,Kanpur
  • 2. 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.
  • 3. 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.
  • 4. FTZs – in Dubai, Known for state-of-art Logistic, has triggered The development of Dubai’s 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.
  • 5. A FTZ is essentially a bonded warehouse facility to store Imported goods ultimately designated for re-export without payment of duties.
  • 6. SEZ: Lesson from China Why did Kandala,the first free trade zone of its kind in Asia, fail while China’s Shenzen ,a late entrant, succeed? What explain the fact that Shenzen’sa GDP now stands at nearly $21 bn, annual foreign trade at nearly $65 bn, while Indias’s annual trade stands approximately at $ 70 bn? The answer are not so far seek.
  • 7. 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 world’s exports. Besieged at every stage by structural and attitude barrier, India’s trade promotion policies still remain a ‘uncelebrated dream’
  • 8. 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.
  • 9. China’s 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
  • 10. SEZ . . . .the Context Post WTO The world What will make after 1990s Today’s FZs relevant now? Choice  Industry - zone vs. zone international  Policy: national production focus treatment of free not zone goods nation vs. nation  Multilateral ‘equal- 3 opportunity’ MFN  Concept of V i.e trade facilitation- Velocity Volume  All countries are and therefore lowering barriers to Value compete for foreign trade and  Capital: private investment ownership (service standards)  Regions are forming closed economic groups
  • 11. 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 . . .
  • 12. What is Special Economic Zone? EOU ICD Cluster of Dry Port & Duty EOUs & Trading Free Enclave Model Bonded Area Industrial Township EPZ FTZ Free Excellent Infrastructure Integrated Infrastructure Port Superior Governance Facilitative Environment 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”
  • 13. Special Economic Zone ( as defined by EXIM Policy) 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.
  • 14. Warehousing Hub Special Economic Zone ICD Trading HUB Model Industrial Township Excellent Infrastructure Strategic Location and Connectivity Superior Governance Facilitative Environment Cross- Real Inventory Value- Material Facility docking & Time Bar Manage- Added Handlin Management Consolidatio coding ment Services g n Centers
  • 15. SEZ offer…….. The various components of the Hub, seamlessly integrate the different elements of the supply chain Raw Material Inbound Manu- Inventory Outbound Customer’s Suppliers Transportation facturing Deployment Transportation Customers Integrated Information Systems
  • 16. SEZ offer…….. INFRASTRUCTURE q Air Cargo Terminal SERVICES q Multi-Purpose Terminals q Warehousing q Cross Docking & Consolidation q Transport & Distribution Centres q Bar Coding, Fumigation, Quality Assurance & Control q Central Distribution Centres q Inspection & Surveying q Distriparks q Pick & Pack and repackaging q Cold Storage q Inventory Management q Leasing of Warehouses & Yard q Single Point Custom Space Clearance q Transit back up & Warehouses TECHNOLOGY SERVICE PROVIDERS q Electronic Data Interchange q Transporters - Inbound & Outbound (EDI) q 3PL Providers q Computer Integrated Terminal q Freight Forwarders Operations System q Consignees q Track & Trace Systems q Trade custom agencies q Vehicle Scheduling & q Hauliers Transportation Systems q Inventory & Warehouse Management Systems
  • 17. Positra: India’s 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
  • 18. 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
  • 19. Proposed SEZ in India  Positra ( 880 hectare)  Navu Mumbai ( 30 sq km)  Bhadoi  Kupri  Paradeep  Kakinada  Nanguneri (1,012 hectare)
  • 20. 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 SEZ’s
  • 21. Union commerce ministry claims that their an additional investment 100000 Crore mainly through FDI. 500000 additional jobs will be created through SEZ
  • 22. Large Multi –product SEZ’s Developer Area (Hectare) Kakinanada, Andra 1134 Gujrat Adani port 2658 Gujrat Industrial Dev. 1768 Corp Mundra SEZ,Gujrat 1082 Essar Hazaria,SEZ 1100 Maharastra Industrial 1010 Dev. Corporation
  • 23. Large Scale Specific SEZS Developer Type Area Reliance Petro & 440 Infrastructure petrochem Claridges Multi service 210 CPL,Infra,TN Pharma 200 MIDC-5 Agro + Auto 383 +200 +210 +Textile +208 +Pharma