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  • 1. Special Economic Zones: Conducive Investment Regimes Exim Bank India by S.R. Rao Chief General Manager Export-Import Bank of India New Delhi, April 29, 2004
  • 2. Exim Bank Structure of Presentation India Definition of SEZs / EPZs Objectives of Setting up SEZs / EPZs Common features of SEZs / FTZs Performance of EPZs / SEZs in Select Countries Some Success Factors Exim India: Role & Activities 2
  • 3. Exim Bank Definition of EPZs / SEZs India World Bank: EPZs are defined as fenced-in- industrial estates specialising in manufacturing for exports that offer firms free trade conditions and a liberal regulatory environment. India’s Exim Policy: SEZs are specifically delineated duty-free enclaves and shall be deemed to be foreign territories for the purpose of trade operations and duties and tariffs 3
  • 4. Exim Bank Objectives India To enhance foreign exchange earnings by promoting exports To attract Foreign Direct Investment and induce technology transfers To generate employment opportunities and assist in income generation 4
  • 5. Exim Bank Common Features India Unlimited duty- free imports of raw materials, intermediate inputs and capital goods Minimal bureaucratic intervention or red tape with greater flexibility in labour laws. Generous and long term tax holidays and concessions Superior communication and infrastructure 5
  • 6. Exim Bank Performance of EPZs in Select Countries India Mauritius: Exports from EPZs are 64% of total exports. More than 500 enterprises and 87,000 people employed in EPZs Bangladesh: Exports from 6 EPZs contribute around 20% of total exports. There are 180 industries in operation in EPZs 6
  • 7. Exim Bank Performance of EPZs in Select Countries (cont..) India Sri Lanka: It has 8 EPZs and 3 industrial parks. Exports from EPZs account for over 20% of the Country’s total exports Mexico: The concept of an EPZ is reflected in the Maquiladora Programme. They employ over 1 million workers in over 3800 maquiladoras and account for over 40% of total exports. 7
  • 8. Exim Bank Some Success Factors India Private Development and Management The onsite infrastructure should be privately developed and managed. Development of infrastructure external to zone to enable spillover effect by facilitating transport and communication. Encourage economical use of resources and factors of production. 8
  • 9. Exim Bank Some Success Factors India Business Friendly Labour Laws Remove labour market constraints such as cumbersome firing procedures to reduce market adjustment and labour costs. Strengthen legal and regulatory areas to prevent abuse of workers’ safety and health. Create an agency to protect the interests of workers so as to reduce labour turnout and absenteeism and improve labour productivity. 9
  • 10. Exim Bank Some Success Factors India Role of Government Government involvement needs to be clearly defined. It should provide the initial impetus like feasibility studies, encouraging private sector involvement and promoting the zone abroad It should provide legal & regulatory framework and leave the running of the zone to private sector. It should provide a stable, efficient and transparent policy framework. 10
  • 11. Exim Bank Some Success Factors India Nodal Agency to act as a Facilitator and Catalyst It should aid in quality enhancement, productivity, innovation and creativity, cater to training requirements; carry out assignments to identify management and technical problems. It should act as a one stop service centre to provide assistance in identification of investment opportunities, site location, obtaining clearances E.g. Mauritius Export Processing Zones Development Authority (MEPZDA) E.g. Bangladesh Export Processing Zones Authority (BEPZA) 11
  • 12. Exim Bank Some Success Factors India Develop Sector Specific Economic Zones Focus on specific areas of activities depending on locational advantage, local skill and infrastructure. E.g. Santacruz SEZ - focus on electronics and gems and jewellery. Size of Economic Zones Increase in the size of the zones to impact economies of operations within the zone. E.g. Hainan SEZ (China) – 34,000 sq. kms 12
  • 13. Exim Bank Some Success Factors India Linkages between Zone & Domestic Industry Develop linkages by sourcing raw materials from domestic sources. Develop local partnerships through shared technology and investment in human resource. Encourage local suppliers by giving them incentives to supply to the economic zones. Set up an agency to identify and facilitate such linkages and enable local firms to procure skills and technology to supply to the zone. 13
  • 14. Exim Bank Some Success Factors India Implementation of Incentives Actual implementation of incentives which are granted has to be ensured. Incentives should be granted in a streamlined manner and documentation should be simplified. Focus on Quality Given the growing trend of global production networks, requiring suppliers to respond flexibly. Quality, productivity and innovation are needed to survive global competition and attract quality investors. 14
  • 15. Exim Bank Exim India: Evolving Vision India To developing To commercially viable creating export relationships with a From capability by target set of externally financing, arranging oriented companies by facilitating and competitive offering them a promoting financing at comprehensive India’s various stages range of products and foreign trade of the export services, aimed at cycle enhancing their internationalisation efforts 15
  • 16. Exim Bank Exim India: Role & Activities India Policy Input - Study on “Export Processing Zones in Select Countries: Critical Success Factors” Study covered Mauritius, Bangladesh, Sri Lanka, China, UAE, Mexico, Malaysia, Philippines, Ireland and India – Success Factors in Other Countries Study published as an Occasional Paper 16
  • 17. Exim Bank Exim India: Role & Activities India Conducive financial environment essential for Success of SEZs Policy Input - Study on “Offshore Banking Units in Select Countries” – Singapore, Malaysia & Mauritius Round Tables on “SEZs and Offshore Banking Units” 17
  • 18. Exim Bank India Thank You 18