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What’s Special About Special Economic Zones                 Introduction to Economic Zones“Export else perish “ these are ...
What’s Special About Special Economic Zonesnation wants to give its industries ample facilities for efficient productionof...
What’s Special About Special Economic ZonesTypes of Economic ZonesDepending on the facilities provided, the level of gover...
What’s Special About Special Economic Zones      the foreign trade activities of the units in the zones. For Example:     ...
What’s Special About Special Economic ZonesIn the 9th International Anti-Corruption Conference in South Africa held from 1...
What’s Special About Special Economic Zones        Genesis of Chinese Special Economic ZonesChinese Economic ReformsHistor...
What’s Special About Special Economic ZonesProvince and Xiamen in Fujian Province, and the entire province of Hainanwere, ...
What’s Special About Special Economic ZonesThe common threads of these reforms are the search for efficiency and anassumpt...
What’s Special About Special Economic Zonesplaces provide tax treatment and other advantages for the foreigninvestor. Laws...
What’s Special About Special Economic Zones                  ‘Window to the World’ – Shenzhen SEZ              2.3 Chinas ...
What’s Special About Special Economic Zonesbeing accepted into the World Trade Organization, Shenzhen may be thequintessen...
What’s Special About Special Economic Zonesor by sea. According to the Shenzhen Municipal Foreign InvestmentBureau, at the...
What’s Special About Special Economic ZonesGoing Hi-TechTechnologically, Shenzhen did not mature as fast as some had origi...
What’s Special About Special Economic ZonesFuture GrowthTo believe that Shenzhen can maintain this level of sustained grow...
What’s Special About Special Economic ZonesRailway converge in Shenzhen. Take the fact that Shenzhen already hasthe infras...
What’s Special About Special Economic Zonestheir intellectual property rights has sharpened Shenzhens competitiveedge.    ...
What’s Special About Special Economic ZonesFuture of Shenzhen – Next 5 YearsThe guideline and goal for the next 5 years is...
What’s Special About Special Economic Zones      modern international city. We are to speed up the development of      the...
What’s Special About Special Economic Zones             Impact of SEZs on Chinese EconomyThe favourable impact of the SEZs...
What’s Special About Special Economic Zones      2. Growth of Exports – As all five SEZs are coastal cities, they areconve...
What’s Special About Special Economic Zoneswork culture and practices adopted by foreign companies could havesome wash-bac...
What’s Special About Special Economic ZonesThe rapid socio-economic development in southern Vietnam’s Dong Nai Provincerec...
What’s Special About Special Economic ZonesCurrent ScenarioWHILE celebrating the 20th anniversary of Chinas four earliest ...
What’s Special About Special Economic ZonesShenzhen is tightening ties with Hong Kong, and Xiamen and Hainan withTaiwan. I...
What’s Special About Special Economic Zones                   25
What’s Special About Special Economic Zones             Beginning of Economic Zones in IndiaThe policies of Liberalisation...
What’s Special About Special Economic Zoneszone. These zones would regulate all the material coming into and goingout of t...
What’s Special About Special Economic Zones6. Noida Export Processing Zone (NEPZ), Noida, Uttar Pradesh – 1985;7. Visakhap...
What’s Special About Special Economic Zones               Shortcomings & Problems of EPZsAccording to an Audit Report cond...
What’s Special About Special Economic ZonesFor example:On 12th March 1994, a memorandum was submitted to Shri Zafar Saiful...
What’s Special About Special Economic Zones         rejected components, de-bonding of capital equipment, waste         di...
What’s Special About Special Economic ZonesIn January 2001, SEEPZ customs conducted a stock taking of two units from Jan 3...
What’s Special About Special Economic Zones                            Change to SEZsEXIM Policy changesRealising the fail...
What’s Special About Special Economic Zonesto working outside the units, giving them total operational flexibility, asprop...
What’s Special About Special Economic ZonesInadequate extra facilities over EPZsThe relaxation for SEZ units was significa...
What’s Special About Special Economic Zoneswas the declaration of SEZs as foreign territory. The Finance Ministrydeclared ...
What’s Special About Special Economic Zones      SEZ units have to be a net foreign exchange earner. No      pre-determine...
What’s Special About Special Economic Zones      100% of foreign exchange earnings can be retained in EEFC account.      E...
What’s Special About Special Economic Zones     The SEZ should have an area preferably of 1000 hectares.     Such SEZ shal...
What’s Special About Special Economic Zones      Other facilities like tax holiday, retention of 70% of export earnings   ...
What’s Special About Special Economic ZonesExports will be permitted on the basis of self-certification by theunits and th...
What’s Special About Special Economic ZonesWhen the import consignments are required to be transshipped to aSEZ located at...
What’s Special About Special Economic ZonesThe SEZ units are also allowed to undertake job-work for export onbehalf of DTA...
What’s Special About Special Economic Zonesof the production or production process through other units in thesame SEZ subj...
What’s Special About Special Economic Zoneswarehouse at international airports for being handed over to thesaid passenger ...
What’s Special About Special Economic ZonesCustoms authorities. This provision, however, does not apply togold, silver, pl...
What’s Special About Special Economic ZonesLevy of Central Excise Duty on Goods Produced or Manufactured bySEZ Units and C...
What’s Special About Special Economic Zones   are within the overall percentage prescribed in Appendix-41 of the   Handboo...
What’s Special About Special Economic ZonesA study of Chinese trade unions will be interesting. Comparison with Indian lab...
What’s Special About Special Economic Zones                                SEEPZ SEZSEEPZ (Santacruz Electronics Export Pr...
What’s Special About Special Economic Zonesbegins production in the very first year of obtaining the SDF shed, he isentitl...
What’s Special About Special Economic Zonesvery nominal rates. This is the central warehouse for all the units insideSEEPZ...
What’s Special About Special Economic ZonesConvention CentreCommunications CentreOptical fiber telephone exchange with a c...
What’s Special About Special Economic ZonesSEEPZ & DevelopmentAncillariesThe proximity of available spares, components and...
What’s Special About Special Economic ZonesGeneral Information on SEEPZAccording to the Annual Report of SEEPZ for the yea...
What’s Special About Special Economic Zones                                             7.1 Comparison of electronics expo...
What’s Special About Special Economic ZonesLatest Happenings at SEEPZ     SEEPZ is full in terms of capacity, when taking ...
What’s Special About Special Economic ZonesChinese Delegation                             58
What’s Special About Special Economic Zones                               Navi Mumbai -                            City of...
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Sez(Special Economic Zones)

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Sez(Special Economic Zones)

  1. 1. What’s Special About Special Economic Zones Introduction to Economic Zones“Export else perish “ these are the words of first Prime Minister of India Pt.Jawaharlal Nehru. India being a continent like country having 30 states,more than 1000 languages and world second largest man power havingdiversified natural conditions right from Rain Forests of Kerala, IceMountains of Himalaya, Runn of Kuch to productive land of Bramahaputrahas great potentials of world class export worthy products from variousindustries like Agriculture, Engineering, Chemicals, Software’s, Gems andJewellry, Pharmaceuticals, Bio technology and many more.During last fifty years, mostly ours exports have been less than ourimports and the balance of trade been unfavorable. In 1990-1991 Indiahad faced real pressure on the balance of payment. During this period,exports had stagnated and there was a crisis in foreign reserves whichlead to an emergency situation in India.Liberalization policy was announced in June 1991. It is the precious gift ofDr Manmohan Singh to the people of India at a time when the country wasin the grip of unprecedented economic crisis and political turmoil. One ofthe areas in which this policy focused on was on increasing India’s export.And the trickle down effect of these reforms has lead to the advent of SEZIn this age of Globalisation, there is a need for every nation in the worldto perform well economically. With the improvements in science andtechnology and the raising standards of living worldwide, ensuringeconomic development assumes primary importance in the policies ofevery nation.While striving for economic development, every nation takes stepsnecessary for the implementation of its ambitious plans. But more oftenthan not, these plans cannot be affected successfully throughout thenation. There are always shortcomings in these economic plans. Every 1
  2. 2. What’s Special About Special Economic Zonesnation wants to give its industries ample facilities for efficient productionof goods and services and in order to make them globally competitive interms of price and quality. Some of these facilities can be used by allindustries throughout the nation. But sometimes, some facilities cannotbe given on account of reasons like the geographical extent and thepossibility of misuse.For Example: If a country wants to give subsidized power to a specificindustry, it cannot do so throughout the nation as keeping a check onwhether the subsidized power is going to the right people or not is aHerculean task.Thus, in order to give the industry certain added advantages, thegovernments of various nations come up with special schemes andsubsidies mostly related to customs duties. These schemes provide anupward thrust to the nation’s products in the global markets on accountof lower prices / better quality. Such schemes, if implemented directly,are not allowed by the WTO. This has resulted in many nations coming upwith such schemes in an indirect manner. One of the most popular onesis to set up a special area demarked for the purpose of industrial growth.Various facilities can be offered in this area without the fear of thembeing misused and also, no resistance from WTO (or any other tradingpartner / nation) is encountered on account of the scheme not being anational policy, but only limited to a small area demarked for the purpose.This is where the concept of ‘Economic Zones’ comes in. 2
  3. 3. What’s Special About Special Economic ZonesTypes of Economic ZonesDepending on the facilities provided, the level of government controlexercised, the type of industries allowed in the zone, and the type ofactivities allowed in the zone, they are classified into many types bydifferent countries. A few common types are as follows: Foreign Trade Zone (FTZ) – These are designated sites where special customs procedures are applicable. These procedures allow domestic activities involving foreign trade to take place as if it were outside the nation’s borders, thus relieving them of the Customs of the land. For Example: Miami Foreign Trade Zone, Florida (USA) Export Processing Zone (EPZ) – These are the most common types of zones. And are similar to the FTZs of USA in many respects. Established for the purpose of promoting exports, these zones concentrate on providing the exporters with all facilities of production in one place and also relax the customs procedures for 3
  4. 4. What’s Special About Special Economic Zones the foreign trade activities of the units in the zones. For Example: Noida Export Processing Zone (NEPZ), Uttar Pradesh (India) Free Zone (FZ) – These are the zones in countries mainly like the UAE. Such zones give total exemption from all taxes and duties levied on profits to the units existing in them, besides other financial benefits and incentives. For Example: Dubai – Jebel Ali Free Zone (JAFZ), Dubai (United Arab Emirates) Special Economic Zone (SEZ) – These are an extension of the EPZ scheme with added benefits and fewer bureaucratic hassles. But these zones do not restrict themselves to export promotion only. They provide all facilities and infrastructure necessary for the development of the industries in the region. They are normally huge in size and hence are suitable for mass-production of commodities, which can be sold domestically, as well as internationally. For Example: Shenzhen Special Economic Zone (Shenzhen SEZ), ChinaThe same zones are also referred to as Free Economic Zones (FEZ) in theKyrgyz Republic and as Free Trade Zones in many other Asian countries.Essentially, the core concept of all these zones is the same; i.e. to treatthe designated zone as a foreign territory for the purposes of customsprocedures and to also give them certain added incentives andinfrastructure facilities, which are not available to ordinary units operatingwithin the country. 1.1 A permanent solution for corruption: Special Governance Zone (SGZ) 4
  5. 5. What’s Special About Special Economic ZonesIn the 9th International Anti-Corruption Conference in South Africa held from 10-15December 1999, Shang Jin Wei, Advisor to the World Bank submitted an action planfor the establishment of a new concept; the concept of SGZs (Special GovernanceZones).It advocates establishing a special governance zone (SGZ) within a country as anentry point for an eventual nation-wide anti-corruption program. A SGZ is anenclave within which comprehensive reforms can take place. It is geographicallylimited so that any unpredictable negative consequences can be contained.According to the plan, reform measures can easily be explored and fine-tunedwithin small manageable zones before trying their implementation nationwide. Oncesuccessful, its experience can serve as a model for the rest of the country. TheWorld Bank (and other international institutions) can play an important roleespecially at the initial stage of the program.The SGZ idea reflects a fundamental belief that the quality of public governance inmany developing and transition economies can be significantly improved andcorruption can be drastically reduced. The proposal is designed to achieve severalobjectives: to start the reform program within an area small enough to containunpredictable consequences, to experiment and fine-tune various components ofthe anti-corruption program in practice, and by the power of example, to buildmomentum to implement a nation-wide governance-improving program.There are a few basic principles for successfully operating a SGZ. First, wheneverpossible, a fair market mechanism should be used to allocate resources, to produceand/or procure public goods, to cut red tape, and to reduce the need for permitsand licenses. This would limit the opportunities for government officials to takebribes (and to be offered bribes). The reward for civil servants to deliver qualityservice and not to take bribes should be raised. At the same time, the penalty forcivil servants for poor performance and for taking bribes should also be raised andfairly applied. 5
  6. 6. What’s Special About Special Economic Zones Genesis of Chinese Special Economic ZonesChinese Economic ReformsHistorically, China has adopted an inward-looking strategy to itseconomic development. Successive Chinese governments thought that theeconomy could grow purely through self-reliance. However, there arealways limitations to what a country can do by itself, for examplelimitations in raw materials, natural resources, technology, etc. These canhold back the growth of an economy and certainly Chinas economicgrowth lagged far behind much of the rest of the world up to the 1970s.By contrast, countries like the USA were achieving significant economicgrowth in this period because they were practising foreign trade policies,which facilitated free trade. Any shortages in the domestic economy, forexample oil in the USA or Japan, wheat in the Soviet Union or cars in Indiacould be compensated for by imports. Foreign trade, then, could help toaid economic growth.The export trade is also vital. Not only can exports be a means of payingfor imports, but they also help to earn foreign exchange. Since 1979, theChinese government has recognised the importance of exports as ameans of fostering economic growth. Economic policies and specialincentive programmes have been introduced to increase exports.Establishment of SEZsWhen it decided to reform the national economic setup in 1978, theChinese government embarked on a policy of opening to the outsideworld in a planned way and step-by-step. A decision was made in 1978to permit direct foreign investment in several small "special economiczones" along the coast. Shenzhen, Zhuhai and Shantou in Guangdong 6
  7. 7. What’s Special About Special Economic ZonesProvince and Xiamen in Fujian Province, and the entire province of Hainanwere, under this policy, the first five Special Economic Zones to beestablished.The aims of the establishment of the SEZs were to earn foreign exchange,to enhance employment, to attract foreign investment and to acceleratethe introduction of technology and management expertise. The five SEZsestablished were Shenzhen, Zhuhai, Shantou in Guangdong province,Xiamen in Fujian province and Hainan Island. In order to attract foreigninvestors and develop foreign trade, the five SEZs offered similarpackages of favourable incentives to foreign firms. One of the mostattractive points of these packages was that income tax was fixed at therate of 15 per cent, lower than that in other parts of China. Otheradvantages given were tax exemptions, land use rights, and banking andfinance privileges, which were available to firms operating outside theSEZs.IncentivesChina lacked the legal infrastructure and knowledge of internationalpractices to make this prospect attractive for many foreign businesses,however. In later years steps were taken to expand the number of areasthat could accept foreign investment with a minimum of red tape, andrelated efforts were made to develop the legal and other infrastructuresnecessary to make this work well.Many other non-financial advantages were provided inside the SEZs.Firms were provided relatively free-market environments with minimalgovernment intervention. This means that private and joint-ventureenterprises were free to hire their own workers. They were also free to setwages to reflect market conditions. Bonuses could be awarded to workersfor outstanding performance. 7
  8. 8. What’s Special About Special Economic ZonesThe common threads of these reforms are the search for efficiency and anassumption that management of the economy by large governmentalbureaucracies is unlikely to produce this result.PerformancePrimarily geared to exporting processed goods, the five special economiczones are foreign-oriented areas, which integrate science and industrywith trade, and benefit from preferential policies and special managerialsystems. They have summed up their rich experiences in absorbingforeign investment and developing foreign trade for China to open up tothe international market. In recent years, the special economic zones haveled the country in establishing new systems, upgrading industries andopening wider to the outside world, serving as national models. In 1999,Shenzhen’s new-and high-tech industry became one with best prospects,and the output value of new-and high-teach products reached 81.98billion Yuan, making up 40.5 percent of the city’s total industrial outputvalue and coming out in front in the country.China has so far created 124 export-processing zones. Some 18 millionwere employed in firms with foreign investment alone, and many millionsmore in Chinese-owned zone enterprises. Shenzhen has become awindow of the country to the outside world and a platform for reformmeasures, along with Xiamen, Zhuhai and Shantou.Open Coastal CitiesIn the period between1984-85, China furtheropened 14 coastal citiesand three coastalregions to foreigninvestment. All of these 8 2.1 Chinas 99 Kunming World Horticultural expo was opened on April 30. This picture shows a scene built by Shandong Province.
  9. 9. What’s Special About Special Economic Zonesplaces provide tax treatment and other advantages for the foreigninvestor. Laws on contracts, patents, and other matters of concern toforeign businesses were also passed in an effort to attract internationalcapital to aid China’s development. The largely bureaucratic nature ofChina’s economy, however, poses inherent problems for foreign firmsthat want to operate in the Chinese environment, and thus the policies toattract foreign capital have had to evolve continually in the direction ofpresenting more incentives for the foreigner to invest in China.Since 1992, the State Council has opened a number of border cities, andin addition, opened all the capital cities of inland provinces andautonomous regions. In addition, 15 free trade zones, 32 state-leveleconomic and technological development zones, and 53 new- andhigh-tech industrial development zones have been established in largeand medium-sized cities. As a result, a multi-level, multi-channel,omni-directional and diversified pattern of opening, integrating coastalareas with riverine, border and inland areas has been formed in China. Asthese open areas adopt different preferential policies, they play the dualroles of ‘Windows’ (in developing the foreign-oriented economy,generating foreign exchanges through exporting products and importingadvanced technologies) and of ‘Radiators’ (in accelerating inlandeconomic development).All these efforts of the Chinese government were fruitful and resulted inthe success of the concept of Special Economic Zones (SEZs). The mostprominent amongst the Chinese SEZs is the Shenzhen SEZ. The growth ofSEZs in China has been explained with the example of Shenzhen SEZ inthe following Chapter. 9
  10. 10. What’s Special About Special Economic Zones ‘Window to the World’ – Shenzhen SEZ 2.3 Chinas Special Economic Zones gear up for WTO, future In recent years, the Chinese SEZs have been focusing on improving the overall economic quality and on developing high-tech industries and other economies with special features. Compared with other parts of China, the SEZs still hold an edge in utilizing domestic and overseas resources and markets and in adapting themselves to international common practices to boost economic development. Experts say that improving overall economic performance is a necessary choice for the SEZs, as China will face fiercer competition after its entry into the World Trade Organization. It is the only way for them to realize modernization. To hit the goal, analysts say, the SEZs should give national treatment to overseas investors for more funding while making efforts to open up overseas markets for their own companies products. By changing the past practice of offering preferential policies to overseas investors in certain fields, the SEZs have lifted all restrictions for them. According to officials, the expansion of reform in the SEZs will focus on systematic innovations, including adjustments in the ownership structure, and transformation of functions of government departments in accordance with international common practices.Shenzhen – The VillageOnly twenty years ago, Shenzhen was a small fishing village located inChinas southern province of Guangdong. Today, after two decades ofrapid economic expansion, the city enjoys the highest income per-capitaamong the 35 major Chinese cities at US$ 225 per month. At close to US$3,000 per year the income per capita is approximately four times thenational average. This coastal city, which shares a border with Hong Kong,has become one of Chinas most prosperous cities averaging an economicgrowth rate of 34 percent between 1980 and 1998. Now that China is 10
  11. 11. What’s Special About Special Economic Zonesbeing accepted into the World Trade Organization, Shenzhen may be thequintessential model for the central government to follow when taking itsnation, gripped in authoritarian rule, and preparing it to operate in anincreasingly open market environment.Formation of the SEZThe city of Shenzhen was founded in 1979 and a year later wasestablished as Chinas first special economic zone (SEZ) by Chinese leaderDeng Xiaoping. The special economic zones were implemented by theCommunist government as a virtual laboratory for experimentation with afree market economy. The SEZs operate under an entirely differenteconomic premise than that of the mainland, specifically, with anemphasis on exporting and creating an attractive environment for foreigndirect investment through favorable tax incentives.Influence of Hong KongWhen the SEZ was first established, the majority of the new businessesthat settled in Shenzhen were Hong Kong-based enterprises drawn to thezone to take advantage of, among many other things, the abundance ofcheap labor and the customs-free industrial environment. Since this time,the economic border between Shenzhen and Hong Kong has grownincreasingly vague. Hong Kong dollars flow freely in Shenzhen and manyresidents of Hong Kong invest in the Shenzhen stock exchange.The cultural border has eroded over the years as well. With the proximitythat Shenzhen enjoys to Hong Kong, the population is able to pick-upHong Kong based radio and television signals. Those in Shenzhen whospeak Cantonese can receive news and other content that is restricted onthe mainland. Residents of Shenzhen are therefore, able to perceive worldevents from a more objective point of view than the one presented by thecommunist governments news outlets. Currently, there are a dozen ormore crossing venues between Hong Kong and Shenzhen either by land 11
  12. 12. What’s Special About Special Economic Zonesor by sea. According to the Shenzhen Municipal Foreign InvestmentBureau, at the end of 1998 Hong Kong was engaged in 1,078 projects inShenzhen accounting for over 78 percent of the total projects undertaken.Remarkably, Taiwan was the second leading project forum with 119 or8.5 percent of the total projects.Troubled TimesEven with its unprecedented track record for growth, things have at timesbeen less than perfect for Shenzhen. In 1980, Shenzhens appeal as a SEZmade it an attractive area for entrepreneurs and fortune hunters, but by1992, seventeen hundred special economic zones had been established.Over time Shenzhen was not as unique as it had once been. Fortunately,in that same year Shenzhen was the first Chinese city to be givenlegislative authority in the way of a Municipal Peoples Congress. To asmall degree this gave the city a level of control over local policy whichwas not seen anywhere else.Additionally, the few years leading up to the return of Hong Kong toChina can be described as a time of over exuberant expectation. Theextraordinarily hot Shenzhen stock market in 1996 goes a long way inillustrating this point. The people of Shenzhen were under the impressionthat when Hong Kong rejoined China in the middle of 1997, Hong Kongresidents would spill into the city buying up property as well as goodsand services from companies listed on the Shenzhen stock exchange.Investors, including small individual investors who laid out their modestsavings, began pouring money into the stock exchange. When the timefinally came for Hong Kong to reunite with the mainland, the conclusionwas anticlimactic. Many of the anticipated benefits simply did not occur,and while some experienced asset appreciation others lost their entiresavings. 12
  13. 13. What’s Special About Special Economic ZonesGoing Hi-TechTechnologically, Shenzhen did not mature as fast as some had originallyanticipated. Recently, that trend has changed. The goal of makingShenzhen one of Chinas most prevalent high-tech centers is definitelybeing realized. The combination offavorable economic policy, coupledwith a highly educated work force,explains the progress being madein Shenzhens high technologyindustries. In 1998 nearly a third ofall Chinese individuals holding adoctorate degree resided inShenzhen. Additionally, 10 percent 2.2 An exhibition being heldof all residents are estimated to be in Shenzhen SEZ to showcasecollege graduates while less than new technologieshalf of one percent of the national population has obtained a collegedegree. In 1998 Shenzhen was responsible for approximately half ofChinas information technology output, and the Internet industry is nowbeginning to gain international exposure. Overseas investors, such as IDGand Pacific Venture Capital Co., are starting to channel money into theShenzhen Internet industry.According to a release from the Xinhua News Agency in mid-March of thisyear, Shenzhen has 180,000 Internet users in the city and over 40companies offering Internet related services. Furthermore, an estimated70 percent of these Internet users are said to be using e-commerce tobuy goods. Additionally, an impressive list of multinational ITcorporations that are increasingly being drawn to Shenzhen includingMicrosoft, IBM, Lucent Technologies, Compaq and Intel to name a few. 13
  14. 14. What’s Special About Special Economic ZonesFuture GrowthTo believe that Shenzhen can maintain this level of sustained growthforever would be irrational. As the cost of labour grows higher and otherareas of China begin to adopt more market-oriented policies, businesseswill ultimately begin migrating to other parts of this vast nation. Thisassumption is supported by the shear size of China and the magnitude ofnatural, as, well as human resources that have remained untapped for somany years. The only question remaining is at what speed will the centralgovernment allow this to occur.The wealth will inevitably begin to spread, but that does not meanShenzhen will fade into Chinas background. The wealth generated in thiscity over the last twenty years has given rise to a burgeoning servicesector and is home to one of Chinas two stock markets. The city hasbecome a regional financial center. At the end of 1999 there were 100financial institutions operating in Shenzhen employing an estimated30,000 professionals. According to the Shenzhen Municipal ForeignInvestment Bureau, at the end of 1999 there were 736 projects involvingforeign direct investment in excess of US$ 10 million per project, 109projects involving amounts in excess of US$ 30 million per project and 18projects currently underway involving over US$ 100 million per project.Transportation IssuesA major dilemma that China, as well as its trading partners face, is how toeffectively access and deliver goods and services to a large percentage ofthe population that is geographically isolated from the major economichubs in China. Shenzhen is very important in this respect. Over the years,the city has developed an advanced infrastructure that is now well poisedto assist in alleviating the burden that this problem presents. The citypossesses 8 harbors and 12 cargo docks and is home to the HuangtianInternational Airport, which is the fourth largest airport in China.Additionally, both the Beijing-Canton Railway and the Beijing Kowloon 14
  15. 15. What’s Special About Special Economic ZonesRailway converge in Shenzhen. Take the fact that Shenzhen already hasthe infrastructure in place to be considered a regional distribution center,and its continuous advancement in both the financial and technologysectors, one can see that as China enters the WTO and the globaleconomy, it will look to Shenzhen as a road map for the future.AchievementsAlready, 48 of the worlds 500 top enterprises have taken root inShenzhen. Coupled with the rapid development of its export-orientedeconomy, the city achieved an export volume worth US$26.4 billion in1998, amounting to one-seventh of Chinas total, topping the list ofChinas big and medium -sized cities for six consecutive years. Outputvalue of the citys high and new technology products was worth 65.52billion Yuan (US$7.89 billion) in 1998, making up 35.4 per cent of thecitys total industrial output.The International Architecture Association awarded Shenzhen this year,marking the first urban planning award in China and Asia. Shenzhenseducational, scientific and cultural undertakings have also achieved onesuccess after another.Computer hardware, software and phone-related products made up 70per cent of the citys total high-tech exports. Asian markets receive 60per cent of these goods. North America gets 26 per cent and Europe getsabout 10 per cent. And 31 per cent of Shenzhens high-tech exports werefrom State-owned enterprises. Wholly foreign-funded enterprises shippedout 30 per cent, and joint ventures made 28 per cent of the exports.Shenzhen has become one of the worlds most important manufacturingbases for high and new technology, namely electronics. Citysencouragement of local enterprises to update technology and protect 15
  16. 16. What’s Special About Special Economic Zonestheir intellectual property rights has sharpened Shenzhens competitiveedge. 16
  17. 17. What’s Special About Special Economic ZonesFuture of Shenzhen – Next 5 YearsThe guideline and goal for the next 5 years is to follow Deng Xiaopingstheory on building socialism society of Chinese characteristics; take "holdon to the opportunity, deepen the economic reform, open up further,promote development, and keep stability of the society" as the guideline.Focus on establishing market economy and mechanism, optimizeeconomic structure, made the city functional better, build new and hightechnology industrial development zone, regional information center,trading center, distribution center, and turn Shenzhen into a modern,international city.In more detail, Shenzhen is going to: 1. Expedite the major projects of infrastructure construction. Infrastructure construction is what a city based upon to exist and develop. In the coming five years, in order to improve Shenzhens investment environment, five networks are to be built: public transit network, water supply network, flood preventive network, power supply network, telecommunication network. 2. Widen the range of structural adjustment of industry; enhance the quality of economic growth and economic efficiency. Increase the input and establish production base to support leading industries. Encourage the merge of production and capital. Adjust organizational structure; strengthen equity management, quality assurance, and financial management. Put emphasis on making use of up to date technology. Introduce new agricultural technology, increase value add and economic efficiency on agricultural products. 3. Develop the service industry vigorously, perfecting the functionality as an international city. Developed service industry symbolizes a 17
  18. 18. What’s Special About Special Economic Zones modern international city. We are to speed up the development of the service industry, and turn Shenzhen into a financial center, information center, trading center and distribution center.Construction of the Regional Financial CentreInvite more global banks and financial institutions to open office inShenzhen; Develop offshore business of domestic banks; broaden thecoverage and internationalization of our security industry, increase theradiation power of Shenzhens financial institutions.Construction of Regional Information CentreAs a hub of domestic and international market, Shenzhen boasts theunique advantage in developing information industry. We are going tostrengthen the corporation with worlds leading information serviceorganizations, exploit information sources in conjunction with theseorganizations to form a wide connecting, highly efficient informationnetwork. 2.3 Chinas Special Economic Zones gear up for WTO, future In recent years, the Chinese SEZs have been focusing on improving the overall economic quality and on developing high-tech industries and other economies with special features. Compared with other parts of China, the SEZs still hold an edge in utilizing domestic and overseas resources and markets and in adapting themselves to international common practices to boost economic development. Experts say that improving overall economic performance is a necessary choice for the SEZs, as China will face fiercer competition after its entry into the World Trade Organization. It is the only way for them to realize modernization. To hit the goal, analysts say, the SEZs should give national treatment to overseas investors for more funding while making efforts to open up overseas markets for their own companies products. By changing the past practice of offering preferential policies to overseas investors in certain fields, the SEZs have lifted all restrictions for them. According to officials, the expansion of reform in the SEZs will focus on systematic innovations, including adjustments in the ownership structure, and transformation of functions of government departments in accordance with international common practices. 18
  19. 19. What’s Special About Special Economic Zones Impact of SEZs on Chinese EconomyThe favourable impact of the SEZs on the economy of China is fivefold: They attract foreign investment They help the growth of the export industry They earn foreign exchange They provide employment opportunities They help the indigenous economy improve its level of technologyThese points are discussed below in detail: 1. Foreign Investment – The preferential treaties of the SEZs haveattracted foreign investors to invest a huge amount of money in China.For instance, Hainan and Xiamen have attracted investments mostly fromTaiwan. By June 1987, a total foreign investment of $2.12 billion hadbeen made in the five zones, amounting to one quarter of the totalforeign investment in China during this period. The most marked successwas registered in Shenzhen. By the end of 1986, it accounted for $1.4billion through more than 4000 economic cooperation agreements. Onesignificant factor is that the investment has not been confined to theexport industry, but has permeated other sectors such as infrastructureconstruction, commerce, tourism and real estate. 19
  20. 20. What’s Special About Special Economic Zones 2. Growth of Exports – As all five SEZs are coastal cities, they areconvenient for ocean transport routes and help to promote the exportindustry. Preferential policies have encouraged foreigners to set upexport- oriented factories in the territories. From 1985 to 1987, anannual average real growth rate of 83% was recorded for exports from thefive zones. Shenzhens exports, for example, grew at an average rate of70% during this period. At the same time the proportion of the SEZsindustrial products that went to export had risen to 53% by 1987. 3. Foreign Exchange – The establishment of the SEZs has opened away for China to increase its trade with foreign countries. They not onlyenhance trading activities such as foreign investment and tourism butalso help China to earn foreign exchange through these activities. 4. Employment Opportunities – Since the beginning of theopen-door policy, small-scale private businesses have been allowed tocoexist with state enterprises. This has increased employmentopportunities for local people and raised the level of economic activity.Also, many state workers sense that going into business on their ownmay provide greater income potential. They generally adopt an attitudecommonly known in China as "I Bu Zho Er Bu Shu", which, looselytranslated, means ‘refusing to work and refusing to relax’. Many prefer towork for joint-venture firms for higher wages. So the average income inSEZs now ranks as the highest in China. 5. Improvement in Technology – In theory advanced technology andknow-how will also flow into the country as a result of foreign investment.In turn, with increasing exports the force of international competitionmay bring greater pressure on Chinese firms to adopt more efficient workpractices. It is perhaps questionable how much benefit the wider Chineseeconomy has reaped from these investments. The technology, patentsand know-how remain firmly the property of, and are controlled by theparent companies. It may however be the case that in the long run the 20
  21. 21. What’s Special About Special Economic Zoneswork culture and practices adopted by foreign companies could havesome wash-back effect over wider economic practices in the country.In conclusion, the establishment of the SEZs has helped to increase theexport trade, which in turn has helped to improve the Chinese economy.Preferential treaties have been offered in the five SEZs to attract foreigninvestment. A large amount of foreign investment has occurred not onlyin the export trade, but also in infrastructure construction, commerce andtourism. Foreign companies have been encouraged to set up factories inthe territories and the export industry has grown. Jobs opportunities havebeen provided for locals as factories need labour and the average incomeof the people has increased. In addition, advanced foreign technology hasbeen brought in with the inflow of foreign investment. All these factorshave contributed to the growth of the Chinese economy. It remains to beseen if these quantitative advances, in which the SEZs have played animportant role, are matched by commensurate advances in the quality oflife for the majority of Chinese people. 3.1 Not all roses - Unwanted byproducts of SEZ developments About 27 million people, 90 per cent of whom are women, work in export processing zones worldwide, often earning low wages in poor working conditions, the International Labour Organisation (ILO) said. The United Nations agency also said that the industrial zones, which import and process materials before exporting them again, were huge employment generators but often lacked meaningful links with the domestic economies around them Vietnamese example 21
  22. 22. What’s Special About Special Economic ZonesThe rapid socio-economic development in southern Vietnam’s Dong Nai Provincerecently has been attributed to its successful Industrial Zones (IZs), which haveresulted in impressive job generation and export figures. More than 80,000 jobshave been generated by the IZs over the past five years and more than US$2.7billion in export revenues has been earned by enterprises operating within them.Total revenues for the IZs during that period topped $4.7 billion, contributing $176million to the State budget, nearly $1 billion in export receipts Throughout thecountry most of the projects in the IZs focus on sectors that is expected to providequick returns on capital such as motorbike and electronics assembly and otherindustrial consumer goods. Little attention has been paid by investors, to keyindustrial sectors such as engineering, electronics and chemical production andfood processing. Furthermore, nearly 80 percent of foreign-invested projectsuse obsolete machinery and equipment, resulting in products oflow competitiveness aimed at domestic consumers, Another problem was that theoccupancy rate of the IZs remains low with only some 41 percent of the total landarea let to investors at present. 22
  23. 23. What’s Special About Special Economic ZonesCurrent ScenarioWHILE celebrating the 20th anniversary of Chinas four earliest SpecialEconomic Zones (SEZs) on August 26, the cities of Shenzhen, Xiamen,Zhuhai and Shantou, and Hainan Province mapped out developmentblueprints for the new century. Analysts believe that by setting the goalsfor modernization, the SEZs are still leading other parts of the country indevelopment as they were 20 years ago.Two decades ago, local authorities in Shenzhen, encouraged andsupported by senior Chinese leaders including Deng Xiaoping, weredetermined to blaze a trail for Chinas reform and opening-up drive.Shenzhen has then become a window of the country to the outside worldand a platform for reform measures, along with Xiamen, Zhuhai andShantou.To ensure successful reform and opening up in the SEZs, Chinaintroduced a wide range of special preferential policies. As theopening-up drive swept other parts of the country, the preferentialpolicies were applied to more regions. The saying that special economiczones are no longer special prevails in the country. However, the SEZshave not lost their vitality. And observers say that the SEZs still shoulder ahistorical mission today.In recent years, the SEZs have been focusing on improving the overalleconomic quality and on developing high-tech industries and othereconomies with special features. Compared with other parts of China, theSEZs still hold an edge in utilizing domestic and overseas resources andmarkets and in adapting themselves to international practices to boosteconomic development.While fully expanding economic co-operation with multinationals, 23
  24. 24. What’s Special About Special Economic ZonesShenzhen is tightening ties with Hong Kong, and Xiamen and Hainan withTaiwan. In Shantou, efforts have been made to attract overseas Chinese,one of the major channels of overseas investment to the Chinesemainland.Experts say that improving overall economic performance is a necessarychoice for the SEZs, as China will face fiercer competition after its entryinto the World Trade Organization. It is the only way for them to realizemodernization. To hit the goal, analysts say, the SEZs should give nationaltreatment to overseas investors for more funding while making efforts toopen up overseas markets for their own companies products.By changing the past practice of offering preferential policies to overseasinvestors in certain fields, the SEZs have lifted all restrictions for them.According to officials, the expansion of reform in the SEZs will focus onsystematic innovations, including adjustments in the ownership structure,and transformation of functions of government departments inaccordance with international practices.The government should also simplify procedures to make it easier to getbusinesses up and running and give a bigger role to the market, whileimproving services, experts say. At the same time, efforts must be madeto improve the social security system and the financing system, and haveintermediary organs operating according to standards.The forthcoming 50 years will be an important historical period in Chinasdrive to realize modernization and make the Chinese nationslong-cherished dream of building a powerful China come true. Expertsare confident that Shenzhen, Zhuhai, Shantou, Xiamen, and Hainan willset the pace in Chinas drive toward modernization. 24
  25. 25. What’s Special About Special Economic Zones 25
  26. 26. What’s Special About Special Economic Zones Beginning of Economic Zones in IndiaThe policies of Liberalisation, privatization and globalisation (LPG) thatwere introduced in 1991 removed the highly complex system of controlsprevailing in post-independent India. Now, in the new market scenario, itbecame very important to become competitive in terms of price, but alsoquality, time, service, etc. India has always paid more attention to itsexports, because they earn revenue. To increase them, the idea of ExportPromotion Zones (EPZ) was conceived. These were areas where importsubstitution was not followed and all inputs for any manufacturingprocess were allowed to be imported freely. Such zones were establishedto promote trade and to develop a specific industry by providing it withthe entire infrastructure it needs.Evolving ConceptThis initial concept was called EPZ (Export Processing Zone) and wasintroduced first in Kandla, Gujarat. The Indian manufacturer was nowherein terms of international standards of either quality or price. So, to makehim globally competitive, the government had to provide some incentivesto him. Most of these incentives could be used by almost every producereverywhere. But, there were special incentives which, when given, couldresult in a very low cost of production for the manufacturer and there wasa risk then that the goods could then end up being sold in the domesticmarket instead of being exported. So, the government established specialzones where people could come in, establish their factories, procure (buydomestically or import) whatever they would require for production,produce locally and then export these goods. For such a situation, thereneeded to be precise control over every importer and all his actions,which could lead to any harm to national interest. To prevent all this, EPZswere established, which were land-locked areas, under constantsurveillance by the customs authorities and security personnel of the 26
  27. 27. What’s Special About Special Economic Zoneszone. These zones would regulate all the material coming into and goingout of the zone and thus, keep a check on the manufacturers’ actions.EPZs worldwideThus, EPZs were set up with the aim of boosting export-orientedinvestment and for eliminating the constraints imposed by India’s tradeand industrial policies. As a concept, EPZ dates back to 1962. Some of thefirst EPZs were founded in Puerto Rico in 1962, Mexico (1964), Kandla(1965), Taiwan (1966), South Korea (1971), Philippines and Malaysia(1972). The EPZ set up in Mauritius is not based on geographical andlocational advantages but is more a functional concept.Most of these countries have had a good and fulfilling experience bysetting up EPZs. EPZs have helped promote an export-orientedindustrialization strategy with increasing value-additions in domesticproduction. Studies have shown that countries where EPZs function havehad excellent performances on the trade front.Of the 850 EPZs worldwide, a large number of them operate in developingcountries. The world over, it has been observed that processing exportshave outperformed others. In fact, most Asian and Latin Americancountries have excelled in trade only due to the processing trade.The Government of India had established seven EPZs over a period of time.These were:1. Kandla Free Trade Zone (KAFTZ), Kandla, Gujarat – 1965;2. Santa Cruz Electronic Export Processing Zone (SEEPZ), S. Cruz, Maharashtra – 1974;3. Cochin Export Processing Zone (CEPZ), Cochin, Kerala;4. Falta Export Processing Zone (FEPZ), Falta, West Bengal – 1984;5. Madras Export Processing Zone (MEPZ), Madras, Tamil Nadu; 27
  28. 28. What’s Special About Special Economic Zones6. Noida Export Processing Zone (NEPZ), Noida, Uttar Pradesh – 1985;7. Visakhapatnam Export Processing Zone (VEPZ), Visakhapatnam, Andhra Pradesh.Kandla was the only Free Trade Zone in India and was the first zone to beestablished in India.While the Santa Cruz Electronics Export Processing Zone (SEEPZ) wasmeant exclusively for the exports of electronics and gems and jewellery,all other zones were multi-product zones. 100% foreign equity waswelcome in EOUs and EPZs. 28
  29. 29. What’s Special About Special Economic Zones Shortcomings & Problems of EPZsAccording to an Audit Report conducted on EPZs and FTZs in 1999, SEEPZearned only US$ 1.25 bn. net foreign exchange in the past 8 years.The reasons for this were attributed to the following causes: Failure to elicit full commitment from people as they stay far away from their place of work. Insufficient comprehensive and well-knitted internal and backup infrastructure. High dependence on outside infrastructure created and maintained by different agencies lacking co-ordination. The result: under achievement of actual potential. Limited possibility of improving connecting infrastructure to enhance the performance of existing EPZ/FTZ. 29
  30. 30. What’s Special About Special Economic ZonesFor example:On 12th March 1994, a memorandum was submitted to Shri Zafar Saifullah,Cabinet Secretary, Government of India regarding the problems of EPZsand EOUs. The Development Commissioner, SEEPZ, Santacruz ElectronicsExport Manufacturers’ Association (SEEMA), and the SEEPZ Gems &Jewellery Manufacturers’ Association, SEEPZ submitted this memorandumin association with the Federation of Indian Export Processing Zones 5.1 The above graph shows that the EPZs never really contributed a substantial amount in the national exports. Also, the share of EPZ unit exports in total exports was more or less at the same ratio over the 3 years from 96-97 to 98-99.Industries Association.The main problems highlighted in this report were: Inconsistencies in government regulations – The Import Trade Control and Exchange Control Regulations have changed over time to benefit EPZ units, but the customs regulations were still governed by the notification issued at the time of formation of the zones. This resulted in a situation wherein certain activities permitted by the EXIM policy could not be undertaken, as the same were not permitted by the customs regulations. Customs working & procedures – The units in the zone were allowed to work 7 days a week to maximize exports, but the Customs department worked only 5 days a week, resulting in the units having to wait for 2 days to get clearance for their activities. Also, there was still a lot of red-tapism left while dealing with issues like returning of export goods, return of 30
  31. 31. What’s Special About Special Economic Zones rejected components, de-bonding of capital equipment, waste disposal Modes of transportation – Courier was not recognised as an approved mode of transportation and hence any goods received by courier had to be notified and duty had to be paid on them.Also, there were problems with the formation of Trade Unions,multiplicity of bonds, fax copies not accepted by customs, hassles insub-contracting, DTA sales regulations, etc. These, and many other suchtrivial matters were barriers in the proper working of the units in thezones. Over a period of time, some of these hassles were done away with.But there was never a situation when the units in the zones were reallysatisfied with the procedures.The experience of Export Processing Zones (EPZs), which were duty-freeenclaves, has not been up to expectations. Even with flexibility to sell 50per cent of exports in DTA at concessional rates of duties, most EPZ unitshave failed. The eight EPZs together contributed barely 3.7 per cent of thecountry’s total exports.In fact, other than Santacruz Electronic EPZ, the other seven EPZs togethercontributed to only about 1.41 per cent of the country’s exports. There isa very strong view in the revenue department that the dismal performanceof the EPZ units does not justify the revenue sacrifice or revenue leakageinherent in the schemes. In their eyes, the EPZs have failed.These shortcomings were responsible for the recent makeover of theseEPZs into SEZs. The transition process is covered in the next Chapter. 5.2 Customs probe Bharat Shahs export units for diamond smuggling 31
  32. 32. What’s Special About Special Economic ZonesIn January 2001, SEEPZ customs conducted a stock taking of two units from Jan 31,2000. B V Star and B V Jewels (both owned by Bharat Shah) were probed forsuspected diamond smuggling. The following was found: Diamonds worth 26.29 cr (73730 cts) of B V Jewels were found short, allegedly were smuggled out of SEEPZ. Customs duty demanded, therefore, is Rs 12.54 cr B V Jewels had also suppressed the facts of disposal of capital goods worth Rs 58.34 lakh to one SB &T International Ltd, SEEPZ, without permission of customs. The customs duty foregone was Rs 39.31 lakh. That is how the total duty demanded is Rs 12.94 cr Suresh Mehta, a partner in both companies, had shown possession of 23 diamonds of 27.42 cts, valued at Rs 39.63 lakh, for which he could not show legal import documents. B V Jewels exported diamonds worth Rs 27 cr studded in jewellery, between 1998 and Feb 2000, but could not show how they had procured these. Further, another unaccounted lot of diamonds of B V Jewels weighing 10631.39 cts and valued at Rs 4.03 cr, were found without corresponding documents to show legal possession. In the case of B V Star, which had no production since 1997, customs duty of Rs 2.57 cr is demanded because of shortage of 8604.5 gms of gold and 844.16 cts of diamonds revealed in the stock taking. 32
  33. 33. What’s Special About Special Economic Zones Change to SEZsEXIM Policy changesRealising the failures and shortcomings of the EPZ Scheme in India, theCommerce Ministry decided to improve the existing situation. Thechanges and fine-tuning done in the existing EPZs was to no avail andwas not yielding the required results. An Indian delegation headed by thethen Director-General of Foreign Trade, Mr. N.L. Lakhanpal visited UAEand saw the Jebel Ali Free Zone (JAFZ), Dubai and Fujairah Free Zone (FFZ)there. This was the birth of the idea of having similar zones in India.Toying with the idea of Free Trade Zones / Free ZonesAfter the delegation came back, it submitted a report on the findings ofthe visit. The report recommended that the Development Commissionersof each zone (in India) should be vested with all the authority regardingtheir respective zones, thus making them the ultimate local authority onall issues, as is the case in UAE. Also, like their UAE counterparts, theIndian DCs should be required to prepare a Business Guide. The reportalso stated that the Free Zones in UAE accounted for all duty-free rawmaterial, ensuring it was used for export. Even in the case of DTA, theywould ensure that it was after payment of full customs duty on the valueof the finished goods. The commerce ministry then decided to convert allexisting EPZs into FTZs with SEEPZ, Noida and Kandla being convertedthat year, and the rest to follow.Reducing role of CustomsAccording to the proposed policy, the role of customs was to reduce andthe new zones would be exempt from all customs department rules andregulations from July 1, 1999. After the proposed conversion of the unitsto FTZs, the role of the customs department officials was to be confined 33
  34. 34. What’s Special About Special Economic Zonesto working outside the units, giving them total operational flexibility, asproposed in the revised export and import policy (1997-2002). The FTZswould have been outside the customs ambit with checks only at the entryand exit points by customs officers.Under the new scheme, FTZs would be permitted to sell 50 per cent oftheir production in the DTA, subject to payment full customs duties. Thismeans the remaining half alone needed to be exported. But, according toministry officials, for their own survival, the units would have to findmarkets for their entire production, as DTA sale will prove ratherprohibitive.The Indian labour laws ere to apply to FTZs though the commerceministrys ultimate objective is to make these inapplicable. The practicethe world over is to exempt FTZs from the purview of labour laws.Arrival of SEZsThe plans for the FTZs got shelved eventually. Mr. Murasoli Maran, theMinister for Commerce & Industry, suggested the setting up of SpecialEconomic Zones in India, similar to the ones in China. This decision to setup SEZs was the highlight of the EXIM Policy.The decision was commendable, but it did not take into account severalthings. The initial proposed SEZ Scheme was not a major improvementover the existing EPZ Scheme at that time. Basically, almost all thefeatures of the original SEZ Scheme already existed in the form ofincentives available to EPZ units. The major advantage for SEZ units wasthat they had to now achieve only positive net foreign exchangeearning as a percentage of exports (NFEP), where as EOU/EPZ unitswith investment of less than Rs 5 crore in plant and machinery had toachieve minimum stipulated NFEP. 34
  35. 35. What’s Special About Special Economic ZonesInadequate extra facilities over EPZsThe relaxation for SEZ units was significant but not sufficient enough tosway the decision of the entrepreneurs in favour of setting up units in SEZ.The major advantage for EOU/EPZ units was that they could sell upto 50per cent of their exports in the DTA at half the rates of customs duties,whereas SEZ manufactures could sell in DTA only on payment of fullduties. DTA sale was a very important option for EOU/EPZ/SEZ units, asthe international markets are not always booming or lucrative.Trading units in SEZ/EPZ were not allowed to sell in DTA. Ideally, so longas the trading unit paid full import duties on DTA sales, there should havebeen no restrictions.Unmet expectationsThe commerce minister had announced that the EPZ at SEEPZ, Kandla,Cochin and Viskhapatnam would be converted to SEZ. The transitionalarrangements for existing EPZ units who did not want to opt for SEZscheme was that they had to convert into EOU or de-bond. In either case,they had to move out of EPZ, which was difficult for existing units.The industry felt that the government needed to make SEZs an attractivedestination for entrepreneurs. The most oft-repeated request was thatthe government should treat SEZ as foreign territory for all purposes.There was also a feeling that the supplies from DTA to SEZ must betreated as physical exports and that all the customs notifications shouldapply to sales from SEZ to DTA as they apply to physical imports.AmendmentsThe existing EPZs were converted to SEZs and activated on 1st November2000. Also, proposals for the establishment of new SEZs were cleared.This was followed by some notifications being issued which made thenecessary changes in the SEZ Scheme. The most prominent among them 35
  36. 36. What’s Special About Special Economic Zoneswas the declaration of SEZs as foreign territory. The Finance Ministrydeclared the area under the SEZs as `foreign territory for the purpose ofduties and taxes. This means that goods supplied to the SEZ from theDomestic Tariff Area (DTA) will be treated as `deemed exports and goodsbrought from the SEZ to the DTA will be treated as `imported goods.Thus, was evolved, the present concept of SEZs in India.Present SEZ ConceptThe facilities available to SEZ units are as follows:Customs related: No license required for import. Exemption from custom duty on import of capital goods, raw materials, consumables etc. Exemption from Central Excise Duty on procurement of capital goods, raw materials etc. from the domestic market. Exemption from Custom/Excise duty on import/domestic procurement of goods for setting up of units in the Zone Supplies from DTA to SEZ will be treated as deemed exports. Reimbursement of Central Sale Tax (CST) on inter-State purchases. Reimbursement of duty paid on Furnace oil as per Drawback rate notified by DGFT. 36
  37. 37. What’s Special About Special Economic Zones SEZ units have to be a net foreign exchange earner. No pre-determined foreign exchange earning or minimum performance requirement. Access to domestic market. Simplified Custom procedure. Trading activity for exports permitted. Fast track clearance of imports and exports. Job working/sub-contracting facilities for exports, including for jewellery units. Facility to subcontract part of production abroad In-house Custom clearance. Ready infrastructure. Duty free goods to be utilized within the approval period of 5 years. Performance of units to be monitored by a committee consisting of Development Commissioner and Customs. No separate documentation required under Customs and EXIM Policy. Export defective goods etc. without GR waiverInvestment related: 100% FDI permissible for units in SEZs in manufacturing sector barring few sectors. No Cap on foreign investment for SSI reserved items. Exemption from industrial licensing requirement for items reserved for SSI sector.Foreign exchange related: Profits allowed to be repatriated freely without any dividend-balancing requirement. 37
  38. 38. What’s Special About Special Economic Zones 100% of foreign exchange earnings can be retained in EEFC account. External commercial borrowing shall be subject to usual procedure. Facility to realize and repatriate Export proceeds within 12 months.Tax related: Attractive tax holiday upto 2010 as per Section 10A of the Income Tax Act.Labour Laws:The labour laws of the land will apply to all units inside the Zone.However, the respective State Governments may declare units within theSEZ as public utilities and may delegate the powers of the LabourCommissioner to the Development Commissioner of the SEZ.Role of State GovernmentsState Governments will have a very important role to play in theestablishment of SEZ. Representative of the State Government, who is amember of the Inter-Ministerial Committee on private SEZ, is consultedwhile considering the proposal. Before recommending any proposals tothe Ministry of Commerce & Industry (Department of Commerce), theStates must satisfy themselves that they are in a position to supply basicinputs like water, electricity, etc.Terms and Conditions for establishment Only units approved under SEZ scheme would be permitted to be located in SEZ. The SEZ units shall abide by local laws, rules, regulations or bye-laws in regard to area planning, sewerage disposal, pollution control and the like. They shall also comply with industrial and labour laws as may be locally applicable. 38
  39. 39. What’s Special About Special Economic Zones The SEZ should have an area preferably of 1000 hectares. Such SEZ shall make security arrangement to fulfill all the requirements of the laws, rules and procedure applicable to such SEZ. Wherever the SEZs are landlocked, an Inland Container Depot (ICD) will be an integral part of SEZs.The main differences between the EPZ and SEZ Schemes are: No minimum Export Performance (EP) or Net Foreign Exchange earnings as Percentage of exports (NFEP) is needed in an SEZ, as for EPZ units. Monitoring of performance of SEZ units by a Committee headed by Development Commissioner and consisting of Customs. Duty to be recovered in case of failure to achieve positive NFEP under Custom Act in proportion to shortfall unlike in EPZ. Unlimited DTA sales on full duty. For EPZ, only 50% of exports No linkage with positive NFEP for domestic sale for SEZ units. In EPZ sales are subject to achievement of NFEP. Duty free material to be utilized over five years unlike in EPZ where it is one year. Subcontracting facility available to SEZ jewellery units, which is not available to EPZ units. All imports on self-certification, unlike in EPZ, where attestation of Development Commissioner is required for import of Capital Goods. No routine examinations by Customs of export and import cargo in SEZ. 100% FDI through Automatic Route available to manufacturing SEZ units. In EPZ, FIPB approval required. Procedural simplification for operations like record keeping, inter-unit transfer, subcontracting, disposal of obsolete material, waste and scrap. 39
  40. 40. What’s Special About Special Economic Zones Other facilities like tax holiday, retention of 70% of export earnings in EEFC Account, etc. are common for both EPZ and SEZ.Salient features and schemes of an SEZ in India Units set up in SEZs which will operate under a single purpose bond, can import or procure goods from the DTA duty-free for manufacture of goods and services, trading, production, processing, assembling etc and exports thereof. Goods can be sold in the DTA only if the unit achieves the Net Foreign exchange Earning as a Percentage of exports (NFEP) annually and cumulatively as specified in the EXIM Policy. A trading unit has to achieve a turnover of $1 million in five years. Penal action can be taken on default. DTA sales are, however, banned for goods that have been imported both as scrap as well as for repair. Trading units in the SEZs also cannot sell goods in the DTA. SEZ units can import and export through port, airport, land customs station, ICD, CFS, courier mode and post parcel. Software development units can import and export through data communication and telecommunication links. The norms for procurement of goods from domestic sources by SEZ units will be the same as those laid down for the EPZ units. In respect of imported and domestically procured cargo, goods will be assessed on the basis of documents provided by the units and there will be no physical examination. However, customs authorities may examine such cargo when there is specific information regarding clandestine removal. 40
  41. 41. What’s Special About Special Economic ZonesExports will be permitted on the basis of self-certification by theunits and there will be no routine examination of the consignmentby the SEZ custom authorities. At the gateway port, the SEZ cargowill be subject to the examination procedure as per instructions inforce.SEZ units will have to maintain financial year-wise accounts of allforex inflow by way of exports and other receipts; all forex outflowon account of payment of dividend, royalty, fees etc and sale in theDTA. Units can also undertake job work for the DTA withoutpayment of duty. Provisions have also been made for temporaryremoval of goods into the DTA and to other SEZ, STP, and EOUzones. Inter-unit transfer of goods amongst SEZs will not besubject to customs scrutiny. Duty remission will be available ondestruction of goods within the SEZs. Units have also beenpermitted to dispose obsolete goods on payment of the applicablecustoms duties.In case of imports, the Bill of Entry with specially stampedendorsement as "SEZ Cargo" is filed with the AssistantCommissioner/Deputy Commissioner of Customs in the SEZ forassessment. For procurement of goods from domestic sources bySEZ units, CT-3 certificates are issued to the units and against suchCT-3; the goods including capital goods are procured from DTAwithout payment of duty. In both cases, i.e. both in respect ofimported and domestically procured cargo, the goods are assessedon the basis of documents furnished by the units. Goods are notexamined physically and ‘out-of-charge’ is given after verifying themarks and numbers on the packages only. 41
  42. 42. What’s Special About Special Economic ZonesWhen the import consignments are required to be transshipped to aSEZ located at a station away from the place of import, the same isallowed under normal transit procedure. The unit files the Bill ofEntry with the Assistant Commissioner/ Deputy Commissioner ofCustoms in-charge of the SEZ on the basis of the transit document.In case of exports, the Shipping Bill along with relevant documentsis filed with the Customs authorities in the Zone. As in the case ofimports, the SEZ export cargo is not examined in routine andexport is allowed on the basis of self-certification by the units. Theunits, after self-examination of the consignments, are required tosubmit the shipping bills to the Assistant Commissioner/DeputyCommissioner of Customs for "let export" order. After obtaining the"let export" endorsement on the shipping bill, the consignment istaken to the gateway port for export. At the gateway port also, theSEZ export consignment is not examined in routine. However,whether at the Zone or at gateway port or during transit of suchcargo, the Customs authorities can examine the consignmentswhen there is a specific information/intelligence. For this purpose,the orders of the Assistant Commissioner/Deputy Commissioner ofCustoms are required to be obtained.Sub-contracting: The SEZ units are allowed to sub-contract part ofthe production process abroad. Approval for sub-contractingabroad is accorded by the Board of Approval. The goods sent forjob-work abroad are to be returned to the unit for finalprocessing/manufacturing before exports. The unit is required toexecute a suitable bond for sub-contracting goods abroad and isrequired to account for the goods including waste/rejects in themanner as prescribed by the Commissioner of Customs/ CentralExcise in this behalf. 42
  43. 43. What’s Special About Special Economic ZonesThe SEZ units are also allowed to undertake job-work for export onbehalf of DTA units. This is subject to the condition that thefinished goods are exported directly from SEZ units and exportdocuments are made in the name of the DTA unit. On export ofsuch goods manufactured by SEZ unit on behalf of the DTA unit,the DTA unit is entitled to refund of duty paid on the inputs by wayof brand rate of duty drawback.The SEZ units are allowed to remove the moulds, jigs, tool, fixtures,tackles, instruments, hangers, patterns and drawings withoutpayment of duty to the premises of the sub-contractors subject tothe condition that such goods are brought back to the unit oncompletion of the job work within the period specified in this behalf.Gem and Jewellery units in SEZ:Generally speaking, sub-contracting is not allowed to gem andjewellery units. However, the gem and jewellery units in SEZ areallowed to take out gold/silver/platinum for sub-contractingsubject to the condition that goods, finished or semi-finished,including studded jewellery, containing quantity and purity equal tothe gold/silver/platinum so taken out are brought back to the Zonewithin 30 days. It is to be noted that diamonds, precious orsemi-precious stones are not allowed to be taken out forsub-contracting. The gem and jewellery units are also allowed toreceive plain gold/silver/platinum jewellery from DTA in exchangeof gold/silver/platinum of equal quantity and purity. These unitsare, however, not eligible for any wastage or manufacturing lossagainst the jewellery received from DTA after processing or againstexchange of gold/silver/platinum. The DTA units undertaking jobwork or supplying jewellery against exchange ofgold/silver/platinum are not entitled to deemed export benefits.The gem and jewellery units are also allowed to sub-contract part 43
  44. 44. What’s Special About Special Economic Zonesof the production or production process through other units in thesame SEZ subject to records being maintained by both thesupplying and the receiving units.Further, the gem and jewellery units in SEZ are allowed certainother facilities as mentioned below:(i) Taking out the items of gem and jewellery into DTA temporarilywithout payment of duty for the purpose of display and returnthereafter;(ii) Personal carriage of gold/silver/platinum jewellery or preciousor semi-precious stones or beads and articles as samples up to US$1,00,000 for export promotion tours and temporary display or saleabroad subject to the condition that the exporter would bring backthe jewellery or the goods or its sale proceeds within 45 days fromthe date of departure through normal banking channel;(iii) Export of jewellery including branded jewellery for display andsale in the permitted shops setup abroad, or in the showroom oftheir distributors or agents provided that items not sold abroadwithin 180 days, shall be re-imported within next 45 days;(iv) Removal of parts & tools of machine temporarily withoutpayment of duty for the purpose of repair and return thereof.(v) Taking out gem and jewellery manufactured in the SEZ to theretail outlets or showrooms set up in the departure lounge atinternational airports for sale to a tourist, as defined in the BaggageRules, 1998, leaving India.(vi) Sale of gem and jewellery manufactured in the SEZ to aforeign-bound passenger and transferring the same to the retailoutlets or showrooms set up in the departure lounge or Customs 44
  45. 45. What’s Special About Special Economic Zoneswarehouse at international airports for being handed over to thesaid passenger for the purpose of export.(vii) Removal of moulds, tools, patterns, and drawings into the DTAfor job work without payment of duty and to be returned to the unitthereafter.For availing of the above mentioned facilities, prior permission ofAssistant Commissioner / Deputy Commissioner is required.In case of gem & jewellery units, scrap, dust or sweepingsgenerated in the unit is allowed to be forwarded to the GovernmentMint or Private Mint for conversion into standard gold bars andreturn thereof to the Zone subject to the observance of procedurelaid down by the Commissioner of Customs. The said dust, scrap orsweepings are also allowed clearance into DTA on payment ofapplicable customs duty on the gold content in the said scrap, dustor sweepings. Samples of the sweepings/dust are taken at the timeof clearance and sent to mint for assaying. The assessment isfinalized when the reports are received from the mint.Inter-Unit Transfer:Inter unit transfer of goods amongst units in a SEZ does notrequire any prior permission, but the supplying and receiving unitsare required to maintain proper accounts of the transactionDuty Remission on Destruction of Goods:A provision has been made in the notifications that duty would notbe levied on capital goods, raw materials, components, waste orscrap etc. if these goods were destroyed in the presence of the 45
  46. 46. What’s Special About Special Economic ZonesCustoms authorities. This provision, however, does not apply togold, silver, platinum, diamond, precious stones and semi-preciousstones. The officers supervising destruction are required to ensurethat goods are destroyed fully rendering them unfit for further useand give certificate to that effect. After destruction of capital goods,raw materials, components, waste or scrap etc., if the remains havescrap value, the unit in DTA on payment of duty applicable to scrapcan clear the sameDTA Sale:The facility of DTA sale is available to the SEZ units. Under theScheme, finished goods including by-products and services andwaste/scrap/remnants/rejects etc. can be sold in the DTA onpayment of applicable duty and in accordance with theExport-Import Policy in force. However, where such finished goods(including rejects, waste and scrap materials) are not excisable,duty equal in amount to that leviable on the inputsimported/indigenously procured under the notifications and usedfor the purpose of manufacture of such finished goods, whichwould have been paid but for the exemption under the saidnotifications, is payable at the time of clearance of such finishedgoods. In case of service sector SEZ units, the rendering of servicesin DTA is allowed subject to the condition that the unit hasachieved the positive NFE, cumulatively, as specified in the Policy.This would mean that service units would not be eligible for makingDTA sale if the NFE is not positive cumulatively at any point of time.Further, if any of such services are taxable under provisions ofChapter V of Finance Act, 1994, then rendering of such services inDTA would require payment of service tax as per the provisions ofFinance Act, 1994. 46
  47. 47. What’s Special About Special Economic ZonesLevy of Central Excise Duty on Goods Produced or Manufactured bySEZ Units and Cleared into Domestic Tariff Area:In terms of section 3 of the Central Excise Act, 1944, the exciseduty leviable on goods manufactured in an SEZ unit and clearedinto Domestic Tariff Area is an amount equal to the customs dutyleviable under section 12 of the Customs Act, 1962 or under anyother law for the time being in force on like goods produced ormanufactured outside India, if imported into India. Thus, the duty isworked out exactly in the same manner as applicable to importedgoods.Maintenance of Accounts:A SEZ unit is required to maintain proper account in the formatconvenient to it and financial year-wise, of all foreign exchangeinflow by way of exports and other receipts, all foreign exchangeout flow on account of imports, payment of dividend, royalty, feesetc., consumption and utilisation of the materials and sale in theDTA. The units are required to submit regularly quarterly statementto the Development Commissioner and the Customs in this regardin the format prescribed at Appendix 16H of the Hand Book ofProcedures.Monitoring of activities of SEZ units:All activities of the SEZ unit, unless otherwise specified, are throughself-certification procedure and are monitored by a Committeecomprising Development Commissioner and Customs. TheDevelopment Commissioner in charge of the Zone heads theCommittee. The Committee is also required to see that wastage /manufacturing loss on gold/ silver/platinum jewellery and articles 47
  48. 48. What’s Special About Special Economic Zones are within the overall percentage prescribed in Appendix-41 of the Handbook (Vol-1). In case of higher wastage/manufacturing loss, the Committee is required to satisfy itself of the reasonableness of the same. Penal action in case of default: The Customs officials posted in SEZs are not supposed to visit the units for verification of records or even otherwise in routine. However, in case of specific information/intelligence which, prima facie, show that there is fraud, collusion, mis-declaration, suppression of information etc having a bearing on the export performance of the unit or where there is specific information regarding clandestine/unauthorized removal of goods into DTA etc, the Customs officials can visit the units for verification of records, goods etc. so as to initiate proceedings under Customs Act, 1962. The Assistant Commissioner/Deputy Commissioner may keep a watch on the export performance of the units and in the event of non-achievement of positive NFE within the stipulated period; action can be taken against the units for recovery of the duty and interest. So far as utilization of imported/indigenously procured goods is concerned, the same may be utilized within the period of five years. In case of failure to utilize the imported / indigenously procured goods within the period of five years, the unit is liable to pay duty on the said unutilized goods along with the interest at the rate of 24% per annum from the date of importation or procurement of the said unutilized goods till the date of payment of such duty.SEZ is an evolving Scheme and more features would be added asrequired. 6.1 Structure & Role of Trade Unions in China 48
  49. 49. What’s Special About Special Economic ZonesA study of Chinese trade unions will be interesting. Comparison with Indian labourlaws almost certainly makes it clear that Indian SEZs will not enjoy same level oflabour cooperation that their Chinese counterparts enjoy.Chinese trade unions are organized on a broad industrial basis. Membership is opento those who rely on wages for the whole or a large part of their income – aqualification that excludes most agricultural workers. In theory, membership is notcompulsory, but in view of the unions role in the distribution of social benefits; theeconomic pressure to join is considerable. The lowest unit is the Enterprise UnionCommittee. Individual trade unions also operate at the provincial level, and there aretrade union councils that coordinate all union activities within a particular area andoperate at county, municipal, and provincial levels. At the top of the movement isthe All-China Federation of Trade Unions, which discharges its functions through anumber of regional federations.In theory, the appropriate trade union organizations are consulted on the level ofwages as well as on wage differentials, but in practice their role in these and similarmatters is insignificant. They do not engage in collective bargaining – not at allsurprising, since their principal duties include assisting the party and promotingproduction. In fulfilling these tasks, they have a role in enforcing labour discipline.From the point of view of the membership, the most important activities concern thesocial and welfare services. Thus, it is the unions that look after industrial safety;organize social and cultural activities; provide services such as clinics, rest andholiday homes, hostels, libraries, and clubs; and administer old-age pensions,workers insurance, disability benefits, and other welfare schemes. 49
  50. 50. What’s Special About Special Economic Zones SEEPZ SEZSEEPZ (Santacruz Electronics Export Processing Zone) was formed in 1974exclusively for electronics. SEEPZ was established on land leased by theGovernment of India (Ministry of Commerce) from MIDC for a period of 99years. MIDC, in turn had taken this land on lease from the MaharashtraGovernment. MIDC and the Government of India together developed thebasic infrastructure needed for such an EPZ to exist. The Government ofIndia did all the funding and MIDC cleared the land, laid the roads,provided adequate water supply and arranged for an uninterruptiblepower supply source. Thus, SEEPZ was finally established basically for theelectronic industry as government had identified it as a strategic sectorand wanted rapid growth in it. In 1988-89, seeing the potential of theGem & Jewellery industry, this industry was also made a part of SEEPZ.Infrastructure Facilities at SEEPZThe Philosophy while landscaping SEEPZ was to have Mother Nature live inharmony with industrial manufacturing and technology. All set in asophisticated infrastructure catering to all basic needs of industry.Inexpensive Factory Space or LandAt SEEPZ, plots are given on lease for a period of 30years, at rates fixed from time to time. The initial rateswere Rs. 10/- per sq. metre per annum for an SDFplot. Entrepreneurs can construct their own buildingson these plots. For this purpose the SEEPZadministration will obtain all necessary permissionsand clearances. Also, Standard Design Factories (SDFs)are available on a 5-year renewable lease basis at the rate of Rs. 650 persq. metre per annum plus Municipal Taxes (10%). When an entrepreneur 50
  51. 51. What’s Special About Special Economic Zonesbegins production in the very first year of obtaining the SDF shed, he isentitled to a concession of 50% of the lease rent in the first year, 40% inthe second year and 25% in the third year. Again the space allotted to anentrepreneur inside the SDF shed is based on his export projections. Allinternal partitions, air conditioning, electrical wiring, etc. are to be carriedout by the entrepreneur.Uninterrupted PowerThe generating stations of western Maharashtra ensure uninterrupted supply of power at the rate of Rs. 4.74 per unit. SEEPZ is exempt from the payment of taxes on the purchase of power or on its sale. The units are also allowed to generate and/or sell their own power without any obligation to pay taxes.Abundant WaterThe Zone has an assured supply of 4.55 million litresof water a day at the rate of Rs. 21 for every 1000litres.Hi-Tech Communication FacilitiesThe most important facility that lures software enterprises to SEEPZ is the hi-tech 64KB/128KB/256KB line, that enables these companies to communicate and videoconference over the satellite to any of the branches around the world. A telephone / telex connection is given to SEEPZ units on priority basis.Adequate Warehousing and Forwarding FacilitiesA large warehouse called an Inland ContainerDepot (ICD) is situated within SEEPZ for storing at 51
  52. 52. What’s Special About Special Economic Zonesvery nominal rates. This is the central warehouse for all the units insideSEEPZ. Also Clearing & Forwarding facilities are available here.In-Zone Custom ClearancesSEEPZ has its own ports of entry with a fully dedicated customs wingsimilar to that at the Mumbai Port. Since this customs wing is solely forthe clearances within SEEPZ, the procedures for clearing incoming and outgoing consignments are simple and very fast. Also, there is no need for the same to be carried out either at the airport or the docks. This facility at SEEPZ is provided specially keeping in mind the delay and trouble that occurs to the exporter while obtaining clearances. This speedy andefficient system is available to all the units within SEEPZ at no extra cost.The number of pending cases with this Customs department is also less,as they have to cater only to the EPZ units.Miscellaneous Facilities 3 Industrial Canteens Exclusive Restaurant Gymnasium 52
  53. 53. What’s Special About Special Economic ZonesConvention CentreCommunications CentreOptical fiber telephone exchange with a capacity of 4000 linesinstalled within the Zone ComplexForeign Post OfficeCrèche for working women’s children4 Banks – State Bank of India, Bank of India, Punjab National Bank,Central Bank of IndiaNominated agencies like MMTC and banks authorized by RBI forsupply of precious metalsClearing Agencies – M/s Air freight Pvt. Ltd., M/s Lee and Muirhead,M/s Tulsidas Khimji Pvt. Ltd 53
  54. 54. What’s Special About Special Economic ZonesSEEPZ & DevelopmentAncillariesThe proximity of available spares, components and raw materials affordsZone units the advantages of lower freight costs and lower inventorylevels. The feedback necessary for effective quality control on supplieswill be quicker, easier and simpler, as the supplier will be almostnext-door.A Regional Testing Centre of the Department of Electronics (ERTL) locatedjust outside SEEPZ provides facilities for meeting the evaluation needs ofmanufacturers and designers of electronic products.TransportDue to the huge workforce in SEEPZ and lack of residential areas nearby,the employees need to be transported everyday to large distances. Thetransport industry has developed to a huge extent in this area because ofthis need.Development of the landWith the establishment of SEEPZ, the surrounding area has increased inland value. There has been an increase in demand for residential housingnear SEEPZ. There have also been a number of ancillary industriesspringing up to serve the needs of the SEEPZ Community.Many fast food joints, small shops and industries near MIDC,communication centers, banks, etc. have developed in this previouslyunderdeveloped area.A residential colony has been constructed for the SEEPZ authority nearSEEPZ. There is access to many more regions due to the presence of a BusStop exactly at the entrance/exit gate of SEEPZ. 54
  55. 55. What’s Special About Special Economic ZonesGeneral Information on SEEPZAccording to the Annual Report of SEEPZ for the year 1999-2000: The Government of India has so far invested Rs. 47 crores on the development of SEEPZ. Employment in SEEPZ in 1999-2000 stands at 42,000 employees, up from 24,000 in 1995-96. Number of operational units increased from 156 to 223 during the same period. At present, there are 7 Standard Design Factories (SDFs), 3 Gem & Jewellery Complex Buildings and 14 self-built factories. Total built-up area is 2,65,151 sq. mtrs. During 1999-2000, SEEPZ registered 26.34% growth.Growth of Electronics Industry (India &SEEPZ): 1990-94The electronics industry has alwaysplayed a significant role in India’sexports. In recognition of the catalyticrole electronics plays in globaldevelopment, the industry has beenaccorded the status of a priority area inthe new industrial policy. A significantmove was made with the establishmentof an Export Processing Zoneexclusively for electronics at SEEPZ(Santacruz Electronics ExportProcessing Zone), Mumbai in 1974. 2001 2001 2001 2001 2001 55
  56. 56. What’s Special About Special Economic Zones 7.1 Comparison of electronics exports of SEEPZ and India( 2001)Growth of Gems & Jewellery Industry (India & SEEPZ): 1990-94 Another industry that has recorded a significant growth in recent years is the gem and jewellery industry. In fact India has established its place on the world map along with such centres as Antwerp and Tel Aviv for gem and jewellery processing and exports. To catalyze growth of this sector, the Government along with the apex trade bodies, has set up a number of training institutes specialising in imparting the requisite skills for gem and 199 2000 2001 2002 2003 jewellery processing and manufacture. In fact, a special 7.2 Comparison of gems & gem and jewellery complex was jewellery exports of SEEPZ and India (1999-2003) set up in 1987-88 inside SEEPZ, entirely dedicated to exports. 56
  57. 57. What’s Special About Special Economic ZonesLatest Happenings at SEEPZ SEEPZ is full in terms of capacity, when taking FSI into account. But, the Government of Maharashtra has granted double the existing FSI in respect of space utilized for software activity. Accordingly, an IT Tower with a built-up area of 3 lakh sq. ft. is being constructed besides the lake to accommodate IT units. Maharashtra Government had earlier agreed in principle to transfer 11 hectares of land adjoining SEEPZ for further development of the Zone. Now, due to the doubling of the FSI, there is no need for the additional space according to it. Plans for an expansion through SEEPZ ++ are underway. Beautification of the Zone was carried out recently in association with some of the Zone units. Facility of 24 Hrs. ATM in SEEPZ Service Centre by VYSYA Bank Ltd. The newly constructed SDF VII has been bought over by a company for further leasing. An ambulance is stationed at SEEPZ for 24 Hrs. Service. There are proposals to improve the physical and telecommunication infrastructure. Administrative Improvements: Strengthening of computerization with additional Hardware & Software Packages. Training and familiarization of staff with the use of computers. Computerizing basic work in various sections. Rationalisation of work allocation amongst officers. Promotional Measures: SEEPZ web site is being renewed Preparation of SEEPZ brochure Visit of Foreign Delegations: Visited Vietnamese Presidents 57
  58. 58. What’s Special About Special Economic ZonesChinese Delegation 58
  59. 59. What’s Special About Special Economic Zones Navi Mumbai - City of the 21st CenturyIntroductionNavi Mumbai is a modern township spread over an area of around 350 sq.km., and been planned, designed and developed by CIDCO. CIDCO hasdeveloped high-quality infrastructure facilities in the Navi Mumbai areaincluding housing complexes, industrial infrastructure, business districts,road & railway linkages, educational and recreational facilities, etc.The township has been developed as a series of nodes with high-qualityhousing infrastructure available at most nodes. Further, socialinfrastructure for the township has also been developed in terms ofhospitals (2200 beds capacity), gardens (175 nos.), community centres(20 nos.) and over 80 playgrounds. Other infrastructure like fire stations,police stations, etc. is also in place.Navi Mumbai is well connected to Mumbaiboth by wide roads and mass rapid railsystems. Travel time from Mumbais centralbusiness district at south Mumbai varies from45 minutes (water transport) to 60 minutes(road/rail transport). Indias busiest domesticand international airport Chatrapati ShivajiInternational Airport - is just 90 minute drivefrom Navi Mumbai.The township is also well connected to other parts of the state throughrailway and road networks. In terms of rail infrastructure, Navi Mumbaihas six rail corridors and an independent mainline rail terminalconnecting the city directly to other parts of the country. Several nationaland state highways pass through the township. Indias first expressway - 59

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