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