Special economic zones as a concept have caught the attention of countries around the globe. Deemed as separate ecosystems for industrial and economic growth, many of them, especially in Asia, have been fighting against odds to make even the high expectations placed on them. As port activity gears up in India, several SEZs are emerging on the coastline. Here’s a quick look at the sizzling facts ’n figures and what makes them hot.
by Radhika Rani G.
Ever since aggressive Asian economies have been making headlines, a rapt international audience has been watching in awe the energy and ferocity of the emerging tiger, dragon and bull! As the charged up nations take centrestage, the world reckons with reason that time has turned around for new competitors on the block. If England ruled the world economy from 1820-1890 and America from 1890-2000, analysts say China and India are set to dominate the world scene in the 21st century.
As trade liberalisation has opened unprecedented business opportunities, maritime nations, especially in Asia, are creating value-added facilities along their coastline to reap economic benefits through their ports and network of shipping services. In line with the strategy to pep up growth drivers, special economic zones are being conceptualised and implemented.
Interestingly, China has set up all its SEZs along the coast, with reason and thought though.
Having realised the role of exports in the country’s development, China opened its territories for foreign investment in the name of SEZs. “It now has in principle 6 major SEZs and more than 120 FTZs. They attract foreign investment worth $ 60 billion that is more than 10-15 times of India’s FDI,” notes Dr Arunachalam, an expert on SEZ. “China attracted more FDIs possibly only because of SEZs in China,” he opines.
The SEZs, variously named as free trade zones (FTZ), duty free areas (DFA), high technology zones (HTZ) and export processing zones (EPZ) are the designated land areas of a country where tariff and quota restrictions are eliminated, bureaucratic stranglehold is minimised and various economic incentives are offered to potential entrepreneurs, observes S K Modak, an eminent researcher.
Indian scenario
With the hub port concept intensifying in India, port-based SEZs have started taking shape to provide value-added services. They are being perceived as viable ventures not just for the government but also investors like infrastructure companies, construction conglomerates and investment banks. The concept thrives on stakeholders’ money-returns many!
The SEZs, variously named as free trade zones (FTZ), duty free areas (DFA), high technology zones (HTZ) and export processing zones (EPZ) are the designated land areas of a country where tariff and quota restrictions are eliminated, bureaucratic stranglehold is minimised and various economic incentives are offered to potential entrepreneurs, observes S K Modak, an eminent researcher.
Indian scenario
With the hub port concept intensifying in India, port-based SEZs have started taking shape to provide value-added services. They are being perceived as viable ventures not just for the government but also investors like infrastructure companies, construction conglomerates and investment banks. The concept thrives on stakeholders’ money-returns many!
While the key factors for a port-based SEZ are infrastructure, environment, regulations, labour and weather conditions, a clear-cut policy framework with due attention to objectivity is the key.
“What characterise SEZs, particularly in the context of a developing country like India, are a focused attention on investment, especially foreign and private investment, and the promotion of exports,” notes Sriram Ananthanarayanan in his article ‘New Mechanisms of Imperialism in India: The Special Economic Zones’. All this, according to the government, is done with the stated purpose of increasing economic growth, which in turn increases employment.
“What characterise SEZs, particularly in the context of a developing country like India, are a focused attention on investment, especially foreign and private investment, and the promotion of exports,” notes Sriram Ananthanarayanan in his article ‘New Mechanisms of Imperialism in India: The Special Economic Zones’. All this, according to the government, is done with the stated purpose of increasing economic growth, which in turn increases employment.
Objectives of the SEZ Act 2005:
- Generation of additional economic activity
- Promotion of exports of goods and services
- Promotion of investment from domestic and foreign sources
- Creation of employment opportunities
- Development of infrastructure facilities
- Maintenance of sovereignty and integrity of India, security of the state and friendly relations with foreign states
While Kandla SEZ is Asia’s first export processing zone to have been started near Kandla Port in Gujarat in the early sixties, several such self-sustaining entities have come up in later years. The Central Government followed up the Kandla Free Trade Zone experiment by setting up EPZs and FTZs at Mumbai, Chennai, Surat, Noida, Cochin, Falta and Visakhapatnam. Of the 147 valid in-principle approvals out of 579 formal approvals as on date, a third of them comprise of port-based SEZs, thanks to port activity picking up pace in the country.
The government, admit industrialists, has been proactive in the development of SEZs ever since passing the Special Economic Zone Act in 2005. It has formulated policies and has ensured that developers get proper facilities to start their units in liberal trade zones. In line with it, Cochin Port has commenced a large-scale port-based SEZ project initiative in Vallarpadam and Puthuvypeen.
The government, admit industrialists, has been proactive in the development of SEZs ever since passing the Special Economic Zone Act in 2005. It has formulated policies and has ensured that developers get proper facilities to start their units in liberal trade zones. In line with it, Cochin Port has commenced a large-scale port-based SEZ project initiative in Vallarpadam and Puthuvypeen.
Already, port-based projects like the international container transshipment terminal (ICTT), LNG re-gasification terminal, crude oil handling facilities for BPCL-Kochi Refinery, are underway. Other projects like a bunkering terminal, distribution park including free trade warehousing and process industries have also been proposed. The port is currently establishing infrastructure and amenities for the zone at a cost of Rs 7500 crore and is likely to commission the project by 2012.
Among the private ones, Mundra Port & SEZ is the first port-based multiproduct SEZ to come up in more than 100 sq km. of area to offer world-class infrastructure for establishment of business units since 2001. Also, Gujarat is the first state to create SEZ Policy and has the largest area under SEZs.
Taking pride in his state’s best infrastructure and conducive environment for business, chief minister Narendra Modi feels the idea a is not just to create wealth. “The development should be by all and for all to ensure inclusive growth.” Gujarat, he says, believes in development through PPP mode and accordingly, the state manages 24-hour uninterrupted power supply in villages and is all set to ensure broadband connectivity in all the villages going forward.
Newer options
In the wake of the petrochemical industry offering a wide scope of economic growth, the Central government has decided to attract major investment, both domestic and foreign into this sector. Accordingly, it has given the go-by to integrated Petroleum, Chemicals & Petrochemical Investment Regions (PCPIRs) to make the country a hub for both international and domestic markets to boost manufacturing, augmentation of exports and generation of employment.
As part of the initiative, the West Bengal government has recently signed an MOU to develop a PCPIR at Haldia. The coal ministry hopes that at least 10 lakh people are likely to get jobs at the proposed PCPIR units, including four lakh direct employment.
An investment of Rs 93,180 crore is proposed for high-class infrastructure and conducive environment for setting up businesses in an area of nearly 250 sq km. The major processing activities are being taken up by IOCL, Haldia Petrochemicals, MCCPTA India Corp Pvt Ltd, Tata Chemicals Ltd, Exide Industries Ltd and Shaw Wallace and Co. Ltd.
An investment of Rs 93,180 crore is proposed for high-class infrastructure and conducive environment for setting up businesses in an area of nearly 250 sq km. The major processing activities are being taken up by IOCL, Haldia Petrochemicals, MCCPTA India Corp Pvt Ltd, Tata Chemicals Ltd, Exide Industries Ltd and Shaw Wallace and Co. Ltd.
“All existing labour laws of the country would be applicable in the PCPIR. And SEZs in the region, if any, would be governed by special laws, as approved by the Government of India,” the coal ministry explains.
Similarly, the government of Andhra Pradesh and the Department of Chemicals and Petrochemicals of the Central Government signed an MOU for setting up a PCPIR in the Vishakhapatnam-Kakinada region of the state. The total industrial investment is estimated at Rs 343,000 crore, including committed investment of Rs 1,63,890 crore. As the future of the petrochemical industry looks bright, the PCPIR is likely to provide 5.25 lakh direct and 6.73 lakh indirect employment.
If conventionally, thermal power stations were established near coal mines to reduce logistics cost, they are now being developed in port-based SEZs owing to the import of coal with high calorie value.
Similarly, the government of Andhra Pradesh and the Department of Chemicals and Petrochemicals of the Central Government signed an MOU for setting up a PCPIR in the Vishakhapatnam-Kakinada region of the state. The total industrial investment is estimated at Rs 343,000 crore, including committed investment of Rs 1,63,890 crore. As the future of the petrochemical industry looks bright, the PCPIR is likely to provide 5.25 lakh direct and 6.73 lakh indirect employment.
If conventionally, thermal power stations were established near coal mines to reduce logistics cost, they are now being developed in port-based SEZs owing to the import of coal with high calorie value.
According to Vinay Pandey, general manager of AP Trade Promotion Corporation Ltd., the shift in fact ensures economical, uninterrupted and stable power that can be made available to industrial, commercial & residential units within the SEZ. “Similarly, projects that rely on imported ores are also suitable for development in port-based SEZs,” Pandey adds.
In view of the environmental concerns being voiced against such large-scale projects, experts advise developers to ensure comprehensive water management system including water desalination, distribution drainage and collecting domestic waste water.
Further treatment and recycling of water can be done to sustain water levels, they say. Also, chemical and other hazardous industries can be established in SEZs by setting up common effluent treatment plants. To protect nature, environmentally demanding industrial units can also be set up in port-based SEZs. And most importantly, business units can rely on the available ample sea water for their heavy water demands.
Further treatment and recycling of water can be done to sustain water levels, they say. Also, chemical and other hazardous industries can be established in SEZs by setting up common effluent treatment plants. To protect nature, environmentally demanding industrial units can also be set up in port-based SEZs. And most importantly, business units can rely on the available ample sea water for their heavy water demands.
As a range of SEZs are coming up across the country, experts caution the government to watch the implications for food security, political stability and the functioning of democratic institutions since the SEZ Act has a provision for ‘not’ having any democratically elected bodies of local governance. The special economic zones, though touted as separate ecosystems, are hoped not to remain aloof and above nature and law.
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