For “MAKE IN INDIA” success, role of SEZs is crucial

Source: http://www.portwings.in/general/for-make-in-india-success-role-of-sezs-are-crucial/

Port Wings News Network:

Dr. Swarna, IAS., Joint Development Commissioner, MEPZ, addressing the gathering during the Commerce Ministry’s Roadshow held in Chennai recently. Also seen (from left) Mr. C Velan, CEO – Tril Info Park Ltd., Mr. Shivachandra Reddy – Regional Chairman – EPCES, Mr A K Chouwdhary, ITS, Development Commissioner, MEPZ and Mr, Atul anand IAS, MD, ELCOT.

With a view to accelerating the growth in Indian economy, the Prime Minister Narendra Modi has come out with a new mantra -- Make in India, which could bring all the leading global players to invest in India.

However, his mission could be derailed even before it comes on track, if the plaguing issues and flawed policies on Special Economic Zones (SEZ), which are the potential enclosures for bringing in huge investments and the magic wand to create employment opportunities, are not fixed soon.

While the foreign investors (as well as the domestic players) are at liberty to invest on various projects outside the SEZ parameters also, ideally SEZs are the location, which give more guarantee to their investments due to relaxation in otherwise cumbersome procedures.

Though SEZ, as concept of growth, is promoted by the Union Government’s Commerce Ministry, role of state governments in land acquisition, providing uninterrupted power supply and better connectivity to ports and airports, entangles the whole equilibrium of progress.

While Tamil Nadu is seen as a success story in promoting SEZs for years due to its conducive atmosphere, the latest developments, where Nokia (manufacturer of mobile phones) has already shut down its production and another big Foxconn (manufacturer of mobile phone parts) planning to shut shop soon from Sriperumbudur SEZ, are going to raise several questions about the very basis of SEZ and its functioning in the minds of potential investors sitting in the different parts of the globe.

What is SEZ:

Considering the need to enhance foreign investment and promote exports from the country and to realize the need that level playing field must be made available to the domestic enterprises and manufacturers to be competitive globally, the Government of India in April 2003, as a part of the EXIM policy, announced the introduction of Special Economic Zones policy in the country deemed to be foreign territory for the purposes of trade operations, duties and tariffs.

To provide an internationally competitive and hassle free environment for exports, units were allowed be set up in SEZ for manufacture of goods and rendering of services. All the import/export operations of the SEZ units are on self-certification basis.

Special Economic Zones (SEZs) in India are hubs of economic growth and activity, where the Govt’s inspirational mission of MAKE in INDIA can be realised. The concept of SEZ was put in place in 2003, when the seven Export Processing Zones set up by Government of India across the country were converted into Special Economic Zones.

Primary objective of the SEZs has been to be the harbinger of growth which is intended to be achieved by enhancing exports, attracting fresh investment and generating employment. Over the years, these objectives have been significantly realised and the potential for further growth and investment is enormous.

Commerce Ministry’s Roadshow:

With a view to promote and disseminate the role of SEZs in building Indian Economy, the Ministry of Commerce is embarked on a road-show. As part of the road-show, Development Commissioner had organized meetings at Hosur and Chennai, which were turned out to be eye-opener for many potential investors as well as to the visitors. Speaking at the function, Mr A K Choudhary, Development Commissioner, MEPZ SEZ, said that the Ministry has planned to organise these road-shows at different places mainly to bridge the communication gap about the policies  (on SEZs)and its implications among the investors as well as public.

55% land bank of SEZs in Tamil Nadu lying vacant:

Around 50-55% of the land available in the 36 operational Special Economic Zone (SEZ) in Tamil Nadu is lying vacant owing to various reasons including the recent economic slowdown.

During a roadshow organised by the Tamil Nadu Association of SEZ Infrastructure Developers (TASID) and the Export Promotion Council for EOUs & SEZs (EPCES) in Chennai to promote the SEZs and the Prime Minister’s Make in India mission recently, Mr A K Choudhary, Development Commissioner, MEPZ SEZ, Ministry of Commerce and Industry, admitted that out of the 56 notified SEZ in Tamil Nadu, around 36 are functional and operational, in which almost 50-55% of the land bank is vacant. In other words, it shows the clear disconnect in policy and practical promotion of SEZs.

He also said that the concept of Free Trade Warehousing Zones (FTWZ), which is yet to find many takers in India, has turned out to be success stories in various countries, including United Arab Emirates.

SEZs in China:

China’s government first set up SEZs in the late 1970s in Southeastern China, with an eye on the compatriots in Hong Kong, Macao and Taiwan.

The most successful was Shenzhen, which back then was a village on the border of Hong Kong’s New Territories and now is a booming city that’s home to high-tech leaders like Huawei and ZTE. Of the important five SEZs in China, Shenshen, Shantou and Zhuhai are in Guangdong Province adjoining Hong Kong. Fourth, Xiamen is in Fujian Province and nearer Taiwan.

SEZs in Tamil Nadu

Tamil Nadu is one of the leaders in the SEZ movement with active public, private, or joint sector participation. The state has a total no of 56 notified SEZ out of which 36 are functional & operational. The state ranks first in the number of notified and operational SEZs in the country. The vibrancy for investment and industry in Tamil Nadu led to investment in the electronics, automobile and the flourishing Service sectors.

The GST Corridor, The Banagalore –Sriperumpudur corridor, the OMR stretch and the Oragadam region have major SEZs, which have impacted the economy and the lives of the people in the area positively.

MEPZ-SEZ, originally set up as an Export Processing Zone in the year 1984 and later converted into an SEZ in the year 2003, has been on the forefront of realising the vision of a vibrant and self-reliant India by nurturing industrial growth, generating employment and boosting foreign exchange reserves.

Apart from MEPZ-SEZ-which is a government run SEZ, there are around 35 privately developed fully functional SEZs (Special Economic Zones) within the state of Tamil Nadu, each having numerous manufacturing and service exporting units. The SEZs within Tamil Nadu have big domestic investors like Mahindra, L&T, Sterlite, Infosys, CTS, TCS, MARG, Foxconn, Hexaware, Syntel etc and international investors like Dell, Timken, Robert Bosch, Sanmina and others.

The state government is also an active player in the sector and SIPCOT & ELOCOT have promoted the maximum number of zones within the state.

Performance of SEZs in Tamil Nadu:

MEPZ-SEZ and the other Private SEZs under the jurisdiction of the Zonal Development Commissioner, MEPZ-SEZ has witnessed exponential growth in all areas despite the global gloom in business. The numbers of operational Special Economic Zones have gone up from 28 in 2010-11 to 36 as on date in 2013-14 and the numbers of SEZ Units have gone up from 201 to 445 in the corresponding period. Similarly, investments in the SEZs in this zone have gone up from Rs.5500 Crores to Rs.36,506 Crores in the past four years. While the SEZs in the region employed 86,536 people in 2010-11, the employment went up to 2,68,405 in the year 2013-14.

Physical Exports out of the country from the SEZs have grown by 95% in the past 4 years i.e from Rs. 36124 crores in 2009-10 to Rs. 70627 crores in 2013-14) and the FDI by more than 30 %.

The SEZs located within Tamil Nadu have all put together have an export turnover of around Rs.79,556/- Crores during the financial year 2013-2014. The employment generated from all the SEZs put together is to the extent of 2.68 lakhs.

Thus SEZs in the state have not only been core centers for earning foreign exchange , but also have created huge employment avenues for both the unorganized sector and the educated professionals.

Need of the hour:

While there in no doubt that SEZs are the real growth engines of Indian economy, poor marketing about the concept among the potential investors has put question marks over the very viability of such projects in the country. However, after the Prime Minister’s mission – MAKE IN INDIA, there are expectations that SEZs would attract huge investments in coming years.