SEZs should focus on growth and employment, says study

New Delhi, Jan 14 | Updated: Jan 15 2005, 05:30am hrs
The National Council of Applied Economic Research (NCAER) has underlined the need for a liberal labour policy in the sepcial economic zones (SEZs). In a study on SEZs: what more needs to be done, the report said labour policies for SEZs should include mechanism allowing non-viable firms to close down.

It added, the focus of overall policy for SEZs should shift from augmenting infrastructure facilities for export production to overall growth and employment. Shift in focus to growth also needs to include quantum growth in the size of the geographical area over which the SEZ-type policies are applied. The report suggested that private sector should be involved in providing infrastrcuture services even if financing remains public.

Administrative obstructionism, it added, should give way to a transparent process based on security of financial accounts instead of monitoring physical targets.

The existing SEZs, the report said, had been able to streamline the customs procedures along with keeping the corruption levels low. However, there are problems which inhibit rapid growth and performance as well as the prospects of the forthcoming SEZs. Hence, the report argued, it was necessary to deal with the problems relating to labour reforms, infrastructure, administrative interference etc.

The first export promotion zone (EPZ), it may be recalled, was set up in Kandala in 1965. With the commencement of the Surat EPZ in 1977, India had eight operational EPZs in little over three decades. By the end of 1990s, however, it had become evident that these EPZs did not perform as well as those in China. Perhaps because Indias approach to export zones, at least till 2000, was one of relative neglect rather than support, the report said.

With the intention of emulating China, India introduced a new policy in 2000 replacing its EPZ model with SEZs to provide internationally competitive and hassle-free environment for exports.

The existing eight EPZs have now been converted into SEZs. Another 27 SEZs have already been approved and their construction is underway. The EPZ scheme has been discontinued from April 1, 2003.