India can learn lot from China in matter of SEZ

NEW DELHI: When it comes to SEZs, India has a lot of catching up to do with China. Beijing enjoys a lead of 20 years during which the Dragon managed to attract billions of dollars of foreign investment.

Identifying foreign capital as the tool to boost its domestic manufacturing, China attracted investors by offering a slew of tax sops, flexible labour regime and quick clearances.

China’s SEZ policy was essentially state-driven, having FDI and export markets as its main focus. With the governing philosophy being the scale of operations, China emphasised on establishing zones which were very big in size. Shenzen, which is the largest SEZ, has an area of 33,000 hectares. In case of Hainan, the entire province was declared as SEZ.

SEZ contributed to more than 50% of China’s foreign export earnings initially. India’s SEZ scheme was initially designed on the Chinese model and the then commerce & industry minister Murasoli Maran visited Shenzen before finalising his SEZ policy.

The scheme, however, took wings only after the SEZ Act was passed by Parliament in ’05. When Maran launched the scheme, the idea was to have zones which were ‘deemed foreign territory’ with minimum area of 1,000 hectares, not tiny enclaves.

Unlike China, India’s focus is not so much on FDI as on generation of economic activity. The philosophy driving India’s policy is to boost manufacturing, generate jobs while attracting FDI.

However, flexible labour policy has been elusive due to the towering influence of the Left parties. It needs to be seen if the Indian model works as effectively as the Chinese one.