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A geographical region that has economiclaws that are more liberal than a countrys

typical economic laws. A trade capacity development tool, with the

goal to promote rapid economic growth byusing tax and business incentives to attractforeign investment and technology.

Domestic regulations, restrictions andinfrastructure inadequacies are eliminated.

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SEZs is governed by a three tier administrative setup: The Board of Approval is the apex body in the

Department. The Unit Approval Committee at the Zonal level

dealing with approval of units in the SEZs andother related issues.

Each Zone is headed by a DevelopmentCommissioner, who also heads the UnitApproval Committee.

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Special Economic Zones Act, 2005. Special Economic Zones Rules, 2006.

Foreign Trade (Development and Regulation)Act 1992.

Foreign Exchange management Act, 1999. The Special Economic Zones Act, 2005,

provides the legal framework forestablishment of SEZs and also for unitsoperating in such zones.

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SEZ units can be setup for manufacture of goodsand rendering of services, production,processing, assembling, trading, repair,

remaking, reconditioning and re-engineering. SEZs may be set up in the public, private or joint

sector or by state governments. SEZs should have and area preferably of 1000

hectares. SEZs unit would have to be positive net foreign

exchange earners and would not be subject toany minimum value addition norms or exportobligations.

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100% FDI would be permitted for all investments inSEZs expect for activities under the negative list.

No fixed wastage norms.

Duty free goods to be utilize within the approvalperiod of five years. The ministry of commerce and industry through issue

of a notification can also convert the existing EPZsinto SEZ.

The development commissioner would be responsiblefor administrative control of the zone.

Simplifies accounting procedure and SEZs unit tomaintained account in formats of their choice.

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The major incentives and facilities available toSEZ developers include: Exemption from customs/excise duties for development of

SEZs for authorized operations approved by the BOA.

Income Tax exemption on income derived from the business ofdevelopment of the SEZ in a block of 10 years in 15 years underSection 80-IAB of the Income Tax Act.

Exemption from minimum alternate tax under Section 115 JB ofthe Income Tax Act.

Exemption from dividend distribution tax under Section 115O

of the Income Tax Act. Exemption from Central Sales Tax (CST). Exemption from Service Tax (Section 7, 26 and Second

Schedule of the SEZ Act).

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Stated objective for development of SEZs augmentation of exports.

SEZs to act as catalyst to increase in Indias

portion in Global trade. SEZ exports at a faster pace in comparison to

Indias portion in Global trade. Percentage of SEZ exports in Indias overall

exports remains largely untapped positionedfor higher growth.

In value terms projections for 2007-2008 showthat SEZ exports are likely to triple from currentlevels.

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Over 3000 SEZs have been set up in 120countries the world over.

Worlds first SEZ set up in Puerto Rico in 1947.

Objective for development of SEZs in eachcountry differed from the other:Mauritius employment generationSouth Korea establishment of the services

sector SEZ concept has been a driver of economic

growth and success in countries like China,Korea, UAE etc.

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First EPZ was set up in Kandla as early as 1965. The idea of SEZs was first mooted in an attempt

to copy the model evolved in China.

Government of India have introduced theconcept of SEZs in the year 2000 through arevision in the Export-Import Policy 1997-2002.

In 2005, the SEZ Act was passed by the IndianParliament and came force from February 10,2006.

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Currently there are 114 SEZs operatingthroughout India in the following states:

Karnataka 18; Kerala 6; Chandigarh 1;Gujarat 8; Haryana 3; Maharashtra 14;Rajasthan 1; Tamil Nadu 20; Uttar Pradesh 4; West Bengal 2; Orissa 1. Additionally, more than 500 SEZs are

formally approved by the Government ofIndia.

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Zone marketing has been carried out mainly by governmentsIndian model envisages private sector carrying out zone

marketingUnfamiliar experience for private sector

Internationally, free zones were indeed special in theirdispensation

Comparatively, Indian zones are less special due to an overallliberalized domestic regime

FDI has been the main driver of zone investmentsDomestic Investment may play an equally prominent role in

Indian contextRelatively, Indian private sector is more developed

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Internationally, free zones have been publicly fundedIndian model envisages private financing of SEZsFiscal constraints place limitations on public funding of SEZs

Economic and indirect benefits have been the main motivationsFinancial viability a key consideration in Indian context

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CHINA

SEZs large in size likeShenzan (326 sq km),Xiamen (132 sq km) etc.

Locational advantage asSEZs lie strategically closeto ports and cities of HongKong, Taiwan and Macau.

Vast areas provision forworld class infrastructure.

Flexible labour laws.

INDIA

SEZs vary in size from 10 to1000 hectares with the

Reliance SEZ being thelargest at 119 sq km.

Can be set up anywhere. Portbased SEZs have beenapproved but majority SEZs

are land locked. Small areas inadequacy of

infrastructure.

Stringent labour law regime.

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Broad options for developing private SEZs: Government develops the entire zone

infrastructure. Government funds a portion of zone

infrastructure. BOT zone development with enhancers from

government. Zone development on a joint venture. Full concession.

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To developers: SEZ developers would be entitled to claim all

concessions and incentives available toinfrastructure players, under the Income TaxAct.

Developers of SEZs as well as all industrial

units within the SEZs would be exempt fromall state and local taxes. Developers of SEZs will be granted full

autonomy to develop townships within SEZs.

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To units within SEZ: No requirement of minimum net foreign

exchange earning, as percentage of exports. SEZ units to have unrestricted access to the

domestic markets, on payment of applicabletaxes/ duties.

Profits from operations within the SEZ zonescan be repatriated freely, without anydividend balancing requirements.

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Other benefits: Well-developed road network.

Abundant water supply. Uninterrupted power supply. Transportation and security. Commercial infrastructure. Township infrastructure. Solid waste removal and effluent treatment.

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Lack of proper rules. Diversity in development.

Threat to water security. Threat to food security. Mangroves destruction. Fertile land destruction. Land requirements.

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Before SEZ and After SEZ:

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Though at the current situation the darkerside of SEZ is predominant, the moral behind

its implementation is not to give any kind ofharassment to the people but to provideemployment and well developedinfrastructure to the people.

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