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SEZ
Exploring the Trillion $ Opportunity
“India has a potential to lead the world in 2022 with its predicted largest pool of manpower consisting of 200 million college graduates and 500 million trained and
skilled workforce. It could be home for at least 30 of the Fortune 100 companies of the world and generate over 10% of the world trade. …….. This is possible in next
fifteen years provided leaders focus on this goal
as a priority.”
C.K.Prahlad In his vision of India @ 75
The Chinese Experience
China celebrates its 30th Anniversary of SEZ in September 2010. The stark divergence between the figures of India and China in terms of GDP and Exports shows that SEZ strategy has been very successful in China. Even in India, we have seen a couple of success stories in the field of SEZ. However, as right propounded by Sun Tzu we need not replicate the SEZ model of China but need to customize it in consonance with the facts abd circumstances in India
“
Do not repeat the tactics which have gained you one victory, but let your methods be regulated by the infinite variety of
circumstances.”- The Art of War, Sun Tzu
SEZs Giving exporters the Competitive Edge
Indian Model for SEZ is different from China but it is capable of being as effective.
As against one large SEZ, India has numerous relatively small sized SEZ. This causes anxiety amongst certain factions in India about the potential benefits and advantages of SEZ that will accrue to India. However the fears are unwarranted.
Firstly, our key focus is not just on manufacturing sector. Services sector holds immense potential and SEZ policy is also devised to cater to this sector. Services SEZ do not require large parcels of land. In fact small SEZs close to the city is advantageous.
Further, multiplicity of SEZ ensures competition amongst developers. Competition is virtuous and is ultimately beneficial to exporters. The advantages of competition will accrue in the medium to long run.
In contrast to certain other countries, MSME sector is one of a predominant contributors to GDP and employment. Using this analogy, small may indeed be beautiful and the large number of small sized SEZ can help India achieve the a greater share in the pie of world trade.
Competing with China
Apply our Strengths against their Weaknesses
Win Without Fighting
Cooperation
Complete Solutions
Value for Money
Weaknesses of China
Fragmented Markets Awareness about Quality Lack of Commitment IPR protection Regime Lack of a Strong Labour Regime Language Barriers WTO Violations
Our Strengths against Their Weaknesses
Strengths of India
Proven Delivery Capabilities Quality Manpower Political Stability Telecom Infrastructure IPR/ Data Security Communication Skills Lower Wages Relatively Strong and Developed Financial System
Our Strengths against Their Weaknesses
“Win Without Fighting”
India can use its competency, experience, good will and expertise in grabbing a major share in the increasing pie of service exports
Service Sector holds immense potential
Service Sector constitutes a major portion in the GDP of Developed Countries. Its share in the GDP of developing countries is steadily increasing. This opens a wealth of opportunities for India
“Win
Wit
ho
ut
Fig
hti
ng
”
Providing Complete Solutions
EXPERIENCE OF AUTO AND PHARMA SECTOR
Providing a slightly expensive product with great service is the
key
The Pharma Experience
SEZ
A Potent Tool To Compete With China
Export Competitiveness
Spill over effect of benefits to Third Party Suppliers
Direct Benefits to Exporters
Trickle down effect of benefits to SEZ
developers
20% savings in constructions
Tax exempt earning
Faster clearances
Low cost finance
Local tax and duties exempt
Exempt earning
Indirect tax exemptions
Local taxes exempt
Export Obligations Manageable and flexible
Faster clearances
Lesser legal formalities
More funding options
More flexibility
Reliable and cost competitive utilities
better infrastructure
better logistics
The process streamlines
More activities permitted to be sourced and outsourced
Indirect tax exemption
Deemed exporter status
SEZs ….Giving exporters the Competitive Edge
Development Strategies: Key Takeaways
"Strategy rests on choosing a unique position by offering a different mix of
value than competitors“
Prof. Michael E. Porter
Theme Based Development
Mahindra’s “ Work, live, learn & play Mundra SEZ’s “ One Levelling and Seven
Connections Brandix’s “ Vertically Integrated SEZ”
Leveraging Flexibilities in SEZ Development**
Change the type of SEZ. Increase and decrease the size of SEZ Denofity the SEZ Construct structure for which you have general Transfer SEZ to SPV created for the SEZ Create more than one processing within your SEZ Broadband sector Change type of sector* Combine two or more SEZ if contiguity established Services to other SEZ Have any number of co-developer Accept any person whether Indian or foreign or even unit as your co-developer Create SEZ on Land acquired by statutory corporations like MIDC Create SEZ on leasehold or freehold land Have DTA area around SEZ Use FSI of NPA for PA
. ** Such flexibilities have been permitted in select cases. This list is based on experience of various developers. It is based on minutes of Board of Approval.
Key Learnings
Alternate Business Structures
Henzberg’s Strategy
Optimum Land Use
Business Models
Client Mining
Right Client Mix
Cross- Subsidization
Redefine Profit
Centres
Development Strategies
Key strategies evolved from the experiences of successful SEZ Developers in India
Business Model For SEZ
SEZ is like hybrid industry with characteristic features of three sectors namely Infrastructure, Real Estate, Services. Devising a unique Business Model for your SEZ is a important ingredient in the success and profitability of SEZ. We try to explore the business models of existing successful SEZ in India which will give an insight into the key processes and decisions that a company will have to take to devise a good business model.
Steps to Devising a Great Business Model
Understand the Customer value proposition
• Identifying needs & demands
• Identifying problems that you seek to resolve
• Identifying the Motivations and Initiative
Identify Profit formula
• Revenue Model
• Cost Structures
• Margins
Determine Key Resources and Processes• People• Technology• Products, • Facilities• Utilities • Brand and Expertise • Processes to leverage resources.
Example
Thanking You
Ms. Prachi Manekar Director, Estopia SEZ Consultants Private Limited
Senior Consultant, Trans India Law Associates
Expert Panel Member, Legalpundits