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Special Economic Zone

A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country\'s typical economic laws. Usually the goal is an increase in foreign investment. Specifically it is a delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations, duties and tariffs. Usually the goal is an increase in foreign investment.

Asia’s first Export Processing Zone (EPZ) was setup in Kandla in 1965 for promoting exports. Further in April 2000 the SEZ policy was announced, as a part of Export-Import (‘EXIM’) policy, to attract FDI (Foreign Direct Investment) and to overcome the shortcoming experiences of the multiplicity of controls & clearness; absence of the world class infrastructure and an unstable fiscal regime. Hence SEZ is An SEZ is a trade capacity development tool, with the goal to promote rapid economic growth by using tax and business incentives to attract foreign investment and technology. SEZs magnetized investment & foreign exchange, real estate, spur employment and swifts the development of improved technology and infrastructure. The World Bank report shown that in India more than 500 SEZs have been proposed, 220 of which have been created in 2007.

It is quite clear by the globalization and present scenario that to attain the sustained growth of the economy and increased contribution to the GDP of the nation; it has to recognize the importance of facilitating international trade.

The SEZ is a very gigantic entity, as it covers a broad range of more specific zones typically FTZ (Free Trade Zone), Free Zones (FZ), Industrial Estate (IE), EPZ (Export Processing Zones), Free Ports etc. In early 1980s, Deng Xiaoping, People Republic of China, was developed as the world’s earliest and most famous SEZ. The most successful SEZ in China, Shenzhen, has developed from a small village into a city with in 20 years.

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. The units in the Zone are required to be a net foreign exchange earner but they would not be subjected to any pre-determined value addition or minimum export performance requirements. Sales in the Domestic Tariff Area by SEZ units are subject to payment of full Custom Duty and as per import policy in force. Further Offshore banking units are being allowed to be set up in the SEZs.

India passed special economic zone act in 2005 and came into force with effect from 10th February 2206, with SEZs Rules legally vetted and approved for notification. Estimated exports from SEZs in 2007-08 were at Rs. 67,299 crore which is about three times the Rs. 22,839 crore posted in 2005-06.

Currently, India has about 1022 units in operation in 13 functional SEZs and about 65 SEZs are in pipeline, each an average size of 200 acres. The policy provides for setting up of SEZs in the public, private, joint sector or by State Governments. It was also envisaged that some of the existing Export Processing Zones (EPZ) would be converted into SEZ; accordingly the Government has converted EPZs located at Kandla and Surat (Gujarat), Cochin (Kerala), Santa Cruz (Mumbai-Maharashtra), Falta (West Bengal), Madras (Tamil Nadu), Visakhapatnam (Andhra Pradesh) and Noida (Uttar Pradesh) into a Special Economic Zones. In addition, 3 new Special Economic Zones were approved for establishment at Indore (Madhya Pradesh), Manikanchan – Salt Lake (Kolkata) and Jaipur and have already commenced operations. All these SEZs are in various parts of the country in the private/ joint sectors or by the State Government. Genpact has announced its plans to extecnd its presence in Hydrabad by setting up a SEZ across 50 acres in the city at Jawahar Nagar. Recently the Mahindra SEZ (Special Economic Zone) was inaugurated by the Chief Minister of Rajasthan, Vasundhara Raje Scindia, in Jaipur.

The overwhelming response to the SEZ scheme is evident from the flow of investment and creation of additional employment in the country. The SEZ scheme has generated tremendous response amongst the investors, both in India and abroad, which is evident from the list of Developers who have set up SEZs:

  • Nokia SEZ in Tamil Nadu

  • Quark City SEZ in Chandigarh

  • Flextronics SEZ in Tamil Nadu

  • Mahindra World City in Tamil Nadu

  • Motorola, DELL and Foxconn

  • Apache SEZ (Adidas Group) in Andhra Pradesh

  • Divvy’s Laboratories, Andhra Pradesh

  • Rajiv Gandhi Technology Park, Chandigarh

  • ETL Infrastructure IT SEZ, Chennai

  • Hyderabad Gems Limited, Hyderabad

The Ministry of Commerce and Industry lays down the regulations that govern the setting up and administering of the SEZs. The Central Government is involved in notifying SEZs and in overseeing their functioning, while the State Governments play a significant lead role in the development of SEZs in their respective States by stipulating the conditions to be adhered to by an SEZ and granting the necessary approvals. The policy framework for SEZs has been enacted in the SEZ Act and the supporting procedures are laid down in SEZ Rules.

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