[Marxism] high cost of 'easy' foreign exchange

["Sudhir Devadas" <sudhirdin@xxxxxxxxx>]

  this is a thoroughly reseached piece on the hollowness of the neo-liberal
economic agenda being implemented by the indian government.

sudhir

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ECONOMY   india together
*The high cost of 'easy' foreign exchange *
A new sop came into effect for net-foreign exchange earning businesses in
designated export zones from February 10 -- a 15-year income tax holiday.
But are the costs of the revenues foregone worth the claimed benefits of
more investment and jobs? M Suchitra examines the reality and does not find
a rosy picture.

*9 March 2006* - It was in early 2000 that the late Murasoli Maran, the then
Union Commerce and Industries Minister, went on a visit to China to garner
first-hand knowledge of how a socialist economy suddenly became the most
attractive investment destination in the world. During that trip he visited
the Special Economic Zones (SEZ) in China. Inspired by the impressive impact
of these industrial enclaves on China's economic growth, Maran introduced
the concept of SEZs in the Indian economy through the annual Export-Import
(Exim) Policy in March 2000.

The effort has been to create delineated, duty-free zones with world-class
infrastructure, internationally competitive production environment and fast
track clearance system for attracting private investments, especially
foreign direct investment (FDI) for setting up export oriented units. In
order to convince the investors about the commitment of the country on SEZ
scheme and to provide them with the protection and stability of a policy
regime, Parliament passed a comprehensive legislation in May last year. When
the Special Economic Zones Act 2005 and new rules came into effect on
February 10 this year, it made headlines in the national and regional media.
Newspapers and news channels quoted the Commerce Minister Kamal Nath, "The
SEZ Act and Rules will provide comfort to and instill confidence in
prospective investors." He also said that investment of Rs.1,00,000 crores
was expected to flow into the zones in the next three years providing
employment to over 5 lakh people. The mood was clearly upbeat. (1 crore = 10
million)

The country is now promoting the SEZ programme more vigorously than in the
past. In fact, India's experience with SEZ predates that of China. India was
the first country in Asia-Pacific region to follow the international trend
of setting up a separate zone with special incentives for earning foreign
exchange through export promotion and employment generation. The first
special export processing zone (EPZ) was set up in Kandla, Gujarat, as early
as 1965. It was followed by Santacruz Electronics Export Processing Zone
which became functional in 1973. The Central government set up five more
zones in mid 1980s at Cochin (Kerala), Chennai (Tamil Nadu), Visakhapattanam
(Andhra Pradesh), Falta (West Bengal), Noida (Uttar Pradesh). Under the new
SEZ scheme, all these seven EPZs and the first private zone at Surat which
started operations in 1998 were converted to special economic zones. China
established its first zone much later in 1980. .....

-more-

*M Suchitra*
<%09%09mailthequest@xxxxxxxxx,%20editors@xxxxxxxxxxxxxxxxx%09%09?subject=Feedback:%20The%20high%20cost%20of%20'easy'%20foreign%20exchange>
9 Mar 2006

*M Suchitra is an independent Kochi-based journalist working for Quest
Features. This report is part of a study "Socio-economic Impacts of
Proliferation of Special Economic Zones (SEZs) in India". She received the
2005 Appan Menon Memorial Award for this study. *
*URL for this article:*
http://www.indiatogether.org/2006/mar/eco-freezones.htm
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