A Peek Into Special Economic Zones

A Special Economic Zone (SEZ) refers to a geographical region within a nation where

the economic and financial laws enforced in other parts of the nation are either suspended or relaxed so that the laws are more free-market-oriented. This special zone is more like a foreign territory that not only benefits from tax exemptions and relaxed financial and environmental regulations but also gets subsidized water and electricity.

The objective behind creating special economic zones is to encourage foreign investors to make foreign direct investment. However, for the foreign investors to make investments it is necessary that the conditions are favorable for their businesses. The government can achieve this by creating certain areas as special economic zones with reduced taxes and relaxed financial and environmental regulations. Only then would the government be able to encourage rapid economic growth.

Special economic zones broadly divided into more specific zone types namely

* Export Processing Zones (EPZ)

* Free Zones (FZ)

* Free Trade Zones (FTZ)

* Industrial Parks or Industrial Estates (IE)

* Free Ports

* Urban Enterprise Zones

Due to the immense benefits of special economic zones, almost all governments of the world support it. There are approximately 3000 special economic zones in 120 countries. As far as India is concerned, there are 143 special economic zones in India and more than 500 formally approved by the government. Among Asian countries, India was the first country to realize the benefits of creating Export Processing Zone (EPZ) in promoting exports. The first EPZ was set up in Kandla, Gujarat in 1965. Among the 143 special economic zones, 7 have been set up by the central government, 15 approved before the enactment of the SEZ Act 2005, and the rest after the enactment of the SEZ Act. The operational economic zones are in Tamil Nadu (26), Andhra Pradesh (21), Karnataka (15), Maharashtra (15), Chandigarh (1), Gujarat (10), Haryana (3), Kerala (8), Orissa (1), Rajasthan (3), Uttar Pradesh (10), and West Bengal (5).

The SEZ Act, 2005 along with the SEZ rules came into effect on 10 February 2006. Creation of SEZ benefits the nation considerably by facilitating (as per the SEZ Act)

* generation of additional economic activity

* promotion of exports of goods and services

* promotion of investment from domestic and foreign sources

* creation of employment opportunities

* development of infrastructure facilities

* maintenance of sovereignty and integrity of India, the security of the State and friendly relations with foreign States

Special economic zones definitely promote growth and investment as proved by the different success stories in different parts of the world. With different success stories in the making, special economic zones are something that needs to be encouraged rather than opposed.

by: Gladeyas

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