ABSTRACT

A Special Economic Zone in short SEZ is a geographically bound zones where the economic
laws in matters related to export and import are more broadminded and liberal as compared to
rest parts of the country. SEZs are projected as duty free area for the purpose of trade, operations,
duty and tariffs. SEZ units are self-contained and integrated having their own infrastructure and
support services.

Within SEZs, a unit may be set-up for the manufacture of goods and other activities including
processing, assembling, trading, repairing, reconditioning, making of gold/silver, platinum
jewellery etc.

As per law, SEZ units are deemed to be outside the customs territory of India. Goods and
services coming into SEZs from the domestic tariff area or DTA are treated as exports from India
and goods and services rendered from the SEZ to the DTA are treated as imports into India.

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 SPECIAL ECONOMIC ZONE (SEZ) ± An Overview

The world first known instance of SEZ have been found in an industrial park set up in Puerto
Rico in 1947. In the 1960s, Ireland and Taiwan followed suit, but in the 1980s China made the
SEZs gain global currency with its largest SEZ being the metropolis of Shenzhen.

From 1965 onwards, India experimented with the concept of such units in the form of Export
Processing Zones (EPZ). But a revolution came in 2000, when Murlisone Maran, then
Commerce Minister, made a tour to the southern provinces of China. After returning from the
visit, he incorporated the SEZs into the Exim Policy of India. Five year later, SEZ Act (2005)
was also introduced and in 2006 SEZ Rules were formulated.

Early Start:

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone
(EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in 1965. With a view
to overcome the shortcomings experienced on account of the multiplicity of controls and
clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view
to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was
announced in April 2000. This policy intended to make SEZs an engine for economic growth
supported by quality infrastructure complemented by an attractive fiscal package, both at the
Centre and the State level, with the minimum possible regulations.

Step towards SEZ Act, 2005:

To instill confidence in investors and signal the Government's commitment to a stable SEZ
policy regime and with a view to impart stability to the SEZ regime thereby generating greater
economic activity and employment through the establishment of SEZs, a comprehensive draft
SEZ Bill prepared after extensive discussions with the stakeholders. A number of meetings were
held in various parts of the country both by the Minister for Commerce and Industry as well as
senior officials for this purpose. The Special Economic Zones Act, 2005, was passed by
Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. The draft

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SEZ Rules were widely discussed and put on the website of the Department of Commerce
offering suggestions/comments. Around 800 suggestions were received on the draft rules. After
extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th
February, 2006, providing for drastic simplification of procedures and for single window
clearance on matters relating to central as well as state governments.

The main Objectives of the SEZ Act are:

A Generation of additional economic activity

A Promotion of exports of goods and services;
A Promotion of investment from domestic and foreign sources;
A Creation of employment opportunities;
A Development of infrastructure facilities;

The SEZ Rules provide for:

d Simplified procedures for development, operation, and maintenance of the Special

Economic Zones and for setting up units and conducting business in SEZs;
d Single window clearance for setting up of an SEZ;
d Single window clearance for setting up a unit in a Special Economic Zone;
d Single Window clearance on matters relating to Central as well as State Governments;
d Simplified compliance procedures and documentation with an emphasis on self
certification.

Types of SEZ:

Sector Specific SEZ-units may be set up for

± Manufacture of one or more goods in a sector
± Rendering of one or more services in a sector

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Multi-product SEZ-units may be set up for
± Manufacture of two or more goods in a sector or goods falling in two or more sectors
± Trading and warehousing
± rendering of two or more services in a sector or services falling in two or more sectors.

Other SEZ¶s
± SEZ in a port or airport
± SEZ for Free Trade and Warehousing

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 [ACILITIES AND INCENTIVES [OR SEZ UNITS

Customs and Excise:

d SEZ units may import or procure from the domestic sources, duty free, all their
requirements of capital goods, raw materials, consumables, spares, packing materials,
office equipment, DG sets etc. for implementation of their project in the Zone without
any license or specific approval.
d Duty free import/domestic procurement of goods for setting up of SEZ units.
d Goods imported/procured locally duty free could be utilized over the approval period of 5
years.
d Domestic sales by SEZ units will now be exempt from SAD.
d Domestic sale of finished products, by-products on payment of applicable Custom duty.
d Domestic sale rejects and waste and scrap on payment of applicable Custom duty on the
transaction value.
Income tax
d Physical export benefit
d 100% IT exemption (10A) for first 5 years and 50% for 2 years thereafter.
d Reinvestment allowance to the extent of 50% of ploughed back profits
d Carry forward of losses
[oreign Direct Investment:
d 100% foreign direct investment is under the automatic route is allowed in manufacturing
sector in SEZ units except arms and ammunition, explosive, atomic substance, narcotics
and hazardous chemicals, distillation and brewing of alcoholic drinks and cigarettes ,
cigars and manufactured tobacco substitutes.
d ^o cap on foreign investments for SSI reserved items.
Banking / Insurance/External Commercial Borrowings
d Setting up Off-shore Banking Units allowed in SEZs.OBU¶s allowed 100% Income Tax
exemption on profit for 3 years and 50 % for next two years.
d External commercial borrowings by units up to $ 500 million a year allowed without any
maturity restrictions.
d Freedom to bring in export proceeds without any time limit.

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 d Flexibility to keep 100% of export proceeds in EEFC account. Freedom to make overseas
investment from it.
d Commodity hedging permitted.
d Exemption from interest rate surcharge on import finance.
d SEZ units allowed to µwrite-off¶ unrealized export bills.
Central Sales Tax Act:
d Exemption to sales made from Domestic Tariff Area to SEZ units.
Service Tax:
d Exemption from Service Tax to SEZ units
Environment:
d SEZs permitted to have non-polluting industries in IT and facilities like golf courses,
desalination plants, hotels and non-polluting service industries in the Coastal Regulation
Zone area
d Exemption from public hearing under Environment Impact Assessment ^otification
Companies Act:
d Enhanced limit of Rs. 2.4 crores per annum allowed for managerial remuneration
d Agreement to opening of Regional office of Registrar of Companies in SEZs.
d Exemption from requirement of domicile in India for 12 months prior to appointment as
Director.
Drugs and Cosmetics:
d Exemption from port restriction under Drugs & Cosmetics Rules.
Sub-Contracting/Contract [arming
d SEZ units may sub-contract part of production or production process through units in the
Domestic Tariff Area or through other EOU/SEZ units
d SEZ units may also sub-contract part of their production process abroad.
d Agriculture/Horticulture processing SEZ units allowed providing inputs and equipments
to contract farmers in DTA to promote production of goods as per the requirement of
importing countries.

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 ROLE AND TERMS & CONDITIONS O[ SEZ

State Governments will have a very important role to play in the establishment of SEZ.
Representative of the State Government, who is a member of the Inter-Ministerial Committee on
private SEZ, is consulted while considering the proposal. Before recommending any proposals to
the Ministry of Commerce & Industry (Department of Commerce), the States must satisfy
themselves that they are in a position to supply basic inputs like water, electricity, etc.

d Only units approved under SEZ scheme would be permitted to be located in SEZ.

d The SEZ units shall abide by local laws, rules, regulations or bye-laws in regard to area
planning, sewerage disposal, pollution control and the like. They shall also comply with
industrial and labour laws as may be locally applicable.

d Such SEZ shall make security arrangements to fulfill all the requirements of the laws,
rules and procedures applicable to such SEZ.

d The SEZ should have a minimum area of 1000 hectares and at least 25 % of thye area is
to be earmarked for developing industrial area for setting up of units.

d Minimum area of 1000 hectares will not be applicable to product specific and port/airport
based SEZs .

d Wherever the SEZs are landlocked, an Inland Container Depot (ICD) will be an integral
part of SEZs.

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 ADVANTAGES & DISADVANTAGES O[ SEZ

A SEZ unit which has been set up for carrying on manufacturing, trading or service activity has
both advantages as well as disadvantages. SEZ advantages are quite far more as compared to its
disadvantages which are almost negligible.

Advantages:

d 15 year corporate tax holiday on export profit ± 100% for initial 5 years, 50% for the next
5 years and up to 50% for the balance 5 years equivalent to profits ploughed back for
investment.

d Allowed to carry forward losses.

d ^o license required for import made under SEZ units.

d Duty free import or domestic procurement of goods for setting up of the SEZ units.

d Goods imported/procured locally are duty free and could be utilized over the approval
period of 5 years.

d Exemption from customs duty on import of capital goods, raw materials, consumables,
spares, etc.

d Exemption from Central Excise duty on the procurement of capital goods, raw materials,
and consumable spares, etc. from the domestic market.

d Exemption from payment of Central Sales Tax on the sale or purchase of goods, provided
that, the goods are meant for undertaking authorized operations.

d Exemption from payment of Service Tax.

d The sale of goods or merchandise that is manufactured outside the SEZ (i.e., in DTA) and
which is purchased by the Unit (situated in the SEZ) is eligible for deduction and such
sale would be deemed to be exports.

d The SEZ unit is permitted to realize and repatriate to India the full export value of goods
or software within a period of twelve months from the date of export.

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 d >Write-off´ of unrealized export bills is permitted up to an annual limit of 5% of their
average annual realization.

d ^o routine examination by Customs officials of export and import cargo.

d Setting up Off-shore Banking Units (OBU) allowed in SEZs.

d OBU's allowed 100% income tax exemption on profit earned for three years and 50 % for
next two years.

d Exemption from requirement of domicile in India for 12 months prior to appointment as

Director.

d Since SEZ units are considered as µpublic utility services¶, no strikes would be allowed in
such companies without giving the employer 6 weeks prior notice in addition to the other
conditions mentioned in the Industrial Disputes Act, 1947.

d The Government has exempted SEZ Units from the payment of stamp duty and
registration fees on the lease/license of plots.

d External Commercial Borrowings up to $ 500 million a year allowed without any

maturity restrictions.

d Enhanced limit of Rs. 2.40 crores per annum allowed for managerial remuneration.

Disadvantages

d Revenue losses because of the various tax exemptions and incentives.

d Many traders are interested in SEZ, so that they can acquire at cheap rates and create a
land bank for themselves.

d The number of units applying for setting up EOU's is not commensurate to the number of
applications for setting up SEZ's leading to a belief that this project may not match up to
expectations.

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 IMPACT ON INDIAN ECONOMY

1. Employment:

It is expected that if all 577 formal approvals become operational then Employment numbers will
be more than 2 millions directly.

2. Exports:

SEZ has contributed good amount of exports revenue for country. In the year 2009-2010 India
seen growth of 121.40% of in exports from SEZ¶s compare to previous year.

Year Value (Rs. Crore) Growth Rate (Over Previous Year)

2003-2004 13,854 39%
2004-2005 18,314 32%
2005-2006 22 840 25%
2006-2007 34,615 52%
2007-2008 66,638 93%
2008-2009 99,689 50%
2009-2010 2,20,711.39 121.40%

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3. Exports from special economic zones (SEZs) rose 33 per cent during the year to end-
March 2009. Exports from such tax-free manufacturing hubs totalled US$ 18.16 billion last
year up from US$ 13.60 billion a year before.
4. Exports from 98 functional special economic zones (SEZs) increased by over 25 per cent
to US$ 8.19 billion between April and June this year.
5. The government has allowed companies located in SEZs to claim service tax refund for
services availed outside the tax-free export zones.

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 MINIMUM LAND REQUIREMENT
Minimum
Sr Contiguous
Nature of SEZ Minimum Processing Area Required
No Area Required
(Max 5000 ha)

Multi Product 1000 ha 35%

1
Sector Specific 100 ha 50%
2
SEZ in Port or Airport 100 ha 50%
3
50% , 1 lakh sq. m of built up area,(not
SEZ for Free Trade Zone and
40 ha exceed 20% of the Processing area in
4 Warehousing
Sector Specific SEZ)

Gems and Jewellery,

Bio-technology, ^on- 10 ha 50%
5
conventional Energy

Electronic Hardware and

Software, Information 10 ha 50%
6
Technology

^ote

1 hectare = 2.421 acres = 10,000 sq.metres; 1000 hectares = 2500 acres

Minimum Investment Requirements

Sector Specific SEZ¶s

d Investment should be more than Rs. 250 crores or

d ^et worth* of Rs. 50 crores

Multi product SEZ¶s

d Investment should be more than Rs. 1000 crores or

d ^et worth* of Rs. 250 crores

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Major SEZ Benefits:

^o Customs Duty ^o Customs Duty

^o Excise Duty ^o Excise Duty
^o Sales Tax ^o Sales Tax
^o Service Tax ^o Service Tax
Development Stage
^o Purchase Tax ^o Purchase Tax
(Capital Goods, Consumables,
^o Stamp duty & ^o Stamp duty &
Components & Spares)
Registration Fees Registration Fees
^o Stamp duty on ^o Stamp duty on
Mortgages Mortgages
^o Electricity duty ^o Electricity duty

Operation Stage
(Raw Materials, Consumables, As above As above
Components & Spares)

Exemption from Income ^o Income Tax for 10

Profit Stage
Tax years (80 IAB)

Results of Benefits:

1. Reduced Cost of infrastructure

2. Reduced Cost of Utilities
3. Reduced Cost of Raw Material
4. Reduced Cost of Capital
5. Reduced Cost of Manpower
6. Operational Ease Enabled
7. Baskets of Benefits leading to global competitiveness

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 CURRENT [ACTS O[ SEZ¶s IN INDIA
Current [act Sheet:

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 SEZ CONTROVERSY

0and, especially agricultural land is a very sensitive issue in India. There are millions of people
whose livelihood depends on agricultural land. But the introduction of SEZ in India has resulted
in the dispossession of agricultural land and has affected the livelihood of farmer at large. In
against of this, farmers first protested to safeguard their interests through litigation and court
cases challenging the establishment of SEZs. But later on, the resistance against SEZ in India
became massive when political parties also joined the farmers.

amnagar Incidence

In ^ovember 2006, farmers from the Jamnagar District in Gujarat moved the High Court of
Gujarat and later to the Supreme Court in order to challenge the setting-up of a 10,000-acre
(approx. 4,000-ha) SEZ by Reliance Infrastructure. They claimed that the acquisition of large
tracts of agricultural land in the villages of the district not only violated the 0and Acquisition Act
of 1894, but was also in breach of the public interest. This led the Government to >consider´
putting a ceiling on the maximum land area that can be acquired for multi-product zones and
decide to >go slow´ in approving SEZs.

Nandigram Violence

The ^andigram violence is another famous incidence related to SEZ controversy. ^andigram is a
rural area in Purba Medinipur district of the Indian state of West Bengal. It is located about 70
km south-west of Kolkata, on the south bank of the Haldi River, opposite the industrial city of
Haldia.

In 2007 the West Bengal government decided to allow Salim Group to set up a chemical hub at
^andigram under the SEZ policy. Farmers of that village were against it. So, on the order of the
0eft Front government on 14 March, 2007, more than 3,000 heavily armed police stormed the
^andigram area. The main objective was to remove the protestors in order to expropriate 10,000
acres of land for a Special Economic Zone (SEZ) to be developed by the Indonesian-based Salim
Group. During this incidence, police shot dead at least 14 villagers and wounded 70 more
including children and women.

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 DIRECT TAX CODE (DTC) IMAPACT


 






SEZ tax sops retained till 2014, but will need to pay 20% MAT

^EW DE0HI: In a partial reprieve to special economic zones (SEZs), the Direct Taxes Code Bill
has proposed to retain the current tax system of exemptions for zones notified till 2012 but imposed
a 20% minimum alternate tax.

>The code will grandfather the existing unavailed exemptions for units that commence operations
by 2014,´ said Sunil Mitra, revenue secretary on Monday after the Bill was tabled in the 0ok
Sabha.

As per the Bill, any zone notified before March 31, 2012 and any unit that commences commercial
operations by March 31, 2014 will be able to enjoy profit-linked tax exemption even as the Bill
marks a shift in the criterion of corporate tax holidays.

SEZ units get 100% tax exemption on profits earned for the first five years, a 50% exemption for
the next five years and another 50% exemption on re-invested profits in the following five years.
SEZ developers, on the other hand, get 100% tax exemption on profits for 10 years, which they can
choose in the block of the first 15 years.

The Bill has suggested a phased withdrawal of the current regime of tax exemptions that are linked
to profits, and replacing it with tax sops linked to investments. The finance ministry proposes to
implement the DTC by April 1 2012.

The finance ministry is hopeful that this will help offset the revenue loss of nearly `80,000 crore
from tax exemptions, Mr Mitra said.

But developers and units have opposed the move, as it would make investments in such zones
unattractive. For sectors such as IT, where investments made are relatively low, it would definitely
lead to lower exemptions.

>The tax-free status is partly taken away by the imposition of 20% MAT on such units though the
MAT will be creditable in future years,´ said ^eeru Ahuja, partner, Deloitte Haskins & Sells.

At present, there are nearly 576 formerly approved special economic zones of which 114 are
operational. They are expected to garner nearly `10 lakh crore of investments.

>It is a welcome move given the original position of the code. But the tax exemption should have
been continued in perpetuity, as this will hurt the SEZ policy. The 20% MAT adds more pressure
on investors and skews the picture from a cash-flow perspective,´ said Abhishek Goenka, partner,
BMR Advisors.

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 SEZ: THE CHINESE WAY

Special Economic Zones (SEZ's) are development zones established by the Peoples Republic of
China (PRC) to encourage foreign investment in China, bringing much need jobs, technical
knowledge, and future tax revenues in return for significant tax concessions at start-up of the
operations and over a number of years. They are not unlike SEZs in other part of the world.

SEZ has been one of the key reasons for the huge FDI that China has managed to attract so far.
The concept of SEZ is fundamental model of China FDI model, where it developed SEZ on a
focused manner. This is to be remembered that, this did not happen overnight and it has taken 25
years for China to become what it is today.

The first four SEZs set up in China in 1980 were Shenzhen (32,750 hectare (Ha)), Zhuhai
(12,100 Ha), and Shantou (23,400 Ha) in Guangdong Province and Xiamen (13,100 Ha) in
Fujian Province, which are multi-product SEZs. They were chosen specifically because of their
proximity to major regional world trading centers of Hong Kong, Macao and Taiwan. The
understanding was that this proximity would make it easier to attract FDI and in turn would
facilitate the firms to shift parts of their production processes to China.

In 1984, fourteen coastal towns were opened up to form Open Coastal Zones and in 1988 the
island of Hainan (3,40,000 Ha) received full provincial status and was officially declared as the
µFifth SEZ¶. The five SEZs cover an area of 421,350 hectare. SEZs apart, China has
conceptualized various other forms of free zones depending upon their geographical locations,
type of investments and regional political structure such as Open Coastal Areas, Open Economic
Zones, state level Economic and Technology Development Zones (ETDZs) and FTZs. The
ETDZs cover an area of 30,000 hectare.

The contribution of Chinese SEZs to the country¶s exports is in the range of 15-23
per cent.
These zones, taken together, employ more than two million people directly and approximately 16
million overall. Cumulatively, 20 per cent of the total FDI into China has made its way into
SEZs. Prominent industries established in these zones are textile and garments, metal works and

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machinery, trading, warehousing, logistics and high technology enterprises, chemicals and
pharmaceuticals and healthcare product manufacturing.

Benefits of an SEZ:

The biggest benefit to the foreign investor is significant tax concessions during the early life of
the project. These rates can vary by site and are subject to change from time to time. A typical
example of the PRC tax concessions offered to a manufacturing startup typically looks like:

d ^o tax during start-up years before making a profit

d The first year that your company makes a profit starts the "Tax Clock" and is year one
d The first and second year after the tax clock starts, there is no tax.
d For years three and four, there is 1/2 of the normal tax rate.
d In the fifth year, the company pays the full normal tax rate.

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 INDIA-CHINA COMPARISON

Issue China India

Very big. Typically in hundreds of
Size Even 10 hectares will do.
hectares.
It may be interesting to note that total Valid In-principle approved 155 SEZ¶s in India is less than
the land area of China¶s one SEZ.
Currently India has 577 formally
^umber China has only 5 SEZ¶s
approved SEZ¶z
Well thought out and located only
0ocation on coasts. To facilitate exports and Anywhere. ^o restriction.
imports easily.
0abour laws Relaxed in the SEZs. Flexibility is totally absent.
Experimentation of liberal policies
in the specified areas while
Policy Regime Based on fiscal sops.
insulating them from the rest of the
country.
Basically foreigners who are wooed Basically locals. ^ot foreign
Investors with sops and promise of stability in investor driven; which should have
policy. been the case.
In 1969 with the export processing
zone concept. But failed to muster
In 1979 courage in giving these regions
Commencement
foreign territory status till the year
2000 when Murasoli Maran
announced the SEZ policy.
Only six: Shenzhen, Zhuhai, Anywhere and any number. So far
^umber Shantou, Xiamen, Hainan and 28 operational. About 200 received
Pudong approvals.
Tax holidays Present. 0onger and steeper than in China.

Other Comparative [actors:

d China's SEZ initiative is government driven. But in India the private sector will develop
most of them. There is no minimum area requirement to set up an SEZ in China, unlike
as in India. And China does not offer tax incentives across the board to all companies, as
India does.

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 d Chinese incentives differ from zone to zone and are based on the number of years of
operation, use of advanced technologies, extent of exports and the type of activities
indulged in. For example, companies involved in building infrastructure get special tax
benefits.

d And though India's policy is a "please-all" one, many Indian corporate prefer the Chinese
way.

d China's SEZ initiative is linked to the opening up of its economy. It goes back to the
1980s when China was looking for a way to invite private and foreign investment. India's
SEZ policy comes 15 years after it kicked off economic liberalisation. And its goals are
many - building infrastructure, creating employment or inviting foreign investments

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 CHINA SEZ & NEW LABOUR RE[ORMS


New Chinese Labour Laws May [orce [light of [oreign Investment

September 2010
07

Overseas

companies may no longer find China a lucrative country to set up manufacturing units
after the newly-drafted labour laws in southern China's Shenzhen special economic zone (SEZ)


were introduced, aimed at empowering workers to collectively negotiate higher wages.

The

draft law scheduled to be reviewed this month, allows workers in the manufacturing hub of
Shenzhen SEZ to collectively bargain for higher salary if the wages of the majority of workers are
less

than half the average pay level in the city.

The

average monthly wages for factory workers in the city are about 3,900 Yuan ($560), while
workers at most of the manufacturing units at Shenzhen SEZ are paid between 1,100 Yuan ($146)
to

1,500 Yuan ($220).

The new labour draft comes after the Shenzhen SEZ was hit by a series of wage disputes mainly at


Japanese auto parts units that saw production grinding to halt until the companies agreed to hike
wages.


The new laws would allow workers at Shenzhen SEZ demand wage hikes of as much as 70 per


cent in order to bring their salary level to that of city workers.

0abour strikes started in May in Shenzhen SEZ and in nearby cites in Guangdong province,
affecting parts suppliers of Japanese carmakers like Honda and Toyota.


Taiwan's Hon Hai Precision Industry, the world's largest contract manufacturer to companies like
Apple,

raised workers' wages at its Shenzhen plant by 66 per cent from 1 October 2010, in a bid to
prevent a spate of worker suicides the consequent rising public anger against it.


Overseas firms in China are now increasingly facing labour issues with migrant workers, many
from

the vast countryside, demanding better pay and service conditions.

After a series of copy-cat strikes at Shenzen, analysts had then said that China was rapidly turning


into a developed market from an emerging market and labour costs were set to rise. They said car
makers have little choice but to accept higher costs and wages if they want to remain in business in


China.


Shenzhen SEZ, established in 1980, comprises four of the six districts of Shenzhen City in
Guangdong Province spanning an area of 493km that turned the city from a cluster of fishing


villages with a population of 30,000 into a booming metropolis of 8.9 million.

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Shenzhen, which is often seen as a test bed for economic reform in China, had an output of $120
billion last year. Year after year, Shenzhen has delivered double-digit growth but workers' salaries
have remained the same since the past decade.

Shenzhen became the first area in China to be designated as a Special Economic Zone that could
accept foreign investment, under reforms brought out by the late Deng Xiaoping.

Overseas companies were lured into investing in Shenzhen as it offered lower taxes, cheap power,
less red tape and abundant cheap labour that would later set the place to lead the country's explosive
manufacturing-based economic growth.

But with social unrest due to huge differences in wages between workers at Shenzhen SEZ to those
working in cities, the country saw mass strikes and Beijing for the first time remained a mute
spectator.

"If you are a foreign enterprise and cannot afford to pay higher wages, then get out of China," one
Guangdong provincial official is reported to have said.

But many overseas companies are now pondering pulling out of China as cheap labour was one of
the prime reasons that made them invest in the country in the first place.

Some companies like Foxconn have already decided to shift some of their manufacturing units from
Shenzhen to ^orthern China, where labour costs are still low.

Foxconn is planning to build a new plant in Zhengzhou, capital of Central China's Henan province

(Source: http://groups.google.com/group/stocktalks/topics)

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IS COMMUNISM IS BETTER THAN DEMOCRACY INCASE O[ [ASTER
DEVELOPMENT O[ COUNTRY???

India being a democratic country, political system of governance either carried out by the people
directly or by elected representatives. Here the representative of people from different parts of
India carries different views towards the social and economical growth of the country. Where as
China, Communism is a political ideology that is based on a common ownership, mainly
concerned with equality and fairness is focused while taking major decision due to its centralized
political structure. This is the main reason because China can take decisions faster unlike India
where representative of people with different motives and views affects the decision taking
ability of government.

India is seeking lots of major reforms like 0and acquisition reforms, 0abor Reforms that are in
pipeline but due to different political views towards those reforms, still they are unable to enact
them at faster pace. As the ongoing debate about them in India shows, they¶re the latest example
of how ideas that work just great in Communist China don¶t quite translate so well in Democratic
India. India, unlike China, isn¶t a dictatorship. India¶s leaders can¶t just railroad through policies
the way China¶s communists do.

All in all, unless and until the views of political parties in India is focused and centralised
towards the India, India may not be able to achieve those highs what China has achieved.

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 CONCLUSION

India has 363 notified SEZs as on 27th August, 2010 in addition to 19 existing zones established
before the enactment of the SEZ Act 2005 as compared with the US, China, Indonesia,
Philippines and Thailand, where the numbers of SEZs are much lower and the land areas of their
multi-product SEZs are huge in size. Total 363 SEZs are in the pipeline due to aggressive
policies adopted to promote them as growth drivers but are delayed for notification due to land
acquisition problems, lower growth prospects for some specific zones, 
. ^o doubt, the SEZs
are promoting infrastructure and also instrumental in increasing manufacturing growth and
thereby exports. But the growing number of SEZs with sector-specific small sized fragmented
zones may not yield the desired results.

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