Address SEZ concerns through appropriate policies: Survey

New Delhi, Feb 27 (UNI) The Economic Survey 2006-07 reflects the growing pressure on the United Progressive Alliance (UPA) Government to carry the reforms process forward and calls for addressing concerns about Special Economic Zones (SEZs) through appropriate policies and safeguards.

Commenting on the recent debate about the SEZs, the survey calls for appropriate sequencing by the UPA Government to sustain popular support for reforms and reconciling conflicting interests of the various reforms constituencies.

According to the survey, "the debate about the SEZs illustrates the kind of considerations that have to be taken into account in the formulation of policies." Apprehensions have been voiced regarding displacement of farmers with meagre compensation, loss of prime agricultural land having serious implications for food security, revenue loss and generation of little new activity due to relocation of industries to take advantage of tax concessions.

The survey highlights that SEZs have been established in many countries as testing grounds for implementation of liberal market economy principles. They are viewed as instruments to enhance the acceptability and credibility of the transformation process, to attract domestic and foreign investment, and for the opening up of the economy.

In India, the SEZs, which have its origins in the Export Processing Zones (EPZ), seek to promote value addition component in exports, generate employment and mobilise foreign exchange.

The successful instances of China and other ASEAN countries is cited in setting up EPZs and SEZs in the 1970s and 1980s to create regional islands, where export oriented manufacturing could be undertaken.

Not that EPZs have not had their share of early difficulties. They provided scope for cultivating manufacturing competitiveness when licensing, labour rigidities and high import duties and taxes acted as a disincentive for investment in the rest of the areas.

But, the EPZ experiment in India was not exactly an unequivocal success. Since 1965, when the first EPZ in Kandla was set up, a total of 11 such zones have come in to existence. The Exim Policy of 1997-2002 introduced the more comprehensive and liberal SEZ concept, after which a Bill was drafted and passed by Parliament in the form of SEZ Act, 2005.

UNI