FOREIGN TRADE: CONTRAST BETWEEN INDIAN AND CHINESE SEZ

“Why China is already an economic power and Asia’s other giant, India, is still struggling to catch up?”

Answer is Special Economic Zones, SEZ’s are industrial areas designed to attract outside investment by offering liberal foreign ownership policies and generous tax incentives. The Chinese started their liberalization and industrialization with the formation of SEZs in late 70s and early 80s. with an eye on luring dollars back to the motherland from compatriots in Hong Kong, Macao and Taiwan.

Unlike India, where SEZ is being incorporated 15 years after the start of Asia's first EPZ set up in Kandla in 1965. The SEZs were vital to the development of China’s export machine. Twenty five years later, India’s politicians have woken up and suddenly discovered the concept of SEZs. And realized the importance of SEZ’s. The Indians were late to the game.

Now question is -
“ Can we do better than China? “

Although ,currently as many as 267 SEZ’s have already been cleared by the government; out of these, 150 proposals have won final approval”. But on the other side : Critics are angry, saying that Indian peasants are getting robbed, losing their farmland to the industrial zones. Farmer activists have gone to the Supreme Court to stop things.
India is democratic, unlike china thus Indian leaders leader’s can’t just railroad through policies the way China’s communists do. But it does seem to be a shame that India, with a desperate need to generate more jobs for people from poor rural areas left out of the IT services boom, can’t figure out a way to get SEZs right.

To Choose from Contrary choices following points should be considered:

1. SCHEME POLICY :

INDIA
1 - 5 Years “ NO TAX” .
6 - 10 Years “ 50 % of profit is taxable.
11 - 15 Years “ 50 % of Ploughing back profit is Taxable.

CHINA
NO TAX during stand-up years before making PROFITS.
The 1st Year company makes the profits, the tax clock starts:
1st Year : NO TAX.
2nd Year: NO TAX.
3rd Year : 50% of Profits are Taxable.
4th Year : 50% of Profits are Taxable.
5th Year onwards 100% Profits are Taxable.


2. All the Chinese SEZs are located along the coast line while the Indian SEZs are mostly concentrated near major cities and more than half are being developed by real estate companies attracted by the cheap land prices.

3. China started its liberalization and industrialization with the formation of SEZs in late 70s and early 80s, while in India it’s the 2000’s policy that started SEZ’s .

4. China had a Master Plan and an economic framework on how to build and proceed with SEZs, most probably inspired by the success of Asian Trading Hub, Hong Kong. The Dragons started building massive cities for manufacturing and industrialization under their SEZ framework. Dragons also rolled out red carpet for foreign companies to build and operate from these SEZs.

5. Dragon SEZ blueprint says, Size Matters for SEZ. Shenzhen is the largest SEZ in China and is spread over 493 Sq Kms.(49,300 hectares). While the largest SEZ in India, Reliance - Navi Mumbai and Maha Mumbai SEZ, is mere 14,000 hectares.

6. Chinese SEZ initiative is government driven, Indian SEZs are driven by private sector.

7. China has only five SEZs, while India has approved 200 and still counting.

In order to conclude following is apt-

"We should look at entire districts, with a port and a hinterland for SEZ. We should make large-scale investments in that so there is synergy, and we should ensure that manufacturing has priority, followed by services, but the vision has to be much larger. The way it is today, the vision is too myopic, and too small, and I am afraid we will not get the benefit that China did.
As said by Mr. Mohandas Pai (EXECUTIVE DIRECTOR INFOSYS).