QUE: “Special Economic Zones are the engine of industrial development, production and exports.” Explain.

Special Economic Zones (SEZ) are areas within a country that are covered under different trade and commerce rules and regulations than the rest of the country. They are created to boost economic growth and development in a particular region. In India too, such SEZs are becoming a driving force for industrial development, manufacturing and exports and are contributing immensely to the development of the country.

• Contribution of SEZ in the multidimensional (industrial development, production and export) development of the country:

• Important in attracting foreign investment: SEZs help in attracting foreign direct investment (FDI) especially through tax incentives and other basic facilities as well as necessary subsidies.
• New opportunities for employment generation: The problems of unemployment can be solved by providing new opportunities for employment to the local people in SEZs.
• Promotion of exports: SEZ plays a major role in boosting the country’s exports. Especially due to SEZ, quality along with diversity in export products can be ensured.
• Important role in the supply chain of the global market: New industries are attracted by providing various types of financial assistance in SEZs, due to which the number of exporters also increases, due to which the country’s position in the global supply chain is strengthened.
• Reduction in logistic and transportation costs: Since SEZs are generally established near important ports of the country, there is a saving of money and time in transportation and logistics.
• Promotion of innovation: Industries located in SEZs can spend more on research as they receive financial support and other incentives. Moreover, such industries are required to ensure quality and innovation as they compete in the global market.
• Infrastructure Development: SEZs can develop infrastructure facilities.
• Economic activity: SEZ can generate additional economic activity.

• Challenges facing SEZ.

• Protectionism: SEZs are often accused of being developed by certain countries to achieve exemption from tax and other regulatory frameworks and to implement protectionist policies.
• Poor compliance with labor rights: Industries located in SEZs are exempted from the general laws of the country. Due to which, even the basic rights of the workers are often not taken care of, leading to the possibility of exploitation of the workers.
• Lack of fairness and crony capitalism: Government intervention and lack of transparency in approving the establishment of industries in SEZ areas.

Thus, SEZs certainly have the potential to transform manufacturing, export and industrial sectors for countries like India. However, there is a need to ensure that the rights of workers in such sectors are protected. In addition, for this scheme to be successful at the ground level, it is also very important that all the approved SEZs function to their full potential.