How To Save The SEZs; In all the heat and dust that the issue of SEZs has raised, no one is asking the most important questions and finding the right answers. This story is an answer to that problem

• Published in: Business today (New Delhi, India) p. 76
• Main Authors: Shalini S. Dagar additional reporting by Amit Mukherjee, Sharma, E Kumar, Varadarajan, Nitya, Gopalan, Krishna
• Format: Magazine Article
• Language: English
• Published: New Delhi Living Media India, Limited 06.05.2007
• Subjects: Dass, Anita Arjan; Dhoot, Venugopal; Doe, John; Exports; Infrastructure
• ISSN: 0974-3650

Circa 2015: John Doe Jr., the young new CEO at one of the world's largest auto-parts companies, is on a guided tour of Reliance's Maha Mumbai special economic zone (SEZ). Doe wants to invest more than a billion dollars in a new factory, and he's weighing his options, which include India and China. His father, John Doe Sr., who last visited India in 2008, has warned him against investing in India because, as he remembers, it has a horrendous bureaucracy, convoluted regulations, and pathetic infrastructure. Yet, the young man has decided to check out Reliance's new SEZ because he's heard a lot of good things about it from some of his peers who already operate out of the SEZ. As the Reliance chopper in which he's seated gives him an aerial view of the city, Doe Jr. can hardly believe what he sees. Forget China's Shenzhen; this city is something else. Beautifully laid out roads, clearly zoned residential and industrial areas look stunning from about 2,500 feet above ground. The numbers, which Reliance's head of SEZ offers to Doe Jr., are even more impressive. Almost a fifth of Fortune 500's manufacturing companies already have facilities in the SEZ, with investments of about $5 billion; the SEZ airport, world-class in every respect, can handle 90 million passengers a year (as much as Frankfurt airport) and 4 million tonnes of cargo. As a new city, Maha Mumbai has brought down real estate prices in the main Mumbai city and eased pressure on infrastructure. As an economic zone, it accounts for 5 per cent of India's total exports of $1 trillion. There's no red tape, there are no power cuts or water problems. What's more, there's a booming, vibrant city of blue and white-collar workers, whose per capita income is three times the national average. "Gosh, dad couldn't have been more wrong," thinks Doe Jr. "India it has to be." This is a question that has been doing the rounds ever since the policy was first conceived in 2005. The question emanates from the tremendous success of the Chinese model. In eight years from 1980 to 1988, China established the SEZs in Shenzhen, Zhuhai, Shantou and Xiamen cities, and Hainan province. And by 2002, these free trade zones had attracted $60 billion of investments, employed two million people and were contributing 15-23 per cent to the nation's exports, according to a KPMG report. Surely this success is worth emulating. However, the Chinese SEZs are few in number and large in size. The famed-Shenzen, at best a mid-sized zone, is 327 square kilometers. The Hainan island is 34,000 square kilometers. Indian SEZs, with their cap on size at 5,000 hectares (50 sq km), are going to be midgets in comparison. Even Reliance with its proposed 10,000 hectare SEZs would have been middling at best in terms of sheer size. Fewer, larger SEZs have a compelling economic logic with their scale, and ease of administration. Anita Arjan Dass, Managing Director of Mahindra City, points out that a large size is preferred by a developer since it prevents overexposure to just one industry (as in single-industry SEZ) and protects investments. "Besides, the growth of ancillary industry development for a multi-product SEZ could be stymied in a small-sized SEZ. Today, large companies want to bring their ancillaries with them," Dass says.