Need for the study:

Vishakhapatnam is one of the fastest growing city on the coast line of Andhra Pradesh have infrastructure backings at SEZ level like poor roads leading to zones, inadequate transport facilities for the zones and within zones poor street lights and no proper guidelines for disposal of waste water disposal and accumulation only, Vishakhapatnam, Kandla and surat are only zones where 6-8% of the area is dedicated to such facilities

SEZ & PORT LED DEVELOPMENT

Li i i l lt ti t ti i titi i t ti ti l t i t t t l l i ti li i t . I li ti t i i .T T x t i i i t l t li it i l l i t l i ti t i ti l l it t i t x i t t i t i t l t t l li ti ti t iti i l li i i t i i i l l t t i i ti t t t l i i l t. M i t i i t l t i t t t i i i ill t i t lti l t. M t i t i l i il t t t t ti t t t li t i l l t t i l l i i i ti i i t l ltil t i i it t t t t i t l i t i t (JIT) i t i t li ilit ti i i l . i (ICT) ti t t t l l t .T i t t i i ti l lit l i i t i i ll i il i t t l t t t l i i t i i t t i t t i lt t i t t i l tii t t t t t

t t i . i i t i t

i l i t i ti t li t i i i . T t i t t i

l l i ti / i t i ti titi it

i t l

j t i ti l

free trade zones (FT )

i T l N :1 Table No : 1

350% 300% 250% 200% 150% 100% 50% 0%

INDIAN EXPORTS SEZs EXPORTS

Sources: htt ://commerce. ic.i / ressrelease/ ressrelease_detail.asp?id=2356 http:// .sezi dia. ic.i /about ep.asp

he concept of a SEZ and the way of establishing a SEZ differs slightly from one country to another Lack of understanding and e perience in establishing and operating a SEZ has often meant that only a few countries have had a truly successful e perience he focus of the study was logistics oriented zones and the traditional Z& SEZ with its focus on manufacturing hese are e amined in order to understand the concepts and see how some of their features can be applied successfully in the conte t of port hinterland development he three key goals of the public sector when deciding upon building a successful SEZ is to: attract business, bring in capital and create employment rom a customers perspective, the three main attributes of the SEZ can be summarized in one well known marketing adage, LOCA O , LOCA O , and LOCA O his adage is not simply related to the positioning of a SEZ but also relates to global trends in manufacturing, outsourcing, business mobility and the whole process known as globalization n this report we look at how this adage relates to SEZ and port hinterland development n doing this we have considered trends in business location, developments in sea transportation and shore side interface systems in order to provide governments, policy makers and port operators with guidelines that will assist them in optimizing their comparative advantages

SEZ DRIVE IN INDIA

Economic development can only result from state-led policies designed to address the numerous production failures and bottlenecks that characterize the economies of underdeveloped countries SEZ is one such state led policy SEZs are benefited, apart from general fiscal and non fiscal concessions to firms, from the following: y Location-specific advantage y Modern and efficient infrastructure y Better governance due to single window facilities to ensure corruption and red tape free business environment SEZs thus make up for infrastructural deficiencies and procedural comple ities that characterize developing countries and offer a more conducive investment climate rade related infrastructure and institutional framework are generally deficient in developing countries Besides, too many windows in the administrative set up, bureaucratic hassles and barriers raised by monetary, trade, fiscal, ta ation, tariff and labour policies further increase production and transaction costs of e ports Since country-wide development of infrastructure is e pensive and implementation of structural reforms require time due to socio-economic and political realities, Special Economic Zones SEZs or E port Processing Zones EPZs are considered an strategic tool for the promotion of e ports in developing economies such as those of ndia, China, Bangladesh etc According to this modern view, the SEZ offers quality

infrastructure and hassle free business environment permitting an economy to promote and diversify e ports and develop a competitive industrial base However, given the limited technological and marketing capabilities of developing countries, the zones may not affect e ports substantially unless they attract D also Due to easy access to proprietary technology of their parents and international marketing network, M Cs affiliates are likely to be more competitive in international markets urthermore, in this era of globalization, M Cs restructuring their operations to avail economies of scale and scope by internalizing the economies of specialization through the integration of assets, production and marketing activities across countries to advance the core competencies in the global markets he vision of SEZs / EPZs in an e port oriented regime is to establish a viable internationally competitive platform that is capable of attracting e port oriented D to promote e ports SEZs are industrial clusters of companies that are concentrated in a geographic region hese companies share economic infrastructure, a pool of skilled human capital, and governmental and other institutions that provide education, specialized training, information and technical support Also, these companies may co-operate to create joint companies, distribution agreement, technology transfer agreements and common manufacturing agreements E ternal economies of scale and other advantages of the cluster help the operating firms in reducing costs, acquiring competitive advantages and attracting foreign direct investment Dunning 998 o sum up, SEZs play a crucial initiating role in the development of national industrial capacity by: offering a platform for internationally mobile productive units, 2 creating an environment conducive to promote investment and e ports, 3 initiating a shift in the orientation of the domestic private sector toward e port activities, 4 leading government to adapt a more proactive and responsive attitude toward private sector's requirements of regulatory and administrative efficiency

EVOLUTION OF SEZ
ndia initiated the process of industrial growth in 948 immediately after the political independence , when it announced its first ndustrial Policy Resolution, PR 948 he strategy adopted was one of import-substitution industrialization across all sectors E port promotion had also been a concern of the government hus, attempts to promote the EPZ as an e port platform on the basis of economic incentives, such as the provision of better infrastructure and ta holidays became a feature of ndian development he first zone was set up in 965 at Kandla, Gujarat he country has had four phases in the evolution of the EPZ policy since then ollowing is a brief overview of the evolution of the EPZ policy in ndia through these four phases

3.1 INITIAL PHASE: 1965-1985

he first zone was set up in Kandla in a highly backward region of Kutch in Gujarat as early as in 965 t was followed by the Santacruz e port processing zone in Mumbai which came into operation in 973 here was however no clarity of objectives that the government wanted to achieve Kandla and Santacruz EPZs were set up with different sets of objectives Operationally, an overall inward looking trade policy with umpteen controls and regulations influenced the EPZ policy also he policies were rigid and the package of incentives and facilities was not attractive Zone authorities had limited powers here was no single window facility within the zone Entrepreneurs had to acquire individual clearances from various state

government and central government departments Day-today operations were subjected to rigorous controls Custom procedures for bonding, bank guarantees and movement of goods were rigid D policy was also highly restrictive According to the business environment rating inde which rated investment climate in 43 countries on the basis of 8 independent factors, ndian, zones were placed at the bottom for D CS 976 n 980 the government introduced the E port Oriented Units Scheme EOU his scheme facilitates the setting up of EOUs beyond the boundaries of EPZs he responsibility of administering these units was also entrusted with the zone administration

EXPANSIONARY PHASE: 1985-1991

owards the end of the 970s, ndias failure to step up significantly the volume of her manufactured e ports in the background of the Second Oil Price Shock began to worry the policy makers o provide fillip to e ports, the government decided to establish four more zones in 984 hese were at oida Uttar Pradesh , alta West Bengal Cochin Kerala and Chennai amil adu hereafter, Visakhapatnam EPZ in Andhra Pradesh was established in 989, though it could not become operational before 994 All t hese zones with the e ception of Chennai were set up in industrially backward regions he primary objectives of the zones were still not specified and there were no significant changes in other laws and procedures pertaining to the EPZs

3.3 CONSOLIDATING PHASE: 1991-2000

n 99 , a massive dose of liberalization was administered in the ndian economy n this conte t, wide-ranging measures were initiated by the government for revamping and restructuring EPZs also Kundra 2000). his phase was thus marked by progressive liberalization of policy provisions and rela ation in the severity of controls and simplification of procedures. he focus had been on delegating powers to zone authorities, providing additional fiscal incentives, simplifying policy provisions and providing greater facilities. he scope and coverage of the EPZ/EOU scheme was enlarged in 992 by permitting the agriculture, horticulture and aqua culture sector unit also. n 994, trading, re-engineering and re-conditioning units were also permitted to be set up.

E ERGENCE PHASE: 2000 ONWARDS

This period has witnessed a major shift in direction, thrust and approach. The EX M Policy 997-2002 has introduced a new scheme from April , 2000 for establishment of the Special Economic Zones SEZs in different parts of the country. SEZ is an almost self contained area with high class infrastructure for commercial as well as residential inhabitation. SEZs are permitted to be set up in the public, private, joint sector or by the State Governments with a minimum size of not less than 000 hectares. The number of incentives both fiscal and non fiscal has also been e tended to the units operating in SEZs. Several measures have been adopted to improve the quality of governance of the zones. These include rela ation in the conditions for approval process and simplifying custom rules. More recently, Development Commissioners are given the labour commissioners powers. SEZ policy is thus the most significant thrust towards ensuring the success of e port processing zones. rom ovember , 2000 the E port Processing Zones at Kandla, Santa Cruz Mumbai , Cochin and Surat have been converted into SEZs. n 2003, other e isting EPZs namely,

Noida, alta, Chennai, Vizag were also converted into SEZs. n addition, approval has been given for the setting up of SEZs in various parts of the country in the private / joint sectors or by the state. After 200 , one of the hottest, as well as most heavily debated, issues in ndia today is the concept of special economic zones or SEZs as they are widely known locally. They were brought into focus after altercations within the government about their approvals were made public. Attempts to push growth with the establishment of SEZs have been made since 200 02 when the then e istent e port processing zones EPZs were renamed as SEZs. The fact that the SEZ idea has been talked about for so long without much material progress see Table No. 2 does not reflect well on the scheme of things. Nevertheless, the recent surge in the granting of SEZ licenses suggests that a breakthrough in the impasse is hopefully on the horizon. The SEZ concept is nothing new, of course. The successful development of SEZs has been closely linked to Chinas economic success story, and it is no secret that proponents of SEZs would be keen to replicate the Chinese e perience in ndia. orward and Backward nterlinkages are critical factor of success of any SEZ.

3.5 EXPORT PERFORMANCE OF THE SEZS IN INDIA (US$ M)

Special Economic Zones Cochin Falta Kandla Madras Noida SEEPZ Surat Visakhapatnam Indore Jaipur Manikanchan Total exports from the sez Share of sezs in total exports
Source: http://www.sezindia.nic.in

2000-01 54.4 94.3 00.1 160.4 206.3 1099.4 65.6 52.8 1933.3 4.00%

2003-04 65.3 80.2 222.5 226.7 335 1710.5 190 95.1 3025.2 4.80%

2004-05 03 26.6 235.8 306.3 948.8 1845.5 342.5 128.8 12.2 1.2 21.3 4072.4 5.10%