SEZ; Monkey Brained Idea Of GOI- Inventor's Exclusive ©
There is a proverb in India "Nakal Me Bhi Akal Chahiye" meaning intelligence is required even for copying.
It is generally perceived that GOI is following the concept of Shanghai and Chinese SEZ model little realizing that it took nearly two-three decades for Chinese to reach present level of development and progress.
It is always a bright idea to get inspired from anything good immediately, late response could be lethargy but following a model that was entirely tailored to Chinese political and economic situation prevailing 2-3 decades in the past gone by India is most foolish or monkey brained. Situation in India is entirely different and industry too is foolishly after it for SEZ program is lured with cheap acquisition of prime private land with states connivance in additions to tax breaks.
Politically it is perceived corporate sustain India but employ only 1% or less pollution. GOI can't be providing Oxygen to few thousand families employing 1% with 15 years of tax breaks when 99% of the population is breathing in Carbon Dioxide full of high taxes, Carbon Monoxide of moneylender mafia. India has one of the lowest expenditure on healthcare and education when population in learning age is 2-3 times or developing and developed countries.
When every known company goes after SEZ in India in a stampede it is purely land grab and the corporate is crushing poor farmers and small property owners.
There were several excellent reasons to promote the SEZ concept in China;
C1. Politically China was still in transition from communism rule to capitalism, which still is on, politically China has communist party rule but for most business and industrial purposes it has its unique brand of capitalism where communist party led governments make investment decisions.
C2. Very small percentage of people in Mainland China understood any alien language and introduction of foreign companies in mainland was not the right choice. There were no facilities and infrastructure suited to attract and accommodate foreign companies, railways was not highly developed and freeways didn't exist.
C3. Market size of China at that time for most engineering and industrial goods was too little to even think of locating in mainland. Market size of 50,000 per annum didn't warrant car factories, which every competing state may like to set up then when export market was in tens of millions.
C4. Equally important was inadequate availability of skilled and highly skilled manpower in Mainland China.
C5. There was not enough market, capital and skills to start own industrial enterprises in Mainland China.
C6. Largely government owned wasteland was available free.
C7. Also Chinese SEZs removed or minimized corruption and bureaucratic red tape.
C8. Chinese SEZs came up when there was little competition. Now even Vietnam is emerging as a big competitor among hundreds of other developing countries.
Goal of the Chinese government was to develop High-Tech skills, acquire market share, import substitution and rapid economic growth. Mostly engineers led government of China developed a strategy to grow very fast and remove any hurdles in development of industry, capturing big market share in most industrial goods by producing goods very cheaply and keeping the margins very low. China also focused on emerging high technology – electronics goods in particular.
SEZs were created where English speaking work force could be easily available, foreign trained Chinese were invited to bring capital, technology, management skills. Chinese SEZ companies were competing against high wage complex environment and labor laws in Mainland USA and EU industries. Thus there were huge incentives and margins to locate factories in Chinese SEZs.
Chinese SEZ initiative was hugely successful that transformed China in to a "World's Factory".
But none of the key ingredients of the Chinese SEZs are applicable in present Indian SEZ program. It is not just a case of aping China but of shear incompetence of the Manmohan Singh government that has neither caliber, nor patience nor political will to intellectually address India's development strategy.
Agriculture that is stagnant and decaying but sustaining 700 million is getting completely neglected to provide capital resources for SEZs. It suits the corporate land grabbers to make quick money with government connivance. But it shall end up ultimately in complete disaster.
The disadvantages of the SEZ policy in order of most foolish first are;
I1. The first to move in to SEZs shall be the promoters themselves who shall shut down their old facilities, install new more automated plants that will need fewer employees.
I2. SEZs will need huge investment on infrastructure and very little on plant and machinery that produces goods.
I3. Newly created SEZs by corporate shall be the most expensive in the world to begin with but lack in skilled people reluctant to relocate to new places for various reasons shall be a big bottleneck.
I4. Mukesh Ambani the greediest land grabber cum SEZ promoter is now hiring 2000 Chinese to lay gas pipelines. Clearly sending a message to global investors to think elsewhere for projects than India that has no skilled and productive labor.
I5. Actually most of the disadvantages come under most foolish class. India is a 1130 million market in population. Locating and relocating plant to Mumbai or Chennai to serve India shall be most foolish. Similarly locating in Reliance Mumbai SEZs means very high cost of building residential complexes for work force.
· Mukesh Ambani may have to create slums either in SEZs or outside to provide workforce to SEZs. Government has already made his task easier by not implementing labor laws in SEZs. He may even ask the labor to sleep on roadsides or drain pipes. Ambanis hire contract lowest wage labor for most projects that live in slums.
· So when India promotes Ambani or such companies it promotes slums as well.
I6. India has still not invited NRIs to invest freely in Indian Companies and three is little to attract NRI investors, few who come get frustrated within few months and go back.
I7. India has done little to invest in creating globally competitive "High-tech Industries" when China is already at par with the world that could bulk produce any product world may need and has limitless capacity and infrastructure and skills to do so.
I8. India has already dropped down all barriers that hindered foreign products to reach India. Improved highways and railways make it smoother for foreign companies to serve India efficiently from foreign plants and locations.
SEZ Situation 2021; Going by the performance of all existing government controlled and owned SEZs that generate only $6b or so of exports or practically very little by way of value additions, it is impossible high cost private SEZs will be more competitive either.
S1. Indian population may increase by 30% and inflation by 100% in 15 years.
S2. GDP growth shall be 150% or 2 ½ times of present or $1800b.
S3. India's budget shall be $300b or 2 ½ times the present. How the GOI shall mobilize such huge funds when 70% to 80% of Indian industry shall re-locate or new units are established in SEZs?
S3. It may be impossible for GOI to even pay for the pensions and wages to its employees when industries contribute little by way of taxes for next 15 years.
Neglect of Agriculture and High-Tech industries;
· Agriculture and High-Tech industries offer very high value additions. Their neglect has not only dragged down our economy but also made our population weak, sick and vulnerable to diseases.
· Education is most neglected area. Private schools and colleges provide poor education and their high costs are depriving brighter students of poor families to acquire quality education and neglect of rural education deprives industry of hard working skilled labor that Mukesh Ambani had to hire from China.
Ø IN CONCLUSIONS, SEZs ARE COMING AT A TIME, THANKS WTO REGIME WHEN INDIAN COMPANIES CAN HIRE FOREIGN LABOR—THEREFORE TOMMORROW WE MAY FIND CHINESE OR VIETNAMESE LABOR WORKING IN SEZ FACTORIES.
Ø SEZs INDUSTRIES ARE LIKELY TO PROMOTE SLUMS THAN GLOBALLY COMPETITIVE WORK CONDITIONS FOR INDUSTRIAL WORKERS.
Ø THAT'S WHY I RATE PRESENT GOVERNMENT AS MOST INCOMPETENT IN THE WORLD.
Ravinder Singh, September29, 2006
Inventor & Consultant.
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