Elements Influencing Successful Development Of Sezs
By property vertical
Special Economic Zones (SEZs) are geographical regions that have economic laws different from a country’s typical economic laws. The goal is usually an increase in foreign direct investment (FDI) in the country. The key elements that influence the success of these zones in attracting investment and promoting export competitiveness includes the location, infrastructure facilities, quality of governance and the incentive packages.
Location: Locating SEZs near or in industrial/urban areas is likely to be a factor critical to their success. This satisfies the labour needs of the zone units, ensures more accessible and uninterrupted Utilities, better services and allows for more spillover effects. SEZs located near ports or airports or having proximity to a bigger city have been more attractive than other industrial sites and are likely to show better export performance.
Infrastructure: Availability of good quality infrastructure improves the business climate by reducing the cost of operations and Boosting operating profitability. The term ‘infrastructure’ includes physical infrastructure within the zone as well as external and also social infrastructure within the zone. Physical infrastructure within the zone includes water, electricity, warehousing, transport, telecommunication, police station, fire station and banks while physical infrastructure external to the zone includes transport facilities for the zones, roads leading to the zones and port facilities. Social infrastructure within the zone comprises of residential complexes, schools, hospitals and recreation facilities.
Governance: Efficient governance in all stages of the creation and running of an SEZ is crucial to its performance. It greatly influences the attractiveness of a zone to foreign investors and its eventual performance. The provision of efficient bureaucratic and economic services, a clear and transparent legal and regulatory structure and an unfettered
and stable policy framework ensure the success of the zones.
Incentive package: A preferential treatment is given to SEZ units by granting them government policy concessions. Governments offer a multitude of fiscal and non fiscal concessions. Fiscal concessions include duty free imports of raw and intermediate inputs and capital goods and income tax exemptions. Non fiscal incentives vary widely across countries. These include relaxation from industrial laws including labour laws in many countries. The theory behind these incentives is that liberalizing the rules and tax commitments lowers direct and indirect costs. Fiscal Incentives have direct bearing on the cost. These incentives may help in directly reducing the costs of producing and exporting. Non fiscal incentives affect costs indirectly. These concessions expedite decision making and Streamline day to day operations. Investor friendly custom regime, for instance, implies that the entrepreneurs are free from routine inspections of import- export cargo.
It can be concluded that the government needs to enact legislation, create a focused administrative infrastructure to govern SEZs, offer highly attractive incentives and locate zones in the best possible locations. Overall investment climate Infrastructure, governance) in a country matters in the success of its SEZs in terms of competitiveness. Generally, it is argued that the SEZ concept is attractive because it is much easier to resolve the problems of infrastructure and governance on a limited geographical area than it is to resolve them countrywide. The zones cannot be insulated from the broader institutional and economic context of the country and be treated as an economy within the economy. Zones are a part of the economy and require overall improvement in the investment climate to ensure success in the long run. They should not, therefore, be viewed as an alternative to the overall development model. This is perhaps the reason why SEZs failed to fulfill the role of engines of industrialization in most countries on a sustainable basis.