A geographical region that has economic laws that are more liberal than a countrys typical economic laws.

A trade capacity development tool, with the goal to promote rapid economic growth by using tax and business incentives to attract foreign investment and technology. Domestic regulations, restrictions and infrastructure inadequacies are eliminated.

SEZs is governed by a three tier administrative set up: The Board of Approval is the apex body in the Department. The Unit Approval Committee at the Zonal level dealing with approval of units in the SEZs and other related issues. Each Zone is headed by a Development Commissioner, who also heads the Unit Approval Committee.

Special Economic Zones Act, 2005. Special Economic Zones Rules, 2006. Foreign Trade (Development and Regulation) Act 1992. Foreign Exchange management Act, 1999. The Special Economic Zones Act, 2005, provides the legal framework for establishment of SEZs and also for units operating in such zones.

SEZ units can be setup for manufacture of goods and rendering of services, production, processing, assembling, trading, repair, remaking, reconditioning and re-engineering. SEZs may be set up in the public, private or joint sector or by state governments. SEZs should have and area preferably of 1000 hectares. SEZs unit would have to be positive net foreign exchange earners and would not be subject to any minimum value addition norms or export obligations.

100% FDI would be permitted for all investments in SEZs expect for activities under the negative list. No fixed wastage norms. Duty free goods to be utilize within the approval period of five years. The ministry of commerce and industry through issue of a notification can also convert the existing EPZs into SEZ. The development commissioner would be responsible for administrative control of the zone. Simplifies accounting procedure and SEZs unit to maintained account in formats of their choice.

The major incentives and facilities available to SEZ developers include: Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA. Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act. Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act. Exemption from dividend distribution tax under Section 115O of the Income Tax Act. Exemption from Central Sales Tax (CST). Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).

Stated objective for development of SEZs augmentation of exports. SEZs to act as catalyst to increase in Indias portion in Global trade. SEZ exports at a faster pace in comparison to Indias portion in Global trade. Percentage of SEZ exports in Indias overall exports remains largely untapped positioned for higher growth. In value terms projections for 2007-2008 show that SEZ exports are likely to triple from current levels.

Over 3000 SEZs have been set up in 120 countries the world over. Worlds first SEZ set up in Puerto Rico in 1947. Objective for development of SEZs in each country differed from the other: Mauritius employment generation South Korea establishment of the services sector SEZ concept has been a driver of economic growth and success in countries like China, Korea, UAE etc.

First EPZ was set up in Kandla as early as 1965. The idea of SEZs was first mooted in an attempt to copy the model evolved in China. Government of India have introduced the concept of SEZs in the year 2000 through a revision in the Export-Import Policy 1997-2002. In 2005, the SEZ Act was passed by the Indian Parliament and came force from February 10, 2006.

Currently there are 114 SEZs operating throughout India in the following states: Karnataka 18; Kerala 6; Chandigarh 1; Gujarat 8; Haryana 3; Maharashtra 14; Rajasthan 1; Tamil Nadu 20; Uttar Pradesh 4; West Bengal 2; Orissa 1. Additionally, more than 500 SEZs are formally approved by the Government of India.

Zone marketing has been carried out mainly by governments Indian model envisages private sector carrying out zone marketing Unfamiliar experience for private sector Internationally, free zones were indeed special in their dispensation Comparatively, Indian zones are less special due to an overall liberalized domestic regime
FDI has been the main driver of zone investments Domestic Investment may play an equally prominent role in Indian context Relatively, Indian private sector is more developed

Internationally, free zones have been publicly funded Indian model envisages private financing of SEZs Fiscal constraints place limitations on public funding of SEZs Economic and indirect benefits have been the main motivations Financial viability a key consideration in Indian context

CHINA

INDIA
SEZs vary in size from 10 to 1000 hectares with the Reliance SEZ being the largest at 119 sq km. Can be set up anywhere. Port based SEZs have been approved but majority SEZs are land locked. Small areas inadequacy of infrastructure.

SEZs large in size like Shenzan (326 sq km), Xiamen (132 sq km) etc. Locational advantage as SEZs lie strategically close to ports and cities of Hong Kong, Taiwan and Macau. Vast areas provision for world class infrastructure. Flexible labour laws.

Stringent labour law regime.

Broad options for developing private SEZs: Government develops the entire zone infrastructure. Government funds a portion of zone infrastructure. BOT zone development with enhancers from government. Zone development on a joint venture. Full concession.

To developers: SEZ developers would be entitled to claim all concessions and incentives available to infrastructure players, under the Income Tax Act. Developers of SEZs as well as all industrial units within the SEZs would be exempt from all state and local taxes. Developers of SEZs will be granted full autonomy to develop townships within SEZs.

To units within SEZ: No requirement of minimum net foreign exchange earning, as percentage of exports. SEZ units to have unrestricted access to the domestic markets, on payment of applicable taxes/ duties. Profits from operations within the SEZ zones can be repatriated freely, without any dividend balancing requirements.

Other benefits: Well-developed road network. Abundant water supply. Uninterrupted power supply. Transportation and security. Commercial infrastructure. Township infrastructure. Solid waste removal and effluent treatment.

Lack of proper rules. Diversity in development. Threat to water security. Threat to food security. Mangroves destruction. Fertile land destruction. Land requirements.

Before SEZ and After SEZ:

Though at the current situation the darker side of SEZ is predominant, the moral behind its implementation is not to give any kind of harassment to the people but to provide employment and well developed infrastructure to the people.