1. Special Economic Zone
Group 1 – Legal Environment
Aarthi V. B.
Abhinandan Choudhury
Aditya Pachori
Ajinkya Ninawe
Akash Mohanty

2. INTRODUCTION

3. What is Special Economic Zone?
• Special Economic Zone (SEZ) is a geographical region that has
economic laws different from a country’s generally applicable
economic laws, with the underlying objective being an increase
in economic growth and activity through increased foreign
investment.
• According to World Bank estimates, as of 2007 there are more
than 3,000 projects taking place in SEZs in 120 countries
worldwide.

4. About SEZ
• SEZs are exempt from federal laws regarding taxes, quotas, FDI-bans, labor laws
and other restrictive laws in order to make the goods manufactured in the SEZ at a
globally competitive price.
• The category SEZ includes free trade zones (FTZ), export processing Zones
(EPZ), free Zones (FZ), industrial parks or industrial estates (IE), free ports, free
economic zones, and urban enterprise zones.

5. Origin
• The concept of “special zones” is not new.
• The first industrial park was set up in 1896 in Manchester. “Free trade zones”,
designed to promote free trade
• The first export processing zone (EPZ), designed to liberalize both the trade and
investment environment, was operationalised in Ireland in 1960.
• Many developing countries adopted the EPZ model, though not much action was
seen on this front after the 90s.

6. Evolution of SEZ - India
Since the 60s, India has seen the emergence of several initiatives to boost exports.
They are
• Export Processing Zone (EPZ) Scheme
• Export Oriented Units (EOU) Scheme
• Software Technology Park (STP) Scheme
• Electronic Hardware Technology Park (EHTP) Scheme
• Export Promotion Capital Goods (EPCG) Scheme
• Advance Licensing and Deemed Exports Scheme
• Free Trade Zone(FTZ) Scheme

7. The Indian Scenario

8. • First came into inception on April 1, 2000
• Foreign trade policy
• Ad-hoc amendments to different laws, executive
orders
• SEZ Act 2005

9. Objectives of SEZ Act
•Generation of additional economic activity
•Promotion of exports of goods and services
•Promotion of investment from domestic and
foreign sources
•Creation of employment opportunities
•Development of infrastructure facilities

10. Role of SEZ in Indian Economy
• Provides internationally competitive environment
• Encourages FDI and enhance GDP
• Increase share in global exports
SEZ exports account for 23% of India’s total export
in 2011-2012

11. Definitions in Special Economic
Zones Act,2005
• “Unit" means a Unit set up by an entrepreneur in a Special
Economic Zone and includes an existing Unit, an Offshore
Banking Unit and a Unit in an International Financial Services
Centre, whether established before or established after
commencement of this Act (Section 2(zc) of Special Economic
Zones Act ,2005)
• “Offshore Banking Unit” means a branch of a bank located in a
Special Economic Zone and which has obtained the permission
under clause (a) of sub-section (1) of section 23 of the Banking
Regulation Act, 1949 (Section 2(u) of Special Economic Zones
Act ,2005)
• “International Financial Services Centre” means an
International Financial Services Centre which has been
approved by the Central Government under sub-section (1) of
section 18 (Section 2(q) of Special Economic Zones Act ,2005)

12. DEFINITIONS (contd)
• “Entrepreneur” means a person who has been
granted a letter of approval by the Development
Commissioner under sub-section (9) of section 15
(Section 2(j) of Special Economic Zones Act ,2005)
• “Existing Unit” means every Unit which has been set
up on or before the commencement of this Act
(Section 2(l) of Special Economic Zones Act ,2005)
• New Unit Any person, who intends to set up a Unit
for carrying on the authorised operations in a Special
Economic Zone, may submit a proposal to the
Development Commissioner concerned

14. Administrative Set Up For SEZs
Governed by a three tier administrative set up
1. The Board of Approval is the apex body in the
Department
2. The Unit Approval Committee at the Zonal level
dealing with approval of units in the SEZs and other
related issues
3. Each Zone is headed by a Development
Commissioner, who also heads the Unit Approval
Committee

15. Approval Mechanism of SEZs
• Proposal for setting up of SEZ in the
Private/Joint/State Sector
• State Government
• Department of Commerce
• Board of Approval
• Proposals for setting up of units in the SEZ
• At Zonal level
• Development Commissioner, Customs
Authorities,representatives of State Government

16. • Currently, there are about 143 SEZs operating
throughout India
• Additional 634 SEZs that have been
formally/principally approved by the Government of
India

17. Advantages of SEZ -Enterprise
• Income tax holiday for 15 years
• 100% for the first 5 years
• 50% for the next 5 years
• 50% for the following 5 years on plough back of profits
• Duty free import/domestic procurement of goods
• Exemption from minimum alternate tax
• Exemption from Central Sales Tax

18. Cont…
• Exemption from Service Tax.
• Single window clearance for Central and State level approvals.
• Exemption from requirement of domicile in India for 12 months prior
to appointment as Director.
• No strikes would be allowed
• Enhanced limit of Rs. 2.40 crores per annum allowed for managerial
remuneration.

19. Advantages of SEZ - Country
• Economic growth and development – through exports and backward
integration
• Foreign Investment
• Infrastructure development
• Employment generation
• Up-gradation of managerial and technical skills

20. Disadvantages of SEZ

21. To Nation
Loss of Revenue

22. To Business
Land Acquisition
No single window facility
No strategic planning for water, electricity

23. To People
Grabbing of fertile land
Water scarcity- Threat to access
Food scarcity
Exploitation of labor
Landless farmers

24. To Environment
Ecosystem destruction
Destruction of ground water recharge system
Pollution

25. Case
Synefra SEZ, Padubidri 2008
Close to the New Mangalore Port and adjacent to National Highway 17
which passes through Maharashtra, Goa, Karnataka and Kerala
Synefra Padubidri SEZ is designed to provide a Gateway to Global
Market, for easy export & import

26. • Spread across an approximate area of 641 acres land with an
efficiency of over 80% and a dedicated 210 acres for non process
areas, green cover and roads;
• Synefra has already leased out 120 acres to hi-tech engineering
companies from across the globe.
Companies present
SWIL Suzlon Wind International limited
SE Blades Suzlon Energy Limited

27. Flow Chart for Setting up SEZ
SEZ can be formed in two ways
By Applying
to SG
SG forward the
Proposal to BOA
BOA
approves the
proposal
By applying to
Board of Approval
Obtain the
concurrence
of SG
SG=State
Government

28. Flow Chart for Setting up SEZ contd..
Central Government shall
issue letter of Approval to developer
Developer shall furnish to
Central Government information about area
Central Government will notify the area as SEZ

29. SWOT ANALYSIS OF INDIAN
SEZ
 STRENGTH
• Based on Western model or SEZ in China
• An established legal redressal system
• Relatively low labour costs
• Employment opportunities
• India’s large English speaking and skilled workforce
• Exposure to technology and global market

30. • Worldwide acceptance of capabilities in fields
like
• Pharmaceutical manufacturing & research
• Clinical trials
• Manufacturing auto parts
• Engineering designing & consultancy, IT & ITES
• Malls and hotels
• Hospital
• Financial & other institutional Networks like
Insurance Companies

31.  WEAKNESS
• Poor infrastructure and transport
facilities
• High cost of capital
• Inadequate institutional support
• Political changes
• Inappropriate locations

32.  OPPORTUNITIES
• An alternative manufacturing base, particularly
compared to Chinese SEZs
• Investments in core strength areas like IT and
software products and services.
• New small ports & airports are also being
developed keeping SEZ concept in mind
• A large NRI base who have traditionally invested
less in Greenfield development in India

33.  THREATS
• The pattern of buying & selling may not
continue. With relocations of industries in
other third world countries, new competitors
will emerge
• opposing interests
• Prospect of even more restrictive labour
laws being introduced
• Increasing rejection rate for proposals to
establish SEZs

34. CONCLUSION
• scope of human capital formation and technology upgrading
•
effects will widen.
• Government to play a pro active role in strengthening these
effects.
• linkages between the domestic economy and Special
Economic Zones.
• Effects of Special Economic Zones are contingent upon the
success of these zones in attracting Foreign Direct
Investment.