fdi in india and its growth linkages - Department Of Industrial Policy ...

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In a span of a few years, there have been visible gains from SEZs by way of generating employment, creating world-class infrastructure within the zones, and attracting investment, including FDI. Sriperumbudur in Tamil Nadu is a leading global hardware hub with investments from companies like Nokia, Foxconn, Motorola, Ericsson, Samsung and Dell. Nokia SEZ already provides employment to 9,645 people, the majority of whom are women. Mahindra World City SEZ in Tamil Nadu is another SEZ cluster in which three SEZs for IT, auto and apparel have been set up in adjoining areas. Similarly, in Andhra Pradesh, in addition to a large of number of IT/ITES SEZs, several successful sector-specific SEZs for the manufacture of textiles, leather items and gem and jewellery are in full operation. Apache shoes in Nellore district employs about 4,500 workers, of which the majority are women from nearby villages, who receive training before being employed. Hyderabad Gems SEZ has employed over 2,000 people, with a projection of employing 30,000 people. These SEZs are new industrial clusters and are not relocated from elsewhere. 4 4.9 Issues Related to SEZs Apprehensions have been expressed about the misuse of the scheme and relocation of existing industries into SEZs. However, experience shows that these apprehensions are ill-founded, and fresh investments and employment have been flowing into the Special Economic Zones. The benefits derived from the multiplier effect of the investments and additional economic activity in the SEZs along with the employment generated is estimated to far outweigh the revenue losses on account of tax exemptions given to the SEZs. These SEZs are new industrial clusters that have not been relocated from elsewhere. Concerns have also been expressed regarding acquisition of agricultural land for setting up SEZs. The state governments have been advised by the Centre that in the case of land acquisition for Special Economic Zones, the first priority should be for acquisition of waste and barren land and, if necessary, single-crop agricultural land could be acquired for the SEZs. If a portion of double-cropped agricultural land has to be acquired to meet the minimum area requirements, especially for multi-product Special Economic Zones, it should not exceed 10 per cent of the total land required for the SEZ. Various issues related to setting up of SEZs in the country, including issues raised by various political parties, have been addressed by the Empowered Group of Ministries (EGOM). Pursuant to the decision taken by EGOM, all state governments have been informed that the Board of Approval will not approve any SEZs where the state governments have carried out or propose to carry out compulsory acquisition of land for such SEZs after April 5, 2007. 5 4.10 SEZs in China and India: A Comparison 4.10.1 Chinese SEZs At the centre of China’s strategy to attract investors and to develop China as a major platform for labour-intensive manufacturing exports were the SEZs in which favourable export conditions were assured. Urban export-oriented enterprises in China were encouraged by the designation of a growing number of SEZs, coastal open cities and economic and technological development zones, all designed to encourage manufacturing exports. Starting in 1979, SEZs and other areas were developed through incentives. Five SEZs were established: the whole of Hainan province; three cities in Guangdong province, viz., Shenzen, Zhuhai and Shantou; and Xiamen city in Fujian province. Another 14 SEZs were added in 1984. Other special economic areas, though much smaller, were also established. These include the Economic and Technological Development Areas (ETDA), High-Technology Industry Development Areas (HITDA) and Export Processing Zones (EPZs). Some of these policy zones were located within SEZs. ETDAs and HITDAs enjoy tax incentives from the central as well as the local governments. EPZs dealing 4. Ministry of Commerce, Government of India, Annual Report, 2007-08. 5. Government of India, Economic Survey, 2007-08. SPECIAL ECONOMIC ZONES (SEZS) AND FDI IN INDIA 39
FDI IN INDIA AND ITS GROWTH LINKAGES exclusively in the processing trade were first established in 2001 and had spread to 26 cities by 2004. EPZs accounted for only 3.5 per cent of China’s exports in 2005, with their share being even smaller in the case of processing exports. It was in the 1990s that the central government commenced the process of developing Shanghai’s Pudong District and establishing Suzhou Industrial Park. China has introduced major reforms since the early 1990s. It extended preferential policies and regulations already being enjoyed by Special Economic Zones (SEZs) that were established in the 1980s. SEZs were expanded to include a wider area along the coast and the Yangtze River. Local governments were given the autonomy of facilitating the entry of foreign investment enterprises (FIEs) and extending preferential policies and regulations, along with tax concessions to these firms in an expeditious manner. The FDI attraction was reinforced by providing good infrastructure, simplified procedures, a skilled labour force and favourable geographical locations. The increase in FDI was also enabled by increasing production-sharing by China with ASEAN countries and preference for foreign firms to come into China, particularly after the 1997 financial crisis which affected ASEAN countries but not China. This led to stronger production linkages in this region (Yao, 2008). Export promotion was facilitated through: � Duty-free import of intermediate products and capital goods, � Generous tax holidays, and � Decent physical infrastructure through the provision of land, power, physical security, transport to the ports within specially created industrial parks, etc. The first SEZ, Shenzen SEZ, was set up in 1980. Today, China has five SEZs, of which four were set up 20 years ago – Shenzen, Shantou, Xiamen and Zhuhai – and the fifth, Hainan, was set up in 1988, thereby promoting the province to Provincial status. Setting up these zones close to internationally reputed commercial destinations was basically for easier access to foreign investments, modern technology and managerial expertise. The location advantage of these SEZs attracted foreign investors that drew FDI into China, with Hong Kong accounting for over 60 per cent of the FDI inflows. As China liberalised, Guangdong Province, which has the largest number of SEZs, became the most attractive foreign investment destination. The Chinese SEZs, being very large in size, housed activities such as commerce, tourism, housing, agriculture and industrial production apart from export processing. The zones are in direct competition with one another at both the domestic and the international level. They are typically marked with minimum bureaucracy, good infrastructure, 40 Labour Contracts in China Labour contracts signed between the employer and employee regulate the labour relationship between the contracting parties and define the respective responsibility, rights and interests of both parties, thus introducing a new competitive mechanism in the employment system. However, the nature of the contract is subject to approval by local authorities. Enterprises gain the right to dismiss employees who violate labour discipline. Workers benefit because as more profitable enterprises expand, they bid workers away from the latter with higher wages and/or more generous benefits. A labour contract stands terminated upon the expiration of its term or the emergence of conditions for the termination of the contract as agreed upon by the parties involved. During the period of statutory consolidation, when the employing unit comes to the brink of bankruptcy, or runs into deep difficulties in production and management and if reduction of its personnel becomes really necessary, the unit may make such reductions after it has explained the situation to the trade union or all of its staff and workers 30 days in advance, solicited opinions from them and reported to the labour administrative department. But, if the employing unit recruits personnel within six months after the personnel reduction, the laid-off workers have priority for re-employment. Source: www.ilo.org
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FDI IN INDIA AND ITS GROWTH LINKAGE
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PROJECT TEAM Study Team Project Lea
Page 7 and 8: linkages with the economy. The sect
Page 10: Contents Executive Summary Chapter
Page 13 and 14: Chapter 5: FDI: Linkages with the E
Page 16 and 17: Executive Summary Foreign direct in
Page 18 and 19: EXECUTIVE SUMMARY petroleum product
Page 20 and 21: Chapter 1: Introduction 1.1 Backdro
Page 22 and 23: section industry data. However, the
Page 24 and 25: in India stood at $23 billion, show
Page 26 and 27: viii) Backward and Forward Linkages
Page 28 and 29: Chapter 2: FDI Scenario in India: T
Page 30 and 31: Secretariat for Industrial Assistan
Page 32 and 33: Table 2.2 shows that FDI outflows f
Page 34 and 35: at about 2 per cent or less of the
Page 36 and 37: Table 2.5 Sector-wise Break-up of F
Page 38 and 39: Table 2.7 FDI in India in the Servi
Page 40 and 41: Figure 2.4 Country-wise FDI Inflows
Page 42 and 43: 2.10 Foreign Technology Transfers A
Page 44 and 45: Chapter 3: Mergers & Acquisitions a
Page 46 and 47: Table 3.2 Short-term effects of FDI
Page 48 and 49: proportion of foreign investment in
Page 50 and 51: Chapter 4: Special Economic Zones (
Page 52 and 53: 4.4 Management of SEZs SEZs are und
Page 54 and 55: in the eight major SEZ’s exports
Page 56 and 57: Foreign Direct Investment in SEZs S
Page 60 and 61: SPECIAL ECONOMIC ZONES (SEZS) AND F
Page 62 and 63: existing infrastructure, (b) exploi
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Page 70 and 71: construction (4200); fuels, includi
Page 72 and 73: FDI: LINKAGES WITH THE ECONOMY S. N
Page 74: Table 5.5 Sector-wise FDI in India
Page 77 and 78: FDI IN INDIA AND ITS GROWTH LINKAGE
Page 92 and 93: Chapter 7: Primary Survey: Analysis
Page 94 and 95: the North and South zones, whereas
Page 96 and 97: PRIMARY SURVEY: ANALYSIS AND RESULT
Page 98 and 99: Table 7.1a Distribution of Surveyed
Page 100 and 101: Table 7.2b Zone-wise Distribution o
Page 102 and 103: Table 7.3b Zone-wise Distribution o
Page 104 and 105: Table 7.6a Number of Employees in S
Page 106 and 107: Table 7.7a Mode of Transport from F
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Table 7.8a Number of FDI-enabled Fi
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Chapter 8: FDI Data Reporting and C
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sector, non-profit institutions ser
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three categories, namely, (i) inves
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Table 8.1 Trends in FDI Inflows to
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FDI DATA REPORTING AND CLASSIFICATI
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Table 8.3 Trends in FDI Inflows by
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Table 8.5 DIPP Classification of FD
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SECTOR-WISE CODE 3700 DEFENCE INDUS
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S. No. DIPP DIPP Activity NIC 2-Dig
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Chapter 10: Key Findings and Salien
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Findings � About half the total o
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7. Forex Implications: To understan
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manufacturing firms taken together.
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References Australian Bureau of Sta
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for economic growth and poverty all
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Tables for Chapter 6
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Questionnaires
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QUESTIONNAIRE 257
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QUESTIONNAIRE 259
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QUESTIONNAIRE 261
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QUESTIONNAIRE 263
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