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    Sez Sector in India: JANUARY 2007

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    Vaishali Baid
    300,000 hectares of land is to be developed and leased out over the next few years as part of the fervent activity seen in the SEZ opportunity. 3,000 SEZs operate in 120 countries and account for more than $600 billion in exports and 50 million direct jobs. The government has promoted all kinds of industries to set up bases in these SEZs and take advantage of the facilities.

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    Sez Sector in India: JANUARY 2007

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    Vaishali Baid
    30 views9 pages
    300,000 hectares of land is to be developed and leased out over the next few years as part of the fervent activity seen in the SEZ opportunity. 3,000 SEZs operate in 120 countries and account for more than $600 billion in exports and 50 million direct jobs. The government has promoted all kinds of industries to set up bases in these SEZs and take advantage of the facilities.

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    SEZ Opportunity

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    300,000 hectares of land is to be developed and leased out over the next few years as part of the fervent activity seen in the SEZ opportunity. 3,000 SEZs operate in 120 countries and account for more than $600 billion in exports and 50 million direct jobs. The government has promoted all kinds of industries to set up bases in these SEZs and take advantage of the facilities.

    Copyright:

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    Download as PDF, TXT or read online from Scribd
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    30 views9 pages

    Sez Sector in India: JANUARY 2007

    Uploaded by

    Vaishali Baid
    300,000 hectares of land is to be developed and leased out over the next few years as part of the fervent activity seen in the SEZ opportunity. 3,000 SEZs operate in 120 countries and account for more than $600 billion in exports and 50 million direct jobs. The government has promoted all kinds of industries to set up bases in these SEZs and take advantage of the facilities.

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    of 9

    SEZ SECTOR IN INDIA

    Revealing the hidden opportunity

    JANUARY 2007

    A report by IndiQuest Research Services All Right Reserved, 2007

    Executive Summary:
    Considered to be corporate Indias biggest investment rush, currently 400 Special Economic Zone (SEZ) projects are on the anvil in India. There is no doubting the fact that foreign investors would come running to India for the enormous opportunities that are on offer through the SEZ route. All in all 300,000 hectares of land is to be developed and leased out over the next few years as part of the fervent activity seen in the SEZ opportunity that everyone wants to be a part of. We decided to study the business of and within SEZs further to answer questions such as: Factors which entice the global investor to set up base in an Indian SEZ Sector focus and its growth Set up shop within an SEZ or outside pros and cons Investment in SEZ - pay off? Answers to the above not only concerns companies willing to leverage the SEZ facilities but also the investors and its stakeholders. According to a recent World Bank paper, 80 SEZs in 30 countries generated barely $6 billion in exports and employed about one million people 30 years ago. Today, as many as 3,000 SEZs operate in 120 countries and account for more than $600 billion in exports and 50 million direct jobs, making it one of the most conducive places to conduct business. Though India had been lagging behind the world in promoting its exports through the SEZs, it is slowly catching up. This is becoming possible with a considerable change in the governments outlook and policies towards the SEZs. The government has promoted all kinds of industries to set up bases in these SEZs and take advantage of the facilities. The chart below indicates the changing demography of industries in the Indian SEZs. The Pharmaceuticals and the Engineering sectors, which had a 26 percent and 27 percent share in 1990, have seen their share shrink to 6 percent and 5 percent respectively in 2002. On the other hand the Gems and Jewellery industry, which had a 11 percent share in 1990, has seen its share going up to 42 percent in 2002.
    Sectoral Focus of SEZ in 1990

    Textiles Gems & 9% Jewellery 11% Engineering goods 27%

    Others 2%

    Drugs & Pharmaceuti cals 26%

    Sectoral Focus of SEZ in 2002 Drugs & Others Pharmaceuti Textiles 6% cals 7% 6%

    Electronics 34%

    Electronics 25%

    Gems & Jewellery 42%

    Engineering goods 5%

    With the Indian companies setting up bases in SEZs, the total investments in SEZs went up from US$220 million way back in 1996 to over US$380 million by 2003. During the same period, the foreign investments in SEZs also went up from 17 percent to over 24 percent. As a consequence of this, the exports from SEZs grew from US$1.91billion in 2000-01 to US$4.07 billion in 2004-05, indicating a growth of over 16 percent. The IT sector has contributed to the growth of SEZ exports in a major way as most of the IT/ITES companies are based in SEZs. With the new SEZ Act 2005, the government has introduced major changes from its earlier policy. It has done away with certain regulations and has simplified the process of starting a business by bringing in the single window clearance policy. The government has already sanctioned a massive 220 SEZs with another 130 odd companies having received in-principle approval to set up SEZs. Initiative of such magnitude brings challenges related to lack of data around it and validity of information to give a holistic understanding of the potential. This report gives you a complete visibility on the new initiative, also looks at the functioning of the existing SEZs. It gives you further insights to make informed decisions towards your investments in a SEZ.

    To order a copy of the full report, please contact indiquest.services@indiquest.co.uk

    Table of Contents 1 2
    2.1 2.2
    2.2.1 2.2.2 2.2.3 2.2.4

    Benchmarking Global SEZ Reviewing Shenzhen SEZ


    Scale of operations Infrastructure
    Commercial Residential Utilities Transport

    2.3 2.4

    Other facilities Assessment of existing facilities and future plans

    SEZ in India
    3.1 3.2
    3.2.1 3.2.2

    Overview The existing set up Pros and Cons


    Pros Cons

    3.3
    3.3.1 3.3.2

    Comparison between Indian and Global SEZ


    FDI Investment Export Promotion

    3.4
    3.4.1 3.4.2 3.4.3 3.4.4

    New SEZ Act 2005


    Comparison between the old and the new Policy Investment Incentives under the New SEZ Act 2005 New SEZs Sanctioned Focus Industries

    3.5
    3.5.1 3.5.2

    Regulations
    FDI Investment regulations Change in Government attitude

    Assessment of the new SEZ policy


    4.1 4.2 4.3 The financial implications on the government Implications on the agricultural business in India Political opposition

    5 6

    Benchmarking Global and Indian SEZ Annexure


    6.1 6.2 Current SEZs Export Performance of existing SEZs

    Benchmarking Global SEZ


    Overview of the Global SEZ sector

    2
    2.1

    Reviewing Shenzhen SEZ


    Scale of operations
    Total Turnover recorded by the SEZ. This would give an indication of how the firms operating within the SEZ are operating

    2.2
    2.2.1

    Infrastructure
    Overview of the Infrastructure built or developed within the SEZ and surrounding it Commercial

    2.2.2

    Residential

    2.2.3

    Utilities

    2.2.4

    Transport

    2.3

    Other facilities
    The other support and logistics provided by the government to promote the SEZ

    2.4

    Assessment of existing facilities and future plans


    Checking whether the facilities available are capable of handling the business or is there any shortfall.

    3
    3.1

    SEZ in India
    Overview
    Overview of the SEZ evolution in India

    3.2
    3.2.1

    The existing set up Pros and Cons


    What are the pros and cons of the existing SEZs in India Pros The positives of setting units within an SEZ Cons The negatives of setting units within an SEZ

    3.2.2

    3.3

    Comparison between Indian and Global SEZ


    The difference between Global and Indian SEZ on the operational front as well as the government support

    3.3.1

    FDI Investment General description, key figures like subscribers, revenue, growth, important events etc. Export Promotion General description, key figures like subscribers, revenue, growth, important events etc.

    3.3.2

    3.4
    3.4.1

    New SEZ Act 2005


    Key points of the new Act Comparison between the old and the new Policy Investment Comparison on various parameters such as tax, policies, etc Incentives under the New SEZ Act 2005 New incentives on offer for the SEZ developer as well as the units setting up base in the SEZs New SEZs Sanctioned Number of new SEZs and the states in which sanctioned Focus Industries List of sectors which are the prime focus of the new policy

    3.4.2

    3.4.3

    3.4.4

    3.5
    3.5.1 3.5.2

    Regulations
    New regulations bought in by the New SEZ act with reference to the following two points FDI Investment regulations Regulations of the government with respect to foreign investments in the SEZ Change in Government attitude Recent changes in the governments support

    4
    4.1

    Assessment of the new SEZ policy


    Finding the implications of the new policy on the Indian economy

    The financial implications on the government


    How much the Indian government stands to gain or loose due to the tax incentives on offer?

    4.2

    Implications on the agricultural business in India


    What is the impact on the agricultural business?

    4.3

    Political opposition
    Opposition from the political parties and reasons behind it

    Benchmarking Global and Indian SEZ


    Doing a comparative assessment between the two different SEZs and determine their contribution to the economy

    6
    6.1

    Annexure
    Current SEZs
    A table depicting the number of current SEZs, their revenue, their location and total number of companies operating out of there

    6.2

    Export Performance of existing SEZs


    The total turnover of existing SEZs over the past three years

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