Is there a midlife crisis Essay Example for Free

Is there a midlife crisis Essay As a man approaches middle age a number of factors converge that tend to disrupt his previous modes of experiencing himself. For some men, this stress may culminate or be expressed in a â€Å"midlife crisis. † This crisis has been variously described as a pervasive sense of alienation from ones own being in the world, unidentified or misunderstood feelings of anxiety or depression, and/or physical symptoms expressive of psychic distress. In an attempt to bring some order to conflicting reports about the experience of people entering middle age, we reviewed the existing literature. A lack of consensus soon became apparent. Some writers argued that a midlife crisis was a universal experience in male development; others suggested that men reached their peak of self-actualization at this point. Looking at the literature more closely, we saw that the research findings seemed to depend upon which methods were used and in which culture the middle-aged population was being studied. Psychoanalysts, psychiatrists, and other writers working with clinical data often see a middle-age crisis as universal a developmental inevitability. Levinson proposes, as did Jaques and others, a developmental sequence, with a period of midlife crisis, which â€Å"exists in all societies, throughout the human species, at the present stage of human evolution† (Sifford 1983). More recently, theorists like Slater, Laing, and Henry have focused on the alienating effects of socialization into a culture based on denial, distortion, and repression. Culture, that is, works to deny and distort what is most human in us. Regardless of whether we see midlife crisis as a consequence of social structure or culture, many theorists tell us that midlife crisis is widespread phenomenon. The impact of historical forces on the life course does not stop with one generation. Each generation encounters a set of historical circumstances that shape its subsequent life history and that generation transmits to the next one both the impact that historical events had on its life course and the resulting patterns of timing. Cultural norms governing the timeliness of life transitions (being â€Å"early,† â€Å"late,† or â€Å"on time†) and norms governing familial obligations also shape individual and collective family timing. In all these areas, historical and cultural differences are critical. Particularly significant is the convergence of socioeconomic and cultural forces. For example, â€Å"middle-age crisis† was a relatively recent invention in popular psychology in American society. It was attributed to middle-class women in particular in describing the problems connected to menopause and the â€Å"empty nest† in mid adulthood. â€Å"Middle-age crises† were not widespread, however. They were a product of stereotypes and a social construction rather than of sociobiological or familial realities. Since the 1970s, a considerable volume of feminist psychological literature has placed â€Å"middle-age crisis† in its proper perspective by exposing the cultural and â€Å"scientific† stereotypes that created the concept (Lawrence 1980). For the process to be fully working, then, we would expect to have evidence from lay accounts that the wider public had accepted and normalised the condition. Further evidence was provided by a Gallup poll survey in 1992 which found that over two-thirds of middle-aged men in the UK believed that there was some indefinable phenomenon called the ‘midlife crisis’. Furthermore, it stated that over half of the sample thought they had experienced a midlife crisis, or were actually having one, at some point between the ages of 40 and 60 (Neustatter 1996:80). Second, a further stage occurred in the United States when the midlife crisis started to appear as a legitimate condition in course material designed for the training of nurses. The psychologist Carl Jung believed that in Western cultures, the midlife crisis of males is rooted in a search for deeper spiritual roots (Marin 2001). From the perspective of male and female roles, there is often a reversal of roles away from the closed/traditional paradigm; that is, the husband moves inward to find strength for the future, and the female moves outward to the work world and career (Morris 1995). Thus midlife men experience the self-doubts, malaise, and concern over issues of a failure of adaptation. External economic changes in the opportunity structure affect changes in the timing of entry into the labour force, and, ultimately, retirement. Institutional and legislative changes, such as compulsory school attendance, child-labour laws, and mandatory retirement, shape the work-life transitions of different age groups and eventually influence their family life as well. People who suffer a midlife crisis in this form see the exciting experience of forward movement as ending with youth and the future as repetition and decay. Some people have midlife crises, but most do not. Crises do occur in midlife, but they are usually caused by a variety of factors, certainly not by chronology alone. We conclude that a more adequate theory of human development must take into account both the socio-historical environment, on the one hand, and internal psychological and biological processes on the other. References Lawrence, B. S. (1980). â€Å"The Myth of Midlife Crisis. † Sloan Management Review, 21(4): 35-49. Marin, Rick. (2001). â€Å"Is This the Face of a Midlife Crisis? † N. Y. TIMES, June 24, [section] 9. Morris, B. (1995). â€Å"Executive Women Confront Midlife Crisis. † Fortune (September 18): 60-86. Neustatter, A. (1996). Looking the Demon in the Eye: the challenge of midlife, London: Joseph. Sifford, D. (1983). â€Å"Midlife Crisis: The Nagging Pain of Unfulfilled Dreams,† Philadelphia Inquirer, October 17, p. 4.

The Importance Of The Physical Evidence Marketing Essay

The Importance Of The Physical Evidence Marketing Essay Services are radically different from products and need to be marketed very differently. So the classical 4 P structure of the Marketing Mix needs to be modified suitably to incorporate the 8 Ps for services marketing, which was previously known as 7 Ps only. Services can range from financial services provided by the banks to technology services provided by the IT Company or hospitality services provided by hotels and restaurants Services marketing are dominated by the 7 Ps of marketing namely  Product, Price,   Place, Promotion, People, Process  and  Physical evidence. All of these factors are necessary for optimum service delivery. While everyone knows about the 7 Ps of services marketing, the  8th P of Services Marketing  has emerged in research very recently. The 8th P is  Productivity and Quality. 8-P-Marketing-Mix Physical evidence Physical evidence is the ability and environment in which the service is delivered.  Both tangible goods that help to communicate and perform the service, and the intangible experience of the existing customers and the ability  of  the  business  to  relay  that  customer  satisfaction  to  potentialcustomers.Physical  evidence  is  the  element  of  the  service  mix  which  allows  thecustomer again to make judgments on the organization. Consumers will make perceptions based  on their  sight of the  service provision which will have an impact on the organizations perceptual plan of the service. For e.g. If one moves into a restaurant his expectations are of a clean, friendly environment, besides high quality food which is  the core  service of  the restaurant. On an aircraft if he travels he expects enough room to be able to laydown.Some  points  stating  the  importance  of  physical  evidence  in  service m arketing are- à ¢Ã… ¾Ã‚ ¢Physical evidence  is packaging for services, therefore creation of  service environment should not be left to chance. à ¢Ã… ¾Ã‚ ¢Customer  judges  the  service  quality  through  the  process  of  deduction. à ¢Ã… ¾Ã‚ ¢Physical evidences both- dominant and peripheral should be co-ordinated to achieve uniformity in its projected service image. à ¢Ã… ¾Ã‚ ¢Peripheral  evidences  are  small  and  trivial  but  have  impact  oncustomer  perception  about  services  and  are  real  source  of  competitive differentiation. à ¢Ã… ¾Ã‚ ¢It makes the intangible service apparent. Physical Environment of Hotel: à ¢Ã…“†location   Ã‚  What kind of customers prefers a city centre?   What  kind  of  customers  prefers  a  hotel  at seaside? à ¢Ã…“†Signs and logos Many hotels belong to chains and their signs and logos are well known. Different chains help hotels to profitable business. Competition is very hard nowadays. Good reputation and recommendations help very much a hotel to get new customers and also make them to come again. à ¢Ã…“†Style, furniture, colors, lighting à ¢Ã…“†Clean air: some customers want luxury, and they are ready to pay for it. Other customers are satisfied with a little lower level. à ¢Ã…“†Reception What is good customer service at the reception? à ¢Ã…“†Office, information, customer service Is it easy to reserve a room? What is the easiest way to reserve a room today? Good customer service is very important in the competition  today. à ¢Ã…“†A hotel room What does a customer want from a good hotel room? The room itself and the bath room must be clean and the bed must be comfortable. Something extra  provided  that  a  customer  has  not  expected gives a good feeling. à ¢Ã…“†Restaurant- heart of the Hotel The restaurant and its kitchen create the heart of a hotel. At a big hotel there can be many different types of restaurants. Reception A hotel receptionists job is to make guests feel welcome, to check them in and out efficiently, and to deal professionally with enquiries, face to face and by phone, fax or email. When guests call at a hotel to make a booking, the receptionist is the first person they speak to and may also be the first person whom they meet at arrival. The receptionist in short represents the entire hotel in front  of the customer. à ¢Ã… ¾Ã‚ ¢The Hotel should provide a 24 hour reception service. à ¢Ã… ¾Ã‚ ¢At the Hotel  there should  an  array  of  experienced  and  qualified receptionist to handle the customers. They should work in a batch of three that is at any time there should be three receptionists in the front office for  the convenience of the customers.  They should change the shifts to ensure the best service possible. à ¢Ã… ¾Ã‚ ¢The  receptionists should  act  as  a  guide,  a  friend,  a counselor to the  customer. à ¢Ã… ¾Ã‚ ¢They should use laptops and telephones to manage the accounts and to handle the queries or to provide service to the customer.   Ãƒ ¢Ã… ¾Ã‚ ¢The front office plays the most important part in hospitality industry. Welcoming the customer with a smile, making them feel important is the valuable job of the receptionist. à ¢Ã… ¾Ã‚ ¢Receptionists at Hotel should provide extra services such as calling the in house porter to carry the luggage, arranging for conveyance for  sightseeing or official visits, booking flight or rail tickets and arranging parties. à ¢Ã… ¾Ã‚ ¢Receptionist should look after the customers personal taste such as his menu, movies and music and proper functioning of equipments in his room. à ¢Ã… ¾Ã‚ ¢The  receptionist should  also  allott  time  for  visits  to  the  spa  and  fixeappointments with doctors. This aspect of service  in a  Hotel  accounts  for  the  high  satisfaction  among  its customers. Rooms at Hotel Rooms should be spacious and attractively decorated. The rooms can be differentiated on two major criterias.   Space  Facilities  provided. The rooms can be categorized as follows: superior, deluxe, club, crescent, terrace, executive and presidential suite. However the superior, deluxe and club  rooms  must be  the same  in  area The visitors of  the presidential suite should be  provided with  superior  services  and  the  most  spacious  rooms. The services provided inside the rooms can be as follows: à ¢Ã… ¾Ã‚ ¢Mini bar à ¢Ã… ¾Ã‚ ¢Coffee and tea maker to provide the ease of making it according to their own preference. à ¢Ã… ¾Ã‚ ¢Hairdryer à ¢Ã… ¾Ã‚ ¢Iron and an ironing board. à ¢Ã… ¾Ã‚ ¢Television  facility  with domestic  channels  and  international channels.   Ãƒ ¢Ã… ¾Ã‚ ¢DVD  players  and  a  variety  of  video  tapes à ¢Ã… ¾Ã‚ ¢High speed internet facility. à ¢Ã… ¾Ã‚ ¢Telephone  with speaker  facility. à ¢Ã… ¾Ã‚ ¢Refrigerator. à ¢Ã… ¾Ã‚ ¢Smoke detector. à ¢Ã… ¾Ã‚ ¢Newspapers and magazines. à ¢Ã… ¾Ã‚ ¢Convenient and adequate plug points in the room. à ¢Ã… ¾Ã‚ ¢Electronic safe and door locks for ensuring the safety of the visitor. à ¢Ã… ¾Ã‚ ¢Bathrobes and slippers. à ¢Ã… ¾Ã‚ ¢User friendly bathroom fittings. à ¢Ã… ¾Ã‚ ¢Jacuzzi. Restaurant Human aspect of a service sector industry sets it apart from the productionsector.  The  inherent  quality  of  a  product  and  also  its  physical  outlook attracts  the  customers  towards  it.But  when  it  comes  to  service  theapproach is totally different. Through its service, i.e. the quality of service provided, an industry in the service sector, tends to retain as well as create a customer. The service has to be made tangible in this fashion. à ¢Ã… ¾Ã‚ ¢The  entrance  made should wear a majestic look. The warm welcome by the man at the gate should make the guests comfortable and wanted. à ¢Ã… ¾Ã‚ ¢ The overall ambience should be mesmerizing. à ¢Ã… ¾Ã‚ ¢The furniture laid around: The chairs and table should have wooden finish. The tables should be arranged to cater to the customers needs i.e. buffet and sitting arrangement. The buffet should have table  with expensive copper,  steel and  glass cutlery. The  sitting arrangements should be  planned judiciously keeping in  mind the  customers comfort as well as taking care of the economic aspect of spaceutilization.  The  furniture  should be  elegant  and  highly  comfortable.  The chairs should have soft cushions. à ¢Ã… ¾Ã‚ ¢The  most  attractive  and  significant  part  should be  the  attitude  and professionalism of the waiters. They should be in a proper dress code. The ratio of waiters and table should be 2:1, because of which customers can always be at ease and taken care of. à ¢Ã… ¾Ã‚ ¢To satisfy a customer  in service sector especially in restaurants where the service delivered should provide the maximum satisfaction- which itself differs from one individual to another. Gym The physical environment at the gym should include the following: à ¢Ã… ¾Ã‚ ¢Stairs à ¢Ã… ¾Ã‚ ¢Front door: There  should be  a  guard  at  the  entrance  who  checked  the membership cards of each customer. à ¢Ã… ¾Ã‚ ¢Smoothie  bar  Area- There  should be  a  bar  area  which should  include drinks such as: energy and fruit drinks besides providing normal water.   Ãƒ ¢Ã… ¾Ã‚ ¢Membership Card- All the customers should be given membership cards for easy recognition and catching the defaulters. à ¢Ã… ¾Ã‚ ¢Appearance of Employee- All the employees should have a dress code which should be similar to the other employees of the Hotel. à ¢Ã… ¾Ã‚ ¢Walls- The walls of the gymnasium should be with posters suggesting health  and gymming  tips and motivational phrases. à ¢Ã… ¾Ã‚ ¢Lockers- Locker  facility  for all  customers  to  keep their  belongings  safely. à ¢Ã… ¾Ã‚ ¢Music à ¢Ã… ¾Ã‚ ¢Equipments-  The  gym should  have  all  equipments  related  to  cardio  and weight training. à ¢Ã… ¾Ã‚ ¢Light- The hall should be well illuminated with focused lights. à ¢Ã… ¾Ã‚ ¢Appearance of staff- The trainers and the supervisors should be wearing branded sportswear. à ¢Ã… ¾Ã‚ ¢Towels- The towels should be very clean and  dirt free. à ¢Ã… ¾Ã‚ ¢Hair Dryer- Hair drying facility for customers. à ¢Ã… ¾Ã‚ ¢Cleanliness- It should be well maintained to keep the entire area spic and span. à ¢Ã… ¾Ã‚ ¢Therapist- There should be a therapist to look after any unexpected injury. à ¢Ã… ¾Ã‚ ¢Temperature- The room should be conducive for  comfortable exercising. à ¢Ã… ¾Ã‚ ¢Merchandise-If  the  customers  intend  to  purchase  any  similar  health product, the same should be available. à ¢Ã… ¾Ã‚ ¢Sauna and steam bath à ¢Ã… ¾Ã‚ ¢Jacuzzi Parking à ¢Ã… ¾Ã‚ ¢Hotel should provide valet parking for its  customers. à ¢Ã… ¾Ã‚ ¢Valet parking is a service whereby a valet takes the car from the customer and parks it in the parking lot. The customer is hence spared of the hassles involved in car parking. à ¢Ã… ¾Ã‚ ¢In most five star  hotels the parking lot becomes jammed during peak hours. Car parking by the valet proves beneficial for both customers as well as the hotel officials. On one hand the customer does not need to worry about the parking place; on the other hand the valet has the car at  his own disposal. This means that he  can park the car  wherever he feels it convenient to do so. à ¢Ã… ¾Ã‚ ¢This leads to better service of the customers as they can enjoy the stay at the hotel without caring for maintenance of their vehicle. à ¢Ã… ¾Ã‚ ¢Offering a valet to take care of the car adds luxury to the service à ¢Ã… ¾Ã‚ ¢This can be further increased by the valet bringing the car up to the main entrance and holding the door opened to allow the customer to get in. Conclusion   Its not always words that impressà ¢Ã¢â€š ¬Ã‚ ¦.  Truly, physical evidence in hotels and restaurants speak louder than words. It is through these evidences that the  customer  attaches  himself.  A  hotel  is  an  abode  of  customer delight. During this Endeavour we learnt the importance of physical evidence in a service industry like the hotel industry. Physical evidence serves as an entire package for a service industry. It holds the power to tangible the intangibles. In the end we can conclude that the physical evidence of the services provided at Hotel should be highly impressive and efficient. It should make sure that the customer makes repeated visits. For a hotel industry viral marketing is the strongest advertising tool, hence all efforts should be made to make the customer satisfied. s

An Inspector Calls - J. B. Priestley :: English Literature

An Inspector Calls - J. B. Priestley Introduction My aim is to explain a key scene from the play ‘An Inspector Calls’, how it might be staged and to explain the role of my chosen character Mr Birling in this part of the play. This is the key scene: Birling (solemnly) But this is point. I don’t want to lecture you two young fellows again. But what so many of you don’t seem to understand now, when things are so much easier, is that a man has to make his own way – has to look after himself – and his family too, of course, when he has one – and so long as he does that he won’t come to much harm. But the way some of these cranks talk and write now, you’d think that everyone has to look after everyone else, as if we were all mixed up together like bees in a hive – community and all that nonsense. But take my word for it, you youngsters –and I’ve learned in the good hard school of experience – that a man has to mind his own business and look after himself and his own – and – (We hear the sharp ring of the front door bell. Birling stops to listen.) Eric Somebody at the front door. Birling Edna’ll answer it. Well, have another glass of port, Gerald – and then we’ll join the ladies. That’ll stop me giving you good advice. Eric Yes, you’ve piled it on a bit tonight Father. Birling Special occasion. And feeling contented, for once, I wanted you to have the benefit of my experience. (EDNA enters.) Edna Please, sir, an inspector’s called. Birling An inspector? What kind of inspector? Edna A police inspector. He says his name’s Inspector Goole. Birling Don’t know him. Does he want to see me? Edna Yes, sir. He says it’s important. Birling All right, Edna. Show him in here. Give us some more light. (EDNA does, then goes out.) I’m still on the Bench. It may be something about a warrant. Gerald (lightly) Sure to be. Unless Eric’s been up to something. (Nodding confidentially to Birling) And that would be awkward, wouldn’t it? Birling (humorously) Very. Eric (who is uneasy, sharply) Here, what do you mean? Birling (lightly) Only something we were talking about when you were out. A joke really. Eric (still uneasy) Well, I don’t think it’s very funny. Birling (sharply, staring at him) What’s the matter with you? Eric (defiantly) Nothing. Edna (opening door, and announcing) Inspector Goole. (The INSPECTOR enters, and Edna goes, closing the door after her. The INSPECTOR need not be a big man but he creates at once an impression of massiveness, solidity and purposefulness. He is a man in his fifties, dressed in a plain darkish suit of the period. An Inspector Calls - J. B. Priestley :: English Literature An Inspector Calls - J. B. Priestley Introduction My aim is to explain a key scene from the play ‘An Inspector Calls’, how it might be staged and to explain the role of my chosen character Mr Birling in this part of the play. This is the key scene: Birling (solemnly) But this is point. I don’t want to lecture you two young fellows again. But what so many of you don’t seem to understand now, when things are so much easier, is that a man has to make his own way – has to look after himself – and his family too, of course, when he has one – and so long as he does that he won’t come to much harm. But the way some of these cranks talk and write now, you’d think that everyone has to look after everyone else, as if we were all mixed up together like bees in a hive – community and all that nonsense. But take my word for it, you youngsters –and I’ve learned in the good hard school of experience – that a man has to mind his own business and look after himself and his own – and – (We hear the sharp ring of the front door bell. Birling stops to listen.) Eric Somebody at the front door. Birling Edna’ll answer it. Well, have another glass of port, Gerald – and then we’ll join the ladies. That’ll stop me giving you good advice. Eric Yes, you’ve piled it on a bit tonight Father. Birling Special occasion. And feeling contented, for once, I wanted you to have the benefit of my experience. (EDNA enters.) Edna Please, sir, an inspector’s called. Birling An inspector? What kind of inspector? Edna A police inspector. He says his name’s Inspector Goole. Birling Don’t know him. Does he want to see me? Edna Yes, sir. He says it’s important. Birling All right, Edna. Show him in here. Give us some more light. (EDNA does, then goes out.) I’m still on the Bench. It may be something about a warrant. Gerald (lightly) Sure to be. Unless Eric’s been up to something. (Nodding confidentially to Birling) And that would be awkward, wouldn’t it? Birling (humorously) Very. Eric (who is uneasy, sharply) Here, what do you mean? Birling (lightly) Only something we were talking about when you were out. A joke really. Eric (still uneasy) Well, I don’t think it’s very funny. Birling (sharply, staring at him) What’s the matter with you? Eric (defiantly) Nothing. Edna (opening door, and announcing) Inspector Goole. (The INSPECTOR enters, and Edna goes, closing the door after her. The INSPECTOR need not be a big man but he creates at once an impression of massiveness, solidity and purposefulness. He is a man in his fifties, dressed in a plain darkish suit of the period.

Deviation from Genre in Hitchcock’s Movie, Vertigo :: Movie Film Essays

Deviation from Genre in Hitchcock’s Movie, Vertigo When a director achieves great success, as Hitchcock did, he is able to follow a formula, much like a genre does, for future success. Further, a successful director is able to do a genre movie but place his own personal touch on it; in doing so, he ignores the formula that has thus far brought the genre so much success. Knighted as the â€Å"Master of Suspense,† Hitchcock was well known for his witty dialogue and genius plot twists. But Hitchcock’s true mastery came through in his ability to enshroud one story within another. In Vertigo, Hitchcock reveals the twist, that an imposter was hired so that the real Madeleine could be murdered, halfway through the film. The bold tactic breaks the formulaic structure we expect from a murder mystery, in which solutions always come at the end. It risks unsettling the viewer, particularly on an initial viewing of the film. However, by dispensing with formula, Hitchcock shifts the emphasis of the story from murder to character, a potentially deeper subject than the typical whodunit conundrum. It is after this revelation that Hitchcock’s true movie shines through. The mystery is solved for the audience, but James Stewart’s character â€Å"Scotty† is still haunted by the memory of his possessed love. His possession takes him so far that he attempts to remake a woman (Judy) that reminds him of his beloved Madeleine into the actual woman. With the movie now a â€Å"love† story, Hitchcock was able to elude yet another genre. His twisted approach on a relationship based on obsession with a dead woman garners pity for both Judy, who is something of an accomplice to the murder of the real Madeleine, and for Scotty, who actually fell in love with the woman he is trying to make into a woman he never met. And so Hitchcock is able to pose a stunning question: Did Scotty fall in love with Judy or her impression of Madeleine? This answer is impossible to know, with Scotty never having met the real Madeleine or getting the chance to know Judy for who she is b ecause she ironically falls to her death just as Madeleine did. It is the very departure from genre that may warrant the success of a film. Perhaps the formula has been done too many times, leaving the audience unfulfilled, or the very topic no longer holds any interest.

The Tower Pig Essay -- essays research papers

What happens when in spite of all odds, foe becomes friend? What happens, when an infinite and unending chasm between individuals is filled, and a void of mistrust, hatred and prejudice is replaced with more noble values, such as understanding and a sense of mutual respect? These are among the themes in the American short story, â€Å"The Tower Pig.† The story is set behind, and outside, the walls of the Thomaston Penitentiary in present day America. The story essentially revolves around a young man who suffers the hardships of imprisonment in an American correctional facility. The protagonist is throughout the tale addressed only by his surname, Caine. Caine expresses incomprehensible anger he feels for one of the wardens, an outcast despised by colleagues and inmates alike, and who is commonly known as â€Å"The Tower Pig† by all the prisoners at the facility. â€Å"Pain, joy, worry, are shielded away until the cell doors slam and we’re alone in our solitude. For ten days in the hole, I had nothing to do but hate Strazinsky, the Tower Pig, for putting me there, and to mourn my grandmother, finally to sick to visit.† When we are first introduced to Caine, he has just come out of â€Å"The Hole.† The Hole is presumably a slang expression for a non-corporal punishment, which implies the use of isolation for the involved offender. This sort of punishment is usually deployed as a reaction to a disciplinary offense; this is also the case with Caine. Caine put in the hole because of a verbal fight with Strazinsky. While Caine undoubtedly finds Strazinsky to be responsible for his punishment, it seems, looking back in retrospective, that he is fully aware that he himself was to blame; yet all Caine’s inner turmoil and anger is channelled into his hate for Strazinsky, and the fury towards his arch-enemy continues to blaze. Imprisonment tends to have a debilitating effect on both mind and body alike. Therefore in order to counter a mental breaking, one must deploy facades, facades that show strength and vitality, since any behaviour expressing the slightest trait of weakness will be preyed upon by both inmates and wardens. Caine seems fully aware of this, and prudently manages to keep all his fears and doubts to himself. Caine is greatly disturbed upon learning about the death of his beloved grandmother, the one person who, despite him being imprisoned, still managed to show him both... ... desired intimacy of mind is what we call friendship. But sadly, in this present world ruled by the divisive spirit of greed and corruption, it is not possible to achieve this intimacy of mind to any worth-while depth with just anyone. The minds of potential friends must from the outset already possess a mutual sense of affinity, not based on anything but an inexplicable sense of compatibillity. Although Strazinsky and Caine hardly fit the common definition of friendship, it seems that the two share more thoughts than either would care to admit, honest exposure of the inner self to another is not easy, yet this is exactly what Strazinsky does. Strazinsky opens himself in a sincere manner to a man, whom he knows despises him with all of his heart. This courageous act initially only serves to confuse Caine. It is, however, my impression that Caine, although reluctant to start a conversation with Strazinsky, suddenly begins to look at the warden in a different way. The gap between p risoner and warden is as self-evident as can be; nonetheless, it is my distinct belief that the chances of a friendship arising from the ashes of a past enmity, could in this case be very realistic indeed.

Importance of balance of trade

Importance of balance of trade Balance of trade data is a very important piece of understanding the global puzzle of international trade, and thus, forex. Much like an income statement, balance of trade data clearly defines whether a trade deficit or trade surplus is in play. Why Balance of Trade Matters Balance of trade data shows the imports and exports of goods and how a country competes in a global marketplace. Balance of trade numbers can run a trade deficit, showing that a country imported more than it exported, or they can reflect a trade surplus, exporting more than was imported in a specific time period.Imports and exports can include physical goods and intangible services. Luxembourg, which is a popular banking destination, has one of the highest per capita service exports because its banking system is used internationally. Likewise, Middle Eastern nations have stronger physical exports due to the international oil trade. Just as a negative balance of trade is a bad sign fo r a country's long run economic health, high export figures can be equally poor for domestic trade. China, which has for a long time been a net exporter, has fought several bouts of domestic inflation as money flows into the country from all over the world.When the supply of money rises internally at pace faster than the relative increase in wages, internal consumption and demand can be temporarily stymied, causing recessions. However, all things considered, a country would much prefer to attract too much foreign export purchases than too few, as a negative balance of trade cannot be sustained forever. In addition, negative trade increases the possibility of high national debts or inflation from the central bank to maintain domestic currency levels. Making Use of the DataBalance of trade data is released once per month and may be revised as time passes and the numbers become clearer. Since tallying all the exports flowing out of a country and all the imports flowing in requires a su bstantial amount of record keeping and manpower, these reports on trade surplus or trade deficit may be revised for years following their first release. From a forex trading point of view, balance of trade statistics are best used in conjunction with balance of payments. While a net importer cannot show a positive balance of trade, it can, and in many times does, show a positive balance of payments.This is because net importers have to borrow from other countries to sustain their current consumption, and they routinely borrow more funds than are needed in a single time period or calendar year Factors that can affect the balance of trade include: Measuring the balance of trade can be problematic because of problems with recording and collecting data. As an illustration of this problem, when official data for all the world's countries are added up, exports exceed imports by almost 1%; it appears the world is running a positive balance of trade with itself.This cannot be true, because all transactions involve an equal credit or debit in the account of each nation. The discrepancy is widely believed to be explained by transactions intended to launder money or evade taxes, smuggling and other visibility problems. However, especially for developed countries, accuracy is likely. * The cost of production (land, labor, capital, taxes, incentives, etc. ) in the exporting economy vis-a-vis those in the importing economy; * The cost and availability of raw materials, intermediate goods and other inputs; * Exchange rate movements; Multilateral, bilateral and unilateral taxes or restrictions on trade; * Non-tariff barriers such as environmental, health or safety standards; * The availability of adequate foreign exchange with which to pay for imports; and * Prices of goods manufactured at home (influenced by the responsiveness of supply How to calculate BOT Trade balance shows how countries interact with each other in the international market place. Trade balance is also kno wn as net exports. The trade balance shows if a country exports more than it imports.A positive trade balance means the country exports more than it imports. A negative trade balance shows a country imports more than it exports. Having a positive or negative trade balance is neither good nor bad. Trade balance is also part of the calculation for gross domestic product. 1. Use the U. S. Census Bureau to find net imports for the period for which you seek the U. S. trade balance. The Census Bureau releases these statistics periodically on its website. On the Census Bureau website, click â€Å"Balance by Partner Country† on the left-side of the screen. Then select a country.For example, select Ivory Coast. Then select the year to analyze. In the example, select 2010. In the example, for January 2010, the United States had net imports of $221. 9 million from the Ivory Coast. 2. Use the U. S. Census Bureau to find net exports for the period. In our example, U. S. net exports to the Ivory Coast were $24. 3 million 3. Subtract net imports from net exports to determine the trade balance. In our example, $24. 3 million minus $221. 9 million yields a trade balance of negative $197. 6 million, which the Census Bureau rounds to $197. 5 million.The balance is negative because net imports is greater than net exports. Goods and Services Deficit Decreases in February 2013 The Nation’s international trade deficit in goods and services decreased to $43. 0 billion in February from $44. 5 billion (revised) in January, as exports increased more than imports. | Goods and Services * Exports increased to $186. 0 billion in February from $184. 4 billion in January (revised). Goods were $132. 2 billion in February, up from $130. 8 billion in January. Services were $53. 8 billion in February, up from $53. 6 billion in January. February imports were $0. 1 billion more than January imports of $228. 9 billion (revised). Goods were $192. 4 billion in February, down from $192. 5 billion in January. Services were $36. 5 billion in February, up from $36. 3 billion in January. * For goods, the deficit was $60. 2 billion in February, down from $61. 7 billion in January (revised). For services, the surplus was $17. 3 billion in February, up from $17. 2 billion in January. Goods by Category (Census basis) * The January to February increase in exports of goods reflected increases in industrial supplies and materials ($1. billion); other goods ($0. 5 billion); and automotive vehicles, parts, and engines ($0. 2 billion). Decreases occurred in capital goods ($0. 8 billion); consumer goods ($0. 3 billion); and foods, feeds, and beverages ($0. 1 billion). * The January to February decrease in imports of goods reflected decreases in industrial supplies and materials ($2. 6 billion) and other goods ($0. 3 billion). Increases occurred in automotive vehicles, parts, and engines ($1. 1 billion); consumer goods ($0. 7 billion); capital goods ($0. 3 billion); and foods, feed s, and beverages ($0. billion). Services by Category * Exports of services increased $0. 2 billion from January to February. The increase was mostly accounted for by increases in other transportation ($0. 1 billion), which includes freight and port services, and travel ($0. 1 billion). Changes in the other categories of services exports were relatively small. * Imports of services increased $0. 2 billion from January to February. The increase was more than accounted for by increases in other transportation ($0. 1 billion), travel ($0. 1 billion), and passenger fares ($0. 1 billion).Changes in the other categories of services imports were relatively small. Goods by Geographic Area (Not Seasonally Adjusted) * The goods deficit with Canada decreased from $4. 8 billion in January to $2. 6 billion in February. Exports were virtually unchanged at $23. 1 billion, while imports decreased $2. 2 billion (primarily crude oil) to $25. 7 billion. * The goods deficit with China decreased from $27 . 8 billion in January to $23. 4 billion in February. Exports decreased $0. 1 billion (primarily soybeans and nonmonetary gold) to $9. 3 billion, while imports decreased $4. billion (primarily cell phones and other household goods) to $32. 7 billion. * The goods deficit with Mexico increased from $3. 6 billion in January to $4. 3 billion in February. Exports decreased $0. 3 billion (primarily computer accessories, electric components, and semiconductors) to $17. 7 billion, while imports increased $0. 4 billion (primarily automobiles, automotive parts, and accessories) to $21. 9 billion India Balance of Trade India recorded a trade deficit of 561. 19 INR Billion in March of 2013. Balance of Trade in India is reported by the Ministry of Commerce and Industry.Historically, from 1978 until 2013, India Balance of Trade averaged -113. 01 INR Billion reaching an all time high of 13. 91 INR Billion in April of 1991 and a record low of -1111. 46 INR Billion in October of 2012. India had been recording sustained trade deficits due to low exports base and high imports of coal and oil for its energy needs. India is leading exporter of petroleum products, gems and jewelry, textiles, engineering goods, chemicals and services. Main trading partners are European Union countries, United States, China and UAE. This page includes a chart with historical data for India Balance of Trade

India vs China Essay

To compete in the global market, the Government of India (GoI) has liberalized export policies & licensing of technology and implemented tax reforms providing various incentives. Special Economic Zone (SEZ) policy is also one of the steps India has taken to boost economic growth through outward looking approach. Special economic zone is a specifically duty fee enclave and shall be deemed to be foreign territory for the purpose of trade operations and duties and tariffs. When SEZ policy was introduced in the country, it made headlines and people started considering it as a policy to create a hassle free and investment friendly environment. The main objective of this research paper is to analyze SEZ policy in terms of export performance, FDI inflow, employment generation and overall physical and financial infrastructure building. This research paper tries to investigate whether having these policies are good for the country or not. SEZs are a larger variant of Export Processing Zone (EPZ), thus performance of EPZ has also been discussed briefly. It has been five years now since all then existing EPZs have been converted into SEZs. Section –II has been devoted to performance analysis of these zones. After the failure of EPZs, a significant change has been made in the rules/regulations and a new package of fiscal and non- fiscal incentives is also being offered to developers and units. According to Finance Msinistry, the government has to forego about Rs. 90,000 crore in direct and indirect taxes over the next four years on account of SEZs. Despite so many incentives, performance of these privileged enclaves over the last five years indicates the failure of this scheme. For instance, the share of exports from SEZs in the total exports of the country has only increased from 4. 2% in 2000-01 to 5. 1% in 2004-05. Some economic experts are also seeing it as a corporate welfare scheme and the possibility of a sharp decline in investments in SEZs can’t be ruled out as tax benefits are only for 10 years. Other issues of concern like the heavy economic cost, real estate scam and labour policies are also discussed in the last section of the paper. Data are mostly secondary but the opinion of different economists and the Development Commissioners (SEZ) has also been taken into account. 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 economic growth in most countries on a sustainable basis. 3 Major Findings †¢ The union Govt has foregone a whopping Rs 39,704 crore of duty under export promotion schemes during 2003-2004 accounting for 82% of customs duty collected in that year. †¢ The foreign exchange earned by all the 811 units in the 8 zones put together came to only Rs. 8,309 crores, a mere 5% of India’s exports during the fiscal year 2004-05. †¢ During 1966-1980 average annual export growth rates of EPZs was over 77%, whereas during the post 2000 period (2001-03) it came down to 7%. †¢ Total share of FDI investment in Noida SEZ in 1997 was 12. 3% and it went up by a mere 0. 4% in the six years. To tal FDI share in 2003 was 12. 7%. †¢ A slew of tax exemption planned for SEZ to boost exports will erode Rs. 93,900 ($ 20. 62 billion) in government revenue over the next four years. †¢ Haryana Govt has offered over 1700 acres of land near Gurgaon to RIL (Reliance) for about Rs. 60 crore while it is estimated that the land was worth 5000 crore and HSIDC had acquired this land by paying Rs. 300 crore in compensation to the farmers. 4 Section – 1 SEZ Policy: An Overview 5 1. 1 Introduction A Special Economic Zone (SEZ) is defined as a deemed foreign territory within a country with special rules for facilitating FDI for export-oriented production, and for purposes of trade and customs duties. These Zones (SEZs) are geographical region that have economic laws different from a country’s typical economic laws. Different economic institution and government departments have defined it in different ways. As per Ministry of Commerce and Industry they are defined as: Special economic zone is a specifically duty fee enclave and shall be deemed to be foreign territory for the purpose of trade operations and duties and tariffs. SEZs have been established in several countries, including the People’s Republic of China, India, Jordan, Poland, Kazakhstan, the Philippines and Russia. The concept of having free trade zones, export oriented zones and SEZs dates back to 1970. In 1979-80, China opened up its economy to foreign investment with the establishment of Shenzhen SEZ. Situated close to the Hong Kong port, this small fishing hamlet has today acquired the distinction of being the manufacturing hub of the world with a GDP of $20 billion and an annual foreign trade of nearly $50 billion. Inspired by the success of Chinese SEZs our policy makers also tried to experiment with SEZs in India. Despite the failure of Export Processing Zones (EPZs) Murasoli Maran after visiting China in the year 2000 introduced the SEZ policy very same year considering the need to enhance foreign investment and promote exports from the country. The SEZ bill was passed by parliament in 2005 and the Commerce Ministry notified the Special Economic Zones law on February 9, 2006 and the rule came into effect from February 10, 2006 but the rush of proposals for setting up SEZs had begun much earlier and by November 2005 some 61 SEZs were already approved. According to reports, so far, the Government has cleared around 150 SEZ proposals out of around 200 received. The policy provides for setting up of SEZs in the public, private, joint sector or by State Governments. It was also envisaged that some of the existing EPZs would be converted 6 into SEZ. Accordingly, the Government has converted all eight EPZs into SEZs. Table 1. 1. 1 below shows all the EPZs which has been coveted to SEZs with their size Table 1. 1. 1 List of all the EPZs converted into SEZs with their size Location Kandla (Gujarat) SEEPZ (Mumbai) Cochin (Kerala) Surat (Gujarat) NOIDA (UP) Chennai (TN) Vizag (AP) Falta (WB) Size (Sq. KM) 2. 99 0. 38 0. 40 NA 1. 22 1. 04 1. 43 1. 12 Source: Export Promotion Council. Ministry of Commerce, Government of India 1. Evolution of EPZs/SEZs in India The economic policy of 1960’s which were geared towards selective import liberalization and export promotion, marked the development of EPZ’s in the country. The first EPZ in India which was also the first in Asia was set up at Kandla in 1965. The proposal for setting up the Kandla free trade zone was mooted in 1961, with the objective of facilitating the development of the Kutch reg ion, to ensure greater utilization of Kandla port and to create employment opportunities in the Kandla. The second EPZ in the country, the Santa Cruz Electronics Export Processing Zone (SEEPZ), was set up at Mumbai in 1974. This EPZ was developed specifically for processing electronics goods and was expected to generate employment opportunities and facilitate the technology transfer. SEEPZ was initially planed as single product zone for processing electronics goods but by 1986 it was made a two product zone providing for gems and jewellery complex as well. 7 Four more zones were set up in the mid-eighties at Noida (NEPZ), Chennai (MEPZ), Cochin (CEPZ, Kerala), and Falta (FEPZ, West Bengal) and the seventh EPZ in the country was commissioned at Vishakhapatnam (VEPZ, Andhra Pradesh) in 1994. Initially the Central Government was solely responsible for establishing EPZ, but this policy was amended in 1994 to enable state governments, autonomous agencies and the private sectors to participate in the development agencies and operation of EPZs. Following the implementation of this policy, one EPZ was developed by private sector in Surat. A joint sector EPZ (now SEZ) has been approved for Greater Noida (UP). In terms of export performance, employment generation and FDI inflow EPZs failed in India but considering the need of better export performance and infrastructure building, central government came up with SEZ policy in 2000. Section II of this research paper has been devoted to analysis of the failure of EPZs in India. Without understanding the key difference between these two similar policies it would not be fair to comment upon the future of SEZ scheme. 1. 3 How SEZs are different from EPZs ? SEZs are a larger variant of EPZs. Both have a delineated area and permit duty free import of capital goods and raw materials; both aim to attract foreign investment for setting up export-oriented units by providing developed infrastructure, conducive operating environment and a package of fiscal incentives. However, the objective of SEZs is much larger than mere promotion of export processing activities. While EPZs are industrial estates, SEZs are virtually industrial townships that provide supportive infrastructure such as housing, roads, ports and telecommunications hospitals, hotels, educational institutions, leisure and entertainment units, residential/industrial/commercial complexes, water supply sanitation and sewerage system and any other facility required for development of the zone. The scope of activities that can be undertaken in the SEZs is much wider and their linkages with the domestic economy are stronger. Resultantly they have a diversified industrial base. Their role is not transient like the EPZs, as they are intended to be instruments of regional development as well as export promotion. Although the objectives 8 of SEZ policy are quite similar to the objectives envisaged by central government through EPZ policy in early eighties but there is significant difference between these two policies in terms of tax benefits and rules and regulations. The table 1. 3. 1 below summarizes the difference between these two: Table 1. 3. 1 Comparison between SEZ and EPZ India’s SEZ Restriction sectors on Open manufacturing, services trading activities India’s EPZ to Open manufacturing and trading considered SEZ vs. EPZ to While SEZs are and generally open to activities. all activities, EPZs more manufacturing and trading on Services may also be appear to focus Tax exemption Companies in Companies in EPZs SEZs offer more tax than SEZs enjoy a 5 were exempted from attractive year corporate tax corporate tax for a benefits holiday, by more years followed block of 5 years in EPZs 50% first 8 years of exemption for 2 operations. However, under section 10a of the income tax act, the concession was to be Retention foreign exchange earnings of Retain earnings Exchange phased out by in control foreign 2009 100% Retain 70% foreign Companies in Exchange Earner Foreign Earner better Currency over foreign exchange exchange earnings in SEZs would have 9 Foreign Currency Account (EEFC). urrency relation purchase in to of Account (EEFC). imported inputs. Export performance (EP) Foreign Exchange exports (NFEP) & No minimum EP Minimum required. Positive NFEP Net NFEP (varies industries required (varies and EP and Companies in SEZ more across leeway in meeting export performance requirements. required. enjoy across industries and states) Earning as % of states) requirements Duty recovery in Duty recovery is Full duty recovery is Lesser penalty for case of failure to in proportion to imposed achieve positive shortfall NFEP DTA* sales Unlimited sales on full duty Duty imported material free Allowed. raw duty qualify for DTA sales but SEZs achieve NFEP DTA Only 50% of exports SEZs enjoy greater access to domestic market These Allowed, duty More flexibility in and for in 1 inventory planning companies SEZs. Certifications of Imports on self- Imports imports certification basis attestation Development Commissioner require Simplified of customs procedures facilitate movement of 10 free free materials are to production utilized over failing to positive materials are to be years be utilized over 5 year. mports into SEZs Customs inspection No routine Routine of inspections import/export cargo FDI Foreign promotion customs Expedited of movement SEZs investment Easier SEZs and for board quicker FDI flows manufacturing companies. of goods in an out of examination import/export cargo by Cusoms FDI process approval 100% investment through automatic approval is required into route available for for FDI manufacturing companies Source: SEZ Authority, Ministry of Commerce and Industry, Government of India Available at sezindia. nic. in. Accessed on June 5, 2006 1. Objectives of SEZ envisaged by the Government of India The main objective of the SEZ scheme according to the finance and commerce ministries is to create delineated, duty –free zones with world class infrastructure, internationally competitive production environment and fast track clearance system for attracting private investments, especially foreign direct investment (FDI) for setting up export oriented unit. The broad objectives of the SEZ policy are: Attract Foreign Direct Investment (FDI) Earn foreign exchange and contribute to exchange rate stability Boost the export sector, particularly on traditional exports Create jobs and raise standard of living Transfer new skills and expertise to local human resources Create backward & forward linkages to increase the output and raise the standard of local enterprise that supply good s and services to the zone Introduce new technology 11 Develop backward regions by locating such zones in these areas and attracting industries Provide a stimulus to the economy Test key policy reforms in these ‘pilot areas’ According to the Commerce Ministry, investment of the order of Rs. 00,000 crore over the next 3 years with an employment potential of over 5 lakh is expected from the new SEZs apart from indirect employment during the construction period of the SEZs. Heavy investments are expected in sectors like IT, pharma, bio-technology, textiles, petrochemicals, auto-components etc. With the Act and Rules in place, it is expected that many large format, multi-product SEZs that have so far been unable to achieve financial closure will now quickly move towards such closure. It is anticipated that this will trigger a large flow of foreign and domestic investment in SEZs, in infrastructure and productive capacity, leading to generation of additional economic activity and creation of employment opportunities. Fiscal and other incentives are being offered to woo investors and SEZ developers. Incentives like tax benefits, single window clearance, flexibility in export and import rules and regulations has made SEZs an important and most sought after destination for setting up the business empire. Unlike most of the international instances where zones are primarily developed by Governments, the Indian SEZ policy provides for development of these zones by the government, private or joint sector. 1. 5 Establishing SEZs : Procedures and Requirements According to Commerce Ministry and SEZ authority SEZs may be developed and managed in the private sector or jointly by state government and a private agency or exclusively by the State Government or their agencies. In the case of privately developed zones, the investors could be either Indian individuals, NRIs, Indian or foreign companies. New infrastructural development works such as construction of Standard Design Factory Building, operation and maintenance of infrastructure in the Zones may also be undertaken through private/joint/state sector in the Export Processing Zones, now converted into Special Economic Zones. Any person, who intends to set up a SEZ, may, 12 fter identifying the area can make a proposal to the Board of Approval (BOA) but will also have to obtain the concurrence of the State Government. SEZ developer will have to get a no-dispute certificate for that area where he wants to establish SEZ from the Chief Secretary of that state. After getting clearance from the state government BOA considers that proposal and if the proposal is within the purview of SEZ act BOA can approve the proposal. However if a state government wants to set up a special economic zone, after identifyi ng the area can make a proposal directly to the board. The central government has prescribed the minimum area requirement for setting up SEZs. Table 1. 5. 1 shows the minimum requirement of area for various sectors. Table 1. 5. 1 Minimum area requirement for various sectors Sector Multi Product Green field Service sector Bio-Technology InformationTechnology Gems & Jewellery All other sectors 10 100 Minimum area required (in hectare) 1000 1000 100 10 10 Source: SEZ authority, Ministry of Commerce & Industry. Government of India. Available at sezindia. nic. in. Accessed on June 15, 2006 The area requirement for multi-product SEZs has been relaxed to 200 hectares and for sector specific SEZs to 50 hectares, for certain States (Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram, Manipur, Tripura Himachal Pradesh, Uttaranchal, Sikkim, Jammu & Kashmir, Goa) and Union Territories, keeping in view the difficulty in finding large tracts of contiguous land in such states/union territories. According to the SEZ Act at 13 east 25 % area of the SEZ shall be used for developing industrial area for setting up of such units and the remaining 75% can be used for building infrastructures like roads, hotels, power generation station, educational institution and other facilities. 1. 6 Setting up Units Any person who wants to set up a unit for operating in a SEZ will have to submit a proposal to the development commissioner of that SEZ. Development commissioner submits the application to the Approval Committee and the Appro val Committee may, either approve the proposal without modification, or approve the proposal with modification. A modification suggested by Approval Committee will be well within the purview of SEZ Act. 1. 7 Important Features of SEZ Policy and Incentives given to SEZ In India SEZs are deemed foreign territory within the country with special rules for facilitating FDI for export-oriented production, and for purposes of trade and customs duties. The key implication of being a deemed foreign territory is that individual units within the SEZ are allowed operational freedom in routine activities and not supervised by the customs authorities. Units may be set up in SEZ for manufacture of goods and rendering of services. To woo the investors to the zones, the Central Government has been offering a number of fiscal incentives and concessions. For instance, the zones are deemed as foreign territories as far as trade operation, duties and tariffs are concerned. The units (100% export oriented) also have full flexibility in operations. They are exempt from all direct and indirect taxes. No export and import duties, no excise duties, no central or state sales tax and no service tax. The units don’t require license for importing capital goods and raw material. According to SEZ Act 2005, the firms are eligible for getting an extended Income Tax holiday for 15 years. Income tax exemption for 15 years is available for SEZ units as detailed below:- 14 a) 100% of profits and gains from exports for the first 5 years b) 50% of profits and gains from exports for the next 5 years c) Amount not exceeding 50% which is credited to a reserve account ‘Special Economic Zone Re-investment Reserve Account’ and utilized for business for the next 5 years. The only condition imposed on the firms is that they must have positive net foreign earning (NFE). The important fiscal and non-fiscal incentives given to SEZ developers and firms are as follows: †¢ 100% FDI in the manufacturing sector permitted through automatic route1 except arms and ammunition, explosives, atomic substance, narcotics and hazardous chemicals, distillation and brewing of alcoholic drinks and cigarettes, cigars and manufactured tobacco substitutes. †¢ †¢ †¢ †¢ †¢ †¢ External commercial borrowings by SEZ units upto US$500 million in a year without any maturity restrictions through recognized banking channels. Facility to retain 100% foreign exchange receipts in Exchange Earners’ Foreign Currency Account. Exemption from Central Sales Tax and Service Tax Facilities to set up off-shore banking units in SEZs. Exemption from duties on import /procurement of goods for the development, operation and maintenance of SEZ. FDI to develop townships within SEZs with residential, educational, health care and recreational facilities permitted on a case-to-case basis. The full list of all the fiscal and non-fiscal incentives being offered to SEZ developers and units has been given in the (appendix-i). Apart from getting tax benefits from central government these zones are also getting tax benefits from state governments. TABLE 1. 7. 1 shows the list of tax benefits given by state governments to all the EPZs which has been converted into SEZs. Table: 1. 7. 1 Exemption From The State Level Taxes By Zone Falta Cochin Chennai Noida Vizag Kandla 15 Sales tax Contract tax Purchase tax VAT State entry tax Octroi tax CESS Luxury tax Entertainment tax Stamp duty and registration chages on land transfers Stamp duty and registration charges on loan agreements/credit deeds Yes No Yes Yes Yes No No No No No Yes n. a. n. a. n. a. Yes n. a. No n. a. n. a. Yes Yes n. a. n. a. n. a. n. . n. a. n. a. No No No Yes No Yes n. a. Yes Yes Yes No No No Yes n. a. Yes n. a. No No No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No No Yes Yes Source: Agrawal,2004 Units within the SEZ and EPZ also get subsidies sometimes on land rents and built up areas are also provided on lower rental rate. In some countries utility services such as electricity, water, and telecommunication are also subsidized. Table 1. 7. 2 shows the list of subsidies being given to zone units in six EPZs (now SEZs): Table: 1. 7. 2 Provision of subsidies by Zone Falta On land rent Factory rent On purchase on capital goods On capital investments Interest rate subsidies Concessional finance Any other Cochin Chennai Noida Vizag Kandla Yes Yes Yes Yes Yes Yes No Yes Yes No No No No No Yes Yes No No No No No Yes Yes No No No No No Yes Yes Yes Yes No No No Yes Yes No No No No No Source: Agrawal,2004 In terms of fiscal and other benefits we are ahead of China but the record of the Indian EPZs stands in contrast even to the performance of the general economy. Unlike other countries, in India, SEZs are being developed by the private sectors as well and to attract 16 he private and foreign investment a package of incentives is being offered by both state as well as central government. Later in the research paper an investigation has also been made to analyse the worth of these benefits. Section – II Performance Analysis of EPZs & SEZs 17 Introduction What is a successful SEZ? Is it the one that contributes to the host economy, one that generates prof it for its own owners/managers? SEZs are extensions of EPZs and taking this into consideration, an attempt has been made to analyze the success of both EPZs and SEZs in India. It has been just five years since the introduction of the SEZ policy in India. Some economists believe that it’s too early to comment upon its potential or chances of its failure. A significant change has been made in the rules and regulations but by and large the objectives of SEZs and EPZs are similar. Taking this into account this section has been devoted to explain the experience India had with EPZ policy in terms of export performance, employment generation, FDI inflow and infrastructure development. SEZs have been viewed as a tool to attract FDI and boost the export sector, which will 8 further create employment. It might be argued that policies like SEZ which has been introduced very recently can not be categorized as a good or a bad policy by looking at the performance analysis of five years but it definitely gives an insight into its potential success or failure. 2. 1 Share in Total Exports: Aggregate Analysis Exports from SEZs grew by 16. 4% from 2000-01 to 2004-05. In the same period, total exports in India grew by 12. 1%. This clearly indicates that despite getting special treatment, performance of SEZs in India is not satisfactory. Even, the share of exports from SEZs in the total exports of the country has only increased from 4. 2% in 2000-01 to 5. 1% in 2004-05. It’s quite apparent from the diagram that Domestic Tariff Area is also more or less witnessing the same rate of growth. Exports from SEZ touched the figure of 18,309 crore in 2004-2005 which is just a mere 5% of the total exports from India. Figure: 2. 1. 1 Trend in export performance of SEZs Exports from SEZs (Rs. in Crores) 20000 Rs (in Crores) 15000 10000 (4) 5000 0 2000-01 2001-02 2002-03 2003-04 2004-05 Year 11) (8) (4) (8) Source: Export Promotion Council, Ministry of Commerce & Industry, Government of India Note: figures in parenthesis shows the No. of functional SEZs 19 Figure: 2. 1. 2 Contribution of SEZs in country’s total Export SEZ’s contribution in country’s total export Contribution in percentage 6. 00% 5. 00% 4. 00% 3. 00% 2. 00% 1. 00% 0. 00% 4. 20% 4. 40% 4. 70% 5. 10% 3. 90% 2000-01 2001-02 2002-03 2003-04 2004-05 Year Source: CII report, 2005 Study shows that initially EPZs also witnessed high growth but gradually it started declining. In the early seventies, the growth rate of EPZs touched 77% but gradually it started coming down (Agrawal, 2004) and declined to 7% in 1999-00. Figure 2. 1. 3 indicates that the SEZs are failing to induce dynamism in the overall export performance of the economy. As the figure shows, despite a high growth of overall exports, SEZ contribution has remained constant over the years despite various other benefits. However, this may be counter argued by saying that apart from exports government has other objectives like employment generation and attracting FDI but our analysis shows that SEZ scheme is also failing like EPZs in attracting FDI. Figure: 2. 1. 3 Growth Trend of SEZ and Country Export 20 2000000 1800000 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 1990 1992 1994 1996 1998 2000 2002 Rs. in Crores SEZs export Country export Source: sezindia. nic. in, Ministry of Commerce & Industry. Government of India 2. 2 FDI inflow and Employment India had a very slow expansion in the initial phases of EPZ policy. Expansion in the zones started picking up in the 1980s in terms of employment but total investment remained abysmally low till the late 1980s8. In the 1990s, investment also started increasing. Growth rates in employment slowed down considerably in the late 1990s but in terms of investment EPZs in India continue to be dominated by domestic investment. This was despite its edge in terms of labour costs, availability of trained manpower and a stable macroeconomic environment. The share of FDI in total investment increased slowly from 12% in 1989 to slightly over 18% in 2000 ( Agrawal, 2004). During 2000-03, however, FDI inflows increased faster. Table 2. 2. 1 below shows the share of FDI in EPZ/SEZ investment. In 2000, all the EPZs were converted into SEZs, and with new rules and incentives it was expected that FDI will pour in but a more detailed study of Noida SEZ shows a mere 0. 4% growth in FDI investment in six years while in Chennai it just went up by 2. 3%. Despite this, new SEZs are becoming the most sought after destinations for foreign investors, however the chances of decline in FDI in SEZs can’t be ruled out as once the tax benefit period gets over and there would not be much incentives for investors to invest in SEZs. 21 TABLE: 2. 2. Share of FDI in total EPZ/SEZ investment (%) Zone Kandla Santacruz Noida Chennai Cochin Falta Vizag 1997 1. 3 8. 4 12. 3 28. 4 9. 6 3. 1 2003 4. 9 9. 2 12. 7 30. 7 13. 7 4 38. 8 Source: Ministry of Commerce & Industry. Government of India Unlike other countries, in India SEZs are being developed largely by private sectors and to avail the tax and other benefits private players are rushing in but it would be interesting to see if Govt doesnà ¢â‚¬â„¢t extend the benefits again once the period gets over , will they be still interested in investing and building infrastructure. Employment creation is one of the important goals which Indian government wants to achieve through SEZs but previous experiences with EPZ and other free trade zones doesn’t give us any rosy picture. EPZ had a share of near about 1% in organized employment (Agrawal, 2004) and till now all eight functional SEZs has created 1 lac employment and it is being expected that in next five years it will cross the figure of 5 lac. Table 2. 2. 2 shows the employment generated by different zones and the amount of Government and private investment in these zones. Table: 2. 2. 2 Zone wise employment and Investment upto 31. 3. 2005 Private No of Zone units Employment as on 31. 03. 2005 Govt investment upto 31. 03. 2005 investment upto 31. 03. 2005 KSEZ SEEPZ NSEZ MSEZ CSEZ 123 176 151 105 74 9821 42150 19857 16107 4712 26. 93 57. 39 78. 04 74. 83 87. 53 134 279. 49 650 223. 96 92. 79 22 FSEZ VSEZ Surat Manikan chan 83 28 62 5 2 2 2753 2500 2250 300 50 150 82. 83 39. 3 32. 46 263. 85 311. 58 5 . 07 4 1 3 Jaipur Indore Source: Export Promotion Council, Ministry of Commerce & Industry. Government of India SEZ or any other free trade zone should not be viewed as a tool to generate employment. Studies show that even small countries like Philippines has created 1. 1 million jobs through these economic zones (KPMG Report, 2004) but despite being the first country to have EPZ in Asia, India failed to achieve a high employment rate. Dysfunctional policies, regulations, lack of single window clearance facilities, poor attitude of the officials, centralized governance, stringent labour laws, poor physical and financial infrastructure, all accounted for an undesirable investment climate and thus EPZ failed to create employment. SEZ should have witnessed much higher growth in exports and employment but it is not happening either. If SEZ policy is really an example of decentralized governance, is it capable to strengthen our physical and financial infrastructure and if single window clearance facilities are no longer a dream, all these issues and concerns have been emphasized in the last section. 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. On the contrary, the performance over the last five years of these privileged enclaves indicates the failure of this scheme. 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 economic growth in most countries on a sustainable basis. 23 Section – III A comparative study of Chinese SEZ policy 24 3. SEZs in China The development of Special Economic Zones is one of the highlights of remarkable Chinese economic achievements. The Development of Chinese Special Economic Zones dates back to 1980’s. It is different from Indian practice: SEZ in China is classified in two levels by their scales. SEZ is the whole city even whole province opened to special financial, investment and trade policy, while Economic and Technologi cal Development Zones (ETDZ) is a relatively small piece of land earmarked in coastal and other open cities for industry and trade development. As early as 1980, under the opening-up and reform policy, the Chinese Government set up the first group of Special Economic Zones in Shen Zhen, Zhu Hai, Shan Tou and Xia Men, 25 all of which are located in costal areas of Southeast China, followed by other 10 costal cities, Hai Nan Province and Pu Dong area in Shanghai as the second group. To further open to the outside world and to spread successful experiences of SEZs, at the beginning of 1984, the government decided to establish ETDZs along coastal line on the basis of successful experiences of and favorable policies granted to the SEZs in the previous period. Consequently, China’s first group of 14 National Economic and Technological Development Zones (NETDZ) were established from 1984 to 1988 successively. The distinguishing features of Chinese SEZs are their large size, investment friendly customs regime, flexible labour laws, liberal policy for DTA access, attractive package of incentives and delegation of powers in favour of provinces and local authorities for managing the zones. 3. Comparing Chinese SEZ policy with India In spite of the fact that India was a pioneer in creating one of the worlds’s first export processing zones at Kandla in 1965, EPZs have never had much impact on India’s export performance. Tariff exemption schemes have tended to be excessively complex and encourage a ‘licence raj’ mentality at the operational level. Both economies are large emerging markets that had rather similar profiles in 1978. Today, China ranks number one as the world’s preferred foreign investment dest ination. Closer examination of the FDI statistics suggests that India’s performance has been abysmal in comparison to China. India lags behind for a number of reasons. These include a high tariff regime, poor infrastructure (power, ports, roads and railways), and a regulatory system that is too often not business-friendly and inflexible labour laws. In this section a comparison has been done between Chinese and Indian SEZ policy on different parameters like tax incentives, labor laws, FDI inflow, employment and export performance. First, consider the size of the proposed SEZs. Chinese SEZs are like townships. India has not gone that far, but according to the SEZ guidelines, the area of an SEZ should be 1000 hectares. It is being argued that large sized SEZs can perform better as they will have a larger scale of economy but on contrary to that the best performing SEZ in Mumbai has an 26 area of 93 acres only. It is being considered that one of the china’s success factors was large size of SEZs. For instance, entire Hai Nan Island has been declared as SEZ with an area of 34,000 Sq. km. Table 3. 2. 1 below shows the size of all five existing SEZs in china. Table: 3. 2. 1 Size of Chinese SEZs SEZ 1) Shenzhen 2) Zhuhai 3) Xiamen 4) Hainan 5) Shantou Area (Sq. KM) 327 121 131 34000 234 Source: Kumar, 2003 There is no doubt that SEZs have an edge over rest of the economy in terms of investment friendly environment and it’s quite obvious that if we have an investment friendly environment in a larger area, economy would do well. Rather than applying the theory of having larger scale of economy we should focus on an overall hassle free environment for export and this can be done only by extending the SEZ policy to whole country where every small and big export oriented manufacturers will have the access to business friendly environment. One counter argument to this proposal might be that SEZ policy in India is being implemented on a pilot basis, and government can extend this policy to whole country if SEZ works as a tool to bring economic reform. But unfortunately SEZ policy nowhere talks about extending the same hassle free system to rest of the country. It means that carrying out businesses in hassle free environment would still be a dream for rest of the country, so infrastructure else where in the country would not improve. The performance of SEZ also depends on the inner infrastructure and how can we think of a great performance from SEZs when rest of the economy still suffers from the same unfriendly environment. 27 SEZ’s were established by the China to encourage foreign investment, bringing jobs, technical knowledge, and future tax revenues in return for significant tax concessions at start-up of the operations and over a number of years. The biggest benefit to the investor is significant tax concessions early in the project. Tax concessions offered to a manufacturing startup in Chinese SEZ are: †¢ †¢ †¢ †¢ †¢ No tax during start-up years before making a profit The first year that any company makes a profit starts the â€Å"Tax Clock† and is year one The first and second year after the tax clock starts, there is no tax. For years three and four, there is 1/2 of the normal tax rate. In the fifth year, the company pays the full normal tax rate In terms of tax benefits we are ahead of china. In SEZ policy tax benefits has been increased in comparison to EPZ but the failure of EPZs indicates that tax benefits can’t alone boost the FDI and export performance. Table 3. . 2 below compares the performance of these two countries. Table 3. 2. 2: Comparison of SEZ performance China Share of SEZs in total export Employmnet(Direct) generated through SEZs FDI inflow through SEZs India 5% 0. 1 million US $ 2 billion 23% 2 million US $ 60 billion Source: KPMG report, ministry of commerce and industry (GoI) The contribution of Chinese SEZs to the country exports is in the range of 15-23%. Acc ording to available statistics, the share of SEZ exports to country exports in 1997 was 23% (i. e. approximately US $ 42 billion). Overall, all the zones put together have played an important role in the overall growth of the Chinese economy. These zones taken together employ more than two million people directly and approximately 16 million overall (both direct and indirect). Cumulatively, 20% of the total foreign direct investments 28 into China have made its way into SEZs (i. e. approximately US $ 60 billion till date). Performance of SEZs in these two countries should not be compared just on the basis of export and other figures because size wise Chinese SEZs are much larger than Indian SEZs. But even in performance (export, employment) per Sq. KM China witnessed higher rate of growth and it was possible because of their liberal framework of SEZ policy. As regards labour laws, it is difficult to imagine that a communist country like China has relaxed these laws by allowing a hire and fire policy for the SEZs. This single measure went a long way in attracting foreign investment to these zones. After investors gained confidence in the productivity of Chinese workforce, the hire and fire policy was substituted by the contract system. There is ample justification for adopting in India a flexible labour policy in India, not just for these exporting enclaves but also for rest of the country. Rigid and outdated labour laws hinder the economic development and it sets the rationale for having a labour reform. According to section 5B of the labour code any registered firm, that is employing more than 100 people, is required to seek permission from the state government to retrench its workforce. The country budget of March 2002 promised a change in the legislation to raise the level to 300 but due to coalition government it never happened. The result is that formal-sector firms (those that are registered and that pay their taxes) loath to take on new employment, and the vast majority of India’s employment is informal, in small, tax-evading, inefficient enterprises. The policy in India on these critical issues is lukewarm. It just mentions that the laws of the land will apply and that the zones can be declared as public utilities under the Industrial Disputes Act. Merely declaring SEZs as public utilities will, however, not serve much purpose as seen in the EPZ experience. The radical difference in the attitude of the Indian and Chinese governments on this matter is reflected n the recently published investors guide for Special Economic Zones in India. It states ‘the labour laws of the land will apply to all units inside the Zone. However, the respective State Governments may declare units within the SEZ as public utilities and may delegate powers of the Labour Commissioner to the Development Commissioner o f 29 the SEZ’ (Ministry of Commerce and Industry, 2002, p. 15). In China, the right to hire and fire has been enshrined in SEZ regulations since 1982. Moreover, in India there are strict regulations stipulating that contract labour is only allowed work of a temporary nature. By contrast, the World Bank survey (2002b), estimates that in Guangzhou firms employ more than 20 per cent of the labour force as non-permanent workers. Of course many Indian employers find ways round the regulations through outsourcing and less formal means but the current system undoubtedly reduces flexibility. China made the provincial and local authorities act as partners and stakeholders by delegating them powers for approving foreign investment. The SEZ authorities in China can approve investment proposals up to $30 million. This has been a significant feature of the Chinese policy and a key contributor to the success of SEZs. The Indian policy only enables the State governments to set up SEZs, but does not empower them to approve investment proposals. These powers have been vested with the development commissioners concerned who represent the Central Government. This will result in centralization of work in their offices. Government boasts of decentralizing the whole process and talks about single window clearance but anybody who goes through the SEZ act can figure out how complex and centralized this policy is. Last section of this research paper critically analyzes the ‘so -called’ decentralized nature of the SEZ policy. Another ticklish issue is involvement of local government. Unless the State and local governments are directly made responsible for the management of SEZs and approving investment proposals, their political leadership and bureaucratic set up may not have any incentive to push the initiative forward. But in India all the important decisions are being taken by central government China has gone a step further by delegating powers to the local authorities. The local authority manages Shenzhen SEZ, which has the highest export turnover. 3. 3 Current scenario in China 30 Over the last five years the GDP growth of china has been near about 10% and SEZs is being viewed as an engine for this rapid growth. Higher GDP rate can be considered as one of the major success of SEZ policy but regional disparities as an outcome of this policy has forced China to rethink and restructure this policy. Per capita income in the richest city is over 50 times per capita income in poorest city. Awarding a privileged status to some zones at the cost of others is responsible for this higher disparity. For instance, china had received the cumulative amount of US $ 128. billion of FDI between the year 1979 to 1995 and the coastal areas accounted for over 90% of all the FDI received in this period. It might be argued that there is no harm in developing country in pockets but how we can forget that these areas were developed by tax money paid by everyone. Government had to forego tax revenues as tax concessions were the main attracting features. All the tax revenue lost due to SEZ was/is being recovered through taxes from rest part of the country and resultantly all tax payers end up paying higher tax but the benefits are available for very few of them. I see this as the one of the main causes for high income disparity in China. To combat this problem even China has given emphasis on balanced development and tax benefits accorded to foreign investments in the SEZs has been partially lifted. India’s tax and tariff structures are still anti export. India’s high overall tariff rates, especially tariffs on intermediate products that are used by exporters, impose a heavy indirect tax on export competitiveness. Deregulation of the private sector is perhaps one of the most critical areas in the context of India’s reforms. Since almost 90-plus percent of the workforce is in the informal sector, it is of utmost importance to deregulate the private sector so as to get the unorganized sector workforce in the mainstream. Workers in large firms in the formal sector have a virtual guarantee of continued employment according to the Industrial Disputes Act. For firms of 100 employees or more, reductions in the workforce must be upon the permission of state government, which is almost never granted. Remarkably, loss-making firms are also not allowed to close their operations without government consent. The results of India’s ighly regulated labor markets have been devastating. Formal-sector employment in India is shockingly low, in large part 31 because so much urban employment is carried on outside of formal registration. Out of a total labor force of around 406 million, formal sector employment accounts for only 28. 1 million. Of this, 19. 4 million works in the state sector (state enterprises and publ ic administration), and just 8. 7 million works in private firms with formal employment. Indeed with a more open and deregulated economy (economy is not just SEZs), India may well be in a position to perform as China has done over the last two decades. 32 SECTION- IV CASE STUDY: NOIDA SPECIAL ECONOMIC ZONE 33 4. 1 Introduction Noida EPZ was established in 1984 and attained the status of SEZ in the year 2000. Based on their share in exports, past performance and potential for growth, software and gem & jewellery have been identified as the thrust areas. Spread in 310 acre, NSEZ is just after SEEPZ in terms of export performance. NSEZ’s proximity to Delhi sets it apart from other SEZs. Being close to national capital it has an easy access to skilled manpower, abundant managerial and technical expertise. With 151 units in operation, NSEZ contributed 30% of total exports from SEZ in the year 2004. It employs 19,857 people and per unit employment is 131. In terms of per unit employment SEEPZ and MSEZ are ahead of NSEZ with 239 and 150 employee per unit respectively. Units in NSEZ get the tax benefits according to SEZ act but at the same time they have been exempted from the payment of stamp duty, trade tax and entry tax. Noida has witnessed higher growth in export in comparison to other SEZs. The figure 4. 1. 1 shows the export growth of NSEZ: Figure 4. 1. 1 Export growth trend of NSEZ Export Growth of NSEZ 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 Exprort (in million) 15341 10143 10342 7483 8456 9924 Source: NSEZ Authority The total government investment in NSEZ is Rs 78 crore while the private investment is of 650 crores. NSEZ has the highest private investments and the reason for this is better business opportunities due to its proximity to Delhi. Another important factor is incentives given by the state government. Over the years exports in textile and hardware has been 34 declining but gems & jewellery has witnessed a very high growth and in the year 2003-04 the total contribution was 49. 87% in total exports from NSEZ. The table below summarizes the contribution of different sectors in total exports. Table: 4. 1. 1 Contribution of different sectors in exports from NSEZ Sector 19992000 1341 1660 1393 1201 1295 462 127 295 682 8456 Exports (Rs. Million) 2000-01 1388 2697 1786 1014 1928 329 88 269 843 10342 2001-02 1199 885 1906 1184 3015 207 100 287 1141 9924 2002-03 990 739 1787 1374 3437 238 53 229 1296 10143 2003-04 990 930 1980 1640 7650 310 50 230 1560 15341 Textile/Garments Hardware Software ENGG. Goods GEM & Jewellery Chemical & Pharma Leather Products Plastic/Rubber/Synthetic Miscellaneous Total Source: NSEZ Authority 4. 2 The reasons for NSEZ’s success: A) Proximity to Delhi: One of the prime reasons of NSEZ’s success is its proximity to Delhi. Noida has better transport and other infrastructural facilities in comparison to others SEZ. Noida was developed as an industrial area and therefore, the whole environment is business friendly. Noida is just 24 KM away from Delhi and it comes under national capital territory (NCT), so in terms of administration, infrastructure and business opportunities NSEZ has an edge over other SEZs. B) Special benefits given by the U. P. overnment: It has been discussed in previous sections that the tax benefits are the key determinants in attracting investments. To woo the investors U. P. government has exempted SEZ developers and units from some state taxes as well and it has resulted in higher private investments in NSEZ Exemptions from the payment of entry tax, trade tax and stamp duty makes NSEZ the 35 most sought after destina tion for setting up the units. Due to these exemption units in NSEZ export more to reap the benefits given by the state government at the fullest. 36 Section – V Policy Analysis: A Critical Approach 37 Without doing the cost benefit analysis when a government establishes any economic policy which affects all the people in a direct or indirect way, it becomes important to raise some basic questions like whether the benefits of that policy would outweigh their costs, is it good for the country in the long run? SEZ policy has been enacted by parliament but ironically no cost benefit analysis was done before announcing it. As discussed earlier the prime objective of this scheme is to boost the export sector and a package of fiscal and non fiscal incentives are being offered to developers and units to achieve the objectives. One way to assess the rationale for having SEZ policy is to investigate what would have been the performance of the economy in the absence of this policy. Anticipating this would not be an easy task. Export performance of our country has been abysmal and there was a need to take some measures but according to me, preferential treatment should be the last measure and firstly any government should root out all those evils which are hindering the growth of export or for that matter whole economy. Rigid tariff regime highly regulated labour market, centralized governance are some major problems which obstruct the growth of the export sector and this also makes the investment climate unfriendly. Deregulating the labour market and decentralizing the whole process should have been the first priority of the government and making the whole country hassle free for investments and business opportunities would automatically boost the export sector. Establishing SEZs is a very complex task encompassing a wide range of policy, legal and regulatory issues. SEZ policy was praised initially as a well drafted policy but inter ministerial conflicts, heavy economic costs and recent cases of migration from DTA to SEZs actually highlights the blind spots of its designers. 5. 1 Heavy Economic Costs According to SEZ Act 2005, the firms are eligible for getting an extended Income Tax holiday for 15 years. Firms and developers have also been exempted from excise duty and custom duty. A loss of Rs. 39,704 crore of duty under export promotion schemes during 2003-04 (CAG Report, 2004) which accounts for 82% of customs duty collected that year gives an idea of how costly this whole affair is. According to an internal assessment by the 38 Finance Ministry, the Government may have to forego about Rs 90,000 crore in direct and indirect taxes over the next four years on account of SEZs. 5. 2 Corporate Welfare Very recently an article written by M. Bhardwaj appeared in ‘Business Standard’ which alleges that Haryana government acquired over 1700 acres of land from farmers at Rs. 300 crore and offered this land to Reliance for 360 crore in the name of SEZ while it was estimated that land was worth 5,000 crore. This is a perfect example of corporate welfare. It’s true that the value of land goes up drastically when market anticipates the introduction of any such scheme into that particular area but taking away the land from farmers at a much lower rate can’t be justified. According to the SEZ Act any state government can set up SEZ jointly with private sector. This can be called public private participation. Theoretically everything sounds good, so where is the problem. Now if any company has link with top politicians of a state, the possibility of favoured treatment can’t be ruled out. Even in terms of incentives state can also offer a package of tax benefits. Imagine a situation where two firms which produces the same good, are operating from two different states and one of them gets an edge over another just because of preferential treatment by the state. Would you call it a fair competition? SEZ act enables the state government to offer land at a much lower rate and to provide extra incentives and what do we expect that the state governments would not misuse these powers? 5. 3 Migration from DTA to SEZ To avail all the facilities and incentives offered by SEZs, small firms and even big companies are shifting to these privileged enclaves. SEZs have encouraged inward migration. One of the prime objectives of this policy was to attract FDI but the share of FDI in investments in SEZs is very low and due to inward migration very few new manufacturing units have been set up in the SEZs. 5. 4 Real Estate Play 39 State governments are offering land to SEZ developers at concessional rates. For real estate developers SEZ policy has come as an opportunity to grab the scarce land near cities. Ideally SEZs should be established in remote areas but due to lack of infrastructure the concentration of SEZs are near by cities. According to SEZ Act at least 25% of the total acquired area would be processing area and in the remaining area developers can build commercial complexes, malls, hospitals, hotels, educational institutions etc. Minimum area requirement for setting up SEZ is 1000 hectares and according to SEZ guidelines developers get a tax break even on all the buildings on the 750 hectares. On going real estate boom has shifted the focus from export to building residential complexes and commercial malls. Developers can always make huge profit from selling or leasing the buildings and this is where real estate play comes in. Land deals and compensation payments are known to be hot-beds of corruption so no wonder if farmers are being displaced from their place in the name of SEZ without giving adequate compensation. Conclusion Considering the need to boost export sector and attract FDI, government announced this policy but ironically the performance of SEZs in exports highlights the failure. When government should liberalize overall policy, government has decided to focus on one or two areas. The real attraction of SEZs is the tax holiday promised and to grow the business in hassle free environment firms are just shifting to these privileged enclaves. To compete with China a package of fiscal and non fiscal incentives are being given but this has been overlooked that tax benefits in china’s SEZ were available only to foreign investments, not exports. All exemptions and fiscal incentives should go in the process of overall tax and labour reform. Giving preferential treatment to any particular area in the name of exports can’t be justified in the democratic set up. Even if government wants to continue with this policy, only developers should be given the tax benefits if they are developing any SEZ in the remote area. The whole process is still centralized and government should minimize their role. 40 References: 1. Official Website of SEZ. http:// sezindia. nic. in. 2006, accessed on 23 May 2006 2. Ministry of Commerce. 2005. Annual Report2004-05. 3. CII report. 2005. Special Economic Zone: Engines for Growth. Available at http://www. ciionline. org/Northern/regionalfocus/836/images/sez. pdf. Accessed on 23 June 2006. 4. Bhardwaj, M. 2006. No review, RIL mega SEZ signing next week, says Haryana CM. June 13. Business Standard 5. Aggarwal, A. 2004. Export Processing Zones in india : Analysis of the Export Performance. ICRIER Working paper No. 148. 6. Jain, S. 2006. Killing SEZs, making a killing. 22 May. Business Standard 7. Tondon Committee (1982) ‘The Committee on Free trade Zones and 100% Export oriented Units, Apponited by the Ministry of Commerce, Government of India, September 1981. 8. IIPM Editorial. 2006. The Great Indian obsession. 9. The Hindu. 2005. Lok Sabha passes SEZ Bill. 11 May 10. Suchitra, M. 2006. The high cost of easy foreign exchange. 9 March. India Together 41 Annexure-1 (List of all the fiscal and non-fiscal benefits given to SEZ developers and units) i. 00% income tax exemption for a block of five years and an additional 50% tax exemption for two years thereafter ii. 100% FDI in the manufacturing sector permitted through automatic route, barring a few sectors. iii. External commercial borrowings by SEZ units upto US$500 million in a year without any maturity restrictions through recognized banking channels. iv. Facility to retain 100% foreign exchange rec eipts in Exchange Earners’ Foreign Currency Account. v. 100% FDI permitted to SEZ franchisee in providing basic telephone services in SEZs. vi. vii. No cap on foreign investment for small scale sector reserved items. Exemption from industrial licensing requirements for items reserved for the SSI sector. viii. No import licence requirements 42 ix. Exemption from customs duties on import of capital goods, raw materials, consumables, spares etc x. Exemption from Central Excise duties on procurement of capital goods, raw materials, consumable spares etc. , from the domestic market. xi. xii. xiii. No routine examinations by Customs for export and import cargo. Facility to realize and repatriate export proceeds within 12 months. Profits allowed to be repatriated without any dividend-balancing requirement. xiv. xv. Job work on behalf of domestic exporters for direct export allowed. Subcontracting both domestic and international is permitted; this facility is available to jewellery units as well. xvi. †¢ Exemption from Central Sales Tax and Service Tax †¢ Facilities to set up off-shore banking units in SEZs. †¢ Exemption from duties on import /procurement of goods for the development, operation and maintenance of SEZ. †¢ Income tax exemption for a block of 10 years in 15 years. †¢ Exemption from Service Tax 43 †¢ FDI to develop townships within SEZs with residential, educational, health care and recreational facilities permitted on a case-to-case basis.