Needed: Coastal economic zones

Context: The failure of the Special Economic Zones (SEZs) in India diverts attention to Coastal Economic Zones (CEZs) which could help improve exports and employment, attract FDI and offer a credible public works programme 

Failure of Special Economic Zones (SEZs) in India :

• Minimal economic benefits: SEZs in India failed to significantly improve development indicators (Princeton University).
• Unholy politico-business nexus: intended to benefit politicians and local developers, rather than being used for wider developmental goals.

• Rent-seeking: influenced the key parameter of SEZ development i.e location, which consequently led to poorly matched for market conditions for the private sector.

A case for Coastal Economic Zones:

• NITI Aayog: advocated the setting up of CEZ adjacent to deep-draft ports to bypass logistics and connectivity problems associated with SEZs.
• China’s Model: focused on the key parameter of the location to draw off business from other much higher developed states like Taiwan and Hong Kong.
• The coastal location allowed firms to operate in the world markets unhindered by the poor infrastructure in the hinterland

• Immediate Reasons for adoption: 

• Investments: Need for massive infrastructure boost to revive economy amidst pandemic.
• FDI: Attracting global manufacturing firms looking for relocating out of China.
• Employment: Promotion of labor-intensive exports to tackle the current level of unemployment.

• Next step to Sagarmala: which is focussed on port-led growth and connectivity, will get enhanced by CEZ development next to a port
• Continuing success of decentralisation:

• Various non-major ports (handling 43% of total traffic) ) like Kandla, Kakinad and Pipavav have become key to the export-driven growth due to greater autonomy in decision making.
• China’s success of CEZs in delivering prosperity in the region has been a fruitful result of focused decentralisation.

Conclusion:

• CEZs ticks all the right boxes: a credible public works programme, creating jobs and investments, spurring exports, and attracting FDIs.