Needed: Coastal economic zones

Business Standard 12th June 2020 Save

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: