Special Economic Zones in India

Special Economic Zones in India, or Hey, They Worked Great in China, Right?

This article was originally published in the October 2007 issue of the Industrial Worker, my union's newspaper.

In one of his recent works, How Much Should a Person Consume?, noted Indian historian Ramachandra Guha points out that developing nations currently on the rise, such as India and China, do not have the same opportunities for colonial plunder that were available to the West. While these budding economic superpowers are increasingly pursuing stronger "relationships" with other developing nations, to date they have relied largely on plundering their own human and natural resources in the name of development. Indeed, to quote Gandhi, "the blood of the villages is the cement with which the edifice of the cities is built."

Immediately upon arriving in India in March of this year, I found such sentiments underscored by events in the village of Nandigram in the state of West Bengal. According to official accounts, open warfare erupted between as many as 5,000 enraged villagers and paramilitary police aided by supporters of the ruling Communist Party of India. The conflict, which resulted in hundreds of injuries and the deaths of more than a dozen protestors, captivated the nation and received wide-scale media coverage. The source of the conflict: the proposed creation of a “Special Economic Zone” (SEZ) in the region and resulting eviction of agriculturalists from land that they depend upon for their livelihoods.

This outbreak of violence was but a crescendo however to ongoing struggles in the region, and throughout the country, around SEZs. Less than two months prior, the IWW’s International Solidarity Commission had issued a letter in support of a rural workers’ union (the Paschim Banga Khet Majoor Samity, or PBKMS) in West Bengal. Yet it would be naïve to allege that India’s land struggles originated with the nascent SEZ approach to development. Rather SEZs are merely the newest public face to the liberalization of the Indian economy (dating back to the early 1960s, and intensifying in the 1990s), and to the politics of rich and poor going back much, much further. As noted by the PBKMS: “The legal mechanism for these land seizures—the Land Acquisition Act—derives from [British] colonial law.” Guha also points to an “imperial model of [natural resources] management” that runs throughout modern Indian history, the aim of which has been “…to legislate commercial exploitation of [natural resources] as the only legitimate use, thereby denying traditional subsistence use by locals. Such an approach inevitably resulted in ongoing breaches of policy and even open rebellion by locals.”

A far cry from the economies of the North, in India a vast proportion of the population still relies directly on the agricultural sector for their livelihood. While academics speculate as to whether the nation’s economy has entered a “new phase” of development, a whopping 60+% of Indians still rely upon natural resource-based livelihoods, declining only 15% over the past 50 years. Agriculture directly employs 234 million Indians, and these agriculturalists, again in contrast to those in the North, run predominantly small, subsistence-based operations, with 90% of landowners still tilling their own fields. In India, as in much of the global South, land is life. Contrast this economic reality with a brutal history of land-grabs and displacement and the outcome is not hard to imagine. Indeed, India’s poor have good reason to view “development” schemes with hostility; the New Delhi-based Centre for Science and Environment (CSE) estimates that since 1950, 40 million people (the majority of whom are tribal people and Dalits, or “untouchables”) have been displaced from their land due to large industrialization projects; at least 75% of them still await rehabilitation and resettlement. As reported in the pages of the Industrial Worker in recent months, similar State-sponsored land grabs, also in the name of development, have resulted in mass civil uprisings in Vietnam and in China.

Though India first began experiments with free trade zones (under the rubric of “Export Processing Zones”) back in the 60s, the more recent rush to develop SEZs is frequently attributed to the “success” of this model in China. Yet as Shankar Gopalakrishnan points out in a recent re-assessment of Chinese SEZs, “The general impression that China’s special economic zones are a remarkable success is an incomplete one. Left out of the picture are inequities in development, arable land loss, real estate speculation and labour violence…What is happening in SEZs can be seen as progress, therefore, only insofar as aggregate investment is concerned; socially it is nothing but regression.” Further, he concludes that while Indian states are scrambling to emulate and even intensify the Chinese SEZ model, they have utterly failed to address the aspects of this model which have led to such regression.

Special Economic Zones in India, as in other countries, have been established with the ostensible goals of attracting greater foreign and domestic investment, improving productive capacity, and boosting employment and exports. This model typically involves a “streamlined” regulatory environment, enhanced infrastructure, tax breaks, government subsidies, and other forms of State support. And according to the Indian Ministry of Commerce and Industry, SEZs are yielding great results, with an increase of hundreds of thousands of new jobs and several billion dollars of private investment predicted by year’s end. Yet these rosy statistics leave many questions unanswered and gloss over a few important facts on the ground.

Already mentioned is the highly contentious issue of displacement of those dependent upon natural resources, such as the Mundra SEZ in Gujarat, whose development undermines the livelihoods of local fisher-folk and pastoralists, or the proposed Midnapur petrochemical SEZs in West Bengal, which would be built alongside and over top of the area’s freshwater supply and farmlands. In addition to dispossessing locals and the specter of environmental spillover, SEZs are also specifically designed to create “industrial townships” or “countries within a country,” thereby removing authority from local governments and even township residents and relaxing important labor, health and safety, and environmental legislation. If SEZs are truly being established to advance the common good, then they should obviously be beholden to citizens and to laws enacted to protect residents and the natural environment. In the words of one local NGO critical of the SEZ model, “…this is a new form of the East India Company establishment.”

Indeed, the SEZ debate epitomizes the competing interests of rich and poor so frequently glossed over in “development” schemes. By simply designating their project a SEZ, developers are able to (sometimes forcibly) acquire land at rock-bottom prices, fueling a highly-speculative real estate boom with powerful ripple effects for neighboring farmers struggling to hold on to their land as well as landless agricultural laborers. While the robber barons make a fortune, those most ill-prepared to adapt to the rapid economic, demographic, and ecological shifts accompanying the SEZ model of development are left behind. Further, since no more than 50% of the overall land area of the SEZ is required to be devoted to manufacturing, the rest can be used for “support infrastructure” such as housing developments, shopping malls, and other amenities aimed at India’s growing middle class—all subsidized at taxpayer expense. As with China’s SEZ experience, rapid development in a few privileged pockets will likely be exchanged for revenue shortfalls in the country’s poorest districts—a policy which can only exacerbate regional inequalities.

Critics of SEZ policies can be found even within the ranks of the Indian bureaucracy, with the Finance Ministry bemoaning an estimated 1,750 billion rupees (>$43 billion) in foregone tax revenues by 2011—a hefty price tag for a cash-strapped government unable to deliver basic services to much of its populace. To-date it has not even been adequately demonstrated that the private sector investment flowing into the SEZs is a direct result of the policy itself, as opposed to capital which would have been invested in the fast-growing Indian economy anyway but is simply being redirected towards the path of least resistance (as capital is wont to do). Sunita Narain of CSE points to Korean giant Posco's mega steel plant as a case in point: “It 'managed' to get categorized as an SEZ, well after it had already come into the country to set up shop.”

Given the high social costs and inequitably-distributed benefits of current models of development, citizens’ groups across India are agitating for alternatives. Sadly, scenes such as those witnessed at Nandigram are likely to reoccur. Today there are few regions of India which are not caught up in one way or another with contentious land disputes that pit the State and moneyed interests against the working poor, many of whom with little left to lose. In response to this public outcry, the government has taken a number of steps, including limiting the size of SEZs and stripping state governments of the power to acquire land on behalf of developers. The Ministry of Rural Development is also formulating a much-needed overhaul to the State’s approach to resettlement and rehabilitation, and political leaders have suggested that productive farmland should not be diverted to SEZ projects. Whether these reforms will address criticisms of SEZs without also undermining the professed goals of the program remains to be seen, but for the moment at least, the SEZ march continues largely unabated. As of this summer, a total of 339 SEZs had been formally approved by the central government, with another 170 projected approvals on the way.

WORKS CITED:

-Guha, How Much Should a Person Consume?

- Guha chapter in Environmental Issues in India for commentary on how British colonialist policy/relations w/ rurals has continued under independent India (e.g., 1935 declaration re: State’s role in land acquisition)

-ISC solidarity letter re: West Bengal: http://lists.iww.org/private/isc/2007-January/000881.html

-IUF statement on violence/repression in West Bengal: http://www.iuf.org/cgi-bin/dbman/db.cgi?db=default&uid=default&ID=4017&view_records=1&ww=1&en=1

-“India: General strike called after 14 protesters killed” http://libcom.org/news/india-general-strike-called-after-14-protesters-killed-20032007

-“Special Economic Zones: Are They Good for the Country?” by Ram Krishna Ranjan, Centre for Civil Society

-Shri Kamal Nath, India’s Union Minister of Commerce and Industry, addresses University of Oxford (University College) re: the Doha round of the WTO negotiations. May 4, 2007. http://commerce.nic.in/pressrelease/pressrelease_detail.asp?id=2025

- March 2005, IMF Country Report No. 05/87. “India: Selected Issues”

-Economic and Political Weekly May 26, 2007 “Nandigram and the Question of Development” MALINI BHATTACHARYA

- Economic and Political Weekly May 26, 2007 “Help the Rich, Hurt the Poor: Case of Special Economic Zones” E A S SARMA

-Shankar GOPALAKRISHNAN, “Negative Aspects of Special Economic Zones in China” Economic and Political Weekly April 28, 2007.

-CSE’s Natural Resources Management and Livelihoods “Towards Green Villages” workshop materials

-Website, Indian Ministry of Commerce and Industry, Department of Commerce: http://sezindia.nic.in/HTMLS/about.htm

-“Prowling tiger: India pushes anew for special economic zones”

Jul 9th 2007, From the Economist Intelligence Unit ViewsWire: http://www.economist.com/agenda/displaystory.cfm?story_id=9462984

-“A peasant surprise: A scheme to provide land for industrial development hits the skids”

Jan 25th 2007 | GAR CHAKRABERIA, From The Economist print edition: http://www.economist.com/background/displaystory.cfm?story_id=8597150

-“Cash cows: They worked in China. But will India's zones boost investment, or just divert it?”

Oct 12th 2006 | DELHI, From The Economist print edition: http://www.economist.com/world/asia/displaystory.cfm?story_id=8031219

-Editorial Note: SEZ Policy “Ceiling on size will limit growth” by Savita Kulkarni

-website and research paper of Paryavaran Mitra http://paryavaranmitra.org.in/

-“A concession called SEZ, all for foreign exchange: Special Economic Zones barter away democracy” by MAHESH PANDYA AND HIRAL MEHTA; http://downtoearth.org.in/Full6.asp?FolderName=20061031&FileNAme=news&sid=30&sec_id=18

- Sunita Narain editorial in Down to Earth 10/25/06

-Gobar Times, 30/6/07 http://www.gobartimes.org

-Asian Development Bank, Asian Development Outlook 2007

-Down to Earth, “Freeze on special economic zones lifted” 4/30/07: http://www.downtoearth.org.in/full6.asp?foldername=20070430&filename=news&sec_id=4&sid=12

-“Background Paper: Land Acquisition and Displacement” Shri. Sanjay Upadhyay, Supreme Court Advocate, New Delhi

-“Land Sovereignty and Food Sovereignty the Key Issue in the Land Debate,” Dr. Vandana Shiva

-“Testimonies from Nandigram,” April 15, 2007, Down to Earth: http://www.downtoearth.org.in/full6.asp?foldername=20070415&filename=news&sec_id=4&sid=1

-“Mundra SEZ Spells Displacement for Fisherfolk” March 31, 2007, Down to Earth: http://www.downtoearth.org.in/full6.asp?foldername=20070331&filename=news&sec_id=50&sid=18

-“UP Farmers Continue Protest Over Land Acquisition by Reliance” February 15, 2007, Down to Earth: http://www.downtoearth.org.in/full6.asp?foldername=20070215&filename=news&sec_id=4&sid=6

-“Update” Dec. 31, 2006, Down to Earth: http://www.downtoearth.org.in/Full6.asp?FolderName=20061231&FileNAme=news&sid=60&sec_id=4

-“SEZ, How Special” November 15, 2006, Down to Earth: http://www.downtoearth.org.in/cover.asp?foldername=20061115&filename=news&sid=58&page=1&sec_id=9&p=1

-“Scratched record: Will SEZs succeed, where precursors failed?” November 15, 2006, Down to Earth: http://www.downtoearth.org.in/full6.asp?foldername=20061115&filename=news&sec_id=9&sid=59

-“Zones of conflict: Land acquisition has united farmers” November 15, 2006, Down to Earth: http://www.downtoearth.org.in/full6.asp?foldername=20061115&filename=news&sec_id=9&sid=61

-“Not wasted: New compromise excuse to grab” November 15, 2006, Down to Earth: http://www.downtoearth.org.in/full6.asp?foldername=20061115&filename=news&sec_id=9&sid=63

-“Windfall loss:Tax breaks: Public money for private gain” November 15, 2006, Down to Earth: http://www.downtoearth.org.in/full6.asp?foldername=20061115&filename=news&sec_id=9&sid=64

-“New nabobs” November 15, 2006, Down to Earth: http://www.downtoearth.org.in/full6.asp?foldername=20061115&filename=news&sid=66&page=2&sec_id=9

-“SEZs get a social face” Down to Earth, Oct. 31, 2006: http://www.downtoearth.org.in/full6.asp?foldername=20061031&filename=news&sec_id=4&sid=8

-“Union ministries clash over SEZ” September 30, 2006, Down to Earth: http://www.downtoearth.org.in/full6.asp?foldername=20060930&filename=news&sec_id=4&sid=8

-“Gujarat NGOs demand separate environment court” July 15, 2006 Down to Earth: http://www.downtoearth.org.in/full6.asp?foldername=20060715&filename=news&sec_id=49&sid=51

-“SEZ who?: No industrial revolution this“ March 15, 2006, Down to Earth: http://www.downtoearth.org.in/full6.asp?foldername=20060315&filename=news&sec_id=4&sid=17

-“Protests against land acquisitions in India intensify“ 8/22/07, http://southasia.oneworld.net/article/view/152479/1/

-“Medha Patkar criticises Indian govt's new SEZ policy” April 9, 2007, http://southasia.oneworld.net/article/view/148030/1/

-“Nandigram bloodbath puts WB’s land acquisition policy on hold” March 20, 2007 http://southasia.oneworld.net/article/view/147295/1/

-“India:Special Economic Zones on the Backburner” Feb. 12, 2007, http://southasia.oneworld.net/article/view/146035/1/

-“Indian economic zones 'hitting the poor'” http://uk.oneworld.net/article/view/145038/1/ 1/21/2007

-“Modhwadia smells foul play in land allotment to DLF” September 6, 2007 http://cities.expressindia.com/fullstory.php?newsid=254904

-Shoma Chaudhury interview with Arundhati Roy, March 31, 2007, http://www.tehelka.com/story_main28.asp?filename=Ne310307Its_outright_CS.asp