SEZ Act to give big boost to FDI and Employment
KAMAL NATH ADDRESSES PARLIAMENTARY CONSULTATIVE COMMITTEE
OF COMMERCE & INDUSTRY
Shri Kamal Nath, Union Minister of Commerce & Industry, has said that the proposed legislation on Special Economic Zones (SEZs) would give a big boost to the inflow of foreign direct investment (FDI) into the country and would generate more employment through increased economic activity. Presiding over the Meeting of the Parliamentary Consultative Committee of the Ministry of Commerce & Industry, here today, Shri Kamal Nath explained that since SEZs required world class infrastructure and the additional costs would be very high, infusion of investment on a massive scale including FDI was required to make the scheme a success. A single law was needed to give stability to the legal framework as also to consolidate all SEZ related rules and regulations in one place. “FDI can be attracted only if foreign investors see a law in place, indicating a stable statutory policy”, Shri Kamal Nath said.
Members of the Committee cutting across party lines welcomed the proposed legislation and responded positively to Shri Kamal Nath’s appeal for support in order to expedite passage of the SEZ Bill in the Budget Session of Parliament. MPs present were: S/Shri Sambasiva R Rao, Abdul Rehman Antulay, S. Sathyanarana, Harin Pathak, P. Karunakaran, Shyam Chandra Gupt, Suresh Prabhu, Rajeev Shukla, N.R. Govindarajar and Sharadrao Anantrao Joshi. Shri E.V.K.S. Elangovan, Minister of State for Commerce and Industry and Shri Ashok Jha, Secretary, Department of Industrial Policy & Promotion (DIPP) attended along with senior officials of the Ministry. During the discussions, Shri Kamal Nath also announced that the Foreign Trade Policy for the year 2005-06 (within the five-year framework) would be announced by the end of March 2005 and indicated that it would focus on areas of potential quantum growth.
“Domestic investment has to be supplemented by infusion of FDI and FII in substantial measure. It is crucial for us to be able to accelerate economic growth and to this end, substantial increase in foreign investment involving funding over a period of 15 to 25 years would be required, especially in infrastructure”, Shri Kamal Nath said. Exports from SEZs world-wide (850 SEZs in 116 countries) amounted more than US $ 1 trillion, i.e. 15% of total world exports. Further, 40 million jobs were created world wide through SEZs, while “China and Dubai have been even more successful in targeting FDI mainly due to their SEZ policy”, the Minister said. SEZs, he said, would be instrumental in increasing manufactured exports and the revival of the manufacturing sector, pointing out that within 20 years, Malaysia’s manufactured exports increased from 18% to 73%; Thailand’s from 24% to 74%; Mauritius from 26% to 66%; and China’s from 51% to 82%.
Shri Kamal Nath informed that at present there were over 700 units in operation in India’s existing SEZs providing direct employment to about one-lakh persons, of whom 40% were women. Indian entrepreneurs had invested about Rs.1500 crore in these units, and FDI had been Rs.500 crore (just 100 million dollars). Exports from SEZs last year were 3 billion dollars (about 5% of India’s total exports).
Responding to Shri Suresh Prabhu’s suggestion for services SEZ in view of the huge export potential in this sector, Shri Kamal Nath informed that services were already covered in the scheme, including medical services. Shri Prabhu along with Shri Antulay suggested SEZs for coastal areas and setting up of single product Zones, as well as focus on SEZs for agriculture. Shri Karunakaran while welcoming the proposed legislation wanted to build adequate safeguards to protect domestic industries, especially in the agriculture and allied sectors. Shri Antulay also suggested that steps be taken to invite loans from abroad on the same lines as inviting FDI. Shri Shyam Chandra Gupt stressed the need to ensure investor-security. Shri Rajeev Shukla felt that state governments must be more supportive towards SEZs. Shri Sharad Joshi wanted SEZs in areas of India’s comparative advantage, notably organic farming; aromatic and medicinal plants; manufacture of hybrid seeds and horticulture. Shri Kamal Nath agreed with Shri Joshi on the need to establish credible certifying agencies for organic farm products. Shri Joshi also suggested exclusive Zones for growing variety of onions popular in the West. Thus, the domestic market could be insulated from the international markets, and shortages could be averted even while earning foreign exchange.
Shri Kamal Nath in his reply said that already six States had their own SEZ legislations. He stressed that States should vie with one another by providing state of the art, facilitative environment for the creation of more SEZs, as also for attracting FDI into the Zones. He also clarified in response to a query from members that all supplies to SEZs would be treated as exports.
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SB/SS/MRS
(Release ID :7042)