Citizens’ Research Collective on SEZ

New Delhi, 09 October, 2007: Special economic zones may help India overcome barriers to growth, but they cannot provide long-term solutions to economic reform, says the Organisation for Economic Cooperation and Development (OECD).

In its maiden Economic Survey of India released Tuesday, the organisation says special economic zones (SEZs) could act as a catalyst for economic change, but the focus should be on removing barriers to growth at the national level.

“It might be better to implement reforms like having a lower national corporate tax,” said Angel Gurria, secretary general of OECD, while releasing the survey here.

“Overall, while long-term strategy should not depend on SEZs, these can perform a useful short-term role in overcoming drawbacks and showcasing the positive impact of a number of economic reforms in a real-life setting,” he said.

The OECD feels that the SEZ policy had been devised and introduced to accelerate the Indian manufacturing sector’s global integration and because of the difficulties the government faced in introducing reforms at the national level.

They have also been designed to free businesses from a number of constraints they face in terms of restrictive labour laws, excessive regulation and rickety infrastructure, and extend fiscal concessions to make investments attractive.

“But care must be taken as to the extent of tax concessions that are granted,” the survey said, adding that tax policies also needed to be reformed for creating a truly national market and removing all physical barriers to growth.

The survey says SEZs are expected to attract $6 billion in investment by the end of this year, and extend employment to some 500,000 people.

Source: Sify.com