India
The most contentious issue in the operation of special economic zones is land acquisitions where the SEZ will be located. In India where land is a scarce commodity with a very big population (second only to China’s 1.5 billion people), vast tracts of arable land being converted into economic zones brought the ire of the rural people. In some cases, very productive agricultural lands (with irrigation) were converted into industrial use which greatly reduced the total arable land. China has to feed 22% of the world’s total population on only 7% of the earth’s land and India’s situation is not that much different. Altogether, Indian social scientists have estimated that close to 50 million Indian peasants and farmers have been dislocated since special economic zones started sprouting in India.
It is this seemingly mindless headlong plunge into putting up SEZ that had the World Bank itself worried. There are still about 500 special economic zones in the drawing boards at various stages of being completed or negotiated by their developers. The World Bank is concerned that an indiscriminate attempt to follow China’s hugely successful economic zones is not necessarily good for India since there are critical differences between them. For one, China’s economic zones succeeded due to the artificially low value of its currency which made Chinese exports very competitive in world markets despite some quality concerns. This is not the case with India. If its special economic zones attempt to export their produce, it will not be that competitive price-wise in world markets.
In the belief of some left-leaning Indian economists, the ultimate motive of enterprises located inside these special economic zones is not to produce for export but somehow to smuggle their finished products into the Domestic Tariffs Area or DTA. This refers to the local Indian market where goods and services are subjected to the normal tax rates. There is also one marked difference between India and China and that is the size of their domestic markets. In India’s case, domestic or household consumption is at a high 68% of its GDP (gross domestic product) while that of China is at a meager 38% of its GDP. In China’s case, it has no other choice but to export the produce since its domestic market cannot absorb all the production coming from its economic zones. One unusual interesting measure used by some economists to gauge China’s efficiency is the amount of electricity used to generate the equivalent one U.S. dollar of GNP. In China’s case, it is almost 5 times that of the United States and 12 times that of Japan.