The concept of SEZ goes much beyond merely facilitating exports generation; they are integrated townships with well-laid infrastructure and services and without any encumbrances for trade. However, SEZs cannot be viewed as the only model for promoting industrial development.Special Economic Zones (SEZs) are insulated export areas that offer benefits, such as duty concessions to industrial units, so that the industrial exports can be given a boost to and result in higher growth rates of exports; they are analogous to the concept of Free Trade Zones (FTZs) but extend beyond that as they offer integrated infrastructure development within the zones.

They are coupled with several advantages like boost to productivity of capital, labor and innovation, enhanced technology deployment and better management practices in the industries. This, in turn, is expected to provide long-term and short-term impetus to the growth of industrial manufacturing sector, and transform it into better oriented towards attaining the levels of global competitiveness. Often, the SEZs are created as tax havens in over-regulated economies so that the general taxes do not eat away profits, and manufacturers will have the flexibility to utilize their resources in an efficient manner. The concept of SEZ, however, goes much beyond merely facilitating exports generation; they are integrated townships with well-laid infrastructure and services and without any encumbrances for trade. The value addition ladder can be very high in SEZs to provide world-class facilities that exert a strong pull on domestic and Foreign Direct Investments (FDIs).

However, SEZs cannot be viewed as the only model for promoting industrial development; alternate models like cluster- based development of industries and incentivized growth options for small and medium enterprises may gear up production in meeting the economic objectives. It is also important to recognize that while SEZs provide an opportunity to establish the export links (or distribution links) for the manufactured goods, they are neither competitors nor alternative to better/strong trade relations between a country and the external world. SEZs have given rise to a sleuth of issues, which we attempt to discuss hereunder from a trade economics/export promotion perspective.

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