Although India has somewhat relaxed and liberalized many of its foreign investment laws, special economic zones (SEZs) are popping up throughout the country to make it more attractive to foreign direct investment. One such SEZ has been created near Chennai and will be dedicated solely to the leather and footwear industry, as was announced at a special dinner held during the week of the 2007 India International Leather Fair, which ran in Chennai from Jan. 31 to Feb. 3.
The proposed SEZ should be in place within roughly three months. The land set aside for the leather industry has not been developed and lacks infrastructure, but it is arable. The SEZ awaits partners. It will be the first SEZ in the country that will be specifically related to the leather and footwear sector.
Located on 300 acres of land and about an hour’s drive from Chennai, the new SEZ is dangling in front of potential investors the prospect of a 100 percent repatriation of profits and duty-free imports of goods and materials. In addition, the government has promised to subsidize all necessary training for fresh workers.
The plan is to eventually grow this particular SEZ to nearly 1,000 acres of land, but promoters of the SEZ admit that land prices will be high and acquiring the additional land could take a while. One such worry could be an underlying resistance from farmers and peasants who live in certain parts of the land being bought. In some pockets of the country the government has met stiff resistance from these kinds of groups, who claim that they are not being fairly compensated for the lost property.
But the Indian government maintains that the SEZs springing up throughout the country should offer one million new jobs. This could be true for industrial SEZs, while others that involve mainly real estate could be more self-serving. However industrial SEZs carry their own set of issues. Since the zone is almost completely devoid of government interference, labor laws, workers’ unions and other such rights are also generally unprotected. One of the perks noted in an “Investment Opportunities” booklet handed out by the Council for Leather Exports (CLE) was that in an SEZ there are no fixed wage norms.
There are other incentives for investors, besides the 100 percent repatriation of profits, duty-free imports, etc. Foreign investors can write off unrealized export bills by up to 5 percent, will have full freedom to subcontract within and outside of the country and will not be subject to routine examinations by customs officials of import and export cargo. There are taxes only when you sell into India.
Currently there are a total of 23 operational SEZs for various sectors in India, and another 237 have been approved. Through the leather sector’s proposed SEZ and future zones, it is hoped that an additional 500,000 jobs will be created.