The central problem is (inadvertently, probably) captured in your sentence: "The Santacruz Electronics Export Processing Zone (SEEPZ) in Mumbai, for instance, massively transformed Indian jewellery and became an export success in its own right." An Electronics Export Promotion Zone succeeds not by exporting electronic products but "jewellery"! It succeeds because jewellery and diamond processing are some of the labour-intensive skills where Indian output is internationally competitive. Here too the output, especially jewellery, is not West-orientated but caters to similar tastes in the Middle East and those of the Indian diaspora. The reason why SEZs fail is that Indian manufacturing has low productivity and is not price-competitive (even with subsidies) in its ex-India landed price for a whole spectrum of goods. High labour and energy costs are part of the reason. So, for many industrial products, even if you give frictionless access via SEZs, you are still unable to compete globally. That's the question to address, and it won't be solved via SEZs: deep structural changes in workers' physical health and skills, less onerous labour laws, ease of exit of zombie firms, etc. On the other hand, institutional changes that encourage productive entrepreneurship rather than unproductive or destructive activities encouraged by high, less-risk, riskless returns from rent-seeking in various forms.
Why everything is so cluttered in Substack? Or it’s intentional because if I only want to read the daily brief now I have to go through every heading being published by Zerodha under various channels. Such clutter is irritating.
The central problem is (inadvertently, probably) captured in your sentence: "The Santacruz Electronics Export Processing Zone (SEEPZ) in Mumbai, for instance, massively transformed Indian jewellery and became an export success in its own right." An Electronics Export Promotion Zone succeeds not by exporting electronic products but "jewellery"! It succeeds because jewellery and diamond processing are some of the labour-intensive skills where Indian output is internationally competitive. Here too the output, especially jewellery, is not West-orientated but caters to similar tastes in the Middle East and those of the Indian diaspora. The reason why SEZs fail is that Indian manufacturing has low productivity and is not price-competitive (even with subsidies) in its ex-India landed price for a whole spectrum of goods. High labour and energy costs are part of the reason. So, for many industrial products, even if you give frictionless access via SEZs, you are still unable to compete globally. That's the question to address, and it won't be solved via SEZs: deep structural changes in workers' physical health and skills, less onerous labour laws, ease of exit of zombie firms, etc. On the other hand, institutional changes that encourage productive entrepreneurship rather than unproductive or destructive activities encouraged by high, less-risk, riskless returns from rent-seeking in various forms.
Why everything is so cluttered in Substack? Or it’s intentional because if I only want to read the daily brief now I have to go through every heading being published by Zerodha under various channels. Such clutter is irritating.
Very good insights about SEZ. Thanks for posting it.
Glad you liked it!