Magazine article New Internationalist

The Bottom Line

Magazine article New Internationalist

The Bottom Line

Article excerpt

The idea that creating spaces with good infrastructure and simplified procedures assists industrialization is not new. But its latest form goes further - there have to be tax breaks, highly subsidized land and little or no compulsory worker protection as well.

Proponents argue that these concessions are essential to attract investment, in a world of increasingly mobile capital. In fact, many studies have found that good overall infrastructure, economic growth and stable socio-political conditions are more important.

Typically, China is taken as a successful example by the proponents of Special Economic Zones (SEZs). However, the real impetus behind Chinese economic growth and export-oriented production came not from SEZs per se, but from massive infrastructure investment by the state. Since the 1980s, China has spent nearly a fifth of its national income on this. Chinese SEZs also provoked wild real-estate speculation called 'zone fever', which prompted the Government to impose a blanket moratorium on land-use conversion in 1997.

While the benefits of SEZs based on tax breaks and subsidies are not clear, there are large social and economic costs.

Land acquisition is the most controversial. What is absolutely necessary is that all those affected (not just those with property titles) are adequately compensated. Leaving this to market forces is just not good enough. Tenants and agricultural labourers, for example, would not be compensated. Large purchasers can use pressure tactics, making Offers that can't be refused' at less than the true value of the land. …

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