EPZs not sustainable: ICRIER study

As  the government finalises a law for special economic zones (SEZs), a new study by ICRIER has said that export processing zones (EPZs), which have now been converted into SEZs, are not a sustainable growth model in the long run and should make way for industrial clusters.

The study, which compared EPZs in India, Sri Lanka and Bangladesh, also found that a large number of investors in India complained that the zones were not effective in providing single-window services despite claims by the government.

"Zones are not a sustainable model of growth in the long-run. After the initial phase of expansion, their competitiveness can be sustained by improving the countrywide investment climate," ICRIER consultant Aradhana Aggarwal said.

EPZs need to give way to industrial clusters, especially of high-tech industries, she said, adding this would help in improving export competitiveness.

Of the three countries studied, EPZ investment and employment levels were the lowest in India. About 88,977 people were employed in these zones in India during 2003 as compared to 1,04,237 in Sri Lanka and 1,44,147 in Bangladesh.

Total investment in India EPZs till 2003 stood at $388 million as against $749 million in Bangladesh and $292 million in Sri Lanka, the study said.