In English Employment Law the Issue of Employment Status is Almost Essay

In English Employment Law the Issue of Employment Status is Almost Exclusively one for the Courts to Decide Upon - Essay Example The basic distinction between employee and self employed person is that employee has to serve under the employer with certain terms and conditions whereas the self employed has to work under the contractor for specific job on fixed payment. Another simple way of distinguishing employment from self employment is: a) buying an employee or b) buying a service1. Employment Tribunals Act 1996 provides the formation of employment tribunals. It comprises of judge and two lay members. Most of the times tribunals deal with the employment disputes leaving few exceptions where a judge has to sit alone2. The Tribunal can hear and decide the case if it falls within the ambit of the given acts: a) equal Pay Act 1970 breach of equality clause in contracts of employment b) employment Agencies Act 1973 application by the Secretary of State for a prohibition order c) sex discrimination Act 1975 d) race relations Act 1976 e) Section 230 (3) 19963. Employment Tribunals Regulations 2004 governs the proce dures of employment. The tribunal in question examines the nature of employment with specific reference to the relationship of an employee and the self employed. The decision of the Tribunal is binding on all stake holders. In such cases, if affected employees hire the services of a solicitor he / she have to bears the fee4. The aggrieved party can challenge the decision of lower judiciary in the Court of Appeal or in the Supreme Court as the case may be. The apex court while dealing with the employment cases frequently refers the judgments of House of Lords5. The Supreme Court can: a) affirm or set aside the impugned orders of the subordinate courts b) Order subordinate courts to retrial the case if found that the trial was not fair6. The terms that create confusion in the trials are ‘implied’ and ‘irrelevant’. Employment status is determined on the basis of actual relationship. Court has its own guidelines which prevail in the event of any dispute. One qu estion that arises is that why should the two parties be in dark over this issue for a considerable amount of time. Many workers carry on their duties under the employment status labelled on them by the employers. This goes on for months and even years. There should be a rigid framework that prevents workers from living in ignorance or being completely oblivious to the benefits they can receive from a change in their employment status7. Control Test One of the most important tests to determine the employment status is the Control Test. This test determines the manner in which the work is done8. In the ancient times most of the workers were unskilled. Now there has been a dramatic change in the labour market. Workers are skilled and have in-depth knowledge about their work as compared to their employers. As mentioned earlier, changes in the working styles of corporations and individuals have made the control test less effective in many ways. The problem multiplies when dealing with s killed workers who are not under the direct control of the employer / client, but an integral part of the organization9. Of course there are strengths and weaknesses in control test. Many factors can be considered in the physical control such as presence at work, timely completion of task and the quantity of work given to workers. But with skilled workers who decide their own pace and timing may not be under direct ‘

Career Development Plan Part 4 Essay Example | Topics and Well Written Essays - 1000 words

Career Development Plan Part 4 - Essay Example This paper analyses the new compensation plan at InterClean Corporation. A well structure compensation plan reduces employee turnover and increases corporate profits since it provides adequate incentive for an employee to increase their productivity. The old InterClean had a sales staff that got awarded a sales commission for the sales an employee obtained. This system force the employee to think about individual results, since the salesperson pay would increment based on his/hers achievements. Since the company offered simple product this was a viable strategy. This no longer applies to the new business model the company is implementing. Teamwork is now more important than ever and long term satisfaction of the customer is a strategic focus that must be pursed in order to achieve customer retention. In the solution based business follow up contracts with the clients generated a lot of income for the enterprise. There are two types of rewards systems that cam be used by a company. These two types of rewards are intrinsic rewards and extrinsic rewards. Intrinsic rewards are positively valued work outcomes that the individual receives as a result of work outcomes, while extrinsic rewards are positively valued work outcomes that are given to an individual or group by some other person or source in the setting (Schermerhorn & Hunt & Osborn, 2003). The total compensation plan the company will offer has to satisfy the needs of both the employee and the firm. The firm does not want to establish a plan that does not encourage professional development and teamwork. The new compensation plan the company will offer to its salespeople will be profit sharing plan with a group merit pay element as well as other individual incentives. In a profit sharing plan a company contributes a portion of its pre-tax profits to a pool that will be distributed among the eligible employees (Hr-guide, 2008). The profit sharing at InterClean will be calculated

Human resource Management in International Expansion

Human resource Management in International Expansion In todays global environment when expanding a business in to another country IHRM would play a handle new key role. There can be identified very clear 6 differences between domestic and international HRM. They are more HR activities, need for broader perspectives, the more involve with employees personal life, risk exposure, broader external influence, changes in emphasis as work force mix of expatriates and locals. IHRM is concern with staffing policies, recruitment and selection, remuneration, motivation, training and development, performance appraisals, promotion, retirement, redundancy and lay off, industrial relations and foreign assignments. Expatriates are the employees who is working and temporarily residing in a foreign country. They could be PCNs, TCNs or HCNs. Due to the development of technologies such as telecommunication, satellite and computer technology and lower cost in going business globally has made the IHRM much more important and easy to manage when compared to the last to few decades. For any organization that have global operations all around the world IHRM would play a Key factor for the company success. Session 2 When a organization do business internationally, understanding the cultural deferences among the countries is very essential to be successful in the long run. This is because operations starting in another country, if there are huge cultural difference among the parent and the subsidiary companies would face varies implications. According to the Hofsteds there are 5 cultural damnations. Power distance This is the extent to which power is distributed unequally among the employees in between the higher positions and the lower positions. Eg India is a high power distance culture (even have a cast system) and USA is a lower power distance culture. Individualism vs collectivisms In a individualistic country people would priorities them self ( USA) where as collectivism country people would priorities group needs. Uncertainty avoidance People would try to minimize risk they face in a situation ( avoiding paralysis through analysis ) usually countries with long history and traditions have a high uncertainty avoidance. Countries such as USA well come higher risks. Masculinity/femininity Masculine- tough value dominant Eg; success, money, satiates, competition Feminine- tender values dominant such as personal relationships, care for others, quality of life etc. When we take Sri Lanka for a example I think we have feminine culture even though have many masculinity futures. The best example for this is during the tsunami situation whole county get together to help the tsunami victims within ours. Cross-cultural communication Similarly, among various countries cross-cultural communication is very necessary so that they can understand each others through religion, culture, art, literature, foreign policies, fiscal polices, etc. such type of bridges of understanding will help to lessen and minimize the gap between two culture. Thirukkural, a noted tamil poet, who has been translated in more than twenty five languages and who had been famous for ethical themes and brevity, has very aptly remarked on power of speech: The goodness called goodness of speech IS goodness which nothing can reach Since gain or ruin speeches brings Guard against the slips of tongue Weight the words and, speak, because No wealth or virtue words surpass. They overspeak who do not seek A few and flawless words to speak (Gupta .reprint 2004) It is said that speech is grater than words, mind is greater than speech, will is grater than mind consciousness is greater than will, meditation is greater than will and power of understanding is greater than meditation.sanakumara, surmonzing narad atma vidya or brahmavidya (knowledge of the supreme) says : power of understanding beings sine quo non for proper meditation, thats is greater than meditation. If we cannot correctly understand and discriminate good and bad, truth and untruth and discriminate between good and bad, truth and untruth, and the like pairs of opposites, how can we meditate? Thus there is no doubt that the power of understanding is linked with speech, one of the tools of communication. Session 3 There are many activities effecting the IHRM in a organizational context. Industrial relations, health and safety, management style, authority structure, organizational structure, leader ship style and etc. And organization could implement a different structures such as global product division, global area division and global matrix structure depends on the situation, subsidiary age and size structure adopted. Controlling of subsidiary would have both formal and informal control systems. Formal methods would be structure, reporting systems, budget and targets where as informal methods would be cooperate culture and personal relationships. we know some of the transferable HRM policies such as physical layouts, use of technologies, holiday entitlements, quality circles depending on the culture, motivation and leadership style, performance appraisals and etc. company expatriates would have to perform the key activities when implementing the procedures in subsidiary an at the same time adopt the suitable local norms, standards and value in to the system to make it more localize the operations. Improving the performance, implementation of corporate culture, solve technical problems, handling of sensitive information, reduces risk, improve trust and team working skills are some of the important functions that expatriates should perform during a foreign assignment. Future more political stability, country infrastructure, technology and resources available in the country, organizational and national cultural differences should be looking to when implementing IHRM policies. Session 4 When starting a subsidiary in a foreign country, there are many reasons why expatriates are needed. Teaching a new process, setting up a new branch, facilitating the knowledge transfer between parent and the subsidiary, helping branch to implement a matrix integration is some of the purposes. This would also depend on the relationship between parent and subsidiary, amount of investment, other host country environment factors. Depending on the host culture, size and the maturity of firm, relative importance of the subsidiary, moral and ethics balancing of standardization and localization of HRM could be done. Localization would be the recruitments, holidays, leave procedures and etc. according to Huo the best IHRM practice ought to be the ones best adopted to culture and national environment. Developing staff members investing in human capital, career development, good working conditions and good management practice could help the organization to retain and attract skilled and qualified labour force in to the organizations. In Sri Lanka Mas holdings is a very good example for a organization which is practicing this method Session 5 There are many ways of staffing international operations. They are ethnocentric, polycentric, geocentric and regiocentric. Each of this method has it own advantages and disadvantages. Most of the companies use ethnocentric approach at the initial stage and move to polycentric approach after some time. Eg;- after operating Sri Lanka for many years Coca Cola has appointed a Sri Lankan as a country head for the first time. Organizations use expatriate for international assignment as position filling, management and development and for organizational development. They could be assigned for varies time periods and would have many roles to play as expatriate such as agent of control/socialization, network builder, boundary spanner, language node, transfer of knowledge etc. Non-expatriates are people who travel internationally, yet no conceder as expatriate as they do not relocate to another county.. Examples for non-expatriates are auditors, inspection department, regional managers etc. even though its a glimmers life on first site non- expatriates would have high level of stress because of family working arrangements, health concern and host culture issues. Even expatriates would face lot of difficulties such as spouse and family problems, lack of cultural sensitivity, reluctant to change and adopt, them us mentality, home country mentality and etc. There for organizations must use most appropriate method when selecting a person for a expatriate job. Session 6 When recruiting a expatriate for a international assignment organizations has to be extremely concern. This is because expatriate failure is extremely costly for an organization. Career advancements financial incentives, interest in countries, interest to travel are the factors that motivate the expatriates. For expatriate to be successful in a foreign assignment they have to have the job knowledge and motivation, job related skills, be flexible and adoptable, helpful family situations and extra cultural openness. Expatriate failure could be defined as premature return or under performance during the a foreign assignment. There could be varies reasons for early return of a expatriate but direct cost of the failure is extremely high for the organization. Eg- salary and training cost, airfares, relocation expenses, exchange rates, replacing the failed manager etc. indirect costs would be the damagers to the relationship with stake holders, family relationships, and negative effects on the local staff members. There are four phases in cultural adjustments which expatriate has to go through in a foreign assignment. They are, Tourist every thing is new and enjoyable Crisis/ cultural shock see differences and negative side off the new culture Pulling up Adjustment There is a high possibility of expatriate to exit during the cultural shock period. There for in this each stage organizations would have to take many steps to easy the situation.. Eg- food, customs, cultural values(seniority), home sickness etc. Session 7 Training and development of expatriates is essential for the success of a intentional assignment. This is because expatriates are send to subsidiaries to show how systems and procedures work, ensure adoption and motivation of performance. There for cultural differences and business out comes attitudes and how it effects the behavior, facts about the target country, skill building and language is some of the areas that organization should look in to. Effective pre-departure training should include cultural awareness programmes, preliminary visits, language training, non traditional assignments and training etc. future more practical assistance for relocation, find accommodation and schooling, future language training, would also contribute to adaptation of expatriates and his family members to settle down. Many methods could be use ot train the expatriates and many examples Some off them was showing videos, giving case studies, role play and anointing a experience mentor. Session 8 Multinational organizations would face lots of performance management issues and expatriate re-entering career issues. Performance management is also a way of controlling the subsidiaries. It also contribute shape the organizational culture. HCNs and non-expatriate performance would have to be evaluated separately. Appraisal of host country nationals could be done with standardizes company evaluation form. But customization of the form according to the local staff should be done to get the maximum benefits to the all parties. Performance evaluation criteria would be done on hard goals, soft goals and contextual goals. When evaluating the performance of a non- expatriate stress associated with constent air travel, family relationship issues should also be considered. Expatriate performance would be evaluated on how well he/she achieve organizational targets, relationship and network build up with key parties, implementation of cooperate culture in the organization and etc. evaluation results would also have a impact from who is doing the appraisal, frequency, timeliness and use of standards and customization of the appraisal form. Re-entry of expatriate after completion of foreign assignment would also have to be given consideration. Preparation, physical relocation, transactional readjustments are the phases which have to go through again. To retain the staff in the organization and repatriation pre-departure career discussions, naming a contact person, succession planning and etc could be done. Eg- decrease of living standards, children schooling issues and etc. Session 9 For a multinational organization to be successful they should have a good compensation package in place for their employees. This is because different countries different currencies, labour laws and customs are in place. There for expatriate pay should be determine according to cost of living, hardship, currency fluctuations, health care, housing, taxation and education expense of children. To determine the compensation package awarded to the expectorates going rate approach and balance sheet approach can be used. Even though both approaches have its advantages and disadvantages the balance sheet approach is the most commonly used system in multinationals. Balance sheet approach would consider about the goods and services cost, housing cost, income tax and reserves when determining the benefit package. Session 10 When a organization do business with a another country to make this transactions successful knowing the business ethics and social customs are very essential. Different countries have different values, practices, and taboos which you have to understand and be respectful. From country to country the way they use first name, title, position and states, dining practices, tipping, gift giving, and that an traveling etiquettes, greetings, superstitions and taboos differ. Japanese people shows and have a grate respect to the business card and exchange and consider are in tipping as a insult. Different countries have different meal times, number of courses. Eating every thing in the plate or leaving some thing in the plate could be reason to be offended in some cultures. Some times its better not to know what is in your plate which you are serve to eat and be restrain form giving comments on the foods. ( it is better to eat without knowing whats in the plate (eg- dog meat, snake meat) without offending your counter party.) When going abroad for business deal proper dressing, footwear and packing and even and quality luggage could add some value to your transaction. Male and female relationships would also in a differ from culture to culture and it is wise not to use you are hummer during a business meetings . holidays and holy days also differ from country to country according to the religion they and practice and the traditions. And organization should looking to this because many cultures do not make any business decisions in holy days. Even though bribery is conceder illegal, unethical and immoral it almost take place all over the world. But if an organization is doing this kind of transactions they would have to be extremely careful because it could lead to fines and damage of organization reputation.

The Tragedy of Oedipus Rex :: Oedipus the King Oedipus Rex

The Tragedy of Oedipus Rex Oedipus Rex is a tragedy that illustrates a man's sense of justice. The same man is also paranoid and impulsive. In the text, he overcomes his negative characteristics and succumbs to his greater sense of justice and responsibility. The king of Thebes is shown as a just ruler who cares about the suffering of his people. After saving the city from the Sphinx and her riddle, King Oedipus learns that a plague has beset upon the population. After consulting with the oracle at Delphi, Oedipus realizes that an unsolved crime is the cause for the suffering of the people. In this consultation, the oracle tells Creon that corruption must be driven from the land. At this point, the corruption is assumed to be the murder of the previous king of Thebes. This is a hint of what is to come in the reading. A simple murder is usually described as a crime or an offense. The word corruption alludes to a greater span of wrong that has been committed. In his rash manner, Oedipus sets out to solve this mystery so that the plague in Thebes will end. When the blind prophet Tiresias is summoned, the king loses his temper and shows more of his true character. After relentlessly questioning Tiresias, the perpetrator of the murder is revealed. Oedipus himself is the murderer being sought. After being insulted in Corinth, Oedipus had angrily left and set out on his own. In his journey, he encountered King Laius's party enroute to the oracle. The two parties clashed at the crossroads and Oedipus killed all but one of his foes. The curse that Jocasta describes came true on that day. She had tried to avoid fate by casting away the infant Oedipus, but years later he reappeared at that junction near Phocis. King Laius was Oedipus's father and the curse bore fruit. James Weigel best summarizes Oedipus's sense of justice in his writing: "Having learned the full truth of his dark destiny, his last act as king is to blind himself furiously over the dead body of Jocasta, his wife and mother. It is a terrible, agonizing moment, even in description. But in his depths of pain Oedipus is magnificent. He does not submit passively to his woe or plead that he committed his foul act in ignorance, although he could do so with justice. He blinds himself in a rage of penitence, accepting total responsibility for what he did and determined to take the punishment of exile as well" (Weigel 1601).

India vs China Essay

To compete in the global market, the Government of India (GoI) has liberalized export policies & licensing of technology and implemented tax reforms providing various incentives. Special Economic Zone (SEZ) policy is also one of the steps India has taken to boost economic growth through outward looking approach. Special economic zone is a specifically duty fee enclave and shall be deemed to be foreign territory for the purpose of trade operations and duties and tariffs. When SEZ policy was introduced in the country, it made headlines and people started considering it as a policy to create a hassle free and investment friendly environment. The main objective of this research paper is to analyze SEZ policy in terms of export performance, FDI inflow, employment generation and overall physical and financial infrastructure building. This research paper tries to investigate whether having these policies are good for the country or not. SEZs are a larger variant of Export Processing Zone (EPZ), thus performance of EPZ has also been discussed briefly. It has been five years now since all then existing EPZs have been converted into SEZs. Section –II has been devoted to performance analysis of these zones. After the failure of EPZs, a significant change has been made in the rules/regulations and a new package of fiscal and non- fiscal incentives is also being offered to developers and units. According to Finance Msinistry, the government has to forego about Rs. 90,000 crore in direct and indirect taxes over the next four years on account of SEZs. Despite so many incentives, performance of these privileged enclaves over the last five years indicates the failure of this scheme. For instance, the share of exports from SEZs in the total exports of the country has only increased from 4. 2% in 2000-01 to 5. 1% in 2004-05. Some economic experts are also seeing it as a corporate welfare scheme and the possibility of a sharp decline in investments in SEZs can’t be ruled out as tax benefits are only for 10 years. Other issues of concern like the heavy economic cost, real estate scam and labour policies are also discussed in the last section of the paper. Data are mostly secondary but the opinion of different economists and the Development Commissioners (SEZ) has also been taken into account. The zones cannot be insulated from the broader institutional and economic context of the country and be treated as an economy within the economy. Zones are a part of the economy and require overall improvement in the investment climate to ensure success in the long run. They should not, therefore, be viewed as an alternative to the overall development model. This is perhaps the reason why SEZs failed to fulfill the role of engines of economic growth in most countries on a sustainable basis. 3 Major Findings †¢ The union Govt has foregone a whopping Rs 39,704 crore of duty under export promotion schemes during 2003-2004 accounting for 82% of customs duty collected in that year. †¢ The foreign exchange earned by all the 811 units in the 8 zones put together came to only Rs. 8,309 crores, a mere 5% of India’s exports during the fiscal year 2004-05. †¢ During 1966-1980 average annual export growth rates of EPZs was over 77%, whereas during the post 2000 period (2001-03) it came down to 7%. †¢ Total share of FDI investment in Noida SEZ in 1997 was 12. 3% and it went up by a mere 0. 4% in the six years. To tal FDI share in 2003 was 12. 7%. †¢ A slew of tax exemption planned for SEZ to boost exports will erode Rs. 93,900 ($ 20. 62 billion) in government revenue over the next four years. †¢ Haryana Govt has offered over 1700 acres of land near Gurgaon to RIL (Reliance) for about Rs. 60 crore while it is estimated that the land was worth 5000 crore and HSIDC had acquired this land by paying Rs. 300 crore in compensation to the farmers. 4 Section – 1 SEZ Policy: An Overview 5 1. 1 Introduction A Special Economic Zone (SEZ) is defined as a deemed foreign territory within a country with special rules for facilitating FDI for export-oriented production, and for purposes of trade and customs duties. These Zones (SEZs) are geographical region that have economic laws different from a country’s typical economic laws. Different economic institution and government departments have defined it in different ways. As per Ministry of Commerce and Industry they are defined as: Special economic zone is a specifically duty fee enclave and shall be deemed to be foreign territory for the purpose of trade operations and duties and tariffs. SEZs have been established in several countries, including the People’s Republic of China, India, Jordan, Poland, Kazakhstan, the Philippines and Russia. The concept of having free trade zones, export oriented zones and SEZs dates back to 1970. In 1979-80, China opened up its economy to foreign investment with the establishment of Shenzhen SEZ. Situated close to the Hong Kong port, this small fishing hamlet has today acquired the distinction of being the manufacturing hub of the world with a GDP of $20 billion and an annual foreign trade of nearly $50 billion. Inspired by the success of Chinese SEZs our policy makers also tried to experiment with SEZs in India. Despite the failure of Export Processing Zones (EPZs) Murasoli Maran after visiting China in the year 2000 introduced the SEZ policy very same year considering the need to enhance foreign investment and promote exports from the country. The SEZ bill was passed by parliament in 2005 and the Commerce Ministry notified the Special Economic Zones law on February 9, 2006 and the rule came into effect from February 10, 2006 but the rush of proposals for setting up SEZs had begun much earlier and by November 2005 some 61 SEZs were already approved. According to reports, so far, the Government has cleared around 150 SEZ proposals out of around 200 received. The policy provides for setting up of SEZs in the public, private, joint sector or by State Governments. It was also envisaged that some of the existing EPZs would be converted 6 into SEZ. Accordingly, the Government has converted all eight EPZs into SEZs. Table 1. 1. 1 below shows all the EPZs which has been coveted to SEZs with their size Table 1. 1. 1 List of all the EPZs converted into SEZs with their size Location Kandla (Gujarat) SEEPZ (Mumbai) Cochin (Kerala) Surat (Gujarat) NOIDA (UP) Chennai (TN) Vizag (AP) Falta (WB) Size (Sq. KM) 2. 99 0. 38 0. 40 NA 1. 22 1. 04 1. 43 1. 12 Source: Export Promotion Council. Ministry of Commerce, Government of India 1. Evolution of EPZs/SEZs in India The economic policy of 1960’s which were geared towards selective import liberalization and export promotion, marked the development of EPZ’s in the country. The first EPZ in India which was also the first in Asia was set up at Kandla in 1965. The proposal for setting up the Kandla free trade zone was mooted in 1961, with the objective of facilitating the development of the Kutch reg ion, to ensure greater utilization of Kandla port and to create employment opportunities in the Kandla. The second EPZ in the country, the Santa Cruz Electronics Export Processing Zone (SEEPZ), was set up at Mumbai in 1974. This EPZ was developed specifically for processing electronics goods and was expected to generate employment opportunities and facilitate the technology transfer. SEEPZ was initially planed as single product zone for processing electronics goods but by 1986 it was made a two product zone providing for gems and jewellery complex as well. 7 Four more zones were set up in the mid-eighties at Noida (NEPZ), Chennai (MEPZ), Cochin (CEPZ, Kerala), and Falta (FEPZ, West Bengal) and the seventh EPZ in the country was commissioned at Vishakhapatnam (VEPZ, Andhra Pradesh) in 1994. Initially the Central Government was solely responsible for establishing EPZ, but this policy was amended in 1994 to enable state governments, autonomous agencies and the private sectors to participate in the development agencies and operation of EPZs. Following the implementation of this policy, one EPZ was developed by private sector in Surat. A joint sector EPZ (now SEZ) has been approved for Greater Noida (UP). In terms of export performance, employment generation and FDI inflow EPZs failed in India but considering the need of better export performance and infrastructure building, central government came up with SEZ policy in 2000. Section II of this research paper has been devoted to analysis of the failure of EPZs in India. Without understanding the key difference between these two similar policies it would not be fair to comment upon the future of SEZ scheme. 1. 3 How SEZs are different from EPZs ? SEZs are a larger variant of EPZs. Both have a delineated area and permit duty free import of capital goods and raw materials; both aim to attract foreign investment for setting up export-oriented units by providing developed infrastructure, conducive operating environment and a package of fiscal incentives. However, the objective of SEZs is much larger than mere promotion of export processing activities. While EPZs are industrial estates, SEZs are virtually industrial townships that provide supportive infrastructure such as housing, roads, ports and telecommunications hospitals, hotels, educational institutions, leisure and entertainment units, residential/industrial/commercial complexes, water supply sanitation and sewerage system and any other facility required for development of the zone. The scope of activities that can be undertaken in the SEZs is much wider and their linkages with the domestic economy are stronger. Resultantly they have a diversified industrial base. Their role is not transient like the EPZs, as they are intended to be instruments of regional development as well as export promotion. Although the objectives 8 of SEZ policy are quite similar to the objectives envisaged by central government through EPZ policy in early eighties but there is significant difference between these two policies in terms of tax benefits and rules and regulations. The table 1. 3. 1 below summarizes the difference between these two: Table 1. 3. 1 Comparison between SEZ and EPZ India’s SEZ Restriction sectors on Open manufacturing, services trading activities India’s EPZ to Open manufacturing and trading considered SEZ vs. EPZ to While SEZs are and generally open to activities. all activities, EPZs more manufacturing and trading on Services may also be appear to focus Tax exemption Companies in Companies in EPZs SEZs offer more tax than SEZs enjoy a 5 were exempted from attractive year corporate tax corporate tax for a benefits holiday, by more years followed block of 5 years in EPZs 50% first 8 years of exemption for 2 operations. However, under section 10a of the income tax act, the concession was to be Retention foreign exchange earnings of Retain earnings Exchange phased out by in control foreign 2009 100% Retain 70% foreign Companies in Exchange Earner Foreign Earner better Currency over foreign exchange exchange earnings in SEZs would have 9 Foreign Currency Account (EEFC). urrency relation purchase in to of Account (EEFC). imported inputs. Export performance (EP) Foreign Exchange exports (NFEP) & No minimum EP Minimum required. Positive NFEP Net NFEP (varies industries required (varies and EP and Companies in SEZ more across leeway in meeting export performance requirements. required. enjoy across industries and states) Earning as % of states) requirements Duty recovery in Duty recovery is Full duty recovery is Lesser penalty for case of failure to in proportion to imposed achieve positive shortfall NFEP DTA* sales Unlimited sales on full duty Duty imported material free Allowed. raw duty qualify for DTA sales but SEZs achieve NFEP DTA Only 50% of exports SEZs enjoy greater access to domestic market These Allowed, duty More flexibility in and for in 1 inventory planning companies SEZs. Certifications of Imports on self- Imports imports certification basis attestation Development Commissioner require Simplified of customs procedures facilitate movement of 10 free free materials are to production utilized over failing to positive materials are to be years be utilized over 5 year. mports into SEZs Customs inspection No routine Routine of inspections import/export cargo FDI Foreign promotion customs Expedited of movement SEZs investment Easier SEZs and for board quicker FDI flows manufacturing companies. of goods in an out of examination import/export cargo by Cusoms FDI process approval 100% investment through automatic approval is required into route available for for FDI manufacturing companies Source: SEZ Authority, Ministry of Commerce and Industry, Government of India Available at sezindia. nic. in. Accessed on June 5, 2006 1. Objectives of SEZ envisaged by the Government of India The main objective of the SEZ scheme according to the finance and commerce ministries is to create delineated, duty –free zones with world class infrastructure, internationally competitive production environment and fast track clearance system for attracting private investments, especially foreign direct investment (FDI) for setting up export oriented unit. The broad objectives of the SEZ policy are: Attract Foreign Direct Investment (FDI) Earn foreign exchange and contribute to exchange rate stability Boost the export sector, particularly on traditional exports Create jobs and raise standard of living Transfer new skills and expertise to local human resources Create backward & forward linkages to increase the output and raise the standard of local enterprise that supply good s and services to the zone Introduce new technology 11 Develop backward regions by locating such zones in these areas and attracting industries Provide a stimulus to the economy Test key policy reforms in these ‘pilot areas’ According to the Commerce Ministry, investment of the order of Rs. 00,000 crore over the next 3 years with an employment potential of over 5 lakh is expected from the new SEZs apart from indirect employment during the construction period of the SEZs. Heavy investments are expected in sectors like IT, pharma, bio-technology, textiles, petrochemicals, auto-components etc. With the Act and Rules in place, it is expected that many large format, multi-product SEZs that have so far been unable to achieve financial closure will now quickly move towards such closure. It is anticipated that this will trigger a large flow of foreign and domestic investment in SEZs, in infrastructure and productive capacity, leading to generation of additional economic activity and creation of employment opportunities. Fiscal and other incentives are being offered to woo investors and SEZ developers. Incentives like tax benefits, single window clearance, flexibility in export and import rules and regulations has made SEZs an important and most sought after destination for setting up the business empire. Unlike most of the international instances where zones are primarily developed by Governments, the Indian SEZ policy provides for development of these zones by the government, private or joint sector. 1. 5 Establishing SEZs : Procedures and Requirements According to Commerce Ministry and SEZ authority SEZs may be developed and managed in the private sector or jointly by state government and a private agency or exclusively by the State Government or their agencies. In the case of privately developed zones, the investors could be either Indian individuals, NRIs, Indian or foreign companies. New infrastructural development works such as construction of Standard Design Factory Building, operation and maintenance of infrastructure in the Zones may also be undertaken through private/joint/state sector in the Export Processing Zones, now converted into Special Economic Zones. Any person, who intends to set up a SEZ, may, 12 fter identifying the area can make a proposal to the Board of Approval (BOA) but will also have to obtain the concurrence of the State Government. SEZ developer will have to get a no-dispute certificate for that area where he wants to establish SEZ from the Chief Secretary of that state. After getting clearance from the state government BOA considers that proposal and if the proposal is within the purview of SEZ act BOA can approve the proposal. However if a state government wants to set up a special economic zone, after identifyi ng the area can make a proposal directly to the board. The central government has prescribed the minimum area requirement for setting up SEZs. Table 1. 5. 1 shows the minimum requirement of area for various sectors. Table 1. 5. 1 Minimum area requirement for various sectors Sector Multi Product Green field Service sector Bio-Technology InformationTechnology Gems & Jewellery All other sectors 10 100 Minimum area required (in hectare) 1000 1000 100 10 10 Source: SEZ authority, Ministry of Commerce & Industry. Government of India. Available at sezindia. nic. in. Accessed on June 15, 2006 The area requirement for multi-product SEZs has been relaxed to 200 hectares and for sector specific SEZs to 50 hectares, for certain States (Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram, Manipur, Tripura Himachal Pradesh, Uttaranchal, Sikkim, Jammu & Kashmir, Goa) and Union Territories, keeping in view the difficulty in finding large tracts of contiguous land in such states/union territories. According to the SEZ Act at 13 east 25 % area of the SEZ shall be used for developing industrial area for setting up of such units and the remaining 75% can be used for building infrastructures like roads, hotels, power generation station, educational institution and other facilities. 1. 6 Setting up Units Any person who wants to set up a unit for operating in a SEZ will have to submit a proposal to the development commissioner of that SEZ. Development commissioner submits the application to the Approval Committee and the Appro val Committee may, either approve the proposal without modification, or approve the proposal with modification. A modification suggested by Approval Committee will be well within the purview of SEZ Act. 1. 7 Important Features of SEZ Policy and Incentives given to SEZ In India SEZs are deemed foreign territory within the country with special rules for facilitating FDI for export-oriented production, and for purposes of trade and customs duties. The key implication of being a deemed foreign territory is that individual units within the SEZ are allowed operational freedom in routine activities and not supervised by the customs authorities. Units may be set up in SEZ for manufacture of goods and rendering of services. To woo the investors to the zones, the Central Government has been offering a number of fiscal incentives and concessions. For instance, the zones are deemed as foreign territories as far as trade operation, duties and tariffs are concerned. The units (100% export oriented) also have full flexibility in operations. They are exempt from all direct and indirect taxes. No export and import duties, no excise duties, no central or state sales tax and no service tax. The units don’t require license for importing capital goods and raw material. According to SEZ Act 2005, the firms are eligible for getting an extended Income Tax holiday for 15 years. Income tax exemption for 15 years is available for SEZ units as detailed below:- 14 a) 100% of profits and gains from exports for the first 5 years b) 50% of profits and gains from exports for the next 5 years c) Amount not exceeding 50% which is credited to a reserve account ‘Special Economic Zone Re-investment Reserve Account’ and utilized for business for the next 5 years. The only condition imposed on the firms is that they must have positive net foreign earning (NFE). The important fiscal and non-fiscal incentives given to SEZ developers and firms are as follows: †¢ 100% FDI in the manufacturing sector permitted through automatic route1 except arms and ammunition, explosives, atomic substance, narcotics and hazardous chemicals, distillation and brewing of alcoholic drinks and cigarettes, cigars and manufactured tobacco substitutes. †¢ †¢ †¢ †¢ †¢ †¢ External commercial borrowings by SEZ units upto US$500 million in a year without any maturity restrictions through recognized banking channels. Facility to retain 100% foreign exchange receipts in Exchange Earners’ Foreign Currency Account. Exemption from Central Sales Tax and Service Tax Facilities to set up off-shore banking units in SEZs. Exemption from duties on import /procurement of goods for the development, operation and maintenance of SEZ. FDI to develop townships within SEZs with residential, educational, health care and recreational facilities permitted on a case-to-case basis. The full list of all the fiscal and non-fiscal incentives being offered to SEZ developers and units has been given in the (appendix-i). Apart from getting tax benefits from central government these zones are also getting tax benefits from state governments. TABLE 1. 7. 1 shows the list of tax benefits given by state governments to all the EPZs which has been converted into SEZs. Table: 1. 7. 1 Exemption From The State Level Taxes By Zone Falta Cochin Chennai Noida Vizag Kandla 15 Sales tax Contract tax Purchase tax VAT State entry tax Octroi tax CESS Luxury tax Entertainment tax Stamp duty and registration chages on land transfers Stamp duty and registration charges on loan agreements/credit deeds Yes No Yes Yes Yes No No No No No Yes n. a. n. a. n. a. Yes n. a. No n. a. n. a. Yes Yes n. a. n. a. n. a. n. . n. a. n. a. No No No Yes No Yes n. a. Yes Yes Yes No No No Yes n. a. Yes n. a. No No No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No No Yes Yes Source: Agrawal,2004 Units within the SEZ and EPZ also get subsidies sometimes on land rents and built up areas are also provided on lower rental rate. In some countries utility services such as electricity, water, and telecommunication are also subsidized. Table 1. 7. 2 shows the list of subsidies being given to zone units in six EPZs (now SEZs): Table: 1. 7. 2 Provision of subsidies by Zone Falta On land rent Factory rent On purchase on capital goods On capital investments Interest rate subsidies Concessional finance Any other Cochin Chennai Noida Vizag Kandla Yes Yes Yes Yes Yes Yes No Yes Yes No No No No No Yes Yes No No No No No Yes Yes No No No No No Yes Yes Yes Yes No No No Yes Yes No No No No No Source: Agrawal,2004 In terms of fiscal and other benefits we are ahead of China but the record of the Indian EPZs stands in contrast even to the performance of the general economy. Unlike other countries, in India, SEZs are being developed by the private sectors as well and to attract 16 he private and foreign investment a package of incentives is being offered by both state as well as central government. Later in the research paper an investigation has also been made to analyse the worth of these benefits. Section – II Performance Analysis of EPZs & SEZs 17 Introduction What is a successful SEZ? Is it the one that contributes to the host economy, one that generates prof it for its own owners/managers? SEZs are extensions of EPZs and taking this into consideration, an attempt has been made to analyze the success of both EPZs and SEZs in India. It has been just five years since the introduction of the SEZ policy in India. Some economists believe that it’s too early to comment upon its potential or chances of its failure. A significant change has been made in the rules and regulations but by and large the objectives of SEZs and EPZs are similar. Taking this into account this section has been devoted to explain the experience India had with EPZ policy in terms of export performance, employment generation, FDI inflow and infrastructure development. SEZs have been viewed as a tool to attract FDI and boost the export sector, which will 8 further create employment. It might be argued that policies like SEZ which has been introduced very recently can not be categorized as a good or a bad policy by looking at the performance analysis of five years but it definitely gives an insight into its potential success or failure. 2. 1 Share in Total Exports: Aggregate Analysis Exports from SEZs grew by 16. 4% from 2000-01 to 2004-05. In the same period, total exports in India grew by 12. 1%. This clearly indicates that despite getting special treatment, performance of SEZs in India is not satisfactory. Even, the share of exports from SEZs in the total exports of the country has only increased from 4. 2% in 2000-01 to 5. 1% in 2004-05. It’s quite apparent from the diagram that Domestic Tariff Area is also more or less witnessing the same rate of growth. Exports from SEZ touched the figure of 18,309 crore in 2004-2005 which is just a mere 5% of the total exports from India. Figure: 2. 1. 1 Trend in export performance of SEZs Exports from SEZs (Rs. in Crores) 20000 Rs (in Crores) 15000 10000 (4) 5000 0 2000-01 2001-02 2002-03 2003-04 2004-05 Year 11) (8) (4) (8) Source: Export Promotion Council, Ministry of Commerce & Industry, Government of India Note: figures in parenthesis shows the No. of functional SEZs 19 Figure: 2. 1. 2 Contribution of SEZs in country’s total Export SEZ’s contribution in country’s total export Contribution in percentage 6. 00% 5. 00% 4. 00% 3. 00% 2. 00% 1. 00% 0. 00% 4. 20% 4. 40% 4. 70% 5. 10% 3. 90% 2000-01 2001-02 2002-03 2003-04 2004-05 Year Source: CII report, 2005 Study shows that initially EPZs also witnessed high growth but gradually it started declining. In the early seventies, the growth rate of EPZs touched 77% but gradually it started coming down (Agrawal, 2004) and declined to 7% in 1999-00. Figure 2. 1. 3 indicates that the SEZs are failing to induce dynamism in the overall export performance of the economy. As the figure shows, despite a high growth of overall exports, SEZ contribution has remained constant over the years despite various other benefits. However, this may be counter argued by saying that apart from exports government has other objectives like employment generation and attracting FDI but our analysis shows that SEZ scheme is also failing like EPZs in attracting FDI. Figure: 2. 1. 3 Growth Trend of SEZ and Country Export 20 2000000 1800000 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 1990 1992 1994 1996 1998 2000 2002 Rs. in Crores SEZs export Country export Source: sezindia. nic. in, Ministry of Commerce & Industry. Government of India 2. 2 FDI inflow and Employment India had a very slow expansion in the initial phases of EPZ policy. Expansion in the zones started picking up in the 1980s in terms of employment but total investment remained abysmally low till the late 1980s8. In the 1990s, investment also started increasing. Growth rates in employment slowed down considerably in the late 1990s but in terms of investment EPZs in India continue to be dominated by domestic investment. This was despite its edge in terms of labour costs, availability of trained manpower and a stable macroeconomic environment. The share of FDI in total investment increased slowly from 12% in 1989 to slightly over 18% in 2000 ( Agrawal, 2004). During 2000-03, however, FDI inflows increased faster. Table 2. 2. 1 below shows the share of FDI in EPZ/SEZ investment. In 2000, all the EPZs were converted into SEZs, and with new rules and incentives it was expected that FDI will pour in but a more detailed study of Noida SEZ shows a mere 0. 4% growth in FDI investment in six years while in Chennai it just went up by 2. 3%. Despite this, new SEZs are becoming the most sought after destinations for foreign investors, however the chances of decline in FDI in SEZs can’t be ruled out as once the tax benefit period gets over and there would not be much incentives for investors to invest in SEZs. 21 TABLE: 2. 2. Share of FDI in total EPZ/SEZ investment (%) Zone Kandla Santacruz Noida Chennai Cochin Falta Vizag 1997 1. 3 8. 4 12. 3 28. 4 9. 6 3. 1 2003 4. 9 9. 2 12. 7 30. 7 13. 7 4 38. 8 Source: Ministry of Commerce & Industry. Government of India Unlike other countries, in India SEZs are being developed largely by private sectors and to avail the tax and other benefits private players are rushing in but it would be interesting to see if Govt doesnà ¢â‚¬â„¢t extend the benefits again once the period gets over , will they be still interested in investing and building infrastructure. Employment creation is one of the important goals which Indian government wants to achieve through SEZs but previous experiences with EPZ and other free trade zones doesn’t give us any rosy picture. EPZ had a share of near about 1% in organized employment (Agrawal, 2004) and till now all eight functional SEZs has created 1 lac employment and it is being expected that in next five years it will cross the figure of 5 lac. Table 2. 2. 2 shows the employment generated by different zones and the amount of Government and private investment in these zones. Table: 2. 2. 2 Zone wise employment and Investment upto 31. 3. 2005 Private No of Zone units Employment as on 31. 03. 2005 Govt investment upto 31. 03. 2005 investment upto 31. 03. 2005 KSEZ SEEPZ NSEZ MSEZ CSEZ 123 176 151 105 74 9821 42150 19857 16107 4712 26. 93 57. 39 78. 04 74. 83 87. 53 134 279. 49 650 223. 96 92. 79 22 FSEZ VSEZ Surat Manikan chan 83 28 62 5 2 2 2753 2500 2250 300 50 150 82. 83 39. 3 32. 46 263. 85 311. 58 5 . 07 4 1 3 Jaipur Indore Source: Export Promotion Council, Ministry of Commerce & Industry. Government of India SEZ or any other free trade zone should not be viewed as a tool to generate employment. Studies show that even small countries like Philippines has created 1. 1 million jobs through these economic zones (KPMG Report, 2004) but despite being the first country to have EPZ in Asia, India failed to achieve a high employment rate. Dysfunctional policies, regulations, lack of single window clearance facilities, poor attitude of the officials, centralized governance, stringent labour laws, poor physical and financial infrastructure, all accounted for an undesirable investment climate and thus EPZ failed to create employment. SEZ should have witnessed much higher growth in exports and employment but it is not happening either. If SEZ policy is really an example of decentralized governance, is it capable to strengthen our physical and financial infrastructure and if single window clearance facilities are no longer a dream, all these issues and concerns have been emphasized in the last section. Generally, it is argued that the SEZ concept is attractive because it is much easier to resolve the problems of infrastructure and governance on a limited geographical area than it is to resolve them countrywide. On the contrary, the performance over the last five years of these privileged enclaves indicates the failure of this scheme. The zones cannot be insulated from the broader institutional and economic context of the country and be treated as an economy within the economy. Zones are a part of the economy and require overall improvement in the investment climate to ensure success in the long run. They should not, therefore, be viewed as an alternative to the overall development model. This is perhaps the reason why SEZs failed to fulfill the role of engines of economic growth in most countries on a sustainable basis. 23 Section – III A comparative study of Chinese SEZ policy 24 3. SEZs in China The development of Special Economic Zones is one of the highlights of remarkable Chinese economic achievements. The Development of Chinese Special Economic Zones dates back to 1980’s. It is different from Indian practice: SEZ in China is classified in two levels by their scales. SEZ is the whole city even whole province opened to special financial, investment and trade policy, while Economic and Technologi cal Development Zones (ETDZ) is a relatively small piece of land earmarked in coastal and other open cities for industry and trade development. As early as 1980, under the opening-up and reform policy, the Chinese Government set up the first group of Special Economic Zones in Shen Zhen, Zhu Hai, Shan Tou and Xia Men, 25 all of which are located in costal areas of Southeast China, followed by other 10 costal cities, Hai Nan Province and Pu Dong area in Shanghai as the second group. To further open to the outside world and to spread successful experiences of SEZs, at the beginning of 1984, the government decided to establish ETDZs along coastal line on the basis of successful experiences of and favorable policies granted to the SEZs in the previous period. Consequently, China’s first group of 14 National Economic and Technological Development Zones (NETDZ) were established from 1984 to 1988 successively. The distinguishing features of Chinese SEZs are their large size, investment friendly customs regime, flexible labour laws, liberal policy for DTA access, attractive package of incentives and delegation of powers in favour of provinces and local authorities for managing the zones. 3. Comparing Chinese SEZ policy with India In spite of the fact that India was a pioneer in creating one of the worlds’s first export processing zones at Kandla in 1965, EPZs have never had much impact on India’s export performance. Tariff exemption schemes have tended to be excessively complex and encourage a ‘licence raj’ mentality at the operational level. Both economies are large emerging markets that had rather similar profiles in 1978. Today, China ranks number one as the world’s preferred foreign investment dest ination. Closer examination of the FDI statistics suggests that India’s performance has been abysmal in comparison to China. India lags behind for a number of reasons. These include a high tariff regime, poor infrastructure (power, ports, roads and railways), and a regulatory system that is too often not business-friendly and inflexible labour laws. In this section a comparison has been done between Chinese and Indian SEZ policy on different parameters like tax incentives, labor laws, FDI inflow, employment and export performance. First, consider the size of the proposed SEZs. Chinese SEZs are like townships. India has not gone that far, but according to the SEZ guidelines, the area of an SEZ should be 1000 hectares. It is being argued that large sized SEZs can perform better as they will have a larger scale of economy but on contrary to that the best performing SEZ in Mumbai has an 26 area of 93 acres only. It is being considered that one of the china’s success factors was large size of SEZs. For instance, entire Hai Nan Island has been declared as SEZ with an area of 34,000 Sq. km. Table 3. 2. 1 below shows the size of all five existing SEZs in china. Table: 3. 2. 1 Size of Chinese SEZs SEZ 1) Shenzhen 2) Zhuhai 3) Xiamen 4) Hainan 5) Shantou Area (Sq. KM) 327 121 131 34000 234 Source: Kumar, 2003 There is no doubt that SEZs have an edge over rest of the economy in terms of investment friendly environment and it’s quite obvious that if we have an investment friendly environment in a larger area, economy would do well. Rather than applying the theory of having larger scale of economy we should focus on an overall hassle free environment for export and this can be done only by extending the SEZ policy to whole country where every small and big export oriented manufacturers will have the access to business friendly environment. One counter argument to this proposal might be that SEZ policy in India is being implemented on a pilot basis, and government can extend this policy to whole country if SEZ works as a tool to bring economic reform. But unfortunately SEZ policy nowhere talks about extending the same hassle free system to rest of the country. It means that carrying out businesses in hassle free environment would still be a dream for rest of the country, so infrastructure else where in the country would not improve. The performance of SEZ also depends on the inner infrastructure and how can we think of a great performance from SEZs when rest of the economy still suffers from the same unfriendly environment. 27 SEZ’s were established by the China to encourage foreign investment, bringing jobs, technical knowledge, and future tax revenues in return for significant tax concessions at start-up of the operations and over a number of years. The biggest benefit to the investor is significant tax concessions early in the project. Tax concessions offered to a manufacturing startup in Chinese SEZ are: †¢ †¢ †¢ †¢ †¢ No tax during start-up years before making a profit The first year that any company makes a profit starts the â€Å"Tax Clock† and is year one The first and second year after the tax clock starts, there is no tax. For years three and four, there is 1/2 of the normal tax rate. In the fifth year, the company pays the full normal tax rate In terms of tax benefits we are ahead of china. In SEZ policy tax benefits has been increased in comparison to EPZ but the failure of EPZs indicates that tax benefits can’t alone boost the FDI and export performance. Table 3. . 2 below compares the performance of these two countries. Table 3. 2. 2: Comparison of SEZ performance China Share of SEZs in total export Employmnet(Direct) generated through SEZs FDI inflow through SEZs India 5% 0. 1 million US $ 2 billion 23% 2 million US $ 60 billion Source: KPMG report, ministry of commerce and industry (GoI) The contribution of Chinese SEZs to the country exports is in the range of 15-23%. Acc ording to available statistics, the share of SEZ exports to country exports in 1997 was 23% (i. e. approximately US $ 42 billion). Overall, all the zones put together have played an important role in the overall growth of the Chinese economy. These zones taken together employ more than two million people directly and approximately 16 million overall (both direct and indirect). Cumulatively, 20% of the total foreign direct investments 28 into China have made its way into SEZs (i. e. approximately US $ 60 billion till date). Performance of SEZs in these two countries should not be compared just on the basis of export and other figures because size wise Chinese SEZs are much larger than Indian SEZs. But even in performance (export, employment) per Sq. KM China witnessed higher rate of growth and it was possible because of their liberal framework of SEZ policy. As regards labour laws, it is difficult to imagine that a communist country like China has relaxed these laws by allowing a hire and fire policy for the SEZs. This single measure went a long way in attracting foreign investment to these zones. After investors gained confidence in the productivity of Chinese workforce, the hire and fire policy was substituted by the contract system. There is ample justification for adopting in India a flexible labour policy in India, not just for these exporting enclaves but also for rest of the country. Rigid and outdated labour laws hinder the economic development and it sets the rationale for having a labour reform. According to section 5B of the labour code any registered firm, that is employing more than 100 people, is required to seek permission from the state government to retrench its workforce. The country budget of March 2002 promised a change in the legislation to raise the level to 300 but due to coalition government it never happened. The result is that formal-sector firms (those that are registered and that pay their taxes) loath to take on new employment, and the vast majority of India’s employment is informal, in small, tax-evading, inefficient enterprises. The policy in India on these critical issues is lukewarm. It just mentions that the laws of the land will apply and that the zones can be declared as public utilities under the Industrial Disputes Act. Merely declaring SEZs as public utilities will, however, not serve much purpose as seen in the EPZ experience. The radical difference in the attitude of the Indian and Chinese governments on this matter is reflected n the recently published investors guide for Special Economic Zones in India. It states ‘the labour laws of the land will apply to all units inside the Zone. However, the respective State Governments may declare units within the SEZ as public utilities and may delegate powers of the Labour Commissioner to the Development Commissioner o f 29 the SEZ’ (Ministry of Commerce and Industry, 2002, p. 15). In China, the right to hire and fire has been enshrined in SEZ regulations since 1982. Moreover, in India there are strict regulations stipulating that contract labour is only allowed work of a temporary nature. By contrast, the World Bank survey (2002b), estimates that in Guangzhou firms employ more than 20 per cent of the labour force as non-permanent workers. Of course many Indian employers find ways round the regulations through outsourcing and less formal means but the current system undoubtedly reduces flexibility. China made the provincial and local authorities act as partners and stakeholders by delegating them powers for approving foreign investment. The SEZ authorities in China can approve investment proposals up to $30 million. This has been a significant feature of the Chinese policy and a key contributor to the success of SEZs. The Indian policy only enables the State governments to set up SEZs, but does not empower them to approve investment proposals. These powers have been vested with the development commissioners concerned who represent the Central Government. This will result in centralization of work in their offices. Government boasts of decentralizing the whole process and talks about single window clearance but anybody who goes through the SEZ act can figure out how complex and centralized this policy is. Last section of this research paper critically analyzes the ‘so -called’ decentralized nature of the SEZ policy. Another ticklish issue is involvement of local government. Unless the State and local governments are directly made responsible for the management of SEZs and approving investment proposals, their political leadership and bureaucratic set up may not have any incentive to push the initiative forward. But in India all the important decisions are being taken by central government China has gone a step further by delegating powers to the local authorities. The local authority manages Shenzhen SEZ, which has the highest export turnover. 3. 3 Current scenario in China 30 Over the last five years the GDP growth of china has been near about 10% and SEZs is being viewed as an engine for this rapid growth. Higher GDP rate can be considered as one of the major success of SEZ policy but regional disparities as an outcome of this policy has forced China to rethink and restructure this policy. Per capita income in the richest city is over 50 times per capita income in poorest city. Awarding a privileged status to some zones at the cost of others is responsible for this higher disparity. For instance, china had received the cumulative amount of US $ 128. billion of FDI between the year 1979 to 1995 and the coastal areas accounted for over 90% of all the FDI received in this period. It might be argued that there is no harm in developing country in pockets but how we can forget that these areas were developed by tax money paid by everyone. Government had to forego tax revenues as tax concessions were the main attracting features. All the tax revenue lost due to SEZ was/is being recovered through taxes from rest part of the country and resultantly all tax payers end up paying higher tax but the benefits are available for very few of them. I see this as the one of the main causes for high income disparity in China. To combat this problem even China has given emphasis on balanced development and tax benefits accorded to foreign investments in the SEZs has been partially lifted. India’s tax and tariff structures are still anti export. India’s high overall tariff rates, especially tariffs on intermediate products that are used by exporters, impose a heavy indirect tax on export competitiveness. Deregulation of the private sector is perhaps one of the most critical areas in the context of India’s reforms. Since almost 90-plus percent of the workforce is in the informal sector, it is of utmost importance to deregulate the private sector so as to get the unorganized sector workforce in the mainstream. Workers in large firms in the formal sector have a virtual guarantee of continued employment according to the Industrial Disputes Act. For firms of 100 employees or more, reductions in the workforce must be upon the permission of state government, which is almost never granted. Remarkably, loss-making firms are also not allowed to close their operations without government consent. The results of India’s ighly regulated labor markets have been devastating. Formal-sector employment in India is shockingly low, in large part 31 because so much urban employment is carried on outside of formal registration. Out of a total labor force of around 406 million, formal sector employment accounts for only 28. 1 million. Of this, 19. 4 million works in the state sector (state enterprises and publ ic administration), and just 8. 7 million works in private firms with formal employment. Indeed with a more open and deregulated economy (economy is not just SEZs), India may well be in a position to perform as China has done over the last two decades. 32 SECTION- IV CASE STUDY: NOIDA SPECIAL ECONOMIC ZONE 33 4. 1 Introduction Noida EPZ was established in 1984 and attained the status of SEZ in the year 2000. Based on their share in exports, past performance and potential for growth, software and gem & jewellery have been identified as the thrust areas. Spread in 310 acre, NSEZ is just after SEEPZ in terms of export performance. NSEZ’s proximity to Delhi sets it apart from other SEZs. Being close to national capital it has an easy access to skilled manpower, abundant managerial and technical expertise. With 151 units in operation, NSEZ contributed 30% of total exports from SEZ in the year 2004. It employs 19,857 people and per unit employment is 131. In terms of per unit employment SEEPZ and MSEZ are ahead of NSEZ with 239 and 150 employee per unit respectively. Units in NSEZ get the tax benefits according to SEZ act but at the same time they have been exempted from the payment of stamp duty, trade tax and entry tax. Noida has witnessed higher growth in export in comparison to other SEZs. The figure 4. 1. 1 shows the export growth of NSEZ: Figure 4. 1. 1 Export growth trend of NSEZ Export Growth of NSEZ 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 Exprort (in million) 15341 10143 10342 7483 8456 9924 Source: NSEZ Authority The total government investment in NSEZ is Rs 78 crore while the private investment is of 650 crores. NSEZ has the highest private investments and the reason for this is better business opportunities due to its proximity to Delhi. Another important factor is incentives given by the state government. Over the years exports in textile and hardware has been 34 declining but gems & jewellery has witnessed a very high growth and in the year 2003-04 the total contribution was 49. 87% in total exports from NSEZ. The table below summarizes the contribution of different sectors in total exports. Table: 4. 1. 1 Contribution of different sectors in exports from NSEZ Sector 19992000 1341 1660 1393 1201 1295 462 127 295 682 8456 Exports (Rs. Million) 2000-01 1388 2697 1786 1014 1928 329 88 269 843 10342 2001-02 1199 885 1906 1184 3015 207 100 287 1141 9924 2002-03 990 739 1787 1374 3437 238 53 229 1296 10143 2003-04 990 930 1980 1640 7650 310 50 230 1560 15341 Textile/Garments Hardware Software ENGG. Goods GEM & Jewellery Chemical & Pharma Leather Products Plastic/Rubber/Synthetic Miscellaneous Total Source: NSEZ Authority 4. 2 The reasons for NSEZ’s success: A) Proximity to Delhi: One of the prime reasons of NSEZ’s success is its proximity to Delhi. Noida has better transport and other infrastructural facilities in comparison to others SEZ. Noida was developed as an industrial area and therefore, the whole environment is business friendly. Noida is just 24 KM away from Delhi and it comes under national capital territory (NCT), so in terms of administration, infrastructure and business opportunities NSEZ has an edge over other SEZs. B) Special benefits given by the U. P. overnment: It has been discussed in previous sections that the tax benefits are the key determinants in attracting investments. To woo the investors U. P. government has exempted SEZ developers and units from some state taxes as well and it has resulted in higher private investments in NSEZ Exemptions from the payment of entry tax, trade tax and stamp duty makes NSEZ the 35 most sought after destina tion for setting up the units. Due to these exemption units in NSEZ export more to reap the benefits given by the state government at the fullest. 36 Section – V Policy Analysis: A Critical Approach 37 Without doing the cost benefit analysis when a government establishes any economic policy which affects all the people in a direct or indirect way, it becomes important to raise some basic questions like whether the benefits of that policy would outweigh their costs, is it good for the country in the long run? SEZ policy has been enacted by parliament but ironically no cost benefit analysis was done before announcing it. As discussed earlier the prime objective of this scheme is to boost the export sector and a package of fiscal and non fiscal incentives are being offered to developers and units to achieve the objectives. One way to assess the rationale for having SEZ policy is to investigate what would have been the performance of the economy in the absence of this policy. Anticipating this would not be an easy task. Export performance of our country has been abysmal and there was a need to take some measures but according to me, preferential treatment should be the last measure and firstly any government should root out all those evils which are hindering the growth of export or for that matter whole economy. Rigid tariff regime highly regulated labour market, centralized governance are some major problems which obstruct the growth of the export sector and this also makes the investment climate unfriendly. Deregulating the labour market and decentralizing the whole process should have been the first priority of the government and making the whole country hassle free for investments and business opportunities would automatically boost the export sector. Establishing SEZs is a very complex task encompassing a wide range of policy, legal and regulatory issues. SEZ policy was praised initially as a well drafted policy but inter ministerial conflicts, heavy economic costs and recent cases of migration from DTA to SEZs actually highlights the blind spots of its designers. 5. 1 Heavy Economic Costs According to SEZ Act 2005, the firms are eligible for getting an extended Income Tax holiday for 15 years. Firms and developers have also been exempted from excise duty and custom duty. A loss of Rs. 39,704 crore of duty under export promotion schemes during 2003-04 (CAG Report, 2004) which accounts for 82% of customs duty collected that year gives an idea of how costly this whole affair is. According to an internal assessment by the 38 Finance Ministry, the Government may have to forego about Rs 90,000 crore in direct and indirect taxes over the next four years on account of SEZs. 5. 2 Corporate Welfare Very recently an article written by M. Bhardwaj appeared in ‘Business Standard’ which alleges that Haryana government acquired over 1700 acres of land from farmers at Rs. 300 crore and offered this land to Reliance for 360 crore in the name of SEZ while it was estimated that land was worth 5,000 crore. This is a perfect example of corporate welfare. It’s true that the value of land goes up drastically when market anticipates the introduction of any such scheme into that particular area but taking away the land from farmers at a much lower rate can’t be justified. According to the SEZ Act any state government can set up SEZ jointly with private sector. This can be called public private participation. Theoretically everything sounds good, so where is the problem. Now if any company has link with top politicians of a state, the possibility of favoured treatment can’t be ruled out. Even in terms of incentives state can also offer a package of tax benefits. Imagine a situation where two firms which produces the same good, are operating from two different states and one of them gets an edge over another just because of preferential treatment by the state. Would you call it a fair competition? SEZ act enables the state government to offer land at a much lower rate and to provide extra incentives and what do we expect that the state governments would not misuse these powers? 5. 3 Migration from DTA to SEZ To avail all the facilities and incentives offered by SEZs, small firms and even big companies are shifting to these privileged enclaves. SEZs have encouraged inward migration. One of the prime objectives of this policy was to attract FDI but the share of FDI in investments in SEZs is very low and due to inward migration very few new manufacturing units have been set up in the SEZs. 5. 4 Real Estate Play 39 State governments are offering land to SEZ developers at concessional rates. For real estate developers SEZ policy has come as an opportunity to grab the scarce land near cities. Ideally SEZs should be established in remote areas but due to lack of infrastructure the concentration of SEZs are near by cities. According to SEZ Act at least 25% of the total acquired area would be processing area and in the remaining area developers can build commercial complexes, malls, hospitals, hotels, educational institutions etc. Minimum area requirement for setting up SEZ is 1000 hectares and according to SEZ guidelines developers get a tax break even on all the buildings on the 750 hectares. On going real estate boom has shifted the focus from export to building residential complexes and commercial malls. Developers can always make huge profit from selling or leasing the buildings and this is where real estate play comes in. Land deals and compensation payments are known to be hot-beds of corruption so no wonder if farmers are being displaced from their place in the name of SEZ without giving adequate compensation. Conclusion Considering the need to boost export sector and attract FDI, government announced this policy but ironically the performance of SEZs in exports highlights the failure. When government should liberalize overall policy, government has decided to focus on one or two areas. The real attraction of SEZs is the tax holiday promised and to grow the business in hassle free environment firms are just shifting to these privileged enclaves. To compete with China a package of fiscal and non fiscal incentives are being given but this has been overlooked that tax benefits in china’s SEZ were available only to foreign investments, not exports. All exemptions and fiscal incentives should go in the process of overall tax and labour reform. Giving preferential treatment to any particular area in the name of exports can’t be justified in the democratic set up. Even if government wants to continue with this policy, only developers should be given the tax benefits if they are developing any SEZ in the remote area. The whole process is still centralized and government should minimize their role. 40 References: 1. Official Website of SEZ. http:// sezindia. nic. in. 2006, accessed on 23 May 2006 2. Ministry of Commerce. 2005. Annual Report2004-05. 3. CII report. 2005. Special Economic Zone: Engines for Growth. Available at http://www. ciionline. org/Northern/regionalfocus/836/images/sez. pdf. Accessed on 23 June 2006. 4. Bhardwaj, M. 2006. No review, RIL mega SEZ signing next week, says Haryana CM. June 13. Business Standard 5. Aggarwal, A. 2004. Export Processing Zones in india : Analysis of the Export Performance. ICRIER Working paper No. 148. 6. Jain, S. 2006. Killing SEZs, making a killing. 22 May. Business Standard 7. Tondon Committee (1982) ‘The Committee on Free trade Zones and 100% Export oriented Units, Apponited by the Ministry of Commerce, Government of India, September 1981. 8. IIPM Editorial. 2006. The Great Indian obsession. 9. The Hindu. 2005. Lok Sabha passes SEZ Bill. 11 May 10. Suchitra, M. 2006. The high cost of easy foreign exchange. 9 March. India Together 41 Annexure-1 (List of all the fiscal and non-fiscal benefits given to SEZ developers and units) i. 00% income tax exemption for a block of five years and an additional 50% tax exemption for two years thereafter ii. 100% FDI in the manufacturing sector permitted through automatic route, barring a few sectors. iii. External commercial borrowings by SEZ units upto US$500 million in a year without any maturity restrictions through recognized banking channels. iv. Facility to retain 100% foreign exchange rec eipts in Exchange Earners’ Foreign Currency Account. v. 100% FDI permitted to SEZ franchisee in providing basic telephone services in SEZs. vi. vii. No cap on foreign investment for small scale sector reserved items. Exemption from industrial licensing requirements for items reserved for the SSI sector. viii. No import licence requirements 42 ix. Exemption from customs duties on import of capital goods, raw materials, consumables, spares etc x. Exemption from Central Excise duties on procurement of capital goods, raw materials, consumable spares etc. , from the domestic market. xi. xii. xiii. No routine examinations by Customs for export and import cargo. Facility to realize and repatriate export proceeds within 12 months. Profits allowed to be repatriated without any dividend-balancing requirement. xiv. xv. Job work on behalf of domestic exporters for direct export allowed. Subcontracting both domestic and international is permitted; this facility is available to jewellery units as well. xvi. †¢ Exemption from Central Sales Tax and Service Tax †¢ Facilities to set up off-shore banking units in SEZs. †¢ Exemption from duties on import /procurement of goods for the development, operation and maintenance of SEZ. †¢ Income tax exemption for a block of 10 years in 15 years. †¢ Exemption from Service Tax 43 †¢ FDI to develop townships within SEZs with residential, educational, health care and recreational facilities permitted on a case-to-case basis.

Causation and Intervening Acts in Criminal Law Essay

According to Robin J.A. in Malette v Shulman[1], â€Å"the right of self-determination which underlies the doctrine of informed consent also obviously encompasses the right to refuse medical treatment. A competent adult is generally entitled to reject a specific treatment or all treatment, or to select an alternate form of treatment, even if the decision may entail risks as serious as death†¦The doctrine of informed consent is plainly intended to ensure the freedom of individuals to make choices concerning their medical care. For this freedom to be meaningful, people must have the right to make choices that accord with their own values regardless of how unwise or foolish those choices may appear to others.†[2] R v Blaue[3], a famous causation case in criminal law, brings to foreground a thought-provoking debate about whether an individual’s religious beliefs and other psychological values could be included in the ‘thin skull’ rule and whether the refus al to take lifesaving medical treatment breaks the chain of causation that exists between the defendant’s wrongdoing and the purported outcome of that wrongdoing. The facts of the case are as follows – Blaue, the defendant, stabbed a woman numerous times after she refused to have sexual intercourse with him. She was a Jehovah’s Witness and was therefore not in favour of blood transfusions. After the stabbing, she was taken to a hospital and was told that she urgently needed to have a blood transfusion, without which she would die. Owing to her religious beliefs, she refused to consent with the suggested treatment. As a result, she died in the hospital. While giving the judgment, Lawton L.J. stated that â€Å"those who use violence on other people must take their victims as they find them.†[4] This, according to him, not only includes victims’ physical characteristics, but also their emotional, psychological and spiritual values and beliefs. This decision has proved to be extremely controversial and gives rise to various debates. Most understand the rationale behind the court’s judgment and agree that the defe ndant is, as a matter of fact, criminally liable for causing the injury. After all, the victim was at the receiving end of several stabbings, imposed by the defendant, who clearly had an intention of causing serious bodily harm, if not death. However, some feel that the death was the result of the victim’s refusal to carry out the blood transfusion. They feel that the defendant should not be responsible for the unusual, irrational and unjustified religious beliefs of the victim. In addition, the defendant could not have possibly foreseen her backing out of receiving medical treatment in the hospital. The Blaue case creates many doubts about the doctrine of causation in criminal law. Was Blaue responsible for the victim’s death or was it an act of the victim, since it was her decision to refuse a blood transfusion? If we conclude that Blaue is indeed responsible for her death, another question comes to mind: Why is the victim not responsible for her own death? First and foremost, it is a fact that the victim sustained injuries due to numerous stabbings and it was Blaue who had inflicted them upon her. Her not taking any steps to save herself did not instigate her death. Secondly, there is an application of the ‘thin skull’ rule in this case. An important principle of the law of causation is that defendants must ‘take their victims as they find them.’ This means that if a defendant pushes someone and because they have a thin skull, they crack their head and die, the defendant will be liable for causing their death. The Court of Appeal in Blaue indicated that the decision could be seen as a ‘thin skull’ example. It was established that the ‘thin skull’ rule goes beyond the physical characteristics of individuals, also including a person’s moral and religious beliefs. Thirdly, the victim’s decision to not undergo blood transfusion, which would have clearly saved her life, was based on profound religious views and hence, did not constitute a novus actus interveniens. That is, it was not an intervening act. Nevertheless, the judgment has been critisised on various grounds. Why was the vict im’s decision to refuse medical treatment seen as a subsisting condition rather than an intervening cause? Would it have been the same if the refusal was due to a fear of needles or the fact that she could not bear the pain and thought dying was the only way to end the agony? A decision steered by religious beliefs is a moral choice, that is, a free decision. Why should the defendant endure the responsibility if the victim makes a free choice to kill herself any more than he should if, weakened by the injury, the victim took a controversial choice to end her life with dignity rather than enduring pain and life-long humiliation? Thus, to understand the Blaue case, we not only need to take into account causation in criminal law, but also the two doctrines which apply to the concept of proximate causation; the ‘thin skull’ rule and the principle of novus actus interveniens. Causation – In criminal law, individuals that are guilty of a crime are penalised for the harm they cause if both the physical and the mental element of committing an offence is present. There must be a valid connection between an individual’s conduct and the result alleged to constitute an offence. The causation requirement attaches criminal responsibility to those individuals whose conduct is sufficient enough to bring about serious bodily injury or death. In Hallett[5], the accused assaulted a man and left him on a beach. Over the next few hours, the man drowned. The court concluded that Hallett’s contribution to his death was more than minimal to hold him responsible for it. However, in Blaue, the defendant was found to be the substantial and operating cause of the woman’s death. That is, his stabbings is why she was admitted to a hospital in the first place. ‘Thin skull’ rule – The defendant must take the victim as he finds him or her and this means ‘the whole man and not just the physical man.’ This rule applies irrespective of whether the defendant is aware of the condition in the victim. On one hand, there are instances where the victim suffers from a pre-existing condition which renders him or her more vulnerable to injuries. On the other hand, there are cases where the victim does not take medical treatment to heal wounds and suffers serious harm as a result. A defendant cannot escape liability for a victim’s death as a result of an abnormal ity present in the victim or an internal, subsisting belief of the victim. It is his fault that he caused harm in the first place. In R v Hayward[6], a man chased his wife into the street shouting threats and kicked her. She collapsed and died from an unusual thyroid condition which made her susceptible to physical exertion and fear. He was convicted of manslaughter because he aggravated her pre-existing condition by physically assaulting her. This case is a good example of the ‘thin skull’ rule applying to the physical characteristics of an individual. The fact that he could not possibly foresee her dying is not an excuse. However, can a victim’s religious beliefs constitute a thin skull? With reference to Blaue, according to Hart and Honorà ©: â€Å"The question is not whether it is reasonable to believe that blood transfusion is wrong, but whether a person whose life is in danger can reasonably be expected to abandon a firmly held religious belief. The answer must be surely no.†[7] Religious beliefs and convictions are an inte rnal characteristic of individuals, which is deeply rooted in their way of thinking and life. It is intrinsic to every person. Hence, people cannot be held legally accountable for possessing such sentiments. Novus Actus Interveniens – The general principle is that an intervention by a third party will break the chain of causation if it is ‘free, deliberate and informed.’ In R v Kennedy[8], Kennedy prepared a syringe for the victim, who injected himself and died due to an overdose. Kennedy was convicted of unlawful manslaughter. The act of the victim, in injecting himself with the drug, was an intentional, free, deliberate and an informed action. Thus, the drug dealer is not guilty of unlawful manslaughter. In contrast, in R v Dear[9], the defendant slashed the victim repeatedly with a knife. The victim died two days later. The defendant appealed against his conviction for murder, arguing that the chain of causation had been broken because the victim had committed suicide either by reopening his wounds or because he had failed to take steps to stop the blood flow after the wounds had reope ned themselves. The court dismissed the appeal and held that the real question was whether the injuries inflicted by the defendant were a substantial and operating cause of the death. The victim’s death resulted from excessive bleeding from the artery, which was triggered by the defendant when he attacked the victim. In Blaue, the refusal to get treatment does not break the chain of causation, despite the fact that it was informed and deliberate, because having such a belief is involuntary and requisite. According to Hart and Honorà ©, â€Å"the question to be decided is whether the decision to refuse treatment is not merely deliberate and informed but also a free one. In view of the high value attached in our society to the matters of conscience, the victim, though free to accept any belief she wished, is not thereafter free to abandon her chosen belief merely because she finds herself in a situation in which her life may otherwise be in danger. So it was not her free act to refuse a transfusion.†[10] It was reasonably foreseeable that a Jehovah’s Witness would refuse a blood transfusion. The victim had no choice due to her religion. It was not a free decision because, in a way, she was bound by it. It could be said that she simply let the wound take its natural course. Moreover, the death was caused due to the bleeding arising from the penetration of the lungs, which was brought about by the stabbings. The substantial and operating cause test does not take into account a victim’s distinct characteristic. So long as victim died of internal bleeding due to the wound administered by Blaue, we need not ask further questions. However, if the principle of ‘taking your victims as you find them, including their beliefs’ is applied to more cases, it would have varying results. Let’s assume that X assaults Y. Y ends up committing suicide because she is mentally unstable or because she hopes to get X behind bars. Another example could be that X shoots Y on his left leg. Y could go to the hospital but decides to remove the bullet by himself. Unable to do so and still refusing medical treatment, he dies. Should X ‘take’ Y’s unstable, vengeful or negligent behaviour? Is that justified or is it unfair? ——————————— [ 1 ]. Malette v Shulman [1991] 2 Med LR 162. [ 2 ]. Jerome Edmund Bickenback, Canadian cases in the philosophy of law, 4th edition, at 160 to 161. [ 3 ]. R v Blaue [1975] 1 WLR 1411. [ 4 ]. Michael T. Molan, Sourcebook on Criminal Law, 2nd edition, at 67. [ 5 ]. Hallett [1969] SASR 141. [ 6 ]. R v Hayward (1908) 21 Cox 692. [ 7 ]. Denis Klimchuk, Causation, Thin Skulls and Equality (1998) at pg. 126. [ 8 ]. R v Kennedy [2007] UKHL 38. [ 9 ]. R v Dear [1996] Crim LR 595. [ 10 ]. Alan Norrie, Crime, Reason and History: A Critical Introduction to Criminal Law, at pg. 143.