Special Economic Zone is the specific region which enjoys liberal economic laws as compared to other parts of the country. SEZs have been developed by many countries including India, there are 3000 SEZ’s in 120 countries approximately.


Special economic zones are also called favourite investment destination for the foreign investors, Under SEZ policy certain zones are created in which laws are relaxed concerning taxes and government regulation which attract foreign investors to make an investment in the country thereby helps in the rapid development of the country. The special economic zone is a driver of economic growth which boost the economic activity in the country.


The policy has a simplified procedure with minimum and effective regulations which provide a hassle-free competitive environment to run a business. Government adopt this policy to attract investment in the country which can aid in the development of infrastructure, generate employment, increase in foreign exchange and expansion in Exports.


SEZ is a broad term which includes certain kinds of zones such as export processing zones (EPZ), free trade zones (FTZ), Industrial parks, free economic zones (FEZ), bonded parks, free ports, high-tech zones and enterprises zones etc, all these zones are categories of SEZ.


The objective behind the arrival of special economic zone scheme is to promote industrialisation, to deal with the problem of unemployment by the creation of job opportunities, development of infrastructure, advancement in exports of goods and services, to increase the flow of foreign exchange from other countries thereby increasing GDP of the country, Therefore, an overall growth of the country without using much resources.



Earlier it was difficult to carry on business in India due to the presence of several policies and Framework which prevents foreign investors not to take interest foreign investment in India. This situation persisted even after the globalisation and liberalisation policy came in 1991. Therefore, a Special Economic Zone Policy was adopted by India to attract more foreign direct investment.

Though the beginning of the concept of SEZ already started in 1965 when India makes use of export processing zones (EPZ’s) policy and Asia’s first export processing zone was created in Kandala and then Santa Cruz EPZ in 1973 and after that many zones were set up in later years. But the idea of export processing zones was unsuccessful to achieve the motive for which it was adopted and has not proven effective in the India economy. Due to which all export processing zones were converted into special economic zones in 2005 for the better outcomes in foreign direct investment.

India encouraged from china observing their contribution to the GDP by using SEZ policy and adopt the same in India also after wide discussions of the Ministry of Commerce and Industry.

In India, special economic zones are governed by the Special Economic Zones Act, 2005 enacted by the government in 2005 which is supported by special economic zone rules, which came into effect on 10th February 2006.


Special Economic Zones Act, 2005

The act provides guidelines and framework under which special economic zones can be regulated in a better manner. It deals with the procedure to classify and establish a unit in a zone and relating to the management of a zone, provides certain powers to authorities who look after the zones and other essential aspects related to SEZ which helps in the functioning of such zones.

Special Economic Zone Rules, 2006

SEZ rules provide-

  • Simplified procedures for development, operation and maintenance of SEZs and setting up units and running a business in SEZs.
  • Single window clearance for setting up of an SEZ or setting up units in SEZ.
  • Single window clearance on matters related to central and state governments.
  • Simplified compliance procedures and documentation with an emphasis on self-certification.



The concept of special economic zones was well adopted by China. In 1980, China established the biggest economic zone in Shenzhen which helps to boost their economy very rapidly. China proves itself to the most successful country in using Special Economic Zone policy to attract foreign investment.

The first four Special Economic Zones established by China has consisted of Shenzhen, Zhuhai, Shantou and Xiamen. China allows foreign investors to use the special economic zones for developing their own infrastructure for which they do not require any approval from local or the central government. They also offer tax incentives to foreign investors. As Foreign investors would always be ready to invest in an area if the conditions are favourable for their business and Such support of Chinese government to foreign investors make entrepreneur’s excited to invest in china to generate profits out of it and this also helps china to excel in the economic growth.

Chinese SEZ initiative is government-driven which provides a hassle-free environment for foreign investors with liberal policies and tremendous flexibility in terms of labour laws, it has also made emphasis on size and location of SEZ for the effective functioning that is locating SEZs near coastal regions to help the trade of goods easily. So, the adoption of such measures by proper planning brings success to the Chinese model of SEZ and leads to the expansion of more than 38 special economic zones since 1980.



Every country wants economic enrichment in their country and that’s why many countries adopted this concept for their development but china has made remarkable history with its largest SEZ in the 1980s, which grabs the world attention as china got successful in attracting FDI and increasing exports by using SEZ Policy effectively and efficiently.

It cannot be doubted that the special economic zone policy has given a boost to the Indian Economy. Though India introduced the policy of special economic zone on large scale, it has also witnessed unprecedented growth in exports and development of economy but in comparison to other countries of implementation of special economic zone brings out lacunas in India’s SEZ Policy. There are several reasons behind poor SEZ’s performance of India such as Improper planning while locating SEZ, Poor infrastructure, Ineffective Land Acquisition Policies, Poor coordination between state and central government, Lack of clarity in incentive packages and many more.

However, such complications are usual while trying to adopt new policies in a country especially in developing countries which can be sorted by making proper plans after analysing previous loopholes and implementing it in a responsible and effective manner that advances the development of a country.







Delhi Metropolitan Education affiliated to GGSIPU/ 2nd Year/ Law Student


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