Besides, with the growth of the global production network, it's easy for the MNCs to source goods and services throughout the world and reconfigure production lines quickly. A country or a supplier will be cut out from the network if they fail to respond to the increasing demands of the global market rapidly enough.

International trade agreements too effect investment decisions. For instance, China's accession to the World Trade Organisation and phasing out of the Agreement on Textiles and Clothing (ATC) which allocated clothing export quotas to developing countries have accelerated the recent trend of shutting down operations in various EPZs throughout the world and relocating to the Chinese zones. The International Textile, Garment, Leather Workers' Federation (ITGLWF) had estimated that the phenomenal rise of China would lead to a million job loses in Bangladesh (an estimate confirmed by the UNDP), another million in Indonesia, around 200,000-250,000 in Sri Lanka, several thousand more in the Philippines and many other countries. Hundreds of factories have closed down in Mexico since their orders have gone to China which offers cheap -- and perhaps the most exploited -- labour.

The ICFTU study also points out that companies in the zones bypass local markets by importing their raw materials, which brings little benefit to the host country. Also, there are no strategies or agencies to facilitate the transfer of technologies and skills to the domestic market. And since most companies operating in SEZs do so independently, there is very little communication between them and domestic firms. The investors usually limit their activities in the zones to simple processing operations, thus limiting the transfer of technologies and skills. Thus neither the workers nor local industry gains much from the zones.

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Statistics available from the Commerce ministry reveals that the average annual EPZ export growth rate declined continuously. During 1966-1980 average annual export growth rates of EPZs was over 77%, whereas during the post 2000 period (2001-2003) it came down to 7%. The reasons generally attributed are growth of exports outside the zones and the fact that bulk of the exports from EPZs was to the former Soviet Union and East European countries. These nations were not too bothered about quality and price as there was little competition. But with the break up of USSR and the East European block, the scenario changed and exports declined.

Likewise, while the net foreign exchange earning in absolute terms increased phenomenally after the mid 1980s, the rate at which it grew remains stagnant, and in fact, started declining after 1998. Also, more than half of the foreign exchange earned by the industrial units through exports is spent for importing goods and raw materials. For instance, in 2004-2005, exports from Madras Export Processing Zone (MEPZ SEZ) amounted to Rs.1590 crores. However, Rs.859 crore was spent for imports.

In the present circumstances, do exports per se justify an income tax rebate? In the past, when the country was starved of foreign exchange, the Central Government decided to give exports a special break. It was justified then. But to create income tax-exempt zones now in the name of foreign exchange, when India's foreign exchange reserve has crossed $140 billion appears without justification. Incidentally, for export oriented units (EoUs) outside the zones, there is a sunset clause on income tax. Section 10-B of the Income Tax Act envisages their income tax benefit will end in March 2009. The SEZs though are governed by the new SEZ legislation.

Zones and employment

It's true that the zones in the country provide thousands of people with their livelihood. When the Kandla zone became operational, it had only 70 employees. Now over one lakh people work in 946 units in different SEZs, and with the number of zones increasing sharply, as the Commerce Minister points out, a few more lakh employment is expected to be generated. There will be more economic activities as a result of the ripple effect of these employments. (1 lakh = 100,000.)

However, the gains generated by SEZs in terms of employment cannot be viewed as long-term. Apart from providing the best infrastructure, the zones entice investors with promises of cheap labour and peaceful work environment. According to a study conducted by Society for Participatory Research in Asia (PRIA) on the plight of workers in Indian zones, few workers have long-term employment contracts. Short-term contracts are used for flexible hiring and firing and for avoiding costs such as maternity and redundancy pay.

Since the industries are export-oriented, the emphasis is on minimising production costs to competitively price the product in the international market. Women workers constitute 70-90% of the workforce, and it is they who bear the brunt of the competition. To meet the production targets, they are compelled to work harder and longer until they burn out or quit. They work 10-12 hours a day without or improper overtime payment. Minimum wages are not paid. Social security benefits are not implemented. Women are forced to work in the night shifts. Maternity leave is not allowed and sexual harassment of women workers is common in the zones.

Though, unlike in many other countries, in India, labour laws are applicable to the SEZs too, in practice, they are rarely implemented. Workers hardly benefit from any of the labour laws — not just because the laws are not implemented properly but also because there are many loopholes in the existing zone legislation. For instance, all the zones in the country have been declared as 'public utilities' under the Industries Disputes Act and complicated procedures restrict the workers from going on strike. A minimum of six weeks' notice is required before resorting to strikes. Restrictions on the right to join trade unions, right to collective bargaining and the right to strike are common features of all zones. Companies campaign strongly against trade unions and threaten the employees with dire consequences if they associate with unions. Except in emergency situations, state government agencies themselves require prior permission of the Development Commissioner to inspect the industrial units in the zone.

Hard work, strain and stress due to stiff targets and unhealthy work environment have taken their toll on the workers' health. A study among female factory workers, mainly at MEPZ, done by the Madras Institute of Development Studies revealed that the women suffered from frequent headaches due to tension and intense concentration on work, acute back pain, joint pains, swelling in the legs, severe abdominal pains, various types of allergies, skin ailments, and, piles (the result of working sitting in the same position for hours on end). The majority of women working in the garment units suffered from respiratory disorders such as asthma, long-lasting coughs and breathlessness.

It is true that international buyers insist on healthy and safe working conditions and reasonable wages. They have a crucial role in determining the working environment in the firms. Some buyers even visit the companies and place orders only when they are satisfied. There are a few companies in all zones which abide by the labour laws and cater to the demands of the buyers regarding work environment. They recognise workers' basic rights and realise the importance of productive labour and healthy industrial relations. While some lucky employees benefit from this, there are thousands of workers who are trying to support their livelihoods in an atmosphere of threat, fear and uncertainty.

Development, Export and FDI

In fact, no nation has so far proved that real development—progress and welfare of all sections of people—is possible through exports alone or FDI. In a submission to World Trade Organisation in April 1999, India itself has raised concerns of developing countries on the quality of FDI inflows: " …'more' is not necessarily 'better' in the case of multinational corporate activities in developing countries. Studies have shown that between 25 and 40 per cent of FDI has a demonstrably negative impact on host countries. This is the cost in terms of using scarce domestic resources inefficiently and substantially outweigh the benefits of national income…" Still, in the World Economic Forum held in Davos recently, the focus of the India Economic Summit was how India can achieve Chinese growth rates. Of course, the Prime Minister Dr Manmohan Singh reiterated that India was not interested in adopting China's "growth first, equity later" model.

Why then is India madly running behind foreign investors at the cost of public resources and the welfare of the workers? (Quest Features & Footage, Kochi)