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• Business-friendly Vs market-friendly policy- SEZs a good idea?

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  Amarendra Dhiraj    Group moderator

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  Business-friendly Vs market-friendly policy- SEZs a good idea?

  Political scientists draw a distinction between business-friendly and market-friendly governments. A business-friendly government works closely with business leaders, individually or collectively, to promote preferred activities. It likes to play God and decide who will be the winners. A market-friendly government, on the other hand, focuses more on setting rules of the game and levelling the playing field for all producers and sectors. A market-friendly policy does not rule out measures to assist producers. It only requires that such measures should be based on a sound analysis of market failure.
  
  The policy relaxations for the SEZs basically involve tax concessions that treat them as if they were units located outside country—a more liberal regime for external borrowings, and some significant relaxations of environmental and labour laws and of conditions governing infrastructure and urban development.
  
  - The SEZ policy is not a response to market failure. -> Governance failure
  - A belief that growth and social justice cannot be reconciled
  - An attempt to by-pass political constraints they will run into agitations sooner rather than later.
  - The SEZs involve discrimination and discretion. -> The discrimination is between the policy regimes that apply to producing units within the domestic tariff area and those within the SEZs.
  
  Results= Sooner or later they degenerate into what we politely call rent-seeking by politicians, bureaucrats and their business cronies.
  
  The SEZs are meant to drive rapid export expansion. But export production and production for the domestic market should not be separated in a sensibly-run economy. In an open trade regime with low tariffs there is no essential distinction between the two.
  
  The bottom line is that the SEZs do not address and in fact work against what is really needed—an economic policy that promotes competition, innovation and growth throughout the economy, an urban policy that focuses on affordable housing and services for all, a social policy that actively expands opportunities for all regions and classes and a political policy that bridges the divide between those who support continuing reform in the role of government and those who fear the rigours of liberal capitalism.
  
  • 15 Mar 2007, 3:16 pm
  Amarendra Dhiraj wrote: > Political scientists draw a distinction between business-friendly and > market-friendly governments. A business-friendly government works > closely with business leaders, individually or collectively, to > promote preferred activities. It likes to play God and decide who > will be the winners. A market-friendly government, on the other hand, > focuses more on setting rules of the game and levelling the playing > field for all producers and sectors. A market-friendly policy does > not rule out measures to assist producers. It only requires that such > measures should be based on a sound analysis of market failure. > > The policy relaxations for the SEZs basically involve tax concessions > that treat them as if they were units located outside country—a more > liberal regime for external borrowings, and some significant > relaxations of environmental and labour laws and of conditions > governing infrastructure and urban development. > > - The SEZ policy is not a response to market failure. -> Governance > failure > - A belief that growth and social justice cannot be reconciled > - An attempt to by-pass political constraints they will run into > agitations sooner rather than later. > - The SEZs involve discrimination and discretion. -> The > discrimination is between the policy regimes that apply to producing > units within the domestic tariff area and those within the SEZs. > > Results= Sooner or later they degenerate into what we politely call > rent-seeking by politicians, bureaucrats and their business cronies. > > The SEZs are meant to drive rapid export expansion. But export > production and production for the domestic market should not be > separated in a sensibly-run economy. In an open trade regime with low > tariffs there is no essential distinction between the two. > > The bottom line is that the SEZs do not address and in fact work > against what is really needed—an economic policy that promotes > competition, innovation and growth throughout the economy, an urban > policy that focuses on affordable housing and services for all, a > social policy that actively expands opportunities for all regions and > classes and a political policy that bridges the divide between those > who support continuing reform in the role of government and those who > fear the rigours of liberal capitalism.