The Hindu Business Line : Think `SDZs', not SEZs

Had the Government thought of creating Special Development Zones instead of the Economic Zones, and created better educational, medical, communication, municipal and other facilities of direct value to people. Had it explained to the people that just to pay for those amenities, it is establishing a Public-Private Partnership and bringing in major industry, then the SEZs, or rather SDZs, would have been met with much enthusiasm, not scepticism, says P. V. INDIRESAN.

In spite of the euphoric success of the Tatas in the Corus takeover, they are facing painful opposition to their mega projects in Bengal and Orissa. The vast reputation the Tatas have has not been good enough for them to prevent bruising political damage.

Sad to say, and truth to tell, the problem has arisen because of the poor reputation of the governments that have invited the Tatas to invest. Association with Tatas should have enhanced the reputation of those governments. Instead, the poor reputation of the governments has rubbed off on the Tatas. It is like laying a flower garden next to a coal yard: The coal yard does not become more beautiful, but the garden definitely becomes dirty.

Villagers are not blind to the advantages of modern developments of this nature. They are unhappy because few of them will become as prosperous as the company employees. In projects of this nature, living conditions within the company campus are excellent. Immediately outside, slums are what people get. The difference in quality of life is difficult to accept; it creates jealousies. The important point is not how good a campus you build for your employees, but how good is the habitation in which you embed your industrial plant, how equitable the proposed development will be ultimately.

On a retreat

The kind of problems the Tatas are facing is even more acute in the case of Special Economic Zones. Opposition to the SEZs has been so fierce, scepticism within the government itself so high, that the Government has been forced to beat a hasty retreat.

Goldman Sachs may predict that India will be a larger economy than the US in a few decades. Such predictions smack of the pronouncement of a mathematician that nine crows will remain when one of the ten crows sitting on a tree is shot. The way social conditions are deteriorating, the country may become rich but not necessarily better.

By year 2050, will there be more slums or less? Will water supply be better or will it become worse? Will the country be a safer place to live or will it be more dangerous? Will rich-poor, rural-urban disparity decrease or will both increase? Answers to such questions do not hold out much hope for a distinctly better future. That is the subconscious reason why power-mad politicians are able to get large sections of population to obstruct even worthwhile programmes of industrial development.

Suppose the Government had described these projects as Special Development Zones and not Special Economic Zones. Suppose it had explained its primary objective as creating better educational, medical, communication, municipal and other amenities of direct value to people. Suppose, it had explained that, in order to pay for those amenities, and only for that reason, it was establishing a Public-Private Partnership and bringing in major industry. Then, the same projects would almost definitely have been met with much enthusiasm, not scepticism.

Open to all

The Government should have placed in front social service providers — reputed entrepreneurs in education, healthcare and the like, and let the industrialists follow in their wake. Instead of big industries building fancy campuses to which outsiders will have no admission, they should have located themselves in the midst of an attractive habitation open to all. Then, the employees would have shared those amenities with their neighbours; they would have made those facilities viable by cross-subsidising them.

There is a story of an old teacher of Akbar who sought out the Emperor seeking some favour. He found Akbar praying, "Allah! I am a poor devotee and grant me favours." That set the teacher thinking; he started moving out just as the Emperor came in. When the Emperor asked his teacher why he was going away, he said: "I realise you too are a beggar. I will seek favours directly from your donor than try to get them indirectly from another beggar like you."

The present situation is similar: The Tatas would have been wiser if they had gone directly to the people and had not asked the Government to intercede on their behalf. In the villagers' view, any business that does so is a tax-avoider enriching itself at their expense. The tax shelters that businesses seek are prominent; the benefits they may provide are intangible. The same scheme, promoted in a different way, and at no extra cost, could have been welcomed with open arms.

A different approach

It would have helped if the project had also paid more attention to agricultural needs. Instead of seeking one large chunk of land that would inevitably include large fertile areas, investors could have collected smaller patches of low-value land, as small as a 100 acres or less, as and where they were easily available. That would have saved considerable expense.

What is more that move would have muted the criticism of environmentalists. Further, in case any farmer proved uncooperative, the project could have been moved somewhere else where farmers are more receptive. That prospect of the investor going away would have set a competition among the farmers to cooperate than extract a monopoly price the way they are doing now.

Monopoly, even in the hands of farmers, is bad. It cannot indicate what the proper price is; only competition will do so. Hence, the present impasse will not be resolved by offering farmers more. However high the price paid, farmers will have a lingering suspicion they were diddled, that they could have extracted an even higher price; they will never feel satisfied. The Government would have gained greater political advantage if it had organised the programme in the form of a Special Development Zone and not merely a Special Economic Zone.

Industry would have profited better if it had emphasised harmony and participative welfare. Both should have realised that the bottomline should factor in political costs. Unfortunately, our governments and business houses know, as Oscar Wilde said, the price of SEZs but not their value (rather lack of it).

The direct approach

All middlemen evoke mistrust. If State governments were wise, they should stop acting as middlemen and let investors negotiate with the farmers directly.

In turn, investors should work with service providers and make consumer amenities the primary focus. They should develop the SDZs as modern habitations and not as mere industrial estates. They should also confine themselves, as far as possible to land of low quality. As a thumb rule, in every SEZ, services should generate at least twice as many jobs as industries do. Then villagers will recognise the full benefit of an SEZ, nay, an SDZ.

I am not suggesting that the Government should remain passive. It can, and should, provide valuable support by contributing what it only can — connecting roads for instance. In extreme cases, it should even acquire land — for instance, when the odd farmer turns recalcitrant and obstructive. Even then, as a matter of self-discipline, it should limit such acquisition to no more than 10 per cent of the total.

The essence of democracy lies is self-restraint; in governments exercising power, in not making a naked exhibition of it. Failure to observe this basic discipline has turned many useful projects into political liabilities; negated whatever financial profits they would have provided.

Therefore, to paraphrase President John F. Kennedy, whether you are administering a government or managing a business house, ask not what farmers can do for you; ask what you can do for them.

(Concluded)

(This is 193rd in the Vision 2020 series. The previous article was published on January 22.)

(The author is a former Director of IIT Madras. Response may be sent to: indiresan@gmail.com)

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