A Study of Madras Export Processing Zone (MEPZ) Towards Infrastructure & Policy Initiatives Umesh Kumar Shukla Research Scholar, Faculty of Management Studies, Sathyabama University, Jeppiaar Nagar, Rajiv Gandhi Salai, Chennai-600119, Tamil Nadu, India. Abstract The Role of Indian Special Economic Zones (SEZs) is that the SEZs must generate a critical mass of economic activity to set the conditions for the sustainable growth. This paper analyses whether India s SEZs have succeeded in meeting this objective. It examines their performance in terms of policy initiatives, infrastructural facilities and scope for more investment-against the backdrop of the shift in the policy regime in 2005. This paper reports the results of a survey carried out in the units inside an operational SEZ. This paper analyses the infrastructural facilities, government initiatives and export promotion measures with a pilot study of 23 companies inside the MEPZ-SEZ out of a total of some odd 157 companies fully functional and engaged in export based services, manufacturing and activities. The samples were selected with systematic random sampling keeping in mind the factors: age of the company, origin of the country-domestic ownership or the foreign company and sector / industry of the company. Keywords: Infrastructural Facilities, Special Economic Zones (SEZs), Policy Initiatives, Exports, MEPZ-SEZ. INTRODUCTION Special Economic Zones (SEZs) have been touted to be magic pills for nations to kick-start exports, develop infrastructure, and increase employment by adhering to the principles of free markets and minimum distortions caused by effective administration and low or no taxes (Tantri, 2010). Owing to the success of China and other countries, India took up the development SEZs with much enthusiasm, but the outcome has not entirely been as desired. On the one hand, the Ministry of Commerce and Industry reports impressive figures to show how SEZs have worked, but on the other hand, there are cases such as that of Nandigram, West Bengal where 14 people died in March, 2007 while protesting against the establishment of a chemicals hub SEZ by an Indonesian developer (Manoj, 2009), and (Dohrmann, 2008). LITERATURE REVIEW Michael Porter provides valuable insights into factors shaping competitiveness of industries and nations (1980, 1985, and 1990). Firm actions, characteristics and strategies are considered important for the profitability and have shown high variance in business unit performance (McGahan, 1999; Rumelt, 1991). Competitiveness has emerged as a useful indicator of long term socio-economic health of a country (Momaya, 2000). Competitiveness of a nation, especially export competitiveness can be achieved through its trade, (Nihon, 2005), infrastructure development and by providing special economic privileges i.e. lower taxes and rebate to a liberalised economy. The respective government adopted development strategy by emphasising either on outward or inward orientation of the trade policy, especially on exports (Agarwal, 2004). Export processing zones (EPZs) therefore are considered as a strategic tool for promotion of exports (Mondal, 2001). STATEMENT OF THE PROBLEM & NEED FOR THE STUDY Over the past few decades, it has been experienced throughout the globe that there is a rapid change in the international trade scenario due to implementation of SEZs by most of the countries. The analysis draws heavily on the existing literature and on Indian SEZs experiences. It presents anecdotal evidence of best practices which draws on newly-notified zones in India. It also addresses questions such as are SEZs a real estate proposition, and should the private sector be allowed to develop SEZs. This study helps to identify the key issues which are prone towards development of the infrastructural facilities and government policies incorporated from time to time towards export promotion. It also enables us to know whether the investors are performing well in various sectors under the SEZ Scheme. Through this study we can also identify the most important factors and the relationship of infrastructural facilities with the export management in a better way. Both domestic and international companies are considered for the study. OBJECTIVES OF THE STUDY To look into the investor s responses towards government policy initiatives To analyse the infrastructural facilities existing inside the MEPZ-SEZ To find the relationship, if any, between the existing infrastructural facilities To provide the base for the main study to be carried out inside the Zone RESEARCH DESIGN & RESEARCH METHODOLOGY The survey was conducted on 23 units of the MEPZ-SEZ using Interview method and the respondents were high and middle level managers / officials of the units inside the 7212
MEPZ-SEZ. The research design that was adopted for this study is descriptive in nature. The information was obtained through well designed questionnaire. The statistical tools of age analysis, chi-square analysis, one-way ANOVA, Correlation & (Rank Analysis) were used using SPSS. The samples were selected using Systematic Cluster Random Sampling from the population based on the factors, namely origin of the company, age of the company and the sector to which it belongs to. A Sample Size of 23 was used for this study, out of the total population of 157 companies. Both Indian and Foreign companies were selected. The information was obtained through well designed questionnaire which was filled by the respondents. Respondents were CEO / MD / High level managers of the units Table 1: Summary statistics of Clusters-Industry-wise samples Industry-Clusters Clusters Frequency Cumulative Valid Textiles 3 13.0 13.0 IT 2 8.7 21.7 Chemical 4 17.4 39.1 Steel 2 8.7 47.8 Leather 2 8.7 56.5 Engineering 4 17.4 73.9 Medical 2 8.7 82.6 Food 2 8.7 91.3 Stationery 2 8.7 100.0 Total 23 100.0 LIMITATIONS OF THE STUDY This study is limited to the exporting companies of the MEPZ-SEZ. This paper has used a sample size of 23 for its analysis. Since it is very small sample the result will not be a generalised one. This study has a response rate of 14.65% (23 out of 157). RESULTS AND DISCUSSION Table 2 reports the summary statistics of all the variables used in the study in the introductory stage. age and cumulative frequencies of the origin of the companies and their age are shown below:- Table 2: Summary statistics of variables-origin of the company ORIGIN OF THE COMPANY Frequency Valid Cumulative Valid Indian 16 69.6 69.6 69.6 Foreign 7 30.4 30.4 100.0 Total 23 100.0 100.0 Table 3: Summary statistics of Variables-Age of the Company AGE OF THE COMPANY Frequency Valid Cumulative Valid Below 9 39.1 39.1 39.1 10 10-15 8 34.8 34.8 73.9 Above 6 26.1 26.1 100.0 15 Total 23 100.0 100.0 HYPOTHESIS I There is no significant difference between Age of the company with respect to overall satisfaction on Government Policy Initiatives. Table 4: ANOVA: Age of the Company vs satisfaction on Govt. Policy Initiatives Sum of df Mean F Sig. Squares Square Infrastructure Between 66.316 2 33.158 1.537.239 Facility Within 431.597 20 21.580 Total 497.913 22 waste material Between 8.040 2 4.020 1.357.280 Within 59.264 20 2.963 Total 67.304 22 Basic Amenities Between 148.623 2 74.312 2.781.086 Within 534.333 20 26.717 Total 682.957 22 Govt. policy Between 90.413 2 45.207 3.539*.048* initiatives Within 255.500 20 12.775 Total 345.913 22 Impact on MEPZ-SEZ Between 6.429 2 3.215.859.439 Within 74.875 20 3.744 Total 81.304 22 Satisfaction level Between 13.357 2 6.679 1.508.245 of MEPZ-SEZ Within 88.556 20 4.428 Total 101.913 22 7213
Since, the P is 0.048, which is less than 0.05; for the factor Govt. Policy Initiatives, we reject the null hypothesis at 5% level of significance. Therefore, there is a significant difference between the age of the company with overall satisfaction on Govt. Policy Initiatives at 5% level of significance. Table 5: Multiple Comparisons (Govt. policy initiatives) Tukey HSD Tukey HSD(a,b) Homogeneous Subsets Age of the N Subset for Company alpha =.05 1 2 Std Deviation Below 10 9 68.67 3.000 F P 10-15 8 69.50 69.50 2.878 3.539 0.048* Above 15 6 73.50 5.010 Sig..895.103 Note: Age of company denotes significant at 5% level of significance using Duncan Multiple Range test. Mean Plots Ranks Mean Rank Govt. Policies 4.78 Tax Exemption 2.30 Comp Advantage 4.35 Infrastructural Facilities 4.57 Customs & Port Clearance 3.22 Vicinity to the Port 1.78 Test N 23 Chi-Square 52.292 df 5 Asymp. Sig..000 Table 6: Friedman test for significant difference towards Mean Rank Chi- Square P value Govt. Policies for SEZs 4.78 52.292 0.000** Exemptions in various Taxes & 2.30 Tariffs Getting competitive advantages 4.35 due to presence inside SEZ Infrastructural facilities help in 4.57 export promotion Customer clearance & Port 3.22 services Vicinity to the Port 1.78 Note: ** Denotes significant at 1% level Since P value is less than 0.01, the null hypothesis is rejected at 1 percent level of significance. Hence, concluded that there is a significant difference between mean ranks towards Infrastructural factors for Effectiveness of MEPZ-SEZ. Since P value is more than 0.01, the null hypothesis is accepted at 5 percent level of significance. Hence concluded that there is no significant difference between numbers of years the company is functional with respect to overall satisfaction on Government Policy initiatives. HYPOTHESIS II There is no significant difference between mean ranks towards of effectiveness of MEPZ-SEZ HYPOTHESIS III There is no significant difference between mean ranks towards Impact on Environment due to setting up of MEPZ- SEZ. Ranks Impact on the Environment Mean Rank Surroundings Polluted 2.57 Displacement of the People 2.24 Agricultural Fields affected 1.91 Increased Job Opportunities for locals 3.96 Status enhancement for locals 4.85 7214
Test N 23 Chi-Square 30.912 df 5 Asymp. Sig..000 Table 7: Friedman test for significant difference between mean ranks towards Impact on Environment due to setting up of MEPZ-SEZ Impact on the Environment Mean Rank Chi-Square P value Surroundings Polluted 2.57 30.912 0.000** Displacement of the People 2.24 Agricultural fields affected 1.91 Increased Job Opportunities 3.96 for locals Status Enhancement for the locals 4.85 Note: ** Denotes significant at 1% level Since P value is less than 0.01, the null hypothesis is rejected at 1 percent level of significance. Hence, concluded that there is a significant difference between mean ranks towards Impact on Environment factors due to setting up of MEPZ- SEZ. Correlations between infrastructural facilities, basic amenities & disposal of waste HYPOTHESIS IV There is no significant relationship between Infrastructural Facilities, Basic Amenities and Waste Material Factors due to setting up of MEPZ-SEZ. Table 8: Pearson Correlation Coefficient between Infrastructural Facilities, Basic Amenities and Waste Material factors Factors Infrastructural Facilities Basic Amenities Waste Material Infrastructural 1.000 0.602** 0.469** Facilities Basic Amenities - 1.000 0.705** Waste Material - - 1.000 Note: ** Correlation is significant at 1% level Null hypothesis is rejected, as there is significant relationship found between the three variables at 1% level of significance. The Correlation Coefficient between Infrastructural Facilities and Basic Amenities Factor is 60%, which is significant at 1% level. Also, the Correlation between Basic Amenities and Waste Material Factors is 70% which is significant at 1% level. FINDINGS AND SUGGESTIONS The study suggests that there is a significant difference between the age of the company with overall satisfaction on the Govt. Policy Initiatives. Based on Duncan Multiple Range test, the below 10 years age of companies are significantly higher level of satisfaction on Govt. Policy Initiatives than the age group between 10 to 15 years, but above 15 years the life of the company, are not significant with other group of years. There is a significant difference between mean ranks towards Infrastructural factors for Effectiveness of MEPZ-SEZ. There is a significant difference between mean ranks towards Impact on Environment factors due to setting up of MEPZ-SEZ. There is significant positive relationship of 60% found between the Infrastructural Facilities and Basic Amenities Factor, which is significant at 1% level. Also, there is significant positive relationship of 70% found between the Basic Amenities and Waste Material, which is significant at 1% level. Companies are satisfied mostly with the government infrastructural facilities, but they are more concerned about the policies; review of the government policies towards Special Economic Zones needs to be taken up. There is also a scope for the improvement of the infrastructural facilities in terms of faster and speedy delivery and despatch of the consignments. Further, improvement in Exemptions on various Taxes & Tariffs is suggested. MEPZ-SEZ should be made a model SEZ by boosting the export with providing the enough infrastructural facilities and recruiting enough maintenance, administrative and security staff to upkeep its beautiful landscapes and have a watch on the day to day activities all around MEPZ-SEZ. CONCLUSION This paper has dealt briefly into a few contentious issues that arise with the establishment of SEZs in India. With significant revenue not being generated, and with no real rise in national exports has taken place, the rationale of this establishment is called into question. Finally, the maximisation of the MAKE IN INDIA impact will require substantial targeted investments in India and almost in all her potential states, keeping in view the larger economic activities and huge economic growth possible in near future. SEZ firms and developers may prove to be instrumental in this endeavour. Governments both-central and State, need to take care of the utilization of the massive 65% of Indian youth-workforce, which are below the age group of 35 years, and make them as the ideal strength of our MAKE IN INDIA initiative, a grand success. REFERENCES [1] Agarwal, A. (2004). Performance of Export Processing Zones: A Comparative Analysis of India, 7215
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