The Indian Special Economic Zones Act 2005 and its Implications for Modelling the Law and Governance of Special Economic Zones

This paper looks critically at the legal structures and modes of governance established by India’s Special Economic Zones Act 2005, arguing that the Act gives extraordinary broad powers to the government, including to suspend laws in SEZs and create special courts for SEZs. It accepts that SEZs are here to stay but consistently with the theme of the conference does not assume they should take a particular form. The paper therefore considers the possibilities for law and governance in SEZs, taking as its starting point the proposition that at present there is little in the way of accountability or transparency in respect of any aspect of SEZs: the decision to set up a SEZ in a particular place and in a particular form; the manner of operation of the SEZ; the regulation of the SEZ in the context of particular issues such as labour rights, human rights, environmental protection, corruption, and so on; and of course macro-accountability in terms of the costs and benefits of continuing a SEZ or more generally a SEZ policy. The paper takes India’s Special Economic Zones Act 2005 as the latest example of hard legal material on which to base some ideas about law and governance in SEZs. The paper is concerned ultimately with imagining what an appropriate system of governance for SEZs would look like, and how the concepts of public law can be profitably brought to bear on the problems of SEZs. In this context we can look at legal structures/ models that could be used, examining them against familiar constitutional and governance parameters and standards, using India as an example. Regulation and accountability are not merely a negative cost or an incubus on the system. They should ensure that SEZs are operated according to the desired principles and standards, making a genuine contribution to the national economy, but, in addition a contribution to development in the broader sense of upgrading technology and skills and improving standards in employment, environmental protection and corporate and social responsibility. SEZs should deliver more than the temporary and often illusory gains of the sweat-shop economy. They should be points of productive partnership of government, the private sector and the local people and their representatives; templates and catalysts for development; examples of best rather than most exploitative practice, engines of growth; and sites of global economic integration. Regulation and accountability should be geared toward these larger objectives and should apply to every aspect of SEZ experience, from the decision to create (often the most crucial one in terms of location and orientation) to the ensuring of continued adherence to the principles of good SEZ-governance.