Dr. Archana Verma

India has gone for economic policies in recent couple of years that have greatly damaged the Indian economy. The earlier model from 2013 was far superior, which gave the Indian unemployed people a chance to set up small businesses easily and make money online. They only had to pay income tax, which had low rates, there were many kinds of exemptions and it was an uncomplicated system which everyone could follow. In contrast, the economic policies enforced in the last two years treat every citizen as criminal unless proven innocent, which is against the democratic legal code. They are complicated  to the extent that even educated people in the urban areas find it difficult to comply by them, let alone the semi educated people in small towns and in rural areas. Small businesses have been ruined and the so-called fast rising GDP of India actually reflects the wealth concentrated in the hands of wealthy industrialists, which are few in number. Exports have evinced a sharp decline and unemployment has risen. Those who are employed are facing exploitation, work overtime against their consent without getting compensation and get salaried lower than their qualifications and are laced at lower levels than where they should be placed, just by the whims and fancies of the business owners. Working environments are unhealthy and mediocrity is consciously being promoted. Although very good laws protecting workers’ exist, their enforcement is almost nil, employees don’t have the resources to go to court and the entire business will gang against them even if they do so. Further, the cost and the delay in the legal process almost ensure that the employees never get justice. Government sector job are seeing a sharp decline. In 2013, if the people couldn’t get jobs, they could earn money by doing small business online. Now, those who are unemployed can’t even earn money online. Market is down and no one wants to spend money in investment. Those who are employed, are fast losing jobs and are badly treated in jobs. In short, this economic policy is good only for the wealthy industrialists and the foreign multinationals. They are being promoted at the cost of millions of small and medium indigenous businesses, which are being killed to feed these large conglomerates.

In contrast, UAE and Bahrain have developed economic models that are conducive to help their local businesses grow and also attracts FDI without harming the local businesses. Following is an overview –

Bahrain

Bahrain – A Prospective Destination for Entrepreneurs

Bahrain is a member of the GCC, together with Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The Bahrain International Investment Park (BIIP) is a business park developed by the Ministry of Industry and Commerce for businesses seeking a world class business park location for their West Asian operations. It caters to companies wanting to establish export-oriented manufacturing and international services operations in the West Asia.

The park offers

∙ Highly subsidised serviced industrial land

∙ Pre-built industrial and office units

Incentives
∙ 100% foreign ownership

∙ 0% corporate tax (with a 10 year guarantee)

∙ Duty free trade agreements across the West Asian Markets

∙ Free trade agreement with the USA

∙ Duty free imports of raw materials and equipment

∙ Industrial land at competitive rental rates $2.66/m²/year

∙ 100% repatriation of capital and dividends

∙ Renewable 25 year leases

∙ No recruitment restrictions for the first five years

 Creating High Quality Jobs

Creating high quality jobs suitable for Bahrainis is a key objective of the BIIP. Each project will be evaluated on the basis of achieving this objective including ensuring that each employer has a comprehensive training plan in place.

• Focused Internationally

The BIIP is designed for companies that are focused internationally.

Companies focused on the Bahraini market, which would cause displacement of existing manufacturing capacity, will only be considered where there is a clear strategy for increasing the size of the market or where there is a significant focus on export activity.

• Value Added Projects

Value added projects not only contribute to the economy of Bahrain but stand the best chance of meeting Bahraini employment criteria. The extent of the value added in the project will be measured by the percentage of jobs paying above an agreed benchmark level and the number of supervisory skilled and graduate staff employed.

• Sustainability

Projects must have long term sustainability. Projects established for short term objectives will not meet BIIP criteria. This will be determined by an assessment of the outline business plan, past financial performance and

3 year financial projections.

Source – GCC Industrial Services Cost Comparison Report 2017, KPMG Fakhro and Ministry of Industry, Commerce and Tourism (MOICT), Bahrain

Free-trade zones in the United Arab Emirates

These are areas that have a special tax, customs and imports regime and are governed by their own framework of regulations (with the exception of UAE criminal law). The UAE has several free zones across Dubai, Abu Dhabi, Sharjah, Fujairah, Ajman, Ras al Khaimah (For this site, click here) and Um Al Qwain. Free zones may be broadly categorized as sea port free zones, airport free zones, and mainland free zones. Free-trade zone exemptions are:

• 100% foreign ownership of the enterprise
• 100% import and export tax exemptions
• 100% repatriation of capital and profits
• Corporate tax exemptions for up to 50 years
• No personal income taxes
• Assistance with labor recruitment and additional support services, such as sponsorship and housing.

Each Free Zone is designed around one or more business industry categories and only offers licenses to companies within those categories. An independent Free Zone Authority (FZA) governs each free zone, and is the agency responsible for issuing FTZ operating licenses and assisting companies with establishing their business in the FTZ.

Investors can either register a new company in the form of a Free Zone Establishment (FZE) or simply establish a branch or representative office of their existing or parent company based within the UAE or abroad. An FZE is a limited liability company governed by the rules and regulations of the Free Zone in which it is established. Except for acquiring nationality in the UAE, the provisions of the Commercial Companies Law (CCL) do not apply to FZEs, provided that the Free Zones have special provisions regulating such companies.

UAE

Advantages of SEZs in UAE and Bahrain

• They are enclosed and require the foreign business to operate globally and not tap the local markets if they want 100% ownership 0% tax liability.
• If they want to tap local resources, then they have to tie up with a local partner who will own 51% of the business. Local tax rules shall apply in this case.
• They generate jobs for the local people, whose employment rights are protected and enforced strictly.
• Many of these SEZs are located in small places, which means that these places are being developed.

This implies that the local businesses are not harmed in the process of promoting foreign businesses to attract FDI. Further, local people get jobs and their worker rights are protected. This has given a win-win situation for both the local people and the foreign entrepreneurs. This has also encouraged small businesses to make forays in SEZs and has given a fillip to them.

Indian SEZs – What are the Flaws?

India also has some SEZs. However, these are structured again to help the wealthy industrialists. A small business entrepreneur or an online business cannot dream of entering this zone. Further, there is no tax exemption in these zones, nor are small exports being promoted at low cost. At the same time, FDI is being encouraged in the non-SEZs, thus killing the local businesses. Manufacture and exports in small sectors are not being encouraged. All the so-called schemes are on paper only. The location of these SEZs are either in airports, seaports or in metropolises. Small places are not being developed.

Overall, this is flawed policy.

What can India do in the area of SEZs?

• Scrap 100% FDI in the non-SEZs general market. In these bring back the earlier rule of maximum 49% ownership by a foreign business with 51% local partnership essential.

• Build in less developed places such as Madhubani, Darbhanga, Raisen, Tuticorin, Ballia, Amroha, Ferozepur, Makrana (Rajasthan) SEZs on the pattern of the SEZs in Bahrain and UAE, with 100% ownership to foreign businesses inside the SEZ (not outside) 0% tax liability to all foreign and Indian businesses inside the SEZs.

• Build state-of-the-art infrastructure available at low cost to the businesses inside the SEZs.

• Promote Indian exports oriented businesses inside the SEZs.

• Enforce the labour laws strictly on all businesses operating in India, so that employees can get their justice.

• Scrap the economic policies and bring back the system from 2013 for the whole of India.

The above can develop the less developed places, can give a relief to the local people and generate employment with improvement in the employment conditions. Without this simply advertising the fast growing GDP is a cruel joke on the Indian people, as it only helps those who are already wealthy and kills the Indian businesses.

@Cosmopolitaneye 2025. For re-publishing, send email in the contact form.