Cyber City, Gurgaon, India

I first experienced a special economic zone (SEZ) on a journey to a real estate developer’s office located in a high-rise complex known as Cyber City. Cyber City is an industrial cluster that is part of a large special economic zone, Gurgaon in Haryana, approximately 14 miles south of Delhi in north India. A new public rail system carried our group to the general area and the view from the elevated train was fantastic.  Villages and small towns with single-story buildings were scattered among the low trees of the dry forest, until we could see a cluster of towers in the distance jetting toward the sky like Emerald City.  Cyber City, like Emerald City, was completely out of scale with its environment.

Cyber City, Gurgaon, India

Inconveniently, the newly constructed train station was several miles from our destination, which set up the adventure for the last leg of our journey.  Piled into precious few rickshaws, we crawled through the traffic amidst a cacophony of horns with eyes tearing and throats burning from the fumes.  Finally spilling out under 5-story-high golden arches, we darted across the street in an unintended game of chicken.  Walking past the American branded worker amenities–cafes, sandwich shops and a gym–we arrive at our complex.  The quiet luxury of the new elevator whisks us into a boardroom with a view.  This view included iconic architecture, concrete, mud and stagnant pools of water in a scene that is typical of SEZ development around the world.

There are approximately 4000 SEZs globally, and this first experience encapsulated some of the negative social and environmental externalities that SEZs have become known for. An externality occurs when the production or consumption of one affects another without compensation (Todaro, p.501). Vast amounts of land have been seized for development via eminent domain, and compensation for an obliterated livelihood is low. Thoughtless development of what is essentially isolated urbanism sometimes occurs on greenfield and fallow land, and is an underutilization of forest and fertile soil. Haphazard construction rarely considers local resources, as a result water tables are lowered and aquifers are polluted. Superfluous use of concrete prevents surface drainage and creates heat sinks requiring even more resources such as water and electricity for air conditioning to operate, while industrial emissions pollute air and water.  These examples are known as public bads.

SEZ developments not only impact our physical environment, they are the underpinning of the way we live.  For example, the absence of public transportation creates a vehicle dependent environment as middle class workers commute from an ad hoc assembly of private enclaves and gated communities servicing the industrial areas.  Promises of low-income housing made in development deals are rarely met, so informal settlements emerge.  All around the world I have seen new commercial developments surrounded by shantytowns depicting increased economic disparity.  These images are compounded by reports of sweatshop conditions and suicides of exploited workers.  Child labor, forced labor and environmental justice issues can all be tied to the development of SEZs.  However, SEZs are not evil.

It is fair to say that the zones have presented serious problems and they may even be pernicious, but to villainize the development tool entirely is reductionist.  SEZ policies have enabled multitudes of less developed countries (LDC) to connect to the global market and generate wealth through export-oriented industrialization. SEZs have the power to grow a dynamic market economy to a scale that dominates the entire economy (Farole, p.211).  The robust character of economic zones is evident in a few well-publicized transformations.  But can development occur without social progress?  By most definitions, development goals are met if lives improve.  Whose lives are improving?

This research will look at two cases that broach the complexity of issues: the poster child of all SEZs, Shenzhen, China and the zone that manages to grow despite itself, Gurgaon, India.  The implication for India and China is that the localized policy zones have profound effects on the entire nation (Palit, p.179).  Their SEZ policies opened their respective trade practices, and inspired the race between the Chinese dragon and the Indian elephant.

Focused on the attraction of foreign direct investment (FDI), SEZs were intended to be a contained experiment in open market trade and a short-term economic growth tool.  Therefore, the quest for rapid growth traded off social and environmental considerations. Thirty years later, the same short-term growth tools are proliferating, reproducing the same negative externalities and perpetuating public outcry.

The response from international financial institutions (IFI) have remained status quo as some economists preserved the belief that increased national production would eventually lead to human development.  This debate continues.  But as we turned into the new millennium a trend to reference sustainable development policy guidelines has emerged, and some auspicious adaptations have been made to the policy package such as wage increases, recycling efforts and restricted toxic dumping.  In 2009, the Indian government instituted a Green SEZ mandate while plans for 14 low-carbon zones were included in China’s most recent 5-year-plan.  These announcements are remarkable and the goals set forth by both countries are the impetus for this research.

Of the two cases, I scrupulously examine Shenzhen, primarily because the region has been heavily researched making a broad range of data available.  The available data on Gurgaon specifically is insufficient, so the case offers counterpoint, illustrating how differently the same policies function in different locations.  I look at the history of environmental policy in both China and India to asses the types of policies that have been effective and how, or if, they are enforced. Past practices provide perspicacious perspective to the grand green and low-carbon zones proposed by both countries.  I have analyzed the adjustments made to SEZ policy in both Shenzhen and Gurgaon to determine that neither has yet accomplished its stated goal of sustainability.