The Cost of Global Competitiveness: Assessing the Impacts of Special Economic Zone Policy on the Working Class in Bangalore A Thesis Presented to the Faculty of Architecture and Planning COLUMBIA UNIVERSITY In Partial Fulfillment of the Requirements for the Degree Master of Science in Urban Planning By Jessica George May 2015 Abstract Bangalore has been lauded as a positive example of economic development in the global South because of its success in attracting investment and fostering the development of small and medium enterprises (SMEs) as well as multi-national corporations (MNCs). The trend of economic liberalization and deregulation within Bangalore in particular has been furthered by the establishment of Special Economic Zones (SEZs) within which firms who operate are granted a variety of tax and duty exemptions, as well as exceptions from several labor laws. This has thereby resulted in tremendous economic growth within the city and established Bangalore as a major global hub of innovation. Simultaneously with the rise of a growing middle class however, inequality has grown within the city, as lucrative opportunities cater to a particular segment of society possessing certain levels of higher educational attainment and skills. The establishment of SEZs has undermined many of the labor rights that have long been established in India for the sake of economic growth. This study examines why individuals choose to work in high-technology SEZs and how employment within these firms impacts workers. Furthermore, this study investigates how the working class has been impacted more broadly by the approach to economic development being taken within the city as exemplified by SEZ policy. It is hypothesized that laborers within SEZs are worse off than those in domestic tariff areas (DTAs) in terms of security of employment and bargaining power, but they are willing to work for firms within these zones because higher average wages translate to compounded benefits to their livelihoods. The impacts of SEZs in Bangalore are explored through a quantitative characterization of government employment and financial data, combined with qualitative data from interviews with government officials, NGOs, trade unions, private sector representatives, and blue-collar workers. Findings suggest that the primary impacts of SEZ policy on workers are the proliferation of subcontracting and associated employment insecurity, heightened barrier to entry for decent employment due to a widened skills gap, and resulting affordability challenges within the city. This study argues that there are opportunities for increased inclusivity in each of these areas existing at the intersection of interests of different stakeholder groups. i Contents Abstract ....................................................................................................................................................................................... i Introduction .............................................................................................................................................................................. 1 Literature Review ..................................................................................................................................................................... 2 Globalization, Innovation, Agglomeration, and Development .................................................................................... 2 Employment and Labor Considerations .......................................................................................................................... 4 Political Economy, Governance, and Institutions .......................................................................................................... 4 Implications for this Study ................................................................................................................................................. 5 Background ............................................................................................................................................................................... 5 SEZ Policy in India .............................................................................................................................................................. 5 Development of SEZ Presence in India ............................................................................................................................ 6 Demographics and SEZ Development of Bangalore and Karnataka ........................................................................... 7 Data and Methodology .......................................................................................................................................................... 11 Interview Results .................................................................................................................................................................... 11 Development Commissioner ........................................................................................................................................... 11 Labour Commissioner ...................................................................................................................................................... 13 Private Sector Operating Unit Management ................................................................................................................. 13 Labor NGOs and Trade Unions ...................................................................................................................................... 15 Worker Interviews ............................................................................................................................................................. 18 Discussion and Policy Implications..................................................................................................................................... 19 Subcontracting Practices and Relationship to SEZs ..................................................................................................... 20 Role of Skills Development in Inclusivity ...................................................................................................................... 21 Affordability of Bangalore as a Result of Recent Economic Boom ............................................................................ 22 Conclusions ............................................................................................................................................................................. 23 References ................................................................................................................................................................................ 25 Appendices .............................................................................................................................................................................. 30 Appendix A: Interviewee Profiles ................................................................................................................................... 30 Appendix B: Interview Questions ................................................................................................................................... 31 ii Introduction Intense competition to attract firms has led to a global phenomenon of government deregulation and incentivization, or a so-called “race to the bottom” in which local jurisdictions have often failed to generate decent and secure regional employment while expanding their tax base. This trend is particularly salient within Bangalore, a city of the Global South whose model of economic development has been lauded internationally due to its success in attracting investment and fostering the development of small and medium enterprises (SMEs) as well as multinational corporations (MNCs). The trend of economic liberalization and deregulation within Bangalore in particular has been furthered by the establishment of Special Economic Zones (SEZs) after 2005 within which firms who operate are granted a variety of tax and duty exemptions, as well as exceptions from several labor laws. This has thereby resulted in tremendous economic growth within the city and established Bangalore as a major global hub of innovation. Simultaneously with the rise of a growing middle class within the city however, inequality has been exacerbated, as lucrative opportunities that have been made available cater to a particular segment of society possessing certain levels of higher educational attainment and skills. The establishment of SEZs has undermined much of the labor rights progress in India for the sake of economic growth. The nation has long struggled with ensuring universal labor rights, especially considering the ubiquitous presence of informality, however, the SEZs as zones of exception are particularly problematic by suggesting that labor protections are not conducive to economic development. The intentionality with which labor rights are subverted in areas that are designated as highly productive and export-oriented present a paradigm within which these two outcomes are mutually exclusive. SEZs and large corporations are politically advertised as major engines of employment generation, yet if the jobs created undermine workers’ rights and contribute towards precariousness of livelihoods, it begs investigation of who really benefits from utilizing these means to increasing a region's