SEZs - equality and property rights

A tussle is on between the Centre and the state government of Goa over the issue of SEZs in the state. I have little to say about the specifics of this issue, except to sigh and note that the decision of the Goan government is probably on account of political considerations and lobbying rather than economics and principles.

I do have a view about the SEZ controversy in general though. As I have often expressed both in this blog and elsewhere, I am a free market enthusiast and a political liberal. And precisely because I am so, I do not agree with the policy on SEZs.

I do not agree with the concept of an SEZ. What is meant to be the point of creating special enclaves, where tax exemptions and labour law flexibility are the USP? I would rather have uniform tax laws throughout the territory of India, and as few exemptions as possible. After that, let the market mechanism direct the location of firms where they make most economic sense. SEZ will only reduce the revenues accruing to the government, and distort the market. I of course support the repeal of the restrictive, ossified labour laws in India, which inhibit job creation (since firms that fear facing difficulties in laying off people will not employ them in the first place). Selective impositions of these laws does not make much sense.

Property rights are the foundation of any market economy. When government comes to the aid of SEZ promoters to acquire land from farmers, I think it is unfairly intervening in private transactions. The only circumstance when intervention can be sometimes justified is when property is compulsorily acquired to develop a public good, i.e., something which will create a benefit to society, but cannot be profitably owned by a private party (like an untolled road). The SEZs will be privately owned, and benefit private owners. If they wish to acquire land for their SEZs, they should negogiate directly with the owners and persuade to sell their holdings. If they can't, too bad. I believe that the modified SEZ policy does indeed require governments to not assist in the process of land acquisition, and that is how it should be.

Am I missing something?