SEZs an instance of growing autonomy from the 'centre': Parag Khanna, geostrategist .

The world is becoming a large scale, neater version of India, says Parag Khanna, a geostrategist and director of the Hybrid Reality Institute, Singapore. What he means is that the world is increasingly moving to a state where the federal or central government says one thing, and the states or individuals you deal with, another. And this is visible the world over, as states and local government bodies increasingly move towards a greater degree of autonomy from the centre.

The most common manifestation of this is the now ubiquitous special economic zone (SEZ) which has become a given in almost all emerging markets. These are specially demarcated areas, enclosed enclaves if you will, which though, are a part of the state, have their own rules and regulations and tax policies. These zones are increasingly playing an important role in the rise of various nations. The best case in point is probably China, which was among the earliest to start setting up SEZs over thre decades ago. "China has the largest number of SEZs and is creating more.

They've been emblematic of China's rise to the top of the value chain," says Khanna, co-author of the best-selling Hybrid Reality: Thriving in the Emerging Human-Technology Civilization with wife Ayesha.

Technology plays an important role in levelling the playing field, and SEZs are playing a crucial role in making this happen. For instance, it's unlikely that Intel would set up a chip making factory in Vietnam if it wasn't for the SEZ. Similarly, China has emerged as the manufacturer for the world and the second largest global economy on the back of SEZs. The Jebel Ali Free Zone in Dubai is among the world's largest ports today.

The kind of technological exposure and capabilities the local workers gain through this wouldn't have been possible under normal circumstances. SEZs are among the most prominent ways in which countries can absorb new technology and they help up-skill workers. With the world changing at the pace that it is, the tech quotient (TQ) of a country, or individual, will be a crucial factor in determining how successful he will be.

"Technology will play an important role as countries and companies move up the value chain and as innovation and services start contributing a larger portion to the GDP. Hybrid reality is a big part of it and you cannot isolate technology from economics or politics," says Khanna. This becomes important as an increasing number of Indian companies start looking outward.

While India has been a remarkable growth story, Khanna contends that it has also been a missed opportunity. There are huge gaps between where India is compared to the ASEAN states. Though it's a dominant geographical presence in Asia, it plays a marginal role in any decision making processes in the region. A few months ago, the Washington Post published a telling picture. It was a map of the world with a circle highlighting the Asian states. It stated simply that there were more people living inside the circle than outside it. And that's where the next big opportunity lies. The way the world economy operates is changing too, in ways that go beyond the emergence of the SEZs. The biggest change is that there is no 'centre' anymore with multiple pockets of dominance existing world over.

Markets like Latin American and Africa, which rarely got any attention in the past, are now major focus areas for most multinationals. In a sense, the country has already lost the first-mover advantage to China when it comes to establishing a presence in other international markets. Whether it's Africa or South East Asia, Chinese companies have a far more dominant presence as compared to India.

Closer home, the 10-nation ASEAN block with a population of about 650 million people has a higher GDP as compared to India. Infrastructure connectivity is tremendous with road, rail and air linkages between all the countries and a young population with an increasing number of women entering the workforce. It presents a compelling reason for companies to invest here, and instead of being threatened by it, Khanna suggests we look at it as an opportunity.

"The centre of gravity is shifting towards Asia and India, and Indian companies need to be quick to capitalise on it," he says. He suggests picking a country to be a hub for your entry into the ASEAN market and focussing on that, which is what China and Japan have already done.

Another thing India needs to be aware of is competition from countries other than China. While the Philippines is fast emerging as a rival destination for BPOs, Bangladesh is now a dominant player in apparel manufacturing. On a parting note, Khanna points out that if the necessary investments in infrastructure materialise, India could actually be its own biggest opportunity.

Source : economictimes.indiatimes.com