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The Shenzhen Syndrome: Growth compromises equity

By Aseem Shrivastava

China's Shenzhen has workers slaving for 9-14 hours a day at less than minimum wages, 500,000 child labourers, and a crime rate nine times that of Shanghai. Is this the economic model Indian policymakers want to emulate, especially at a time when China itself has discredited and abandoned its SEZ policy?

"Among Chinese economic planners, Shenzhen's recipe is increasingly seen as all but irrelevant: too harsh, too wasteful, too polluted, too dependent on the churning, ceaseless turnover of migrant labour. 'This path is now a dead end,' said Zhao Xiao, an economist and former adviser to the Chinese State Council...After cataloguing the city's problems, he said, 'Governments can't count on the beauty of investment covering up 100 other kinds of ugliness.'"

-- The New York Times, December 19, 2006,
describing the world’s leading SEZ

What accounts for the ‘success’ of Shenzhen? Proximity to port facilities, lax environmental laws, cheap land and the attraction of cheap, pliant migrant labour (7 million out of a total population of 12 million) have meant that Shenzhen has managed to attract huge investment ($3-5 billion per annum in recent years) from abroad. This is more than India as a whole has managed to attract in past years. The landscape in the city is covered by TNCs (many American) producing cheap, light manufactures for markets largely in the West. Recently, high-tech companies have also been locating there. Like all the other Chinese SEZs, Shenzhen has been located close to the coast. Proximity to Hong Kong has also enabled high investment and smoother commerce.

However, equity has been sacrificed for growth. Only poorly paid, contractual employment is available for workers. Working conditions are exploitative. For most workers there are no weekends or holidays, even as they slave for 9-14 hours every day. Occupational safety is neglected (seven workers died in a fire at an underwear factory in Shenzhen in January this year; over 14,000 people died in industrial accidents in all of China during 2006). At least a third of the workers in Chinese SEZs earn less than minimum wages. (Wages range from $45 to $101 a month.) A report earlier this year by a Massachusetts non-profit organisation Verite revealed that “systemic problems in payment practices in Chinese export factories consistently rob workers of at least 15% of their (already low) pay.” Many workers receive as little as half the minimum wage.

In June 2006, London’s Mail on Sunday reported forced overtime and the use of corporal punishment in Shenzhen by a Taiwanese electronics major Foxconn (which has just got permission from the Board of Approvals to launch an SEZ in Tamil Nadu), supplying iPods for Apple Computers. The report led Beijing Times to do an investigation which revealed that workers averaged 80 hours of overtime every month, some of them working non-stop for a month in order to earn overtime pay!

Many companies, including Western ones, prohibit journalists from visiting their facilities. Apple Computers turned down requests by several journalists to visit Foxconn facilities in Shenzhen. A sign posted outside the Foxconn factory in Shenzhen says that you cannot bring recording devices into the premises.

In Shenzhen there are 500,000 child labourers, a return to days of China’s pre-revolutionary past. Till recently there were no schools or hospitals for workers’ families. Some months ago The New York Times reported that “in Shenzhen workers’ dormitories, frustration with hard labour, merciless factory bosses, low pay and miserable living conditions is palpable.”

The area has acquired a bad reputation among the working population. Monthly labour turnover rates go as high as 10%; 15% of the labour disputes in China have originated around Shenzhen. Cruel working conditions have led to working class unrest uncommon to China in the past. In one case 10 factory workers were arrested for turning over a car and destroying company property after their Taiwanese bosses ordered them to move to an 11-hour day with less overtime. Large-scale wildcat strikes and job actions for better hours and wages have become the norm. According to the Guangdong Union Association, a government-affiliated group, there were more than 10,000 strikes in the province (to which Shenzhen belongs) in 2005. All this in a country where unions are conspicuous by their absence. The rise in the crime rate – 9 times that of Shanghai – is traced to the breakdown of community coupled with a culture corrupted by money and exploitation.

Based on such evidence one author has recently concluded:

“These events are occurring in a society that had made great strides in providing security, health, shelter and livelihood to its population. Child labour, distress migration and begging, all common features in SEZs and coastal provinces, were phenomena that had almost vanished after the revolution…it is nothing but regression.”

This is the SEZ model that India’s policymaking elite admires and is busy trying to implement – long after it has been rejected in China itself! Not an idea whose time has come. More like an idea whose time has long lapsed. The new wisdom in China is very different from what leaders in India are telling people:

“As the limits of the Shenzhen model have grown more and more apparent, other cities in China’s relatively developed east are increasingly trying to differentiate themselves, emphasising better working and living conditions for factory workers or paying more attention to the environment. ‘Some inland cities have started to provide migrants social security, including pension and other insurance,’ said Wang Chunguang, an expert in class mobility at the Chinese Academy of Social Sciences in Beijing. ‘In Chengdu, in Sichuan Province, residency controls are loosening up and education for migrant children is getting more attention.’”

Not surprisingly, conditions in existing Indian SEZs resemble Shenzhen much more than those obtaining in other Chinese cities on the east coast.

Working conditions that prevail at the SEZ in Noida, near Delhi, are as bad as those in Shenzhen. Of the 10,000 workers in the SEZ, 40% are women on casual labour who work for up to 10-12 hours a day for wages around Rs 1,800 per month, lower than the labour market outside the EPZ. (Women workers are preferred because they are more docile.) Their choice is between working and starving. They work and live in harsh conditions, without maternity leave, minimum wages, or any other benefits like gratuity or pension. They are issued tokens to visit the toilet, the number of tokens being less than the number of workers. According to a gynaecologist who works in the area, the exploitation of workers is “unimaginable”. As one might expect the EPZ has reported high profits over the years.

Similar, if marginally less unhappy, results have been reported from recent studies of the SEZs at Santa Cruz, Mumbai and Falta, West Bengal.

All SEZs in India till 2006 were under State ownership. What might the above picture look like under private ownership? A crucial difference between the institutional set-up of Chinese and Indian SEZs must be remembered. In China, the State has always owned the SEZs. In India, both the development and the ownership is now going to be in private hands. Unrestrained by any public accountability, the new SEZ laws will have potentially catastrophic consequences.

Under the extreme provisions in the SEZ Act of 2005, all the powers of the State Labour Commissioner have been given to the Development Commisioner of the SEZ, the head of the six-member SEZ Authority, an entirely unelected body and hence unaccountable to the public. SEZs have also been given the unusual status of “public utilities” under the Industrial Disputes Act. This makes it illegal for workers to organise and strike for better wages and working conditions.

Let us not forget that Shenzhen has become a zone of social anger and protest during the last several years.

What next in India? Zone fever?

In most of the media coverage and analysis of the SEZ issue in India only the bright end of the Chinese experience is narrated. The fact that the overall SEZ policy failed to bring the fruits of development to the mass of Chinese people is never mentioned. Nor is the fact that China had “lifted millions out of poverty” back in the 1980s itself (thanks not to unrestrained globalisation but to land awards to the rural poor and the creation of Town and Village Enterprises), whereas inequalities have been rising sharply in more recent times.

That the SEZ policy now stands discredited and abandoned by China’s decision-making elite is not known to most educated people in India. With the exception of Shenzhen, the SEZ boom in China only enriched party officials-turned-developers – the reason why the policy remained operative for as long as it did. These facts are not publicised in India – because it might lead to public awakening and a sobering wisdom dawning on our policymaking elite who might be forced to abandon the policy here as well. Keeping the hopes of developers and investors alive is important if they are to put their money here – and in the bargain make more of it, lining the pockets of officials and politicians in the process.

The Central Government’s Board of Approvals for SEZs has met no less than four times in the past eight weeks, clearing over 100 SEZs for notification. That works out to almost two clearances a day! The reasons for this “zone fever” on the part of the government are two-fold. Firstly, while there have been over 850 applications for SEZs in the country, prospective investors (fearing project delays) have cooled off after loud and often violent protests across India, in places like Raigad, Gurgaon, Barnala, Singur, Nandigram and Jagatsinghpur (POSCO). Since April 5, there have been only 25 applications for SEZs. This week, the Prime Minister has made a public appeal to an investment arm of the Government of Singapore, Ascendas, to put their money in two SEZs. So, clearly, the government feels an urgency to send out loud, positive signals to investors globally.

Secondly, after a series of big losses in provincial elections, the parties in the ruling coalition have become cautious about clearing SEZs too close to election dates. Between the UP elections in April and the Gujarat elections towards the end of this year, the government has found a window of opportunity to clear as many projects as it can. For such political reasons, we will continue to see this stop-go pattern with regard to clearance of SEZ projects in the coming months. Democracy is a barrier to capitalist development.

Perverse priorities

Another matter bears mention. The constitution of the Empowered Group of Ministers (EGoM), headed as it is by External Affairs Minister Pranab Mukherjee, is most revealing of the priorities of the UPA government. The Ministers of Defence, Finance, Commerce and Industry, Law and Justice, Communications and IT, Science and Technology, and Ocean Development find a place for themselves in the powerful decision-making body. So does the Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, an unelected member.

Conspicuous by their absence in the EGoM are the Ministers of Environment and Forests, Labour, Rural Development and Agriculture. In other words, issues of environment, land acquisition, loss of agricultural land and infrastructure, food security, resettlement and rehabilitation of the victims of SEZ development, and the exploitation of labour in SEZs are not matters on the radar screen of the policymaking elite. How justice is claimed to be done when executive decision-making processes are so carefully controlled to neutralise and forestall any legitimate opposition to the hunger for ‘development’ projects is a matter of not inconsiderable wonder.

It is a telling commentary on the remarkable priorities of the Indian State when the development of the oceans is seen as a matter of greater consequence than the development of people living in the countryside.

Endnotes

“Chinese Success Story Chokes on Its Own Growth”, The New York Times, December 19, 2006.
Gopalakrishnan op. cit.
NYT, op. cit.
T.K. Rajalakshmi, ‘Sita and Her Daughters’, article reproduced by Third World Network, http://www.twnside.org.sg/title/sita-cn.htm (Accessed on April 5, 2007)
Sunanda Sen and Byasdeb Dasgupta, “SEZs : Modern Enclaves to Reward Capital by Exploiting Labour and Displacing Livelihoods in the Agrarian Economy”, Mainstream, May 4, 2007

Also Read: The Shenzhen Syndrome: Will India repeat China’s mistakes?

InfoChange News & Features, July 2007