Are There Connections Between Previous Free Port Practices and Current Special Economic Zones? The Case of Mumbai’s Ports

By Megan Maruschke

Abstract: Can we understand Special Economic Zones (SEZ) as an extension of Free Ports? The starting point for my research is the knowledge gap between the claims that SEZs have historical precedents in European and Colonial Free Ports and the lack of historical studies on the claim. I chose the port of Mumbai, India as an example and explore its history over the last 150 years. Mumbai continues to be a major port that once functioned partially as a free port under colonial rule and today is the location for special economic zones, including one in the planning phase at the new port site, Jawaharlal Nehru Port Trust. My findings are partially consistent with the claim of continuity, but they also lead to a more nuanced understanding of the complex, entangled history of free trade enclaves and territorial regimes.

Image 1: Southward view of the Mumbai Port naval dockyard (right) and international cruise terminal (left) from the Ballard Estate’s Mackinnon Mackenzie building (photo: private)

The continuity narrative
Export Processing Zones (EPZs) and Special Economic Zones (SEZs) are specially designated and demarcated areas that bypass certain national and local regulations such as relaxing labor laws and reducing or abolishing corporate taxes and import/export tariffs on goods; they are often located near or at ports.¹ Scholars in various disciplines including economy, geography, political economy, and anthropology usually begin their texts on EPZs and SEZs with a brief introductory sentence linking these spaces to the past Free Port or Treaty Port model as special gateways that facilitate cross border trade without duties.

An early example of this is K.Y. Wong and D.Y. Chu (1984).² These geographers cite earlier publications from the Economist Intelligence Unit and from Encyclopedia Americana from the 1970s as part of this Free Port/EPZ narrative. Recent publications issued by the World Bank (WB) and edited by Thomas Farole link EPZ and SEZ practices to historical free port models, spanning to antiquity.³ Patrick Neveling shows that the WB narrative of continuity seems to have been influenced by the World Economic Processing Zones Association (World EPZ Association),⁴ of which Thomas Farole is a member of the advisory board.⁵ This argument has become influential among academics, too. The historical section of the recent book by economist Aradhna Aggarwal, one of the foremost authorities on SEZs in India, relies on the World EPZ Association narrative that Delos in 166 BCE was the first “free zone.”⁶ This narrative is not only present in economics but also in anthropology. Aihwa Ong writes, “Economic enclaves are not a new phenomenon, having their origins in Western colonial practices that created special treaty ports and customs areas in dominated lands, including China.”⁷ Jonathan Bach makes a similar but less pronounced statement.⁸

Image 2: View from the Jawaharlal Nehru Port estate (photo: private)

For these academics and countless others, the historical connection between Free Ports and the Export Processing Zone mainly serves an anecdotal purpose, to draw the reader in through an interesting introduction. But for the WB and the World EPZ Association, this narrative may serve a broader purpose of legitimating the free trade enclave by claiming that it is a timeless practice.⁹

Regardless of intent, these statements on the origins and similarities of EPZs/SEZs to free ports or treaty ports are questionable and do not in any way offer a systematic study of how zones as designated spaces were used to manage risk and bypass certain obstacles to foreign trade, how zones have been utilized by past and present territorial regimes, and how the current model has been transferred and transformed from past ideas. Colonial free ports and European free ports have both been cited as predecessors to the current EPZ/SEZ model, yet the literature does not often differentiate between them.¹⁰ The supposed leap to the current system has not been fully unraveled, except by noting that though past models only allowed duty free storage, the current “zone” now incorporates the use of manufacturing.¹¹

The knowledge gap
Against this backdrop, the starting point for my research is the knowledge gap between the claims that SEZs have historical precedents in European and Colonial Free Ports and the lack of historical studies on the claim. I investigate planning at Mumbai’s ports to explore this claim. Mumbai has been chosen as a place that continues to be a major port that once functioned partially as a free port¹² under colonial rule and today is the location for special economic zones, including one in the planning phase at the new port site, Jawaharlal Nehru Port Trust. In the following, I will focus on some of the continuities and discontinuities of plans for free trade enclaves in Mumbai.

To do this, I look at three periods of time in Mumbai. I first examine the period around the time of the formal institutionalization of British colonial rule (1858) in order to analyze the institutional and spatial development of the port within the context of the needs of traders, the investors, and the changes in government at the time. This perspective is complemented by a later look at the port situation in Bombay around the period of independence (1947) and the subsequent port planning and development projects in the 1950s and 1960s. Finally, the third period looks at Mumbai’s ports and zone projects around 1991 as the Indian state initiated a process of government decentralization and economic liberalization in wake of the end of the Cold War. Here, I also identify the investors, policies, and the government authorities involved in the ports, zones and other related city infrastructure projects. The years indicated seek to pinpoint specific processes during periods of state rescaling¹³ within the history of the same city and investigate how free trade enclaves and the ports are developed and negotiated in a global and local context. My primary source material, however, generally spans from the 1860s through today uninterrupted.¹⁴

Three waves of the zone model
This periodization emerged based on three waves of the zone model. In the first place, Britain in the early 1800s through at least the 1890s adhered in principal to free trade and spread this ideology throughout its empire and to trading partners and/or dependents. It was in this context that we see the first call for a free port in Bombay, to attract traffic to the port and city despite the end of the East India Company monopoly (though not its end as a political power).¹⁵ It was pushed for by business elite in Bombay, especially through the Bombay Chamber of Commerce, supported by the Bombay Presidency, and crushed by the slowly solidifying Government of India. These three groups established the land company practices with private port facilities and later the port trust. The land company practices and their private ports functioned in a similar way to the SEZ scheme of today as a way to increase and improve infrastructure without the state having to pay for it, thereby allowing private players to fulfill what had previously been the role of the government to provide. Later institutionalization of the port trust in the 1870s as a government port became the model that has lasted at Indian ports until today.

Image 3: Eastern view from the Mackinnon Mackenzie building (photo: private)

During the second wave of zone policies in post-independence Bombay, port planners at the Bombay Port Trust are involved in planning a new port (which partly inspired the New Bombay city project), and the Ministry of Commerce investigated schemes inspired by American Foreign Trade Zones of the 1930s as early as 1949.¹⁶ Consultants from the American Point Four program played a role in establishing the township at the new Kandla Port, meant to offset the loss of Karachi following partition;¹⁷ during that same period the Development Commissioner of Kandla Port suggested that the first free trade zone in India be established there,¹⁸ though the Government of India Export Promotion Committee had originally proposed an established port such as Bombay or Calcutta for locating such a zone.¹⁹ The EPZ policy lacked any coherent strategy, and until the 1980s, there were only two: Kandla (1965) and Santacruz in Bombay (1973). They were implemented by the central government with the idea of increasing exports and bypassing certain government restrictions in order to do so. In the end, the EPZs at Kandla and Santacruz were actually used to export to the Soviet Union based on a rupee/ruble payment bilateral trade agreement, enabling India to pay for its imports from that country.²⁰ As a result, we also see something like playing with scales, using an enclaved space based on a capitalist model to trade between the capitalist and socialist markets.²¹

In the third wave, the perceived success of the SEZ policy in China has led countries around the world to adopt this model as a re-branded EPZ. As was the case with EPZs, some of the goals for SEZs are to increase exports and to bypass government restrictions through a government created tool to do so. Unlike EPZs, SEZs are used on a much larger scale in terms of size, scope, and number of zones, regulated by a comprehensive policy scheme. Zones, in this context, are neoliberal tools that can be re-purposed in a variety of settings to create a state of exception.²² Therefore, it is important to view current zone policy not as a passive reaction to “globalization,” but rather as an active rearticulation of the state to prioritize investment in certain spaces.²³ The role of private zone developers is pronounced here. In Mumbai, only the largest corporations such as Reliance Industries Limited (sometimes in a partnership with a parastatal) are able to profit from such a scheme as the zone only becomes profitable once the plot is developed.²⁴ The state government has gained additional power to manage its own development, and SEZs are some of the tools at its disposal to do so.²⁵ Planning often includes consultants from the World Bank, McKinnsey, and Ernst & Young.²⁶ SEZs of the 2000s no longer follow the logic of the government’s original zones from the 1960s-1980s. These are spaces designed to outsource investment in infrastructure development.

Continuities and discontinuities
Based on this timeline, I return to the question of whether we can understand SEZs as an extension of the free port model. While indeed there are port practices in Bombay developed in the 1860s and 1870s that have been continued in EPZ and SEZ projects in India, the ideas for implementing such zones are not actively modeled based on historical precedents but are the results of planning transfers. Those from the 1940s and 1950s include schemes like the US Point Four program, UNIDO, and, for port practices, the UK Colombo Plan and the Government of the Netherlands. The 1990s and 2000s saw an increase in SEZs/EPZs worldwide, but also in India as a result mainly of China’s successful zone policy and pressure to develop infrastructure in urban spaces by the WB.
In the case of Mumbai area specifically, there is continuity in the types of practices being undertaken by SEZs today and the land reclamation companies of the 1860s and later attempts at instituting zones at ports. In the first case, there is a similarity in the way in which the land companies operated in the 1860s and the way the zone policy plays out in Mumbai today. What we see is that the territorial regime grants land to private corporations and in return they are able to develop infrastructure for “public benefit” and profit from such an enterprise by leasing the space for manufacturing and port based services. Though I reject the World EPZ Association’s attempt to legitimate this practice by basing SEZs historically, I do see continuity in the basic strategy of the zone over time. But it is important to point out that the usefulness of such a strategy to different regimes varies considerably. I do not claim that the current planned and operational SEZs in Mumbai area today are actively based on this past practice as a model, yet the specificity of the place may influence how SEZs are utilized. Thus, the zones may not be uniform spaces or non-places where standardized practices span the globe;²⁷ they may also be shaped by the unique institutional, economic, political and social environment in which they operate.
Current zones in Mumbai also share similar unique features of ports in India. Ports have, since their institutionalization in the 1800s, been landlords in the sense of landowners that set up private townships, hospitals, schools, and other facilities present in non-port based SEZs in India today. The first zone in India was set up in relation to the port township at Kandla. Like Indian ports, SEZs in India today include a mixture of township housing, hospitals, and schools with industry. Though the “zone” is a universal concept implemented all over the world, again, a certain specificity of place has endured in the context of zones in India, especially their close connection to port-based land management practices that stem from the period of private ports in Bombay harbor. Zones do, therefore, have something to do with ports in general, but not necessarily free ports.

Conclusions
Based on my findings, I argue that SEZs are not a continuation of the EPZ regime. While it is true that in terms of planning we can see a straight line from the implementation of the EPZ in the 1950s-1980s to the SEZ policies today, the logic and rationale of the zones differ. As mentioned above, the Indian SEZs of today are much more similar in terms of the strategies they use and their logic to the grants and concessions made by the Government of Bombay to land companies in the 1860s. On the other hand, in terms of their physical and managerial structure, there are certain elements that can be seen as a continuation of the first EPZ at Kandla and Santacruz in Bombay. There are some similarities in terms of how exceptional enclaves function during the period preceding and leading to the consolidation of the state as a territorial regime in India and during the emergence of what Charles Maier calls post-territoriality, which differ significantly from how these enclaves functioned during the period of solidified territorial regimes.²⁸
The conclusions we can draw from this investigation are more complex than anticipated. A simple yes or no answer does not suffice. Instead, what we see from a diachronic historical perspective is that zones today and zone-like policies in Bombay’s past share similar features that are distinctive from the EPZs in between. SEZs cannot simply be considered a re-branding of the EPZ in India; these results can be interpreted as indicative of a deeper divide between the policies. From a synchronic comparative perspective, we cannot assume that zones in various countries, though perhaps sharing a name, all operate in the same way. This conclusion points to a needed investigation of the link between the zone and the usefulness of such a practice to the territorial regime.

Megan Maruschke joined the Centre for Area Studies in 2012. Her PhD project is funded by the DFG Research Training Group 1261 “Critical Junctures of Globalization.” She previously studied Global Studies and Italian Studies at the University of California Santa Barbara, USA and the University of Padua, Italy. Following her BA, she later pursued a joint MA in Global Studies from the University of Wrocław, Poland and the University of Leipzig, Germany.

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Photo descriptions

Image 1: Southward view of the Mumbai Port naval dockyard (right) and international cruise terminal (left) from the Ballard Estate’s Mackinnon Mackenzie building, the former offices of the Bombay Chamber of Commerce and Industry, just a few doors down from the Mumbai Port Trust and the Customs offices. In the 1840s, William Mackinnon and Robert Mackenzie, two Scotsmen, formed Mackinnon Mackenzie & co., a merchant company based out of Calcutta. Mackinnon later went on to form the British India Steam Navigation Company, which established close ties with the Government of Bombay under the governorship of Henry Bartle Frere in the 1860s. Today, the port premises, spanning nearly the entire eastern foreshore of Mumbai, are blocked from view by walls and are closed to the public.

Image 2: View from the Jawaharlal Nehru Port estate, also known as Nhava Sheva, the largest container port in India located on the mainland side of Mumbai harbor. There is only one main access road to the three port terminals, leading to congestion, sometimes natural and other times purposefully blocked by protests from so-called project-affected persons, those displaced by the construction of the port some twenty years ago.

Image 3: Eastern view from the Mackinnon Mackenzie building, showing a busy harbor and the bulk carrier ship Al Ain (owned and managed by Ipc Marine Services Dubai and registered in Liberia) in the foreground.

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Citation: Megan Maruschke, Are There Connections Between Previous Free Port Practices and Current Special Economic Zones? The Case of Mumbai’s Ports, in: TRAFO – Blog for Transregional Research, 01.04.2015 https://trafo.hypotheses.org/2112.

1. This research report is based on the findings of my ongoing dissertation, “Historical and Local Specificities of a Global Practice: Free trade enclaves in Bombay 1858-today.” This project is funded by the DFG research training group 1261 “Critical Junctures of Globalization” and supervised by Professor Dr. Matthias Middell at the University of Leipzig. In my research, I question the prevalent narrative that Special Economic Zones have their origins in Free Ports. I do this by exploring the history of port and zone planning in Mumbai, India over the last 150 years. [↩]
2. K.Y. Wong and D.Y. Chu, Export Processing Zones and Special Economic Zones as Generators of Economic Development: The Asian Experience, Geografiska Annaler. Series B, Human Geography, 66:1 (1984) pp. 1-16. [↩]
3. T. Farole, G. Akinci (eds.), Special Economic Zones: Progress, Emerging Challenges, and Future Directions, Washington, D.C. (2011), p. 3; C. Baissac, Brief History of SEZs and Overview of Policy Debates, in: T. Farole (ed.), Special Economic Zones in Africa: Comparing Performance and Learning from Global Experiences, Washington, D.C. (2011), pp. 23-60. [↩]
4. P. Neveling, Imperialism’s New Shades and Long Shadows: Free Trade Zones, Export Processing Zones and Special Economic Zones after World War II, in I. Ness and S.M. Bâ (eds.), Palgrave Encyclopedia on Imperialism & Anti-Imperialism, London (Forthcoming 2015). [↩]
5. “Members” WEPZA, (last accessed 24 February 2015) http://www.wepza.org/members/. [↩]
6. A. Aggarwal, Social and Economic Impact of SEZs in India, New Delhi (2012), pp. 16. For this history of Delos, Aggarwal cites Robert Haywood, former director of the WEPZA secretariat and physicist with an MBA from Harvard. It is therefore unclear how he has become an expert on Delos. For a critique of Delos as an early EPZ, see: Neveling (fn 4). [↩]
7. A. Ong, Neoliberalism as Exception, Durham and London (2006), p. 103. [↩]
8. J. Bach, Modernity and the Urban Imagination in Economic Zones, in: Theory, Culture & Society 28:5 (2011), pp. 98-122, pp. 98-99. [↩]
9. Patrick Neveling has demonstrated the controversial and self serving link between early EPZ practices in Mexico and Richard Bolin, the World EPZ Association’s former director. See: Neveling, (fn 4); P. Neveling Export Processing Zones, Special Economic Zones and the Long March of Capitalist Development Policies during the Cold War, in L. James and E. Leake (eds.), Decolonization and the Cold War: Negotiating Independence, London and New York (2015), pp. 63-84, pp.72-73 and 76-77. [↩]
10. On that note, the Hanseatic League and the Porto Franco of Livorno (both common examples) were also different systems, and the context in which they operated is usually not articulated. [↩]
11. Bach (fn 8), p. 100. [↩]
12. Bombay was proposed as a free port in the 1830s to offset fears of what ending the East India Company trade monopoly would do to business. This proposal was never adopted, but many services at the port were free, and the port was called a free port by its users for that reason. The Government of Bombay also gave special commissions to private companies at the port in the 1860s. [↩]
13. N. Brenner, New State Spaces: Urban Governance and the Rescaling of Statehood, Oxford (2004), pp. 3-4. [↩]
14. Sources include Chamber of Commerce annual reports, Port Trust reports, and Government of India ministry reports, along with news articles since the 2000s as the aforementioned sources have become less descriptive over the years. [↩]
15. M. Dossal, The Call of the Sea: Maritime Mumbai, c. 1660-2000, in L. Subramanian (ed.), Ports, Towns, Cities: A historical tour of the Indian Littoral, Mumbai (2008), p. 143-144. [↩]
16. Letter No. 9-FTA(4)/48 dated 29th June 1949 from the Ministry of Commerce, Government of India, to the Indian Merchant’s Chamber, in A.C. Ramalingam (ed.), Annual Report of the Indian Merchant’s Chamber for the Year 1949, Bombay (1950), pp. 411-416; Resolution No. 64-LW (34)/49, Report of the Export Promotion Committee, Ministry of Commerce, New Delhi (1949), pp. 26-27. [↩]
17. Port of Kandla Administration Report for 1958-59, Ministry of Transport and Communications, Government of India, New Delhi, Annex II. [↩]
18. Letter No. 1257 dated 2nd April 1952 from Chamber to the Government of India, in A.C. Ramalingam (ed.), The Annual Report of the Indian Merchant’s Chamber for the Year 1952, Bombay (1953), pp.448-449. [↩]
19. Letter No. 9-FTA(4)/48 (fn 16); Report of the Export Promotion Committee (fn 16). [↩]
20. Aggarwal (fn 6), p. 140; Indian Institute of Foreign Trade, Export Processing Zones in India: A Case Study of Kandla Free Trade Zone, New Delhi (1990), pp. 60-64. [↩]
21. P. Neveling, Structural contingencies and untimely coincidences in the making of neoliberal India: The Kandla Free Trade Zone, 1965-91, Contributions to Indian Sociology, 48:17 (2014) pp 17-43, p. 38. [↩]
22. Ong (fn 7), pp. 97-118. [↩]
23. N. Brenner, Global Cities, Glocal States: Global City Formation and State Territorial Restructuring in Contemporary Europe, Review of International Political Economy, 5:1 (1998) pp. 1-37, p. 3. [↩]
24. For the role of Reliance in Mumbai area, see: R. Mujumdar and B. Menezes, Maharashtra: Institutional Politics and the Framing of Resistance, in R. Jenkins, L. Kennedy, and P. Mukhopadhyay (eds.) Power, Policy, and Protest: The Politics of India’s Special Economic Zones, New Delhi (2014), pp. 239-271. [↩]
25. L. Kennedy, Large-Scale Economic and Infrastructure Projects in India’s Metropolitan Cities: New Policies and Practices Among Competing Subnational States, in J. Rosemann, L. Qu, and D. Sepúlveda (eds.), The New Urban Question: Urbanism beyond Neo-Liberalism, Rijswijk (2009), pp. 243-255. [↩]
26. L. Kennedy and M.H. Zérah, The Shift to City-Centric Growth Strategies: Perspectives from Hyderabad and Mumbai, Economic & Political Weekly (September 27, 2008), pp. 110-117, p.116. [↩]
27. M. Augé, Non-Places: An introduction to Supermodernity, London, New York (1992). [↩]
28. C. Maier, Transformations of Territoriality, 1600-2000, in G. Budde, S. Conrad, and O. Janz (eds.) Transnationale Geschichte. Themen, Tendenzen und Theorien, Göttingen (2006), pp. 32-55; C. Maier, Consigning the Twentieth Century to History: Alternative Narratives for the Modern Era, The American Historical Review, 105:3 (2000) pp. 807-831. [↩]