It has long been recognized that competition between India's states for inward investment (from Indian or foreign capital) plays a significant role in driving state governments to improve their business climates. But of course the original version of this dynamic was international in nature, with national governments seeking to outdo one another with better tax concessions and less onerous regulatory regimes (as well as greater political stability, lower labor costs, more secure property rights, and whatever other factors might motivate investors).
A combination of these two levels of inter-jurisdictional competition -- between countries, and between regions within countries -- appears to be on the rise in South Asia at the moment. Not only has the SEZ policy of Sri Lanka been something of interest to investors (and state governments in India eager to attract them), now Bangladesh has upped the ante. Prime Minister Sheikh Hasina Wajed came out recently with a directly competitive statement, claiming that SEZ promoters who may have wanted to set up shop in India should consider coming across the border to Bangladesh.
Interestingly, it is the SEZ-related political problems encountered by the neighbouring state of West Bengal -- primarily, but not exclusively, stemming from the Nandigram SEZ -- which has animated the Prime Minister's statement. That Bangladesh provides a more conducive and stable policy environment in which to do business is surely a slap in the face of the West Bengal authorities, as well as an indirect slight (palliative words by the PM notwithstanding) to India's Railways Minister, Mamata Banerjee, who spearheaded the anti-Nandigram resistance.
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