updated 11/19/2004 8:43:42 AM ET 2004-11-19T13:43:42

Southern India's Kerala state plans to create a 1,000-acre zone called "Smart City," where technology companies from around the world will be invited to set up operations, an official said Friday.

The area, outside Cochin city, will include office space, residences, schools and an entertainment complex, said Kerala's Industry Minister P. K. Kunjalikutty.  It will include software developers and call centers — two of the Indian economy's fastest growing sectors.

"Smart City ... will be an exclusive IT zone where foreign companies can easily set up shop without any stringent formalities of registration and licensing," Kunjalikutty said.

Indian states are competing with each other to court investments from information technology companies, trying to emulate the success of the southern technology hubs of Bangalore and Hyderabad, which have spearheaded the country's IT boom.

Kerala, known for its highly educated work force, has been trying to make up for lost time after India's economic boom of the past decade largely bypassed the state because potential investors were frightened away by its powerful, militant labor unions.

But Kunjalikutty said his state's labor force has been changing fast, and information technology companies had not faced any union troubles.

Smart City will be created and managed by Dubai's Internet City, a free trade zone backed by the Middle Eastern country's government. It is being built with an initial investment of $400 million.

It was not yet clear whether Smart City would be a free trade zone, or would simply offer assistance to potential investors.

Dubai's Internet City offers foreign companies 100 percent tax-free ownership, no currency restrictions, easy registration and licensing and protection of intellectual property, its Web site said.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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