Indo Singapore Economic Treaty

There had been fears that the negotiations were getting nowhere. Indeed, when the Manmohan Singh Government took office there were reports suggesting that quick progress on the CECA (which was to be ratified by December 2004) could not be expected because the new government did not share the perceptions of the Vajpayee regime on the utility of free trade agreements. It was also suggested that while growing economic ties with India formed an important part of the agenda of the then Singapore Prime Minister, Mr Goh Chok Tong (who was said to be suffering from an "India fever"), there was no guarantee that it would be so for his successor, Mr Lee Hsien Loong. However, all such doubts are now history. On the crucial issue of Rules of Origin, New Delhi appears to have had its way in getting Singapore to accept the applicability of all the three ROO criteria — minimum value addition (in Singapore); change of tariff heading at the 4/6-digit level, according to the WTO harmonised system code defining the product concerned; and specification of the precise nature of the value-addition involved. Earlier, reports were that Singapore had argued for a product-specific relaxation of the "generic" use of the ROO rules for more than 480 items, including electronics, chemicals, petrochemicals, processed food and automobiles.

The Commerce Minister, Mr Kamal Nath, says that "sufficient safeguards have been built into the agreement" to prevent third-country products coming into India via Singapore. This means a big concession by Singapore, which is after all a premier trading hub. Another score for New Delhi is Singapore agreeing to accept movement of natural persons (Mode 4 services), with Mr Nath saying that 120 professions "are being recognised" for this purpose. Further, while Singapore has offered to extend zero-duty status to "all products made in India", New Delhi has produced a "negative list" of 6,551 tariff lines on which no duty concessions have been offered. For Singaporethe lure is mainly the foreign direct/institutional investment and banking opportunities offered to it. While Singapore is now the third largest FDI source for India (after the US and Mauritius), Mr Nath feels that, within the first year of the agreement's implementation, Singapore FII could rise to $5 billion with another $2 billion for the infrastructure sector.

For, this is the first time that the two are entering into such an agreement. Singapore's initiative is all the more important because that primarily a trading country should strike such an all-encompassing deal points to the importance it attaches to India's growing economic clout. Barring the limited information on the civil aviation aspects (a bone of contention between the two sides), the comprehensiveness of the exercise is evident from the "integrated package governing trade in goods and services, an agreement on investment, mutual recognition agreements in services, and cooperation agreements in areas such as e-commerce, the media and intellectual property".

Speaking at a luncheon meeting hosted by India's leading chambers of commerce and industry — CII, FICCI and Assocham here, Mr Lee said, "We need to strengthen economic ties between India and other Asian countries, especially with Southeast Asia. While Southeast Asia's trade with India is growing rapidly, it is still only15 per cent of its trade with China," adding that the centrepiece of India-Asean cooperation is an FTA which would build "a strong bridge across the two regions".

Stating that the comprehensive Economic Co-operation Agreement (CECA) signed on Wednesday by the two counties was a significant step towards an India-Asean FTA and deeper engagement between India and Southeast Asia, the Singapore premier allayed fears over cheap goods flooding the Indian market, stating that "we are also small and industrialised, our economy complements India's economy, and does not threaten India's sensitive sectors".

He said Singapore-India trade at almost $7 billion is already half of total Asean-India trade of $15 billion, and as such, his country could play "a useful role as a pathfinder for India".

Air passenger services: He said bilaterally, the CECA is just the start of what Singapore and India could do together and one obvious area for deeper engagement was in air passenger services. He said by maintaining a liberal aviation policy, Singapore attracts eight million tourist a year and between Singapore and China there were unlimited flights. But between Singapore and India travellers have great difficulty getting air tickets. He hoped that soon "we will be able to liberalise air services between India and Singapore, so that we can generate further spin-offs throughout our economies".

He said that Asia needs a stable and open regional architecture. While strengthening regional cooperation, "we must continue to keep the region open and connected to the rest of the world, and in particular, we have to keep the US engaged in Asia".

He said one significant new imitative in regional cooperation is the East Asian Summit (EAS) to be held in December. He said that Asean has decided that the EAS should include not just Asean plus three, but also India.

Mutual Recognition Agreements: In his address, the Union Commerce & Industry Minister, Mr Kamal Nath, hoped that through the CECA the bilateral trade would cross $10 billion in two or three years. He said the CECA pact on Goods was based on the premise that an enormous synergy could be activated between the huge manufacturing base of India and the exciting trading interface that Singapore has with the global marketplace.

Mutual Recognition Agreements (MRAs) in Goods would substantially step up these exports in dairy and poultry related activities and "we believe that the benefits of CECA will thus percolate down to our agricultural hinterland". Similarly, he said, MRAs in Service means increased interaction in various services sectors, which would help, improve efficiency "in our economy and at the same provide new avenues to Indian professionals".

Earlier, addressing a joint press conference with the Singapore Minister for Trade & Industry, Mr Lim Hng Kian, Mr Nath described the CECA as a "win-win" pact as it is the first such comprehensive cooperation agreement for enhanced investment and increased flow of goods and services. He said Singapore is a gateway for a wider Asean market and a major trading hub.

INDIA and Singapore on Wednesday turned a new chapter in the traditional ties by signing the Comprehensive Economic Cooperation Agreement (CECA), paving the way for an integrated package of trade in goods and services, an agreement on investments, mutual recognition in services, cooperation pact in customs, science and technology, education, e-commerce, intellectual property and media.

The Prime Minister, Dr Manmohan Singh, and the visiting Prime Minister of Singapore, Mr Lee Hsien Loong, signed the CECA and the Mutual Legal Assistance Treaty in Criminal Matters, which was preceded by a range of bilateral and multi-lateral issues.

The Singapore Commerce Minister, Mr Lim Hng Kiang, told a news conference that the CECA "will go beyond free trade" as it has other elements such as special visa arrangements and liberalisation of air transport.

Singapore is an important trading partner of India with bilateral trade of $6.4 billion. The balance of trade is tilted in favour of India to the tune of $1.2 billion.

would cut tariffs on imports from Singapore under the CECA, gradually cutting them to zero over a five-year period. Singapore has zero customs tariff on all products except six and Singapore has agreed to bind all their tariff lines at zero customs duty for India including beer. Under early harvest programme for duty cut, as many as 506 products mostly information technology items and aeroplane parts would be allowed duty-free to India from Singapore.

To prevent third-country imports piggybacking on preferential route, strict rules of origin (ROO) have been prescribed. Under the ROO, simultaneous application of the three criteria viz., change in tariff heading (CTH) of all imported raw materials, along with value addition of 40 per cent and certain sufficient manufacturing operations to be performed for grant of originating status have been agreed to. However, the sources said, on 534 products, derogations from the general ROO have been agreed to and these mostly cover chemicals, machinery and precision instruments.

On investment, the sources said, for the first time New Delhi has agreed to grant pre-establishment National Treatment on a positive basis. India has taken commitments in 22 areas such as manufacture of food products and of textiles, manufacturing of wearing apparel, dressing and dyeing of fur, tanning, beverages, leather, manufacture of luggage, handbags, harness and footwear, manufacture of paper and paper products, chemicals and chemical products, radio, television and communication equipment and apparatus, manufacture of motor vehicles, trailers and semi-trailers, development of township, housing, built-up infrastructure and construction development projects.

Singapore has taken commitments on a negative list basis. Thus, all manufacturing sectors are included in this offer except sectors covering beer and stout, cigars, drawn steel products, chewing gum, bubble gum, dental chewing gum or any like substances, cigarettes and matches.

The sources said that the investor would not be allowed to have access to international arbitration in case theinvestor states the dispute at the pre-establishment stage. The investor would only have access to domestic courts in this regard.

India has agreed to commit for Singapore the recent policy liberalisation on FDI in township and housing, as these are priority areas for attracting FDI.

On trade in services, India has taken commitments in nine sectors that include professional services (including accounting, taxation (advisory only), architecture, engineering, medical and dental, services by nursing, midwives and veterinary services, computer and related services, R&D services, real estate services (for consultancy), rental/leasing services without operators, other business services such as advertising services, management consulting services, technical testing and analysis services, services incidental to fishing, mining, manufacturing; energy distribution, placement and supply of services of personnel, maintenance and repair of equipment, photographic services, packaging services, telecommunication and audiovisual services, construction and related engineering services, financial services, health, tourism, recreational, cultural and sporting services, maritime transport services and some sectors of air transport services.

While Singapore has taken commitments in dozen service sectors, it has offered partial/full commitments in all the services sectors in which India has offered commitments. Such sectors include legal (for consultancy) services, under other business services areas such as market research and public opinion polling, services incidental to agriculture, forestry, security consultations, alarm monitoring, unarmed guard services, telephone answering services, retail trading and franchising under distribution services, education services, environment and health.

On financial services, the sources said that Singapore has offered qualified full bank (QFB) status to three Indian banks, even as the City State has given only 6 such QFBs globally.

Meet Amarendra Bhushan, An Indian very passionate man, the President of The Euro Indian Foundation, also editing The European journal of NRI (weekly finance magazine TRIBUNE). As one of the leading article writer, and corporate hotel professional. Advisor to various organizations and great sports fan. He is an elected member of south Indian hotel and restaurant federation. Now staying at city of Athens Greece.

Amarendra bhushan Dhiraj
Athens, Greece
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