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China May Get MFN Status

Financial Express, India

16 September 2004

China May Get MFN Status

MEA proposes investment promotion agreement, home ministry may cite security concerns


NEW DELHI, SEPT 15: This may come as a surprise to the ministry of home affairs. Security concerns of the government’s intelligence agencies notwithstanding, the ministry of external affairs (MEA) is quietly pushing for a Bilateral Investment Promotion and Protection Agreement (BIPA) with China.

According to senior government officials, MEA has asked the finance ministry to send a delegation to China and iron out “certain differences” before an agreement could be signed. A BIPA would entail providing China the most favoured nation (MFN) status besides allowing free repatriation and transfer of returns on investment.

“A BIPA binds us to accord post-establishment national treatment to companies from the partner country,” an official told FE. There is, however, flexibility to exclude a company from investing in India. For instance, once a company sets up operations in India, it would have recourse to domestic dispute resolution and international arbitration for investor-state and state-state disputes.

Government officials said Chinese companies were keen on investing in India in a range of industries. In the information technology and telecom sectors, ZTE (Zhongxing Telecom) and Huawei Technologies, had already made some inroads, they said. “A BIPA with China will give more comfort to both Indian and Chinese companies when they plan big-ticket investments,” an official said.

It may, however, be recalled that Huawei’s presence in India had raised some security concerns two-three years ago. The government had, however, denied all such reports. “Security concerns are best addressed by the ministry of home affairs,” said an official, adding that home ministry’s views on the proposed BIPA with China had not yet been taken.

“While a common draft has been prepared, there are a couple of clauses which merit closer scrutiny,” the official said. A second official-level meeting between India and China is expected shortly with an Indian delegation likely to visit China soon, he added.

While India has signed BIPA with almost 60 countries till date, it is yet to formalise such an agreement with the US and some other neighbouring countries like Pakistan and Bangladesh. The officials said that BIPA was similar to regional trade agreements which India was pushing for with various countries without undermining the World Trade Organisation framework.