S’pore benefits to all under new Bipa
Financial Express, 9 November 2005
S’pore benefits to all under new Bipa
KG Narendranath
New Delhi, Nov 8 — Pre-establishment national treatment to foreign investors in India, now a prerogative of Singapore-based entities, will soon be a generic benefit India would offer all eligible investors under the bilateral investment protection agreements (Bipas).
The definition of investment under these agreements is, however, set to change. Short-term finance (trade credit etc.) and most loans except those extended by the affiliate of the relevant investor with a tenure of three years or more would be excluded from the ambit of investment.
The finance ministry has drafted a Cabinet note suggesting these changes as part of a comprehensive revision of the model Bipa text. At present, India has Bipas with 57 countries including the UK, Australia, Germany, France, South Korea and Russia.
In view of the Dabhol debacle, the ministry also proposed to recast the investor-state dispute resolution mechanism under Bipas for the sake of increased transparency, official sources said. If the Cabinet approves the ministry’s proposal, the term “investment” in the context of Bipas would by and large become the same as the revised RBI definition of FDI that includes ploughed-back profits and inter-corporate borrowings.
At present, Bipa definition of investment, drafted as per OECD guidelines, is rather vague and indefinite.
Pre-establishment rights - in terms of investment, acquisition and expansion - is one of the major demands of foreign investors, who seek to have enhanced comfort level while putting money in Indian ventures.
Such treatment would give the investor protection against adverse effects (notional/ real loss) of any subsequent policy reversal through international arbitration. Investors from Singapore are now eligible for this benefit in India under the Comprehensive Economic Cooperation Agreement . Some circles in the government, however, feel that India could give such rights only selectively, as they could well be a bargaining tool in bilateral trade negotiations.
