Economic Times, India
S’pore pact gets Cabinet nod
TIMES NEWS NETWORK
21 June 2005
MUMBAI/NEW DELHI: India has agreed to provide a series of tariff concessions to Singapore under the India-Singapore Comprehensive Economic Cooperation Agreement (CECA), which was approved by the Union Cabinet today.
The four-part agreement includes a free trade agreement, a bilateral investment promotion treaty, an improved double taxation avoidance agreement and an air services agreement. Prime Minister Manmohan Singh and Singapore Prime Minister Lee Hsien Loong will sign the omnibus CECA on June 29, and it will come into effect from August 1, ‘05.
Sources said that the agreement will be notified to the World Trade Organisation (WTO) under the General Agreement on Tariff and Trade (GATT) and the General Agreement on Tade in Services (GATS). This is for the first time that India is entering into such a bilateral economic integration agreement in services.
While Indian beer will gain entry into Singapore, three of the island’s largest banks will now compete on equal terms with domestic entities. In turn, Indian banks already operating in Singapore will qualify for national treatment there. Singapore will welcome Indian professionals, including architects, accountants and doctors from next year.
The concessions given by India cover about 80% of Singapore’s present exports to India. Singapore is an important trading partner of India with bilateral trade of over $5bn. Though the balance of trade had always been in favour of Singapore, it tilted in India’s favour during FY05, at around $88m.
Sources said India has categorised products into four lists - early harvest, phased elimination, phased reduction and the negative list. Over 500 products were clubbed into the first list, while imports from Singapore on these items will become duty-free from Day 1, when the CECA comes into effect. Another 2,300 products are in the phased elimination list, where the customs duty will be brought to zero in a phased manner during a timeframe fixed till April 1, ‘09. Sources said the modality of tariff elimination has been fixed as 10%, 25%, 50%, 75% and 100%.
Another 2,292 products are in the phased reduction list where Singapore will be offered a margin of preference on the applicable rate of Most Favoured Nation (MFN) duty, each year from the Day 1, till April 1, ‘09. Sources said a maximum margin of preference of 50% will be given to Singapore on April 1, ‘09, and the modality of tariff reduction has been finalised as 5%, 10%, 20%, 35% and 50%.
The remaining 6,528 products are in the negative list, which means that India would not offer any concessions.
For imports, Singapore has agreed to zero customs duty for India. The country, however, has zero customs tariff on all products except six, said sources.
Singapore has agreed to India’s demand to retain flexibility for imposition of the trade defence measures like anti-dumping and safeguard. although it had demanded complete freedom for bilateral trades without any such measures.
Sources said the two countries have identified some sectors for mutual recognition agreements (MRAs) on standards and technical regulations, sanitary and phytosanitary measures. These include food products - such as egg, poultry, milk and milk products and packaged drinking water, electrical and electronic equipment, telecommunication equipment and drugs and pharmaceuticals. MRAs in food products would be implemented immediately, while those in electrical, electronics, telecom and drugs would be implemented after 12 months of entry into force of CECA.
In case of import of capital goods into India, India would give special consideration on a case-by-case basis on requests from Singapore for duty exemption on import of capital goods for their infrastructure projects in India.
The CECA has also relaxed the existing norms for capital requirement for Singaporean AMCs setting up shop in India, reducing them from the present US $50m to $30m.
Singapore accounts for 3.4% of India’s global trade. The bilateral trade volume now stands at $6.4bn with India having a trade surplus of $1.2bn, expected to go up substantially. According to commerce minister Kamal Nath, FII flow is likely to go up 300% to $5bn while FDI flow is expected to be around $2bn in the first year of the agreement.