What does India-Singapore agreement hold in store?
The Economic Times, India
July 04, 2005
What does India-Singapore agreement hold in store?
Last week, India signed its first ever Comprehensive Economic Co-operation Agreement (CECA) with any country. The CECA with Singapore is the first for the island nation with a South Asian country although it has such agreements with major economies.
Such agreements cover a wide gamut of areas like trade, services, investment and are aimed at enhancing bilateral, regional and multilateral ties. The India-Singapore CECA which will be effective from August 1, ’05 is reckoned to be forerunner for similar such agreements which are now being finalised and are close to fruition.
What does the India-Singapore CECA cover?
It covers agreements relating to trade in goods, services and investment protection besides economic co-operation in areas like education, science, technology, air services and intellectual property. It also has a renewed double taxation avoidance agreement on the lines of the one with Mauritius which provides for concessional capital gains tax.
Which are the key sectors to be impacted by the agreement?
The financial sector, especially banking, services, manufacturing and trade will benefit. In the financial sector, India will gain in the form of greater access to the Singapore markets for our banks. Three Indian banks will now obtain full banking privileges, which means that they would be in a position to offer a variety of services including ATMs.
In return, three Singapore banks will be granted national treatment or, in other words, the same treatment as local banks which means greater operational freedom. Two state-owned companies from Singapore, Temasek and the Govt of Singapore Investment Corporation, will also be allowed to invest in listed Indian companies 10% above the ceilings prescribed for other FIIs in India.
Asset managers in Singapore who offer mutual funds to investors in India will also be allowed to invest $250m over and above the ceiling of $1bn for overseas investment in Indian mutual funds.
In the services sector, Indian companies stand to benefit through increased market access in distribution services, including retail trading, business services including opinion polls, market research, legal, environmental management, management consultancy, tourism, real estate consultancy and advertising, engineering, architecture and computer-related services.
Other areas which will open up are food, poultry, milk products, electronic and electrical equipment and pharmaceuticals. For Singapore, the sectors India has committed for opening up to investment are manufacture of food products, motor vehicles, textiles, paper and paper products, chemicals, leather and the infrastructure sector.
How will our professionals gain?
The visa restrictions will now be eased for Indian professionals in several areas such as information technology, medicine, engineering, nursing, pharmacy, financial and advertising professionals, accountants and university lecturers. In short, the two countries have agreed to include 127 professional categories where a grant of visa would be easier.
Earlier, Singapore used to insist that a professional seeking visa to its country ought to have a salary equivalent to that drawn by a similar professional in its country. Singapore has also agreed to recognise the degrees issued by specified universities and technical education boards of both countries for the issuance of multi-entry visas.
Will there be any changes on import tariffs?
Indeed. India will cut tariffs on products imported from Singapore with a plan to move to zero customs duty on all products except six items. Singapore on its part has committed to bind all its tariff lines at zero customs duty. Now, 506 products will be allowed duty free into the country from Singapore.
What are the benefits of the CECA for both the countries?
For India, it could be in the form of Singapore companies investing in the country and expanding their presence. The agreement will help Indian companies, especially those in the information technology field, to expand their operations in Singapore as well as globally out of that country.
Singapore could serve as the gateway to East Asia. The CECA is also expected to help both the countries integrate with other countries in the South East Asia region and improve both efficiency and competitiveness of manufacturing and services.
