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Singapore is in no hurry to conclude the second review of the Comprehensive Economic Cooperation Agreement (CECA), even as India is pushing for entry of its banks and professionals into the Singapore market for more than four years.
“Yes, it (the second review of CECA) has taken a bit longer. We are in no hurry. These sort of negotiations take time. The Indian government is yet to come to terms with our laws. If CECA review takes over 10 years then also it is no big deal. Life goes on,” a senior Singaporean government official told Business Standard.
India had signed its first ever CECA with Singapore in August, 2005, under which both sides have a preferential tariff arrangement for over 80 product lines. Besides, India and Singapore enjoy greater access in services and investment under CECA.
The CECA's second review was launched in May, 2010, but since then the review had been held up mainly on two important issues. One is allowing Indian banks to Singapore and second the free movement of Indian professionals.
India had been consistently raising this issue with Singapore at all high-level meetings. The matter was even discussed during the recent meeting between external affairs minister Sushma Swaraj and her counterpart K Shanmugam in Singapore last month.
The Singapore government, in its effort to reduce reliance on foreign workers, passed the ‘Employment Pass Framework’ in 2010 under which the foreign share of the total workforce has to be brought down to around one-third by the companies located there, while encouraging employers to invest in productivity in return for incentives in the form of tax breaks.
However, India has argued that while Singapore has done this to address its own domestic concerns, it had committed a separate provision under CECA, exempting India from such a rule. The matter has taken a political colour now.
“The issue of achieving greater market access in services has become politically difficult,” commerce secretary Rajeev Kher had said recently.
As far as banking cooperation is concerned, Indian banks such as ICICI and State Bank of India (SBI) have been trying to enter Singapore for several years now. However, banks operating in Singapore, one of the world’s largest financial hubs, are required to meet very high qualifying standards in order to do business there.
The qualifying standards in the form of Asset Management Ratio (AMR) is higher for Indian Banks compared to other international banks operating there such as BNP Paribas or Standard Chartered. The Monetary Authority of Singapore (MAS) has set the AMR on the domestic banking unit (DBU) at 70% for SBI and ICICI as against 35% for other foreign banks.
Despite this, India and Singapore's bilateral trade continues to grow by leaps and bounds, although the trade surplus is heavily tilted towards Singapore. The two-way trade between India and Singapore reached $19.4 billion in 2013-14 from $4.2 billion in 2003-04. Both sides have also agreed to work under a framework of ‘Five S’ in which the first focal area is scaling up trade and investment.
Besides, Singapore emerged as the topmost investor in India surpassing Mauritius. Foreign direct investment from Singapore into India reached almost $6 billion in 2013-14 compared to $4.85 billion from Mauritius.
