Business environment in India complicated, says Singapore PM

Singapore, the second country to send a high-level delegation to India after the draft guidelines on the General Anti-Avoidance Rules (GAAR) were issued (Mauritius was the first), on Wednesday said the environment for doing business here was complicated.

“I think India’s environment is complicated,” Singapore Prime Minister Lee Hsien Loong said on Wednesday. Though he didn’t mention the proposed GAAR or the retrospective amendments to the Income Tax Act, he stated companies investing in India looked for predictability of rules.

When asked why Loong had termed the business environment here “complicated”, Singapore Business Federation chief executive Ho Meng Kit said he was referring to red-tapism. On whether companies from Singapore had complaints on retrospective amendments and GAAR, he said though companies from his country would not be hit by these, India’s image had taken a beating.

WHY SINGAPORE IS IMPORTANT

• Singapore is India’s largest trading partner in Asean 
• Bilateral trade post Comprehensive Economic Cooperation Agreement (CECA) in 2005 has been growing at 20% annually
• Between 2006-07 and 2010-11, trade has grown by 51%, and it is expected to touch $32 billion by 2015.
• Singapore accounts for 10% of India’s total inward FDI, making it the 2nd largest investor in Indian economy. India has emerged as the 8th largest investor in Singapore
• Singapore is India’s gateway to Asean, China and APEC. Many Indian companies using Singapore as a base for operations in South East Asia

Excerpts from the speech made by CII President Adi Godrej at the meeting with Singapore Prime Minister Lee Hsien Loong, in New Delhi
on Wednesday

Prime Minister Manmohan Singh, however, assured Loong India would continue to be an investment-friendly country. “I assured the prime minister of India’s commitment to reinforce its status as an investment-friendly country, and expressed hope Singapore companies would look at India as a valued investment destination in the current scenario,” Singh said.

India and Singapore are reviewing the double taxation avoidance agreement (DTAA) between the two nations. Already, a ‘limitation of benefit’ clause has been added to the DTAA to avoid its misuse by companies not genuinely based in Singapore.

Loong said India was working on improving its environment for businesses. “But it is something business people pay a lot of attention to, because when you are going to a country with investment, it means you are making a decision. You want predictability, you want a reliable partner,” he said. He added the concerns of Singapore companies investing in India included those on good governance, a predictable regime and a hassle-free, rule-based business environment.

Loong, who met Prime Minister Manmohan Singh, said Singapore’s expertise in urban planning, water treatment, infrastructure and education could complement India's development agenda. He said he understood the problems India faced in pursuing regional engagements, and this required liberalisation of economic policies which in turn, needed political consensus.

Loong invited Indian companies to Singapore and also to take part in inter-linking of the Association of Southeast Asian Nations. He said the overall business environment in his country was comprehensive, safe and reliable. Also, while the corporate tax rate in the UK is 50 per cent and that in the US is 40 per cent, Singapore’s is just 17.5 per cent.