India seeks more Singapore FDI

India to seek qualifying full banking status for SBI during CECA meet with Singapore on Friday.

India will seek qualifying full banking (QFB) status for the State Bank of India from Singapore during the first review meeting on the Comprehensive Economic Cooperation Agreement (CECA) to be held in the city-state tomorrow.

Under the CECA, Singapore had agreed to provide up to three bank licences with QFB privileges for those that satisfied its admission criteria. Officials said the SBI was the only Indian bank which had sought the status, but had not been granted the same so far.

Singapore is expected to seek further relaxation in the double taxation avoidance agreement (DTAA) to bring it fully at par with the Mauritius DTAA and changes in the rules of origin to bring them at par with the proposed rules for Asean.

Rules of origin are norms laid down under a bilateral agreement to check against trade diversion or misuse of duty free access by a third country. The interim rules suggested for Asean are far more liberal than those negotiated with Thailand and Singapore.

The India-Singapore DTAA lays down two eligibility conditions for capital gains tax exemption. These are, listing on a recognised stock exchange and a total annual expenditure on operations in the residence state equal to or more than $2,00,000 or Rs 5,000,000 in the 24-month period from the date of the gains.

Officials said India would also raise the issue of low investment flows from Singapore. "FDI inflows from Singapore have only increased marginally. It accounts for just 3.2 per cent of the entire FDI inflows. During April-March 2004-05, the total inflows from Singapore were $184 million, which increased to $227 million during April-January 2005-06," an official said.

Among the other issues which New Delhi is expected to raise is slow progress in finalising mutual recognition agreements in areas like medical and dental services. Customs cooperation to check over-invoicing and under-invoicing would also be sought by New Delhi at the meeting.