India and Singapore signed the Second Protocol amending the Comprehensive Economic Cooperation Agreement. The signing of the Second Protocol, amending CECA, will boost bilateral trade between India and Singapore. The CECA was the first comprehensive agreement covering trade in goods, services and investments, which India had signed with any of its trading partners. The CECA was signed on 29th June, 2005 and its first review was concluded on 1st October, 2007.
Singapore is the second largest trading partner of India within ASEAN and India is the largest trading partner of Singapore in South Asia, with a bilateral trade of USD 17.7 billion in 2017-18. Singapore’s trade with India constitutes about 21.8% of India’s total trade with ASEAN and 2.3% of India’s global trade. India had a trade surplus of USD 2.73 billion with Singapore in 2017-18.
The Protocol amending CECA will give effect to the provisions agreed between India and Singapore during the closure of the Second Review of India Singapore CECA. The conclusion of the Second Review of CECA was announced during the State visit of the Prime Minister of India to Singapore on 1st June 2018. The provisions of the Second Protocol will come into effect on 14th September, 2018. The two countries are exploring the possibility of launching the 3rd Review of India-Singapore CECA in September 2018.
HIGHLIGHTS OF THE AMENDED CECA
India and Singapore have successfully reached mutual understanding and agreement to expand the coverage of tariff concessions, liberalize the Rules of Origin, rationalize Product Specific Rules and include provisions on Certificate of Origin and Cooperation on its verification. The second review of the CECA was launched in May 2010, but since then the review was held primarily on these counts.
1. Singapore had restricted the movement of skilled professionals from India after putting Indian information technology companies under its fair consideration framework watch list, which gave preference to Singapore citizens in jobs introduced in 2014.
2. Singapore mandated a higher asset maintenance ratio (AMR) for Indian banks, including the State Bank of India and the ICICI Bank, operating in Singapore compared to the mandate for other foreign banks. India complained about the discrimination, but Singapore was not ready to oblige.
3. Both sides have also signed an agreement to recognize three more nursing institutions in addition to the present list of four, which will facilitate the practice of more Indian nurses in Singapore.
4. The second review has expanded tariff concessions for an additional 30 products to take the CECA to the level of the Asian-India Free Trade Agreement. These new preferential tariffs apply to a variety of sectors, including food (sweet biscuits, curry paste and chilli sauce) and nylon moulding powder. It has also improved rules of origin to provide more flexibility for Singapore’s exports into India.
BENEFITS OF CECA FOR INDIA:
CECA involve tariff reduction/elimination in a phased manner on listed / all items except the negative list and tariff rate quota (TRQ) items. The Aim of the Agreement is to enhance economic and social benefits, improve living standards and ensure high and steady growth in real incomes in their respective territories by the expansion of Trade and Investment flows.
Signed in 2005, CECA is the cornerstone of trade and investment ties between Singapore and India. CECA widened the scope of business between India and Singapore. It clarifies taxation rules and opens up market access in a variety of manufacturing, services and financial sectors. It also creates clear provisions for dispute resolution and encouraged the cross-border movement of people. Some of the benefits of CECA are discussed below:
- CECA updates and expands the 1994 Double taxation avoidance (DTA) agreement. The agreement gives Singapore residents exemption under which capital gains can be remitted to Singapore free of Indian withholding tax. However, there are conditions to this exemption. Companies whose operations exist to take advantage of the DTA benefits are ineligible.
- CECA enables Indian companies to access Singapore’s capital markets to raise capital through a variety of financial instruments. For example, Flipkart, the Indian e-commerce website which counts GIC (Government of Singapore Investment Corporation) as an investor, has raised external funding in Singapore. However, Market access to Indian banks in Singapore has been a challenge.
- Under CECA, India accords national treatment to Singaporean investors in areas such as manufacturing of textiles, paper and paper products, chemical products, and construction development projects. Meanwhile, Singapore gives national treatment to Indian investors on a negative list basis with beer and stout, drawn steel products, and chewing gum excluded.
- CECA allows investors to directly initiate arbitration against a state without approaching its own government in case of a violation
- The CECA recognise the strategic partnership in civil aviation and the importance of air connectivity to support the expansion of tourism, trade and investments between the two countries.
- The agreement provides a platform for ensuring free movement of professionals. Mutual Recognition Agreements (MRAs) – negotiated on the basis of CECA – recognise educational and professional qualifications in services such as accounting and auditing, architecture, medical, dental, and nursing services.
- As India and Singapore prepare to elevate their relations to a strategic partnership based on trade and investment, CECA can be a model for regional economic engagement between India and Southeast Asia. Singapore is well placed to encourage this wider engagement because it is the center of Southeast Asia’s regional value chains.
Singapore, along with many other East Asian countries, has achieved spectacular levels of economic development over the past half-century. Singapore’s strategy of development relied heavily on foreign direct investment and international trade. Development strategy of post-independent India focused on building self-reliance, especially in the areas of science and technology, through import substitution industrialization. After decades of unimpressive growth, India’s economy is today on a high growth path. Given its success in knowledge-intensive sectors, particularly information technology, there is widespread optimism that India will soon emerge as a major economic power. In this context, it is in the interests of the Association of Southeast Asian Nations (ASEAN), Singapore in particular, as much as in the interests of India, to build closer economic ties with each other.