India-Singapore Relations: Exploring Potential Partnership

Strategically located on the Strait of Malacca, Singapore has the largest port in South-East Asia connecting the Indian Ocean and the South China Sea. The dominance of the country on the Strait of Malacca makes the port one of the busiest ports in the world and the main transshipment hub in South-East Asia. India under Act East Policy mandates to enhance its relationship with South-East Asian countries and Singapore’s geo-strategic features makes it a gateway towards other SE countries like Brunei, Vietnam, Philippines etc. which can be only reached through sea unlike Thailand, Myanmar and Cambodia. The upcoming tri-lateral highway in future will connect India with Thailand, Myanmar & Cambodia. But then again for large scale trade, countries depend on sea routes and this necessitates a robust relationship between Singapore and India.

India-Singapore relation dates to 1965 when the latter became independent. Singapore’s first prime minister Goh Chok Tong recognized India’s potential and urged to open its economy and invited India to make Singapore the fulcrum for promoting India in ASEAN. The succeeding prime minister followed the same policy and in 2005 India and Singapore entered into a ‘Comprehensive Economic Cooperation Agreement’ (CECA). The Agreement entailed several trade benefits such as Enhancement to avoid double taxation agreement, Trade in goods, Mutual recognition agreements, Trade in services etc. The agreement was reviewed twice, and the second review took eight long years and concluded in 2018.

Usually, CECA only includes the reduction in tariff on a list of selected goods between two countries. Comprehensive Economic Partnership Agreement (CEPA) on the other hand, deals with reduction/elimination of tariff and trade in services and investments i.e. it provides market access to professionals, software companies, banks etc. of a country to the other. India has CEPA with Japan and South Korea. Although the relationship with Singapore is hailed as warmest and closest, one can question why both the countries are still ‘cooperating’ and haven’t become ‘partners’, signing the CEPA. But rather, India and Singapore have included trade in services and investment in CECA.  Going through the agreements between India-Singapore (CECA) and India-Japan (CEPA) one of the main objectives of both the agreements is to liberalise trade in service.

As mentioned above, the second review of CECA was concluded after a long delay that began from 2011. Two major issues dealt in the second review is explained here further. One of the issues was that Singapore restricted the movement of software professionals from India, enlisting Indian Information Technology companies under the fair consideration framework watch-list giving preference to Singaporeans for job opportunities. According to the Singapore government, the Fair Consideration Framework ensure Singaporeans’ presence in the workforce. Albeit the framework justifies a country’s initiative to protect their citizens, it is against the cooperation agreement signed between both the nations. This is a cause of concern as to how Indian IT professionals are not being given equal treatment, though mostly, they are highly qualified compared to other nationalities. Second, the Asset Maintenance Ratio was increased for Indian banks such as the SBI, the ICICI bank etc. The officials of the finance ministry called it discriminatory as it didn’t apply to other foreign banks in Singapore. The asset maintenance ratio denotes a company/bank ability to make the profit with its total assets. Singapore, on the other hand, has expressed concern over Indian banks non-performing assets. India also stalled application process of Singaporean banks as a counter to Singapore’s decision.

Both issues were solved in September 2018 concluding the second review of CECA. The third review has already begun and will be including investment chapter. The agreement between both the countries was in discussion for a few years by the Joint Study Group before signing and the above-discussed issues were clarified in the agreement in separate articles. Singapore’s stance towards India contradicting the agreement raises questions regarding the robustness of the relationship. What is influencing Singapore to take such measures is also ambiguous here. Both countries are still in the learning phase to cooperate with each other 13 years after signing the agreement and this reveals how India and Singapore are not mature enough to step up to be partners in the trading framework. Thus, a partnership agreement between both the countries has still a long way to go.

References

  1. https://www.differencebetween.com/difference-between-ceca-and-vs- ta/
  2. https://mea.gov.in/rajya-sabha.htm?dtl/30194/question+no974+restriction+on+indian+it+professionals+in+singapore+and+other+countries
  3. https://www.mom.gov.sg/employment-practices/fair-consideration-framework
  4. http://www.nas.gov.sg/archivesonline/speeches/view-html?filename=20050629983.htm
  5. https://www.livemint.com/Politics/nLYauYcmQzG4JIXFY1UNjK/India-Singapore-conclude-second-review-of-trade-pact.html

Sivaranjini R is a Research Intern at CPPR Centre for Strategic Studies.  

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