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THE INDIA-SINGAPORE ACCORD to work towards a Comprehensive Economic Cooperation Agreement (CECA) is the result of the recommendations by the joint study group set up by the two countries last year to improve trade and other ties between the two economies. The Agreement is to cover a free trade arrangement, investment promotion, an open-sky policy for charter flights, and a double-taxation avoidance agreement. Clearly, the CECA can exploit fully the benefits of closer economic ties between the two sides, but with a word of caution vis-à-vis the nature of Singapore's economy, which is very different from India's.

Primarily an entrepot economy, its trading attributes are more pronounced than manufacturing characteristics. A re-exporting haven could turn out to be a source of worry for New Delhi, particularly if the re-exports are of the cheap variety posing a threat to Indian industry. Indeed, Singapore's domestic export and re-export figures (vis-a-vis India) over 1998 to 2002 suggest that New Delhi should be on its guard while negotiating the proposed free-trade agreement. This feature of India-Singapore trade will have to be kept in mind principally as China is working overtime to gain access to Asean markets using the free-trade route, the implication for New Delhi being that Beijing could use the proposed India-Singapore free-trade agreement to route its cheap products.

On the other hand, India's exports to Singapore over 1998-2002 more than doubled, (from $1.01 billion to $2.08 billion), led by non-industrial worked diamonds, unwrought aluminium and topped crudes. The pattern of the India-Singapore trade exchange should be clear from the fact that of the top six items exported from Singapore to India (which includes re-exports), five relate to electronics. On his recent visit to New Delhi, the Singapore Prime Minister, Mr Goh Chok Tong, said his Government had targeted a billion dollars worth of investment in India after the CECA came into force, which is substantial by any standards. This initiative, however, is not surprising going by the record of the past decade when Singapore investors have been keen on putting their funds into India. From 1991 to 2002 (end April), Singapore's share in total FDI into India has risen from 0.27 per cent to 1.99 per cent.

Clearly, the moves to strengthen India-Singapore trade ties pose more of a challenge to New Delhi, though this should be no reason to go slow in view of the benefits for Indian trade, industry and, most important, the services sector. Singapore's agenda is apparent. It wants to further its entrepot status by serving as (in the words of Mr Goh) "a bridge to facilitate economic interaction between (India and China)". Also, its interest in an FTA with New Delhi must be seen in the perspective of such agreements with Japan, Australia, New Zealand and the four-nation European Free Trade Area (comprising Norway, Iceland, Switzerland and Liechtenstein), and those in the works with the US, Thailand and China; the strategic shift in trade policy being perhaps determined by the recession-bound Singapore facing the lowest growth rates in recent times with joblessness reaching unprecedented levels. New Delhi will have to keep all this in mind while negotiating the CECA; some tough bargaining will have to be done before pen is applied to paper.

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