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G. Srinivasan

New Delhi , June 29

INDIA and Singapore on Wednesday turned a new chapter in the traditional ties by signing the Comprehensive Economic Cooperation Agreement (CECA), paving the way for an integrated package of trade in goods and services, an agreement on investments, mutual recognition in services, cooperation pact in customs, science and technology, education, e-commerce, intellectual property and media.

The Prime Minister, Dr Manmohan Singh, and the visiting Prime Minister of Singapore, Mr Lee Hsien Loong, signed the CECA and the Mutual Legal Assistance Treaty in Criminal Matters, which was preceded by a range of bilateral and multi-lateral issues.

The Singapore Commerce Minister, Mr Lim Hng Kiang, told a news conference that the CECA "will go beyond free trade" as it has other elements such as special visa arrangements and liberalisation of air transport.

Singapore is an important trading partner of India with bilateral trade of $6.4 billion. The balance of trade is tilted in favour of India to the tune of $1.2 billion. CECA will take effect from August 1.Official sources told Business Line here that India would cut tariffs on imports from Singapore under the CECA, gradually cutting them to zero over a five-year period. Singapore has zero customs tariff on all products except six and Singapore has agreed to bind all their tariff lines at zero customs duty for India including beer. Under early harvest programme for duty cut, as many as 506 products mostly information technology items and aeroplane parts would be allowed duty-free to India from Singapore.

To prevent third-country imports piggybacking on preferential route, strict rules of origin (ROO) have been prescribed. Under the ROO, simultaneous application of the three criteria viz., change in tariff heading (CTH) of all imported raw materials, along with value addition of 40 per cent and certain sufficient manufacturing operations to be performed for grant of originating status have been agreed to. However, the sources said, on 534 products, derogations from the general ROO have been agreed to and these mostly cover chemicals, machinery and precision instruments.

On investment, the sources said, for the first time New Delhi has agreed to grant pre-establishment National Treatment on a positive basis. India has taken commitments in 22 areas such as manufacture of food products and of textiles, manufacturing of wearing apparel, dressing and dyeing of fur, tanning, beverages, leather, manufacture of luggage, handbags, harness and footwear, manufacture of paper and paper products, chemicals and chemical products, radio, television and communication equipment and apparatus, manufacture of motor vehicles, trailers and semi-trailers, development of township, housing, built-up infrastructure and construction development projects.

Singapore has taken commitments on a negative list basis. Thus, all manufacturing sectors are included in this offer except sectors covering beer and stout, cigars, drawn steel products, chewing gum, bubble gum, dental chewing gum or any like substances, cigarettes and matches.

The sources said that the investor would not be allowed to have access to international arbitration in case theinvestor states the dispute at the pre-establishment stage. The investor would only have access to domestic courts in this regard.

India has agreed to commit for Singapore the recent policy liberalisation on FDI in township and housing, as these are priority areas for attracting FDI.

On trade in services, India has taken commitments in nine sectors that include professional services (including accounting, taxation (advisory only), architecture, engineering, medical and dental, services by nursing, midwives and veterinary services, computer and related services, R&D services, real estate services (for consultancy), rental/leasing services without operators, other business services such as advertising services, management consulting services, technical testing and analysis services, services incidental to fishing, mining, manufacturing; energy distribution, placement and supply of services of personnel, maintenance and repair of equipment, photographic services, packaging services, telecommunication and audiovisual services, construction and related engineering services, financial services, health, tourism, recreational, cultural and sporting services, maritime transport services and some sectors of air transport services.

While Singapore has taken commitments in dozen service sectors, it has offered partial/full commitments in all the services sectors in which India has offered commitments. Such sectors include legal (for consultancy) services, under other business services areas such as market research and public opinion polling, services incidental to agriculture, forestry, security consultations, alarm monitoring, unarmed guard services, telephone answering services, retail trading and franchising under distribution services, education services, environment and health.

On financial services, the sources said that Singapore has offered qualified full bank (QFB) status to three Indian banks, even as the City State has given only 6 such QFBs globally. But QFB status entails rigorous prudential norms and operational ability, the sources said adding that the Indian entities currently functioning in Singapore, such as SBI, IOB and Indian Bank had to gird up their efforts to qualify for this status. They said that Singapore is also binding its current policy on security transactions, asset management and insurance to any eligible entities from India to set up shop there.

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