Singapore and India have sealed a groundbreaking pact on economic cooperation, the first between Singapore and a South Asian country.
The Comprehensive Economic Cooperation Agreement will enhance ties between both countries by speeding up the already growing flows of trade, investment and people.
Since the talks kicked off back in 2003, trade between Singapore and India has doubled totalling US$7 billion (S$11.8 billion) last year.
These figures are expected to be given a boost when the agreement takes effect from August 1st.
Under it, three-quarters of Singapore's exports to India will face zero or substantially reduced tariffs, making them cheaper and more attractive to Indian consumers.
Indian imports will also enter Singapore duty-free.
This agreement with India will give Singapore an added momentum to position itself as a free trade hub and for India to leverage on that role.
Lee Hsien Loong, Singapore Prime Minister, said: "There'll be many opportunities for our business people on both sides to take advantage of the doors which will open up, the investments, the trade, the tourism, the movements of people, professionals. I think the opportunities are open, the sky is the limit."
Exporters will enjoy savings from simplified testing procedures for electronic and telecommunication equipment as well as food products.
So India will be able to export egg and dairy products to Singapore within a shorter timeframe.
Both countries will also open up various services sectors - ensuring that their companies are given the same treatment as local firms.
Singapore's telecom companies will also be assured of fair, transparent treatment and allowed access to necessary public infrastructure in order to offer their services.
Foreign equity limit for telecom services like basic, cellular and long distance services will be lifted from 25 percent to 49 percent.
And banks from Singapore will have greater access into the Indian banking scene compared to other foreign players.
And they can set up wholly-owned subsidiaries to enjoy the same treatment the Indian government gives to its local banks.
Alternatively, should they choose to set up as branches, they have to be allocated a separate quota of 15 branches over 4 years, over and above the quota for all foreign banks.
Indian lenders will also be able to expand their activities in Singapore.
Those who satisfy Singapore's admission criteria will be given Wholesale Bank licences and up to 3 bank licences with Qualifying Full Bank privileges.
Indian insurers which satisfy admission criteria will also have open access to set up in Singapore.
With an improved double-taxation avoidance treatment agreement, there will be greater investment flows between Singapore and India as they don't need to pay capital gains tax.
To encourage more Singapore investments, the Indian government will recognise Singapore investment company Temasek Holdings and the Government of Singapore Investment Corporation which manages Singapore foreign reserves as distinct entities.
This will allow them to each own up to 10 percent of a listed Indian company.
The agreement will also allow allow freer movement of skilled and qualified professionals between the two countries.
This means, subject to further negotiations, within a year, doctors, dentists, nurses, accountants and architects from both countries can practise in each other's country.
Channel News Asia, June 29, 2005
Posted June 30, 2005