India-Singapore CECA: The Investor’s Guide

The India-Singapore Comprehensive Economic Cooperation Agreement (‘CECA’) was signed on 29 June 2005. The CECA, which became effective on 1 August 2005, is an integrated package that comprises a free trade agreement, a bilateral agreement on investment, an improved double taxation avoidance agreement and an economic cooperation pact in areas such as media, education, science, technology, air service, intellectual property and flow of human resources. The India-Singapore CECA is testimony to both signatories’ firm commitment to broaden bilateral economic relations, to pave the way and open further opportunities for the business and trading communities of both countries.

The India Practice Group at Wong Partnership is the principal author of India-Singapore CECA: The Investor’s Guide. This reference book provides a comprehensive analysis of the CECA and serves as a useful roadmap to help prospective investors navigate through its provisions. Contributors from the Institute of South East Asian Studies and the Federation of Indian Chambers of Commerce and Industry add policy and business perspectives to this commendable publication.

This well-integrated book comprises nine chapters and five case studies. Chapter 1 provides a comprehensive overview of the Indian economy as well as the various growth areas complete with key and relevant statistics and data. Chapter 2 analyses the objective and implications of the CECA and highlights the expected benefits to be reaped by the Singaporean business community. Chapter 3 gives a succinct overview of all the chapters of the CECA and is an effective introduction to the subsequent substantive chapters of the book.

Chapters 4 to 9 discuss the various main provisions in the CECA. The most important CECA provisions which relate to investment and trade in services between the two countries are explained in Chapter 4. Singapore’s annual investment channelled into India from 1992 to 2003 climbed from US$4m to a staggering US$62m. These figures may even be understated as investments were also routed through Mauritius for tax purposes. Clearly, the CECA intends to strengthen these growing economic relations and therefore makes several important provisions to promote and protect bilateral investments. Both countries recognise that the benefits and scope for win-win possibilities and synergies are greatest in the service sector. The CECA aims to provide service suppliers of both countries guaranteed and free access to each other’s market. This chapter examines the key features of CECA against the backdrop of existing relations between India and Singapore and highlights the many mutual benefits in this area. Various important concepts such as national treatment of investors, expropriation, repatriation, subrogation and treatment accorded to various modes of supply of services are clearly explained with key definitions set out. The commitments and reservations undertaken by both countries are also comprehensively enumerated.

Chapter 5 examines the relevant provisions of the CECA in the context of the Indian real estate and construction industry and highlights the two Memoranda of Understanding signed by the Building and Construction Authority of Singapore and the Singapore International Arbitration Centre respectively with India’s Construction Industry Development Council. The improvements to treatment of capital gains tax on investments set out in a protocol that amends the existing Double Tax Avoidance Agreement between the two countries are studied in Chapter 6. Chapter 7 looks at the CECA’s provisions relating to trade in goods. India will cut tariffs on products imported from Singapore with a plan to move to zero customs duty on all products except six items. With immediate effect from 1 August 2005, India eliminated duties on 506 tariff lines. For Indian goods entering Singapore, Singapore on its part has committed to grant zero-tariff treatment on all imports as of entry into force of the CECA.

Chapter 8 analyses the new rights and obligations set out in the CECA in relation to movement of natural persons. Visa restrictions for Indian professionals in several areas such as information technology, medicine, engineering, nursing, pharmacy, financial and advertising professionals, accountants and university lecturers will now be eased. Essentially, the two countries have agreed to include 127 professional categories where a grant of visa would be easier. Previously, an Indian professional seeking visa to Singapore was required to have a salary equivalent to that drawn by his Singapore counterpart. Singapore has also agreed to recognise the degrees issued by specified universities and technical education boards for the issuance of 
multi-entry visas.

Chapter 9 details the framework to resolve state-to-state disputes and investor-state disputes. The relevant procedures and provisions contained in the CECA to resolve such disputes are methodically set out.

The complete provisions of the CECA are also set out after the case studies to make for easy and quick reference.

Wong Partnership’s active experience in advising on India-related issues and matters has no doubt helped make this publication highly accessible despite the technicalities of the CECA. This book is definitely a useful read for any businessman who wants a firm grasp on the necessary CECA provisions.

The only slight flaw was the brevity of the case studies, which tend to be more narrative than informative. No doubt, many readers would have liked for these commentaries to be expanded with more facts and data to offer better insights to the plans and aspirations of those who have ventured forth, especially in the light of the CECA.

The conclusion of the CECA will certainly provide a significant added momentum in the years ahead to the already booming bilateral economic relations. For India, the benefit could be in the form of more Singapore companies investing there or increasing their presence. The agreement will also help Indian companies, especially those in the information technology field, to expand their operations in Singapore as well as globally through the latter. For Singapore, the CECA opens a market of one billion consumers for its economy. Singapore could serve as India’s gateway to East Asia. Studies have projected that the implementation of the CECA will enable bilateral trade to reach US$10 billion by March 2006 and US$50 billion by 2010. The challenge ahead for the two signatories and the companies in both countries would be to leverage on the CECA to achieve results and real numbers.

Tan Lee Cheng

Harry Elias Partnership

E-mail: tlc@harryelias.com.sg