India as an Asia Pacific Power by David Brewster

Author:David Brewster [Brewster, David]
Language: eng
Format: epub
Tags: International Relations, Ethnic Studies, Social Science, Political Science, Regional Studies, General
ISBN: 9781136620072
Google: AF6pAgAAQBAJ
Goodreads: 17548562
Publisher: Routledge
Published: 2011-11-28T00:00:00+00:00

The new economic and security partnership between India and Singapore

Economics plays a leading role in most of Singapore's bilateral relationships, including its relationship with India. Although Singapore benefits from its role as an economic gateway between China and Southeast Asia, India could present an even greater opportunity. In contrast to China, which has the benefit of longstanding direct trading links with many Southeast Asian economies (including through the large Chinese ethnic communities in many states), India's direct economic ties with the region are much less established. As well as acting as India's gateway to Southeast Asia, the Singaporeans also believe that they can become a trade and financial intermediary between India and China.31 More generally, they believe they can assist in India's development as an ‘economic balancer’ to China.

Singapore has aggressively pursued economic ties with India since the opening of the Indian economy and the announcement of its Look East policy in the early 1990s. It has now become the largest investor in India among ASEAN states and in 2006/07 was the third largest foreign investor overall. In 2007, Singapore FDI in India aggregated US$2.9 billion for the year, much of it in the infrastructure sector, including ports and roads, while cumulative Indian FDI in Singapore aggregated US$8.8 billion. Bilateral trade has grown from US$2.34 billion in 2000/01 to approximately US$23 billion in 2010 (with the balance of trade in India's favour). Nevertheless, Singapore–India bilateral trade is a fraction of Singapore–China trade and is likely to remain so for some time.

In June 2005, India and Singapore signed an extremely broad-ranging Comprehensive Economic Cooperation Agreement (CECA), the first such arrangement India has entered into with a developed country. The CECA is unusually comprehensive, covering not just trade in goods, but also services, investment and tax. It provides for significant tariff reductions on goods covering approximately 80 per cent of Singapore's exports to India and for Indian exports to Singapore tariff-free – thereby promoting Singapore's role as a logistics hub for the export of Indian goods to Asia and the United States. However, the most significant aspects of the CECA are its treatment of services, investment and tax. It provides for the removal of many restrictions on services, something of particular significance for India with its large number of well-trained English speakers. The CECA also extends to financial services, giving specified Singaporean banks unrestricted access to the Indian market (and Indian banks to the Singaporean market) and provides special arrangements for Singaporean companies (and in particular the Singapore state-controlled investment companies, Temasek and GIC) to invest in India. The significance of the tax treaty arrangements should also not be underestimated, providing special concessions to Singaporean companies that place them on par with investors from Mauritius and Cyprus, historically the two primary gateways for foreign investment into India. As a result of the CECA, more than 2,800 Indian-owned companies now operate out of Singapore.32 In aggregate, the CECA gives Singapore a gateway role with respect to India – particularly in relation to financial services and investment – that it could never realistically hope to achieve with China.

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