India’s leading business daily, the Business Standard, published a news report last Tuesday (2 Sep) revealing that the Indian government has been continuing to raise issues with the Singapore government to allow more of its banks as well as its Indian professionals to enter Singapore (‘Singapore in no hurry to review economic pact with India‘).
It reported that Singapore has been stalling to conclude the second review of the Comprehensive Economic Cooperation Agreement (CECA) for more than 4 years now.
The second review of CECA was launched in May 2010, but since then the review has been held up mainly on 2 important issues:
Allowing Indian banks into Singapore, and
The free movement of Indian professionals
India has been consistently raising this issue with Singapore at all high-level meetings, the news report said. The matter was even discussed during a recent meeting between India’s External Affairs Minister Sushma Swaraj and Singapore’s Foreign Affairs Minister Shanmugam last month.
Due to political pressures from an increasingly enlightened Singaporean electorate, the Singapore government has been tightening the inflow of foreign workers into Singapore.
India argues that while Singapore has done this to address its own domestic concerns, there is a separate provision under CECA, exempting India from such a rule.
“The issue of achieving greater market access in services has become politically difficult,” Indian Commerce Secretary Rajeev Kher said recently.
As far as banking cooperation is concerned, Indian banks such as ICICI Bank and the State Bank of India (SBI) have been trying to enter Singapore for several years now. However, banks operating in Singapore are required to meet very high qualifying standards set by the Monetary Authority of Singapore (MAS).
One of the qualifying standards in the form of Asset Management Ratio (AMR) is higher for Indian banks compared to other international banks operating in Singapore such as BNP Paribas or Standard Chartered. The MAS has set the AMR for the domestic banking unit (DBU) at 70% for SBI and ICICI as against 35% for other foreign banks, the Business Standard reported.
ESM Goh started “India fever”
It all started in the 1990s when Goh Chok Tong, then PM of Singapore, initiated a “mild India fever” with the aim of establishing deeper ties with India.
Following the warming of ties, CECA, a free trade agreement between India and Singapore, was later negotiated and signed on 29 June 2005, during PM Lee Hsien Loong’s state visit to India.
Besides preferential tariff arrangement enjoyed by both sides, India and Singapore also enjoy greater access in services and investment under CECA. As of now, Singapore is the topmost investor in India. Foreign direct investment from Singapore into India reached almost US$6 billion in 2013-14.
One aspect of CECA is that Singapore must give more access for Indian professionals to work in Singapore.
When Singapore began to make a number of changes to the criteria that qualified foreigners for a work pass, India became unhappy with Singapore as the changes to Singapore’s labour law did not give India the preferential treatment accorded by CECA.
Things came to a head last year when the Indian government cried foul over Singapore’s attempts to impose restrictions on the entry of foreign workers, which affected Indian nationals already working or seeking to work in Singapore [Link]. According to Indian officials, this was a violation of the services trade agreement under CECA. The Indian officials said that the restrictions would adversely affect Indian nationals, especially middle level workers.
The Indian media reported, “Those of you planning to make it big in Singapore might be in for a setback. Singapore recently made certain changes to its Employment Pass Framework law to reduce inflow of foreign workers significantly to create more job opportunities for local professionals. The move is expected to impact even those Indians working there at present across various sectors.”
“This stance by the Singapore Government is expected to affect Indians working as middle-level managers, executives and technicians.”
There was even speculation that India might take up the issue with the World Trade Organization’s (WTO) dispute settlement body.
However, a senior Singapore government official told the Indian media then, “We have not imposed quotas as such for any country. Of course, the end result is still a reduction of the current foreign workforce numbers. But in doing so, I do not think we have contravened our commitments in the WTO or the CECA. Moreover, this is not specifically targeted to any one country. We remain very open to foreign talent.”
Currently, there are about 200,000 Indian nationals in Singapore, working in IT, finance, scientific research and other industries – including laundry services where an Indian “foreign talent” was caught last year using a fake university degree to obtain an S-Pass to work as an assistant manager illegally, reportedly drawing a salary of $2,000 per month