The Hindu Business Line : Little credit for financial services

THE recently-concluded Comprehensive Economic Cooperation Agreement, or CECA, with Singapore has shown that the two Ministries — Finance, and Commerce and Industry — have failed to do their homework. The hopes of the financial services sector for a fair deal have been betrayed.

In its present avatar, CECA could be an economic setback for the financial services providers. Having had experience with bilateral Preferential Trade Agreements (PTA) one would have expected India to have a more mature and farsighted approach to trade negotiations. Yet, financial services, such as insurance, banking and investment advisory services, have not received their due from Singapore.

Let us examine the Agreement. As per the CECA, India has given full national treatment (NT) to three Singapore banks. But Singapore has so far granted only one full banking licence and two customer service locations to India.

Without three banking licences, Indian banks would be reduced to wholesale banking. Further,

Qualified Full Banking (QFB) for Indian banks will not be free but subject to compliance of various local restrictive regulators.

Directors of Singapore outfits of Indian banks must be Singapore citizens or permanent residents.

Indian banks with QFB licences will not have access to the ATM network of any Singapore bank.

Merchant banking faces restrictions on certain types of trading as also financial future brokers and money changing institutions.

Indian banks dealing in forex, transfer of financial services and data processing will not have a free hand as they will be without NT cover.

Because of Mode 3 (commercial presence) restrictions, Indian life insurance providers cannot operate without opening a branch in Singapore.

In a similar trade agreement with the US, Singapore has given free market access and NT to American financial and service providers.

The Table exposes the double-standards of the Singapore Government.

In bilateral trade agreements, economic power and political standing of the country in the region play an important role. That does not imply that India not prepare itself for the negotiations, because the country, along with China, sees itself as a force to reckon with in Asia.

While Singapore was within its rights to set its terms, nothing prevented India from negotiating on them to get the best for itself.

The Centre must revisit the terms of the agreement given that a trade agreement with Singapore could be an "entry" into the Asean (Association of South-East Asian Nations), and could have also paved the way for a closer relationship in WTO (World trade Organisation) negotiations on services.

Sufficient care must be exercised as even "The Early Harvest Agreement"— a free trade agreement with Thailand — is being seen with some apprehension in trade and commercial circles. Perhaps, the government should involve trade and industry and service providers before embarking on such ventures as signing FTAs.

(The author is a Chennai-based cost accountant.)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Changing face of consumer credit

Double-whammy for oil companies

Little credit for financial services

The `sunset' politics of Bihar

Janus-faced

Open source software is a movement that is gathering momentum

Is the derivatives market model a weak link?