Bloomberg reported yesterday (28 May) that the Singapore Exchange SGX and the Indian National Stock Exchange of India NSE have abandoned talks on a cross-border trading link, amid a bitter court battle that’s soured an 18-year partnership.
The companies couldn’t reach consensus on issues including timing, regulatory guidelines and the resources required for the project, according to Bloomberg sources. Officials from NSE and SGX have declined to comment.
The venture is supposed to spur buying and selling of derivatives on both exchanges. A months-long quarrel between the two exchanges over data and licensing rights escalated last week when NSE sued to stop SGX from launching derivatives based on Indian stocks next month.
The dispute has threatened an alliance that began in 2000.
Free Trade Agreement issues with India
The “courtship” with India started when then PM Goh Chok Tong initiated a “mild India fever” in Singapore back in the 90s.
However the relationship has become stormy in recent years with many Singaporeans expressing concerns with regard to the flood of Indian professionals coming to Singapore to work.
Under the Comprehensive Economic Cooperation Agreement (CECA) signed between Singapore and India in 2005, it enables movement of people between the 2 countries:
- Professionals who are employed in 127 specific occupations are allowed entry and can stay for up to a year;
- Intra-corporate transferees will be permitted entry and can work for up to 2 years. This can be extended to a total term of not more than 8 years;
- Business visitors who hold five-year multiple journey visas will be permitted entry for business purposes for up to 2 months, with an option to extend by an additional month; and
- Short-term service suppliers will be allowed entry to service their contracts for an initial period of 90 days.
At the time of the signing, PM Lee said in New Delhi at an official dinner hosted by the Indian PM, “It (CECA) is much more than a free trade agreement. The CECA will bring our two countries closer together.”
“Singapore and India stand to gain immensely from the increased flow of goods, services, investments and (foreign) talent,” he added. “As economic linkages expand and the free flow of people and ideas continues, I am confident that the relationship will grow from strength to strength.”
In particular, under CECA’s Article 9.3, all the “intra-corporate transferees” are to be exempted from any “labour market testing” or “economic needs testing”. That means, economic needs testing like Singapore’s fair consideration framework which ensures fair hiring of Singaporeans cannot be applied to “intra-corporate transferees”.
To top it all, CECA’s Article 9.6 even allows the “intra-corporate transferees” to bring in their spouses or dependents to work here too.
Indian IT companies exploiting CECA loophole
So with CECA, large number of Indian IT workers were moved into Singapore as “intra-corporate transferees”, since CECA did not set any quotas. Many of these Indian IT companies reside in Changi Business Park. Few Singaporeans, if any, were hired.
But in last couple of years, driven by higher unemployment rates among Singaporean PMETs as well as discriminatory hiring complaints from Singaporean workers, the Singapore government started to slow down the approvals of Indian IT professionals to work here.
Times of India reported last year (‘Singapore blocks visas for Indian IT professionals‘) that work visas for Indian IT professionals to work in Singapore have dropped “to a trickle”, prompting the Indian government to put on hold the review of CECA, citing violation of the trade pact. Some of the Indian IT companies affected include: HCL, TCS, Infosys, Wipro, Cognizant and L&T Infotech.
“This (visa problem) has been lingering for a while but since early-2016, visas are down to a trickle. All Indian companies have received communication on fair consideration, which basically means hiring local people,” the president of Nasscom, the IT association of India, said.
In retaliation, the Indian government decided against expanding the scope of goods where import duties for Singapore goods would be cut unless the concerns of Indian industry are addressed, the report added.
In particular, the Indian government is against Singapore using the “fair consideration framework” to regulate the employment of Indian professionals in Singapore. “They (Singapore) are doing it despite the CECA clearly stating that there will be no ENT (economic needs test) or quotas on agreed services. This is a violation of the agreement,” warned an Indian official.
A review of CECA to update the terms has been under negotiation and held up for more than six years as India seeks even more access for its professionals and banks.
DPM Tharman defends Singaporeans’ interests
In July last year, DPM Tharman visited India and spoke at an economics forum organized by the Indian Finance Ministry. He was asked point blank about the sudden curtailing of Indian professionals moving into Singapore.
DPM Tharman replied that Singapore has been one of the strongest advocates when it comes to the free flow of goods and services, but there must be limits to the movement of people. Otherwise there will be less push for businesses to be more productive, and “more fundamentally, you become a society where people don’t feel it’s their own society”, he said.
“This is a reality not just because of (President Donald) Trump in the US or Brexit in UK. It is a reality all over the world.”
Noting that a third of Singapore’s workforce is already made up of foreigners, he added, “It would be mindless to have an open border without any policy framework to govern and constrain the flow of people into your job market. It will not just be wrong politics but wrong economics.”
DPM Tharman has done much to defend the interests of Singaporean workers. In fact, few years ago, he and then Manpower Minister Tan Chuan Jin had to call up some banks in Singapore to tell them to stop the practice of “hiring their own kinds”. This was revealed in Parliament by Minister Tan in 2013.
Then Minister Tan did not name the banks nor the nationalities of the hiring managers but many netizens have speculated that DPM Tharman and Mr Tan must have spoken to some of these foreign banks which were dominated by Indian nationals.
In any case, DPM Tharman told the Indian officials that he is confident about India’s future despite the complex challenges it faces.
Singapore was India’s top investor for the financial year from May 2015 to end April 2016, investing US$13.7 billion into India, no doubt, spurred by CECA. The investments, however, are believed to be mainly coming from Singapore government and GLCs, like DBS, Sembcorp, Ascendas, etc.