Singapore And Mauritius Vie To Supply India's FDI

by Mary Swire, for LawAndTax-News.com, Hong Kong

24 October 2005

With Singapore and Mauritius both eager to be the prime conduit for Indian FDI, Singapore's Education Minister Tharman Shanmugaratnam said last week that Singapore aims to be the market intelligence hub on India.

Speaking at the India Conference, co-organised by The Business Times and Nanyang Technological University (NTU), Mr Tharman, who is also deputy chairman of the Monetary Authority of Singapore, said global financial institutions are increasingly basing India-related work in Singapore. JP Morgan and Citigroup, for instance, cover India from Singapore using Indian expatriate specialists, while Deutsche Bank and Aberdeen manage their fund investments in India from Singapore.

'MAS will develop this segment of India intelligence proactively, as part of our effort to develop Singapore as a funding centre for Indian companies,' Mr Tharman said. But while there is rising awareness that opportunities abound in India, there is still a 'huge knowledge gap', he said.

Although Singapore has been given a boost by the recently signed Comprehensive Economic Cooperation Partnership Agreement (CECPA) with India, Mauritius has historically been the leading external conduit jurisdiction for Indian FDI, and retains some tax advantages over Singapore. The Indian/Singapore CECPA incorporates a Double Tax Avoidance Agreement which includes only a very narrowly defined capital gains tax exemption, while the long-standing India/Mauritius DTAA has a much broader exemption.

After Singapore's CECPA was signed, Mauritius began to have concerns that their DTAA might be under threat, but Indian Foreign Secretary, Shyam Saram, was more or less reassuring on the subject on a trip to Mauritius in September.“There is space for everyone. The treaty with Mauritius has benefits that are not included in the one with Singapore," he said. "You have offshore management firms, which know the Indian market very well and which offer a high-level service to operators investing in India. You don’t have to worry…”

Indeed, Mauritius signed its own CECPA with India in September, and there have already been three rounds of implementing discussions since then. Last week, Rajesh Jeetah, Mauritian Minister of Industry, told a meeting of the India/Mauritius Joint Business Council that the CECPA would 'bring a new dynamism' to cooperation between the two countries. The meeting brought together private sector leaders to discuss the new possibilities in such sectors as tourism, IT and the 'knowledge hub'. The meeting also listed a series of issues, including air and sea links, visa issue and standard-setting which would be raised with the two governments.

Rajesh Jeetah reassured Indian businessmen that the 'preferential access' given under CECPA to Mauritian exporters in certain sectors would not damage their interests. Mauritius is only a small player, he said. "We are targeting an upper segment of the market, which is anyway supplied by imports. Preferential access will not mean a surge in exports from Mauritius."

Agreements reached between the two countries at CECPA implementation meetings are expected to be signed at the end of this month. A joint Indian/Mauritian document identifies the main areas of co-operation as including trade in goods and services, promotion of investment, tripartite co-operation (particularly in Africa) and co-operation in education and health, among other sectors.

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