‘India will need freer trade’

HURDLES: “India’s rules are the consideration. You have multi-levels of government... and many rules, and not all of them are consistent. Land acquisition is another thing investors are concerned about.” — PHOTO: V.V. KRISHNAN  

Currently in the country on a five-day trip, Singapore Prime Minister Lee Hsien Loong explains how India is invested in East and Southeast Asia. Excerpts from an interview

You are one of the first dignitaries to visit India after the >Uri attack as well as India’s announcement that it had >crossed the Line of Control to attack terror camps in Pakistan-occupied Kashmir. Do you support India’s decision to do so?

We stand stoutly against all forms of terrorism and cross-border terror is a particular problem that India has. Singapore has a problem with cross-border terror too, because we are a very small country and it is quite possible for an attack to be mounted on Singapore from beyond our shores. So we absolutely understand the seriousness with which India takes this problem. I think these are problems India has to manage over a long term and you need a tactical response, but at the same time you have to try and develop a relationship that is stable and constructive with your neighbours, particularly with Pakistan. It is not something that is easy to do, but it is certainly something India has to work at and Pakistan has to work at too.

The UN Secretary General has said that he views rising tensions as a source of concern. Do you see the impact of international concerns on investors at all, given Singapore is the biggest source of FDI in India?

Any business that invests in India must understand the geopolitical environment that they exist in and things like this will happen every so often and they have to take a long perspective. If they get excited every time something happens, it will be very difficult to sustain your business.

Where do you see the potential in India’s role at the ASEAN, and could you throw some light on where the RCEP (Regional Comprehensive Economic Partnership) negotiations are headed, as they seem to be delayed?

India is not just an observer in the ASEAN region. It is also your region, you have a lot of interests there, you are an ASEAN dialogue partner, [a participant at the] East Asia Summit, FTAs with the group. We hope that in RCEP negotiations India will take a more liberal approach on freeing up trade and promoting regional integration. Because as you need to promote “Make in India” and exports to grow, you will need freer trade, not more protective trade.

The RCEP grouping had said they hope to wrap up the negotiations by this year end. However, India’s Commerce Minister has said that worldwide there is a logjam, a traffic jam on all regional freed trade agreements. Is RCEP headed that way too?

I don’t know if the worldwide traffic jam should affect the RCEP project. The old model for India was to be self-sufficient. It was the ideal India became independent with, that you spin your own thread, make your own clothes. But today you don’t do that. You make clothes for the whole world, you buy things from all over the world. And therefore you need a different kind of approach to grow your economy and progressively deepen your engagement with RCEP partners.

Is India the sticking point in RCEP negotiations?

It is never helpful to point at sticking points, but it is always helpful to encourage one’s partners to take a more active and forward-looking approach.

Despite the good optics, bilateral trade between India and Singapore has actually decreased considerably in the past year…

Yes, trade is down year-on-year, but investments are up compared to 10 years ago. In the last two-three years with the new government you have set a new direction to the economic policy and as the new investments become realised I hope trade will improve. But for the trade to grow, India must make a strategic decision that you want to encourage interdependence and more openness and more trade-based economy. Your trade is one-fifth [that of] Chinese international trade even as your GDP is one-third China’s — so it isn’t in proportion with what it should be.

In what way can India be more open to trade?

India’s approach has hitherto been one of self-sufficiency and trade was a very small proportion of GDP. India started to shift that with Dr. Manmohan Singh through the 1990s and when he became Prime Minister. Your growth rate increased because India was prepared to open up the economy, loosen government control, enable investments and free up the “animal spirits”. So Tata, Infosys, Mahindra went all over the world. But you have to allow other countries to operate in India too. It cannot be a one-way exercise. The process of changing the environment and reimagining where India stands in the global environment still needs to be done.

Where does Singapore face the biggest bottlenecks in its economic relationship with India?

India’s rules are the consideration. You have multi-levels of government, you have a State government, a local government and many rules, and not all of them are consistent. Land acquisition is another thing investors are concerned about. I think if you look at the Singapore projects, we wanted to do industrial parks — they have taken very long to clear the issues of land and these become politicised and we can’t settle it, and eventually the project languishes and nothing happens.. Yesterday I met the business delegation that came with me. They said the ministry here said there is nothing to stop them from setting up industry. So I said, really? And they said, yes, nothing to stop you but you have to go and buy the land yourself! (Laughs) Now, that may take a long time, and on an industrial scale it is impossible to do. So these are some of the issues, and if not overcome, they will be a problem.

Will the India-Singapore tax treaty be revised, as is being speculated?

That’s one of the issues for us. Because India has revised the tax treaty with Mauritius and you want to revise the tax treaty with us, which India is entitled to do. But you have to understand that Singapore is different from Mauritius. We know India is very focussed on black money, it is a very high-focus subject and we have been very careful to make sure the investments into India are legitimate. There is no ‘round-tripping’ or hot money or bad money being funnelled through Singapore.

Former Prime Minister Lee Kuan Yew, your father, called India a nation of “unfulfilled greatness”. He felt that the Indian bureaucrat viewed businessmen, especially if they were foreign, with suspicion. Has that changed?

I think Mr. Modi is trying very hard to change the ethos of the bureaucracy, and I wish him all success with that.

In terms of animal spirits, what is the animal that describes India right now?

I think Indians consider themselves an elephant… doesn’t move the fastest, but does so inexorably.

In the meeting with Prime Minister Modi there was a reference to keeping sea lanes open, in accordance with international law, a clear reference to South China Sea (SCS) and China’s actions there. How do you see India’s role on this issue?

The SCS dispute has many aspects to it. The specific maritime territorial disputes are at a bilateral level between China and four ASEAN countries. But other countries in the region have an interest because of freedom of navigation and resolving disputes in accordance with international rule of law, that is UNCLOS. India can contribute like other regional countries towards promoting a climate conducive to resolve disputes.

So is that a diplomatic role or a military role for India? The U.S. has spoken about joint patrols in the SCS, which India hasn’t agreed to so far.

The U.S. has conducted Freedom of Navigation Patrols, but each country has to decide for itself where its focus is. For India, you have an interest in the wider region, and historically India’s focus has been on the subcontinent, that has so many issues. But increasingly you have a wider interest in the region and that is why you are part of the ASEAN forum which discusses security issues.

That is precisely the concern for India, that if India were to have a greater role in the SCS, the impact could be felt here in the subcontinent and open a second front with China along with existing tensions with Pakistan. Isn’t that the challenge?

I think that is something your decision-makers must be weighing very carefully. The Chinese have grown bigger, its influence continue to grow. In time it will be a status quo power, with an interest in maintaining international law with partners rather than adversaries. I think these are calculations for them to make. Singapore is a very small player in all this. We hope to be a constructive player.

Our code of editorial values

Related Topics