The Hindu : Business : CECA with Singapore: `most issues resolved'

Online edition of India's National Newspaper
Thursday, Mar 31, 2005

Business

Business

CECA with Singapore: `most issues resolved'

By P. S. Suryanarayana

SINGAPORE, MARCH 30. A comprehensive economic cooperation agreement (CECA) with Singapore, India's first such pact with any country, "will happen in the short term,'' according to the Union Finance Minister, P. Chidambaram.

In an interview to The Hindu on Tuesday, at the conclusion of his visit here, Mr. Chidambaram said: "The legal scrubbing [of the proposed document] is now on, and that may be completed in about two weeks. There are a couple of issues which need to be resolved. I think both countries have shown great willingness to resolve these issues.''

Noting that these residual issues were "not major'' in scope, he identified them as "the space to be allowed to banks in India and one or two clauses of the double-taxation-avoidance agreement.''

About the issue of who might gain more within the framework of the `win-win CECA' which the two countries have been negotiating for nearly two years now, Mr. Chidambaram said: "That is not the approach to a comprehensive economic cooperation agreement. You don't measure in golden scales who won a few grains more or who lost a few grams. We see it as long-term cooperation between India and Singapore.''

Asked whether India may need to take some steps to gain acceptance as a member of the proposed East Asian Economic Community, the Finance Minister said: "If we are invited, we will be happy to attend [the preparatory summit]. I think the countries of ASEAN [Association of South East Asian Nations] are inclined to invite India. A summit in Asia without India or without China or both will be like a bird flapping on one wing or no wing at all... That's a decision which the ASEAN countries have to take.''

Asian Bond scheme

On India's attitude towards the emerging Asian Bond scheme, he said, "there are pros and cons,'' which were now under discussion, and "no decision has been taken'' by New Delhi at this stage.

Giving an update on the State-level value-added tax, which foreign investors have welcomed, Mr. Chidambaram said: "21 States have reaffirmed their intention to introduce VAT from April 1... It doesn't matter if a few States join after a couple of months. This is the most important tax reform attempted, say, in 70 years".

Viewed in this perspective, it was already "a big move forward" that 21 States had by now signed on.

On the issue of rupee convertibility, he pointed out that the currency was already convertible, on the capital account, for foreign investors.

"There is no real compelling need to quickly move to full capital account convertibility.''

Asked whether India would, like the U.S., suggest that China revalue its currency, Mr. Chidambaram said: "Surely, no Indian Finance Minister is going to express a position on China's currency. It is China's autonomous decision. We have a market-determined exchange rate and we are quite happy with a two-way movement of exchange rate. But I am not going to be judgmental about what China does or does not do.''

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