What To Expect From Modi's Diplomatic Visit To Singapore

SINGAPORE- Indian Prime Minister Narendra Modi is on his second visit to Singapore, and already whispers of a ‘New India’ are echoing all around. Starting with his enigmatic address at the Marina Bay Sands Convention Center last night, Mr. Modi has been in great support of strengthening economic ties between Singapore and India and even attended a Fintech exhibition showcasing the work of local and Indian startups in the fields of artificial intelligence, cybersecurity and more. His advocacy for business flow between the “two lions” (countries) comes from the longstanding Comprehensive Economic Cooperation Agreement (CECA), but building on existing relations has consequences for both nations. We here at The Guru are putting Singapore’s and India’s contributions under the microscope to discern who has more at stake in the current negotiations, and what both stand to gain. 

Striking a Delicate Balance 

2017 signaled a burgeoning development in Singapore’s diplomatic ties with both India and China. Both are rapidly developing countries in the region that cater to different Singaporean interests. With China, economic relations have always been dynamic as Singapore’s investments account for close to 85 percent of Chinese investments from Belt and Road countries. Bilateral trade between the two was also valued at $65 billion in 2016, which makes up 13 percent of Singapore’s international trade. 

But when it comes to India, the relationship is mostly built on security cooperation. The two have signed agreements for joint air force training and an army bilateral agreement, which were recently renewed and still stand. The two have also conducted bilateral maritime exercises since 1994. In 2017, Singapore and India took it one step further and signed a navy cooperation agreement to implement understanding between the maritime security measures and mutual logistics support at each other’s’ major ports. These agreements have ensured that Singapore is safe and its armed forces are well-trained. This is more important than ever, as Singapore has relied primarily on the United States and India for its safeguarding, but in the case of a regional conflict, India is its only hope.

However, Singapore shares India’s interest of counterbalancing China’s gaining power in Asia, and this has prompted greater economic interactions between Singapore and India. Now, close to 8,000 Indian companies are registered in the garden city and India is the largest foreign corporate contingent in Singapore. Modi’s visit is aimed at strengthening these ties and increasing employment fluidity between the two nations, but Singapore has a tough act to pull off by balancing India’s interests to ensure security ties while also prioritizing economic growth with China.

Indians Are Laying The Foundational BRICS 

True to the informal acronym (BRICS) it has been associated with, India has experienced massive amounts of growth and restructuring under the Modi government. The most comprehensive introduction has been that of the Goods and Services Tax (GST), although its implementation is still experiencing reform. However, Modi commented on the other changing aspects of India in his speech yesterday: “we remain the fastest growing major economy of the world. We intend to stay that way. Our economy has become more stable. Fiscal deficit is down. Inflation rate is down. Current account deficit is comfortable. The currency is stable. The foreign exchange reserves are at a record high.” India has also reportedly moved up 42 positions in the Ease of Doing Business rankings because of its successful removal of 1,400 outdated laws that now decrease the bureaucracy involved in setting up. On better news, there has also been a steep increase in the FDIs the country receives, from USD 36 billion in 2014 to USD 60 billion today. India is looking to continue at this pace of growth and expand its reach in South East Asia, which is the main reason why Modi is negotiating with Singapore, Malaysia and Indonesia simultaneously. There already exists a Comprehensive Economic Cooperation Agreement (CECA), that binds Singapore to India’s economic ventures, that is up for renewal. India believes that they can use their current position to obtain higher Singaporean support for its trade liberalization ventures. It is also hoping to get more access to Singapore’s professionals and institutions, which is still a topic up for debate. 

DPM Tharman: We Need To Draw Some Boundaries 

Defending Singapore’s interests at an economics forum hosted by the Indian Finance Ministry last year, DPM Tharman expressed that there have to be limits placed on the movement of people between India and Singapore. As a result of the CECA, there has been an influx of Indian IT professionals in Singapore that have put local talent out of work. To combat this, the government has reduced the quota for visas given to Indian professionals seeking work in the IT industry here. This has led to a huge uproar in India, as it goes against the open trade initiative agreed to by both countries in the CECA. However, DPM Tharman defends Singapore’s actions and says that there is no point in more productive businesses if locals don’t feel like they’re living and working in their own society. He adds: “This is a reality not just because of (President Donald) Trump in the US or Brexit in the UK. It is a reality all over the world.”

Currently, foreign workers make up a third of Singapore’s workforce. Local politicians are hence canvassing for the implementation of policies and guidelines to restrict the incoming flow of foreign talent and providing jobs to locals first. The inclusion of too many foreign companies comes with the risk of a good chunk of their profits going back to their host country. Moreover, domestic unemployment of PMETs is another concern as the costs continue to increase in Singapore, often touted as the most expensive city in the world. All this sets the groundwork for not just a bad social policy but a bad economic policy too. 

Despite the waves of confusion this situation has created on both sides, it is still unclear whether PM Lee will still prioritize the bilateral relationship with India, as, after all, he is the one that invited Mr. Modi for negotiations. Only time will tell if both sides come out unscathed clutching what they each want. 

Bilateral ties are designed to benefit both parties. Even if it seems like Singapore’s employment scene is being threatened by Indian workers, it is imperative to keep in mind that Singapore’s primary military support comes from India. Moreover, even though India has expressed disappoint in light of the new visa restrictions, CECA is one of the biggest international trade blocs and India stands to lose out on a lot more than just jobs if it decides to pull out. Singapore’s stature as a small island that is vulnerable is as demanding as India’s status as a rapidly growing economy still seeking development. While with the current information one can only speculate, one thing is certain; both nations have excellent leaders who have had friendly interactions with each other in the past. Their diplomatic relationships and wisdom to save their respective nation’s’ interest ensure that these negotiations will not disappoint.

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