CECA between Singapore & India: Why Our PMETs are Losing Their Jobs

On the 29^th June 2009, Singapore concluded the Comprehensive Economic Cooperation Agreement with India.  This strategic agreement would become a concern for ordinary Singaporeans.  The primary area of concern pertains to the articles on the movement of natural persons.  This agreement will open a flood of Indian PMETs into the Singapore market, squeezing Singaporeans out of 127 specific occupations mentioned in the agreement, mainly in areas of middle management, and cause a direct adverse impact for Singaporean PMETs.

This agreement also allows intra-corporate transferees.  What this means is that a company can open an office in India and Singapore, and taking advantage of this loophole, parachute professionals, technicians and managers into Singapore since they are guaranteed an approval of short term stay.  And this is just one such agreement.

However, in light of the backlash due to the increased numbers of foreign workers, the Singapore government has been put in an unpleasant position of backpedalling from a binding agreement.  The government made changes to its Employment Pass Framework law to reduce the inflow of foreign workers significantly.  There were too many PMETs out of work.

Understandably, the Indian government was displeased.  Indians did not get the preferential treatment incorporated into the CECA between them.  There is a possibility that India might take up the issue with the World Trade Organization’s dispute settlement body.  The Indian government rightfully considers this a violation of the CECA.  There are about 200,000 non-resident Indians in Singapore working, and there is a possibility that some of them would lose their jobs.

According to Chapter 9: Movement of Natural Persons, under Article 9.5: Long-Term Temporary Entry, the paragraph on Professionals, it states clearly “Each Party shall grant temporary entry and stay for up to one year or the duration of contract, whichever is less, to a natural person seeking to engage in a business activity as a professional, or to perform training functions related to a particular profession, including conducting seminars, if the professional otherwise complies with immigration measures applicable to temporary entry, on presentation by the natural person concerned of:

(a) Proof of nationality of the other Party;

(b) Documentation demonstrating that he or she will be so engaged and describing the purpose of entry, including the letter of contract from the party engaging the services of the natural person in the host Party; and

(c) Documentation demonstrating the attainment of the relevant minimum educational requirements or alternative credentials.”

The “professional” here refers to anyone employed in an occupation listed in Annex 9A, List of 127 Professionals.  These are all jobs that Singaporeans find themselves locked out of.  As per this agreement, Singapore is legally bound to allow the free flow of Indian nationals under the list of “professionals” into Singapore without any border controls.  It is specifically written that we may not enact legislation that “requires labour market testing, economic needs testing or other procedures of similar effects as a condition for temporary entry”.  Any such law enacted to protect Singaporeans would be a violation of the agreement.  The agreement also allows Indian nationals who come to Singapore to work to bring in their spouses or dependents, and the Singapore government is required to grant these accompanying spouses or dependents the right to work as managers, executives or specialists.

It is no coincidence that the “other work passes” category experienced a growth rate of about 22% in 2012 and in 2013.  By the middle of 2014, this had grown 30%; that is, in 6 months.  In response to the Singapore electorate’s disgruntlement, in 2013, the Singapore government introduced the Fair Employment Consideration framework.  This is to supposedly ask for employers to consider Singaporeans for employment first.  Most employers paid lip service and the framework is a failure since here is no real check and no teeth in legal enforcement.  It is this framework that made the Indian government consider bringing the issue to the WTO.

In May 2010, CECA was up for a second review.  However, it was held up because of two main issues.  The first is that the Indian government wanted more Indian banks to operate here.  And they are unlikely to hire Singapore management personnel.  And secondly, it wanted Singapore to continue to allow the free flow of Indian professionals into Singapore.

In 2012, Prof. Tommy Koh Thong Bee said, “The truth is that we pay these workers such low wages not primarily because their productivity is inherently low, but largely because they are competing against an unlimited supply of cheap foreign workers.  Because cheap workers are so plentiful, they tend to be employed unproductively.  In the Nordic countries, unskilled workers are relatively scarce and thus deployed more productively, with higher skills, mechanisation, and better organisation.”  He further added, “What is the solution?  The solution is for the State to reduce the supply of cheap foreign workers or introduce a minimum wage or to target specific industries, such as the hospitality industry, for wage enhancement.”

Singapore is India’s 10^th largest trade partner globally, the 2^nd largest in ASEAN, accounting for 25.9% of India’s overall trade with ASEAN in 2013-14.  India was Singapore’s 12^th largest trade partner globally in 2014.  Bilateral trade expanded after the conclusion of CECA from US$6.65 billion in 2004-05 to US$25.2 billion in 2011-12.  It declined to US$19.27 billion in 2013-14.  Bilateral trade stood at US$17.1 billion in 2014-15.  India’s imports from Singapore were US$7.1 billion, and exports from India to Singapore were US$10 billion.  These numbers are from the Indian government.  In 2003-04, just before the signing of the CECA, bilateral trade between India and Singapore was US$4.2 billion.  Singapore is the 2^nd largest source of FDI, at US$32.2 billion from April 2000 to March 2015.  This is 13% of total FDI inflow.  Singapore was the largest source of FDI into India for 2013-14, with US$5.98 billion.  This accounted for about 25% of FDI inflows in the year.  Our FDI grew about 15 times.  The trade surplus favours India.

Clearly, the people who are in business, who run the corporation and the companies, have profited greatly from the CECA.  In terms of pure business, it was an excellent deal.  It also allows us to diversify away from dependence on the performance of the China markets.  From a nation building perspective, however, it is not ideal.  The CECA was not well thought out.  Evidently, the people who sign these deals and plan our trade policies have little contact with the ground.  The needs of Singaporeans do not factor greatly in this.

It is true that Singapore does need this agreement for market access, for creating trade and investment growth avenues, and to balance other developments in the region, including the Chinese strategy in the South China Sea.  For India, the agreement fits her political priorities regarding her interest in the broader international context, and with her need for trade and political alliances with other developing countries.  But political and economic considerations are fluid, and particularly for Singapore, it has mortgaged sort term gain for long term prosperity.  If the PAP government were planning for the next 20, then incremental convergence is likely the most prudent action.  Instead, the PAP found themselves locked in an untenable situation with a disgruntled population.  Hopefully, there will be tweaks in the policy to address these issues.