On the 29th June 2005, Singapore, under
Prime Minister Lee Hsien Loong, and India, under Prime Minister Manmohan Singh,
concluded the Comprehensive Economic Cooperation Agreement. What followed became a genuine, recurring
concern for ordinary Singaporeans, and the concern was never really about trade
in goods. It was about Chapter 9:
Movement of Natural Persons, and specifically Annex 9A, a list of 127
professions Singapore contractually agreed to keep open to Indian nationals,
without the right to apply labour market testing, economic needs testing, or “other
procedures of similar effect” as a precondition for entry.
Why It was Not Well Thought Out
The clause on intra-corporate transferees compounds
the problem directly. A company can open
a nominal office in both India and Singapore and use that structure to
parachute professionals, technicians, and managers into the Singapore labour
market with a guaranteed approval of short-term stay, bypassing the scrutiny
every other work pass applicant faces.
This was not a minor drafting oversight.
It was a structural loophole, written into the treaty text itself, and
treaties are considerably harder to unwind than domestic policy.
The consequences showed up in the numbers almost
immediately. The “other work passes”
category grew by roughly 22% in both 2012 and 2013, then by 30% in the first
six months of 2014 alone. Professor
Tommy Koh Thong Bee explained the underlying wage mechanism plainly: Singapore
pays certain workers low wages “not primarily because their productivity is
inherently low, but largely because they are competing against an unlimited
supply of cheap foreign workers,” and the fix required either reducing that
supply, introducing a minimum wage, or targeting specific sectors for wage
enhancement directly. None of that fix
was available to Singapore unilaterally, because the treaty had already locked
in the supply side of the equation.
Why the Issues Have Still Not Been
Adequately Resolved
The Third Review of CECA has been ongoing since
September 2018. As of the joint
statement issued in early 2025, both governments were still describing their
task as making “progress on initiation” of that Third Review, meaning a review
launched in 2018 had not even been substantively concluded seven years
later. Compare that to the First Review,
concluded within two years, in 2007. The
Second Review took eight years and drew direct parliamentary criticism over the
delay. A Third Review now stretching
past seven years without resolution is not evidence of careful diplomatic
calibration. It is evidence that the two
governments cannot agree on how to unwind a structural problem neither side
wants to be blamed for creating.
Singapore has, in the meantime, tried to patch the
wound domestically rather than at the treaty level. The Complementarity Assessment Framework,
COMPASS, introduced for all new Employment Pass applications from September
2023 and extended to renewals from September 2024, requires a minimum score of
40 points across salary, qualifications, workforce diversity, and support for
local employment, specifically to prevent any single nationality from
dominating a firm’s professional workforce.
It is a genuinely more rigorous filter than anything Singapore had in
2015. It also does not touch the
original problem. Multiple immigration
advisories confirm that certain intra-corporate transferees remain
COMPASS-exempt under the specific provisions of CECA itself, and separately,
any Employment Pass applicant earning above S$22,500 a month is exempt from
COMPASS scoring entirely, regardless of nationality concentration at the hiring
firm. Singapore built an elaborate new
points system explicitly to manage exactly the risk CECA was already
contractually forbidden from letting it manage, for the one category of
applicant the original 2005 agreement was actually written around.
The trade case for the agreement remains genuinely
strong, and pretending otherwise would be dishonest. Singapore was India’s largest source of FDI
in 2013-14 at US$5.98 billion, roughly a quarter of India’s total inflows that
year, and Temasek Holdings alone has continued growing its India-linked
exposure, with its net portfolio value rising to S$389 billion partly on the
strength of US and Indian investments.
Bilateral trade, having expanded from US$4.2 billion in 2003-04 before
CECA to considerably higher levels since, has been genuinely volatile,
reflecting global conditions as much as the agreement’s own design. None of that commercial success addresses the
specific structural flaw the movement-of-persons chapter created, and no amount
of GDP growth retroactively justifies signing away the labour market testing
tools every other trade partner is permitted to retain.
The Verdict
CECA was not badly negotiated because Singapore lacked
capable trade negotiators. It was badly
negotiated because the negotiators optimised for corporate access and
geopolitical diversification away from China, and treated the domestic labour
market consequences as a manageable afterthought rather than a central design
constraint. Twenty years, three review
cycles, and one entirely new immigration points system later, the core
structural loophole, intra-corporate transfer without labour market testing, remains
contractually intact, patched around at the edges rather than fixed at the
source. A treaty that takes longer to
renegotiate than it took to originally draft is not a living agreement being
carefully maintained. It is an admission
that both governments know exactly what is wrong with it, and neither has found
the political will to actually change it.
Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code
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