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India and Singapore have agreed to explore 'out-of-the-box solutions' to allow Singapore-based special purpose vehicles to qualify for advantages under the bilateral Double Taxation Avoidance Agreement.
The issue was discussed at the first ministerial review meeting on the India-Singapore Comprehensive Economic Cooperation Agreement on Friday where Commerce and Industry Minister Kamal Nath said investment from Singapore continued to be below expectations, an official release said.
The Singapore side, led by Minister for Trade and Industry Lim Hng Kiang, stated that one of the main reasons for low investment in India was the rigid condition in the Double Taxation Avoidance Agreement that stipulated an annual expenditure of Singapore $ 2,00,000 in each of the previous two years.
He said the rule restricted investment by both existing and new investors. In response India said the condition was meant to address the issue of shell companies. Both sides, however, agreed to explore solutions to the problem.
The two sides agreed to complete negotiations on mutual recognition agreements (MRAs) before July 31, 2006.
MRA-related issues from the Indian side are: minimum requirement for generic medicinal products from India, clearances for export of egg products, Qualified Full Banking status to the State Bank of India, and Customs cooperation issues.
Nath urged Singapore to accord high priority to FDI, especially in infrastructure and Special Economic Zones (SEZs).
In 2005, FDI from Singapore was around $300 million, up from $62 million in 2004.
According to trade data, till November 2005, Indian exports to Singapore had risen by over 40 per cent while imports from Singapore increased by 11 per cent during the August-November period.
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