Singapore seeks Indian forbearance on Chinese components in projects

To push manufacturing investments into India, Singapore has requested soft treatment for China-made products. Simultaneously, Singapore has decided to pursue large-scale defence sector cooperation with India, a step it has not opened up to with China.

These issues surfaced at the recent second round of the India-Singapore Ministerial Roundtable (ISMR), held in Singapore on 26 August 2024. The Singapore ministerial team impressed upon their Indian counterparts that any manufacturing sector collaboration is likely to involve some Chinese elements.

For India, however, such a presence is a major concern. The Singapore delegation has therefore asked India to consider implementing a sort of “green lane” to handle these possibilities. The Indian ministers have not provided any assurance and instead advised Singapore to explore alternatives, including expanding the scope for sourcing from Indian manufacturers.

On its part, Singapore has made it clear that it will place the highest priority on ensuring the presence of Chinese components in joint ventures with Indian counterparts is kept to a minimum. The nation will also implement strict safeguards to ensure that India’s security concerns are not compromised.

Led by the minister of external affairs, Dr S. Jaishankar, the Indian ministerial team included finance minister Nirmala Sitharaman, commerce and industry minister Piyush Goyal, and railways, information and broadcasting, and electronics and information technology minister Ashwini Vaishnaw.

The Singapore delegation included deputy prime minister and minister for trade and industry Gan Kim Yong, minister for foreign affairs Dr Vivian Balakrishnan, minister for home affairs and minister for law K. Shanmugam, minister for digital development and information and second minister for home affairs Josephine Teo, minister for manpower and second minister for trade and industry Dr Tan See Leng, and minister for transport and second minister for finance Chee Hong Tat. Soon after the meeting, Prime Minister Narendra Modi and Prime Minister Lawrence Wong also met in Singapore.

The highly significant day-long ISMR meeting ended with hardly any details released about what had transpired in the discussions. This was done, as spokespersons for both governments noted, to allow for a candid assessment of the mutual needs of both countries.

“Evidently, they have also agreed to look at their relationship through the prism of their common strategic interests without allowing their relations with other countries to cloud the perspective. India also signals that it is keen on working with Singapore and Southeast Asia in the Indo-Pacific to play a constructive role in new and emerging strategic areas, and Singapore is happy to support that. This is evident from all four declared areas of cooperation: semiconductors, digital economy, education and skills, and healthcare,” said Amitendu Palit, Senior Research Fellow and Research Lead (Trade and Economics) at the Institute of South Asian Studies at the National University of Singapore.

Rising pace of cooperation

The ISMR was last held in New Delhi in September 2022. The ministers agreed that the frequency of these meetings needs to be increased, possibly to an annual schedule. However, they acknowledged that this will be challenging, given the difficulty of coordinating such a large team of top-level ministers. If the ISMR happens in 2025, Prime Minister Modi could visit Singapore in late 2025. Since Singapore goes to the polls in mid-2025, the dates will only be firmed up thereafter.

The Singapore government is very keen to build up the investment momentum with India. While Singapore remained the top investor in India at $11.77 billion in FY24, this was lower than the previous year by 31.55 percent. There was no response to emails sent to the Singapore High Commission on the subject.

In the run-up to the ISMR, 18 CEOs of Singapore-based companies met with the Indian ministers to outline their programmes for investment in India. Informal estimates suggest these could easily reach Singapore dollar 60 billion (US$46.6 billion approx.). This includes substantial cooperation in the defence sector. Singapore has decided to prioritise the development of these projects with India. It will push for the adoption of India-made defence armaments and other gear for imports by ASEAN nations. Many of these nations, wary of China’s presence in the region, are keen to source alternative supplies. India can fill these gaps significantly.

The official communiqué from the meeting, issued by the Indian Ministry of External Affairs, noted that the ministers “deliberated on ideas to expand bilateral cooperation and decided to add two new pillars: Advanced Manufacturing and Connectivity.” Queries sent from Business Standard to the MEA remained unanswered.

The Singapore team pointed out that it is impossible for their companies to build any manufacturing project without some Chinese components. This will remain the case for some time, given the breadth of the Chinese manufacturing sector globally. To avoid issues on this front, Singapore has asked India to consider establishing clear rules. In the aftermath of the deadly Galwan clashes in 2020, the Indian government has imposed strict restrictions on the import of Chinese products and equipment. No plans to offer any exemptions for these have been made public by the Indian government.