Singapore: The inevitable heart of India’s Act East policy

09-Jul-2015 # Singapore

The India-Singapore relationship was almost inevitable. With complementing comparative advantages, democracies and values it was the right fit. However, the relationship between the two remained just cordial and did not really start delivering real dividend until then Indian Prime Minister P.V. Narshima Rao delivered his now historic “Look East” policy in 1994.

Incidentally, PM Rao’s speech coincided with Singapore’s decision to proactively engage with India to play it’s rightful geo-political and economic role in the region. This was also the island nation’s way to balance China’s influence. The city-state has been instrumental in India connecting as well as re-connecting with ASEAN countries but bilateral relations remain at the heart of it all.

It did not of course stem from altruism but from the fact that relationship with India, a reforming and fast-growing economic giant with tremendous potential and indigenous nuclear/space capabilities was good for Singapore, both strategically as well as economically. Similarly, India wanted access to new markets, investment as well as knowledge on delivering rapid urbanisation with good quality of life that comes with a corruption-free governance and development. In addition, access to Singapore ports enabled India to become a serious strategic player in Asia. These potential mutual advantages led to India signing a Free Trade Agreement and a Comprehensive Economic Cooperation Agreement exactly a decade ago by then Prime Minister Manmohan Singh. Since then trade between the two has flourished, hitting a record $19.4 billion in 2013-14 from $4.2 billion in 2003-04. Singapore has established itself as one of the largest FDI sources for India, accounting for about 12 per cent of all inward investment.

The approach towards Singapore from an Indian foreign policy perspective has been consistent and the Manmohan Singh government can take much credit for taking the relationship to a strategic level. Prime Minister Modi has now upped the ante and has announced a vigorous “Act East” policy, in which Singapore will continue to play a pivotal role.

But Singapore is not just another trading partner. It has been integral to India’s development story whether it is in port development or Special Economic Zones and now in helping take PM Modi’s vision of smart cities and skilled India to fruition. It continues to be the Eastern gateway for Indian companies with global ambitions and currently hosts more than 6,000.

Singapore PM Lee Hsien Loong recently said India can play a major role provided it “opens up its economy, encourages foreign trade and investments, and participates actively in regional cooperation” and that is firmly on Prime Minister Modi’s agenda.