DOHA (QATAR): Singapore and the six-nation Gulf Cooperation Council (GCC) yesterday inked a landmark free trade agreement (FTA), the first by the grouping.

Leaders of both sides hailed the pact as a commitment to free trade, a move viewed as significant as the worsening global financial crisis threatens to raise the spectre of protectionism.

What S'pore gets he FTA will allow Singapore and GCC companies to sell goods to each other virtually tax-free, and gain preferential access for their investments. Singapore-based companies will also be allowed to hold majority stakes in key sectors of GCC countries. ... more

Prime Minister Lee Hsien Loong noted the FTA also signals their intention to expand international economic relations.

'We are tackling immediate problems but at the same time, we are also putting in place measures which will be beneficial to our economies in the middle- to long-term, and this GCC-Singapore FTA is one example of that,' Mr Lee said.

He was speaking at a press conference held jointly with his Qatari counterpart Sheikh Hamad bin Jassim Al-Thani.

They had earlier signed the pact at the Amiri Diwan, the office of Qatar's rulers, with GCC secretary-general Abdurrahman Hamad Al-Attiyah. Qatar is currently chairing the GCC.

PM Sheikh Hamad described the agreement as historic.

'It will contribute to increasing the volume of trade between the GCC countries and Singapore,' he said.

Also, it would be a gateway for boosting links between the grouping and other Asian states, he added.

The GCC was formed in 1981 by Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).

In recent years, many Singapore companies have ventured into these nations, which border the Arabian Gulf and are home to some 40 million people.

The FTA will allow Singapore and GCC companies to sell goods to each other virtually tax-free, and gain preferential access for their investments. It will come into effect when Singapore and all six GCC members have ratified the pact, likely next year.

Last year, Singapore's exports to the GCC amounted to about $3.1 billion. They included telecommunications, machinery and jewellery.

One distinctive feature of the FTA is that it is Singapore's first with a provision that will boost recognition of Singapore's halal certification standards, a step Mr Lee said will benefit Singapore firms.

Three GCC countries - Kuwait, Qatar and the United Arab Emirates - already recognise halal standards set by the Islamic Religious Council of Singapore while the other three will start talks on it.

It will boost Singapore's food exports as the GCC imports up to 90 per cent of its food needs. The market is estimated to be worth $18 billion a year.

Bilateral trade with the GCC, Singapore's seventh-largest trading partner, reached a record $42.4 billion last year, an increase of 127 per cent from 2002.

Under the FTA, Singapore-based companies will also be allowed to hold majority stakes in key sectors of GCC countries.

Singapore firms will enjoy preferential access in such fields as legal, accounting and engineering services, construction, and hospital services.

GCC firms will get similar treatment in legal services and integrated engineering services, as well as in advertising, retailing and transport services.

For instance, Qatar now allows foreigners to own at most 49 per cent of a company, but with the FTA, a Singapore company can own up to 100 per cent if it can demonstrate sufficient experience.

Singapore companies such as Keppel, Hyflux and CapitaLand have significant infrastructure projects in the Gulf states.

The GCC and Singapore have also agreed to cooperate in a range of areas, including infocomm technology.

Singapore had completed negotiations with Qatar on an FTA two years ago, but it was converted into a GCC-Singapore pact, for which negotiations were completed early this year.

It was a point Sheikh Hamad highlighted when he was asked about stalled negotiations with the European Union.

He said in Arabic: 'We almost reached an agreement two weeks ago, but at the very last minute, the Europeans changed their minds and retreated.'

He added: 'Singapore is a good example, we took less than three years to reach agreement, and with the Europeans, it's taken over 17 years.'

Before the FTA was signed, PM Lee called on Amir Sheikh Hamad bin Khalifa Al-Thani, Heir Apparent Sheikh Tamim bin Hamad Al-Thani, and PM Sheikh Hamad to renew bilateral ties. He was hosted to lunch by PM Sheikh Hamad and returns to Singapore today.

zakirh@sph.com.sg