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Experts proclaim benefits of commodity exchanges
Vietnamese exporters, producers and investors would benefit greatly from the establishment and effective management of commodity exchanges in the country, experts said on Mar. 15.
Nguyen Duy Phuong, Chief Executive Officer of the Viet Nam Commodity Exchange (VNX), said: "Vietnamese exporters are always put in a more disadvantaged position because they do not have reserves or tools to limit price volatility."
Addressing a workshop on enhancing State management of commodity exchanges and improving the regulatory framework, he said recent "complicated fluctuations in the economy" and climate change impacts had reduced the volume of agricultural products all over the world, making their prices unpredictable.
Furthermore, although Viet Nam was a leading exporter of rice, coffee, cashew nuts and pepper, it suffered from many problems in the chain of production and trading agricultural products, he said.
"Once a commodity exchange is established, it can link the production process with market demand. Furthermore, with direct participation of financial institutions and investment, the exchange can mobilise funds for production."
Phuong said VNX, established last year with a charter capital of VND150 billion (US$7.5 million), was an organised commodity exchange for all individuals and institutions.
VNX, whose operational model is similar to that in other countries, currently listed two products – coffee and rubber – and was expected to provide transaction contracts of steel next month, Phuong said.
He said it was necessary to invest in IT infrastructure and trading software to ensure accurate actions and connections between VNX and its members, investors, settlement banks, not to mention between Viet Nam and the rest of the world.
He stressed the need to co-operate with partners that have relevant experience in warehousing, logistics and inspection to maximise utilisation of resources.
Phuong said a consultation committee should be established to gather expert knowledge in different fields needed to "develop procedures, products, services and expand the market".
Pham Dinh Thuong of the Ministry of Industry and Trade's Department of Legal Affairs said there were more than 70 exchanges worldwide, more than 30 of which were located in Asia.
He said Vietnamese rice had already been traded on exchanges in India and Thailand, rubber on Japanese exchanges, and coffee on the US, Japan, the UK and Singapore exchanges.
Chong Kim Seng, Chief Executive Officer of Malaysia Derivatives Berhard, shared experiences gained in developing Bursa Malaysia, an exchange holding company that operates a fully integrated exchange and offers a complete range of exchange-related services including trading, clearing, settlement and depository services.
Malaysian model
Chong said that it was important to let people know what kind of commodities are traded on the exchange.
He also said unlike stocks that were localised or regionalised, commodities had to be globalised so there would be a lot of risk that can be avoided by buying insurance.
He said Malaysia's three strategic intents were to develop Malaysian Derivatives Industry, internationalise derivative exchange, and globalise crude palm oil, adding Malaysia had put its exchange on the global platform and set the goal of doubling its trading volume in three years.
The half-day workshop was organised by the Ministry of Industry and Trade's Domestic Market Department and the EU-Viet Nam Multilateral Trade Assistance Project III.
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