Dubai tops the world commodity index unveiled in London on Tuesday as part of Dubai Multi-Commodities Centre’s (DMCC) Future of Trade report.
The index is based on a country’s location and trade partnerships, its resource endowment, and its institutional factors, DMCC CEO Gautam Sashittal said in an interview before the launch of the report.
The trade index — the first of its kind — judged 10 global commodities hubs on their location and trading partnerships, their resource endowment, and on institutional factors.
The UAE and Dubai are advancing fast by looking… to capitalise on these changes critical to retaining our position as the world’s number one commodities trade hub.”
– Ahmad Bin Sulayem | DMCC chairman
The UAE’s top placement derives from its oil reserves, its central location and its trade-friendly institutions. “It’s a very wide spectrum of commodities that are traded through the UAE,” Sashittal said.
The report also examines the growing role of digitisation in trade, predicting fintech and technologies such as blockchain will help close a $1.5 trillion global trade finance gap, and fuel the greatest increase in trade since the 2008 recession.
DMCC chairman Ahmad Bin Sulayem said, “Trade and trade finance will be revolutionised by blockchain and other emerging technologies. The UAE and Dubai are advancing fast by looking well into the future to capitalise on these changes critical to retaining our position as the world’s number one commodities trade hub.”
Sashittal said there had not been a great change in digitisation between 2016, when the last DMCC trade report was published, and 2018, but change was on the horizon. New technologies would make shipping cheaper, and give customers greater control, he added — the biggest shake-up and boost to shipping since the development of containerisation.
If I use the analogy of dark clouds versus blue skies, what you’re seeing today is dark clouds, and the dark clouds should and will dissipate to reveal a blue sky…”
– Gautam Sashittal | DMCC CEO
“Today, what’s happening is that entire container may contain individual cargos, each of which can be tracked from source to destination. That’s the sort of digitisation that will completely revolutionise the supply chain and trade going forward. That’s the potential of blockchain and technologies that are emerging by the day.”
Digitisation would also boost trade finance. The report reveals that 50 per cent of SMEs’ applications for funding are rejected by banks, but alternative solutions were emerging.
“In fact, our research shows that start-ups and SMEs are no longer as reliant on banks as before, and that new alternatives to seek finance is rapidly gaining ground,” the report noted.
The report indicates that the shift of trade to Asia-Pacific will continue over the next 10 years, as the result of geopolitical factors such as the UK’s Brexit and US protectionism — and pro-trade initiatives such as China’s Belt and Road project, which Sashittal said would have a significant impact on Dubai.
“If you look at where we sit, we are on the maritime Silk Road, which is part of the Belt and Road initiative as well,” he said. “You can see a lot more Chinese business coming into the UAE. In our own free zone, for instance, we have about 150 Chinese companies. A lot of these companies are large Chinese corporates … Obviously, they use their operations here to service a very wide hinterland.”
The report estimates the potential cost of a trade war between the US and China at $470 billion, but Sashittal felt globalisation would win out over protectionism in the long term.
“It depends on what time frame you’re looking at. If I use the analogy of dark clouds versus blue skies, what you’re seeing today is dark clouds, and the dark clouds should and will dissipate to reveal a blue sky if you’re talking about the longer term.
“Today you’re seeing a lot of these threats and counter-threats happening, but there is also a softening of initial stances. Everyone realises the benefits of no trade barriers, of free trade, because that can only be beneficial for the global economy.”
Source: Gulf News