Dubai Multi Commodities Centre (DMCC) has signed an agreement with Al Khaleej Sugar and blockchain company Universa, which will see its Tradeflow platform used as the basis for a new sugar trading platform in Dubai.
The solution will enable traders to purchase, store and trade the sugar from Al Khaleej Sugar’s refinery through smart contracts on a blockchain framework developed by Universa. “The DMCC Tradeflow platform will act as the central registry of ownership of the sugar through enforceable warrants to prove existence of reserves,” a statement from DMCC says.
“As the largest standalone sugar refinery in the world, with capacity to hold more than 1.6 million tonnes of sugar, we are delighted to be able to set up a sugar platform on such a robust and established platform as DMCC Tradeflow,” adds Jamal Al Ghurair, managing director at Al Khaleej Sugar.
The DMCC Tradeflow platform, launched in 2012, allows physical inventories that are stored in certified warehouses around the UAE to be converted into electronic negotiable instruments, known as Tradeflow warrants. The titles of these digital warrants can be transferred to financiers as collateral in exchange for working capital. By providing collateral-based trade finance products, the commodities receipt platform aims to make trade finance more accessible to those in need of it.
Having already applied the platform to other commodities such as diamonds, gold and tea, Sanjeev Dutta, executive director at DMCC told GTR at the GTR Mena conference in Dubai last week that “sugar was the next natural move” as the Dubai-based refinery contributes about 3% of global annual refined sugar production, exporting to more than 50 countries.
Dutta added that DMCC’s experiences have enabled the team “to be very careful in defining the Chinese walls” when it comes to ensuring data security and user confidentiality, adding that DMCC will also “evaluate new commodities. I don’t have any names, but we will continue to do that.”
Stronger ties for China and Dubai
According to Dutta, DMCC is also looking to strengthen its ties with China in light of the increasing cooperation between the UAE and the Asian giant, and the opportunities posed by the Belt and Road Initiative (BRI). “If you typically look at the importance of Dubai today, DMCC is home to over 539 Chinese companies, and in the UAE there are 4,000 Chinese businesses. Over the next three years and given the bilateral trade projections that is going to be doubled – so there’s a clear opportunity. I’m unable to elaborate further but we’re working on several robust strategies for the Chinese market,” he said.
In January, DMCC signed an agreement with Chengdu Hi-Tech Industrial Development Zone, one of China’s high-tech parks, furthering its partnerships with the country.
China is Dubai’s largest trading partner, in the first nine months of 2019 it contributed Dh109bn to Dubai’s economy, a 6% increase on the previous year, according to official figures (see figure 1).
Figure 1:Dubai’s top trading partners (Dhbn)
“Everything [between China and Mena] is growing at double-digit rates: trade, foreign direct investment, tourist arrivals, projects and joint ventures,” Florence Eid-Oakden, chief economist at Arabia Monitor, a research and strategy firm, previously told GTR. “This is mutually beneficial for China and the Arab world, as it is the confluence of the BRI and the economic diversification underway in Mena. It has all come at the right time, because if either side were doing this a couple of years earlier, the momentum would not be what it is now.”
Meanwhile, earlier this week, Dubai Investment Development Agency (Dubai FDI), a government agency, announced the launch of new services on its official WeChat account to support Chinese investors pursuing investment opportunities in Dubai. “This programme was launched to facilitate communication with Chinese companies and we are getting encouraging feedback from Chinese users on the advantages of the programme and how it is providing them with up to date news and data points on Dubai’s ever-growing investment environment,” says Li Lin, project manager of the Dubai Advantage mini programme, an arm of Dubai FDI.