Innovation in key areas can unlock $18trln worth trade opportunities; DMCC report

By Rahul Vaimal, Associate Editor
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A recent report by Dubai Multi Commodities Centre (DMCC) observes that the application of technology to trade, the growth of cross-border services, innovation in trade policy, and trade-related infrastructure development can act as the catalysts to boost trade to potential growth of $18 trillion. 

DMCC’s Future of Trade 2020 report observes that persistent tension among global superpowers the US and China along with the economic recovery from the pandemic will define the trade landscape of the 2020s.

The report states that even though the pandemic created the fastest and deepest economic shock in history, it has also reshaped the future of global trade by triggering digitalization, recalibration of global supply chains, and a reconsideration of the role of national security in trade policy.

DMCC’s Executive Chairman and Chief Executive Officer, Ahmed Bin Sulayem highlighted that “The Future of Trade report explores the various scenarios for the road ahead in what is an unprecedented time for global trade. Despite the evident economic uncertainty of the time, our research shows that one thing is certain – the future of trade, and indeed the future of the economic recovery, relies heavily on global cooperation.

“Finding common ground and collectively making the case for international trade will be key determining factors of success. With this research, DMCC set out to not only identify barriers to global trade but provide solutions to them,” the DMCC CEO appended.

The latest report explores the impact of COVID-19, geopolitics, technology, and global economic trends on the future of trade, with a focus on sustainability, trade finance, trade growth, supply chains and infrastructure.

Some of the key findings of the 2020 report with respect to finance are outlined below;

Trade Finance 

There is a USD 1.5 trillion (AED 5.5 trillion) gap in trade finance, which is predicted to widen to $2.5 trillion (AED 9.18 trillion) by 2025. The finance gap can be closed by increasing the size of the finance pool and by improving access to trade finance.
Technology, which has a major role to play in the process needs to be supported by global agreement on the digitalization of trade finance.

Infrastructure Finance 

The gap between infrastructure needs and available financing currently stands at $6 trillion (AED 22 trillion) and is expected to increase to $15 trillion (AED 55 trillion) by 2040.

The infrastructure finance gap can be closed by finding solutions to enable reserves of private capital to enter the infrastructure investment pool. This requires coordination with the government and greater innovation in infrastructure planning and development overall.

General Misconception 

Misunderstanding about trade finance and infrastructure investment as highly risky endeavors and the lack of access for wider groups of investors caused by regulatory burden are considered as key barriers to addressing the finance gap.

Substantial change is a must in the way both private and public sector actors operate and work together.