Innovation in policy, tech, finance to create $18trln boost to trade - DMCC

Future of Trade report illustrates that if businesses and governments are willing to collaborate to overcome some of the barriers at hand, the outcome will be a positive one

Maersk at Jebel Ali Port. Image courtesy Dubai Media Office Twitter handle. Image used for illustrative purpose.

Maersk at Jebel Ali Port. Image courtesy Dubai Media Office Twitter handle. Image used for illustrative purpose.

There is the potential for $18 trillion (AED 66 trillion) boost to trade according to DMCC’s latest Future of Trade 2020 report released on Monday. 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, the report said.

Geopolitical tensions such as the US-China trade war, and economic recovery from the global COVID-19 pandemic will define the trade landscape of the 2020s. While the pandemic has caused the fastest and deepest economic shock in history, it has already significantly shaped the future of trade by accelerating trends such as digitalisation, the recalibration of global supply chains, and a reconsideration of the role of national security in trade policy, the report said.

Ahmed Bin Sulayem, Executive Chairman and Chief Executive Officer, DMCC, said: “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," he added.

DMCC’s flagship thought leadership report examined the impact of geopolitics, technology, COVID-19 and global economic trends on the future of trade, with a focus on trade growth, supply chains, trade finance, infrastructure and sustainability. In addition to offering analysis, the report provides clear and tangible trade policy recommendations to government and business.

“Innovation, not just in supply chains, but in the way trade policies are shaped and partnerships are formed, also have a crucial role to play here. Whether governments and businesses will feel the urgency to be more ambitious on ESG and sustainability, in light of competing national economic priorities, will be another factor that will influence the trade landscape. Ultimately, the key to boosting global trade comes down to collaboration and the willingness to forge new ways of working together,” said Feryal Ahmadi, Chief Operating Officer, DMCC.

The latest version of the Future of Trade report is structured in five chapters, which explain how trade can be affected on various realms such as politics, technology, finance, infrastructure and sustainability. Some of the key findings of the 2020 report with respect to finance is outlined below

Making trade happen: finance and infrastructure

  • There are significant gaps in terms of financing. 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.
  • Similarly, there is a $6 trillion (AED 22 trillion) gap between infrastructure needs and the available financing. This gap is predicted to widen to up to $15 trillion (AED 55 trillion) by 2040.
  • Key barriers to addressing the finance gap are the misperception of trade finance and infrastructure investment as high-risk, and the lack of access for wider groups of investors due to regulatory burden.
  • In order to narrow the gaps, there must be significant change in the way both private and public sector actors operate and work together.
  • The trade finance gap can be closed by increasing the size of the pool of finance and improving access to trade finance. Technology has a major role to play but needs to be supported by global agreement on the digitalisation of trade finance.
  • 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 government, and greater innovation in infrastructure planning and development overall.

(Writing by Seban Scaria; editing by Daniel Luiz) 

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© ZAWYA 2020

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