Today, Singapore is probably the most trade-dependent country in the world
Foo Chi Hsia
Finally, one of the major challenges to be dealt with in the trade finance industry is the abundance of paper-based processes. Foo recalls a story where “a shipment of avocado and roses from Kenya to Rotterdam entailed more than 200 communications involving 30 parties. The shipment took 34 days from farm to retailers, including 10 days waiting for documents to be processed. This is not a unique occurrence”.
The issue is that hundreds of pieces of documentation are regularly required to enable a single shipment of goods. “Even paperless trade originated from one country often gets ‘translated’ into paper when crossing borders into another country […] and according to Maersk and IBM Paper Trail Research, the costs of processing trade documents are as much as 20% of those of shifting goods,” she said.
So how do we simplify and harmonise these processes? “Lack of trust is a major contributing factor to non-tariff-related trade barriers. There is an inherent lack of trust between buyers and sellers, supply chain participants, agencies and governments,” she observed.
Many initiatives and projects have been established with a view to bridging this trust gap. One such project – TradeTrust – is a network that connects different trade platforms by using distributed ledger technology (DLT) to exchange digital trade documentation, reduce the inefficiencies of cross-border trade, save on operating costs and lower the risk of fraud. Singapore is working in collaboration with a variety of global partners, including banks, technology and service providers, and international organisations such as ICC to help establish the project.
Foo explains: “TradeTrust is a digital utility that comprises a set of globally-accepted standards and frameworks that connects governments and businesses to a public blockchain to enable trusted
interoperability and exchanges of electronic trade documents across digital platforms.”
The four key components of TradeTrust are:
- Legal harmonisation to ensure legal validity of the digital trade documents across various countries and jurisdictions;
- Standards development to promote the use of internationally accepted standards to facilitate the interoperability of digital documents exchanged across different solutions and ecosystems;
- An accreditation structure to provide a set of internationally accepted rules and policies to certify solutions to meet the requirements of the law; and
- A digital utility which is a set of open source codes that can easily integrate back-end solutions to the TradeTrust network.”
“TradeTrust is of course highly ambitious but we believe a worthwhile project,” she said. Fully implemented, the project should, she added, enable increased cross-border trade, efficiency, visibility and control for all parties. It can do this because:
- TradeTrust will undisputedly associate information and documents from parties to their digital identities across the various source enterprise systems, thereby eliminating the need for repetitive checks;
- Parties are able to synchronise their activities and information while maintaining an unprecedented degree of control over the privacy of their information, leading to lower operational costs and lower overall fees; and
- Neutrality and information access will present fertile grounds for the creation of new service offerings.
“Today, Singapore is probably the most trade-dependent country in the world, concluded Foo. “This in a nutshell explains why trade is so existential for Singapore, why we build such an extensive network of trade ties and put in so much deep thinking. The industry can and must harness cutting edge technology to underpin the trade of the future.”
“So, watch this space.”
Foo Chi Hsia, Singapore’s High Commissioner to the UK, gave the keynote address at the International Chamber of Commerce (ICC) United Kingdom’s Trade and Supply Chain Finance Conference, held at the London Institute of Banking and Finance on 14 November 2019