Climate Change

Trade Finance

Trust in digital trade

December 2019

In 1819, Sir Stamford Raffles founded modern Singapore as a trading outpost of the British East India Company. Today, as this nation state celebrates its bicentennial, international trade remains the backbone of Singapore’s burgeoning economy. Flow reports on the keynote talk given by Singapore’s High Commissioner to the UK, Foo Chi Hsia where she updated delegates on this country is embracing digital trade finance

The partnerships and agreements signed between countries on trade-related issues are a critical component to the industry – encouraging harmonisation of rules, standards and practices to promote growth in trade activity.

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Foo Chi Hsia

Singapore’s High Commissioner to the UK

Forming alliances

Singapore is a member of the Association of Southeast Asian Nations (ASEAN), a collective of ten countries that have been fortunate to have sustained positive economic growth of 4−5% – more than twice the global average of 2%. Despite dampening global growth in trade of 1−2%, total trade in goods across ASEAN continues to grow by more than 9%.
Why is it that ASEAN has seen such success? Foo outlined several reasons why businesses and consumers in the region have benefitted:

  • Intra-regional trade in goods is largely tariff-free;
  • Services regulations are less stringent and more transparent;
  • Investment regulations are more favourable to business; and
  • The regulatory environment is better streamlined and harmonised.

ASEAN not only promotes cooperation between the 10 member countries’ economies; the organisation is also an active participant in the global economy, signing free trade agreements with Australia, New Zealand, India, China, Korea and Japan. Together, these countries (except India) form the Regional Comprehensive Economic Partnership (RCEP) – a proposed free trade agreement which, if successful, would become the world’s largest trade pact, encompassing one-third of the world’s GDP and population.1

“I have often described ASEAN as a bridge,” noted Foo. She continued, “And those who are engineers would know that a bridge is not just a physical structure but involves physics in occupying the sweet spot between two opposing forces – compression (the inward force) and tension (the outward force).”


Aligning and evolving rules and standards

Meanwhile, as a globally trading nation, ongoing trade tensions between the United States (US) and China, as well as the impact on the World Trade Organisation (WTO), are of great concern to Singapore.2

“Singapore is committed to upholding and strengthening the open, rules-based multilateral trading system as embodied by the WTO,” Foo explained. “We must preserve the WTO adjudicatory function as an effective dispute settlement mechanism.”

Simultaneously, she argued it is also important for the rules and practices to stay in line and up-to-date with the evolution of the industry. Alongside Australia and Japan, Singapore is a co-convenor of the Joint Statement on E-Commerce Initiative, which aims to develop multilateral rules for the digital economy.

The Initiative already counts 80 WTO members – accounting for more than 90% of global trade and hopes to achieve the balance between inclusivity and ambition, addressing important issues relating to data governance, for example. Significant progress is expected in the first half of 2020, before the 12th WTO Ministerial Conference (8–11 June 2020in Kazakhstan).

Other projects include the promotion of digital economy agreements to encourage digital trade and facilitate interoperability through aligning standards and frameworks. This will involve fleshing out the implementation of agreements such as the Comprehensive Progressive Trans-Pacific Partnership‘s provisions on the exchange of electronic trade documentation and national single window connection, as well as new provisions like e-invoicing and electronic transferable records.


Trust in digital processes

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



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