NCEL’s project gets CSF assistance

KARACHI: A strategic project of the National Commodity Exchange Limited (NCEL) has received technical assistance from the Competitiveness Support Fund (CSF).

This project is for the establishment of inter-linked physical and spot commodity markets all over the country and for making available postharvest financing to farmers. The technical assistance, to be made available by the CSF, will support the project in two phases. Of this, phase one will be launched immediately and may require two months to complete, according to the CSF website, where the tender inviting proposals for the phase one can be downloaded.

Pakistan’s agriculture commodity sector suffers from a compound problem of a lack of infrastructure and market structure. The resulting inefficiencies impact all market participants and keep the sector from becoming competitive. On the infrastructure side, there is a lack of warehousing and storage facilities. In the market, there is a lack of standardisation, independent verification, collateral management, commodity financing and transaction data.

The result is an opaque and illiquid market which lacks financing and trading opportunities and suffers significant wastage, the website said. At the base of the value chain, farmers are most harmed by wastage, price fluctuation and inability to access finance. To address these multiple and interlinked challenges, the State Bank of Pakistan, in conjunction with the NCEL and the Karachi Stock Exchange, has proposed facilitating the establishment of a ‘national collateral management and bulk handling company’ and the introduction of an ‘electronic warehouse receipt system’ in the country as a private sector initiative.

The establishment of a fully electronic nationwide commodity market system will be one of the most ambitious initiatives ever taken in Pakistan. This will create a network comprising electronic spot (physical) markets, accredited warehouses and linked banks and financial institutions providing post-harvest financing to the farmers, CSF further states.

Published in the Express Tribune, May 16th, 2010.