Commodity Exchanges - An Opportunity for the Serbian Economy

Towards legislation to regulate and improve commodity exchange operations

Belgrade, 31 January 2012 - USAID Business Enabling Project and the Belgrade Chamber of Commerce organized a roundtable on “Commodity Exchanges – An opportunity for the Serbian economy”. The roundtable saw the launch of discussion on economic motives for the development of commodity exchanges and key legal preconditions for their efficient operation, with the aim of overcoming obstacles and ensuring that this field is regulated in Serbia.

 “The current absence of a legislative framework to regulate commodity exchanges makes it impossible to develop these types of trading instruments and mechanisms, and the establihsment of a modern commodity exchange able to support the development of the agricultural sector and the food processing industry”, said Dr Ana Jolovic, Financial Market Development Team Leader at USAID Business Enabling Project. A well-developed commodity exchange would facilitate price risk management by businesses, which is especially significant as such risks have been especially pronounced in recent years, Ms Jolovic added.

Serbian businesses make use of international commodity exchanges, albeit minimally. Businesspeople with experience in these markets gave examples of how hedging was possible for companies based in Serbia, and identified issues and costs resulting from the lack of a well-developed Serbian commodity exchange. Many believe that Serbia will only be able to see growth based on agriculture and food processing if market-based governance mechanisms are put in place for these sectors.

A modern commodity exchange is a centralised market for trading in raw materials, such as wheat, maize and gold, and derivatives such as futures. Such a market enables demand consolidation and price discovery, and at the same time creates conditions for economic growth through market-based risk management.

USAID’s Business Enabling Project, implemented by Cardno Emerging Markets USA, is a fiveyear initiative launched in January 2011. The purpose of the Project is to help the Government of Serbia improve the competitiveness of the Serbian economy and its private sector businesses. The Project will provide technical assistance, training, and other support to improve the business enabling environment, maintain macroeconomic stability, and further develop financial markets.