DUBAI // In a major shift from its usual role of regulating commodities trading, the Dubai Multi Commodities Centre (DMCC) is moving into buying and selling Asian cotton. DMCC has set up a new trading platform called the Dubai Cotton Centre (DCC), through which DMCC is expected to buy and sell about 200,000 tonnes of Uzbekistan cotton during its first year of operation. The DCC will be a fully owned subsidiary of DMCC. It is expected to sign contracts with Uzbekistan's export agency in October, which would initially allow the DCC to buy 100,000 tonnes of cotton and sell it to the wider Asian market, said Ashok Das, the executive director of soft commodities and commodities trade finance at DMCC. Uzbekistan, the third-largest producer of cotton after the US and India, has already signed a trade agreement with the DMCC. Under the memorandum of understanding (MOU), DMCC has agreed to facilitate the trade of 200,000 tonnes of Uzbek cotton through Dubai. "The MOU is there so we can buy up to 200,000 tonnes of cotton," Mr Das said, adding that the final contracts with Uzbek foreign trade authorities would depend on how the cotton trade takes off in Dubai. He added that the DMCC was examining a spectrum of other agricultural commodities, but would first see how cotton trading went before expanding its portfolio. According to Mr Das, this is the first time the DMCC would be getting directly involved in the buying and selling of commodities. The DCC will first focus on procuring cotton from Uzbekistan and then target other countries from the Commonwealth of Independent States. "We have not decided if we want to look towards the US market. [The Indian] subcontinent and Western Africa probably will be the next targets," he said. "Most of the cotton trade is currently happening through Bander Abbas and we will try to change that." The DMCC's soft commodities division has already overseen tea trade through Dubai Tea Trade House since 2005 by bringing together buyers and sellers from across South Asia, Africa and other parts of the world. It also fully owns Dubai Diamond Exchange and Dubai Tea Trading Centre and has a majority stake in Dubai Gold and Commodities Exchange. "In cotton, it's a different approach - we are not only facilitating but leading by example, showing the world how the cotton trade through Dubai could be done," Mr Das said. The DMCC, he said, would utilise a hybrid model that no other parent body of commodities exchange has adopted. "We are buying through Dubai Cotton Centre and selling in a very transparent manner." He said Dubai Cotton prices would be put into the public domain on a daily basis for buyers from around the world to see. That "value addition" is one of the reasons why DMCC is getting directly involved in cotton trade. "There [already] are established cotton supply chains. We are adding value by offering the trade facilities on neutral ground, taking the complexities of import and export policies of the respective countries," Mr Das said. Dubai will also offer buyers and sellers delayed delivery options on consignments bought, trade financing facilities and a quality testing laboratory in order to make the DCC more attractive to international buyers. Dubai will be looking to sell Uzbek cotton to markets like China, presently the largest cotton consuming country in the world, and to high-growth markets such as Pakistan and Malaysia. "Uzbekistan exports around 900,000 tonnes, from which 700,000 tonnes goes into other Asian markets including China, Thailand, Pakistan and Malaysia," Mr Das said. He said Dubai could benefit from its location at the heart of east-west and north-south trade. "All we have to do is to tap into existing supply chains of commodities, add value, and we can make Dubai a hub of commodities trade," he said, adding there were two existing commodities exchanges operating in the emirates and all necessary physical infrastructure was already in place. skhan@thenational.ae