ec-Finance.com

Commodinet Seeks Local Partners
by Ridzuan A. Ghani, The New Straits Times

11/02/2000 - COMMODINET Ltd is scouting for new local partners to assist in its plan to create an electronic exchange for a range of commodities through its online commodity exchange portal (www.commodinet.com).

Its Malaysia's office managing director Ng Thean Hooi said the company has spoken to a number of associations and agencies such as the Malaysian Rubber Association, Malaysian Rubber Board and Malaysian Palm Oil Board to become members of its online exchange under the expansion plan.

The company, he added, will also talk to governing bodies for other commodities like coffee, sugar and cocoa as well as edible oil products such as coconut oil, rapeseed oil and sunflower oil.

According to Ng, the portal has been successful in providing a platform for physical rubber traders to perform transactions online. To date, the exchange has secured more than 200 members, with four to five new members coming on board daily.

With the encouraging development, Commodinet is confident of capturing up to 70 per cent of the world's physical rubber trade by 2004, he said, adding that the company has a domain expertise in rubber trading.

"We study the market thoroughly before starting the business. The idea is not to change the way trades are going, but merely mimicking the traditional way of trading," he said in Kuala Lumpur last week.

Commodinet provides member sellers and buyers with a list of possible business counterparts and allows them to negotiate, trade and arrange shipping, insurance and payments anonymously, if preferred.

According to Ng, Commodinet's World Commodity Exchange which comprises public exchange and private exchange aims to revolutionize global basic commodity markets by providing a top-tier online exchange solution where worldwide sellers and buyers can freely initiate, negotiate and conclude contracts.

Commodinet, which has a start-up capital of US$1.2 million (RM4.56 million), is financed by two Japanese venture capitals, Summit Co Ltd and GMB Private Equity.

The company is now in the midst of discussion for a second round of funding for at least US$10 million where half of the total amount will be channeled to its marketing efforts, including advertising and educational programs to the industry players.

"Gaining liquidity is the most crucial part - getting as many members as we can and have them trade on the system as much as they can," Ng said.

To join Commodinet, traders are required to submit an application; a credit agency will check whether they are genuine buyers or sellers of physical rubber.

According to Ng, traders who are doing transactions on Commodinet.com do not need to pay for the time being as the company is focusing on educating industry players on the feasibility of the system and creating a critical mass. Once that is achieved, a fee of 0.2 to 0.5 per cent of the total transaction value will be charged.

The company currently has partnership agreements with Asiaship (shipping provider), ec-Finance.com (online financial services provider) and dollarDEX.com (insurance portal).

"We are working towards getting more partners to allow members to have more options for better deals and competitive pricing," Ng added.

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