UNITED NATIONS

CONFERENCE ON
TRADE AND
DEVELOPMENT

Expert Meeting on the Trade and Development Implications

of Financial Services and Commodity Exchanges (Part I)

Item 3: Trade and Development Implications

of Commodity Exchanges

3 September 2007

"The Ethiopian Commodity Exchange (ECEX):

Making the market work for all"
by

Dr. Eleni Gabre-Madhin

Program Leader
IFPRI / Ethiopian Commodity Exchange (ECEX)

The views expressed are those of the author and do not necessarily reflect the views of the UNCTAD Secretariat, nor do they imply the
expression of any opinion whatsoever on the part of the secretariat of UNCTAD concerning the legal status of any country, territory,
city or area, or of its authorities or concerning the definition of its frontiers or boundaries.
The Ethiopia Commodity
Exchange (ECEX)
...Making the Market Work for All

Eleni Gabre-Madhin

1 September 3, 2007
2
 ECEX…An idea whose time
has come
 As Ethiopia is poised to transform its agrarian
economy, so too must Ethiopia’s marketing system
take the country into the new Millennium.
 It is time to enter the modern age of globally
connected trading systems, relying on technology
and know how, while tailored to Ethiopia’s realities
and conditions.
 It is time to forge a new partnership between the
private and the public in the new arena created by
market liberalization.
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The Vision

The vision driving the Ethiopia Commodity

Exchange (ECEX) is to revolutionize
Ethiopian agriculture through a dynamic,
efficient, and orderly marketing system that
serves all.

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 Current grain market structure
SMALLHLDR (SS) STATE FARM (SF) COMMERCIAL (CF)

RURAL COOPS EGTE

ASSEMBLERS

WHOLESALERS (SURPLUS) EXPORTERS

BROKERS PROCESSORS

FOOD AID AGENCIES

WHOLESALERS (DEFICIT)

RETAILERS

5 CONSUMERS: DOMESTIC
 Structure with Exchange
SMALLHOLDERS 95% STATE FARM COMMERCIAL (CF):

8%
ASSEMBLERS COOPS EGTE

WHOLESALERS (SURPLUS)

COMMODITY EXCHANGE WITH MEMBER-BROKERS

EXPORTERS WHOLESALERS (DEFICIT) PROCESSORS FOOD AID AGENCIES

RETAILERS

6 CONSUMERS: DOMESTIC
 Why Ethiopia gains
 Commercialization of smallholder agriculture is core
pillar of poverty reduction strategy (currently 28%
marketed out of production)

 Need to capitalize on gains of recent rapid economic

growth (9% in past 3 years)

 Large domestic market:

 Population 70 million
 2006 Prod’n: 17 million tons (25% higher than SA)
 2nd largest maize producer in Africa

Rapid export growth in key commodities

 A 7better functioning domestic market is key to
sustaining and scaling up growth
 Impact on smallholder
livelihoods?
 Power and participation: Farmers are better able
to negotiate prices given market transparency
 Quality: Farmers are able to get market premium
for value added to the product (post-harvest
handling)
 Market access: Farmers are not restricted or
captive to local market, can access national market
 Risk management: Farmers can lock in prices
through forward contracting
 Planning: Farmers can use futures prices for
planting decisions
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The What:
Substance

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 ECEX…An Ethiopian
Exchange for Ethiopia

 A marketplace for all

 Integrity (product, transaction, actors)
 Efficiency
 Transparency
 Risk management

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 A Hybrid Model: Public-Private

 Demutualized structure with separation of

ownership, membership, management
 State owned (initially) physical entity

 Member owned permanent trading seats

 Joint Owner-Member Board

 National Exchange Actors Association

 Independent professional management

 Strong regulatory body reporting to PM

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 Integrated Design of ECEX
 A national multi-commodity exchange based in Addis
Ababa
 Operation of a trading platform using combination of
open outcry (floor) and electronic trading platform
 A network of 10 ECEX warehouses in surplus areas
 A network of 20 ECEX remote access terminal
centers in major markets
 200 Market Information Points (Rural Electronic
Price Tickers) at district level
 Internal clearing and settlement system with 3
partner Settlement Banks
 6 target commodities: maize, wheat, teff, pea bean,
sesame, coffee ($1 billion in physical trade)
 Spot and futures contracts (on select commodities)
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 The ECEX Edge… Integration
Laws and Regulations

COMMODITY EXCHANGE AUTHORITY

National Arbitration Tribunal

Exchange Actors
Market Information
Association

Trading System
EXCHANGE
MEMBERS Remote Access

Clearing and Data center

Settlement

Exchange Warehouses Exchange Clearing Banks

Grade
13 Warehouse
certification receipt
 Beyond agriculture: From a sack
of grain to a sack of money

Finance Information
Technology
PRODUCT
Warehouses=Banks Power the system

Legal Infrastructure
Self-regulatory
14 Electronic trade
 Pushing the frontiers on many
fronts: The Firsts
 First time push of 3rd party grade certification
in extensive way into the rural arena
 First time reach of market information into the
rural arena
 First time recognition of intermediation
- the brokers
 First time recognition of self-regulation
- the national association and the exchange
o First time major push on financial system:
clearing house function
o First time push of ICT into the market:
electronic trading
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 Creating new opportunities:
spillover impacts for economy
 More technology, better designed
means improved access to the market
 mobile telephony
 satellite radio
 other technologies
 Banking: New financial products tailored to
small market players
 Services: Transport, logistics, certification,
insurance, academic
 Role
16 of self-regulation by trade associations
 Trajectory from here on: we
are moving fast!
 ECEX site
 Trading system development in
progress
 Contract design in progress
 Proclamations to establish ECEX
and Exchange Authority passed
in early July 2007
 Active training and
communications campaign
 Membership drive to start
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Starting Bell by Millennium
Harvest 2000 (December 2007)
 The Winds of Change are
Here - Can Ethiopia Do It?
 Necessary political will
 Commitment by all actors
 Catalyst for change

A winning value proposition to….

Empower farmers’ choices, grow our
agriculture, and transform Ethiopia
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The future awaits…
YICHALAL !!

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