Vietnam’s Ministry of Industry and Trade (MoIT) has proposed that cotton fibre may be listed for trade on the Vietnam Commodity Exchange (VNX).

Trading on VNX would reduce price speculation of the commodity, as prices would be based on transparent supply and demand situation. It would also establish a link between the Vietnamese domestic market and international market, said participants in a seminar held in HCM City.

The seminar was organized by MoIT’s Domestic Market Department in association with EU-Vietnam Multilateral Trade Assistance Project III.

Garments and textiles constitute a major portion of Vietnam’s exports, but the domestic production of cotton, an essential raw material for the industry, is much below the demand.

Participants in the seminar said adding cotton fibre to the list of commodities that can be transacted on VNX would encourage farmers to cultivate cotton and thus help in decreasing the supply-demand gap of cotton in domestic market.

Moreover, such a step would reduce the dependence of cotton growers on small-time purchasing agents and thus provide long-term gains to both farmers as well as textile and garment entrepreneurs.

Although prices of agricultural commodities are driven by derivates in the world markets, commodity exchange is comparatively a new concept in Vietnam.

At present, only coffee, rubber and steel are traded on VNX, which was established last year with a capital of Vn$ 150 billion.

VNX acts as link to dissipate information to help businesses judge market demands, lower marketing costs, reduce transportation costs, and connect the production process with market demand.

In addition to the role of a mediator when disputes arise concerning the trading activities of goods through the exchange, VNX also supervises the delivery activities including coordination with the testing and inspection centers and warehouse systems to ensure the quality of goods traded on the exchange in accordance with Vietnamese and international standards, and the clearing house to ensure the solvency of the parties to the transactions.