| Developing Warehouse Receipts in Emerging Market | | | | By creating warehouse receipts legislation, |
| Countries The importance of warehouse receipts | | | | law-makers create an enabling legal framework to |
| financing systems and collateral management | | | | provide opportunities for traders and financiers. |
| arrangements cannot be underestimated as key | | | | These opportunities bring working capital into the |
| components for the development of commodity | | | | marketplace for commodities, which in turn benefits |
| markets, producer finance (pre-export finance), | | | | producers by bringing greater financial liquidity into the |
| commodity risk management and structured trade | | | | supply chain. The legislation itself reduces risk and |
| finance in emerging markets commodity-dependent | | | | therefore creates opportunities for all participants. |
| countries. | | | | Since, according to the World Bank, the IMF and |
| Recognising the importance of warehouse finance, | | | | UNCTAD, many emerging market countries are |
| many emerging markets countries have taken steps | | | | commodity-export-dependent, the positive political |
| to introduce legislation covering public warehousing | | | | and economic effects of introducing warehouse |
| and the issue of negotiable and non-negotiable | | | | receipts legislation are widespread. As stated, the |
| warehouse receipts. This legislation typically provides | | | | rural economy benefits from increased capital. From a |
| for the following: | | | | political standpoint, this will be felt directly in better |
| 1. The provision of "public" warehouse operators. | | | | financial opportunities for a large rural electorate - so |
| These warehouse operators are independent | | | | as a policy goal, the introduction of warehouse |
| providers of storage and they are in the business | | | | receipts seems to work well - both for the market |
| only of storing commodities or other goods. They do | | | | and for the government of the day. |
| not store their own goods, to avoid conflicts of | | | | The newest global entrant to the negotiable |
| interest | | | | warehouse receipts club will be India. Recently, the |
| 2. The rules by which the public warehouse operators | | | | Indian parliament has passed enabling legislation which |
| receive goods for storage and their rights and | | | | is now waiting for Presidential assent and this will |
| obligations when accepting goods for store. | | | | make negotiable warehouse receipts a reality |
| 3. The method by which a warehouse receipt - which | | | | throughout the country. This in turn will pave the |
| is the legal receipt for the goods being stored and | | | | way for a huge explosion in the development of |
| which is issued by the public warehouse operator | | | | logistics systems, farmer and intermediary finance |
| may be pledged (roughly meaning mortgaged) to a | | | | and serve as a basis for future development of the |
| bank, or passed to another in a sale or purchase | | | | futures market. Whilst the trading of futures is |
| (negotiated). This means if you own the warehouse | | | | presently banned for wheat, rice and pulses, |
| receipt, you own the goods and if you sell the | | | | warehouse receipts will be an important development |
| warehouse receipt, you are selling the underlying | | | | for the creation of forward and futures markets for |
| goods themselves. | | | | these key commodities in the future. |
| 4. Other matters. | | | | |