I confess that until a week or two ago at BSC I hadn’t given the notion of commodity futures exchange a single thought – didn’t even have a clear sense of what it is. But I was convinced of its significance to Myanmar’s economic growth when I attended a presentation by Myoe Myint, executive director of MyanAmer Energy, New York.

In Myanmar, as in many countries at a very early stage of development, agriculture accounts for a major share of economic activity. In this case, 70 percent of the labour force is employed in the sector, and 40 percent of GDP derives from it. Yet trading arrangements remain primitive. In the years since the collapse of socialism in 1988, 44 commodity exchanges have opened in places such as Yangon, Mandalay and Monywa. Within them, though, there is little or no standardization of commodities, and everything operates on the basis of spot or cash markets for immediate delivery. Price volatility of 10 percent in a single day is entirely possible. While there are some unofficial forwards markets, they are characterized by widespread default and are therefore highly problematic.

What to do? The fundamental need, Myoe Myint argued, is to move from informal forwards markets to a formal futures market. A forwards contract is typically bilateral, customized, and unregulated. By contrast, a futures contract is based on uniform agreement for a standardized commodity, set within a clear regulatory framework. It generates far more predictability, and is therefore of enormous benefit to farmers facing tricky crop planting decisions.

To bring a futures market fully into being, at least four discrete reforms will be needed. First, a public warehouse system for storing standardized commodities will have to be created. Second, an organized commodity futures exchange will have to be brought into being. Third, a central payments clearing house will have to be instituted. Fourth, an appropriate regulatory framework will have to be set in place.

This remains the sum total of my knowledge. To me, though, Myoe Myint’s core argument makes a lot of sense. Creating a well-organized, centrally-cleared and regulated commodity futures exchange is essential for sustainable development of Myanmar’s agro-based economy.