(Dec 27): In today’s rapidly evolving digital landscape, where technology continuously reshapes business norms and operational methodologies, global trade still finds itself facing challenges due to its traditional practices.

These challenges, ranging from complex documentation to lengthy verification processes, have long hindered efficiency, and added unnecessary burdens on stakeholders involved in international commerce.

With the growing emphasis on digitalisation, I believe the global trade industry can greatly benefit from blockchain as its core technology. This is in line with the United Nations Centre for Trade Facilitation and Electronic Business’ (UN/Cefact) introduction of a comprehensive white paper that emphasises the adoption of digital technologies, particularly highlighting the role of blockchain in digitising and revolutionising trade documentation processes.

The application of blockchain technology presents a much-needed transformative solution.

Blockchain’s immutable ledger system stands as the backbone of the digitalisation of the trade process, offering a secure, transparent, and efficient method for recording transactions and data, which is crucial for critical sectors like international trade.

The UN/Cefact White Paper on Blockchain and Trade Facilitation detailed the prevailing challenges in global trade, and among the principal concerns was the inflated cost of trade.

It was highlighted that the landed price of goods, which is the total cost once they arrive in a country, is typically twice as much as the domestic wholesale prices where these goods originated. Half of this cost increase is due to two main factors: 20% results from freight charges, while the remaining 30% stems from complexities and delays during cross-border inspections.

But the complications do not end there. The white paper also noted the prevalence of fake or illicit items in global trade. Such counterfeit goods represent a staggering 6% or US$600 billion (RM2.78 trillion) of the entire world trade volume.

Furthermore, while border authorities face the immense task of checking sea containers, they can only inspect around 1% of these containers. Given this limited capacity, there’s an alarming potential for losses from the under-declaration of goods, which might be exponentially higher than current estimates.

Additionally, in today’s dynamic consumer market, there’s a growing preference for sustainable products. People are more aware of their buying decisions, and want to ensure their products are ethically and sustainably produced.

As a result, tracing product origins has become crucial in trade as demand for the information increases, but with the existing manual tracking methods, it can be challenging for consumers to access this information.

Considering all the challenges the current cross-border trades experience, the UN/Cefact white paper also demonstrates how these outdated processes can greatly benefit from the transformative potential of blockchain. It explained that blockchain technology promises secure, verifiable transactions, streamlines paperwork, expedites payments, and provides detailed product tracking.

Blockchain is able to refine the trade documentation processes from start to finish. Essential trade documents, such as certificates of origin (COs) and bills of lading, can be issued on a blockchain platform and remain accessible on the blockchain.

Other potential features, such as cross-chain functionality, can help accommodate different blockchain usage, promote smooth access to trade data, improve tariff calculations, customs clearances and the entire trade procedure. Its on-chain signing features also add an extra layer of security, ensuring the immutability of key documents.

Vital trade documents like COs and sanitary certificates, which are currently susceptible to fraud due to their paper-based nature, can be securely digitised on a blockchain, and turned into verifiable and tamper-proof records.

Not only that, these digital records will also help consumers validate product authenticity and ecological responsibility. The detailed supply chain traceability enables importers and consumers to verify product origins and sustainability claims. This not only boosts consumer trust, but is also essential in tackling counterfeit goods.

Another stand-out feature of blockchain is the integration of “trust anchors” and smart contracts into the process.

These innovative programmes let third parties, such as banks, automate risk assessments, and streamline trade operations. Such enhancements benefit small and medium enterprises by reducing trade finance costs, fostering an inclusive trade environment.

Some blockchains, like Zetrix, are already actively implementing some of the solutions described above and revolutionising the way businesses connect and trade across borders.

Zetrix, an initiative by MyEG Services Bhd, is a Layer 1 public blockchain infrastructure that aims to bridge economies with real-world use cases, integrating both blockchain and artificial intelligence (AI). Zetrix’s cross-border trade service, ZTrade, was created to address traditional trade obstacles as mentioned above.

Equipped with blockchain, AI and smart contract technology, ZTrade is now already up and running, allowing essential trade documents to be uploaded on the Zetrix blockchain, and digitally connecting the Malaysian and Philippine trade markets with China.

Zetrix is taking steps to address the challenges mentioned, providing solutions to enhancing global trade. As Zetrix continues to grow and evolve, it seeks to become a key player in the broader adoption of digital solutions in international trade, hoping to make the process more accessible and streamlined for markets all around the world.

The future of international trade depends on the seamless integration of technology and commerce. Given the challenges the sector currently faces, the potential of digital interventions like blockchain becomes even more pronounced.

Embracing these innovative tools not only helps remove the current setbacks, but also paves the way for a more transparent, efficient, and trustworthy trading environment.

The integration of blockchain into global trade is not just a matter of technological advancement, but also of policy reform and international cooperation.

Governments and trade organisations around the world need to work together to create a regulatory framework that supports the adoption of blockchain and other digital technologies. This includes establishing standards for digital transactions, ensuring the security and privacy of data, and addressing legal issues such as jurisdiction and enforceability of smart contracts.

As we look to the future, it is clear that digital technologies like blockchain have the potential to revolutionise global trade.

By reducing costs, increasing efficiency and enhancing transparency, blockchain can help to create a more inclusive and sustainable trading system that benefits everyone.

With the right policies and collaboration, the vision of a digitally unified global market can become a reality. As Malaysia and other nations continue to innovate and adapt, the global market stands on the brink of a new era of efficiency and connectivity.

Wong Thean Soon (TS Wong) is the group managing director of e-government services provider MyEG Services Bhd and a co-founder of Zetrix, which is a Layer 1 public blockchain that facilitates smart contracts and delivers privacy, security and scalability.