Palm oil traders choose NZ system

Software from Albany's Global Ecomex will control a virtual exchange run by Malaysia's largest commodity producers. PAULA OLIVER reports.

It is so versatile that it can be eaten, put in soap, and used as a substitute for diesel in a car.

Palm oil is worth $11.2 billion to the Malaysian economy each year, and the main players in this industry have just bought into a Kiwi-developed model for an e-exchange.

Internet-based marketplaces are multiplying faster than rabbits, but the managing director of Albany-based Global Ecomex, Matt Barker, said the Malaysians were persuaded to buy into his company's product because it was secure, they could own it themselves, and it had been proven to work.

Expected to be up and running early next year, the palm oil exchange will allow growers, millers, refiners, manufacturers and overseas buyers to buy and sell their products in a virtual environment.

The exchange's business structure allows participants to take an equity interest in the venture through a subsidiary company, so they can profit from its success.

The exchange's membership will represent more than 50 per cent of the Malaysian industry's trading volume.

Mr Barker spent more than two years writing the exchange software, which is already supporting a timber exchange that has been operating since 1995.

"We've got five years' experience now, and we've overcome the obstacles that you only see during the running of an exchange."

"They can be difficult to identify, and those starting out now have them still to come," he said.

So how does Global Ecomex make money out of the project?

The system uses software that buyers and sellers download from a CD onto their computers.

After buying a "seat" and passing through a checking process, members bid via the internet. Sellers can choose to sell one-to-one, or offer their product to many players.

Global Ecomex's 115 shareholders, mostly New Zealanders, get money from a licence fee for the exchange, software licences and transaction fees. The company also has an equity in the exchange.

It is a concept that Global Ecomex chief executive Tony Wright believes can go global.

"It's unusual in that it wasn't tech-driven, but came from the industry themselves," he said.

"For an exchange to succeed it has to be independent, not 100 per cent-owned by a dominant player who can make money out of everyone else and see valuable market intelligence."

Global Ecomex took a gamble to get the Malaysian deal. It spent money and developed the specialised parts of the exchange before approaching the industry, which had been developing its own exchange.

Mr Wright believes the Malaysian success will be worth $9 million to the company in the next two years, and far more over the long term as the exchange grows and is eventually listed.

Global Ecomex's 24 staff are now working to develop exchanges for the seafood and plastics industries, all of which will be interchangeable with its present timber exchange.

Eventually, Mr Wright said, the company would develop an international building materials hub that would be supported by timber, steel, and other exchanges.