An Explorative Study On Using Dlt And Smart Contracts In The Export Of Agricultural Goods From Kazakhstan To China

This thesis provides an efficiency analysis of the existing export applications management system for exporting the agricultural goods from Kazakhstan to China and provides a solution based on the use of DLT(distributed ledger technologies)to its existing problems.During the research process of this thesis,a new DLT based export applications managements system will be designed and tested for real-world feasibility.Over the past 70 years,world trade volume has increased several times,and globalization and new technologies made international trade easier than ever before.During 1950-2000 world has seen a dramatic increase in merchandise trade volume.According to the data provided by World Bank,the size of annual merchandise trade in 2018 was 39.63 trillion US dollars or 43.136% of world GDP,while in 1960 it was 1.373 trillion dollars or 16.712% of world GDP1.Even though it's quite challenging to convert old-time prices to the present and conduct a precise comparison,it is evident that international trade has become an influential factor in economic growth.Despite these improvements,there are still various problems in the international trade system that should be solved to make it more fast and easy.Especially,nowadays when countries struggle to boost economic growth using traditional tools like increasing production,governmental interventions,etc.,we have to recall in mind that economic dependence of countries on international trade is enormous and if we remove barriers to conduct international trade and make it easier,it will lead to the economic growth.For example,according to Jacks,Meissner and Novy(2011)from1950 to 2000,the decline in total trade costs accounted for more than 30%of world trade expansion.If we look to problems which exist nowadays in the international trade system,we can see that system is highly inefficient,especially from a technical point of view.For instance,the percentage of import affected by non-tariff barriers can exceed 90%(Disdier et al.,2008).According to Nicita and Gourdon(2012),30% of international trade is affected by Technical Barriers to Trade.Summing up,we can say that solving these problems can result in a dramatic increase in international trade and as a result,bring a new “golden age” in the world economy.In this research,the author will focus on one of the main problems in international trade-the slow and clumsy management system based on paper documentation.Companies around the world are losing hundreds of millions of dollars and which is even more critical-tremendous amount of time because of the clumsy system(for processing of paper documents like a letter of credit,bills of lading and other operational documents),which leads to time and money lose.Paper documentation and inefficient governmental regulations,written for this system are the two sides of one medallion.In past years,many experts raised opinions that digital documentation placed on distributed ledger technologies(like Ethereum blockchain,etc.)and smart contracts can effectively replace paper-based management system and maybe a feasible solution to solve all these problems.Specific characteristics of a distributed ledger like “trustless ledger”,transparency,accessibility for everywhere offer a possibility to create a better and faster system for the international trade management.IVIn such an imaginary system,companies will be able to approve,transfer and sign documents online just in few clicks,no matter where are they located.The issuing and checking of letter of credits will be done online,and automatically executed smart contracts will ensure that after check and receipt of goods by transporting company system will automatically pay the cost of products to the exporter.The whole delivery chain will be recorded on the immutable ledger and will be accessible online.The problem of “double spending”,which doesn't exist in DLT,will eliminate the possibility of falsification of supporting documents.This will create a comprehensive,more trustable and fast system of international trade,which theoretically will boost global trade and dramatically reduce fraud in business.This thesis examines the possibility of implementing the changes as mentioned above on the example of international trade(export)of agricultural goods from Kazakhstan to China and proposes a full design for decentralized blockchain based export applications management system.Estimation of potential benefits from implementing this new business model will also be given.The results taken from this thesis and the business model proposed in it can serve as a basis for further researches and implementation not only in Kazakhstan but also in other emerging economies such as CIS countries,where international trade hampered by inefficient workflow and regulations.