Jordan-based Sigma Investments will partner with the Egyptian government to launch the region's first grains exchange by end 2016, the firm's chief executive said in an interview.

Egypt is the world's largest importer of wheat, purchasing about 10 million tonnes of the grain each year from global markets.

EGYCOMEX, Egyptian Commodities Exchange, with a proposed partnership of 20 per cent government investment and 80 per cent private investment, will trade spot and futures for grains, mainly wheat, as well as gold and oil, Sigma's Iman Mutlaq told Reuters.

"For the past three years, the Egyptian government has been working on the infrastructure for connecting silos and our visibility study showed positive results, especially with the government deciding to become our partner," Mutlaq said in an interview in Dubai.

Mutlaq said most of the Egyptian government's contract wheat imports - done by state grain buyer GASC - will be done on the exchange, helping to bring about 80 per cent of Egypt's total grain trading to the exchange.

Additionally, Egypt's farmers, who produce over 3 million tonnes of wheat annually, will be able to see transparent grain prices and trade grains, even in small quantities.

EGYCOMEX prices for grains will be in the Egyptian pound, providing a hedge for local traders against FX fluctuations and dictated by local demand and supply, she said.

"It will effect the local Egyptian market a lot when a farmer can sell grains at a better price or use them as collateral for loans," Mutlaq said, adding that the firm will be working with the government to help farmers improve the quality of grains, better market their harvest and source financing.

Although the firm is expecting arbitrage at the launch of the exchange as traders seek to benefit from the difference between local and international prices, the firm will put in place regulations that minimise the risk of bubbles as funds rush in, she said.

Sigma, a member of Global Alliance Partners, a Hong Kong-based network of international banks, is currently setting up the legal framework of the exchange with the Egyptian Financial Supervisory Authority, Mutlaq said. – Reuters