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Logistics index show emerging market growth offsetting mixed performance for big players

Steve Rogerson
January 21, 2015
 
Dynamism in Asean, GCC countries, sub-Saharan Africa and the large, next-tier economies of Indonesia, Nigeria, Bangladesh, Mexico and Pakistan is offsetting mixed performance in the Brics countries that powered emerging markets growth in recent years, according to the 2015 Agility Emerging Markets Logistics Index.
 
The index is an annual data-driven ranking of 45 emerging economies accompanied by a separate survey of nearly 1000 global logistics and supply chain executives. Now in its sixth year, the index ranks emerging markets based on their size, business conditions, infrastructure and other factors that make them attractive for investment by logistics companies, air cargo carriers, shipping lines, freight forwarders and distribution companies.
 
Large Brics nations Brazil, Russia, India, China and South Africa have accounted for much of the growth and investment in emerging markets and have dominated the index. But Saudi Arabia climbed to number two in the 2015 index, ranking behind only China, which has 47 times the population and 12.5 times the economic output.
 
Next-tier economies Indonesia (fourth in the index), Nigeria (27th), Bangladesh (28th) and Pakistan (25th) – all with populations topping 100 million – climbed in the index rankings. The other large non-Brics market – Mexico – held steady at number nine.
 
Gulf states UAE, Qatar and Oman, ranked as having the best “market compatibility” – the most ideal business conditions – among the 45 countries in the index. They were followed by Uruguay, Saudi Arabia and Morocco. The UAE, Malaysia, China, Oman, Saudi Arabia and Chile led in “connectivity”, indicating they have the best infrastructure and transport links.
 
The Philippines climbed three spots to number 16 in the data portion of the index – after jumping nine spots in the 2014 index. The country also improved its standing among supply chain executives surveyed. They pushed the Philippines up five spots to number 15 among countries they said would emerge as a major logistics market.
 
Russia’s growing economic isolation has damaged its appeal to logistics and supply chain professionals. More than 75 per cent of survey respondents said they were pessimistic about Russia’s prospects.
 
India continues to divide logistics and supply chain executives. They ranked India as the number two choice to emerge as a major logistics market and ranked it relatively high – 17th – among countries least likely to become a major logistics market. In the data portion of the index, India was leapfrogged in 2014 by Brazil and Saudi Arabia, and it slipped again in the 2015 index, falling past Indonesia to number five. India’s market compatibility deteriorated, despite optimism about reform under new prime minister Narendra Modi.
 
The fastest-growing trade lanes linking emerging and developed markets were USA-Vietnam (up 42.7 per cent by volume) and Cambodia-EU (up 41.9 per cent) for air cargo; and Ukraine-EU (up 35.8 per cent) and EU-Egypt (up 23.2 per cent) for ocean shipments. But for 2015, trade flows between Asia’s emerging markets and other emerging markets are the ones that had logistics professionals most upbeat in the survey. Survey respondents also identified risks to growth by region and provided views on near-sourcing, e-commerce and other trends affecting emerging markets.
 
“A year ago, there was talk of an emerging markets meltdown and of a new fragile five based on concerns about weakness in South Africa, Brazil, India, Turkey and Indonesia,” said Essa Al-Saleh, president and CEO of Agility Global Integrated Logistics. “Emerging markets as a group turned out to be far more resilient – even vibrant – than expected despite continued sluggishness in the global economy.”
 
For 2015, the International Monetary Fund forecasts average growth for the 45 countries featured in the index at 4.57 per cent.
 
“The factors driving growth are increases in population, size of the middle class, spending power and urbanisation rates, along with steady progress in health, education and poverty reduction,” Al-Saleh said. “That’s why we remain optimistic about emerging markets and continue to see them on an upward trajectory.”
 
Transport Intelligence (TI), an analysis and research firm for the logistics industry, compiled the index.
 
“Five years after the global recession, prospects for all economies, developed and emerging, are still unclear,” said John Manners-Bell, chief executive of TI. “Economic fragility, a falling oil price and increasing security concerns in Africa and the Middle East have created uncertainty. Despite the challenges, interest remains high in these volatile markets as indicated by increased infrastructure investment, expanding international trade and increased domestic demand. Global manufacturers, retailers and their logistics service providers need to remain cognisant of the shifting dynamics if they are to exploit the significant opportunities which exist.”