Survey finds global logistics executives expect good year for emerging markets economies
Malaysia, Bangladesh and Vietnam are among the top performers in an annual logistics industry ranking of the world’s leading emerging markets, a list dominated again by China and India.
Two of the world’s fastest-growing economies, China and India sit unchanged at No. 1 and No. 2 respectively in the 50-country 2018 Agility Emerging Markets Logistics Index. But Malaysia ranks No. 4 after UAE, despite the fact that at least 16 other emerging markets countries, including Indonesia, Saudi Arabia, Russia, Brazil, Turkey and Mexico, have larger economies.
Bangladesh, a garment-industry powerhouse with 6%+ GDP growth for seven consecutive years, jumps four spots to No. 23 in the 2018 Index. Only Egypt – leaping from No. 20 to No. 14 – climbs more spots.
The Index, in its ninth year, is a broad gauge of economic competitiveness that includes a survey of more than 500 logistics industry professionals and a data-driven ranking of 50 emerging markets countries by size, economic strength, infrastructure, transport connections and business climate — factors that make them attractive to logistics providers, freight forwarders, shipping lines, air cargo carriers and distributors.
“The economies of the Asia-Pacific region remain the most dynamic in the world,” said Essa Al-Saleh, CEO of Agility Global Integrated Logistics. “They are growing more resilient and sophisticated as they deepen their integration and become more inter-dependent.”
Key Index and Survey Highlights
* In the survey, supply chain industry executives pick Vietnam third – after India and China – as the emerging market where their companies were most likely to invest.
* Executives surveyed are especially bullish about India, in spite of first-half 2017 economic slowdown that followed adoption of sweeping tax reforms and the disruption caused by a surprise move to introduce new bank notes. More than 37% of those surveyed say their companies are considering investment in India, up from 23% a year earlier.
* Emerging markets growth prospects look brighter than they have in years to logistics industry executives. Nearly two-thirds surveyed agree with the International Monetary Fund’s 2018 emerging markets forecast of 4.8%-4.9% GDP growth. That would mark the fastest expansion for emerging markets since 2013 and a second consecutive year of higher growth for developing economies, which have slowed dramatically since a 7.4% GDP gain in 2010.
* More than half (56.4%) of industry executives surveyed say they believe Amazon will overcome its struggles and grow its paltry 1.3% market share in China, where homegrown Alibaba and JD.com dominate the world’s largest e-commerce and online retail market.
* In the Index, not all Asia-Pacific countries saw gains. Sri Lanka, Cambodia and the Philippines were among countries where the business climate or Market Compatibility deteriorated in a year-to-year basis. In the Market Connectedness category, which measures quality of infrastructure and transport connections, Sri Lanka and Thailand were among the countries whose rankings declined.
* There is no consensus among supply chain professionals when it comes to the Trump administration’s high-stakes brinkmanship with Mexico and Canada in negotiations aimed at updating the North American Free Trade Agreement (NAFTA). They are sharply split about whether a new agreement would help Mexico (24.3%); hurt Mexico (21.8%); or leave trade broadly unchanged (25.7%).
* Logistics executives are unconcerned, for now, that emerging markets economies will be harmed by Brexit, the UK’s departure from the European Union. Nearly 45% say emerging markets will be unaffected; 25.4% say emerging markets could gain from Brexit through expanded market access. A year ago, nearly 69% expressed concern that Brexit and the failure of various trade initiatives were a threat to trade.
* Fifty-five percent of those surveyed say small and medium-sized businesses – those with fewer than 250 employees – will benefit most from emerging markets growth. Twenty-six percent said large companies would be the biggest beneficiaries.
* Myanmar, No. 47 in the overall Index, appears for the first time among the 20 countries logistics executives see as a potential logistics market in the next five years. It jumps to No. 16 from No. 38 a year ago. Bangladesh climbs to No. 20 from No. 27.
* Cheap labor is losing its attraction as a driver of emerging markets growth in the eyes of logistics professionals. They rate economic growth, foreign investment, trade volumes, location and transport infrastructure as more important factors.
* Gulf countries continue to dominate the top of the rankings when it comes to be emerging markets business conditions. UAE, Qatar, Oman and Bahrain outpaced all other countries. Saudi Arabia was No. 8; Kuwait was No. 16. Gulf countries also rank toward the top in quality of infrastructure and transport connections: UAE (1), Bahrain (5), Oman (6), Saudi Arabia (7) and Qatar (8) were top performers.
Transport Intelligence (Ti), a leading analysis and research firm for the logistics industry, compiled the Index.
John Manners-Bell, Chief Executive of Ti, says: “Emerging markets enjoyed favourable market conditions in 2017 with trade growth the healthiest in years. However, there are many storylines yet to fully unfold, such as China’s debt, the renegotiation of NAFTA and ongoing political and economic transition in the Middle East. While the going looks good for now, there are numerous challenges on the horizon.”