India is the emerging market with the greatest potential, ahead of a slowing China, according to an annual survey of global logistics industry executives.
In the survey, part of the 10th annual Agility Emerging Markets Logistics Index, India, China, Vietnam, Brazil and Indonesia are the countries seen as having greatest potential.
In the Index itself, China remains atop the annual 50-country rankings and India is No. 2, followed by United Arab Emirates, Indonesia, Malaysia, Saudi Arabia, Mexico, Qatar, Turkey and Vietnam.
The Index is a broad gauge of competitiveness, ranking 50 countries by factors that make them attractive to logistics providers, freight forwarders, shipping lines, air cargo carriers and distributors. China, India and Indonesia rank highest for domestic logistics; China, India and Mexico are tops for international logistics; and UAE, Malaysia and Qatar have the best business fundamentals.
In business fundamentals, India (10) and China (7) trail smaller economies, but India has made leaps in recent years with the adoption of the Goods and Services Tax and other economic reforms.
“The logistics industry’s optimism is based on what India has accomplished – the Goods and Services Tax and other reforms – and on what can still be done to create economic growth and prosperity,” says Andy Vargoczky, SVP Sales & Marketing Asia-Pacific for Agility Global Integrated Logistics. “China still generates excitement, but its economy is slowing, and there is uncertainty about the future of its trade relationship with the U.S.”
2019 Index and Survey Highlights:
- The strongest clusters of emerging markets are in the Arabian Gulf and Southeast Asia, thanks to business-friendly conditions and core strengths – the Gulf’s energy wealth and Southeast Asian manufacturing power – that draw logistics activity. In the Gulf, UAE (No. 3), Saudi Arabia (6), Qatar (8), Oman (12), Bahrain (16) and Kuwait (18) rank highly. Among ASEAN countries, Indonesia (4), Malaysia (5), Vietnam (10), Thailand (11) and Philippines (20) are strong.
- Logistics industry executives see U.S.- China trade volume shrinking by 10% as a result of tensions, which have led to them imposing tariffs on each other. Against a backdrop of trade friction and data showing China’s economy slowing, survey respondents see India as the market with greatest potential over China, their second choice.
- Fifty-six percent of those surveyed say a prolonged trade standoff between the U.S. and China could benefit Southeast Asian countries, which offer manufacturing and sourcing alternatives to China.
- Brazil, in the midst of a severe economic downturn and political upheaval, tumbles from No. 9 to 15 in the Index, ranking behind smaller Latin economies Mexico (7) and Chile (13). Brazil’s business fundamentals – a priority for new President Jair Bolsonaro – were 39th out of 50 Index countries. Despite the poor performance, executives surveyed see enormous promise: 44.5% said they were “optimistic” or “strongly optimistic” about Brazil.
- China’s $4-$8 trillion Belt & Road Initiative (BRI) infrastructure drive is a bigger plus for China than for the countries in Asia, the Middle East, Africa and Europe where it is investing. Sixty-four percent of executives surveyed see the BRI boosting growth and trade for China; only 41.4% believe it will help other emerging markets.
- E-commerce is fueling logistics opportunities in emerging markets. Sixty-percent of industry executives expect more outsourcing of last-mile delivery by retailers; 47.4% expecting more e-fulfilment outsourcing.
- Trade bureaucracy is the biggest obstacle to small and medium-sized companies trying to do business across borders, survey respondents say. But when it comes to what size companies will grow fastest in emerging markets, SMEs are their top pick over multi-nationals and big regional or local companies.
- Brexit could benefit emerging markets. Fifty-nine percent of executives surveyed expect emerging markets to seek trade concessions and new deals from the UK. Seventy-percent think emerging markets will be unaffected by Brexit.
- Iran’s near-term potential has evaporated as a result of re-imposed U.S. sanctions. Nearly 75% of those surveyed say Iran is “less promising than before” or “not at all promising.” Iran ranks 49th of 50 countries as an international logistics opportunity.
- The UAE and Malaysia are tops for business fundamentals. Gulf countries Qatar, Oman and Saudi Arabia also score high. Among the 50 Index countries, it’s hardest to do business in Venezuela, Angola, Myanmar and Libya.
- Sixty-five percent of those surveyed see Mexico increasing trade with the U.S. and Canada under a yet-to-be-ratified trade agreement that is to replace NAFTA.
- Venezuela, which holds the world’s largest oil reserves, ranks last (No. 50) overall and 50th for business fundamentals and international logistics opportunities.
- The so-called BRICS economies (Brazil, Russia, India, China and South Africa) were once considered bellwethers and prime engines of emerging markets growth, but have diverged. China (1) and India (2) continue growing at more than 6% a year. Russia (14) is slowed by economic sanctions and low energy prices; Brazil (15) has lost market investment amid its worst downturn; and South Africa (24) has seen prospects suffer amid years of ruling party infighting and labor unrest.
- Sub-Saharan Africa is a mixed picture. South Africa (24) is an underperformer. But in rankings of business fundamentals, Ghana and Kenya do relatively well at No. 19 and No. 21. Nigeria, which vies with South Africa to be the region’s largest economy, suffers from poor business conditions, an area where it ranks 44th.
- Mobile banking – now available to nearly 43% of the population in Sub-Saharan Africa – is proving to be a catalyst for trade and is lowering barriers for small and medium-sized businesses by providing means for fast, secure payments and financial transactions.
- Several countries would surge in the rankings if they could improve business conditions: Brazil, Philippines, Argentina, Bangladesh, Nigeria, and Bolivia. African economies with relatively strong logistics markets and potential – Uganda, Libya, Mozambique, Angola – are severely hamstrung by weak business fundamentals.
Transport Intelligence (Ti), a leading analysis and research firm for the logistics industry, compiled the Index.
John Manners-Bell, Chief Executive of Ti, says: “This year’s Index highlights the range of challenges and opportunities many markets face. The uncertainty which surrounds trading relationships, combined with implementation of new trade barriers, threatens to derail integration of emerging markets with the rest of the world. It is essential that obstructive trade policy does not stand in the way of commercial opportunities which help drive growth in emerging markets.”
2019 Agility Emerging Markets Logistics Index: www.agility.com/2019index