[ID] => 10778
[post_author] => 6150
[post_date] => 2019-03-22 10:01:17
[post_date_gmt] => 2019-03-22 10:01:17
[post_content] => China and India lead the way among developing markets in terms of domestic and international logistics strengths but fall behind others when it comes to business fundamentals, where countries such as the UAE, Malaysia and Qatar prevail.
Those are among the headline takeaways from this year’s Emerging Markets Logistics Index, the tenth annual survey undertaken by Agility to provide an insight into current concerns. The survey of more than 500 supply chain professionals aims to capture a glimpse into the leading sentiments of executives and rank the world’s leading 50 emerging markets by factors that make them attractive (or otherwise) to logistics providers, freight forwarders, shipping lines, air cargo carriers and distributors.
The three main criteria are domestic and international logistics market strengths, and the provision of business fundamentals in each country. These three criteria are used to derive an overall score. The business fundamentals category ranks countries based on regulatory environment, credit and debt dynamics, contract enforcement, anti-corruption safeguards, price stability and market access.
Despite falling behind smaller markets in terms of business fundamentals, China and India were overall placed first and second, respectively, among emerging markets.
Nearly half of all those surveyed see India’s e-commerce growth being ‘as fast’ or ‘faster’ than that in China, something that has led to it being considered the market with the most potential. However, it is very important to remember that each of these countries has a myriad of contributing factors and political ambitions that influence the results. One of the biggest national actions to consider is China’s Belt and Road Initiative (BRI), estimated to be costing between $4bn and $8bn.
The BRI infrastructure drive is considered by those surveyed as providing a larger windfall to China than the countries in Asia, Middle East, Africa and Europe where it is actively investing. When asked about who the initiative will help in the long-term, 64 per cent of those surveyed see the BRI boosting China, whereas only 41 per cent believed it would help other emerging markets.
The UAE and Malaysia come top for business fundamentals. Gulf countries such as Qatar, Oman and Saudi Arabia also score highly in the eyes of industry leaders, generating plenty of business opportunities.
Latin America offered a more subdued perspective. Brazil is still reeling from a severe economic downturn and the political upheaval and discontent in 2018 has caused the nation to tumble from ninth place last year to 15th this year. Other regional economies such as Mexico (seventh) and Chile (13th) were regarded more confidently by industry experts in terms of their future outlooks. Brazil has also been hit hard in the business fundamentals category - ironically a priority for the new president – where it came in 39th out of the 50 countries included in the survey.
It is not surprising that Venezuela comes out bottom of the pile, ranking last for both business fundamentals and international logistics opportunities. This is a clear reflection of the drastic and damaging effect regional and international politics and sanctions are continuing to have on the country.
It’s not all doom and gloom in Latin America. When asked for their opinions on Mexico and the ongoing frictions with the US, 65 per cent of respondents said they see Mexico increasing in trade under a yet-to-be-ratified replacement for the North American Free Trade Agreement (NAFTA). Furthermore, despite its economic and political problems, industry rank Brazil fourth among those emerging markets with the most potential, behind only India, China and Vietnam.
The worlds of business and politics frequently overlap, influencing each other in a variety of ways. Of the logistics executives surveyed by Agility, 47 per cent said an emerging market crisis is either ‘likely’ or ‘highly likely’. Furthermore, respondents believe that the current frictions between the US and China could potentially result in the loss of 10 per cent of global trade volumes. But the potential benefit of this, from certain points of view, is that 56 per cent of the industry leaders feel a prolonged trade war or stand-off between the US and China would benefit other south-east Asian countries that can offer alternatives to China.
Looking into Europe, the turmoil that is Brexit could benefit emerging markets. Emerging markets are expected by 59 per cent of executives to seek trade concessions and new deals from the UK. However,70 per cent feel that emerging markets will likely be unaffected by Brexit.
Furthermore, the near-term potential of Iran has all but vanished since the reintroduction of US-imposed sanctions. Nearly 75 per cent 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.
Among the 50 Index countries involved, it is not surprisingly considered hardest to do business in Venezuela, Angola, Myanmar and Libya. It could be the case that these nations are able to move up the rankings table in the coming years, but the large political frictions holding them back seem unlikely to be solved in the near term.
FINGERS ON THE PULSE
Sub-Saharan Africa is offering a mixed-bag of results. South Africa, a BRIC economy usually considered a prime engine of emerging market growth, has faltered and slipped to 24th place overall. In contrast, Ghana and Kenya have both performed well in terms of business fundamentals, coming in at 19th and 21st, respectively. This is almost the polar opposite of Nigeria, the second largest economy in Africa, where its poor business conditions lead to it ranking 44th.
One of the main catalysts for trade in Sub-Saharan Africa is mobile banking. Nearly 43 per cent of the regional population now have access to fast, secure payments and transactions, which has significantly boosted prospects for small and medium-sized businesses (SMEs). It has been clearly shown that trade bureaucracy is the biggest obstacle to SMEs trying to do business across borders. Indeed, when Agility asked what types of company are likely to grow fastest in emerging markets, SMEs were the industry respondents’ top pick over multi-nationals and big regional or local companies.
“Companies looking for opportunity are finding it in emerging markets, where small and medium-sized enterprises with access to technology and mobile banking are increasingly driving growth,” says Essa Al-Saleh, CEO of Agility Global Integrated Logistics. “At the same time, logistics professionals worry that these markets are vulnerable to ripple effects from big geopolitical setbacks.
“Concerns about emerging markets in 2019 are valid, especially in countries with significant dollar-denominated debt, but as a group these markets are growing at roughly twice the rate of developed economies,” Al-Saleh adds. “What’s most heartening is that many now appear resilient enough to avoid the sort of contagion we saw spreading among emerging markets in 2013 and 2008.”
Emerging markets expanded 4.7 per cent in 2018 and 55.7 per cent of industry professionals believe that the estimated growth of 5 per cent is ‘about right’ for developing economies. The International Monetary Fund now forecasts 4.5 per cent expansion for 2019.
The 2019 Agility Emerging Markets Logistics Index can be downloaded from the Agility website.
[post_title] => Emerging markets: Crisis concerns
[post_status] => publish
[comment_status] => open
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[post_name] => emerging-markets-crisis-concerns
[post_modified] => 2019-03-22 10:04:46
[post_modified_gmt] => 2019-03-22 10:04:46
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