Logistics Industry Shakes Off Year of Emerging Markets Doubts The BRICs China, Brazil and India – three of the so-called BRIC countries, along with Russia – dominate most discussions about emerging markets because of their size. They rank at the top of the Index again this year, but all three experienced erosion in their raw Index scores, suggesting that they need to take steps to improve their business climate and make additional investment in infrastructure. Despite a troubled economy, Brazil knocked India out of the No. 2 spot. India fell to No. 4, below Saudi Arabia, amid concern about chronic economic problems, lack of clear direction on the economy and a weaker rupee. “This probably says as much about India’s weakness as Brazil’s strength,” . “Both face tough choices. Brazil has shown more willingness to make them, perhaps because policymakers feel pressure as the country gets ready to host the 2014 World Cup and 2016 Summer Olympics. India continues to put off difficult decisions.” Strength in the Gulf Gulf countries Qatar, UAE, Oman, Saudi Arabia and Kuwait, along with nearby Jordan, dominate the Market Compatibility portion of the Index, which looks at whether conditions are favorable for business and trade. Among the largest emerging economies, no country has improved its position as much as Saudi Arabia, which climbed to No. 3 in the 2014 Index from No. 9 five years ago. Saudi Arabia is in the midst of an unprecedented public spending binge, building and expanding airports, roads, ports, universities, industrial complexes and other infrastructure in an effort to diversify, lessen dependence on oil, and create jobs for millions of young Saudis. Qatar and Oman – joined by Chile – make up an elite group in the Index. They are relatively small economies (annual GDP of less than $300 billion) that outperform both their peers and larger emerging economies based on the strength of their accessibility, their vibrant service sectors and world-class transportation infrastructure. Twelve of the 13 countries ranking worst in the area of Market Compatibility were African and Latin American countries. Arab Spring countries Logistics industry executives are pessimistic about a quick return to stability and growth in Arab Spring countries Egypt, Libya and Tunisia. Sixty-three percent say the economic attractiveness of Arab Spring countries is “in question for the foreseeable future” or “significantly weakened in the long term.” Only 7% say prospects are “brighter” than they were before political upheaval. Looking at Egypt, 94% say instability will hamper growth “for the next 2-3 years” or “for the foreseeable future.” Tunisia tumbled 11 spots in the 2014 Index to No. 34. Egypt is last in the area of Market Compatibility, a ranking based on factors determining the climate for business and investment. Rising, falling The Philippines, Vietnam, Nigeria, Colombia and Mexico all improved their positions in the 2014 rankings. Countries experiencing the sharpest declines: Tunisia, Ukraine, Argentina and South Africa. Supply chain risks Industry executives see widely varied threats to the supply chain, depending on the region. They ranked natural disasters the biggest risk in Asia; corruption the most serious threat in Latin America; government instability the top problem in the Middle East and North Africa; and poor infrastructure the most serious risk in Sub-Saharan Africa. Syria and Iran – two countries that are not in the Index and are subject to international economic sanctions – were picked as the least attractive markets for the logistics industry by professionals. Among the countries in the Index, Ethiopia, Iraq, Libya and Egypt were ranked as least attractive. Global economic outlook Logistics and trade professionals are far more optimistic about the global economy in 2014 than they were a year ago, the survey shows. Seventy-two percent expect “modest growth” in global economic output and trade volumes in the next 12 months. A year ago, just 46% of respondents expected modest growth in 2013; an equal percentage expected output and trade to stay flat. Industry executives view prospects for the U.S. and EU economies almost identically. Most -- 54% for the Eurozone; 55% for the United States --predict modest growth in the world’s two largest economies. The percentage of those seeing output stay flat was about 30% for both the US and EU economies. Regional breakdown Most logistics and trade executives (58%) see emerging markets countries in Asia producing the highest growth rates in 2014. Latin America is the top choice of 25% of survey respondents. Sixty-four percent of executives “agree” or “strongly agree” that there is a shift in production away from China. They see the leading alternative destinations as Vietnam, India, Mexico and Indonesia. At the same time, China outshines Brazil, India, Russia and South Africa when industry executives look at the growth prospects of the largest emerging economies in 2014. The industry sectors with the most potential vary by region. In Asia, where rising incomes and policy shifts are beginning to encourage consumption, logistics industry professionals see retail/consumer, high-tech and automotive as the most promising sectors for 2014. Elsewhere, they see extractive industries continuing to dominate. In Latin America, mining and agriculture top the automotive and retail/consumer sectors. In the Middle East and North Africa, prospects for oil and gas overshadow all other sectors. In Africa, the outlook for mining continues to hold the greatest potential in the view of logistics and trade executives. Trade Lanes No country can challenge China’s commanding position as the leading destination and origin in both air and ocean cargo. Even so, China’s air freight volume to the United States fell an estimated 7.5% in 2013 – at the same time air shipments from Brazil and South Africa to the United States were on the rise. Brazil’s ocean freight to the US also increased sharply. US ocean shipments to China fell 19%. Small countries – Oman, Cambodia, Paraguay, Bolivia and Qatar -- posted big percentage gains off of modest ocean volumes to the US and EU. -Source:Agility
Posted on: Wed, 12 Mar 2014 08:15:26 +0000