Home » 3PL/4PL, Breaking News » Logistics execs’ faith in emerging markets firm amid slowdown signs

VietnamNotwithstanding the political and economic turmoil that rocked some developing countries in 2013, the logistics industry is optimistic about growth prospects in emerging markets this year and expects Asia to record the highest growth.

Seventy four percent of logistics professionals view prospects for emerging markets as “good” or “very good” for 2014, according to the fifth annual “Agility Emerging Markets Logistics Index.”

“Respondents remain optimistic despite signs that growth is slowing in China, stalled in Brazil and India, and uncertain in other countries that could suffer if the United States reins in monetary stimulus,” said the report.

The positive outlook is unwavering even as the International Monetary Fund and the Organization for Economic Cooperation and Development cut 2013-2014 global growth forecasts over concerns about emerging markets.

Emerging markets’ currencies and financial markets came under pressure in 2013 amid worries of a possible ripple effect from tighter U.S. monetary policy.

The survey of more than 800 industry executives ranks 45 major emerging markets and identifies factors that make them attractive for investment by logistics companies, air cargo carriers, shipping lines, freight forwarders, and distribution companies.

The 45 countries featured in the index were projected to grow at an average of 6.2 percent in 2013. The U.S. economy expanded 2.9 percent, while the European Union grew 1.4 percent, according to IMF projections.

“The industry’s confidence in emerging markets shows that logistics executives take a long view and see beyond today’s headlines,” said Essa Al-Saleh, president and CEO of Agility Global Integrated Logistics. “In the past, currency pressures, investor jitters, political instability or a pause in growth was a major setback that undermined confidence about other emerging markets. This time, the industry is staying focused on their enormous potential.”

“Not only does the majority of the world’s population reside in emerging markets, but these markets offer expanding middle classes and a younger average age compared to the more developed markets of the U.S. and Europe,” said John Manners-Bell, chief executive of Transport Intelligence, which compiled the Index.

“The need to meet the rising needs of these markets is a great opportunity for logistics providers, but it will also prove a bumpy process as economic, political and other risks will need to be navigated carefully.”

China, Brazil and India—three of the so-called BRIC countries, along with Russia—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 improve their business climate and make additional investment in infrastructure.

Gulf countries Qatar, UAE, Oman, Saudi Arabia and Kuwait, along with Jordan, dominate market compatibility, which looks at whether conditions are favorable for business and trade.

Sectoral pessimism is strong about Arab Spring countries Egypt, Libya and Tunisia. Sixty three percent of the polled say the economic attractiveness of Arab Spring countries is “in question for the foreseeable future” or “significantly weakened in the long term.”

The Philippines, Vietnam, Nigeria, Colombia, and Mexico all improved their positions in the 2014 rankings. Countries experiencing the sharpest declines are Tunisia, Ukraine, Argentina, and South Africa.

Industry executives see widely varied regional threats to the supply chain. Natural disasters are 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.

They 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 in the next 12 months, compared to just 46 percent of respondents a year ago expecting modest economic growth.

More than half of the surveyed predicts modest growth in the world’s two largest economies, the U.S. and EU.

About 58 percent see emerging countries in Asia as producing the highest growth rates in 2014. Latin America is the top choice of 25 percent 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 professionals see retail/consumer, high-tech, and automotive as the most promising sectors for 2014.

In Latin America, mining and agriculture have emerged on top, while prospects for oil and gas overshadow all other sectors in the Middle East and North Africa. In Africa, mining continues to hold the greatest potential.


Photo: ruycervantesfregoso

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