Agility Emerging Markets Logistics Index 2011 A detailed ranking and analysis of the world s major developing logistics markets January 2011
Contents Contents... 2 1.0 Introduction... 3 2.0... 4 3.0 Analysis and results of the index... 5 3.1 Sub-Indices ranking... 12 3.1.1 Market size and growth attractiveness sub-index... 12 3.1.2 Market compatibility sub-index... 13 3.1.3 Connectedness sub-index... 14 3.2 Emerging Markets Quadrant... 15 4.0 Emerging Market Survey... 16 4.1 Question 1 With the exception of China, which markets will emerge as major logistics hubs?... 17 4.2 Question 2 - Why are these countries considered to be important emerging markets?... 20 4.3 Question 3 - Which markets will offer the least opportunities for logistics companies in the next 5 years?... 22 4.4 Question 4 What factors do you believe prevent these markets from emerging as major logistics hubs of the future?... 23 4.5 Question 5 - Which markets have you expanded into in the past 5 years?... 24 4.6 Question 6 - Which markets do you expect to expand into in the next 5 years?... 25 4.7 Question 7 - Which regions will emerge as the next major low cost manufacturing locations in the next 15 to 20 years?... 26 About Agility and Transport Intelligence... 27
1.0 1.0 Introduction Many analysts believe that global economic growth in 2011 will be driven by the developing world and for companies thinking of investing in emerging markets it is more important than ever to understand which markets offer the best opportunities. Increasingly, Western investors are starting to look beyond China due to continued worries about its economic prospects. Although growth in both domestic demand and export activity is still very high, the signs of over-heating continue to emerge. The money supply is growing fast, driven in part by the effects of quantitative easing in the US, whilst the economy still seems hugely over-balanced in favour of investment rather than consumption. Wage rates are rising and the viability of the property market is in question. There is the probability that an unstable China will result in an acceleration of the shift of manufacturing export production away from Southern China. This in turn could also lead eventually to a realignment of trade patterns with many other low cost markets benefiting. markets. This aspect may counter-balance possible instabilities in exports from these countries, such as agricultural products and mineral raw materials. The likelihood of higher oil prices in 2011 will bring about many challenges for emerging markets. Some manufacturers will be encouraged to repatriate manufacturing operations to markets closer to endconsumers in the West. This may well bring benefits to some economies, such as Mexico or Turkey for instance, but will have a detrimental effect on remote manufacturing locations in the Asia Pacific region. For many, Africa has appeared on the horizon (albeit distant) as a potential alternative to the Asia Pacific region although many infrastructure, security and business compliance challenges will need to be overcome. Certainly the Chinese think Africa offers opportunities and there has been massive investment by the Chinese government in infrastructure and energy projects throughout the continent. In fact 2011 could well be the year when many emerging markets come of age. Although many of these, such as Brazil, are influenced by Chinese investment and demand, they are also experiencing growth in domestic consumption as GDP per head rises. Consequently opportunities for domesticorientated logistics provision in these markets look good. Indeed, whilst top-line growth numbers may be weaker, the attractions of markets in say Turkey or Brazil may be greater due to stable and transparent 3
2.0 2.0 The compares the major emerging markets on a number of different metrics, identifying the key attributes which will make the market attractive from the point of view of logistics, air cargo, shipping lines and freight forwarders. The overall index has been built up through three sub-indices: The Market Size and Growth Attractiveness ; Market compatibility ; and Connectedness. The Market Size and Growth Attractiveness subindex rates a country s economic output, its projected growth rate and population size. The Market Compatibility sub-index identifies how compatible a market is with the services which global logistics companies provide. For instance it measures: A country s development in terms of the importance of its service sector (indicative of the level of out-sourcing of logistics requirements); Urbanisation of population (a driver of manufacturers centralised distribution strategies and the likely consolidation of retailing); Distribution of wealth throughout the population (indicative of the widespread need for higher value goods often produced by international manufacturers); Foreign Direct Investment (FDI) (this is an indicator for the penetration of an economy by international companies); Market accessibility (the regulatory regime facilitating or otherwise the entrance of foreign companies to the market. This includes factors such as bureaucracy, regulations etc). Security (measuring the risk to companies operations from threats such as piracy and terrorism) The Connectedness sub-index rates a country s international and domestic transport infrastructure links as well as the level of service it receives. It involves: The frequency and range of destinations of its liner shipping connections The level of airport infrastructure relative to the market s size A rating of its overall transport infrastructure A rating of the efficiency of its customs and border controls. From these three sub-indices a weighted, total rating and ranking has been developed using established statistical techniques. The index has been set out firstly in its full version, showing each of the three sub-indices for the 38 countries surveyed, and the total index score, on which the countries have been sorted. Following that table, the countries have been split into two sections based on size of GDP. This makes it possible to compare the performance of the large emerging markets (GDP over $300 billion) and the smaller emerging markets (GDP under $300 billion) more meaningfully. This year Ti has undertaken a global electronic survey to complement the Index, providing insight on which emerging markets hold the greatest levels of potential and why. The results of this survey are contained in Section 4. 4
3.0 3.0 Analysis and results of the index China, the largest economy in the survey, retained its number one position as the most attractive investment market for logistics companies. The country remains top for market size and growth attractiveness and retains second place for market connectedness. China s connectivity to global shipping networks is among the best in the world, offering access to a global system of high capacity and frequency ocean freight and thus enabling trade. Its market compatibility score however fell, moving China down to ninth position in this respect. This decline explains the fall seen in the country s total index score overall. India, Brazil and Indonesia also remain in the top five investment markets for logistics companies with no changes among their rankings. India s score showed a small improvement as a result of an increase in its size and growth prospects. Its market compatibility and market connectedness scores, already below average, declined leading to an increase in India s inconsistency between the sub-indices. Brazil s overall score remained stable although it experienced some changes among the sub indices. Its market size and growth attractiveness and market compatibility scores saw an improvement whilst its connectedness declined. Poor infrastructure remains a problem for investors in the country. Indonesia recorded an increase in its overall score as a result of improvements in its market size and growth prospects. The country saw a small improvement in its connectedness although it still scores below average in this respect. However its market compatibility sub-index fell, this was driven mainly by a decline in its security. Russia s total index score also increased moving it up one position to join the other BRIC nations in the top five. This increase was driven by improvements in the country s GDP forecast growth, foreign direct investment (FDI) and reductions in security threats. The biggest mover up in the total index rankings was Saudi Arabia which climbed four places and saw the greatest increase in its overall score. The country saw significant improvements in its market compatibility index mainly due to increases in the foreign direct investment index. The majority of countries included in the index saw declines in FDI during the global economic crisis although Saudi Arabia was virtually unaffected. Its energy, industrial, financial and real estate sectors still offered considerable scope for investors. Oman also moved up four places recording increases in its market compatibility and market connectedness index. The improvement in the country s connectedness was driven by developments in its airport infrastructure. The country is currently undertaking major improvements to its airport network including the proposed expansion of Muscat International airport, to include a new air cargo terminal, as well as developing new airports in Sohar and Duqm. Market compatibility increased as a result of improvement in security. Despite its overall score experiencing a slight decline, Chile climbed to tenth position overtaking Thailand and Malaysia in the total rankings. The country recorded small increases in its already strong market compatibility and connectedness sub-indices while its market size and growth attractiveness index declined. Chile saw improvements in its already strong market access. The country benefits from a high number of trade agreements enabling access to foreign markets for its exporters.
3.0 3.0 Analysis and results of the index cont. Egypt was the biggest mover down the index falling four places and out of the top ten most attractive markets for logistics companies. The country saw a significant decline in its market compatibility score to below average due to increases in its business costs of crime and violence and terrorism. This significant fall in market compatibility has reduced the consistency of Egypt s scores. Another significant mover down in the index was Qatar which fell three places as a result of a decline in its market size and growth prospects score. Qatar has experienced rapid economic growth over the past fifteen years led by the energy sector. After reaching its peak in 2011 the oil and gas sector is expected to slow as no new investments into gas export projects are planned, consequently Qatar s GDP growth forecast for 2015 has fallen. Qatar is, however, currently undergoing major infrastructure and tourism developments in an attempt to replace energy revenues in coming years and is, therefore, likely to improve its position in the future. At the bottom of the index Kenya s overall score has improved while Paraguay s overall score declined. Paraguay saw declines in both the The Market Size and Growth Attractiveness and market compatibility sub indices. The country scores particularly poorly in The Market Size and Growth Attractiveness sub indices due to its limited economy based largely on agriculture. Its economy contracted as a result of reduced global demand and commodity prices causing exports to fall and reducing its GDP. Kenya saw an increase in its market compatibility driven by small improvements in the country s security. Despite this security threats such as crime and violence and terrorism still remain exceptionally high. It is expected that reforms of the new constitutional order may help improve these areas further in the future.
3.0 Table 1: Agility Emerging Markets Logistics Index 2011 Total Index 2010 Total Index Change in ranking from previous year China 8.32 8.46 - India 7.00 6.94 - Brazil 6.74 6.74 - Indonesia 6.73 6.56 - Russia 6.22 6.04 up 1 Saudi Arabia 6.01 5.45 up 4 Mexico 5.98 6.05 down 2 Turkey 5.80 5.79 down 1 UAE 5.59 5.55 down 1 Chile 5.29 5.30 up 3 Malaysia 5.28 5.36 - Thailand 5.25 5.30 - Egypt 5.16 5.47 down 4 Oman 5.12 4.94 up 4 Argentina 5.08 4.98 - South Africa 5.07 5.02 down 2 Pakistan 5.02 4.95 - Ukraine 4.97 4.90 up 1 Qatar 4.86 4.96 down 3 Bahrain 4.77 4.80 - Tunisia 4.77 4.65 up 2 Jordan 4.70 4.72 down 1 Uruguay 4.59 4.64 up 1 Philippines 4.58 4.68 down 2 Vietnam 4.55 4.59 - Bangladesh 4.55 4.56 - Nigeria 4.49 4.49 - Morocco 4.47 4.39 - Peru 4.43 4.36 - Kazakhstan 4.33 4.30 up 1 Ecuador 4.29 4.34 down 1 Ethiopia 4.19 4.24 - Colombia 4.17 4.24 - Venezuela 4.10 4.16 - Algeria 4.07 4.08 - Tanzania 3.84 3.99 - Kenya 3.64 3.57 up 2 Bolivia 3.64 3.78 down 1 Paraguay 3.53 3.66 down 1 7
3.0 Figure 1: Agility Emerging Markets Logistics Index Top Movers RUSSIA UKRAINE TURKEY CHINA MEXICO EGYPT SAUDI ARABIA INDIA BRAZIL MOVEMENT KEY: UP NONE CHILE ARGENTINA SOUTH AFRICA DOWN 8
3.0 Table 2: Agility Emerging Markets Logistics Index Sub-Indices Mkt size & growth attractiveness sub-index Market compatibility sub-index Connectedness sub-index Total Index Change in ranking from previous year China 10.00 6.06 7.46 8.32 - India 9.56 4.80 4.54 7.00 - Brazil 8.32 5.49 5.12 6.74 - Indonesia 9.06 4.77 4.44 6.73 - Russia 7.66 5.23 4.60 6.22 up 1 Saudi Arabia 5.29 6.59 6.75 6.01 up 4 Mexico 7.33 4.49 5.02 5.98 down 2 Turkey 6.62 4.75 5.34 5.80 down 1 UAE 3.61 6.51 8.21 5.59 up 3 Chile 3.95 5.99 7.01 5.29 up3 Malaysia 4.62 4.98 6.72 5.28 - Thailand 5.58 4.25 5.59 5.25 - Egypt 5.68 4.10 5.22 5.16 down 4 Oman 3.22 6.94 6.77 5.12 up 4 Argentina 5.00 5.48 4.83 5.08 - South Africa 5.19 4.20 5.66 5.07 down 2 Pakistan 6.53 3.00 4.25 5.02 - Ukraine 4.36 6.19 4.91 4.97 up 1 Qatar 3.31 6.45 6.09 4.86 down 3 Bahrain 3.05 5.78 6.84 4.77 - Tunisia 3.38 6.71 5.38 4.77 up 2 Jordan 3.13 6.44 5.84 4.70 down 1 Uruguay 3.12 6.57 5.32 4.59 up 1 Philippines 5.08 4.25 3.98 4.58 down 2 Vietnam 4.99 4.57 3.76 4.55 - Bangladesh 5.56 4.20 3.08 4.55 - Nigeria 5.83 3.49 3.07 4.49 - Morocco 3.79 5.17 5.01 4.47 - Peru 4.21 4.65 4.62 4.43 - Kazakhstan 3.84 5.52 4.09 4.33 up 1 Ecuador 3.38 4.78 5.42 4.29 down 1 Ethiopia 4.20 4.97 3.45 4.19 - Colombia 4.78 2.51 4.66 4.17 - Venezuela 4.12 4.05 4.12 4.10 - Algeria 4.10 4.10 3.98 4.07 - Tanzania 3.62 5.03 3.13 3.84 - Kenya 3.61 3.84 3.49 3.64 up 2 Bolivia 3.20 4.35 3.73 3.64 down 1 Paraguay 3.10 4.40 3.47 3.53 down 1 9
3.0 Of the larger economies included in the index (GDP in excess of $300bn) Saudi Arabia s score for market compatibility significantly improved bringing its score for this sub-index above that of Brazil and China. Colombia s market compatibility remained low- in particular the country faces extremely challenging concerns over security. While the country saw a small decline in terms of business costs of terrorism, its business costs of crime and violence increased posing increased risks to logistics companies with operations in Colombia. Nigeria, which also performs poorly in terms of market compatibility due to security threats, saw improvements in business costs of both crime and violence and terrorism. It also saw an improvement in market access. Of the larger markets, Nigeria remains the worst for connectedness and saw a decline in its scores for infrastructure and border administration. The country does, however, have some strengths. Its score for its market size and compatibility is above average and the country takes a mid-rank position among the larger economies in this respect. Saudi Arabia stands out as having increased its score for transport connectivity overtaking Malaysia in the sub indices through improvements in infrastructure, air and border administration. Table 3: Agility Emerging Markets Logistics Index for Countries with GDP of more than US$300bn Market size and growth attractiveness sub-index Market compatibility sub-index Change in ranking from previous year Connectedness sub-index Total Index China 10 6.06 7.46 8.32 - India 9.56 4.8 4.54 7 - Brazil 8.32 5.49 5.12 6.74 - Indonesia 9.06 4.77 4.44 6.73 - Russia 7.66 5.23 4.6 6.22 up 1 Saudi Arabia 5.29 6.59 6.75 6.01 up 3 Mexico 7.33 4.49 5.02 5.98 down 2 Turkey 6.62 4.75 5.34 5.8 down 1 Malaysia 4.62 4.98 6.72 5.28 up 1 Thailand 5.58 4.25 5.59 5.25 up 1 Egypt 5.68 4.1 5.22 5.16 down 3 Argentina 5 5.48 4.83 5.08 up 1 South Africa 5.19 4.2 5.66 5.07 down 1 Pakistan 6.53 3 4.25 5.02 - Philippines 5.08 4.25 3.98 4.58 - Nigeria 5.83 3.49 3.07 4.49 - Colombia 4.78 2.51 4.66 4.17 - Venezuela 4.12 4.05 4.12 4.1-10
3.0 Of the smaller economies, UAE remains at the top, offering the greatest exploitable opportunities. Its transport connectedness sub-index score increased, further enhancing its attractiveness to logistics companies as a strong market for logistics operations of all kinds. UAE s border administration, which was already extremely efficient, saw an improvement making the entry and exit of goods even easier. The country s liner shipping connectivity also saw significant improvements. Tunisia climbed two places up to sixth position as a result of increases in its market compatibility index. From 2008 the country s association agreement with the EU created a free trade area between Europe and Tunisia. This has led to a significant increase in its market accessibility. However, Tunisia also simplified its tariff structure abolishing tariff peaks and specific tariffs which led to a more complex customs procedure and consequently decreased its score for border administration. Table 4: Agility Emerging Markets Logistics Index for Countries with GDP of less than US$300bn Market size and growth attractiveness subindex Market compatibility sub-index Change in ranking from previous year Connectedness Total sub-index Index UAE 3.61 6.51 8.21 5.59 - Chile 3.95 5.99 7.01 5.29 - Oman 3.22 6.94 6.77 5.12 up 1 Ukraine 4.36 6.19 4.91 4.97 up 1 Qatar 3.31 6.45 6.09 4.86 down 2 Tunisia 3.38 6.71 5.38 4.77 up 2 Bahrain 3.05 5.78 6.84 4.77 down 1 Jordan 3.13 6.44 5.84 4.7 down 1 Uruguay 3.12 6.57 5.32 4.59 - Vietnam 4.99 4.57 3.76 4.55 - Bangladesh 5.56 4.2 3.08 4.55 - Morocco 3.79 5.17 5.01 4.47 - Peru 4.21 4.65 4.62 4.43 - Kazakhstan 3.84 5.52 4.09 4.33 up 1 Ecuador 3.38 4.78 5.42 4.29 down 1 Ethiopia 4.2 4.97 3.45 4.19 - Algeria 4.1 4.1 3.98 4.07 - Tanzania 3.62 5.03 3.13 3.84 - Kenya 3.61 3.84 3.49 3.64 up 2 Bolivia 3.2 4.35 3.73 3.64 down 1 Paraguay 3.1 4.4 3.47 3.53 down 1 11
3.1 3.1 Sub-Indices ranking The following figures examine the ranking of all the emerging markets covered in the index in each of the three sub-indices: Market size and growth attractiveness ; Market compatibility and Connectedness. The performance of each country is measured by the number of standard deviations from the average score of the entire group which is denoted by 0 on the scale. 3.1.1 Market size and growth attractiveness sub-index In terms of scale and growth prospects it is of little surprise that the most attractive markets are China and India. Indonesia, Brazil, Russia and Mexico also stand out as offering the largest opportunities. At the other end of the scale Bahrain, Paraguay and Uruguay are the smallest markets offering the least potential for investors. Figure 3: Market Size and Growth Attractiveness Sub-Index Scores 3.00 2.50 2.00 1.50 1.00 0.50-0.50 China India Indonesia Brazil Russia Mexico Turkey Pakistan Nigeria Egypt Thailand Bangladesh Saudi Arabia South Africa Philippines Argentina Vietnam Colombia Malaysia Ukraine Peru Ethiopia Venezuela Algeria Chile Kazakhstan Morocco Tanzania UAE Kenya Ecuador Tunisia Qatar Oman Bolivia Jordan Paraguay Bahrain -1.00-1.50 1
3.1 3.1.2 Market compatibility sub-index From the perspective of market compatibility, Oman scores well against a range of criteria including low business costs from crime and terrorism; high levels of foreign direct investment; good market access; high degree of service sector development and urbanization. Pakistan, Colombia and Nigeria score the lowest against this criteria suffering not least from high degrees of corruption and crime. Figure 4: Market Compatibility Sub-Index Scores 1.50 1.00 0.50 Oman Tunisia Saudi Arabia Uruguay UAE Qatar Jordan Ukraine Chine Chile Bahrain Kazakhstan Brazil Argentina Russia Morocco Tanzania Malaysia Ethiopia India Ecuador Indonesia Turkey Peru Vietnam Mexico Paraguay Bolivia Thailand Philippines Bangladesh South Africa Egypt Algeria Venezuela Kenya Nigeria Pakistan Colombia -0.50-1.00-1.50 13
3.1 3.1.3 Connectedness sub-index In the Connectedness sub-index, which is made up of components including liner shipping connectivity; airport density; customs efficiency and infrastructure strength, the United Arab Emirates scores highest, followed by China and more surprisingly by Chile. A range of Middle Eastern also countries score well. At the other end of the spectrum Nigeria, Bangladesh and Tanzania suffer from very poor connectivity. Figure 5: Connectedness Sub-Index Scores 160 140 120 100 80 60 40 20 0 India Brazil UAE Russia Saudi Arabia Turkey Vietnam Qatar Malaysia Czech Republic Mexico Jordan Ukraine Indonesia Chile Thailand Egypt Pakistan South Africa Oman Philippines Argentina Peru Colombia Venezuela Algeria Tanzania Cambodia Slovakia Other 14
3.2 3.2 Emerging Markets Quadrant Figure 6 provides another way of displaying the relative positions of the countries in the survey. The chart is divided into four quadrants and countries are plotted on axes of Market Compatibility and Connectedness (an average of their scores in both these sub-indices) and Market Size and Growth, with the size of the bubble denoting the size of the opportunity. Countries in the top right quartile are those which represent the biggest targets for logistics investment as well as the easiest markets in which to operate; they already have good compatibility and connections. In the top left quartile are those countries which represent smaller market opportunities, but are also easily penetrated, such as the UAE. The bottom half of the chart includes countries in which there are significant barriers to market entry and difficulties in operating. As these economies become more mature, de-regulated and better connected with the global markets, they will move towards the upper quartiles. China s dominance as the most important emerging market is obvious from the chart. Its size and growth potential are massive, but it still has potential for improvements in terms of Market Compatibility and Connectedness. Clustered in the quadrant denoting smaller markets, but with good prospects for market penetration are several Middle Eastern countries led, as can be seen, by the UAE. Larger markets, but compromised by barriers to entry, include Pakistan and Nigeria. Those with much less potential (except on a niche basis) include Colombia and Kenya. Figure 6: Emerging Market Potential Quadrant 1
4.0 4.0 Emerging Market Survey In December 2010, Ti undertook an electronic survey to ascertain the prevailing views on likely future logistics hotspots. 338 respondents took part in the survey, representing a range of industries and markets right across the world. The following information supplements the Agility Emerging Markets Logistics Index 2011, providing additional evidence on logisticians perceptions of which countries globally are more attractive propositions as logistics markets. Due to its sheer size and the level of developments that have taken place, and are continuing to do so, China has been left out of this study as the inclusion of this leading market would skew any results. 16
4.1 4.1 Question 1 With the exception of China, which markets will emerge as major logistics hubs? The sample audience was asked to rate, from a list of potential emerging markets, those they considered would emerge as major logistics hubs in the future. As can be seen below, the BRIC economies, which have long been regarded as offering the most potential to global logistics operators, continue to dominate individuals thoughts. However, surprisingly, the UAE was believed by many respondents (10.7% of the total sample) to represent a greater opportunity for 3PLs than Brazil. This may be due to the country s development as both an import gateway for the GCC States as well as an important transit hub for goods between Asia and Europe / Africa. Figure 7: Perceived Important Logistics Hubs of the Future 160 140 120 100 80 60 40 20 0 India Brazil UAE Russia Saudi Arabia Turkey Vietnam Qatar Malaysia Czech Republic Mexico Jordan Ukraine Indonesia Chile Thailand Egypt Pakistan South Africa Oman Philippines Argentina Peru Colombia Venezuela Algeria Tanzania Cambodia Slovakia Other 17
4.1 If we look at the top ten markets ranked as potential logistics hubs of the future in greater detail, a couple of further surprises emerge. Figure 8: Top Ten Potential Logistics Hubs 140 120 100 Respondents 80 60 40 20 0 India Brazil UAE Russia Saudi Arabia Turkey Vietnam Qatar Malaysia Czech Republic Turkey has long been touted as a potential nearsourcing market to serve the ever enlarging European Union. The country already has strong manufacturing bases in the automotive and clothing / textile industries, as well as having a direct land link to the EU through the newest members, Bulgaria and Romania. Likewise, Vietnam has been called China+One, for some time, eluding to its far cheaper cost base and the opportunities this provides as an alternative manufacturing base. It is, therefore, somewhat surprising that Saudi Arabia is considered, by many, to represent a greater opportunity than these. This is, undoubtedly, due in part by its position as the world s leading oil producer but is also likely to be affected by the wealth of much of the indigenous population and their desire for western luxury products. Saudi Arabia is also developing six economic cities, in an attempt to replicate the success witnessed in Dubai. The largest of these will be the King Abdullah Economic City which will comprise six key components a seaport, an industrial zone, a central business district, a resort district, an educational zone and residential communities. Once completed the Economic City will be a hub for at least 2,700 manufacturing companies and the 13.8 sq km port is estimated to emerge as one of the world s top five largest industrial ports. 18
4.1 With the exception of the BRIC economies, the Middle Eastern / North African region has attracted most attention from the respondents, with 55% of the sample identifying countries located within this region as potential future logistics hubs. In addition to the UAE and Saudi Arabia, mentioned above, markets of interest in the region include Qatar (possibly due in part to the recent development and coverage of the successful World Cup bid), Jordan, Egypt, Oman and Algeria. Of these countries, Egypt is less of a surprise as it possesses many of the characteristics required of a developing nation. It has a large and predominantly young population, largely located within a relatively small geographic area (the Nile Delta). It acts as both a growing consumer market as well as a manufacturing hub for Europe and the Middle East and is developing its infrastructure, particularly its roads and ports, as well as dedicated logistics parks. Figure 9: Regional Analysis 19
4.2 4.2 Question 2 - Why are these countries considered to be important emerging markets? The main reasons cited for countries emerging as potential logistics hubs are highlighted below. Economic growth is, by far, the predominant factor with all of the countries listed in the top ten experiencing higher than average growth rates. Geographic location was also deemed an important factor. India, for example, is seen as a preferable manufacturing base for European and Middle Eastern markets, having far less distance to cover than Chinese exporters. Figure 10: Factors behind Countries Emergence as Potential Logistics Hubs 0
4.2 Looking at the factors affecting the top 3 markets potential to be future logistics hubs it can be noted that for the two BRIC economies (India and Brazil) they are both dominated by economic growth, although India is also believed to benefit from its location. The UAE, on the other hand, is perceived to be important due mainly to its geographic location. Figure 11: Factors behind India s, Brazil s and UAE s Emergence as Potential Logistics Hubs 120 100 80 60 Economic growth FDI Growing population Geographic location Near sourcing market Growing exporter 40 20 0 India Brazil UAE 1
4.3 4.3 Question 3 - Which markets will offer the least opportunities for logistics companies in the next 5 years? Pakistan was viewed, by far, as the least attractive market, with concerns over security being the most widely held. Interestingly, Brazil, which was considered to be the second most attractive market, also ranks as the third least attractive potential logistics hub. Security and poor infrastructure were cited as major issues. It is obvious that this market polarises views it is attractive from the perspective of size and growth, but not from the practicalities of doing business. Figure 12: Least Attractive Markets as Logistics Hubs 50 45 40 35 30 25 20 15 10 5 0
4.4 4.4 Question 4 What factors do you believe prevent these markets from emerging as major logistics hubs of the future? Looking at the factors affecting the three least attractive potential logistics hubs, security was the main concern for Pakistan and Brazil, while poor infrastructure was an important factor for all three. Interestingly, no respondents cited customs issues as a negative factor, perhaps due to the large dependence on local companies handling this activity in many emerging markets. Figure 13: Least Attractive Markets as Logistics Hubs 40 35 30 25 20 15 Security Poor infrastructure Corruption Human rights issues Ease of doing business Difficult customes procecures Geographical location Government policies 10 5 0 Pakistan Bangladesh Brazil 3
4.5 4.5 Question 5 - Which markets have you expanded into in the past 5 years? India has witnessed the highest level of FDI in the past 5 years, followed by Brazil, the UAE. This correlates directly with question 1, which investigated the markets believed to represent major logistics hubs in the future. Along with those companies expected to figure in the top ten (India, Brazil, Russia and the UAE), the near-sourcing markets of Turkey and Mexico have been on the recent expansion list of companies. Interestingly, Saudi Arabia, the surprise from question 1, was also a target market for 21% of the respondents. Vietnam and South Africa have also experienced a reasonable level of FDI recently. Figure 14: Overseas investment in the past 5 Years (number of respondents) 140 120 100 80 60 40 20 0 The African nations of Ethiopia and Tanzania were among the least that had experienced FDI from the sample audience, perhaps highlighting that these markets are not yet ready to exploit. 4
4.6 4.6 Question 6 - Which markets do you expect to expand into in the next 5 years? As with past investments, India is the market that the majority of the respondents expect to expand into in the next 5 years, with the other BRIC countries of Brazil and Russia, along with the UAE, also of continued interest. South Africa, Vietnam, Mexico and Turkey have also been highlighted as areas on interest in the future. Figure 15: Overseas investments anticipated in the next 5 years (number of respondents) 80 70 60 50 40 30 20 10 0
4.7 4.7 Question 7 - Which regions will emerge as the next major low cost manufacturing locations in the next 15 to 20 years? Western China is believed by most respondents as being the next low cost manufacturing opportunity. This location is already starting to benefit from increases in the costs in coastal areas of China with some manufacturers moving further inland. However, poor infrastructure, particularly with regard to roads, has impeded on the growth potential. Developments of new roads and airports are underway, attempting to link this region with the eastern part of China but it is too early to determine how effective these are. South East Asia (including Vietnam, Thailand and India) was also identified as a major potential manufacturing hub of the future. Vietnam and India already compete with China as major global manufacturing hubs, both having lower labour costs. They also represent important consumer bases in the future. Although a number of nations are investing in Sub- Saharan Africa, predominantly for its natural minerals (China leading the way), the continent is some way behind these other two regions and Latin America. Figure 16: Future Potential Low Cost Manufacturing Locations (number of respondents) 140 120 100 80 60 40 20 0 Sub-Saharan Africa South East Asia Latin America Middle East and North Africa Western China CIS
About Agility and Transport Intelligence From its roots in emerging markets, Agility brings efficiency to supply chains in some of the globe s most challenging environments, offering unmatched personal service, a global footprint and customized capabilities in developed countries and emerging economies alike. A publicly traded company, Agility is one of the world s leading providers of integrated logistics with close to $6 billion in annual revenue and more than 25,000 employees in 550 offices across 100 countries. Agility s commercial business, Global Integrated Logistics (GIL), is headquartered in Switzerland. Agility GIL provides supply chain solutions to meet complex and traditional customer needs. GIL offers air, sea and road freight forwarding, warehousing, distribution and specialized services in project logistics, fairs and events, fuels and chemicals. Agility s unique collection of portfolio businesses includes Agility Defense & Government Services, a logistics provider to governments, ministries of defense and international organizations. Agility s Infrastructure group of companies manages commercial and industrial real estate and offers solutions in customs optimization and clearance, waste management and recycling, aviation services, remote infrastructure and life support. For more information about Agility, visit www.agilitylogistics.com/emergingmarkets Ti is one of the world s leading providers of expert research and analysis dedicated to the global logistics industry. Utilising the expertise of professionals with many years experience in the mail, express and logistics industry, Transport Intelligence has developed a range of market leading web-based products, reports, profiles and services used by all the world s leading logistics suppliers, consultancies and banks as well as many users of logistics services. If you have any feedback on this Index please do not hesitate to get in touch with us by any of the following means: Telephone: +44 (0)1666 519900 Email: Web: mnordmann@transportintelligence.com www.transportintelligence.com 27
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