China is the number one country for emerging logistics opportunities in 2019, according to the latest annual Agility Logistics Index, which surveys over 500 logistics professionals.
China also takes the top spot for domestic emerging markets logistics opportunities and the number one position for international emerging markets logistics opportunities. India was close behind in the number two spot. Countries across the Middle East were represented very strongly in the top 20 as were countries across southeast Asia.
China didn’t do so well on being the emerging market that provided the best business fundamentals though – that spot went to the United Arab Emirates in the Middle East.
China and India
“China dominates,” Agility’s report reads, pointing to the country’s top spot in the overall emerging markets index. It scored 8.87 points in the “Agility Emerging Markets Logistics Index 2019.” It landed top spots in both the domestic logistics opportunities index (8.82 points) and the international logistics opportunities index (9.70). And it’s no fly-by-night market opportunity either, as China has been number one in the Emerging Markets Logistics Index for nine consecutive years.
India took the number two spot in the overall emerging markets index (7.39 points). It also was second in the domestic logistics opportunities index (8.09 points) and in the international logistics opportunities index (7.02 points). China and India together left the third-ranked country, the UAE, in a far distant third spot.
Agility says that the top rankings of China and India in the domestic logistics opportunities category should come as “no surprise” due to the scale of both countries in terms of their economies and population sizes. China, for instance, has 156 cities that have a population of one million or more people compared to 10 such cities in the United States, the report states. Consultancy Transport Intelligence estimates that Chinese contract logistics will expand at a compound annual growth rate of 12.4 percent over the next five years. The reports adds that China’s inland cities are experiencing increased demand for logistics as manufacturing, shipping and logistics hubs in coastal areas begin to run low on real estate and goods are shipped west.
However, ongoing China-U.S. tensions and tariffs are sapping energy from the economy and, the report says, the country has a need to deflate bubbles in its financial and housing sectors. Trade tensions “will be felt most acutely in the export-oriented coastal regions, such as Guangdong, which includes Shenzhen and is China’s largest source of exports,” the report says. And it’s a similar picture in India too, the report adds, pointing out the about 34 percent of India’s population lives in cities but, in the next 20 years, that will increase by 250 million.
China and India also dominate in the international logistics opportunities indices too. China powers to the top spot due to the connections of its domestic logistics network to the “vast global network” via “high quality” infrastructure in the coastal areas. India claims the second spot due to strong growth expectation in airfreight forwarding.
It’s easy, when thinking of Asia, to focus on China and India because of the vast markets, populations and geographies those two countries represent. However, other areas of the Asian continent were also strongly represented in the Agility report.
Many countries in the Top 20 Emerging Markets Logistics Opportunities Index are in the Middle East. These include the UAE (third; 6.16 index points); Saudi Arabia (sixth; 5.71 index points); Qatar (eighth; 5.62); Turkey (ninth; 5.56); Oman (12th; 5.44); Bahrain (16th; 5.24); Kuwait (18th; 5.10); and Jordan (19th; 5.04).
Turning to East Asia, several countries from this region are also in the Top 20 Emerging Markets Logistics Opportunities Index. Apart from China, there is also Indonesia (fourth; 6.09 points); Malaysia (fifth; 6.0 points); Vietnam (10th; 5.48); Thailand (11th; 5.47); and the Philippines (20th; 4.96).
Indonesia scored highly as its sea freight market “has also become part of high volume regional and global supply chains.” The Agility report also noted that Indonesia had signed a free trade deal with the four European Free Trade Association members, although the effect is expected to be “mild.” The Agility report appears to have been compiled before Australia and Indonesia inked their deal – that is likely to be a significant deal owing to the high volume in trade between the two countries. High quality infrastructure – or, rather, a lack thereof – weighs down on Indonesia’s logistics efficiency and, ultimately, its rankings.
Malaysia also scored highly owing to its generally favorable business environment “particularly in terms of customs and import-export rules.” Development of the country’s logistics infrastructure in terms of port upgrades and road networks were praised. Growth in the country’s logistics workforce along with local capabilities in supply chain network design, warehouse management, information technology and crane operations were noted with favor. The report commented that Malaysia could even benefit from China-U.S. trade tensions and could potentially emerge as an alternative source of manufactured goods and imports.
Vietnam earned the tenth spot on the Emerging Markets Logistics Opportunities Index primarily on the strength of its international logistics connections. Vietnam seriously punches above its weight. “It rates as the fifth-largest market for logistics intensive goods trade by value – a measure where it is broadly in line with the significantly larger Indian economy and double the size of much larger Brazil,” the report says. It adds that “strong” import and export growth is expected over the next five years. The country boasts several large box ports that have significant volumes, namely at Ho Chi Minh City, Hai Phong and Da Nang, which, together, have a capacity of more than 11 million TEU. Consultancy Transport Intelligence estimates Vietnam’s sea freight market will grow at a 15.3 percent compound annual growth rate over the next five years.
Finally, the last East Asia country in the Top 20 Emerging Markets Logistics Opportunities Index is the Philippines at 4.96 points. The country makes it into the top 20 owing to its domestic and international logistics capabilities – including heavy investments by and the presence of ICTSI, which is a large and sophisticated global box terminal operator. However, the general business environment was regarded in the report as a drag on the archipelago nation’s overall ranking due to failures of the legislative and judicial systems to protect contracts and investments.
The 2019 Emerging Markets Logistics Index was commissioned by third-party logistics provider, Agility, and the research was carried out by research consultancy Transport Intelligence. Exact details of how the indices are calculated is not disclosed due to the use of a methodology and data set proprietary to Transport Intelligence.
The report used the World Bank definition of “emerging market,” which is a country that is making an effort to improve its economy with the aim of reaching the same level of sophistication as developed nations. Further criteria are that the economy is a low- or middle-income economy as defined by the World Bank and its investable market capitalization is low relative to its most recent gross domestic product.
“Domestic logistics opportunities” include market development, strength and growth; population urbanization (which is a driver of manufacturer’s centralized distribution strategies) and a likely consolidation of retailing; distribution of wealth throughout the population; and cluster development.
“International logistics development opportunities” takes into account the frequency and range of destinations across air and sea; a rating of the efficiency of customs and border controls; and the value of the country’s logistics trade as defined by Transport Intelligence.
“Business fundamentals” assess factors that either aid or hinder business including, but not limited to: market accessibility (bureaucracy and regulation); security (personal and business-crime, corruption and terrorism); domestic stability (country financial health, property rights, ability to enforce contracts and minimization of corruption); infrastructure and connectedness; and border procedures – time and cost.
According to the report, over 500 logistics professionals were surveyed although there was no breakdown of this population. Details of confidence level, confidence interval, total population and margin of error were not provided.
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