Dynamic growth in ASEAN countries, the Persian Gulf, the sub-Saharan Africa region, and in the next group of transition economies, such as Indonesia, Nigeria, Bangladesh, Mexico, and Pakistan, is balancing the varied results achieved by BRICS countries, which have been the growth engines in emerging markets over the last few years.
This more balanced picture of growth is reflected in the 2015 Agility Emerging Markets Logistics Index, an annual, data-driven ranking of 45 emerging economies, supplemented by a survey of approximately 1,000 global logistics and supply chain executives. The Index, now in its sixth year, ranks emerging market economies based on their size, business conditions, infrastructure, and other factors that influence their attractiveness to potential logistics investors, air carriers, shipowners, freight forwarders, and distribution companies.
The large countries comprising the BRICS group—Brazil, Russia, India, China, and South Africa—continued to have a large share in growth and investment in emerging markets and dominated the Index. However, for example, Saudi Arabia rose to second place in 2015, second only to China, which has nearly five times the population and 12.5 times higher economic indicators. Also, countries in the next group, including Indonesia (4th in the ranking), Nigeria (27th), Bangladesh (28th), and Pakistan (25th), each with a population of over 100 million, improved their positions in the Index. Meanwhile, another large market outside the BRICS group—Mexico—maintained its previous 9th place.
Other key findings of the Index:
• Persian Gulf countries—the UAE, Qatar, and Oman—were recognized as the “most competitive markets,” meaning they have the best business conditions among all 45 countries included in the ranking. They were followed closely by Uruguay, Saudi Arabia, and Morocco.
• The UAE, Malaysia, China, Oman, Saudi Arabia, and Chile lead in the “connectivity” category, indicating they have the best-developed infrastructure and transport networks.
• The Philippines moved up three spots (to 19th place) in the data-driven portion of the Index, following a jump of 9 places in last year’s ranking. The country also improved its ratings among surveyed executives, who moved it up five spots (to 15th place) among countries they believe will gain importance as logistics markets.
• Russia’s growing economic isolation has negatively impacted its attractiveness among logistics industry executives. More than 75% of survey participants rated the development prospects of this market negatively.
• The Indian market, in turn, continues to divide industry specialists. On one hand, they recognized the country as the second most important logistics market, but on the other, they placed it relatively high—at 17th place—in the category of countries whose importance to the logistics industry is likely to be small. In the data-driven portion of the ranking, India was overtaken by Brazil and Saudi Arabia in 2014, and in 2015 it fell even further—to 5th place—losing its position to Indonesia. The “market competitiveness” of India—that is, business conditions—deteriorated the most, despite the optimism sparked by the reforms of Prime Minister Narendra Modi’s new government.
• Regarding trade connections between emerging markets and developed countries, air freight connections grew fastest between the USA and Vietnam (by 42.7%) and between Cambodia and the EU (by 41.9%), while for sea freight, these were connections between Ukraine and the EU (by 35.8%) and between the EU and Egypt (by 23.2%). However, looking at 2015, the greatest optimism among industry specialists was sparked by the prospects for developing trade connections between emerging markets in Asia and other regions. Survey participants also identified risks that could hinder growth in specific regions and expressed their opinions on key trends that could have the greatest impact on the development of emerging markets, such as near-sourcing or e-commerce.
– Last year, there was a lot of talk about the collapse in emerging markets and fears caused by the weakness of the new “fragile five” markets, namely South Africa, Brazil, India, Turkey, and Indonesia – said Essa Al-Saleh, President and CEO of Agility Global Integrated Logistics. – Meanwhile, emerging markets as a whole proved to be much more resilient—and even vibrant—than expected, despite the ongoing global economic slowdown.
Al-Saleh noted that many developing countries are increasing investment in infrastructure and taking steps to address long-standing problems such as employment and tax rules, investor protection, commercial law, property rights, capital restrictions, and land use regulations. He added that the greatest risks to the development of emerging markets in 2015 would be related to falling commodity prices, the cooling of the Chinese economy, the tightening of US monetary policy, and Russia’s economic troubles.
According to International Monetary Fund forecasts for 2015, average growth in the countries listed in the Index should be around 4.57%.
– Factors supporting development include population growth, the expansion of the middle class, rising purchasing power and urbanization, as well as steady progress in healthcare and education, while simultaneously reducing poverty levels – said Al-Saleh. – That is why we look at emerging markets with optimism and are convinced that they are still on a growth curve.
The Index was prepared by Transport Intelligence (Ti), a leading research firm in the logistics industry.
– Five years after the global recession, the outlook for all economies, both developed and emerging, remains unclear. Economic instability, falling oil prices, and growing security concerns in Africa and the Middle East only increase this uncertainty. Despite such difficult challenges, there remains high interest in these volatile markets, as evidenced by growing infrastructure investment, expanding international trade, and rising domestic demand. Global manufacturers, retailers, and the logistics operators working with them must be aware of all these conditions if they want to fully exploit the opportunities existing in these markets – noted John Manners-Bell, CEO of Ti.