Agility, a global provider of integrated logistics solutions, has published a report on the situation in emerging markets in the first half of 2017 – Agility Mid-Year Emerging Markets Review. An important issue addressed in the report is the impact of Brexit on the relationship between emerging markets and the UK and the European Union. The authors of the report also analyzed the impact of changes in Indian tax law on the logistics services market.
According to the latest Agility report, if the UK fails to maintain key relationships with its partners in the European Union, it will attempt to stimulate its economy by increasing trade with emerging markets. Although the British government has expressed a desire to maintain close, current-like trade relations with the European Union, Brussels has stated that after Brexit, maintaining “unimpeded trade relations” will be “impossible.” As the Agility report points out, the more difficult the divorce between the UK and the EU, the more likely it is that the British will try to conclude new trade agreements with developing countries. This applies in particular to cooperation with Commonwealth countries in Southeast Asia and Africa. Brexit exposes many key exporters from emerging markets, such as South Africa, Kenya, or Turkey, to additional difficulties related to the decline in the value of the British pound and the expected contraction of the British economy in the initial period after leaving the EU.
According to the analysis in the report, developing countries for which the UK is currently a gateway to Ireland and other European countries will have to find new distribution centers and ways to reach these markets. Additionally, if the UK and the EU do not conclude a new customs union and British manufacturers do not strictly adhere to European product standards, exports from the UK to the European Union may face significant barriers in the form of cumbersome checks and additional customs procedures. Essa Al-Saleh, CEO of Agility Global Integrated Logistics, argues that it is still too early to predict in which direction the negotiations between the UK and the EU will be conducted.
– But beyond political obstacles, the British drive to maintain “unimpeded” trade relations with the EU may face various technical difficulties related to commodity quotas, product origin, standards, and import duties. Anything that differs from the current arrangements between the UK and the EU will likely mean delays and additional costs in international trade – says Essa Al-Saleh.
Change in the tax system in India affects the TSL market
In addition to the Brexit issue, the Agility report also analyzed the Indian government’s decision to replace over a dozen separate state and federal taxes with a single Goods and Services Tax (GST). As emphasized, the introduction of a uniform national tax has triggered numerous changes in the previously inefficient Indian logistics sector, as companies had to modify their storage, transport, and accounting methods accordingly.
The GST, introduced on July 1, is already prompting logistics operators and their clients to consolidate warehouse operations, reorganize transport strategies, and invest in the development of systems to increase supply chain efficiency. According to the authors of the Agility report, these changes could lead to a reduction in costs for the Indian logistics sector by as much as 20%, initiate infrastructure investments, and become another strong factor stimulating the country’s rapidly growing economy.
The “Agility Mid-Year Emerging Markets Review 2017” report was prepared by Transport Intelligence, a leading research and analysis firm in the logistics industry.
The full version of the report is available at: www.agility.com/2017index
Agility, together with Transport Intelligence, also prepares the annual Agility Emerging Markets Logistics Index. The ranking of the 50 most important global emerging markets is developed based on a survey conducted among over 800 logistics industry professionals from around the world.