Industry professionals more bullish on developing world in absence of broader global upturn

BAAR, Switzerland - Global economic doldrums slowed emerging markets in 2012, but those countries remain bright spots for investors, manufacturers and logistics executives still wary of the uncertain outlook for the United States and Europe.


Emerging markets felt the effects of the continuing global slowdown in 2012 but generally weathered it better than developed countries that are their main markets. The 45 emerging markets featured in the 2013 Agility Emerging Markets Logistics Index grew at an average of 4.4%. In contrast, the U.S. economy grew at 2.2% while the EU contracted 0.2%.


Heading into 2013, enthusiasm for emerging markets is strong among trade and logistics professionals, even as they indicate they are rethinking the importance of low-cost labor, facing tougher choices over how and where to source, and beginning to look beyond the so-called BRIC countries of China, Brazil, India and Russia. 


Seventy-three percent of those surveyed feel prospects for emerging markets in 2013 are "good" or "very good." The figure is about the same percentage as a year ago - but the number who feel 'very good' is up sharply, to 22% from 14%. The global outlook is cloudier: 46% expect modest global growth while 47% say global GDP will be flat.


"Business confidence is at a premium in an uncertain global economy," said Essa Al-Saleh, President and CEO of Agility Global Integrated Logistics. "This year's Index - in terms of the hard data and industry sentiment - is encouraging when it comes to the promise of emerging markets. It shows that they remain resilient and will continue to offer some of the best opportunities for near-term and long-term business growth."


The Agility Emerging Markets Logistics Index, now in its fourth year, looks at the world's most dynamic economies and the forces powering them. It ranks 45 major emerging markets and identifies the attributes that make them attractive for investment by logistics companies, air cargo carriers, shipping lines, freight forwarders and distribution property companies. Together, the Index rankings, analysis and survey of 375 industry professionals provide a basis to compare individual countries, weigh their strengths and weaknesses, and gauge their near-term prospects.


"This year's Index shows once again the importance of emerging markets to the development of the global logistics industry," said John Manners-Bell, Ti's Chief Executive. "Despite weakened demand for exports in Europe and the United States, confidence in the developing world is high, and investment continues apace. Not all markets display the same level of potential, though, and the Index clearly shows which countries are 'open for business,' and which must do much more if they are to realize the benefits that integration in the global trading community can bring."


BRICS continue to dominate - but weaknesses apparent
China, India and Brazil remain the most dominant emerging markets for investors, exporters, producers of consumer goods, and logistics providers. For the second consecutive year, logistics and trade professionals ranked China, India, Brazil and Russia as the most likely places to emerge as logistics hubs over the next five years. However, the Index points to underlying weaknesses in each BRIC market. China confronts rising labor costs, a skills shortage, and a growing gap in income disparity. India's weak infrastructure and bureaucracy threaten its prospects; Brazil's export sector is slowing; and Russia remains overly dependent on energy and resources exports.


Six 'rising star' markets
The Index survey puts six "rising star" markets on the map alongside the BRIC nations: Indonesia, Turkey, Vietnam, Mexico, United Arab Emirates (UAE) and South Africa all rank in the top 10 "perceived major logistics markets of the future" as well as in the top 10 "markets for potential investment in the next five years."


Saudi Arabia, Indonesia, UAE, Malaysia, Mexico and Turkey all finished in the top 10 overall Index rankings. Turkey broke into the top 10 for the first time.


Stark contrast in Middle East
In the Middle East, the early promise of the Arab Spring countries has soured, gravely damaging their performance even as more stable markets in the region distance themselves by quickening their pace of development and improving their ability to compete with the BRICs.


The UAE, Qatar, Oman and Kuwait scored highest in the overall Index rankings of smaller markets (countries with GDP of less than $300 billion). As a group, the Gulf countries of UAE, Qatar, Oman, Saudi Arabia and Kuwait ranked as the countries with the best "market connectedness," a measure of their transport infrastructure, sea and air cargo links, and customs efficiency.


"The Index confirms the majority of the Middle East remains a stable, promising place to do business in spite of the ongoing difficulties experienced by the Arab Spring economies of Egypt, Tunisia and Bahrain," Al-Saleh said.


Egypt, Bahrain and Tunisia plummeted in the Index country rankings, a reflection of sharp declines in their performance, a fall off in key economic and social development indicators, and an erosion of their transportation infrastructure and capabilities. Only 13% of trade and logistics professionals said the three Arab Spring countries were "ready to grow and absorb investment."


"Egypt holds so much potential because of its size and location," Al-Saleh said. "If it can restore political stability and send the right signals to the domestic and international business communities, it can rebound quickly."


BRICs most appealing for logistics hubs but others in Asia mount strong challenge
While BRIC nations remain favorites to emerge as logistics hubs in the Index survey, non-BRIC Asia markets make a strong showing. Of the 20 countries viewed as having the most potential, Asia dominates - Indonesia, Vietnam, Bangladesh, Thailand, Malaysia and Pakistan all ranked highly. Indonesia moved up five places from the 2012 Index to finish No. 5 behind Russia. Thailand jumped to 14th from 29th; Bangladesh rose to 12th from 25th.


Trade lanes show shifts
The Index trade lanes figures show the impact of the economic contraction in Europe. China's ocean freight exports to the United States exceeded its exports to the EU largely because of a 9.8% decline in exports to the EU. While China's air exports to the United States remained almost flat compared to last year, exports to the EU fell an estimated 11.7%.


Those surveyed were most optimistic about trade within Asia. The Intra-Asian trade lane was ranked by respondents as having the most potential for growth of any emerging market-based lane for 2013.


Industry cautious on global outlook, more optimistic on US
Evenly split on prospects for global growth in 2013, the professionals surveyed are far more upbeat about prospects for the United States than for those of Europe. Fifty-nine percent of respondents predict the United States will experience modest growth; sixty-eight percent see economic stagnation or contraction for the European Union this year.


'Near-sourcing' and ocean freight both winners in the push for cost efficiency
Businesses are looking to lower costs by shifting production locations and modes of transportation. On the production side, Mexico and Turkey - "near-sourcing" destinations for producers looking to tap the large U.S. and European markets - rose in the overall rankings. At the same time, manufacturers clearly are struggling to balance the need to be near large developed markets with their desire to locate in markets with expanding consumer classes and buying power.  


In transportation, pressure to reduce costs appears to be leading a shift away from more expensive air freight to ocean freight. Air freight volumes fell by 2.4% in 2013, while ocean freight volumes experienced growth of 1.7%.


China 'factory of the world' status in question
Of the trade and logistics experts surveyed, 62% believe China will lose production to other emerging market players as the cost of producing goods in China rises. At the same time, those surveyed saw cheap labor a less significant factor than it was only a couple of years ago.  Instead, they identified overall economic growth, foreign investment, and trade volumes as more important indicators of a nation's potential as a logistics market.


About the Agility Emerging Markets Logistics Index


The Agility Emerging Markets Logistics Index, now in its fourth year, looks at the world's most dynamic economies and the forces powering them. It examines and ranks 45 major emerging markets and identifies the attributes that make a market an attractive investment for logistics companies, air cargo carriers, shipping lines, freight forwarders and distribution property companies. Together, the Index rankings, analysis and survey of 375 industry professionals provide a basis to compare individual countries, weigh their strengths and weaknesses, and gauge their near-term prospects. The Index also looks at the inter-relationships among emerging economies and at trade flows between the emerging and developed worlds.


The Index is the result of a unique collaboration between Agility, one of the world's leading providers of integrated logistics and supply chain services, and Transport Intelligence, a leading global provider of expert research and analysis for the logistics industry.


The 2013 Agility Emerging Markets Logistics Index can be found here:  www.agilitylogistics.com/emergingmarkets.

About Agility

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 and developing economies alike. Agility is one of the world's leading providers of integrated logistics. It is a publicly traded company with $4.8 billion in revenue and more than 22,000 employees in 500 offices across 100 countries.

Agility's core commercial business, Global Integrated Logistics (GIL), provides supply chain solutions to meet traditional and complex customer needs. GIL offers air, ocean and road freight forwarding, warehousing, distribution, and specialized services in project logistics, fairs and events, and chemicals. Agility's Infrastructure group of companies manages industrial real estate and offers logistics-related services, including e-government customs optimization and consulting, waste management and recycling, aviation and ground-handling services, support to governments and ministries of defense, remote infrastructure and life support.

For more information about Agility, visit www.agilitylogistics.com

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