Executive Briefings

Index of Next Wave of Attractive Markets for Logistics Companies Available

While Brazil, Russia, India and China continue to be the most attractive emerging markets for logistics companies, the next wave of fast-growing economies set to become the new trade hub is outlined in the 2011 Agility Emerging Markets Logistics Index.

The reference compares 39 emerging markets and identifies key attributes that make these markets attractive for investment, according to officers of Agility, a logistics service provider. The index was developed by Transport Intelligence, a provider of expert research and analysis in the logistics industry.

"While the index confirms much of what we see happening from Agility's vantage point of well-established operations across the world's emerging markets, it offers the logistics industry many useful, longer-term insights into important but less visible developments - especially important for those markets on the industry's watch-list," said Christopher Logan, Agility's chief strategy and marketing officer.

"It is clear that emerging markets are playing an increasingly important role in global supply chain strategies as manufacturers look to the next wave of low-cost production locations," said John Manners-Bell, chief executive officer, Transport Intelligence. "However, investors need to be cognizant of the specific challenges which exist in each market as well as the opportunities. Our index enables companies to differentiate between those markets which offer immediate potential and those which will take much longer to develop."

Brazil remains in the top five (ranking third) of strong investment markets for logistics companies and with a stable overall score. The country improved its ratings both for market size, growth attractiveness and market compatibility, but its connectedness rating actually declined, with poor infrastructure remaining a problem for investors in the country.

In the global survey of more than 330 logistics executives that accompanied the data-based Index, respondents perceived Brazil as the second-most attractive market but simultaneously as the third- least attractive potential logistics hub. Security and poor infrastructure were cited as major issues. It is obvious that this market polarizes views - it is attractive from the perspective of size and growth, but not from the practicalities of doing business. More than one in ten of survey respondents believed the UAE to represent a greater opportunity for 3PLs than Brazil.

Mexico (7) is seen as offering attractive scale and good growth prospects in general. Foreign investors see significant potential in the country as a near-sourcing location because of its strategic proximity to large consumer markets in the West - and especially in view of ongoing concerns about economic over-heating in China and the probability of higher global oil prices in 2011.

Chile overtook Thailand and Malaysia in the Index's overall rankings, moving up a full three places and climbing into the Index top ten - and this in spite of a slight dip in its overall score. The country improved its already strong market compatibility and connectedness scores while its market size and growth attractiveness score declined. The country saw improvements in its already strong market access - Chile benefits from a high number of trade agreements enabling good access to foreign markets for its exporters. In the ranking of smaller emerging markets (those with less than $300bn GDP), Chile is second overall only to the UAE. In terms of its connectedness (liner shipping connectivity, airport density, customs efficiency and infrastructure strength), Chile comes a surprising third in the Index of all markets, trailing only the UAE and China.

With the exception of Argentina (15), most other markets from the region languished in the lower half of the Index - Uruguay (23), Peru (29), Ecuador (31), Colombia (33), Venezuela (34), Bolivia (38) and Paraguay (39) ranking lowest.

Of note among these was Colombia with a low market compatibility rating on the back of challenging security concerns. While the country saw a small decline in terms of business costs related to terrorism, its business costs related to crime and violence increased, posing increased risks to logistics companies with operations in Colombia.

At the very bottom of the Index, Paraguay's score saw a further decline from 2010. The country's scores for market size, growth attractiveness and market compatibility all fell - and driven by the country's limited and largely agricultural economy which contracted as a result of reduced global demand and lower exports caused by changes in commodity pricing.

Compared with the 2010 Index, the largest movements both up and down are to be seen in the Middle East. Saudi Arabia (6) was the top mover, climbing four places and with the greatest increase in its overall score. Over the past year, the Saudi market improved its market compatibility rating and enjoyed greater foreign direct investment. Oman (14) also moved up four places, buoyed by developments in its airport infrastructure and improvements in security.  Moving four places down in the rankings was Egypt (13), on the back of increased business costs associated with crime, violence and terrorism, while Qatar (19) fell three places because of its slowing oil and gas sector.

At the bottom of the rankings, Paraguay (39) performed the least well, falling below Kenya (37) and Bolivia (38). A weak economy, poor infrastructure developments and security threats (especially the latter in the case of Kenya) make these markets the least attractive for investment by logistics companies.

Africa, in general, is seen as a distant potential alternative to the Asia Pacific region as a future manufacturing hub, although many infrastructure, security and business compliance challenges remain to be overcome.

Source: Agility

While Brazil, Russia, India and China continue to be the most attractive emerging markets for logistics companies, the next wave of fast-growing economies set to become the new trade hub is outlined in the 2011 Agility Emerging Markets Logistics Index.

The reference compares 39 emerging markets and identifies key attributes that make these markets attractive for investment, according to officers of Agility, a logistics service provider. The index was developed by Transport Intelligence, a provider of expert research and analysis in the logistics industry.

"While the index confirms much of what we see happening from Agility's vantage point of well-established operations across the world's emerging markets, it offers the logistics industry many useful, longer-term insights into important but less visible developments - especially important for those markets on the industry's watch-list," said Christopher Logan, Agility's chief strategy and marketing officer.

"It is clear that emerging markets are playing an increasingly important role in global supply chain strategies as manufacturers look to the next wave of low-cost production locations," said John Manners-Bell, chief executive officer, Transport Intelligence. "However, investors need to be cognizant of the specific challenges which exist in each market as well as the opportunities. Our index enables companies to differentiate between those markets which offer immediate potential and those which will take much longer to develop."

Brazil remains in the top five (ranking third) of strong investment markets for logistics companies and with a stable overall score. The country improved its ratings both for market size, growth attractiveness and market compatibility, but its connectedness rating actually declined, with poor infrastructure remaining a problem for investors in the country.

In the global survey of more than 330 logistics executives that accompanied the data-based Index, respondents perceived Brazil as the second-most attractive market but simultaneously as the third- least attractive potential logistics hub. Security and poor infrastructure were cited as major issues. It is obvious that this market polarizes views - it is attractive from the perspective of size and growth, but not from the practicalities of doing business. More than one in ten of survey respondents believed the UAE to represent a greater opportunity for 3PLs than Brazil.

Mexico (7) is seen as offering attractive scale and good growth prospects in general. Foreign investors see significant potential in the country as a near-sourcing location because of its strategic proximity to large consumer markets in the West - and especially in view of ongoing concerns about economic over-heating in China and the probability of higher global oil prices in 2011.

Chile overtook Thailand and Malaysia in the Index's overall rankings, moving up a full three places and climbing into the Index top ten - and this in spite of a slight dip in its overall score. The country improved its already strong market compatibility and connectedness scores while its market size and growth attractiveness score declined. The country saw improvements in its already strong market access - Chile benefits from a high number of trade agreements enabling good access to foreign markets for its exporters. In the ranking of smaller emerging markets (those with less than $300bn GDP), Chile is second overall only to the UAE. In terms of its connectedness (liner shipping connectivity, airport density, customs efficiency and infrastructure strength), Chile comes a surprising third in the Index of all markets, trailing only the UAE and China.

With the exception of Argentina (15), most other markets from the region languished in the lower half of the Index - Uruguay (23), Peru (29), Ecuador (31), Colombia (33), Venezuela (34), Bolivia (38) and Paraguay (39) ranking lowest.

Of note among these was Colombia with a low market compatibility rating on the back of challenging security concerns. While the country saw a small decline in terms of business costs related to terrorism, its business costs related to crime and violence increased, posing increased risks to logistics companies with operations in Colombia.

At the very bottom of the Index, Paraguay's score saw a further decline from 2010. The country's scores for market size, growth attractiveness and market compatibility all fell - and driven by the country's limited and largely agricultural economy which contracted as a result of reduced global demand and lower exports caused by changes in commodity pricing.

Compared with the 2010 Index, the largest movements both up and down are to be seen in the Middle East. Saudi Arabia (6) was the top mover, climbing four places and with the greatest increase in its overall score. Over the past year, the Saudi market improved its market compatibility rating and enjoyed greater foreign direct investment. Oman (14) also moved up four places, buoyed by developments in its airport infrastructure and improvements in security.  Moving four places down in the rankings was Egypt (13), on the back of increased business costs associated with crime, violence and terrorism, while Qatar (19) fell three places because of its slowing oil and gas sector.

At the bottom of the rankings, Paraguay (39) performed the least well, falling below Kenya (37) and Bolivia (38). A weak economy, poor infrastructure developments and security threats (especially the latter in the case of Kenya) make these markets the least attractive for investment by logistics companies.

Africa, in general, is seen as a distant potential alternative to the Asia Pacific region as a future manufacturing hub, although many infrastructure, security and business compliance challenges remain to be overcome.

Source: Agility