Growth in demand from the Asia-Pacific will be critical to the fortunes of the logistics industry in 2014, according to the Agility Emerging Markets Logistics Index 2014.
The annual index, produced by Agility and Transport Intelligence, takes in three main components: index country rankings, major trade lanes and a survey of trade and logistics professionals.
With global economic growth and trade set to improve, this year’s survey found logistics insiders were “overwhelmingly upbeat” about prospects for emerging markets. Almost three quarters of logistics and trade respondents said prospects for emerging markets were either “very good” or “good,” while 72 percent expect modest growth in the global economy and trade volumes this year.
“Most logistics professional expect an improvement this year on 2013 trade volumes,” said Essa Al-Saleh, CEO of Agility Global Integrated Logistics.
Logistics executives were mostly upbeat on the Asia-Pacific. Almost 58 percent believe it will be the fastest growing emerging market this year, compared with a quarter choosing Latin America. Four of the Top 10 emerging countries were located in Asia: China, India, Indonesia and Malaysia.
The greatest supply chain risks in Asia-Pacific identified by respondents were natural disasters and economic shocks. By contrast, executives named corruption and poor infrastructure as the main risks in Latin America, government instability and terrorism as top concerns in the Middle East and North Africa and poor infrastructure and government instability as the main threat to logistics operations in Sub-Saharan Africa.
Some 63 percent of executives said they “agree” or “agree strongly” that manufacturing production will move away from China to other emerging markets countries. Vietnam, India, Mexico and Indonesia were seen as the top alternative destinations.
John Manners-Bell, CEO of Ti, told the JOC that it was still too early to say whether China’s new government would do more to improve the competitiveness of China’s logistics network and its attractiveness as a location for manufacturing. However, with China expected to see economic growth of more than 7 percent in 2014, Al-Saleh said China “would still create many opportunities for many logistics professionals” due to the sheer scope of the market, even though relative competitiveness on labor and land costs has seen the cost of doing business increase.
“China remains a strong economy and still dominates our Emerging Markets Index,” he said, adding that it retained its commanding position as the leading destination and origin in both ocean and air cargo.
India, second only to China in the index rankings over 2011 to 2013, slipped to fourth position in the 2014 rankings behind Brazil and Saudi Arabia.
“India’s drop is surprising in light of Brazil’s deepening economic woes and the fact that India’s population is 44 times that of Saudi Arabia,” the report said. “Chronic problems – aging infrastructure, high inflation, and obstacles to job creation and business investment – were compounded by the volatility in the Indian rupee.”
Among the Top 10 largest air lanes identified in the report, the biggest volume gains were on Colombia-U.S., Chile-U.S. and Bangladesh-European Union. On ocean lanes, the biggest winners in 2013 were Brazil-U.S., where freight volumes rose 62 percent, and South Africa-U.S. cargo, which increased 44 percent year-over-year in 2013.
Yet, although logistics executives are upbeat about demand for logistics in 2014 as global growth improves, some economists have argued that the days of trade increasing at twice the pace of global GDP may now have passed, as protectionism has risen since the recession struck in 2008 and 2009.
Manners-Bell said the index had not examined the link between GDP and trade growth, but agreed that the days of trade growth outstripping GDP growth may have passed.
“In the downturn, demand for exports from China fell in the developed world, whereas many countries in the emerging world started to focus on domestic growth and invested accordingly,” he said. “As the world comes out of recession, we may see this trend reverse again.”
Contact Mike King at firstname.lastname@example.org.