HONG KONG — Asian countries dominated the 2015 Agility Emerging Markets Logistics Index released today with four nations ranked in the top 10 emerging markets – China, Indonesia, India and Malaysia.
Out of the seven Asian countries among the top 20, five are Southeast Asian nations – Indonesia, Malaysia, Thailand, Philippines and Vietnam.
The annual data-driven ranking of 45 emerging economies is accompanied by a separate survey of nearly 1,000 global logistics and supply chain executives. Now in its sixth year, the index ranks emerging markets based on their size, business conditions, infrastructure and other factors that make them attractive for investment by logistics companies, air cargo carriers, shipping lines, freight forwarders and distribution companies.
In the survey, logistics executives were most upbeat about 2015 trade flows between Asia’s emerging markets and other emerging markets. Survey respondents also identified risks to growth by region and provided views on near-sourcing, e-commerce and other trends affecting emerging markets.
“Southeast Asia continues to be one of the world’s most vibrant, fast-growing areas. Growing domestic demand in Indonesia and Malaysia, a strong manufacturing base in Thailand, strong economic growth in Philippines, and a rapidly growing manufacturing base in Vietnam, all position the region well for continued growth,” said Morten Damgaard, CEO of Southeast Asia for Agility Global Integrated Logistics.
Improving business conditions raised the “market compatibility” scores of Malaysia and Philippines. Malaysia and China ranked among the countries with the best “market connectivity,” a reflection of their transport infrastructure and links. Indonesia is among the “next-tier” non-BRICS economies with populations topping 100 million.
Data from the index showed that the world’s busiest air trade lanes, as measured by cargo tonnage, were those linking China with the U.S. and European Union. E.U.-China air freight was up 9.1 percent while U.S.-China air freight rose 7.1 percent. Outbound traffic also posted big gains as China-U.S. volume grew 14.3 percent and China-E.U. air freight increased 9.6 percent, the sharpest gains among top trade lanes that link the U.S. and E.U. to emerging markets.
U.S.-Vietnam was the fastest growing trade lane linking emerging markets to the developed economy, growing at 42.7 percent compared to 2013.
ASEAN’s 10 member states have been taking steps toward becoming a single economic market in 2015. The International Monetary Fund forecasts a rebound for one of ASEAN’s largest economies, Thailand, which has been dogged by political instability and remains under martial law.
The steady shift in manufacturing as companies moved away from having all their production in China to a "China plus one" strategy was continuing. The index identified this trend, as well as near sourcing, where companies set up manufacturing closer to their destination markets, such as in Mexico or Eastern Europe. Almost 68 percent of logistics professionals surveyed said they were seeing manufacturing shift locations closer to end markets.
Research firm Transport Intelligence (Ti) compiled the Index, and chief executive John Manners-Bell said global manufacturing retailers had become more sophisticated in their supply chain sourcing strategies.
“Their decisions are obviously based on international transport costs, and on supply chain risk, but the retailers also have to take into account the prevalence of a large and adequately skilled workforce,” he said.
“Apple may never build their products back in the U.S. because the large supply of labor required and the skill set doesn’t exist there, but the manufacturing environment is shifting and manufacturers are relocating elsewhere in Asia.”
For 2015, the International Monetary Fund forecasts average growth for the 45 countries featured in the Index at 4.57 percent.
“The factors driving growth are increases in population, size of the middle class, spending power and urbanization rates, along with steady progress in health, education and poverty reduction,” said Essa Al-Saleh, president and CEO of Agility Global Integrated Logistics.
“That’s why we remain optimistic about emerging markets and continue to see them on an upward trajectory.”
Manners-Bell said five years after the global recession, prospects for all economies, developed and emerging, were still unclear.
“Economic fragility, a falling oil price and increasing security concerns in Africa and the Middle East have created uncertainty,” he said.
“Despite the challenges, interest remains high in these volatile markets as indicated by increased infrastructure investment, expanding international trade and increased domestic demand. Global manufacturers, retailers and their logistics service providers need to remain cognisant of the shifting dynamics if they are to exploit the significant opportunities which exist.”