What’s the new investment hotspot?

Gauging the business potential of emerging markets is a topic of on-going discussion amongst transport and logistics executives, as there are countless variables that can influence which regions are ripe for investment and which may prove risky.

To help expanding businesses gain a clearer understanding of that potential, analysis and research firm Transport Intelligence (Ti) has developed an annual Emerging Markets Logistics Index in collaboration with supply chain service provider, Agility Global Integrated Logistics.

“More than ever, investors in emerging markets [now] need to be discerning and the results of our Index are critical to providing clarity in a confusing and complex world,” says John Manners-Bell, Chief Executive at Ti.

According to Manners-Bell, the most recent edition of the Index collates data from over 1,100 global logistics and supply chain executives, including their opinions on how emerging markets compare in terms of growth potential, connectedness and business climate. The result is a ranking of the top 45 emerging markets, and what Agility calls a ‘snapshot’ of industry sentiment towards opportunities and concerns for the year ahead.

With global market dynamics having shifted substantially throughout 2015, the 2016 edition of the Index found that 61 per cent of logistics industry executives are unclear on the direction of the global economy or expect more volatility this year – listing the most widespread concerns as inconsistent oil prices and the possibility of weakening economies in China and the US.

According to Ti, these concerns have prompted 38 per cent of investors to reassess their involvement in China, as many believe the Asian country is facing “major challenges” down the track. Another 77 per cent say they will re-evaluate their Chinese presence if the country’s economy does not stabilise in the short-term.

Yet, despite that immanent strategy reshuffling, the overall outlook on emerging markets is still positive, even pushing forward the global economy as a whole, Ti found. “Despite the turbulence, the fundamentals driving growth remain consistent – a rising middle class with spending power, progress in poverty reduction, growing populations,” says Essa Al-Saleh, President and CEO of Agility. “That’s why we are still positive on the outlook for emerging markets.”

Although the survey results share the widespread opinion that Chinese instability will continue in 2016, the Asian country still holds the number one position as the emerging market of most interest, as it has done since it entered the Index in 2011.

“China is, though, slowly regressing towards the pack,” the report argues. “This is because growth in the Chinese economy is faltering. Having been geared towards growth as an export-led manufacturer, China’s productive capacity is now facing reorientation in order to smoothly and rapidly transition the economy to a consumption-led domestic market.”

The UAE was able to leverage its friendly business environment built on both geographic position and numerous free trade zones to beat India and Brazil to the number two spot, even though the two countries boast economies five and six times larger, respectively.

“The UAE, home to the powerhouse economies of Dubai and Abu Dhabi, has the best business climate and the best “connectedness,” a measure of infrastructure and transport connections, of any emerging market,” the report says. “The UAE has taken significant steps to create the conditions for logistics service providers, and their clients, to succeed.”

Back in the top three for the first time since 2011, the Index shows India is considered the emerging market with the most growth potential – which is likely influenced by the country’s recent strong economic performance and initial reforms launched by the government of Prime Minister, Narendra Modi.

“India is expected to grow by 7.3 per cent, taking over the mantle from China as the world’s fastest growing large economy, helped by the fact that it is a consumer, rather than producer of oil,” the report explains.

India joins the growing ranks of countries that are benefiting from transport professionals’ reassessment of China, with 22 per cent saying they are now considering a “broader” emerging markets strategy. The next on the list for the professionals is the Asia Pacific region, which has seven of its 11 markets in the top 20 this year. Malaysia, for example, rose four places from last year to its highest ever ranking of fourth place.

However, the rise of Asia Pacific-based countries is also helped by a dramatic drop in Latin American countries’ placements on the Index, mostly as the result of recession and political turmoil in Brazil and depressed prices for commodity exports. “Of the 10 countries that slipped furthest in the Index, six are in Latin America: Peru, Argentina, Uruguay, Brazil, Colombia and Venezuela,” the report unveils.

“It was a volatile year for emerging markets, and you see that in the Index. Eight of the top 10 emerging markets shifted places,” says Agility  CEO, Al-Saleh. Although 2015 saw its fair share of instability in the global economy, emerging markets are still expected to grow around 4.7 per cent in the coming year, he adds. As more people living in emerging markets continue to work their way into the global middle class, up-and-coming regions will increasingly cement their investment potential among transport and logistics professionals.

Concludes Ti chief Manners-Bell, “Looking to the longer term, things aren’t as bad as they may at first seem.”

Leave a Reply

JOIN OUR NEWSLETTER
Close