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Emerging Markets Driving ExpansionWednesday, October 23, 2013 > 12:36:45
(Cargonews Asia – Greg Knowler)
A shift from export-driven growth to demand-driven growth across the world’s emerging markets will create a major change in global trade, Agility Global Integrated Logistics president and chief executive officer Essa Al-Saleh said in Singapore.
Dusting off his crystal ball, Al-Saleh gave an overview of the Agility Emerging Markets Logistics Index, which showed that in 2020, these markets would generate two-thirds of global growth.
“By 2030, China will have surpassed the US as the world’s largest economy. That will create significant underlying changes in global trade flows. By 2060, the combined GDP of China and India will exceed all the OECD countries. These are underlying trends that will develop over the years,” he said.
Agility publishes the annual index that looks at 45 major emerging markets and evaluates their attractiveness for investment by logistics companies, air cargo carriers, shipping lines, freight forwarders and distribution companies.
Even though there was a slowdown in emerging markets, four Asian countries made the global Top 10 on the index – China, India, Indonesia and Malaysia. These vibrant economies were continuing to drive expansion in logistics and trade.
HSBC has forecast that by 2030, demand from China and India will see infrastructure-related trade accounting for more than half of all global exchanges of goods.
Al-Saleh said year-on-year cargo volumes were up in the BRIC countries of Brazil, Russia, India and China, despite stalling in some areas that were recently recording strong growth.
“Asia’s emerging markets continue to provide a mix of dynamism and political stability that makes them very attractive to logistics companies with the ability to invest, hire and broaden their networks,” he told delegates at the Ti Emerging Markets Logistics Conference in Singapore. “Even with a softening in global trade the growth opportunities still remain in emerging markets.”
Wolfgang Lehmacher, partner and managing director (Greater China and India), for Corporate
Value Associates (CVA), also had his crystal ball out. He predicted that in 2050, the combined population of the US and Europe would be 1.1 billion people, less than China today.
“The GDP per capita here in Asia and the growth that will generate will be huge, but the challenges are many,” he said.
“How the countries evolve in terms of competitiveness will determine their future success. What drags them down is definitely the red tape. Those people who have tried to set up operations in India and have experienced the red tape should compare it to Hong Kong – it is day and night.”
Other stumbling blocks include corruption, poor investment in infrastructure and especially talent shortages.
“Talent drags countries down in Asia,” Lehmacher said. “There is a lot of talent in Asia but not enough to drive the massive markets.”
A delegate from the conference floor asked how a company would know the right time to invest in an emerging market in Asia. For Al-Saleh, the answer was simple: “The time is now.”
He said sometimes the ambiguity a company had to accept in the emerging markets was different to that of the developed markets, but as you gain a deeper understanding, a company could find ways to grow.
“Agility embarked on an aggressive acquisition strategy, and clearly not all went as we expected. But on balance we were more right than wrong. We were consistent and committed, and that is the key,” he said.
“If you are in this for a quick buck, there is never a right time. But if you are in it for the long term, then the time is now.”