Logistics company rankings

Emerging Markets Logistics Index Rankings. Overall Rankings. The rankings of the top four markets – China, India, UAE and Malaysia – remained the same year-on-year. China retains its position atop the Index thanks to its continued excellence across all three facets of the Index, ranking near the top of the Market Size & Growth Attractiveness, Market Compatibility (business conditions) and Market Connectedness (infrastructure and connectivity) sub-indices. While its Index score and rank did not change much, there is much debate about whether a mountain of debt threatens to undermine its economy over the next few years. Its economic growth rate, which many argue has been held up artificially for years by the funding of unproductive investments, could significantly slow (see the Emerging Narratives section for more information). India remains second, with its Index score also changing very little. It remains a large emerging market with excellent growth prospects, which is held back by mediocre business conditions and infrastructure (though infrastructure in particular is improving rapidly). Its inertia in the Index this year may surprise some, given the generally positive news surrounding its economic reforms, especially the Goods and Services Tax (GST), but the data is yet to catch up with any impact that such reforms may have had. Many have touted its reforms as ‘game-changing’, and that proposition is examined as an Emerging Narrative. The UAE is No. 3 once again, staying atop the Compatibility and Connectedness sub-indices, whilst remaining in the middle of the pack of Market Size & Growth Attractiveness. Its fellow GCC partner, Saudi Arabia, is down one place to No. 6, as worsening economic growth forecasts and financial stability took their toll. While their positions in the Index are stable for now, there is much change brewing on the Arabian Peninsula. Political tensions boiled over in June when Saudi Arabia, Egypt, Bahrain, Yemen and the UAE enforced a blockade of Qatar. Later in the year, an anti-corruption purge swept Saudi Arabia as its young crown prince, Muhammad bin Salman, is set to become ruler. In the background, structural economic changes are taking place as the region takes steps to adjust to a world of cheaper oil. A deeper examination of these dynamics forms another of our Emerging Narratives. Malaysia is yet another member of the top 10 whose position appears to have changed little as it stays at No. 4 in the Index. However, this disguises significant sub-index variation. It is up three places in Market Size & Growth Attractiveness, on the back of improving financial stability, though its scores declined in Compatibility and Connectedness, due mainly to lower foreign direct investment and poorer overall infrastructure, respectively. Malaysia’s neighbour Indonesia is up one place to No. 5, on the back of moving up five spots in the Connectedness subindex. The overall quality of its infrastructure and efficiency of its customs procedures have improved. Indonesia is a large emerging market that has historically been curtailed by middling business conditions and infrastructure, though there are signs that the latter may be turning a corner, as is explored in depth by another Emerging Narrative. Russia has gained the most places of any country in the top 10, rising three spots to No. 7. It only gained, however, because others around it fell. Russia’s Index score rose by the smallest of margins: just 0.01. Sources: Transport Intelligence. Size & Growth Attractiveness. The Market Size & Growth sub-index ranks participants according to criteria measuring population, size of economy, economic growth forecasts and financial stability. With absolute population and size of economy relatively constant measures year-on-year, what tends to drive change are shifts in growth forecasts and financial stability. This year, 29 countries improved their four-year ahead economic forecasts. Downgrades have been suffered by 21. Perhaps the most symbolic movement in the sub-index is China reclaiming top spot from India, which was viewed as something of a changing of the guard last year. China has retaken the lead on the back of slightly improved economic forecasts, whereas the reverse is true for India. Both countries, however, improved their scores overall and India lies just 0.03 points behind. Although China reclaimed the lead this year, over the next few years it is expected that India will establish a clear gap at the top. This is on the basis that, looking forward, India’s economic growth prospects and financial stability look more robust than China’s (see China’s Emerging Narrative for more). Many oil-dependent economies were the biggest movers down. Brazil lost three spots, Nigeria fell by five, while Venezuela sunk 15 places to rank bottom of the list. Brazil’s financial stability has taken a big hit, Nigeria’s growth forecast has been revised down sharply, while Venezuela has suffered in both regards. That the country which is the 16th largest economy of the 50 emerging markets (according to 2013 data, the latest available) ranks last in Market Size & Growth shows just how disastrous its economic prospects and financial stability are. Some notable improvers this year are Sri Lanka (up 6), Thailand (up 5) and the Philippines (up 4). Sri Lanka’s financial stability has improved markedly. An IMF visit to Sri Lanka, concluded in September 2017, noted that its rebuilding of foreign reserves has strengthened the economy’s resilience. In addition, it commended the government for “strong efforts in implementing their IMF-supported economic reform program with all quantitative performance targets through endJune 2017 having been met and the landmark Inland Revenue Act (IRA) legislation passed by Parliament.” The IRA will take effect from April 1, 2018, and will effectively simplify the tax system to create a more investor-friendly environment. Sri Lanka is hoping to attract more foreign direct investment. In November 2017 there was initially encouragement for foreign LSPs when Sri Lanka’s finance minister announced that restrictions on foreign ownership of shipping agency and freight forwarding businesses would be removed. Later in the month, however, the shipping minister vociferously announced his opposition, asserting: “This is not a subject for the finance ministry, nor should it have come up in the budget”, adding “The President is firmly against this move.” Elsewhere, Thailand moved up five spots thanks to slightly improved growth forecasts and improved financial stability. Thailand’s central bank has kept its benchmark interest rate unchanged at 1.5% since 2015, rebuffing calls from the IMF and the government to loosen policy. The Bank of Thailand has argued that a rate cut may increase financial stability risks. It has also fended off claims of currency manipulation as it boosts foreign-exchange reserves close to a record. President Donald Trump’s executive order to probe 16 countries that run the largest bilateral trade deficits United States poses a risk for export-dependent Thailand. The Philippines’ position improved largely due to its excellent economic growth in 2016, with its growth of 6.8% surpassing the likes of China (6.7%) and Vietnam (6.2%). The government is looking to boost growth by pushing through its Comprehensive Tax Reform Program (CTRP), which will provide tax relief for millions, while also funding the administration’s infrastructure plans. Sources: Transport Intelligence. Market Compatibility​​ The Compatibility sub-index is effectively a measure of market accessibility and the ease of doing business. Six of the top 10 ranked markets for Compatibility come from the Middle East & North Africa region, down from seven last year, as Kuwait dropped out of the top 10. The UAE retains its position at the top for a fourth consecutive year, with its abundance of free trade zones, no corporation tax, the offer of full ownership and unlimited repatriation of profits still setting the benchmark for emerging markets. That said, Qatar, which halved the gap last year, has caught up even more as economic diversification progresses and non-tariff barriers diminish. Its improvement should be treated cautiously, however, as the data has not yet had a chance to really take account of the impact of its blockade. Whether it will adversely impact Qatar’s score is an open question: it appears to be handling the situation comfortably (see Emerging Narratives for more). Some of this year’s best performers include Egypt (up 26 places), Algeria (up 12 places), Ukraine (up 11 places) and Ethiopia (up 7 places). As examined in detail earlier, Egypt’s score has jumped due to business costs of crime, violence and terrorism falling markedly. The same story applies for Ukraine: the business environment has returned to some semblance of normality. For Ethiopia, again overall security is improving, which may also in part be driving improved foreign investment flows. Many textiles manufacturers are embarking on small-scale investments to test the water of the operating environment. Algeria’s gains are more broad-based, as non-tariff barriers have reduced significantly, while FDI flows have increased. As North Africa’s oil superpower, Algeria is desperate to diversify away from hydrocarbons which account for around one-third of GDP, more than two-thirds of government revenues and over 90% of exports. New laws designed to incentivise investment in non-oil sectors have been proposed, providing tax breaks and looser regulations. The hope is that ‘high value-added’ sectors such as agribusiness, renewable energy and ICT will be able to attract significant funding. Unfortunately, Algeria is particularly weak in rule of law, government effectiveness and regulatory quality, which contribute to pervasive corruption. This makes attracting new investors all the more difficult. The worst performers this year include Sri Lanka (down 10), Cambodia (down 7) and Kuwait, Tanzania, Lebanon and the Philippines (all down 6). Sri Lanka fell off a cliff, as its business costs of crime, violence and terrorism jumped year-on-year. The same applies, but less acutely, for Cambodia, Kuwait, Lebanon and the Philippines. In Tanzania, more burdensome non-tariff barriers and weaker foreign direct investment have pushed down its score. Many have flagged legislation enacted in July 2017 as threatening to the mining sector. The new laws give the Tanzanian Government the power to tear up and renegotiate mining contracts, introduce higher royalties, enforce local beneficiation of minerals and bring in strict local-content requirements. They also require the government to own at least a 16% stake in mining projects and deny the rights of mining companies to seek international arbitration in the event of disputes. Numerous mining companies have announced that they are reviewing their operations in the country as a result. Sources: Transport Intelligence. Market Connectedness. The top 10 ranking positions for Market Connectedness exhibited a large amount of continuity year-on-year, as nine markets retained their positions in the top 10. Kazakhstan was the sole country to fall out, dropping five places to 15th. The overall quality of its infrastructure is judged to have worsened marginally, but its customs efficiency took a significant step back. According to the US Department of Commerce, Kazakhstan’s customs code remains overly complicated and does not encourage transparency or the expeditious movement of goods. Generally, Customs requires imported goods to be placed in a temporary storage warehouse pending clearance, causing delays and incurring significant costs. US firms have noted the need to present “transaction passports”, ranging from procurement documents to bank transfers, in order to clear their goods with Customs. That said, the situation may soon improve. In August 2017, the government announced that it would overhaul procedures by introducing a new Customs code, switching to complete electronic customs declaration and the possibility of using a single-window system. In tandem, these two provisions would allow goods to be released automatically, simplifying the declaration process and reducing corruption risk. The new code would also permit postponing customs duties and taxes. It is due to come into effect in January 2018. Elsewhere, two major markets, India and Brazil, continue to go in opposite directions. India is clearly taking steps to address its infrastructure deficit, having moved up from 22nd to 18th last year and now up to 13th this year. Conversely, Brazil continues its slide into mediocrity, falling from 23rd to 28th a year ago and this year slumping to 32nd. India’s power supply is streets ahead compared to just five years ago, when it embarrassingly suffered the world’s biggest-ever blackout, which affected over 600m people. In 2017, Prime Minister Modi commissioned the country’s longest road tunnel and longest bridge. The tunnel will cut driving time between Jammu and Srinagar, the winter and summer capitals of the state of Jammu & Kashmir, by two hours. The new bridge traverses the Brahmaputra River in the north-eastern state of Assam. Another crossing, the world’s tallest railway bridge, which stretches 359 metres over a gorge, will link Kashmir to the rest of India by rail for the first time. India has also started work on its first high-speed rail link, connecting Ahmedabad to Mumbai. As for rapid-transit metro systems, seven cities already have them, while eight more are building them. In contrast, Brazil’s infrastructure is creaking. Operation Car Wash, the giant corruption investigation of the state-owned oil company, Petrobras, not only drew in the government but also most of Brazil’s largest construction companies. This crippled their ability to pursue new infrastructure investments. The government is desperately trying to attract private investment. There is some interest – foreign operators such as German airport manager Fraport are bidding for airports, while Chinese companies are also snapping up assets, including electricity company CPFL Energia. The biggest problem is that the government itself has no money. The Port of Santos, South America’s largest container port and perhaps Brazil’s single most important infrastructure asset, also has its fair share of problems. Although Maersk has invested more than $400m in its terminal there since 2010, supporting infrastructure is shoddy. There is only one highway overpass linking to the terminal and truck drivers suffer long delays at railway crossings. The port authority has failed to dredge the terminal’s access canal properly, preventing certain container ships from loading to full capacity. As explored in one of our Emerging Narratives, it is difficult to see how Brazil’s political problems will turn around any time soon.