UAE Ranks Third In Logistics Index For Fifth Consecutive Year

United Arab Emirates ranks first in the region and third globally, after China and India, for a fifth consecutive year, according to the 2019 Agility Emerging Markets Logistics Index.

In Agility’s 10^th annual ranking of 50 leading emerging markets, a broad gauge of competitiveness based on logistics strength and business fundamentals, Gulf countries outperform most others. Business-friendly conditions and core strengths position several Gulf countries near the top of the Index, behind giants China (1) and India (2), and alongside Southeast Asian nations. The UAE also ranks first in business fundamentals globally.

In the Gulf, the UAE (No. 3), Saudi Arabia (6), Qatar (8), Oman (12), Bahrain (16) and Kuwait (18) rank highly. Among ASEAN countries, Indonesia (4), Malaysia (5), Vietnam (10) Thailand (11) and Philippines (20) are strong.

“The strong performance of Gulf economies in the Index is the result of wise investment in logistics and transport infrastructure, concerted efforts to diversify, steady progress in streamlining regulation, and strategic development of digital capabilities,” says Elias Monem, CEO of Middle East & Africa for Agility Global Integrated Logistics. “The healthy competition among Gulf economies has helped put the entire region out in front.”

Agility’s annual survey of more than 500 supply chain industry professionals shows logistics executives are upbeat about the 2019 emerging markets growth outlook, but fearful that trade tensions, currency and interest rate volatility, and Brexit could trigger a crisis.

In the survey, 55.7% say a 2019 growth rate of 5% is “about right,” but a surprising percentage – 47.1% – say an emerging markets crisis is “likely” or “highly likely.” Emerging markets expanded by 4.7% in 2018, and the International Monetary Fund now forecasts 4.5% expansion for 2019.

The Index ranks 50 countries by factors that make them attractive to logistics providers, freight forwarders, shipping lines, air cargo carriers and distributors. The top 10 are: China, India, United Arab Emirates, Indonesia, Malaysia, Saudi Arabia, Mexico, Qatar, Turkey and Vietnam.

China, India and Indonesia rank highest for domestic logistics; China, India and Mexico are top for international logistics; and UAE, Malaysia and Qatar have the best business fundamentals.

2019 Index and Survey Highlights

• China and India, atop the 2019 rankings based on their size and strength as international and domestic logistics markets, lag smaller rivals in business fundamentals, a category that ranks countries based on regulatory environment, credit and debt dynamics, contract enforcement, anti-corruption safeguards, price stability and market access. In that area, China ranks No. 7 and India is No. 10.
• Logistics industry executives see U.S.-China trade volume shrinking by 10% as a result of tensions, which have led to them imposing tariffs on each other. Against a backdrop of trade friction and data showing China’s economy slowing, survey respondents see India as the market with greatest potential over China, their second choice.
• Fifty-six percent of those surveyed say a prolonged trade standoff between the U.S. and China could benefit Southeast Asian countries, which offer manufacturing and sourcing alternatives to China.
• Brazil, in the midst of a severe economic downturn and political upheaval, tumbles from No. 9 to 15 in the Index, ranking behind smaller Latin economies Mexico (7) and Chile (13). Brazil’s business fundamentals – a priority for new President Jair Bolsonaro – were 39^th out of 50 Index countries. Despite the poor performance, executives surveyed see enormous promise: 44.5% said they were “optimistic” or “strongly optimistic” about Brazil.
• China’s $4-$8 trillion Belt & Road Initiative (BRI) infrastructure drive is a bigger plus for China than for the countries in Asia, the Middle East, Africa and Europe where it is investing. Sixty-four percent of executives surveyed see the BRI boosting growth and trade for China; only 41.4% believe it will help other emerging markets.
• E-commerce is fueling logistics opportunities in emerging markets. Sixty-percent of industry executives expect more outsourcing of last-mile delivery by retailers; 47.4% expecting more e-fulfilment outsourcing.
• Trade bureaucracy is the biggest obstacle to small and medium-sized companies trying to do business across borders, survey respondents say. But when it comes to what size companies will grow fastest in emerging markets, SMEs are their top pick over multi-nationals and big regional or local companies.
• Brexit could benefit emerging markets. Fifty-nine percent of executives surveyed expect emerging markets to seek trade concessions and new deals from the UK. Seventy-percent think emerging markets will be unaffected by Brexit.
• Iran’s near-term potential has evaporated as a result of re-imposed U.S. sanctions. Nearly 75% of those surveyed say Iran is “less promising than before” or “not at all promising.” Iran ranks 49^th of 50 countries as an international logistics opportunity.
• The UAE and Malaysia are tops for business fundamentals. Gulf countries Qatar, Oman and Saudi Arabia also score high. Among the 50 Index countries, it’s hardest to do business in Venezuela, Angola, Myanmar and Libya.
• Sixty-five percent of those surveyed see Mexico increasing trade with the U.S. and Canada under a yet-to-be-ratified trade agreement that is to replace NAFTA.
• Venezuela, which holds the world’s largest oil reserves, ranks last (No. 50) overall and 50th for business fundamentals and international logistics opportunities.
• The so-called BRICS economies (Brazil, Russia, India, China and South Africa) were once considered bellwethers and prime engines of emerging markets growth, but have diverged. China (1) and India (2) continue growing at more than 6% a year. Russia (14) is slowed by economic sanctions and low energy prices; Brazil (15) has lost markets and investment amid its worst downturn; and South Africa (24) has seen prospects suffer amid years of ruling party infighting and labor unrest.
• Sub-Saharan Africa is a mixed picture. South Africa (24) is an underperformer. But in rankings of business fundamentals, Ghana and Kenya do relatively well at No. 19 and No. 21. Nigeria, which vies with South Africa to be the region’s largest economy, suffers from poor business conditions, an area where it ranks 44^th.
• Mobile banking – now available to nearly 43% of the population in Sub-Saharan Africa – is proving to be a catalyst for trade and is lowering barriers for small and medium-sized businesses by providing means for fast, secure payments and financial transactions.
• Several countries would surge in the rankings if they could improve business conditions: Brazil, Philippines, Argentina, Bangladesh, Nigeria, and Bolivia. African economies with relatively strong logistics markets and potential – Uganda, Libya, Mozambique, Angola – are severely hamstrung by weak business fundamentals.

Transport Intelligence (Ti), a leading analysis and research firm for the logistics industry, compiled the Index.

John Manners-Bell, Chief Executive of Ti, says: “This year’s Index highlights the range of challenges and opportunities many markets face. The uncertainty which surrounds trading relationships, combined with implementation of new trade barriers, threatens to derail integration of emerging markets with the rest of the world. It is essential that obstructive trade policy does not stand in the way of commercial opportunities which help drive growth in emerging markets.”

2019 Agility Emerging Markets Logistics Index: www.agility.com/2019index