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Global logistics execs: Brexit won’t harm emerging markets

Baar, Switzerland —The UK’s departure from the European Union is unlikely to damage emerging markets economies and could even help by providing them with wider market access, according to a new survey of more than 500 global logistics industry executives.

The survey findings are part of the 2018 Agility Emerging Markets Logistics Index, an annual ranking of the world’s 50 leading emerging markets as measured by size, economic strength, infrastructure, transport connections and business climate.

In the survey of supply chain industry professionals, nearly 45% of executives say emerging markets will be largely unaffected by Brexit. More than 25% say emerging markets stand to gain, an indication that the UK-EU divorce is seen by some in the logistics industry as a possible catalyst for new trade agreements between emerging markets countries and the UK and EU. Only 12% of industry executives see Brexit damaging emerging markets.

The findings represent something of a turnaround in sentiment. A year ago, 69% of executives surveyed said they worried that the UK’s Brexit vote and breakdown of regional and global trade talks signalled a retreat from free trade.

“The big worry a year ago was that the Brexit vote and U.S. election results represented a desire to pull back from free trade and that an anti-trade backlash would hurt emerging markets economies,” says Essa Al-Saleh, CEO of Agility Global Integrated Logistics. “Those concerns have waned, especially when it comes to Brexit.”

Key survey and index highlights include:

  • In the 50-country Index rankings, Russia climbed three spots to No. 7 after years of declining performance brought about low energy prices, capital flight and U.S. economic sanctions. Russia’s economy stabilized and showed modest growth in 2017 after a wave of corporate cost-cutting, banking industry consolidation and economic reform. Russia also benefitted from Saudi-led efforts to persuade major oil producers to rein in production.
  • China and India top the 2018 rankings and put more distance between themselves and No. 3 UAE in the Index, a broad gauge of emerging markets’ competitiveness. Brazil, struggling to emerge from political turmoil and its worst recession in a century, slips two places to No. 9.
  • Industry executives can’t agree on the future of the North American Free Trade Agreement, which has come under intense criticism from the Trump administration. The United States, Mexico and Canada are in negotiations aimed at updating the agreement. Logistics executives surveyed were sharply split about whether a new pact would help Mexico (24.3%); hurt Mexico (21.8%); or leave trade unchanged (25.7%).
  • Fifty-five percent of executives surveyed say small and medium-sized businesses – those with fewer than 250 employees – will benefit most from emerging markets growth. Twenty-six percent said large companies would be the biggest beneficiaries.
  • India and China are the logistics industry’s favorite investment destinations, but Vietnam leads a second group that includes UAE, Brazil and Indonesia.
  • The percentage of supply chain executives whose companies are considering investment in India jumped to 37.4% from 22.8% a year ago, following the rollout of India’s Goods & Services Tax unification and other reforms.

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

John Manners-Bell, Chief Executive of Ti, says: “Emerging markets enjoyed favourable market conditions in 2017 with trade growth the healthiest in years. However, there are many storylines yet to fully unfold, such as China’s debt, the renegotiation of NAFTA and ongoing political and economic transition in the Middle East. While the going looks good for now, there are numerous challenges on the horizon.”

2018 Agility Emerging Markets Logistics Index:

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