Posted on January 19, 2016

Gulf states, led by the United Arab Emirates, offer the best business conditions found in the world’s emerging markets, according to the 2016 Agility Emerging Markets Logistics Index.

The Index, in its 7th year, ranks 45 leading emerging markets countries based on their size, business conditions, infrastructure and other factors that make them attractive to logistics providers, freight forwarders, shipping lines, air cargo carriers and distributors. The Index also includes a survey of more than 1,100 global logistics and supply chain executives. UAE, home to the powerhouse economies of Dubai and Abu Dhabi, ranks ahead of much larger economies, finishing No. 2 overall behind only China among the countries in the 2016 Index. China’s economy is 25 times larger than UAE; India’s is five times the size of the UAE economy; Brazil’s is six times larger.

Among the countries in the Index, UAE, Qatar and Oman are the most business friendly, based on a combination of market access, risk, regulation, foreign investment, urbanization and wealth distribution. Other Gulf states also rank near the top in business conditions: Saudi Arabia (5); Kuwait (9) and Bahrain (11). UAE leads all 45 countries in “connectedness,” meaning it has the best combination of infrastructure, transport connections, and customs and border administration. After UAE, Malaysia, China and Chile rank highest in connectedness. 

The UAE “is a model for emerging and developed economies alike,” says Elias Monem, CEO Middle East and Africa for Agility Global Integrated Logistics. “In areas critical to logistics providers and their customers, it has been exceptionally farsighted. Its infrastructure and regulatory framework are not merely best-in-class among emerging markets, they are among finest found in any country, no matter how advanced.”

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The survey findings show that logistics industry executives are braced for more uncertainty and volatility in emerging markets in 2016. Sixty-one percent said they are unclear on the direction of the world economy or expect more turbulence. Their top concerns: China’s economic health, oil prices and the direction of the U.S. economy.

Other Index findings:

  • Egypt (No. 22) and Nigeria (No. 17) both climbed 10 spots in the Index -- the biggest gains by any country in seven years of rankings. The Egyptian government has worked to stabilize the economy but continues to battle high inflation and search for ways to spark growth. In 2015, Egypt opened an $8 billion man-made channel intended to speed transit times and increase traffic through the Suez Canal. The government is also is trying to lure investment for ambitious, multi-year projects: construction of a new capital city east of Cairo; a massive land reclamation effort; natural gas exploration; and development of a logistics hub along the Suez. 
  • China, the world’s second-largest economy, remains the leading emerging market by a large margin. Among the countries at the top of the Index rankings, UAE (No. 2), India (3) and Malaysia (4) leaped over the commodity-dependent economies of Saudi Arabia (5), Brazil (6) and Indonesia (7). Rounding out the top 10 were Mexico (8), Russia (9) and Turkey (10).
  • Countries in Latin America are losing ground to other emerging markets as a result of recession and political turmoil in Brazil, the region’s biggest economy, 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. Even so, Chile continues to be the top-ranked emerging market with GDP under $300 million.
  • Russia, hurt by Western sanctions and isolated economically since it began backing rebels in Ukraine and intervened militarily in Syria, fell from No. 7 to No. 9 in the Index. Tension with Russia and the loss of economic output in the breakaway Crimea region have hurt Ukraine, as well. Ukraine fell four spots to No. 34.

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Other survey findings:

  • For the first time, industry executives picked India – not China – as the emerging economy with the most potential to grow as a logistics market. India climbed two spots to No. 3 in the overall Index, behind China and UAE, on strong 2015 growth and economic reforms launched by the government of Prime Minister Narendra Modi.
  • Supply chain professionals signaled their interest in the idea that Iran could emerge from international isolation. Iran is not among the 45 countries ranked in the Index, but in the survey of industry executives, it moved up 12 sports to No. 15 as a potential major logistics market and jumped 19 spots to No. 16 as a market for potential investment.
  • In the Middle East, the countries seen as having the least potential are those most directly affected by conflict: Syria, Iraq, Libya.
  • Logistics executives see “economic shock” as the top risk in Asia Pacific, a sign of concern that a slowdown in China could ripple through economies and supply chains elsewhere in the region. A significant percentage (38%) said they are reassessing their China strategies. In the past, industry executives said natural disasters and corruption were the top risks in Asia.
  • For the first time, logistics professionals see consumer spending in Africa as a more important driver of growth than energy and minerals. They identified Nigeria, South Africa, Ghana and Kenya as Africa’s most promising markets. In spite of recent growth and investment, Sub-Saharan Africa remains a frontier market for most supply chain executives: only 21.2% said they have operations there.
  • The logistics industry is intrigued by the possibility that Iran will emerge from its long economic isolation as the result of an agreement to curtail its nuclear program. In the survey, Iran moved up 12 spots – from No. 27 to No. 15 – among countries with potential as major logistics markets.

“It was a volatile year for emerging markets, and you see that in the Index. Eight of the top 10 emerging markets shifted places,” said Essa Al-Saleh, President and CEO of Agility Global Integrated Logistics. “Despite the turbulence, the fundamentals driving growth remain consistent – a rising middle class with spending power, progress in poverty reduction, growing populations. That’s why we are still positive on the outlook for emerging markets and see them driving global growth.”

Transport Intelligence (Ti), a leading analysis and research firm for the logistics industry, compiled the Index. John Manners-Bell, Chief Executive Ti, said: “The world’s economy is still riven by instability, and emerging markets such as China and Brazil have not been immune. However others, such as Mexico, are in a far stronger position and will benefit from the economic growth experienced in the U.S. and Europe. More than ever, investors in emerging markets need to be discerning and the results of our Index are critical to providing clarity in a confusing and complex world.”

2016 Agility Emerging Markets Logistics Index:; Index video: