Supply chain executives brace for global slowdown, see threat to emerging markets
EMLI 2020
BAAR, Switzerland – February 10, 2020 – Supply chain industry executives anticipate a recession in 2020 amid concerns about downward pressure on global trade volumes, uncertain growth prospects, and ongoing friction between the U.S. and China.
Sixty-four percent of industry professionals surveyed for the 2020 Agility Emerging Markets Logistics Index say a recession is likely in the next 12 months. Only 12% of the 780 respondents say a recession is unlikely.
At the same time, most logistics executives say their companies will ride out any turbulence in trade relations between the world’s two largest economies. Seventy-percent of those with operations and investments in China say they will stay put and that their plans are unchanged despite the U.S.-China trade battle.
If they were to move production or sourcing from China, Vietnam and India were respondents’ top choices of places to relocate. They identified rising trade barriers as the factor most likely to hurt emerging markets growth.
The survey is part of the 2020 Agility Emerging Markets Logistics Index, the company’s 11th annual snapshot of industry sentiment and ranking of the world’s 50 leading emerging markets. The Index is a broad gauge of countries’ competitiveness based on their international and domestic logistics strengths and business fundamentals.
“The fears of a recession are not to be taken lightly, especially because of uncertainty about the impact of the coronavirus outbreak,” says Essa Al-Saleh, CEO of Agility Global Logistics. “A positive sign, however, is that a large number of emerging markets economies were able to weather an array of issues — political and social unrest, structural problems, even international sanctions for some — without losing much ground in the past year.”
The Index ranks 50 countries by factors that make them attractive to logistics providers, freight forwarders, shipping lines, air cargo carriers and distributors. In 2020, the top 10 emerging markets are: China, India, United Arab Emirates, Indonesia, Malaysia, Saudi Arabia, Qatar, Mexico, Thailand and Turkey.
China, India and Indonesia rank highest for domestic logistics; China, India and Mexico are top for international logistics; and UAE, Malaysia and Saudi Arabia have the best business fundamentals.
China and India, atop the 2020 rankings based on their size and strength as international and domestic logistics markets, lag behind 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. 8 and India is No. 18.
The strongest clusters of emerging markets are in the Arabian Gulf and Southeast Asia, thanks to business-friendly conditions and core strengths – the Gulf’s energy wealth and Southeast Asian manufacturing power – that draw logistics activity. In the Gulf, UAE (No. 3), Saudi Arabia (6), Qatar (7), Oman (14), Bahrain (15) and Kuwait (19) rank among the most business-friendly emerging markets. Among ASEAN countries, Indonesia (4), Malaysia (5), Thailand (9), and Vietnam (11) are strong.
Survey respondents see India as the market with greatest potential over China, their second choice. In rankings of best business conditions, several countries are making big moves: Egypt climbs 10 spots to #17; Ukraine jumps 10 spots to #27; Ghana drops 13 spots to #32; and Iran tumbles 12 spots to #38.
Forty-two 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. This is less, however, than 56% who said last year that Southeast Asia would benefit.
Egypt, despite a brief period of social unrest in 2019, showed significant gains across all indices. On the overall index, Egypt rose six spots to No. 20, while leaping 10 spots on the business fundamentals chart (17), six spots on the domestic opportunities index (13) and jumping five spots on the international opportunities index (23).
The top three factors that keep small businesses out of global trade are trade bureaucracy (17%), government/border instability (14%) and inability to compete with larger rivals (14%), supply chain professionals say in the survey.
Despite the belief a recession is likely, emerging markets still grew an estimated 7% in 2019 and are projected by the IMF to grow 4.4% in 2020. As for what is driving emerging markets growth, 23% say modernization of customs systems and processes, 18% cite increased internet penetration, 16% say modernization of logistics provider systems (WMS, TMS, etc.) and 15% mention increased adoption and modernization of online payment systems.
The top five “megacity” emerging markets logistics hubs are Shanghai, New Delhi, Sao Paulo, Jakarta and Mexico City. Megacities – urban centers with populations of 10 million or more – require vast logistics support to meet domestic needs and engage in trade.
E-commerce fulfillment is the top choice among logistics services expected to maintain or improve growth, well ahead of other services such as domestic last-mile delivery and international express parcel delivery.
The countries with the least potential as logistics markets in 2020 are Syria, Iran, Venezuela, Iraq and Libya, according to the survey.
The rise of digital technology has spurred the growth of ever more complex business ecosystems. As companies partner with competitors and become “frenemies”, traditional boundaries are dissolving and co-opertition is now the new normal.
At an event hosted by Agility alongside the 2020 World Economic Forum Annual Meeting in Davos, Switzerland, global business leaders from diverse industries and roles discussed the ways they are using collaborative and interdependent ecosystems to drive growth at their companies.
Watch the video highlights to discover how Unilever has shifted its mindset from looking to drive savings from its suppliers, to a relationship where they partner for mutual growth. Toshiba’s Chief Digital Officer introduces “ifLink”, a new IoT platform and shares his 3 ‘A’s approach to building a successful platform: affordability, agility and availability. Siemens Nigeria CEO describes how she uses partnerships to expand to local markets and also to drive collective action towards solving issues such as cybercrime and corruption. And PayPal’s SVP core markets explains why whether you build, buy or partner, platform integration is key.
Logistics company donation will support 12,000 refugees, mainly from Myanmar
DAVOS, Switzerland – Jan. 25, 2020 – Agility, a leading global logistics provider, and UNHCR, the UN Refugee Agency, announced a partnership that will strengthen the delivery of essential services to refugees in Malaysia, in particular for vulnerable communities living outside of the country’s capital.
The partnership, announced at the World Economic Forum’s annual meeting at Davos, will establish pilot programs in Johor and Penang, Malaysia. The programs will bring critically needed services to more than 12,000 refugees, including refugee card renewal, access to essential information related to protection, and to receive counseling on available services.
There are some 178,000 refugees registered with UNHCR in Malaysia. The new partnership with Agility will allow UNHCR to further extend support to more than 12,000 refugees, most of them Rohingyas from Myanmar. With local engagement and support, Agility and UNHCR will eliminate the need for vulnerable refugees to travel 300+ kilometers from their homes to Kuala Lumpur to have access to vital services, including refugee card renewal.
Agility CEO Tarek Sultan said: “UNHCR’s services are critical to giving refugees and families a safe place in times of turmoil. These services will help support a stronger sense of community for refugees who have been forced to flee their homes and villages. Agility has long supported UNHCR in the Middle East. We see a need to expand our partnership to help meet the needs of refugees in Malaysia.”
H.R.H. Prince Jaime de Bourbon de Parme, Senior Advisor for Private Sector Partnerships, UNHCR, said, “Agility’s contribution is an important demonstration of solidarity from the Kuwait private sector and one that will improve the safety and well-being of thousands of refugees in Malaysia, a country that has a long history of hosting displaced populations. The global size and scale of displacement requires us to go beyond the business as usual approach and I am confident that Agility’s gesture will inspire the private sector to upscale its support to refugees.”
Globally, Agility helps those affected by natural disasters and other crises by providing supply chain expertise and resources in collaboration with commercial partners, relief groups and international institutions. In the past, Agility has supported UNHCR’s work in the Middle East, by assisting more than 490 Syrian refugee families (close to 2,500 individuals) through fundraising and donations. To find out more about Agility’s sustainability activities, visit http://sustainability.agility.com.
Logistics industry survey finds executives worried despite new trade deal
DAVOS, Switzerland – Jan. 22, 2020 – Just days after the United States and China signed a deal that de-escalates months of back-and-forth trade retaliation, a survey of logistics executives shows that the supply chain industry continues to see a U.S.-China trade war as the top threat to global growth.
In a poll conducted this month by Agility and Transport Intelligence, logistics professionals were surveyed for their thoughts on the global economy and the leading threats to growth in 2020*. The results are part of the annual Agility Emerging Markets Logistics Index, a look at industry sentiment and a ranking of the world’s 50 leading emerging markets.
Twenty-eight percent of respondents see a US-China trade war as the biggest threat to global growth in 2020. US-Iranian tensions were next (19%), followed by a slowdown in the Chinese economy (17%).
What is the biggest threat to global economic growth in 2020?
Three of the leading threats involve China, which highlights its growing importance to the global economy and its ability to affect the fortunes of other countries.
The findings come just a week after Washington and Beijing signed a “phase one” trade deal in which they agreed to halt imposition of new tariffs and restore the flow of many goods and commodities that had been cut off by months of friction.
Only 8% of those surveyed see Brexit as the largest threat in 2020.
*The survey of 330 logistics and supply chain professionals was conducted by global research group Transport Intelligence as part of the 2020 Agility Emerging Markets Logistics Index, which will be released Feb. 10, 2020.
As emergencies around the world displaces populations, the work of international organizations like UNHCR are even more critical. In Malaysia, over 70,000 of the 163,000+ refugees in the country are Rohingya, fleeing persecution. Public-private partnerships are an essential part of improving global governance, and this partnership between UNHCR and Agility creates opportunities for both organizations to collaborate and help solve many difficult challenges faced by refugees in Malaysia.
Small businesses have global potential thanks to e-commerce.
SMEs active on the internet export more than traditional businesses.
Heightened economic activity can especially benefit women.
Globalization got a bad rap in part because, by sweeping aside barriers to the movement of capital, labour and goods, it was perceived to have favoured large corporate interests over all others.
With the unfolding e-commerce revolution, however, a fairer and more inclusive balance is reshaping the global business environment to provide more room and opportunity for small businesses, especially those headed by women.
E-commerce: small business accelerator
Today, small businesses – even one-person “social sellers” – can run as global entities thanks to the growing availability of inexpensive digital tools that allow them to source, ship, deliver, pay, collect and virtualize other key aspects of their operations. The fast-developing e-commerce ecosystem, which includes marketplaces, payment gateways and online logistics, is helping to reduce barriers to trade across borders.
Export participation rates for traditional small businesses (those that typically do not sell online) range between 2-28% in most countries. In contrast, 97% of internet-enabled small businesses export, according to the World Trade Organization.
Why is this a big deal? Because firms participating in global value chains see the strongest gains in productivity, income and quality of employment. A report by the World Bank points out that in developing countries like Ethiopia, firms that are part of global value chains are twice as productive as other firms. And in a broad number of emerging markets, companies that take part in global trade are also more likely to employ more women than others with more traditional, male-dominated business models. Female participation in the labour market, in turn, correlates strongly to societal gains in health, education and overall prosperity.
Put simply, e-commerce is creating economic employment opportunities for new sets of players. Amazon claims that the 1 million small businesses selling on its platform have created 900,000 jobs in the process. Alibaba’s Taobao, one of the largest e-commerce platforms in China, has 3,200 “Taobao villages” in rural areas where a significant percentage of the village is engaged in e-commerce transactions. No wonder then, that some non-governmental organizations and think tanks are touting e-commerce as a model for developing rural Africa.
E-commerce: gender accelerator
When it comes to the gender effect of e-commerce, the research is still emerging and much of the data is localized, but early signs are promising.
More and more women are owning businesses – and e-commerce can help close the gap
Image: Mastercard
The International Trade Centre (ITC) has found that despite having less access to technology, women use digital platforms to their advantage. The head of the ITC says four out of five small businesses engaged in cross-border e-commerce are women-owned, while just one in five firms engaged in offline trade is headed by women.
Meanwhile, there is more and more evidence to show how e-commerce and digital technology are bringing women to the fore of global trade:
A McKinsey study on Indonesia’s e-commerce sector found that women involved in online commerce generate more revenue than that contributed by those in traditional commerce.
Taobao says 50% of its online shops were started by women, whereas only 3.7% of businesses across 67 other industries in China are headed by females, according to the South China Morning Post.
The World Economic Forum says one in three Middle East start-ups is female-founded. And Cairo-based ExpandCart, one of the region’s most successful e-commerce enablement platforms, says that one-third of small businesses on its platform are owned by women.
Cross-border e-commerce is the fastest-growing segment of international trade, so all of this should come as welcome news for globalization’s critics and fans alike. More importantly, it can help change the two-decade narrative about opportunity, inclusion, fairness and balance in the global economy.
Technology and e-commerce are finally democratizing access to the benefits of global trade, helping globalization live up to its original promise of shared prosperity and growth.
Sustainable trade will require the participation of emerging economies.
Finding the right balance between sustainability and economics is crucial.
The technology exists; the real barrier is changing existing mindsets.
Eliminating avoidable emissions is a good starting point.
Getting to zero emissions in logistics is a daunting prospect. Developing zero-emissions fuels and vessels is a critical pathway forward, but this approach has its limitations. In a cost-driven industry, a high-cost, high-risk focus on zero-emissions technology may position many players in emerging markets as part of the dirty past – not the clean future. We need a pragmatic approach that balances high-tech practices with practical ones that offer a role for everyone. We can reduce avoidable emissions through more efficient supply chains, but we need to shift mindsets. That’s where we should take immediate steps while continuing the longer journey.
Without the willing participation of emerging market players, a sustainable future for global trade is at risk.
Trade is growing most and fastest in emerging markets, with the growth of import volumes into Asia’s emerging markets as an example. In 2018, developing economies accounted for 64% of seaborne trade. Engaging this majority of actors is essential for the success of the zero-emissions project.
At the same time, we need to balance the environmental with the social and economic aspects of sustainability. If we require investment in new vessels and bunkering infrastructure to participate in global value chains, some actors will simply not comply, and will be left out – and if a port or a country is left out, so are its small and medium-sized firms (SMEs). For SMEs in these markets, accessing global value chains is critical to achieving stable growth and creating jobs. Keep in mind that SMEs contribute over 50% to GDP and account for two-thirds of formal employment in many countries.
Even in mature markets, the largest industry players can’t agree on who should cover the cost of transitioning to a zero-emissions logistics industry.
Logistics is a highly cost-sensitive industry. Just consider that second-generation biofuels are commercially viable, but not available, because no one is yet willing to consistently pay higher costs to ship goods. When given a chance, only a handful of shippers choose the environment over cost. The industry consensus is that a global fuel levy will be necessary to incorporate the social cost of carbon into fuel costs – but action on this has stalled, because oil companies don’t think it’s fair that they shoulder most of the cost burden, even if that cost is ultimately passed on.
Will emerging markets be able to afford the transition to cleaner fuels?
Transitioning to new fuels will be expensive in the short term. Recent research by the Global Maritime Agency – due to be published in late January – estimates that out of up to $1.9 trillion in investments needed to fully decarbonize maritime shipping by 2050, only 13% is for ships. The remaining 87% would be for land-based infrastructure and production facilities for alternative fuels. The International Renewable Energy Agency says “any shift toward a cleaner sector will require important changes to port terminal infrastructure and operational equipment [see chart below], as well as daily operational practices”.
Infrastructure and equipment will demand the lion’s share of investment
Image: IRENA
Consider coastal African countries, or Viet Nam, where newly-discovered offshore oil resources have the potential to drive considerable growth. How should these countries consider these potential assets in a zero-emissions future? Should they not plan to benefit from their natural resources? Should they, instead, invest in port infrastructure for zero-emissions fuels that they will likely need to import? Is that fair?
The industry should mobilize around practical, system-level approaches to address avoidable emissions across supply chains.
No matter what the fuels of the future will be, it will be useful to reduce the total amount of fuel needed to power global trade. More fuel-efficient transport modes, supply-chain optimization and operational efficiency should be prioritized for their emissions-reducing potential. These solutions are not, and cannot be mode-specific, but must address global logistics as a system.
A guide to the trade-offs involved Image: Authors / IRENA
To address avoidable emissions, data-informed optimization across modes and supply chains deserves more industry attention.
Avoidable emissions are embedded into inefficiencies at every step along the supply chain. It’s tough to measure their contribution to overall transport emissions, but the share could be substantial. Consider that in many markets, sometimes more than 40% of trucks on the road at any given time are moving empty, and a much greater percentage are underutilized.
Beyond individual shippers or supply chains, optimization across the logistics system makes better use of transport assets across a country’s distribution network, or back and forth along a trade lane. On a global scale, the containerization of US agricultural exports addressed the asymmetry of cargo flows between the US and China. Digital freight booking platforms, like Cargo X in Brazil, can drastically improve asset utilization, reducing trips, kilometres, costs and emissions. In the US, when Ocean Spray and Tropicana, two fruit juice competitors, collaborated to enable sharing of empty refrigerated rail boxcars, both parties reduced transport costs, and Ocean Spray’s emissions were reduced by one-third.
The barrier isn’t tech. It’s mindset. How do we shift it?
Logistics is full of myriad actors with high levels of interdependence and competing interests, and this drives down costs. Fierce competition leads to such low prices in road freight that often it is cheaper to send a dedicated truck less than half full than it is to use a small freight carrier. From this baseline, how can industry players work together – in ways that preserve competition – for incremental environmental gains?
First, emissions should be a measured key performance indicator against which supply chain performance is evaluated. For example, some shippers have instituted an internal carbon price. Other sustainability performance rankings can help, both internally and for third-party service providers, but we must be careful to avoid the proliferation of varying questionnaires, and include incentives to improve environmental performance. Immediate exclusion of carriers that can’t meet high environmental standards won’t shift behaviour, and may bankrupt smaller players.
Second, we need to amplify the message about the business case. Logistics services providers can use their visibility across supply chains to identify collaboration opportunities and estimate cost and emissions savings, so shippers can visualize lost value. We all must be retrained and our data systems redesigned to actively look for these opportunities. When collaboration is successful, we need to transparently communicate these stories to clarify what’s possible and set higher environmental aspirations.
Reducing avoidable emissions alone won’t get us to zero. But this approach is open to everyone everywhere, starting now, and it can save fossil fuels in the present, and open the door to zero-carbon fuels in the future.
MoU signed with the aim of providing ADNEC customers with world leading logistics solutions
Abu Dhabi-UAE: 07 January 2020: Abu Dhabi National Exhibitions Company (ADNEC) has renewed a five-year strategic partnership agreement with Agility’s Fairs and Events, a division of Agility Global Integrated Logistics. This MoU will continue to enhance ADNEC’s service offering to exhibitors and event organisers with a full range of logistics and freight forwarding services.
Agility is one of the largest integrated logistics providers in the world with more than 26,000 employees and operations in 100 countries. Under the MoU, ADNEC and Agility will continue the success of their established, mutually beneficial cooperation with the aim of providing ADNEC customers with world-leading logistics solutions.
Commenting on the agreement, H.E. Humaid Matar Al Dhaheri, MD and Group CEO of ADNEC at ADNEC said: “ADNEC is committed to providing our clients and customers with the highest quality services across our facilities. To further show our commitment on this, we have partnered with Agility again to ensure the seamless provision of highly efficient and cost-effective logistics solutions to exhibitors and organisers.”
H.E. added: “The collaboration with Agility will continue the significant improvements we’ve put in place with them over the last five years with operational and cost efficiencies, while further showcasing a competitive edge. Additionally, this partnership will continue to boost the leading status of Abu Dhabi as a key destination for business tourism.”
Elias Monem, Agility GIL, CEO – Middle East, said, “This strategic partnership with ADNEC further strengthens Agility’s position as a market leader within the fairs and events sector, allowing us to provide highly sophisticated logistics solutions to ADNEC customers. Agility offers a wide range of supply chain solutions to meet both traditional and complex customer needs. In addition to air, ocean and road freight forwarding, warehousing, distribution, Agility Abu Dhabi also offers specialised services for fairs and events that mirrors the specific needs of ADNEC and its exhibitors.”
Company helps small businesses in MENA build online stores in minutes
From left to right: ExpandCart co-founders; Amr Shawqy and Sameh Nabil
KUWAIT – DEC.28, 2019 – Agility Ventures, the venture capital arm of global logistics company Agility, announced that it has invested in ExpandCart, a Cairo-based e-commerce enabler that allows entrepreneurs and small businesses to build online stores quickly and without any technical expertise.
The investment is part of a funding round closed this year by Agility, Graphene Venture Capital, Betatron, and other angel investors.
ExpandCart provides merchants with mobile-responsive online templates available in Arabic and English, as well as offering marketing, support, and hosting services. Additionally, it allows store owners to integrate with more than 20 payment and shipping options, streamlining the store-building process from start to finish.
Henadi Al-Saleh, Agility Chairperson and leader of Agility’s logistics venture strategy, announced the investment, saying it was part of Agility’s drive to expand its leadership in digital logistics and e-commerce.
“We think the potential of both digital logistics and e-commerce logistics is enormous. But to realize this potential, we also need to support the larger eco-system for digital trade. In other words, we need to go upstream,” Al Saleh said. “Agility is investing more than $100 million in Shipa.com, a digital logistics platform that allows businesses and consumers to manage freight, e-commerce and urban deliveries online. The ExpandCart partnership helps get more businesses trading across borders in the first place.”
More than 10,000 sellers have launched their stores on ExpandCart, allowing the merchants to receive more than 190,000 orders. In addition to store-building tools, ExpandCart offers sellers support for digital marketing, handling and fulfilment, a point-of-sale system, branded native mobile apps, and after-sale service.
Amr Shawqy, ExpandCart CEO and co-founder, said Agility’s investment and logistics expertise will help accelerate the company’s growth.
“The e-commerce sector is booming in the Middle East, and thousands of businesses are in position to expand their sales online. With help from Agility, our goal is to scale and support Middle East merchants throughout the entire e-commerce process,” Shawqy said. “Our engineers are continually working to provide innovative e-commerce solutions, and we have a substantial product roadmap for the coming period. With Agility behind us, we can unlock the incredible potential of the region, especially for its small businesses and entrepreneurs.”
According to a 2019 Bain & Company study, the Middle East and North Africa (MENA) e-commerce market is worth $8.3 billion and has grown by 25% annually since 2014. It is expected to reach $28.5 billion by 2022 and could grow even larger, given that e-commerce penetration in MENA remains low compared with other regions.
“The Middle East retail market is worth more than $231 billion. And although e-commerce is just a small percentage today, the more that we create conditions that allow businesses to trade online, the more we will see e-commerce’s market share grow,” Al-Saleh said.
“Agility Ventures will work closely with ExpandCart to help it grow and reach more customers,” Al-Saleh said. “In addition to funding, Agility will partner with ExpandCart’s team and offer the last-mile logistics and e-fulfillment expertise that is critical to successful online businesses.”
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From left to right: ExpandCart co-founders; Amr Shawqy and Sameh Nabil