Entering its eighth year, the Agility Emerging Markets Index has seen huge amounts of change in the fortunes of emerging markets both individually and as a collective. In its early years, the BRICS were the safe bet – the five nations were said to house the best combination of capacity, capability, rising middle class populations and wealth to seemingly ensure prosperity and return on investment. But, as obstacles arose, fortunes diverged and the acronym has been confined to history. The Index has also tracked the sometimes volatile trajectories of markets across the Middle East and North Africa. The 2016 edition showed that Egypt had regained the momentum it lost after the Arab Spring in 2011, while the UAE proved a triumph of well managed economic diversification and strategic ambition to place second in the overall ranking – behind only China and vastly outperforming significantly larger economies. Not all commodity exporting markets have exited the boom years as well as the UAE, however, and saw falling prices translate into falling rankings – Brazil, Saudi Arabia and Venezuela, amongst others, have suffered in recent editions as a lack of diversity in their economies means fewer opportunities for logistics service providers.
And it is this divergence between emerging markets with seemingly similar strengths and prospects that has become a key issue of late. Emerging markets have had to adjust to a new reality that has undermined the growth model established after the Great Recession of 2008. Lower prices for commodities, suppressed growth in global trade, low growth in China and a rise in protectionism and moves against global free trade have all, to varying extents, exerted downward pressure on the prospects for emerging markets. More widely, currency fluctuations, interest rate movements and other macroeconomic factors have turned the screw, making it more challenging to accrue rewards.
Against this backdrop, the ability of individual emerging markets to create the conditions for domestic and international businesses and investors to succeed has become paramount. As mentioned, the UAE made rapid progress in this area, and Saudi Arabia has adopted a similar model to reduce its dependency on oil & gas exports. India, having finally made progress in approving the Goods & Services Tax, is now better positioned to make good on its promise and realise the potential economic boost the GST offers. At the other end of the scale, though, are markets that failed to make the progress needed during the good times and now face a race to fix systems and create efficiencies before they fall behind and once in a generation opportunities are lost. Perhaps the most obvious example of such a market is Brazil – a huge economy certainly, but one mired by corruption, inefficiency and diving deeper into recession than at any point in decades. Nigeria – Africa’s largest economy – entered a recession after recording a GDP fall of 2.1% in the second quarter of 2016, a result of falling demand for oil and highlighting to the country’s governing administration that a wider productive base throughout the economy is necessary for more sustainable growth.
Such examples of the varying fortunes of emerging markets are broadly common as 2016 enters its final quarter. And while some have clearly already found a more solid foundation for long-term sustainable growth than others, it is far too early and far too much an underestimation of the will and capacity of those that have not yet enacted reform to say that hope is lost. What is true, however, is that the advantages of the best are far greater than they ever have been, and are growing at a quicker rate than before. Failure to get in the race is not an option.
Since its inception in 2009, the Index has become an industry benchmark for tracking the progress of logistics development and opportunity in emerging markets across the world. You can contribute to the Index by taking part in the survey by clicking here.
Source: Transport Intelligence, September 29, 2016
Author: Nick Bailey
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)