• Access to a greater number of consumers
• Access to a larger labor market and lower labor costs
• Potentially less corporate regulation
• Potentially lower corporate taxes

Furthering investments in emerging markets can create additional growth; however, investments in emerging markets also come with additional risks that must be evaluated and addressed. The use of logistics parks as ideal for de-risking emerging markets for multinational corporations is one innovative solution to mitigate risk in emerging markets and gain rewards from investment.

Risks for multinational corporations in  emerging markets

Investing in emerging markets offers further opportunities for growth but has increased risks.

Advantages of investing in emerging markets

In recent years,  economies in the Middle East, Africa, and Asia have been growing  much faster than those of the United States, European and other Western nations. According to Ameriprise Financial, from 1969 to 2019 the US GDP increased by a factor of only 3.8 in comparison to India’s 14.1.

• Emerging markets often emerging affluent and middle classes with additional buying power and an interest in luxury goods. This provides an opportunity to introduce new products into the market. Being one of the first to offer a product allows a company to acquire a significant market share.
• Emerging markets are likely to have a growing infrastructure system. As infrastructure is built in these communities, businesses enter the market to provide services. Being one of the early businesses fosters the creation of lasting relationships with customers.

Investing in emerging markets also offers access to less costly labor and raw materials and helps diversify a company’s portfolio to balance economic downturns in one region with growth in another.

Political, economic, and currency risk

Emerging markets offer unique opportunities for growth. However, there are a number of risks associated with emerging markets. These risks pose potential problems for a multinational corporation’s global expansion strategy and may deter a company from investing.

Though investors in emerging markets have seen evidence of a favorable risk-to-reward ratio in their investments, it is imperative to consider potential risks when making investments in these markets.

Political risk

Political risks of emerging markets are major contributors to hesitancy toward investing in emerging markets. According to a 2006 Economist report, 65 percent of respondents have had to cancel plans to invest in emerging markets due to political risks.

These risks are created by unstable governments or political unrest and have consequences for the economy. Two of the most highly noted risks are corruption and instability of the political regime. An unstable government is at risk of being replaced, which can lead to significant policy changes affecting the economy. A regime change in an emerging market could be hostile to foreign interference, making multinational business particularly difficult.

According to an article by S&P Dow Jones Indices, political instability in Brazil in 2014 caused a drop in Brazilian equities. The underlying causes of this were uncertainty of the incumbent administraton’s stability and shortcomings of an economic policy called the New Economic Matrix. Another example cited by the same article is a drop in equities in Russia in 2014 caused by several risk factors. These are examples of political risks that must be taken into account when investing in emerging markets.

Economic and currency risks

Economic risks also play a significant role in deciding whether to invest in emerging markets. These risks come in the form of insufficient labor and materials, high inflation or deflation, and unregulated markets. The instability creates challenges for investors.

Currency risk relates to valuation of currency. Emerging markets’ currencies can be much more volatile than those of established markets. Investment gains can drop if the local currency drops significantly in value.

Despite this, multinational companies venturing into these markets have been able to see growth. They continue to invest in these markets, proving that it is possible to mitigate these risks.

Finding innovative approaches to alleviate risks can contribute to increased growth when making investments in emerging markets.

Innovations in emerging markets that attract multinational corporations

A logistics park is a defined industrial area that is home to warehousing and other logistics and distribution activities. Logistics parks offer real estate and services to help streamline supply chain management for multinational companies venturing into global markets. These parks help reduce the risk associated with entering an emerging market.

Research and development

One area of promising activity in in emerging markets is research and development (R & D). Performing R & D work in emerging markets with pools of talented, skilled workers is beneficial because of the reduced costs associated with labor and laboratories, and the innovations that come out those laboratories.

Emerging markets allow companies to have state-of-the-art facilities that are not as easily or affordably built in established markets. This reduces cost in real estate and labor while improving the quality of the laboratories.

R & D facilities in emerging markets also give companies access to the best talent from top universities around the globe, some of which are in emerging markets. In 2021 Brazil and China alone were home to over fifty of the top 500 universities in the world, as ranked by U.S. News.

These well-educated graduates are recruited to work in R & D to develop innovative solutions and technologies. According to Reuters, in 2019 and 2020, China surpassed the United States in the number of patent applications. China’s rate of increase was also higher from 2019 to 2020, at 16.1 percent versus the United States’ 3 percent.

Innovation, as displayed by the growth in patents throughout the COVID-19 pandemic, remains resilient and crucial during times of crisis. This resiliency is another reason investing in R & D in emerging markets can be beneficial to multinational corporations.

Direct investment

Emerging markets, investors, and multinational corporations alike can benefit from direct investment. Foreign direct investment (FDI) occurs when a company domiciled in one country establishes lasting interest, through investment, in an entity that resides another country. This normally involves an ownership threshold of 10 percent or higher. FDI stimulates economic growth by building stable links between economies and promoting international trade.

• Increased employment: Investments in the economies of emerging markets create jobs and increase employment.
• Human resource development: FDI often promotes a stronger workforce, providing training and development to increase the skills and knowledge of employees. This creates a ripple effect in the economy.
• Industrial development: Creation of industrial centers in underdeveloped parts of a country can boost the social economy by providing jobs, building infrastructure, and bringing formerly unavailable resources to the area.
• Provision of finance and technology: FDI often allows emerging markets to gain access to financial and technological innovations that were formerly unavailable.
• Increased exports: Many goods produced through FDI are intended for international consumption.

How logistics parks can assist multinational corporations with distribution and compliance in emerging markets

The benefits of investing internationally are abundantly clear, and those of investing in an emerging market can be exponentially greater. However, the risks of those markets need to be addressed. Logistics parks offer a solution for multinational corporations so that risk in the supply chain is minimized. They:

• Lower the cost of market entry for multinationals
• Preserve working capital for multinationals’ expansion and operations
• Allow multinationals to enter markets quickly — without the hassle of buying and securing title to property
• Let multinationals scale and flex operations without having to undertake construction themselves
• Help multinationals concentrate on their core strengths while leaving security, maintenance, waste management, utilities and other functions to a logistics park operator

This is why logistics parks are ideal for de-risking emerging markets for multinational corporations.

Supporting distribution through location

Logistics parks are located in transportation hubs of major cities in emerging markets. They are near urban centers, road networks, seaports, international airports, rail lines, and other national hubs. This provides quick access to domestic and international transportation and export facilities.

Logistics parks are dedicated to supply chain support. They are designed specifically for warehousing and light industrial activities so that companies can handle warehousing and distribution from a centralized location. This facilitates clustering equipment and services for shipping and allows consolidation of trucks or shipments required.

There are many direct benefits of the strategic locations of logistics parks:

• The requirements of demand and supply are met on time.
• Large amounts of space are available, with state-of-the-art storage facilities for goods and products.
• Wide roads enable free-flowing traffic at all hours of the day and night.
• The sites are highly secure.
• Site management and maintenance, including services like landscaping and waste removal, are provided.
• Ample truck and office parking space is available.
• Space for amenities like banking, insurance, office space, catering, and other services is available.

Supporting local economies

In addition to the direct benefits, there are economic and environmental benefits that contribute to the future success of the emerging markets logistics parks are located in. In the long term, this will pay off for the multinational companies investing in these markets and doing business out of these logistics parks.

Having a consolidated location where multinational corporations are storing and distributing goods as well as using the space for other business needs draws local companies to the area. The convenience of logistics parks allows local construction and transportation companies to operate at lower costs. Jobs are created in the logistics park itself, both with multinational companies and with local companies that have been drawn to provide services for the park and its businesses.

All of this generates economic growth in the market and benefits the surrounding community. In some cases this even creates social benefits by improving infrastructure and education.

Supporting distribution and compliance through innovation

Containing the storage and distribution of goods within a logistics park can be considered an innovation in itself. However, the dedication of logistics parks to improving distribution has also allowed the introduction of technologies that support the goal of streamlining the supply chain.

Many automated technologies have been designed and implemented to improve logistics in the supply chain. Advanced robotics and artificial intelligence technologies have allowed for the creation of reliable and efficient solutions for warehouses, factories, and supply chain management. Technology companies are continuing to improve these solutions.

Logistics parks are in a unique position to take advantage of these automation solutions for all parties involved in the logistics process. This further increases the efficiencies embedded into the functions of the logistics park.

Supporting compliance

Logistics parks can also offer support with compliance. When entering the global market, multinational companies must be compliant with the laws and regulations of the foreign countries in which they are doing business. Not only does operating out of a single facility make it easier to manage these regulations, but many logistics parks also offer services to assist with these compliance issues.

Strategies that fit logistics parks in emerging markets

Globalization has made international trade increasingly more streamlined. Supply chain consolidation in the form of logistics parks and technological advances in logistics management are two innovations that have already been touched on. However, innovations in e-commerce have further propelled globalization and can make investing in emerging markets increasingly rewarding.

E-commerce

The innovations of technology and e-commerce have made it possible to handle logistics virtually and for consumers to purchase products online from around the world. The COVID-19 pandemic accelerated the shift to online purchasing, with global retail e-commerce sales increasing 27.6 percent, according to Oracle NetSuite. The same report estimates that by 2023, e-commerce will account for 22 percent of all global retail sales.

Logistics parks can help with this rapid transition to online sales with the built-in efficiencies and ability to take advantage of innovative automation and virtual logistics technologies.

De-risk with logistics parks

Experts see logistics parks as ideal for de-risking emerging markets for multinational corporations because they reduce costs, increase efficiencies, and contribute to global infrastructure.
Contact Agility to learn how Agility Logistics Parks in Africa, South Asia, and the Middle East can help your company with a logistics infrastructure that meets or bests international standards.

Contact Agility to learn how Agility Logistics Parks in Africa, South Asia, and the Middle East can help your company with a logistics infrastructure that meets or bests international standards. 

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How logistics parks work as regional distribution hubs

Logistics parks are ideal for all distribution companies throughout the supply chain. Your logistics park should provide a strategic location close to multiple transportation methods and the workforce population to satisfy your customers. When your logistics park is designed to meet the supply chain demand and accommodate your employees’ needs, the park can work perfectly as a regional distribution hub.

What is a logistics park?

A logistics park is a distribution center designed to store, manage, and transport your products. Since every company and product is unique, the park can be customized to meet the specifications that your company requires. For instance, if your product requires refrigeration or speciality assembly and packaging prior to shipping, the park will be designed to optimize these operations.

Successful logistics parks are built in strategic geographical locations to increase your freight distribution and lower your costs. Your park might be built near expressways for road transport, close to railways for railroad transit, or near a large airport to make air cargo logistics fast, easy, and affordable.

Additionally, your logistics park can include amenities for your employees so that you can attract a skilled workforce population. These amenities might include banks, convenience stores, or even transportation methods to help your staff commute to work.

What is an industrial logistics park?

Many companies across the supply chain require industrial areas to manufacture their products. An industrial logistics park can accommodate large warehousing and production spaces as well as office space and employee amenities to keep your operations running smoothly.

Industrial logistics parks are engineered as manufacturing and logistics centers. Here are a few elements that your park can include:

• Specialty manufacturing equipment
• Hazmat disposal areas
• Freight docks
• Office space
• Common areas, such as a cafeteria or athletic center

How do logistics parks work as regional distribution hubs?

Logistics parks make regional distribution easy. They are built in a central location with fast and easy access to various modes of transportation. This helps your company identify the best logistics zones across the region to distribute and transport your product.

The whole purpose of a logistics park is to increase the effectiveness of your operations and freight distribution. Your park can help your business run like a well-oiled machine because it is built to accommodate your product needs and attract the best employees. The park should also include state-of-the-art technology so that you’re set up for the future. When you put these pieces together, your logistics park will function as a successful regional distribution hub.

How logistics parks assist with sustainable supply chain efforts

In past decades the industrial supply chain has sometimes been thought to contribute to pollution and produce greenhouse gases. Fortunately, a recent push for sustainable supply chain planning across the globe is trying to change that notion. And thanks to these efforts, logistics parks are now being rethought and reengineered to help supply chain industries protect the environment while still producing high-quality goods.

What is sustainable supply chain management?

Sustainable supply chain management incorporates environmentally friendly practices into supply chain operations. Due to climate change concerns in recent years, many industries have developed sustainability initiatives to reduce CO₂ emissions and their overall carbon footprint.

The push toward a greener supply chain has led to a lot of changes for the logistics industry. Companies have added services like reverse logistics and recycling programs. They are moving toward lower-emission transportation methods. And in some cases, they are converting every square foot of their distribution space and warehouse facility to be more eco-friendly.

If sustainability is part of your logistics enterprise, a logistics park can support your green efforts.

How do logistics parks assist with sustainable supply chain efforts?

Nowadays, the most innovative logistics park designers are focusing on building a sustainable supply chain to get greener. Here are a few elements that logistics parks can include to help your sustainability efforts:

• Solar energy to power building HVAC systems
• Wind energy to support electrical systems
• Energy-recapture technology for vehicles
• Safety standards to keep employees safe and healthy

Some companies fear that a sustainable supply chain might lessen their product’s quality or even result in financial loss. However, the most effective supply chain efforts prioritize not only a smaller carbon footprint but high-quality production and financial profitability as well.

What are effective supply chain efforts?

Effective supply chain efforts must achieve three main goals:

• Lower your company’s carbon footprint. State-of-the-art technology uses renewable energy resources to reduce your emissions and support the international sustainability initiative.
• Increase customer satisfaction. Going green doesn’t mean sacrificing product quality. You can still manufacture and distribute high-quality goods to your customers. And since, according to a 2021 Strategy+Business article, roughly half of consumers around the world are trying to be eco-friendly, your sustainability efforts can help grow your brand awareness and customer loyalty.
• Provide financial stability throughout each sustainability effort. Technological innovations help companies save money while being eco-friendly. Motion-sensor lights can save up to 90 percent of electrical costs, according to the Sustainable Buildings Initiative, while newly engineered equipment reduces maintenance fees and lower-emission vehicles mean lower fuel expenses. There are even tax incentives for eco-friendly upgrades, so be sure to see if your company qualifies.

Supply chain sustainability is here to stay—so it’s wise to incorporate sustainable initiatives into your corporate strategy.

Strategies for routing your company’s supply chain processes through logistics parks for distribution

You’ve already developed a strategy that outlines your company’s goals and how to achieve them. And as you work to lower your distribution costs and optimize your supply chain, it’s equally important to create a strategy for routing your processes through logistics parks.

How does supply chain management affect manufacturing distribution costs?

Strong and effective supply chain management affects all aspects of your business—including manufacturing distribution costs. Without strong supply chain planning and management, your supply chain can fail in phases like material delivery and labor allocation that increase your distribution costs. When your supply chain is well managed, your operations will run smoothly and cost-effectively.

Logistics parks help you manage your supply chain and therefore keep your distribution costs low. The best logistics parks include warehousing, office space, eco-friendly amenities, and proximity and access to various methods of transportation. If your logistics company delivers raw materials late, you can still expedite your products once they’re produced if you have easy access to road, railway, and air cargo transport.

What is supply chain optimization?

Supply chain optimization means that you have the most current and effective resources throughout every phase of the supply chain. Technology is constantly changing, and many of these advances help businesses reduce their operating costs, engage in eco-friendly practices, and satisfy their customers’ needs.

Here are a few areas in which optimizing your supply chain with the best and most modern resources can help your business run smoothly:

• Raw material ordering and tracking
• Warehouse management, including machinery efficiency, labor allocation, and inventory loss prevention
• Quality control software
• Outbound logistics operations management

Optimizing your supply chain helps you control the entire life of a product from the moment you order the raw materials through the delivery to your client’s door. This optimization is a key strategy that all companies should incorporate into their daily operations.

What are strategies for routing your company’s supply chain processes through logistics parks for distribution?

Because logistics parks are engineered to increase your distribution operations, they make it easy to design a strategy to route your company’s supply chain processes. An effective park helps you manage each logistic to ensure maximum efficiency throughout your operations.

Here are a few additional components that you can include in your strategy:

• Optimize your warehouse space for efficient operations
• Use speciality software to manage your inventory, control your costs, and forecast your sales
• Determine the best distribution methods across your region, including road, railway, ocean freight, and air cargo

Your strategy is unique to your company. So it’s important to consider your needs as you develop the strategy. And once you’ve laid out your plan, you can begin searching for the optimal location for your regional distribution hub.

How to locate logistics parks for regional distribution hubs for your company

You’re already aware that geographical location plays in important role in the effectiveness of your logistics park. The location must give you easy access to your entire region and a variety of transportation methods. And since the availability of commercial real estate varies across the world, it’s important to understand how to locate the best logistics parks.

One question to keep in mind during your search is whether your location will be affected by the coronavirus. Although supply chain companies faced challenges before the pandemic, companies have had to deal with labor and material shortages over the last two years. Thanks to creative problem-solving and the innovation of multimodal hubs, you can still find a logistics park to suit your needs.

How can companies locate logistics parks during the coronavirus pandemic?

The world changed in late 2019 and early 2020 with the onset of the coronavirus pandemic. Prior to the pandemic, logistics and distribution challenges included high fuel costs, public outcry for a greener supply chain, and the ever-increasing demand of the e-commerce industries.

During the coronavirus pandemic, supply chain companies have faced even more intense challenges. A large percentage of the working population across the world was asked to stay home in effort to prevent the virus’s spread. The reduced workforce meant that less raw material was being made and fewer products were being manufactured. To stabilize and become pandemic-resistant, companies can now look for logistics parks in areas with lower infection rates and with governments that are dedicated to keeping businesses operational.

How can companies locate logistics parks with multimodal hubs to improve supply chains during the coronavirus pandemic?

Multimodal hubs allow for seamless transportation and communication across multiple platforms. Because COVID-19 largely shut down both domestic and international travel and many employees had to work remotely, companies have had to think creatively to keep up their transportation and communication.

Fortunately, technological advancements in multimodal hubs have helped companies become pandemic-resistant. And since the best logistics parks include state-of-the-art technology, businesses throughout the supply chain have had options in choosing a logistics park with a multimodal hub that keeps them operational.

How can you locate logistics parks for regional distribution hubs for your company?

You need to locate a logistics park that will work well for your company’s manufacturing and regional distribution. Here are a few elements to keep in mind as you research commercial real estate and determine where your logistics park should be located:

• Labor cost. Where will you be able to find skilled employees that fit your labor budget?
• Freight and distribution. To optimize your logistics, should you be near an airport, a railway, or an inland port?
• Expansion and upgrade capabilities. Some geographical locations have stronger infrastructures than others. If you want room to expand and continue your sustainability initiatives, you’ll need a location that can accommodate you.

Logistics parks help you access more markets and expand your business

Your company needs high-quality, sustainable logistics services in order to compete in the regional and global markets. And Agility is the expert in developing logistics parks in the Middle East, Africa, and South Asia.

Visit our website to learn how an Agility Logistics Park is your ideal regional distribution center that can help you access regional and global markets as you expand your operations.

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DUBAI – May 10, 2018 – Small and medium-size businesses that have struggled for equal footing in the global economy are increasingly looking to cross-border trade for growth, seeing technology as a way past obstacles in shipping and compliance, according to new research from Shipa Freight.

Shipa Freight’s global study of 800 SMEs from developed and emerging markets shows that smaller companies are remarkably upbeat about their ability to expand through trade.

Eighty-nine percent of exporting SMEs surveyed say their export revenue will grow over the next three years. Seventy-one percent say they are concentrating more on international markets than on their home markets. The Shipa Freight survey included exporters and importers from the UK, USA, Germany, Italy, China, India, Indonesia and UAE.

Smaller companies account for an estimated 95% of all businesses and employ two-thirds of the world’s workers. Critics of globalization have argued that decades of efforts aimed at easing the flow of goods, capital and jobs across borders has come at the expense of SMEs and disproportionately benefitted multi-nationals and other large businesses.

“Smaller businesses used to think they couldn’t compete in trade. Now many see it as their best path for growth,” says Toby Edwards, CEO of Shipa Freight, the online freight service. “SMEs are not naïve about the obstacles to unlocking new markets. They see online tools and other technology as a way to conduct transactions, get financing and gather market intelligence.”

Three-quarters of SME executives surveyed by Shipa Freight believe businesses that operate internationally are more resilient. Nearly 80% say they are already using online platforms for freight quotes and bookings.

Roadblocks

SMEs identified numerous obstacles they face in international trade. Forty-two percent say the costs of shipping abroad are too high, or that they don’t have an accurate picture of their costs. Forty percent say they find it difficult to understand documentation requirements.

A significant minority say their cargo has been held up in customs (39%) or lost in transit (27%).

Small and medium-sized businesses based in emerging markets are finding export regulations particularly challenging: 67% identify export regulations as a difficult issue, compared with just 44% of SMEs based in mature European markets. Seventy-nine percent of exporters from India, China and Indonesia say they find it challenging to penetrate markets in Europe.

SMEs that view the UK as one of their top export markets are looking elsewhere because of Brexit. Seventy-three percent say Britain’s vote to leave the European Union has prompted them to prioritize trade with other European countries. Sixty percent of UK SMEs that export and 52% of UK SMEs that import say that leaving the EU Single Market would be “disastrous” for them.

New tech boosts export prospects

Smaller companies clearly see technology as a way to close the gap with bigger competitors, cope with documentation requirements and get quick access to competitive shipping options. Eighty-six percent say that tech is “leveling the playing field” for SMEs to operate globally; 89% believe technology is transforming the logistics industry.

“The logistics industry has traditionally ignored SMEs and done far too little to help them find new markets and grow,” Edwards says. “Technology is giving them the ‘virtual’ scale that they’ve needed to lower their costs, get real-time information and compete.”

About the study

Shipa Freight’s Ship for Success research examines the trade patterns and barriers of SMEs, defined here as organizations with 10-250 employees. The opinion research was conducted in winter 2017 amongst 800 companies (400 exporters and 400 importers). There were 100 respondents from each of the following markets: UK, USA, Germany, Italy, India, Indonesia, China and UAE. Study participants included SME leaders, such as managing directors and operations directors. Participating companies were drawn from the following sectors: retail and fashion, fast-moving consumer goods (FMCG), automotive (including supply chain), industrial and manufacturing, and technology. You can explore the findings and download the full report below. Download full report

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About Shipa Freight

Shipa Freight is the new online service powered by Agility that makes it easy to get air and ocean freight quotes, book, pay and track your shipments online. With our global network of logistics experts and industry-leading technology, we ensure that your goods arrive safely and reliably every time.

For more information about Shipa Freight, visit www.shipafreight.com/
Twitter: twitter.com/ShipaFreight
LinkedIn: linkedin.com/company/shipafreight/
YouTube: youtube.com/ShipaFreight

About Agility

Agility is one of the world’s leading providers of integrated logistics. It is a publicly traded company with more than $4.6 billion in revenue and more than 22,000 employees in over 500 offices across 100 countries. Agility Global Integrated Logistics (GIL) provides supply chain solutions to meet traditional and complex customer needs. GIL offers air, ocean and road freight forwarding, warehousing, distribution, and specialized services in project logistics, fairs and events, and chemicals. Agility’s Infrastructure group of companies manages industrial real estate and offers logistics-related services, including customs digitization, waste management and recycling, aviation and ground-handling services, support to governments and ministries of defense, remote infrastructure and life support

For more information:

Sabrina Mundy
Man Bites Dog
+44 1273 716 826
teamagility@manbitesdog.com

‘Emerging markets’ refers to the combined results of India, China and Indonesia. It does not include UAE figures. ‘Mature European markets’ refers to the combined results of the UK, Germany and Italy.

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Agility and Transport Intelligence discuss the 2021 global economic outlook, ongoing supply chain turmoil, and lasting change brought about by the pandemic — all reflected in the just-launched 2021 Agility Emerging Markets Logistics Index.

The post The Agility Emerging Markets Logistics Index Webinar appeared first on Agility Logistics.

Indonesia, Thailand, Myanmar, the Philippines and Cambodia – countries that all followed in the footsteps of Viet Nam as first-time hosts of WEF’s annual Asian regional meeting – along with others in the ASEAN bloc, are experiencing strong growth too. The 10 member states are expected to generate GDP growth rates between 3% and 8% over 2017-2021.

While the growth of these individual countries is impressive, the real success story belongs to the region. ASEAN has long heeded the connectivity imperative, and the benefits of regional cooperation and economic integration, through initiatives such as the ASEAN Economic Community (AEC), are paying dividends. ASEAN commands a combined GDP of about $2.4 trillion, and GDP per capita has increased by 63.2% from 2007 to 2015. If it were a single country, it would be among the top 10 economic powers in the world. To further drive growth, ASEAN and its six strategic partners will come together in November for the hotly anticipated signing of the Regional Comprehensive Economic Partnership. This will create the world’s largest free-trade area, representing nearly 30% of global GDP, and demonstrates ASEAN’s commitment to removing barriers to trade and expanding market access both within the region and with its partners.

With a population of over 600 million, ASEAN is the world’s third-largest market. It also offers the third-largest labour force, behind China and India, and has some 67 million households that are part of the “consuming class”, a figure that could almost double to 125 million by 2025. Between 2007 and 2014, ASEAN trade increased by a value of nearly $1 trillion. While nearly a quarter (24%) of trade was within the region, this was followed by trade with China (14%), Europe (10%), Japan (9%) and the United States (8%). During the same period, foreign direct investment rose from $85 billion to $136 billion. As nations elsewhere redefine their approach to international trade, one thing’s for sure: ASEAN is open for global business.

Embracing the 4IR

While significant steps have been made to enhance the free flow of goods, services, investments and people, new challenges lie ahead. The technological advancements brought on by the Fourth Industrial Revolution (4IR) are placing new demands on governments and businesses across the region. However, the 4IR also presents great opportunity, if member states can respond to its challenges with speed, flexibility and agility in order to make these new technologies part of its success. Entrepreneurship could play a key role here. SMEs are the backbone of local economies across ASEAN, and often the largest source of local employment across all economic sectors. In countries such as Thailand and Viet Nam, for example, they account for nearly 99% of all registered businesses and employ more than 70% of the workforce. To unleash this potential, the region must ensure that policy reflects the interests of SMEs, affording them the best environment for growth.

E-commerce is a prime example of how 4IR technologies are disrupting traditional sectors. While e-commerce remains relatively underdeveloped in ASEAN today, accounting for less than 1% of total retail sales, this will soon change as internet penetration spreads and the region’s consumer base continues to grow. Given this potential, large local providers such as Lazada and Tokopedia are competing for market share with global players. With SMEs poised to play such a key role in the region’s success, it will be crucial for governments to ensure the internet infrastructure they require is in place, so that entrepreneurs can future-proof their businesses and actively participate in e-trade.

4IR technologies are also enabling logistics providers to take supply chains to the next level in terms of speed and accessibility. This is contributing to the rise of e-commerce, but also driving business more broadly across the region. Drones are operating in warehouses, artificial intelligence is automating processes and blockchain has the potential to transform decentralised supply-chain functions. Logistics providers are also offering online freight forwarding platforms that ease the process of doing business for SMEs, both within the region and more globally. Unsurprisingly, global logistics hub Singapore is leading the way in adoption of technologies into the supply chain, through its Smart Logistics initiative.

Taking an agile approach

However, to truly ascend the global value chain, ASEAN needs to look beyond trade facilitation and advancements in technology. In reality, the very 4IR technologies that are driving growth are at the same time disrupting the region’s traditional strengths in low-end manufacturing in the form of automation, robotics and 3D printing.

Have you read?

• These Asian cities are best equipped for the future
• How to power a bright future for ASEAN
• The ‘ASEAN way’: what it is, how it must change for the future

Governments and businesses need agile approaches to upgrade education, R&D, lifelong learning and skills development. This will create the necessary conditions for ASEAN to better close income gaps, create employment, support SMEs, expand the pool of knowledge workers and – ultimately – to rise in global value chains. Therefore, preparing the capable and young workforce for new realities must happen with close coordination between industry, governments and civil society. These will complement the tremendous efforts leaders are already making in supporting cross-border trade and enhancing mobility.

While there is much for the region to consider as it sets its sights on ascending the global value chain, what is clear is that now is the time for ASEAN to shine. The theme of this year’s World Economic Forum summit, ASEAN 4.0: Entrepreneurship and the Fourth Industrial Revolution, could not be a more timely one.

Written by Sushant Palakurthi Rao, Head of Global Partnerships, Agility

This article was originally published by The ASEAN Post in collaboration with the World Economic Forum.

Read the full article here: https://www.weforum.org/agenda/2018/09/trade-entrepreneurship-and-the-future-of-asean

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High population with low international movement

Africa is going through an economic boom and tourism in Africa grew by nine percent in 2017, the highest increase of any region. However it is interesting to note that even though Africans total 12 percent of the world population, they make up only three percent of the world’s travellers.

There are many factors influencing this gap. The lack of domestic flights causes significant issues, with stopovers causing double or triple the journey times on many routes. For example, when traveling from Abidjan to Kampala, both notable economic powerhouses, you have to fly via Istanbul and reconnect because there are no direct flights.

High-ticket prices also cause complications for Africa’s aviation industry. It’s expensive traveling to and from Africa, but it’s also expensive to travel within Africa, a factor driven by lesser competition and local airlines.

Non-African carriers currently cover eighty percent of the African market. While there is a steady increase in the number of African carriers like Ethiopian Airlines, South African, Kenyan Airways, Air Cote d’Ivoire, Royal Air Marco and Egypt Air, they still cannot fully compete with the likes of European or Middle Eastern carriers.

Disparity in quality

Intra-region visa restrictions are another major impediment to travel and economic prosperity in Africa. According to the Africa Visa Openness Index, on an average, Africans need visas to enter 55 per cent of states within the continent.

The African Union (AU) has attempted to address this issue of free movement within the region for the last 30 years by introducing a common African passport in 2016, with a goal to distribute them to all citizens by 2020.

While the number of countries becoming more liberal has increased, a visa-free Africa still seems like a dream for the continent’s entrepreneurs, doctors, aid workers, college professors and reuniting families.

Nonetheless, figures show that aviation in Africa has evolved significantly. Thirty or forty years ago, most of the traffic from the continent to other areas of the planet was to Europe or the United States. Now, there’s a lot of traffic between Africa, the Middle East and Asia, as well as between Africa and the rest of the world. For airports in Africa, this has meant that hubs serving all these destinations have grown and improved considerably due to increases in footfall and therefore income.

The future of Africa’s aviation industry

Relationships between African cities and countries, and their Asian and Middle Eastern counterparts have strengthened and deepened. As intra-African trade has increased and visa restrictions have decreased, travel within the continent will also continue to grow significantly.

Aviation impacts all our lives, on both a macro and micro level. A lot of products that are integral parts of our lives come to us through air travel, including food, electronics and medicines.

The ability to travel freely has dramatically changed our understanding of life as it enables a high level of mobility. By making air travel easier and accessible, we are encouraging more and more people to travel and increase interpersonal interactions across multiple borders.

By bridging geographic gaps, removing complexity and bringing people closer, aviation will boost the creation of shared value in our fractured world.

The post Africa’s aviation industry has a problem appeared first on Agility Logistics.

Image on top: REUTERS/Fabian Bimmer

In 2016, the World Trade Organization released an extensive report on small and medium-sized businesses. Its biggest revelation was how little we know about them.

SMEs, which employ most workers and account for 95% of all firms, are the lifeblood of the world’s economy. Yet they remain understudied, underappreciated and underserved, little understood even by the larger companies that count them as customers and suppliers. What’s more, they have been consistently ignored by negotiators writing international trade rules.

The WTO says SMEs – companies with fewer than 250 employees – have been “largely absent from the broad trade debate.” One result, it says, is that cross-border trade is more difficult and costly for smaller businesses than for larger companies.

Beyond that, the WTO study reads like a confession or self-indictment. “Relatively little is known about SME participation in trade, … their decisions to start exporting, or the benefits they may derive from internationalization,” the report says. “In the WTO context, SMEs have not figured very prominently over the years. A relatively small number of agreements have provisions that refer explicitly to SMEs.”Read the full story on TarekSultan.com

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