Iran logistics industry drawing global attention

Financial Tribune- According to Kuwaiti logistics company Agility’s latest annual report jointly conducted by Transport Intelligence, Iran has climbed more spots – eight positions to 18th – than any country in the 2017 Agility Emerging Markets Logistics Index.

The index offers a snapshot of logistics industry sentiment in a survey of supply chain executives and ranks the world’s leading emerging markets 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.

Iran is one of five countries added to the Index in 2017 besides Ghana, Myanmar, Angola and Mozambique, which ranked 39, 48, 49 and 50 respectively.

As Iran emerges from international isolation, the global logistics industry has taken much interest in the country, now widely regarded as an emerging market offering significant opportunities, according to the report.

“Iran represents a new economic opportunity, as well as a new center of gravity in regional issues, as it emerges from western and international sanctions. A big reason for its improvement in the index is upward revision of its GDP forecasts. The IMF’s projections for the next five years or so have increased from an average of roughly 2% growth to over 4%.”

The Agility Emerging Markets Logistics Index uses three metrics to assess and rank 45 emerging markets. The metrics measure the countries’:

– Market Size & Growth Attractiveness (50% of overall Index score)

– Market Compatibility (25% of score)

– Market Connectedness (25% of score).

Market Size & Growth Attractiveness rates a country’s economic output, its projected growth rate, financial stability and population size.

Market Compatibility rates emerging markets according to their market accessibility and business regulation, foreign direct investment, market risk and security threats, as well as the level of likely demand for logistics services based on the country’s economic development.

Market Connectedness assesses a country’s domestic and international transport infrastructure and how well they connect.

“Iran’s leap up the Index rankings this year reflects not only the potential of its large economy and relatively wealthy population, but also the rapidity with which it may capitalize on its new found opportunities.”

According to the report, a country garnering considerable interest from logistics providers lately is Iran. While EU-Iran is a relatively small air freight lane at present with volume only set to exceed 22,000 tons in 2016, what is interesting is its growth resurgence in 2015, although 2016 is expected to see just 5.0% growth. Volume at the end of the year is anticipated to be just shy of the level in 2005. For the year-to-date, commodity groups to perform well are pharmaceuticals (+17.6% to around 2,000 tons), optic, photo, medic and surgical instruments (+36.1% to around 1,000 tons) and machinery (+146.0% to over 2,000 tons).

John Manners-Bell, CEO Transport Intelligence says: “Indeed, Iran looks set to become a major subject on boardroom agendas across the logistics industry – in the data-driven Index, the country entered the top 20 for the first ever time thanks to a rise of eight ranking positions, the highest of any of the 50 markets assessed this year.”

Furthermore, to examine the potential of the world’s most promising emerging logistics markets and to measure the impact of the trends seen across the global economy on the development and emergence of these markets, Transport Intelligence undertook a survey of logistics industry professionals between August and November 2016.

Survey respondents were asked to rank the five emerging markets they viewed as the most likely to become major logistics markets over the next five years. A score was calculated in order to rank the markets – a first preference was awarded five points, a second preference four points, and so on down to a single point for the fifth preference.

The most significant move in the rankings was Iran which rose six positions to claim 9th. Over the last two editions of the Agility Emerging Markets Logistics Index Survey, Iran has risen 21 positions in this ranking thanks to its strengthening ties with the global economy. Iran’s sizeable economy and population, which has a relatively high amount of spending power, are almost certainly a part of this, as are the opportunities created for LSPs in other sectors of its economy, such as oil & gas, and the country’s wider openness to FDI.

The respondents were also asked which emerging markets have the highest potential for investment over the next five years. Here Iran ranked 8th, which indicates an 8 step improvement compared to 2016. The improvement marks the highest rise among all other countries under survey.

“Across all elements of the Agility Emerging Markets Logistics Index 2017, Iran has performed strongly, underlining its current performance, but perhaps more importantly, highlighting its future potential in the eyes of logistics industry professionals. Its newfound openness to FDI will also have played a significant role here.”