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On 25 January 2018 | Logistics Junction
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Exploring logistics in developing markets of Asia

Introduction:

In the ever-changing and developing markets, industry such as logistics activities involves a range of challenges as well as innumerable opportunities to grab and flourish upon. Logistics Junction in Indian market is developing a niche in similar challenging logistics market.

Opportunities revolve around the fact that the developing markets continuously experience economic growth at a splendid speed and the resulting increase in trade and commerce which eventually increases demand for transportation services for the companies like Logistics Junction in India.

There are many challenges in different variations, with the top three problems consistently being infrastructure limitations, procedures and methods involving the bureaucratic regulations and a shortage of the skilled personnel. The poor remuneration resulting from poor utilization rate attracts less people to the industry , Logistics Junction bring about a change in that.

 

Three markets for examples:

If we look at three of the markets in Asia – China, India,and Vietnam:

To look at the broader perspective, one of the distinct indicators of the efficiency of any countries’ market’s logistics sector is the Logistics Costs as a percentage of GDP.

Generally, in the markets which are developed, this is less than 10% of the total count, but in the case of the developing markets, the percentage tends to get higher due to the inefficiencies in the sector. If we look into the developing markets in Asia, China’s logistics represents 18% of their total GDP, India accounts for 13% and Vietnam make the count of 25%.

With the increase in the efficiency, we will see the decrease in the percentage in the near future.

 

Regulatory bodies of the Nations:

It is possible to have an under-developed or not up to the mark regulatory bodies in countries that are still developing in terms of their markets.

The regulatory environments for logistics in China, India, and Vietnam are restrictive in nature compared to the developed markets,but they are showing improvements gradually.

Companies which are into businesses in these three developing markets are bound to encounter government bureaucracy, tedious paperwork and procedures, customs delays, corruption and high duties & tariffs charges without any legal authorization. These turn out to be the barriers to businesses in terms of both time and money.

 

Three significant markets of Asia:

China:

One of the major challenges in China is the changing interpretation and application in the way of customs regulations. As it turns out, foreign companies often think that customs regulations are different in the different locations, however,that is not true. What truly varies is the interpretation and application of the regulations, sometimes by location and sometimes by the individual officials. This often results in companies being able to process a certain type of goods on one port location, but the same kind in another location. This oftenresults in additional complexities within the logistics component of international supply chains.

India:

Earlier, Indian companies like us had the tendency to establish warehouse operations in every state in which they intend to do business. This was because of the reason of the traditional tax system which used to operate at the state level, rather than thenational levelitself.Each state used to have its very own taxation systems with varying regulatory frameworks. Earlier, before the economic and taxation reforms, this introduced unnecessary additional complexities into domestic supply chains. The companies may save on tax while doing this; they spend more on logistics than what was ideally necessary.

After years of debate, a national, standardized taxation system: GST is now into the picture and it has changed the markets of logistics once and for all by bringing a variety of good changes and reducing the flaws which were hindrances in the efficient growth of the logistics and chain supply management market.

Vietnam:

The regulatory environment for logistics in Vietnam is like how it was ten years ago in China. Restrictions on foreign entities are slowly getting reduced due to Vietnam’s recent changes in its regulatory body and the reforms they are making for the growing market.Ownership of the foreign companies of logistics was restricted to49%, but starting from the year of 2014, 100% of foreign-owned logistics businesses are now allowed which is promoting markets at both local and global levels.

 

Infrastructure Developments:

China has always been a good player when it comes massive progress in transportation infrastructure development. The highway systems are way over 75,000 km of expressways. New airports are being constructed at the average rate of one new airport every five weeks. Inland waterways have been developed and expanded and they keep on developing at a substantial rate. Furthermore, the huge development of the high-speed passenger rail network is expected to free up some of the existing rail infrastructures to be converted for cargo use in the future, including containerized rail freight.

India's road network is the second-largest in the world only after USA having approximately 4.7 million kilometers of roads which have around 8 million transportation vehicles traveling on their path at any given point. Road transportation accounts for about 6% of India’s GDP.Indian logistics sector is almost 60% which consists of the transport sector and out of the transport sector, 36% is occupied by road transport.India is also, continuously laying various metro projects which will eventually make the older rails to be used more in the logistics markets.

India is also rigorously developing its water and airways supply management chain to keep up with the changing needs and demands of the market.

Vietnam with the support of foreign investment and through various public-private partnership projects has been able to register progress in the recent years on the infrastructure developments front, particularly in the area of southern Vietnam. One such example is CaiMep port which is a large, impressive and modern container terminal developments, south of Ho Chi Minh City. Other such examples are the huge industrial zones and logistics parks built in Binh Duong province, north of the city. These developments are growing at a continuous rate matching the demands of the market.

Talent Shortages:

One logistics challenge that remains common in any developing market is the shortage of talent or skilled workmen or personnel. Same is the case for China, India,and Vietnam, not only those but developing markets in general.

As the economies are expanding, logistics activity is increasing, which in turn drives demand for trained, skilled and experienced professionals.


Conclusion:

The logistics sector has developed significantly in the Asian market given the introduction of online markets and various reforms in the way the systems used to operate. This is considered as the positive impact that brought a lot of people, be that from the entry level like drivers of the vehicles to the whole logistics companies itself. With growing technologies and more and more people getting encouraged to join and invest in the sector making the future of the Asian logistics market look bright.