OREANDA-NEWS. December 03, 2010. The dynamic economic development of the emerging markets will fundamentally change world trade by 2030. The hubs of global flows of goods as well as trade routes will shift towards the so-called emerging markets within the next 20 years. At the same time, new logistics service providers will emerge and challenge the market shares of established companies. These are the headline findings from the 3rd report in PwC’s "Transportation & Logistics 2030" series, carried out in cooperation with the Supply Chain Management Institute (SMI) of the European Business School (EBS), reported the press-centre of PwC.

Respondents think there almost a seven in ten chance of newly evolving trade routes gaining market share and altering global supply chains. Trade between Asia and the former Soviet states is already growing annually by 42 per cent.  Also, trading volumes on the ‘South-South’-route between South America and Africa shows considerable double digit growth. China already engages in intense trade with other emerging countries like Brazil, Malaysia and Indonesia and invests in several developing countries in Africa. Conversely, North America and Western Europe are becoming less important.

Klaus-Dieter Ruske, partner and global transportation and logistics industry leader at PwC, says:
"China already possesses seven of the 20 largest ports in the world today. In future, India, Russia and South Africa will also be among the logistics giants".

Respondents think that there is a 75 per cent chance that further multinational companies will enter these new markets. However, this will not only be about connecting emerging markets to international trade, but also about entering the domestic logistics markets.

At the same time, increasing competition will also lead to a wave of industry consolidation, according to the respondents. Consequently the number of logistics providers will sharply fall. PwC analysis shows that 69 per cent of the companies that were taken over during the second quarter of 2010 were located in Asia and Oceania.

However, respondents think it is unlikely that logistics companies from emerging countries will seek further growth in the developed markets of Europe and North America. Instead, they will concentrate on their domestic markets and the similarly strong growing neighbouring countries. There they can count on double-digit growth rates – while the developed industrial nations rarely promise growth rates greater than five per cent.

Free trade zones that are established to attract foreign direct investment will spur substantial growth in emerging countries, according to respondents. In India alone, there are currently approval procedures for 600 special economic zones underway. Brazil, China, Mexico, Russia, South Africa and Turkey have already established free trade zones.

Thinking about new transportation routes is especially important for Russia due to its geographic location. Nonetheless, Russia today is not considered as an important transportation corridor, as the main trade between Europe and Asia takes on seaways. Russian Railways is already planning to build several high-speed railways. The first one will be constructed between St. Petersburg and Moscow. The Shanghai Cooperation Organisation (SCO) aims to facilitate the international road transportation between its member states, especially between Russia and China. Since China is interested in using the land connection to accelerate its exports to Europe and Russia, both countries are interested in this new ‘Silk Road’.

Alexander Sinyavsky, global transportation and logistics industry leader at PwC in Russia, says:
“Russia has to actively trigger and promote the future development of transportation corridors through Russia by intensively investing in its transport infrastructure (via public-private partnership tools, attracting international finance and experience) and improving its customs regulation.”

Russia has established around 20 special economic zones; major objectives are to create optimal conditions for foreign and domestic investments and to develop modern industrial complexes able to produce high-quality products. The resulting production is intended to stimulate the economy and the Russian export base. Four special economic zones have been created at transport hubs with the intention of attracting both domestic and foreign investment as well as to develop regional transportation and logistics infrastructure. The zones are located at the airports of Krasnoyarsk in East Siberia and Ulyanovsk in the Volga area, at the Sovetskaya Gavan port in the Khabarovsk Territory, in the Far East and at the Port of Murmansk in the North. The upcoming Sochi Winter Olympic games in 2014 have already triggered the development of transport and logistics infrastructure in Central and Southern Russia, including along the coast of the Black Sea.

Experts of our Delphi survey achieved consensus that multinational logistics service providers will enter the domestic logistics markets in emerging countries. In Russia multinational companies already have active operations in a number of regions, but a fuller level of penetration by such companies into the [regional] market is not happening as fast as one might have expected given the Russian economy’s rapid growth over the past decade.

Many specialists predict that in the near future the domestic Russian CEP market will be more influenced by large multinational companies. Such companies are seen to have significant competitive advantages in comparison with Russian domestic companies, particularly in terms of access to financing and technology. These companies may increasetheir investments in the domestic express market as they are currently doing in China.

Alexander Sinyavsky says:
“International logistics service providers will have enormous business opportunities in the Russian logistics market, if they are able to leverage their lead in experience. Expansion will require a detailed analysis of the Russian market in order to effectively assess risks and opportunities. Russian logistics service providers should be aware that foreign competitors are already waiting in the wings to enter their market. They will need to increase their competitiveness in order to sustain their market share and profitability.”