WORLD OF INDUSTRIES 06/2018 (RU)

NEWS AND MARKETS
the latest sanctions. Growth projections for 2019 and 2020 stand at
1.8 %. This forecast is subject to both favorable and unfavorable
risks. Favorable risk factors come primarily from higher than expected
oil prices. Unfavorable risk factors include escalation of
trade tensions and restrictions among major economies, which
could derail the recovery in global trade and negatively impact confidence
and investment worldwide. Other external unfavorable risk
factors include a further expansion of trade sanctions, unfavorable
currency exchange rate and rising inflation.
Overview of Russia’s logistics sector
Russia’s continent-straddling size is both a blessing and a curse.
Despite existing transport links, Russia ranks 99 out of 160 countries
in terms of logistics performance. The World Bank’s Logistics
Performance Index ranks Russia far lower than other comparable
economies such as Germany (1st) and the UK (8th). Current low
logistics performance, however, does not close off investment
avenues. Rather, it points towards some golden opportunities. Russia
is in need of updated technologies, methodologies and attitudes
when it comes to transportation sector. Below are some reasons
why Russia’s transport and logistics market is a fertile ground
for foreign companies to invest in.
Well established logistics network – but there is room for expansion:
With over 86,000 kilometers in rail tracks, a road network over
1.4 million kilometers long, plus countless air and seaports, Russia
is a well-established intermodal network hub. That said, there is still
major room for improvement and expansion. The estimated market
potential stands at $ 150 billion in a report from research firm PricewaterhouseCoopers.
Fresh warehousing stock is in demand, updated
cargo handling facilities at ports, new airports, rail hubs and
logistics centers are needed to match government ambitions.
Foreign investment in transport & logistics is being sought: Due
to a lack of competitiveness in domestic operators, foreign logistics
businesses are already being courted for investment – often in the
form of tie-ups, joint ventures or operational co-operation. Huge
sums are being injected into transport and logistics from overseas
investors. For example Dubai’s DP World, global port infrastructure
and management specialists inked a $ 2 billion deal to enhance
Russia’s port infrastructure networks. Other foreign firms, such as
DHL or Finnish company Itella Russia, are already well established
in the Russian market. Technological advantages, efficient operations
and experience, puts international brands at a significant advantage.
Russia is greatly in need of integrated and cost-effective
transport and logistics solutions, so international operators can
score some big wins in Russia.
E-commerce is on the rise: With more than 75 million internet users,
Russia’s e-commerce sector has been growing despite the otherwise
economic hardships. Online retail grew by more than 6 % in
2015 during the peak of the Russian recession, and is now worth
more than $ 23 billion. So what does this mean for transport and
logistics? Simply put, Russia requires a higher number of fulfillment
centers, increased third-party and courier services and extra warehousing
real estate. Warehousing alone is estimated to need $ 30
billion of extra investment to keep pace. E-commerce is gaining further
prominence in Russia’s retail makeup – and extra logistical services
are needed to match growing online sales numbers.
Weak third party logistics: Underdeveloped and lack of competitiveness
from Russia’s domestic 3pl providers is hampering the sector.
Foreign companies such as DHL and TNT Express already dominate
the market. Foreign firms are able to do so due to their
significant technological advantages, operational efficiency and
access to financing. Logistics technology manufacturers can supply
Russian 3pl operators with the tech needed to claw back a larger
market share. Fulfillment, cargo tracking and intelligent inventory
solutions are in high demand.
With opportunities abound across the length and breadth of the
country, investors and companies should certainly look to the world’s
largest nation as their next market for investment or expansion.
Photographs: Lead Photo Fotolia, processing VFV Layout
10 WORLD OF INDUSTRIES 2018