Comment: Why logistics is essential to economic growth

Comment: Why logistics is essential to economic growth
Published: 19 June 2019 - 9:59 a.m.
By: Logistics Middle East Staff

The $4.3 trillion global logistics industry is a network of services that supports the physical movement of goods within and across borders. How efficiently goods can move through these systems to their final destinations is a key factor to a country’s opportunities for trade and economic growth.

A well-known connection between logistics and national economic growth is the facilitation of international trade. The global economic environment has seen a significant increase in the volume of goods traded over the last three decades. Additionally, a shift in customer expectations and increase in domestic consumption has increased the demand for newer products in higher volumes, and for them to be supplied faster. E-commerce has also altered the practice, timing, and technology of B2B and B2C markets, affecting everything from transportation patterns to consumer behaviour, compelling a need for improved efficiency in delivery systems, inventory management, and freight forwarding.

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Efficient transport and logistics systems play a vital role in strengthening connectivity between various inter-dependent production sectors like agriculture, manufacturing and tourism. In order to reap the benefits of growing global trade, producers depend on reliable logistics systems that can support their international customer base. Complex border procedures, complicated or inefficient customs clearance process, and fragmented transportation infrastructure, can obstruct international trade, raise the cost of doing business in the country, and affect the potential for economic growth. The toll can be particularly heavy for developing countries trying to compete in the global marketplace. Conversely, progressive and efficient customs operations have the potential, not only to increase trade but also significantly affect the competitiveness of a country´s economy.

The continuing growth of world trade is driving many countries to focus on evaluating and improving their logistics performance. The 2018 edition of the World Bank’s report: “Connecting to Compete”, reveals a persistent gap between high-income and low-income countries when it comes to logistics performance. High-income countries score, on average, 48% better on logistics than low-income countries, which suggests that better trade connectivity can bring about direct development and deliver real economic and social benefits. Improving logistics performance has therefore become a major policy objective for nations, due to its beneficial impact on the economy. Leading countries owe an important part of their economic health to their role in international supply chains and logistics.

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The logistics infrastructure in the UAE is becoming increasingly important thanks to the country’s position as a transhipment hub for Europe-Asia trade. A government-led emphasis on the need for reliable and cost-effective logistics operations has increased the competitiveness of the logistics sector, and in 2018, the country ranked first in the Arab world and 11th globally on the Logistic Performance Index. With further investments in transportation infrastructure and logistics, the Emirates are expecting a stimulation in tourism growth as well as international trade.

A global marketplace will continue to drive countries to participate in, and reap the benefits of international trade. As the world’s largest express delivery company, linking more than 99 percent of the world’s Gross Domestic Product, FedEx connects people and possibilities around the world, connections which allow businesses to prosper, communities to flourish, and people to thrive.

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