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
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