Russia must improve logistics to release potential

by John Manners-Bell on 2012-05-03 03:31:05

I recently spoke at the Horasis-organised Global Russia Business Meeting in Luxembourg about prospects for the Russian logistics sector and the systemic challenges it faces.

The results of the Ti researched Agility Emerging Markets Logistics Index, which examined the investment potential of a wide range of developing economies, showed that Russia ranked lowest of the BRIC group of countries.

Russia scored below average in terms of security threats and ease of access to the market, burdened by corruption and political unease. However, with more raw materials and energy resources than China, India and Brazil and low income inequality, the country does have reasonably strong investment appeal. Also, in the past year, there have been modest improvements in transport infrastructure which have increased the country's 'connectedness' with the rest of the world.

Examining the components of investment compatibility in more detail, Russia's size, growth rate, financial stability and population give it a huge potential. It was placed fifth out of 42 countries in the Index. However, the country underperformed in terms of market compatibility and accessibility for investors - the importance of its service sector, urbanisation of population, distribution of wealth, regulation and security were all marked down. On this range of indicators, Russia was only 18th.

Russia was also only 18th in terms of 'connectedness'. This measures how well the country is linked to the rest of the world by shipping services, airports and airlines, roads and rail as well as levels of customs efficiency. China, in comparison, was in second position. The index reveals the huge improvement needed if the country is to benefit from globalisation.

If Russia is to release the potential of its economy it must address serious investor concerns related to the business environment as well focusing on improving its transport links, both domestically and internationally. The Winter Olympics and Football World Cup, both taking place in Russia over the next few years, must be used as catalysts for this infrastructure investment.

John Manners Bell