Kingpin of economic recovery

By Yang Cheng (China Daily)
Updated: 2009-09-10 08:51

Emerging markets such as China play a pivotal role in global economic recovery, particularly the logistics and transportation industry.

"Emerging markets are already leading the world out of the recession, and it is companies that have a strong presence in these markets that have tended to fare better than the competition," Tarek Sultan, chairman and manager of Agility, one of the world's leading providers of integrated logistics to businesses and governments, told China Daily.

Sultan, who is also chairman of the WEF Logistics & Transportation Board of Governors for 2009, pointed out that, "trade forecasts are predicting that China will see freight exports recover to a 11 percent growth rate next year - an excellent sign. Companies that have moved early to establish a presence and partnerships in these key markets will be in an advantaged position going forward".

The chairman also expects increased investments in key emerging markets in Asia, the Middle East and Africa going forward. China could be a particular area of focus since it is a large and dynamic economy that also performed strongly during the downturn.

He predicts some mergers and acquisitions in the industry with financially secure companies targeting a few hard-hit companies at prices that would not have been possible before the downturn.

Sultan, however, sees some "green" innovation that has been the focus of much government-stimulus spending arising out of people's concern for sustainable supply chains.

He says logistics companies that are able to maintain a stable financial position, use market opportunities to make strategic investments during the downturn, and begin investing in new and more sustainable ways of doing business, will emerge stronger than ever before.

Investment

Agility has enhanced its investment in China in recent years.

Eyeing the enormous opportunities in China, the company has begun to establish a national domestic distribution network through the acquisition of Baisui Logistics based in Shanghai as well as strengthening its ocean freight and upstream pre-distribution supply chain capacity through the acquisition of Cosa Freight and Runtong Logistics in China.

According to the chairman, Agility now has more than 50 offices in the Chinese mainland, Hong Kong and Taiwan.

"We broke ground on a chemical logistics hub and CMU (Compound Manufacturing Unit) for Borouge in Shanghai in 2008 and the 100,000 sq m facility will be completed by early next year."

Its investment for the CMU and logistics center in Shanghai hit $70 million, a stunning figure in the sluggish industry last year.

Agility has also been awarded a contract to be an official logistics service provider for the Shanghai World Expo 2010 and is the only global logistics player in this role. The company will handle international freight for a number of pavilions that are being transported to airports, to and from the expo site. It will handle all temperature controlled storage and distribution for food and beverage products. The Expo will be open to the public for six months and at peak times, it is predicted that Agility will have a team of more than 300 operating on site, says Sultan.

However, the chairman did not reveal its future investment plans and profit growth expectation.

Strategy

Agility focuses great attention on China's increasing appetite for consumption based on the financial stimulus package and rising numbers of Chinese consumers.

Moreover, the trans-Pacific and China-Europe shipping trades have reduced and rebalanced Intra-Asia routes and Latin-Central America, South Asia, Middle East-Africa, Eastern Europe and Russia-Central Asia will grow faster. Agility is well placed to take advantage of this.

It will utilize robust IT linkages and integration to manage its production costs and quality through process improvement.

Challenges

Agility will beef up efforts for a larger share of the market amid cut-throat competition.

Sultan says the company has leveraged the unique complementary mix of its business groups to increase efficiency as well as finding innovative ways of doing business for its customers.

Agility is committed to maintaining a healthy balance sheet by managing cash, capital and cost.

He adds that the logistics giant will continue to build on its leadership position in emerging markets and continue its strategic expansion in the Middle East, Africa, Eastern Europe, and Latin America.

It will also diversify its customer base and strengthen its relationships with existing customers by offering unmatched personal service.

He believes the company's winning card for its increasing presence in promising markets is that it has developed a strong base of talent to help drive its business. "It is built on a financially sound base," he stresses.

"In addition, we also plan to develop our business not only through acquisition but also through organic growth. We are investing in people through training and education and Agility is also contributing to the communities where it operates through CSR (corporate social responsibility) programs."