Nick Behan and Nadan Hadzic share the third and final part of their logistics series with a focus on the APAC region, as they delve into the ever-changing and increasingly complex demands in the biggest logistics market globally.
APAC has been the biggest market globally in logistics for a number of years now. Much of this is down to its large number of high growth economies (particularly China and India), the region’s role as a manufacturing hub for a wide array of sectors, and the sheer volume of consumer activity as a result of being home to so much of the world’s population, including countries with rapidly growing urbanisation. An added advantage has been the highly developed e-commerce activity that businesses leverage across the region, which accounts for almost half of all e-commerce sales globally. Ports in APAC lead the way in the global standings by some distance, with Singapore serving as a critical shipping and commodity hub, and in the ranking of the busiest ports in the world, 7 of the top 10 are in China.
India has recognised the need to bolster its infrastructure if it is to compete with China on a regional and global scale. The re-election of Narendra Modi has also pushed logistics up the list of priorities, with his pledge to modernise India’s freight capability. Once the construction of a port at Vadhavan is completed, it will rank in the top 10 ports globally, further bolstering the region’s position as a freight hub.
There is every chance that with Donald Trump taking office at the end of January, the trade wars between China and USA that emerged in his previous term will be reignited. The proposed changes in trade policies are not just affecting tariff structures but are also likely to prompt changes in how and where goods are produced. Southeast Asia, with its vast and growing manufacturing capabilities, is developing as a crucial connection point between well-established supply chains in China and demand hubs in the West.
However, this positive market activity across the region invariably has an adverse impact on the environment. In contrast to the EU-wide green regulations we have noted in EMEA, environmental standards in APAC vary radically from country to country, leading to significant challenges for cross-border trade and operational efficiency. As an example, Australian environmental measures are stringent, including mandatory Scope 3 reporting, requiring companies to track emissions throughout their supply chains. Conversely, businesses based in Hong Kong are not required to report on Scope 3 emissions, and environmental reporting is not considered a high priority in India. Similarly, several countries lack the enforcement mechanisms to hold businesses to account for breaching environmental regulations. As a result, environmental reporting in the region is often categorised as voluntary, leaving businesses with minimal incentive to reduce their carbon footprint.
From our discussions with our network of senior leaders across APAC ahead of their plans for 2025, the prevailing sentiment has been apprehension at the trade disruption which may result from US-imposed tariffs. However, on the flip side, they anticipate that there will be ample opportunities for developing economies to serve as attractive alternatives to China.
On the back of this we anticipate the logistics sector in APAC to experience significant growth opportunities through continued technological advancements like AI and IoT, enhancing the efficiency and real-time monitoring of activities at large freight hubs and warehouses. As with all other regions, the topic of sustainability will be brought into focus, although the speed of action and investment is likely to be slower than in North America and EMEA. Alongside this, challenges from evolving regulations, cybersecurity threats, and rising consumer expectations for faster deliveries are leaving our clients with no choice but to make strategic changes and investment into how they can tackle these challenges. With so much for business leaders in the sector to focus on at present, we have seen an increased need from our clients to bring in new, external talent and develop their existing workforce to meet these ever-changing and increasingly complex demands.