With most traditional in-store retailing shut in the spring of 2020, shortages of essential items and long delivery delays, Covid-19 has disrupted the globe’s transport, warehousing and logistics sectors beyond what many governments and companies could have expected. Our new ranking comes at a time when efficient and reliable supply chains are more important than ever, with many countries re-evaluating their dependence on complex globalised networks.
The pandemic has unveiled the risks and hidden consequences of globalisation, and has certainly been a blow to the supremacy of ‘just-in-time’ logistics. Countries may begin to rethink their supply dependency on other countries, perhaps moving more towards a ‘just-in-case’ production strategy with a focus on supply chain resilience. There are signs that the trend in offshoring production may be reversing, particularly in the US and Europe. The graph below, based on data derived from fDi Markets, compares total FDI Transport and Warehousing projects in 2019 and 2020, with the Asia-Pacific region seeing the largest drop in project numbers.
The pandemic has also fuelled more interest in sustainability, with many countries viewing the virus’s economic disruption as both a wake-up call and an opportunity for impact investment into the emerging green economy. While Covid-19 is certainly different from other natural disasters caused by climate change, it exposes how vulnerable the world’s supply chains are to natural events.
The shipping industry has shown impressive resilience over the past year, as many airports ground to a halt for a significant portion of 2020. The Financial Times recently reported that the composite index of the Shanghai Containerised Freight Index hit an eight-year high in 2020. The top three winners all have substantial stakes in the shipping industry, with deep-water ports connecting their cities to the world’s waterways. It is interesting to note that despite the possibility of near-shoring and fears about complex supply chains, four of five of the top Transport and Warehousing winners are in Asia. This suggests that the region’s longstanding reputation within the Transport and Warehousing sector, in addition to years of investment in facilities and capacity, may protect locations in the region from the fallout caused by the pandemic.
Hong Kong has been awarded the overall winner of fDi’s Transport and Warehousing Cities of the Future ranking, and also takes first place for the Economic Potential category. With a deep-water seaport located by the South China Sea, strong railway connections and one of the world’s busiest international airports, the city is well equipped for the Transport and Warehousing sector. Hong Kong received an impressive number of projects in the sector, with 15 transport and warehousing megaprojects worth more than $100m recorded on greenfield investment monitor fDi markets between 2015 and 2020. The city ranked the highest for overall capital expenditure on Transport and Warehousing projects, out of a total of 78 locations analysed.
The city also performs well in terms of cost effectiveness, benefiting from a low corporation tax rate and affordable construction permits at just 0.4% of warehouse value. Hong Kong has demonstrated a commitment to strengthening its position in the Transport and Warehousing sector, with a substantial investment of an estimated $18.26bn into expanding their international airport. The proposed expansion would entail adding an extra runway and prepare the airport for dealing with an expected 102 million passengers and 8.9 megatonnes of cargo by 2030.
Singapore ranks in second place in the Transport and Warehousing ranking, performing well in both the Economic Potential and the Human Capital and Lifestyle categories. It has also topped the 2020 Xinhua-Baltic International Shipping Centre Development (ISCD) Index for the seventh year in a row, demonstrating the island’s strong Transport and Warehousing credentials. The Maritime and Port Authority of Singapore reports that at any one time, there are about 1000 vessels in the port, and it is connected to 600 ports in more than 120 countries. While Singapore has a strong presence on the water, the island also benefits from an international airport that was awarded the title of ‘World’s Best Airport’ at the 2020 World Airport Awards.
Singapore’s preeminent port and airport lead to a strong FDI performance, scoring first place out of 78 locations for FDI in the Transport and Warehousing sector. Prospective investors can also benefit from Singapore’s well educated workforce and low cost of establishing a business.
Moving west, London takes third place in the Transport and Warehousing rankings. In a similar pattern to Hong Kong and Singapore, London has a strong presence in both the shipping and airport sectors, with six international airports within 80km and a deep-sea port. London ranked top in the Connectivity category, scoring particularly well in the World Bank’s Logistics Performance Index. In 2019, UPS opened one of their largest parcel facilities outside of the US in the DP World London Gateway. Mark Vale, president for UPS UK, Ireland and Nordics, stated that London’s “state-of-the-art facility enables us to further improve our services to companies of all sizes that are looking to grow their cross-border business”.
This article first appeared in the December/January print edition of fDi Intelligence. View a digital edition of the magazine here.