THE BIGGER PICTURE
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IS THIS CHINA'S NEXT VICE PREMIER?
LIu He China's most high ranking economic advisor and notoriously most publicity shy official, addressed delegates at Davos this morning. Ostensibly,
he was responding to a request by organizers and Klaus Schwab Founder of the World Economic Forum, in particular to provide an overview of the
current state of Chinese economic thinking. In a measured, candid address, Mr. Liu, while generally positive about China's prospects and indeed that
of the global economy, did urge caution in respect of financial markets where he particularly singled out 'asset bubbles' and high debt as areas of
concern. Turning to home, Mr. Liu reported China's finances as 'basically sound' but did admit that “shadow banking and hidden debt for local
governments are serious problems we have to deal with” The 66 year old Harvard educated economist is head of the Communist Party’s top economic
affairs steering group, and a vice-chairman of the country’s main economic-planning body. He was elevated to the party’s 25-member Politburo during
a leadership reshuffle event in October. Speculation is now rife that he could become the next vice-premier in charge of China’s economy. Click
SINGAPORE'S DEPUTY PRIME MINISTER ON BELT & ROAD IN DAVOS
40% of global GDP, 80 countries and 60% of the global population That's how Michael S. Burke summed up the Belt and Road Initiative. Spanning four
continents, the so-called New Silk Road is on track to be the largest infrastructure project in history. It's expected to enhance connectivity, encourage
better exchange of cultural knowledge and technological know-how. In this discussion, the panellists explored the implications for regional
collaboration and the expansion of clean infrastructure. The panel featured representatives from across the belt, who all offered their prospect on what
it will offer the world.
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PRIME MINISTER OF PAKISTAN ON BELT & ROAD LIVE IN DAVOS
40% of global GDP, 80 countries and 60% of the global population That's how Michael S. Burke summed up the Belt and Road Initiative. Spanning four
continents, the so-called New Silk Road is on track to be the largest infrastructure project in history. It's expected to enhance connectivity, encourage
better exchange of cultural knowledge and technological know-how. In this discussion, the panellists explored the implications for regional
collaboration and the expansion of clean infrastructure. The panel featured representatives from across the belt, who all offered their prospect on what
it will offer the world.
Click For More (external site)
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FRANK APPEL TELLS IT LIKE IT IS AT DAVOS
Frank Apel CEO of Deutsche Post DHL was not talking logistics today at Davos, he was talking sense. He transcended national and even internationalism
to give a cogent constructive view on globalization. The boss of 500'000+ employees worldwide, Mr. Appel left listeners in no doubt as to who would
keep the show on the road and combat protectionism, CONSUMERS, who will vote with their wallets and 'buy from different places' He agreed that
inevitably, protectionism and tax reductions would mean short term gains for their protagonists, but that "it has never paid off in the long run" He ended
his contribution to the panel 'Global Markets in a Fractured World' saying: "The only way out is to make your country more competitive. My home
country of Germany is a very good example, we were a lost country in Europe 15 years ago, and now we are a powerhouse. Why? Because we make the
right reforms and made the country more competitive." Logisticians the world over are very proud of Frank Apple today, he projected a strong no
nonsense, can do attitude reflecting very positively on the industry that 'moves the world' LOGISTICS. Thanks Frank. Click For More (external site)
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PRIME MINISTER MODI & INDIA'S COMMITMENT TO GLOBALIZATION
Davos 2018 is up and running and Prime Minister Modi of India was one of the first global leaders to address the summit. It is the first time in 20 years
that an Indian head of state has extended that honour to the gathering and enthusiastic globalists will say it was worth the wait. PM Modi, leading a
large delegation of Indian politicians and business executives poured scorn on 'protectionism' charging its protagonists with "not only wishing to save
themselves from globalization, but to change the natural flow of globalization.” Citing, Mahatma Gandhi, he advised that need rater than greed should
be the motivating factor. So it would appear the stage is set for a contrast of epic proportions when President Donald Trump takes center stage
this coming Friday.Click For More (external site)
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ARGENTINA SAYS 'YA NO MÁS...NOT ANY MORE' TO POOR LOGISTICS: Argentina is in a hurry to catch up with globalization and realises that a reliable,
cost effective and efficient logistics system is key. (The country is ranked 66 in the World Bank Logistics Performance Index) President Macri has used his
powers to issue a 'Necessity and Urgency Decree', (Spanish: Decreto de necesidad y urgencia, or DNU) a special kind of order that has the force of law
and comes into force almost immediately. The decree covers a cross-section of the country's economy with a focus on industry, eliminating import
licenses for hundreds of products and reducing LOGISTICS costs. Firstly, port handling charges and particularly pilotage come under scrutiny where
reductions of between 20 & 40% have been mandated. Secondly the measures include allowing the use of trucks with double trailers ("bitrenes," in
Argentina) hauling up to 75 metric tons, which, according to the transport ministry, will reduce logistics costs by at least 20%. The decree, Plan
Transporte 2016-19 and Plan Belgrano, which involve major investments to upgrade road/rail networks, sea and airport infrastructure augurs well for the
OECD membership contender. Click For More (external site)
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President Duterte’s, Tax Reform for Acceleration and Inclusion (TRAIN) law has taken off and with it has the country’s freight and logistics sector.
The Philippine Ports Authority told the media over the weekend that its net income had risen from $140 to $160 million U.S. up 16% YoY on the back
of surging container throughput which increased a whopping 3 million TEU. So, what is TRAIN and why is the Philippines now ranked by the World Bank
as the world’s 10th fastest growing economy, at 7-8% annual growth ? This is how Moody’s the rating agency put it this weekend: “The Philippines'
economy has been a standout in recent years, underpinned by strong domestic demand and favorable demographics. Domestic demand likely remained
the main driver of growth, with exports also providing lift thanks to strong demand for electronics and components,”
So that’s the answer, Domestic Demand, and that’s what the TRAIN law mandates, a reduction in personal income taxes, increasing people’s take-home pay,
i.e. greater purchasing power. Mabuhay Philippines!
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JD com has launched its autonomous supply automobiles on the streets of Tianjin, a metropolis in northern China. The vehicles have been tested in
controlled environments previously, this is their first time in a live urban setting. Tianjin is uniquely qualified for the partnership as it has been
identified by the Chinese government as its benchmark 'smart city' “Tianjin offers a range of real-world applications for our technology, and this
cooperation will enable us to increase efficiency and convenience for the city’s residents, while providing unlimited scenarios for us to continue
to improve our technology and increase its future potential,” said Jun Xiao, vice president and head of JD X, JD’s logistics innovation lab.
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The United States, Federal Maritime Commision (FMC) has finished hearing evidence from representatives of stakeholder groups from maritime
logistics. The FMC were responding to a petition filed by the Coalition for Fair Port Practices, a group of 20 trade associations demanding it
intervene to combat unfair demurrage and detention charges. The coalition cited port labor challenges in 2014/15, the Hanjin meltdown in '16
& various snowstorms and hurricanes as examples of circumstances where charging demurrage fees was unconscionable. Shipping lines and
terminal operators have vociferously defended their modus operandi and argue that any intervention by the FMC would cause more challenges
than create solutions. Michael Khouri Acting FMC Chairman, a noble man, with endless patience will need all of his vast experience to measure
this one, he said: “Is a problem systemic or episodic? Are there places in between that we need to look at? Where do we step in with a
judicious hand to make things better, recognizing that we’re not going to be able to solve all problems?” Last word to Karyn Booth pictured.
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It is reasonable to assume that when you are the world's largest logistics company with access to information on what's literally 'inside' the Box
(millions of boxes!), you are qualified to check the temperature of global trade. Well that's what DHL under Tim Scharwath have done. Leveraging
BIG Data, they have created the DHL Global Trade Barometer. (GBT) The premise is simple, hindcast is the basis for forecast and combined with real
time data on the movement of intermediate and early cycle commodities central to production, it is possible to build a picture of world trade 3 months
out and consequently the demand for logistics. Mr. Scharwath said yesterday: “DHL has a deep understanding of the driving forces behind global
trade volumes and the industry expertise to analyze and interpret market data, Our network, knowledge and experience uniquely position us to
understand global supply chains in order to derive a global trade outlook” In this DIGITAL week, Mr. Scharwath also had this to say. " GBT shows
impressively how digitalization–with the use of Big Data and Predictive Analytics–opens up entirely new opportunities"
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Maersk's physical presence in the global container market is self evident, it now owns and/or operates some 773 container vessels, with a total
container capacity of around 4.15 million TEU giving it control over a 19.3% share of the market. However, its future success will not just be
measured by lifts but also by clicks and so, it is to it's digital strategy that Maersk now turns its full attention. As the market leader it is vital that
the company led by Søren Skou (pictured) brings shipping firmly in to the digital age. In a piece penned by Mr. Skou for yesterday's Wall Street
Journal he is candid about the challenge, particularly in his final paragraph where he says: "The opportunities are enormous, but so is the
possibility of disruption with the emergence of new competitors that were born digital. Our industry must develop new technology and software
solutions in open, innovative communities. We need to digitize from the inside of our business, but at the same time, finding the best solutions
will require our industry to partner with companies across a wide range of industries."
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Analysts are aligned in their view on how oil prices will perform this year and that is upwards. Global economic growth will support solid oil demand
growth and this combined with the return of geopolitical risk will exert continued upward pressure. When one considers that a 20,000 teu container
vessel burns 250 tonnes of heavy fuel oil (HFO) a day at sea at today's price of $375 per ton, (up from $300 last spring) you get an idea of the type
of headache that carriers and consequently shippers are faced with. All the slow steaming in the world won't provide the necessary savings to
mitigate that kind of rise. The Plot Thickens!
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Norway's sovereign wealth fund, the largest in the world at a valuation of $1 trillion, has decided to exclude four shipping firms from its portfolio
over their shipbreaking practices. The four companies are, Evergreen Marine, Precious Shipping, Korea Line & Thorensen Thai. The fund's Council
on Ethics based its recommendations on the practice of scrapping ships at beaching yards in Pakistan and Bangladesh. It asserted that working
conditions are extremely poor and harms the environment. "The Council considers that by disposing of ships for scrapping in this way, the
company can be said to contribute to serious human rights violations and severe environmental damage, beaching is a consequence of an active
choice on the part of the company that owned the vessel to maximise its profit . . . There are better ways of dismantling ships that are readily
available to the shipowner, but these are more expensive." The announcement coming at the same time as BlackRock's CEO Larry Finks letter to
CEO's of public companies advising that they start accounting for their effect on society indicates a turning point in how investment decisions
will be made from now on. Click For More (external site)
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BlackRock CEO Larry Fink has written to CEO's of public companies advising that they start accounting for their effect on society. BlackRock a $6.3
trillion asset manager ,holds considerable sway in global bordrooms and in the words of one commentator, Mr. Finks letter has the potential to
"Stand out as watershed moments that redefines the environment and re-direct the course of events like Bill Gates writing his “Tidalwave of the
Internet” memo in 1995 and Steve Jobs holding up the iPhone in 2007" The paragraph in the letter which is the most instructive read:
"We also see many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and
worker retraining. As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal
challenges. Indeed, the public expectations of your company have never been greater. Society is demanding that companies, both public
and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how
it makes a positive contribution to society." Click For More (external site)
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$4 trillion in goods are shipped annually, more than 80 % by sea. The cost of trade documentation to process these goods is estimated to reach 20%
of the transport costs. Now, Maersk & IBM have teamed up to reduce this inefficiency using blockchain. Michael White, CEO of the JV (commencing
in New York in 6 months) explains the how and why: "Blockchain technology will employ smart contracts determined by the goods being shipped
and the authorization they require while in transport, eliminating delays and reducing the time waiting for information for cargo to move.
Currently, documents have to go from one customs or regulatory agency to another, signed off on, sent to by courier to the broker who presents it
to customs to validate it as an original certificate. If any one of those documents are delayed, if there are questions around validity, then the shipment
will be held up. And yes, while there are track and trade products out there, they're inconsistent with gaps in the information. Blockchain resolves this,
however the bigger value is getting access to the information and the documentation when it's needed to prevent cargo from being delayed."
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Last week the BIGger Picture quoted Joerg Wolle, Chairman Kuehne + Nagel who in response to a question on the possibility of being 'disrupted'
by a digital newcomer said. "We do not see a disruptive development that could replace a group like Kuehne + Nagel. We are ahead of new companies
because of the huge network and our competence ultimately it takes people who control the flow of goods and fix problems." Well, one week later,
it's a little easier to see where the Chairman's confidence was rooted. On Monday K&N signed a JV agreement with Singapore state owned Temasek.
The common goal is to invest in young companies that develop innovative technology for logistics and supply chains. The partners want to focus on
big data and predictive analytics, artificial intelligence, blockchain and robotics. Temasek which manages a US$197b portfolio will bring its investment
expertise, while K+N will make its global logistics network and know-how available. Not that Temasek will be short on know how, it was the majority
shareholder in APL until its purchase by CMA CGM. PICTURED: Dr. Joerg Wolle, Chairman K+N, Tan Chong Lee, President Temasek (Divisional)
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Hu Huaibang, chairman of China Development Bank, told a panel at the Asian Financial Forum in Hong Kong that the bank had extended $110 billion
in loans to projects along the ancient trade route by the end of 2017. The Chinese bank, which has assets of $2.4 trillion, was set up to provide medium
-to long-term loans to the country's major economic and social development projects. It is also the world's largest development finance institution.
The bank falls under the direct leadership of the country's State Council and is financially backed by the Ministry of Finance and Central Huijin Investment
, China's largest investment company.
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Vietnam's logistics industry has the potential to become a key economic sector; however, after 40 years of operation, it still shows many weaknesses.
According to Ousmane Dione, Country Director of World Bank in Vietnam, Vietnam has emerged as a global manufacturing hub and one of the world’s
leading foreign direct investment (FDI) destinations. Despite highly appreciating the potential of Vietnam’s logistics with export revenue growth being
robust, Dione said that Vietnam still often carries out the lowest value-added segment of production in global value chains. Moreover, Vietnam’s trade
costs are higher than the ASEAN average. As a proportion of GDP, logistics costs in Vietnam stand at about 18 per cent of Gross Domestic Product
(GDP), almost double that of advanced economies and higher than the global average of 14 per cent. Vietnam’s ranking in the Logistics Performance
Index dropped from 48 in 2014 to 64 in 2016. During the same period, other economies improved their performance much faster than Vietnam,
meaning it is losing competitiveness.
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China, Asia and the world are waking up this morning to some really incredible figures coming out of Shanghai's SIPG.
(see the BIGger Picture) In a statement issued yesterday,the company said by way of explanation : "World Economic Growth and China's
Foreign Trade Growth Laid the Foundation for International Container Transportation Demand and Pushed Up the Port's Throughput Growth"
A claim backed up by the the Chinese General Administration of Customs who said Friday: "China's Foreign Trade Rose 14.2 Percent Year On Year In 2017, Ending Two Years Of Drops"
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Netherlands new government a coalition of 4 parties have set out their vision in an agreement called 'Confidence in the Future' It contains
an paragraph on climate and energy, which starts with the observation that the EU's aim to reduce greenhouse gas emissions by 40%,
compared with 1990 levels, by 2030 will be insufficient to meet the Paris Agreement target of no more than a 2 degrees Celsius rise in
the global average temperature. Therefore, the new government has set the bar higher, introducing measures to prepare the Netherlands
for a 49% reduction in greenhouse gas emissions by 2030. Allard Castelein Port of Rotterdam CEO welcomed the development, stating:
‘It’s heartening to see that a whole chapter devoted to our climate and government plans to reduce CO2 emissions. One of the key pillars
of this policy will be the capture and storage of CO2. We have been reviewing this technology in the port.....such trends give a major boost
to an inevitable transition in the port area: from fossil to sustainable. I expect the energy transition to pick up speed’
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Takehiko Nakao President of the Asian Development Bank spoke to CNBC about his views on the Asian economy as it enters 2018. He opines
that Asian economies will continue rising if countries in the region are able to maintain cooperation. "There can be differences in opinions, but
it is important to manage and improve cooperation between countries in Asia," he said, before citing “integration into the global supply chain”
as another key reason behind Asia's economic growth.
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Germany’s next government will inherit one of the largest financial surpluses in the country’s history. €39 Billion to be precise generated by bumper
tax revenues from a booming economy. Employment is at its highest level since reunification — and low interest rates on the country's debt are
the two key drivers in the economies performance. See the numbers in the BIGger Picture above. It will be interesting to see if France's President
Macron’s vision for Europe, (which he presented publicly two days after elections IN Germany) where he suggested transferring German taxpayers’
money to an E.U.-level finance ministry will gain traction. From a logisticians perspective, particularly if your German, this all adds up to more cargo
and that's all that really matters.
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The biggest story in U.S. retail last year was the record number of store closures. From all accounts the number of doors that close in 2018 could
surpass last year’s total by as much as 30 percent. (See the BIGger picture below) In 2017, nearly 9,000 stores closed, this year the number will
be between 10,000 and 11,000, that’s fewer than the 13,000 analysts initially forecast. Either way retail is changing in America and worldwide.
For us as logisticians it means, that the cargo that traditionally went into the trunk of the automobile for the final mile now gets delivered to the
hall door. The final steps in container (TEU) to package logistics are happening. Freight forwarders need to be particularly alive to these changes
and develop and include final mile solutions in their service offerings.
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Terence Corcoran writing in Canada's Financial Post, takes the opportunity in the run up to Davos 2018 to remind his readers that: "A Year Ago The World
Was Gearing Up For A Bad Trade Year, Davos Participants Were On The Alert For The Intellectual Crisis Of Globalization. With Donald Trump Set To Move
Into The White House A Pre Davos Note From A Forum Staffer Warned Of The Triumph Of Nationalist Nihilism Over Cosmopolitan Idealism. Whatever
That Means It Didn't Happen" He is right, it didn't and the numbers prove it, not just those highlighted in the BIGger Picture below but also in these
ones also provided in the column. "The Dow Jones Soared to Record Highs in the First Days Of 2018, so Did London’s Stock Exchange Now 35%
Above Its 2016 Low. Fears of a Brexit Catastrophe Have Disappeared Talks Continue Solutions Are Emerging. Share Prices Are Soaring in Japan."
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In a wide-ranging interview with Finanz und Wirtschaft, (Finance & Economy) the Swiss business newspaper, Jörg Wolle, K+N's Chairman fires the opening
salvo in what is expected to be a year of major acquisitions by the company, particularly in Asia. His thoughts on digitization are particularly welcome
he makes it very clear that "logistics is its life blood" and that for K+N is not a threat, "we do not see a disruptive development that could replace a group
like Kuehne + Nagel. We are ahead of new companies because of the huge network and our competence ultimately it takes people who control the flow
of goods and fix problems." he says. His response to the rise of protectionism and President Trump's tariff barriers is particularly instructive. "Trade barriers
are not necessarily bad for us complexity fosters business our value adding, usually higher margin additional services also include customs clearance so we
do not just profit from free trade" So, there we go again, if you are in logistics and stay ahead of the game, you are always on a winner!
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Emre Eldener, Chairman of The Turkish Association of International Forwarding and Logistics Service Providers (UTIKAD) shared some pretty interesting
numbers earlier today with the state-run Anadolu Agency. The standout number is the $2 Billion U.S. invested in the sector over the last decade,
the others are in the BIGger Picture. (below) Since the early 1980s, Turkey has been going through a rapid transformation economically. Next to the
automotive and textile industry, the transportation and logistics segment is one of the country's most dynamic industry sectors. The country's strategic
Eurasian bridging function is definitely a factor that will drive this development ahead. UTIKAD were consulted widely on the Turkey Logistics Master
Plan 2023 developed by the government. The plan has set ambitious targets in the field of domestic logistics and has resulted in unprecedented
cooperation between the public and private sectors. Judging by what's coming out of Ankara, things are moving along nicely.
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French president Emmanuel Macron began his state visit to China today, in Xian, the starting point of the ancient Silk Road in what is seen as a
recognition of President Xi's $1 trillion infrastructure project to redevelop the trading route. The project known as the Belt & Road Initiative (BRI) has been met with
both interest and worry and France has so far been cautious on it. China has been waiting for President Macron to give his reaction, not just as President
of France but also as an emerging European leader. Well, the Chinese did not have to wait long, President Macron told an audience of academics,
students and business people at the Daming Palace: “The ancient Silk Roads were never only Chinese, by definition, these roads can only be shared.
If they are roads, they cannot be one-way, they cannot be those of a new hegemony, which would transform those that they cross into vassals”
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PETER SUTHERLAND 1946-2018
One of Europe's most influential figures, Irishman, Peter Sutherland, the founding director general of the World Trade Organization and former chair of
Goldman Sachs and BP, has died at the age of 71. A spokesman for the WTO said that Mr. Sutherland's leadership, vision and courage were instrumental
in the birth of the world trade body and that the lengthy Uruguay Round negotiations that led to its creation were by no means assured until the
Irishman took charge. The World Trade Organisation (WTO) replaced the General Agreement on Tariffs and Trade (GATT) from 1995) The WTO deals
with regulation of trade between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process
aimed at enforcing participants’ adherence. Mickey Kantor, the US Trade Minister, credited Sutherland with being the father of globalisation and said
that without him there would be no WTO. He was a statesman in every sense of the word; an Irishman, committed European and a proud internationalist.
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EDITOR’S NOTE:
On a hourly basis we research the latest developments and commentary on logistics from all corners of the world. We do it, firstly to keep our finger on the pulse of this great industry and secondly to continually update our own record on the evolution of what is increasingly becoming the world’s most transformative science.
Lean is at the heart of the matter and as such theses sound bites that we capture and present as the ‘Bigger Picture’ serve to encapsulate the change, the development and further adoption of logistics.