A few weeks ago, The World Bank published the most recent version of its Logistics Performance Index. The LPI is a laudable initiative that The World Bank has undertaken based on earlier work by some of my academic colleagues at Stanford University, that indicated that a country’s logistics performance is directly related to its economic growth. If a country’s customs procedures and infrastructure are better developed, trade and economic development will follow.
In the Netherlands, the LPI ranking is important. Over the last five years since the initial publication, the Netherlands’ position has gradually slided, from a second position (and first in Europe) in 2007 to an all-time low fifth position (and third in Europe) in 2012. The responses have been alarming. The Netherlands logistics news site logistiek.nl opened with “Huge changes in logistics world ranking”, followed by comments how alarmingly poor the ranking of the Netherlands has become. Any subtlety in the analysis appears to have been lost. A famous Dutch football trainer a few years ago denoted this type of comments with “scoreboard journalism”, and I fear that this is the case over here.
A major part that is overlooked, and that is stressed very much by one of the LPI researcher, Professor Ojala – and even this year explicitly mentioned on the website and not only in the full report – are the so-called confidence intervals. Especially for countries with few responses, the confidence intervals are wide. For instance, the highest-ranked European country this year is Finland, but the confidence interval indicates it might as well be placed on the 15th place as on the 3rd place, where it is now. Further, being Dutch there is always envy with the Germans; however, from a confidence interval perspective, the scores of the Netherlands and Germany are identical.
Looking at these details, however, a few interesting observations can be made.
- The absolute score of the Netherlands has declined over time, from 4.18 in 2007 to 4.02 in 2012. The decline is probably significant (I do not have the underlying data to verify this), and should worry the Netherlands. At the same time, the score of the top country has decreased (4.19 to 4.13) and the gap between the top countries and the rest is decreasing. If this trend continues, there are likely to be more frequent position changes in the top 10 in the next editions, simply because the scores are getting closer. Care is required to compare absolute numbers in a survey that is years apart and where from the report it is not clear whether the respondents overlap or are different.
- The Asian countries are this time more clearly in the lead: the gap between the top 2 countries and the rest – again based on confidence intervals – is larger. This implies that increasingly Hong Kong, and in particular Singapore are setting an example.
- Belgium is clearly improving. For the Netherlands, the most important competitors are Germany and Belgium, as they are directly competing for establishments of logistics activities, and popularity of their ports. It could even be true that if a separate score was made for Flanders, the score could be even closer.
All in all, it appears that the ranking has not changed that much when having a closer look. Fluctuations in rankings are likely to increase even more in the next editions. However, I agree with most analysts that the underlying numbers are not good. However, not because Germany is ahead of the Netherlands, and not because the absolute score has dropped, but because the gap with the Asian leaders has increased, and Belgium in improving so much.
Any measures or actions by the Dutch logistics community should be based on such analysis.