The logistics industry in Central and Eastern Europe (CEE) is set to experience a period of high growth over the next five years, going by a new report which predicts the nominal spend on logistics and storage in the region will grow from an estimated $272.3 billion today to $369.4 billion by 2012. On the whole, CEE has a relatively under-developed transportation network but is attracting increasing amounts of investment flows from the EU, local Government and large foreign and domestic private players in the logistics sector.

The lenient tax policies and moves for privatization have also helped attract a good amount of foreign direct investment funds into the region. With rising private consumption and fast-growing external and internal trade, the CEE region has displayed high-potential for the sustained growth of the transportation and logistics market.

Railways have become an expensive transport mode, infrastructure is monopolized by local governments is relatively scantily developed. Only 50% of the railway tracks are operative due to poor investment and maintenance. Consequently, the intermodal capabilities are limited and a majority of the gross tonnage, which could ideally be transported by rail, is being transported via trucks as road infrastructure is quite well developed.

Another problem is the congestion of logistics networks and warehousing in and around the major trading centres. As the manufacturing and distribution activity is concentrated in a few major centres, other cities in CEE need to develop as ideal distribution and logistics hubs in the coming five years. This will create new opportunities to leverage the existing space, labour and logistics infrastructure and result in creation of new transport networks, distribution and warehousing facilities.

The Contract Logistics market is still under-developed due to the highly fragmented nature of both the freight forwarding industry as well as the road freight industry. With the rapidly growing economy, an ever-expanding manufacturing industry, increased international trade and foreign investments in transport infrastructure, this sector is set to undergo a positive transition over the next five years.

Further Reading: Central and Eastern European Logistics Outlook