2009 04 Growth Opportunities In Asia Pacific Rail Markets Frost & Sullivan

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The Asia Pacific rail industry is being viewed globally as a multi-million dollar industry with tremendous untapped potential and is expected to be one of the high growth - high potential markets in the world. This is especially true in the case of high speed rail projects and MRT (Mass Rapid Transit) services, which require superior technical capabilities to build. Several Asian countries have collaborated with international rail infrastructure companies for their MRT projects.

The rail industry has also come a long way as a key mode of freight transportation. Key economies such as China, India, Malaysia and Australia are expected to focus their future development projects towards building their rail infrastructure for freight transportation. High fluctuations in fuel prices and increased urbanization and traffic congestion on roads have triggered the shift towards higher use of railways for freight transportation. With the rail industry across the region also queuing up to attract customers for freight movement, there certainly exists opportunities for Logistics companies, Rail Organizations, Planning bodies, ICT Solution Providers and Real Estate Solution Providers to tap a large portion of the rail freight market.

Frost & Sullivan\'s Consultant, Rohit Gunavanthe, has completed extensive analysis for the Asia Pacific Rail markets and shares his findings in this presentation.

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2009 04 Growth Opportunities In Asia Pacific Rail Markets Frost & Sullivan

  1. 1. Growth Opportunities in Asia Pacific Rail Markets: The Track Ahead Rohit Gunavanthe, Consultant Transportation & Logistics Practice Asia Pacific 2nd April, 2009
  2. 2. Focus Points 1 1 Current Economic Scenario Current Economic Scenario 2 2 World and Asia Pacific Rail Market – An Overview 3 3 Current Trends in Railway Industry ii Passenger Movement Trends (current and expected trends) ii ii Freight Movement Trends (current and expected trends) iiii ii Technology Trends (current and expected trends) 4 4 Market Dynamics (Drivers and Challenges) 5 5 Opportunities for the Rail Industry Participants 2
  3. 3. Economic Downturn – The Recession: How it all began… European Banks European Banks withdraw investments in lose money on sub eastern Europe prime mortgages Unwinding of Yen Carry trade & FII withdrawals Lower exports from Oil prices drop on Asia due to lower slower growth in American and Europe and USA European demand Withdrawal of FII inflows: currency depreciation Crisis has gone global Employment creation has hit the bottom Industrial production has decrease significantly Consumer spending is gradually dwindling Credit markets still remain tight 3
  4. 4. Economic Scenario – The Recession: What lies ahead… Unprecedented focus worldwide on addressing the economic situation Industrial output to rebound from recent lows New US government to focus on Strong demand from emerging creating up to 2 million jobs in Asian nations will be a factor in infrastructure, energy, medical reviving the global economy technology and infrastructure What Lies Ahead… Easing of inflationary and liquidity pressures Decline in commodity and oil prices leading to a tax break stimulus Recovery of industrial output by end 2009, despite lower Automotive growth Consumers activity, aided by fiscal stimulus, will boost industrial output, ultimately aiding recovery Companies to focus on better & more productive means of getting products & services to their customers 4
  5. 5. Focus Points 1 1 Current Economic Scenario 2 2 World and Asia Pacific Rail Market – An Overview World and Asia Pacific Rail Market – An Overview 3 3 Current Trends in Railway Industry ii Passenger Movement Trends (current and expected trends) ii ii Freight Movement Trends (current and expected trends) iiii ii Technology Trends (current and expected trends) 4 4 Market Dynamics (Drivers and Challenges) 5 5 Opportunities for the Rail Industry Participants 5
  6. 6. World Rail Market revenues stood at US$284.24 billion in 2007 – Asia Pacific accounted for 23.9% of it Passenger and freight services contributed 57.2%, rolling stock 19.0%, rail infrastructure, 14.5%, rail control systems 9.1% of total revenue Till 2012, the world rail market is expected to exhibit an annual growth of 1.5% to 2.0% World Rail Market World Rail Market ($284.24 billion) ($284.24 billion) Rail Control Rail Service Rolling Stock Rail Infrastructure Rail Control Rail Service Rolling Stock Rail Infrastructure Systems ($162.80 billion) ($54.05 billion) ($41.38 billion) Systems ($162.80 billion) ($54.05 billion) ($41.38 billion) ($26.01 billion) ($26.01 billion) Asia Pacific is one of the highest contributors to world rail revenues in 2007, accounting for 23.9% of the world rail market, worth US $67.9 billion Asia is the most important growth market in the long term, with an estimated annual growth rate of 2% to 3% Development of rail infrastructure and extension of routes in China and India to be major growth drivers for APAC rail Source: Frost & Sullivan market 6
  7. 7. Rail Market Segmentation The rail market in Asia Pacific comprises of four market segment - Rail Control System Rail Control System Rail Locomotive / / Rail Locomotive Rail Equipment Rail Equipment / /Technology Technology Coach Suppliers Coach Suppliers Suppliers Suppliers Suppliers Suppliers Railway Supply Chain Members Railway Supply Chain Members RAILWAY RAILWAY ASSOCIATIONS ASSOCIATIONS Railway Segments Railway Segments Passenger and Passenger and Rolling Stock & Rolling Stock & Railway Railway Rail Control Rail Control Freight Services Freight Services Rail Equipment Rail Equipment Infrastructure Infrastructure System System Handle passenger Represent all powered Manages all railway Is a centralised rail and freight & unpowered vehicles related infrastructure traffic control movement that move on a railway operations system 7
  8. 8. Focus Points 1 1 Current Economic Scenario 2 2 World and Asia Pacific Rail Market – An Overview 3 3 Current Trends in Railway Industry Current Trends in Railway Industry ii Passenger Movement Trends (current and expected trends) ii ii Freight Movement Trends (current and expected trends) iiii ii Technology Trends (current and expected trends) 4 4 Market Dynamics (Drivers and Challenges) 5 5 Opportunities for the Rail Industry Participants 8
  9. 9. Passenger Transportation Trends Country Passengers Transported (Billions) Railway Network (Kilometers) Japan 8.78 29,682 India 6.29 63,332 China 1.36 76,600 South Korea 0.99 3,472 Australia 0.62 33,819 Thailand 0.05 4,071 Malaysia 0.04 1,699 Note: Figures are as of March 2008 for the year 2007 (March 2006 to April 2007) Japan has the highest number of passenger-to-rail network length ratio with 295,622 passenger per kilometer. China, though has vast network, has low passenger-to-rail network length ratio of just 16,450 passenger per kilometer. South Korea’s rail network though considerably smaller, has the 2nd highest rail passengers-to-rail network length ratio of 285,138 passengers per kilometer in 2008 India has the 2nd longest rail network and stands 2nd in passenger transported in 2008 9
  10. 10. Growth in Key Rail Markets across Asia Pacific India, China and Japan expect the highest growth rates in the rail industry Main Line Service Urban Transport Service Passenger growth of 8.5% in 2008 Significant growth potential in Beijing, Significant growth potential for High Shanghai, Guangzhou & Shenzhen Speed trains (200-250 Kms/hr) Over 1,700 Kms of urban line by 2015 Significant growth potential in Delhi, Passenger growth of 12.9% in 2008 Mumbai and Bangalore urban cities for Significant growth potential for High Metro rail and Monorail services Speed trains (200 Kms/hr) Available urban market of 320 million people across India (est. 2008) Comparatively lower growth for urban Passenger growth of 3.0% in 2008 rail systems Moderate growth potential for Very 14 key private operators, operating High Speed trains (over 300 Km/hr) urban trains over 2,000 Kms 10
  11. 11. Projected Growth in Passenger Services Significant rail network expansion expected across in India, China, Japan, Australia, Rail Network Malaysia and Thailand Expansion Rail network expansion projects throughout the region, to focus largely on Main Line Services High Speed to Very High Speed rail service projects to be implemented in China and Service Enhancement Japan Rail infrastructure revamping includes advanced coaches, electrification, new signaling systems to the immediate focus areas Trans-Asia railway network to be setup by 2015 across four regions: Southeast Asia, International Rail Networks Northeast Asia, Central Asia-Caucasus and South Asia-Iran-Turkey Kuala Lumpur-Singapore high speed rail network post 2012 jointly developed by the Ministry of Transport, Singapore & Malaysia Dedicated China, India and Thailand expected to plan for country-wide dedicated intercity and Lines interstate lines for passenger and freight transport services by 2012 11
  12. 12. Focus Points 1 1 Current Economic Scenario 2 2 World and Asia Pacific Rail Market – An Overview 3 3 Current Trends in Railway Industry Current Trends in Railway Industry ii Passenger Movement Trends (current and expected trends) ii ii Freight Movement Trends (current and expected trends) iiii ii Technology Trends (current and expected trends) 4 4 Market Dynamics (Drivers and Challenges) 5 5 Opportunities for the Rail Industry Participants 12
  13. 13. Poll Question 1 Considering that Rail is assumed to be a cheaper mode of freight transportation, do you think the current recession would have a positive impact on growth of the rail freight market across Asia Pacific? Yes - significant impact No - no impact at all Negative – negative impact similar to other sectors No answer – cannot conclude 13
  14. 14. Freight Transportation Trends Country Freight Transported (Million ton per Km) Railway Network (Kilometers) China 2379.70 76,600 India 726.00 63,332 Australia 46.04 33,819 Japan 25.32 29,682 South Korea 11.61 3,472 Malaysia 1.36 1,699 Note: Figures are as of March 2008 for the year 2007 (March 2006 to April 2007) China with highest freight traffic, transports ~ 31,000 tons per kilometer, followed by India with ~ 11,400 million tons per kilometer Japan the most developed passenger rail network, has relatively low freight volume with 853 tons per kilometer Across the region, Coal, minerals, steel, fertilizers, chemicals, petroleum products, agricultural products are most transported commodities through rail – Coal, Crude Oil and steel make up the bulk of the rail commodities Sustained economic growth in China and India to facilitate steady rail freight volume growth 14
  15. 15. Key Asian Rail Markets – Composition of Freight Transported Countries Top 3 commodities Transported % of Freight China Coal, Iron ore, Steel and Food grains 72% India Coal, Iron ore, Steel and Chemicals 87% Australia Crude Oil, Steel, Livestock 69% Japan Automobiles, Auto parts, Cement 70% South Korea Coal, Steel, Automobiles 90% Thailand Cement, Chemicals, Fertilizers 71% Malaysia Cement, Containers, Petroleum 83% Cement & Steel (for construction), Coal, Iron ore and Chemicals are key commodities transported through railways in the Asian region All these industries are currently witnessing & expected to witness steady growth post 2010 Adoption of railways as a freight transportation mode by these sectors estimated to rise by ~ 5% by 2012 15
  16. 16. Expected Developments - Rail Freight Services China A high-speed passenger rail link under construction from Beijing to Qingdao, and Shanghai The total length of railways in operation expected to Japan China reach 100,000 kilometers by 2020 South Korea India India Thailand Building dedicated lines for freight trains connecting Delhi, Malaysia Mumbai and Kolkata (north-west-east) Indonesia Constructing dedicated freight corridors in north-south, east-west, east-south by 2010 Open up rail freight segment for private operators Australia Thailand Revamp rail freight infrastructure by 2015 for carriages, track lines, handling personnel and so on Strengthen freight rail link from Bangkok to Malaysia by 2012 16
  17. 17. Expected Developments - Rail Freight Services Australia Government to invest AUD$165.0 million to upgrade rail connections in southern Australia Construction of a new dedicated freight line into Sydney Japan China called the Southern Sydney Freight Line, which began South in 2007 is expected to allow for the operation of freight Korea trains into Sydney. India Thailand Malaysia Malaysia Rehabilitation of 134 kilometers of railway line linking in the Indonesia interior of Sabah state (east Malaysia) to boost trade in East Malaysia Expand intercity freight line network between Penang, Kuala Australia Lumpur and Johor Indonesia PT Kereta Api to expand cargo capacity and operate more freight trains in 17 corridors in Java, Sumatra, and Borneo, by 2010 17
  18. 18. Focus Points 1 1 Current Economic Scenario 2 2 World and Asia Pacific Rail Market – An Overview 3 3 Current Trends in Railway Industry Current Trends in Railway Industry ii Passenger Movement Trends (current and expected trends) ii ii Freight Movement Trends (current and expected trends) iiii ii Technology Trends (current and expected trends) 4 4 Market Dynamics (Drivers and Challenges) 5 5 Opportunities for the Rail Industry Participants 18
  19. 19. Poll Question 2 Which application of technology is likely to witness the maximum demand for railways? Real-Time Communication E-Ticketing & Ticket Confirmations Integrated CCTV Security System Signaling System 19
  20. 20. Need for Technology Improvement – Example of an accident and communication failure Incident Occurs Information Gathering Incident Response Incident Solved ? Focus on “getting trains moving”; Passengers information a lower priority Information of the incident’s Fear of complaints and impact on passengers not well lack of information captured & handled verbally Group calls to multiple means, officials do not stations in order to make announcements communicate the incident, wastes precious time 3 to 4 lines of verbal communications before train driver & guards receive information Passenger Address Equipment on the train has poor audibility 20
  21. 21. Need for Technology Improvement – What is driving the demand for technology? Key Drivers for Technology Improvements Reliable & Real Time Value Added Safety Security Efficient Communication Services System Eliminate Accurate Accident free downtime and For passengers For Passenger information to rail operation ensure comforts & & Freight passengers & system profitable connectivity operators operation Communication Terrorist threat Real time feedback Efficient traffic Ticketing, mobility application between detection, on arrival time, management while coverage, Traffic stations, drivers & evacuation system, freight tracking achieving maximum management other interlink rail security of freight trip network security personnel 21
  22. 22. Technology Assistance for Railways Efficient train communication Passenger Freight system and prevention measures Safety Avoid derailments, collisions Real-time communication for in rail operation will reduce rail and real-time communication effective route information accident probability to zero Passenger Freight Rail security management system Security People scanning, CCTVs & are commonly integrated with Scanning technology, Cargo & communication (driver-stations- coach tracking and details passenger information system control room) Passenger Communication System Real Time Real time communication is the Communication Access to schedules & real-time Accuracy to enable tracking, key to modern rail system information security & traffic management Urban Line Main Line Efficiency of urban train operations Reliable & will not only translate to profitability Efficient System Reliable, efficient, robust to High speed technology, better to the operator but will positively include disturbance time all-round service impact the economy 22
  23. 23. Technology Applications in Railways – For Passenger and Freight Transportation Benefits for Railways Online ticketing / e-ticketing system / mobile ticketing Enhanced on-board connectivity Waiting list confirmation via mobile phones Passenger High passenger safety & security Transport On-board wireless broadband internet access Convenient ticketing & confirmation On-board passenger information & communication On-board CCTV Cameras for passenger safety Added revenue source Status alerts to consignor & consignee on consignments Establish rail as a freight transport mode Freight Management System for effective online e- Freight booking & e-payment Enhanced freight safety & security Transport Online information access of freight’s schedule Facilitate Multi-modal transportation Freight carriage monitoring & control systems On-board CCTV Cameras for freight security National to international freight 23
  24. 24. Focus Points 1 1 Current Economic Scenario 2 2 World and Asia Pacific Rail Market – An Overview 3 3 Current Trends in Railway Industry ii Passenger Movement Trends (current and expected trends) ii ii Freight Movement Trends (current and expected trends) iii iii Technology Trends (current and expected trends) 4 4 Market Dynamics (Drivers and Challenges) Market Dynamics (Drivers and Challenges) 5 5 Opportunities for the Rail Industry Participants 24
  25. 25. Railway Industry Market Drivers – Passenger Transport KEY DRIVERS FOR GROWTH 6.8% 2.5% Growth of GDP and resulting rapid industrial growth Urban Main Rail transport price-to-cost factor (cheaper Line Line mode of transport) Urban Transport Growth Drivers Need for urban transport systems is increasing High urbanization leading to major road faster than main line services congestion problems Growth is mainly through ratio of passengers- transported-per-kilometer Increased private participation in Govt. managed rail markets Main Line Growth Drivers Growth in locomotives, rail control systems, Political / Govt. support for railways across electrification and use of IP-based applications countries for enhanced services 25
  26. 26. Railway Industry Market Drivers – Freight Transport Trans Asia Railway Link KEY DRIVERS FOR GROWTH Trans Asia Railway Link expected to increase international freight movement by 2015 Increase in regional and global trade Asia Pacific countries covered – Singapore, within the Asia Pacific region Malaysia, Thailand, Cambodia, Vietnam, China, Bangladesh, Myanmar, India and Pakistan Rail transport price-to-cost factor (cheaper mode of transport) High urbanization leading to major road Singapore – Kunming Rail Link congestion problems To form a continuous rail link from Singapore to China Increased private participation in Govt. managed rail markets – better services To facilitate multimodal transportation from Singapore Demand for multimodal transport – Project includes constructing railway stations Rail a critical factor and related infrastructure such as freight depots 26
  27. 27. The Trans Asia Railway Network Map Source: United Nations 27
  28. 28. Railway Industry Market Challenges PASSENGER Rising railways accidents especially during peak hours Passenger safety issues due to vandalism and robbery on intercity and interstate trains Increase frequency of trains during peak hours and effectively manage it FREIGHT Freight loading and unloading time, OPERATIONAL Lack of funds for Govt. rail operators delays overall delivery time Lack of staff training initiatives to manage Single tracks for passenger as advanced systems freight services delay both service Lack of or no communication, time lag in modes communication or too much communication Government procedures slow down when an incident occurs – number of decision making & implementation channels involved processes 28
  29. 29. Country Specific Challenges for Rail Freight Market Railways in several Asia Pacific countries are subject to relatively strict government control Rail freight transport in several Asia Pacific countries is less popular than road transport Regions in the west of China do not have adequate links to the railway network Current level of investment in rail infrastructure is inadequate to cater to the rising demand India Japanese Railways have already reached saturation in terms of growth 29
  30. 30. Focus Points 1 1 Current Economic Scenario 2 2 World and Asia Pacific Rail Market – An Overview 3 3 Current Trends in Railway Industry ii Passenger Movement Trends (current and expected trends) ii ii Freight Movement Trends (current and expected trends) iiii ii Technology Trends (current and expected trends) 4 4 Market Dynamics (Drivers and Challenges) 5 5 Opportunities for the Rail Industry Participants Opportunities for the Rail Industry Participants 30
  31. 31. Opportunities for Railway Industry High business opportunities for (rail) freight operators (who have ability to partner with the primary rail operator) Opportunities to target Logistics Service Providers Road congestion issues leading to higher operational costs for logistics companies Increased business opportunities for local providers in regional, global markets (Trans-Asia) Rising competency in technology industry to enhance productive for integrated rail logistics operations High business opportunities for (rail) freight operators (who have ability to partner with the primary rail operator) Opportunities for Logistics Services Opportunities for Technology Services Deployment of latest technologies to build supply Provide integrated and advanced chain efficiency – Freight Management System warehousing system through Integration of rail freight systems with other logistics container ports, inland container systems to achieve efficient integrated multimodal depots and freight terminals logistics (similar to the shipping / aviation industry) Multi-modal: Integration of Ocean- Rail, Air-Rail and Road-Rail services 31
  32. 32. Opportunities for Advanced Technology in Railways Urban rail as a freight transportation mode Example of an Urban Cargo Train in Zurich Integrated communication Managed services (services and rail control systems outsourced and managed by across borders experts) IP-based applications from current GSM-R based technology 32
  33. 33. THANK YOU We Accelerate Growth 33
  34. 34. Next Steps Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities (www.frost.com/news) Register for the next Chairman’s Series on Growth on 21 April 2009 (Tue) 11am SGT: Investing in Your Company’s Growth Potential: Plotting Your Course Along the Growth Excellence Matrix ( visit http://www.frost.com/growthapac) Join us at a Growth, Innovation and Leadership 2009: A Frost & Sullivan Global Congress on Corporate Growth (visit www.frost-gil.coml) Request a proposal for a Growth Partnership Service to support you and your team to accelerate the growth of your company. (email apacfrost@frost.com) 34
  35. 35. Your Feedback is Important to Us What would you like to see from Frost & Sullivan? Growth Forecasts? Competitive Structure? Emerging Trends? Strategic Recommendations? Other? 35
  36. 36. Contact Us If you have questions or would like further information about anything we discussed, please send your query to the email provided below and we will get back to you shortly. Alvin Chua Account Manager Automotive, Transportation & Logistics DID: +65 6890 0997 Mob: +65 9199 4566 eMail: alvin.chua@frost.com 36

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