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A detailed analysis on the renaissance and strong market demand for railways solution and rail infrastructure in Asia Pacific market

A detailed analysis on the renaissance and strong market demand for railways solution and rail infrastructure in Asia Pacific market

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The rennaisance in railways in asia pacific cities 14 feb 2011 The rennaisance in railways in asia pacific cities 14 feb 2011 Document Transcript

  • 2011“ The Renaissance of Railways in Asia Pacific Megacities” ET YEW E-mail : etyew@hotmail.com Kuala Lumpur, Asia Pacific 2/18/2011
  • The Rennaisance of Railway in Asia PacificRennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 2
  • TABLE OF CONTENTS 1. Introduction 2. Investment in Rail Infrastructure in Asia Pacific 3. Technology in Rail 4. Potential in planning urban rail systems 5. Conclusion : The Road AheadRennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 3
  • Rennaisance in Railways in Asia Pacific1.0 IntroductionThe Asia Pacific region has been witnessing significant amount of investment andincreasing interest in rail infrastructure development in the last decade. It is a knownfact that rail infrastructure plays a key role in promoting and sustaining economicgrowth as well as intraregional trade. To date, rail investment in Asia Pacific alone hasexceeded US $50 billion.In countries such as China, India, Hong Kong, Japan, South Korea and Singapore, rail isnot only a medium to help people commute faster to work, but also as a medium to helppeople socialize through prompt and timely connectivity to different parts within a city.For instance in China, with a population of over 1 billion is also seeing the emergence ofmegacities. As such, the most practical solution of people’s mobility is urban rail system.Together with strong economic growth and rising middle income earning, the demandfor an effective and reliable mode of modern transportation is high across Asia Pacificcountries. Urban rail is a regarded a key contributor to the country’s economy, byfulfilling the needs for the people to commute to work and creating work opportunitiesfor thousands, within the rail sector.The rail sector in the region is currently witnessing a trend of integration of urban railwith the other multiple modes like public buses, taxis and commercial aviation industry.This is particularly true for modern infrastructure plans which are centred aroundcommercial district and the need to link people from suburban and remote areas ofcities to the central business district for work.Another notable trend is the importance of urban rail in reducing carbon emissions forcities and countries. This phenomenon has gained significant awareness among mostAsia Pacific government in working with United National Intergovernmental Panel onClimate Change to reduce CO2 gas emission.Rennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 4
  • 2.0 Investment in Rail Infrastructure in Asia PacificToday, governments across Asia Pacific are increasingly looking towards Public PrivatePartnerships (PPPs) as the preferred model for development of infrastructure projects.This trend is largely due to private sector entrepreneurship having the efficiency andknowledge base to bridge the financial resource shortfall faced by the public sector. Thismovement has changed the rail industry investment patterns from wholly-governmentowned and managed infrastructure projects towards PPP models. In retrospect, the PPPmodel seems like a sustainable model. Private sector participation in rail infrastructureprojects has witnessed significant increase in Europe and USA and certain urban cities inAsia Pacific. The trend among recent and planned project indicate that PPP is like toremain the most widely adopted investment model for new rail projects in the region. a. List of PPP projects in urban rail across Asia Pacific Country Project Australia New South Wales Rolling Stock & Queensland Rapid Transit System Malaysia New Klang Valley Mass Rapid Transit Lines Indonesia Jakarta Metro and Monorail Hong Kong Guangzhou-Shenzhen-Hong Kong Express Rail Taiwan Taipei High Speed Rail Project India Mumbai new monorail South Korea Yongin LRT and Uijeongbu LRT Thailand Bangkok Mass Rapid Transit Vietnam Ho Chi Minh City Metro railwaysThe new rail infrastructure project will be mostly in the form of public-private-partnership with the public initiating the project either through a partnership ofgovernment with one or more private sector companies. Public private partnership is acontract between a public-sector authority and a private party, where the private partyprovides a project and assumes substantial financial, technical and operational risk inthe project. Typhically, the public sector will form a consortium to develop, build,maintain and operate the asset for the contracted period.Rennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 5
  • For instance in Hong Kong, the development of the Hong Kong Express Rail betweenGuangzhou-Shenzhen-Hong Kong will be a PPP model undertaken by private Hongcompany Mass Transit Railway Corporation Limited (MTRCL).Another notable PPP rail project is the Taipei High Speed Rail project valued of US$16 billion build at length of 345km from Taipei to Kaohsiung was also build underPPP model and undertaken by the Taiwan High Speed Rail Corporation.While the Bangkok Mass Rapid Transit in Thailand is also a PPP model that is importantin helping Thailand develop its modern rail infrastructure amid the constraints to thenational budget and concerns of rising public debt. The new electric-train Purple Line trainfrom Bang Yai to Bang Sue is part of the 236 km mass rapid transit network.In Kuala Lumpur, a proposed three new lines of metro MRT project valued at US $ 10billion is being planned using PPP model as part of the new Greater KL will further addto 150km of rail lines.And for South Korea, both their Yongin LRT and Uijeonbu LRT was delivered followingthe enactment of the Public Participation in Infrastructure Act . Some of the investors for Participatthe projects included Korean insurance institutions. b. List of urban rail project planned across Asia Pacific countries The urban rail projects shown in the list above represent a very optimistic future rban y for urban rail development for various stakeholders. Many of these projects are an aimed at putting in place a seamless public transport system in place that links ublic diverse suburbs and Central Business District areas in cities. The Shanghai Metro, CRennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 6
  • the most expensive urban rail project ongoing in Asia Pacific at the moment, and will be the longest metro in the world with a length at 420 kilometers. The Jakarta MRT, joins the list countries in Asia Pacific with urban rail infrastructure with a new lines due completion in 2014. While Singapore’s Land Transport Commission ( LTA ) has a bold mission to double its existing rail length to 278km by 2020, allocating an addition budget of US $ 15 billion for such a move. c. The availability of financing mechanism for urban rail Rising numbers of loans and funds particularly from infrastructure development banks and other international banks have developed new interests in development projects across Asia Pacific cities. Cities such as Bangkok, Manila, Kuala Lumpur, Shanghai, Seoul, Brisbane, Mumbai, and Taipei are all modeled on either the PPP model or though a private / international bank funding. There is also an emerging trend of financing strategies from private equities for certain private rail operators, similar to the trend witnessed in Europe and United States of America. In 2009, Warren Buffet invested US $ 40 billion into buying Burlington Northern Santa Fe (BNSF) and betting that fuel efficient train will have bigger role in transportation across America. This will certainly spark interest from other investors to modernize rail network following the footstep of Mr Buffet. ( inset Warren Buffest invested US 44 billion in BNSF ) While in Europe, DB Schenker Rail, the Deutsche Bahn freight operator that is largestin Europe, will invest up to US$ 550 million primarily in new freight cars andlocomotives throughout Europe. The investment is necessary due to increasingcustomer demand for its transport services and modern rail equipment.Rennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 7
  • d. The drivers for investment of rail infrastructure in Asia Pacific The drivers for the huge investment in rail infrastructure in Asia Pacific are brought about by the factors like strong government initiative, rate of urbanization, competition for FDIs, and economic growth being the primary drivers. While for the the secondary drvers include social factor like mobility for people, environmental responsibility, and chronic road traffic congestion. Significance Primary Drivers Secondary Drivers The primary drivers for the investment of rail infrastructure in Asia Pacific aregovernment initiative to modernize their infrastructure, the rapid pace of urbanization,the competition to attact foreign direct investment (FDIs) and the role of rail in growingthe economy and services sector growth. In Asia Pacific, our analysis shown that railindustry will grow year-on-year at more than 5% with the need to have reliable publictransportation system for people’ mobility and the government investment inmodernizing their infrastructure to continue progressing and attracting the muchneeded foreign investment. The secondary drivers promoting further the investment of rail infrastructure arethe spending by rail operators for IT equipment and analytics tools to improve theirservices including smart card and automatic fare collection (AFC), the demand from thepeople for realiable and secured mode of travelling, the need for rail to complementother modes of public transport, the factor of environment, to alleviate growing trafficcongestion and finally to use urban rail in promoting the tourism sector.Rennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 8
  • e. Attractiveness Rating for Urban Rail in Asia Pacific The attractiveness rating table from a recent research shown that megacities like Shanghai, Mumbai and Ho Chi Minh City has possessed the strongest attractiveness for their urban rail projects. Attractiveness Ratings for Asia Pacific Cities for Urban Rail Investments Parameters Kuala Hong Ho Chi Shanghai Tokyo Mumbai Seoul Jakarta Brisbane Singapore Lumpur Kong Minh Population Growth 5 3 5 3 4 4 4 4 3 5 Urbanization Trend 4 4 4 3 4 3 3 3 4 4 Rise in Per Capita Income 4 4 3 4 3 3 3 3 4 3 Urban Ridership Growth 5 3 5 3 4 3 4 3 3 4 Urban Rail Project in Pipeline 4 3 5 3 4 4 3 5 3 5 Vehicular Traf fic Issue 3 4 3 4 4 4 4 4 3 4 Investment in Infrastructure 4 3 5 4 3 5 3 5 3 4 Government Initiative in Urban Rail 5 3 5 4 3 5 3 5 4 5 Average Attractiveness Rating 4.2 3.3 4.3 3.5 3.6 3.8 3.3 4.0 3.3 4.2 Note: Ratings are on a scale of 1 to 5, where 1 is least attractive and 5 is most attractive The city of Mumbai in India is the most attractive destination for urban railinvestments for both their metro rail segment and monorails. This is driven by factorssuch as growth in urban rail ridership, urban rail projects in the pipeline, along withpotential for new projects, investments in infrastructure and initiatives from theGovernment to improve urban rail infrastructure.While in Shanghai, a megacities cities dense population of over 20 million offers muchopportunity to the various rail technology companies due to the plan to have as much as20 metro lines within the 10 years.Ho Chi Minh City in Vietnam is another strong contender for huge investment in railinfrastructure development with its Government intended to built six new rapid transitlines up to over 100 km in length.Rennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 9
  • 3.0 Technology in RailThe current scenario emerging from the advanced technology in rail is a new shifttowards making urban rail as the most environmental friendly mode of mobility forpeople and the infusion of state-of-art IT technology to increased its safety andeffectiveness. a. Standardization The emergence of a standardization for rail system from an Asian perspective like the current move mooted by the European Union rail players in the form of ERTMS (European Rail Traffic Management System). ERTMS can enhance cross-border interoperability and signalling procurement by creating a single Europe-wide standard for train control and command systems. Components of ERTMS are the European Train Control System (ETCS), a standard for in-cab train control, and GSM-R, the GSM mobile communications standard for railway operations. ERTMS create an interoperable cross-border railway, encouraging more opportunities for international freight and passenger travel by rail among the European Union. b. Eco-innovation and green practices There are now many railway operators across Asia Pacific beginning to adopt green practices in their rail line’s operation and maintenance. They include such practices like more efficient usages of electricity in the station with installation of energy saving (light emitting diodes) LEDs lightings, platform screen doors that control climate control within stations and sensor, using rain water harvested to wash the train body, using natural skylights to cut down on artificial lights, retrofitting station with photovoltaic cells for renewable energy and installing infrared sensor type of escalators that saves energy. Both train manufacturer and operators in Asia Pacific are also testing with hybrid technology that combined the use of on-board lithium ion battery to the existing diesel multiple unit ( DMU), the usage of biodiesel through mixing ethanol to the current diesel fuel in running their trains and even energy saving regenerative braking that capture ‘lost’ electricity and return that to the third rail system to be used by other train. ( inset : Hybrid train by East Japan Railways)Rennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 10
  • ( inset : Third Rail that transfer electricity to the train) ( inset Platform Screen Doors ) c. Infusion of IT and business analytics into railway network As more rail operators seek to improve efficiency and cut costs, the user expect better level of service while the regulators expected greater safety in the rail infrastructure and operations. The solution to that is essentially a sound IT infrastructure that is able to collect, extract , transform and load (ETL) the data in a data warehousing process manner to produce a consolidated data to create a smarter railway. More integrated solutions are being developed that blend predictive and analytical tools to enable scheduling and capacity to be balanced with demand volume in-real-time. These empower rail operators to optimise the leveraging of their resources to meet fluctuating demand. d. High Speed Rail The high speed rail in Asia Pacific has a good growing interest with these countries having their homegrown high speed rail including Japan, South Korea and China. High speed rail represent the prowess in technology and organizational discipline. Well-established high speed rail systems in use today are more environmentally friendly than air or road travel. This is due to its lower energy consumption perRennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 11
  • passenger kilometer and reduced land usage for a given capacity compared to motorways. In fact in Europe today, such is the popularity of HSR that there are routes where high-speed trains have totally beaten air transport, so that there are no air connections anymore. Examples are Cologne-Frankfurt. Today, high speed rail can offer value added amenities such as cellular phone network availability and wireless internet broadband. An analysis by Chinas largest airline, expects that construction of Chinas high speed railway network to impact on 25% of its route network in the coming years. China currently is constructing a 13,000km high speed railway network comprising of 42 passenger lines. In April this year, the eruption of a volcano in the nation of Iceland has turned into a major headache for businesses across Europe as spreading ash cloud closes more European airports. And the clear winner here was Eurorail services coming in to rescue. e. Localised Manufacturing Capability With advancement of technology , the rail system and technology manufacturer are beginning to shipped their product assembly and manufacturing to the host countries like China and India. The modern communication technology allow for the design to be done in their company headquarter and final assembly be done in host country. The supply chain management technology gives them comparative advantage in sourcing rail components worldwide with the on-going standardization in rail products. With both Chinese and Indian Government investing heavily in its railway infrastructure, it holds tremendous opportunity for the rail system vendors. The companies which produce and shared its rail technology with local companies in host country gives them significant advantage in bridging the cross-cultural factor and having a much lower cost in comparative advantage to manufacture the product for the local marke; not to mention in getting its product typed approved and tropicalised for the host country.Rennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 12
  • 4.0 Potential in Planning urban rail systemsThe strategic reason for the planning of urban rail systems is the benefits of a long termcommitment to build and run a safe, effective and reliable urban transportationsystem. Firstly, with the better planning, there will be more integration of the variousmulti modes to have a truly modern network of urban public transportation. Secondly,on project development and management there can be achieve within the shorter timeframe by employing the best project methodologies. Thirdly, in term of financial, there isbetter economies of scale through good planning and better business case resulting inbetter access to various funding mechanism including the private public partnership. a. Planning in China Specifically, today in China it already has built the world longest railway network spanning across 100,000 km and ran 36,300 trains daily. The urban rail transit system in China’s largest city Shanghai now stood at 420km of tracks in operation with 12 lines is under going further development to reach 877 km in the next 10 years. The Shanghai Metro rail is targeted to carry up to 30 million visitors visting the 2010 World Expo. In 2008, the Chinese government began constructing the Beijing-Shanghai High- Speed Railway, at a length of 1,318 kilometres long high-speed railway that will connect their financial city Shanghai to their capital city with service to starts in 2011. The railway line is the first one designed for 380 km/h commercial running. The high speed rail project would help promote technological innovation and industrial update. Other significant project is with the Hong Kong section of the Express Rail Link runs from the terminus in West Kowloon, heading north to the Shenzhen, where it connects with the Mainland Section of Guangzhou. This will eventually link capital Beijing stations to Hong Kong making high speed rail a truly fast, reliable and effective mode of transportation. ( inset : The Railway Network of China)Rennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 13
  • b. Planning in India While for Indian Railways it outlines its Vision 2020, to grow its current 69,000 kms of rail line with another additional 25,000 kms of new lines by 2020. Among other the four strategic national goals for the Indian Railways Vision 2020 are inclusiveness development for geographically and social, strengthening national integration, large scale of productive employment and environmental sustainability. There are multitudes of rail segment opportunity for the Indian rail market ranging from supply of rolling stock, signaling systems, power supply traction, communication system, track work and civil works. The notable rail project included the Mumbai Metro Rail a system of over 146kms in length due for completion in 2021. The Delhi Metro Rail project that are in third phase which will add to of another 112 kms to the current phase 1 and 2 at 186kms making it almost on par with the Shanghai Metro once completed. Other states launching its metro rail project are Bangalore, East-West Kolkata, Chennai, Hyderabad, Kochi, Chandigarh, Lucknow, Kanpur and Pune. Other rail solution like monorail project are also now being implemented in Mumbai with other state like Bangalore following suit. Indian Railways envisages getting joint private-public in implementation of regional high-speed rail projects to provide rail services at 250-350 km/h. The planning for corridors connecting various commercial hubs. Six corridors have been identified for high-speed rail corridors. They are Delhi-Chandigarh-Amritsar, Pune-Mumbai- Ahmedabad, Hyderabad-Dornakal-Vijayawada-Chennai, Howrah-Haldia, Chennai- Bangalore-Coimbatore-Ernakulam and Delhi-Agra-Lucknow-Varanasi-Patna. These high-speed rail corridors will be built as elevated corridors due to constraint of land. ( inset : Railway Network India )Rennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 14
  • c. Planning in Australia The Australian Government is investing $37 billion on road and rail infrastructure through the Nation Building Program over the six year period from 2009 - 2014. The Department of Infrastructure, Transport, Regional Development and Local Government is delivering this investment through a range of road and rail programs and projects across the National Land Transport Network. The network is based on national and inter-regional land transport corridors that are of critical importance to national and regional growth. d. Planning in Thailand and Malaysia The State Railway of Thailand and the Thai Ministry of Transport have plans for several high speed rail lines. In October 2009, it was reported that funding was being sought for four lines, linking Bangkok to Chiang Mai(711 km), Nong Khai (600 km), Chanthaburi(330 km), and Padang Besar (983 km). It was reported that the Thai cabinet had approved the plan, with the shorter route to Chanthaburi being intended for construction first. Whereas in Malaysia, as part of the Government of Malaysia’s Economic Transformation Plan has consider a new MRT project which will be the largest infrastructure project in Malaysia – spread across 141km of three new corridors and integrated with existing rail systems such as the KTM Komuter, monorail and light rail transit. It will be 66% privately funded. A high-speed rail running at 300 km/h (186 mph) to link the new Greater Kuala Lumpur and Singapore was proposed in the recent unveiling of the Economic Transformation Programme (ETP). e. Others Countries in Asia Pacific with growth in urban rail South Korea rail lines has in December 2007 operate daily freight trains between South and North Korea ,a major step forward, which will see the realization of the true vision of Trans-Asian rail network. South Korean has also developed its local version of the high speed rail train named KTX-Sancheon which designed to move at speed of 330km/h. In Japan, their rail operator East Japan Railways has been task to upgrade Tokyo metropolitan area railway network and further capital expenditure to make the rail system safer and effecient. In Singapore, as much as $20 billion investment has been committed to double its current 138km of rail lines within the next 10 years. This is for its Boon Lay extension, the Circle Line and the Downtown Line. While for Vietnam, the capital city Ho Chi Minh City is currently on progress to complete its planned 6 lines Rapid Transit Rail System with total length of 107km.Rennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 15
  • And for Indonesia, the capital city Jakarta will be completing its first MRT lines by 2014, with possibility of reviving its monorail lines and the airport express rail5.0 Conclusions : The Road AheadFrom the quantitative and qualitative research we concluded that they are few pertinentpoints for the sustainability of the urban rail market in Asia Pacific to continue toadvance and prosper for the next decade.Firstly, the need for a common standardization plan for Asia Pacific rail system in termof reliability, availability ,maintenability and safety ( RAMS ) much like the EuropeanCommittee for Electrotechnical Standardization Cenelec EN 50126 railway applicationpracticed widely in European rail. Rail industry in Asia Pacific must adopt a commonstandard in its rail system and infrastructure to foster a deeper co-operation and allowfor interoperability standards among the various regional rail operators.Secondly,as the rail market in Asia Pacific gets full steam ahead with new orderscontinue pouring in; the critical issue of human capital becoming paramount. Therailway industry must be able to attract and develop the new breed of young technicaltalents, and engineering knowledge workers since most of the current batch of technicalrail workers are heading towards retirement. There must be that emphasis on makingrailway industry a learning organization with much of the tacit knowledge of the currentrail workers being documented and digitized for reference.Thirdly, the need to adopt business analytics and IT usage in railway industry forvarious application ranging from rail asset tracking, automatic train vehicle locating, toimprovement of customer user experience, predictive analysis and in areas ofoperations and maintenance.Fourthly, on the financial side, the railway industry must be able to show better returnon investment ( ROI) for the investors and stakeholders. This may include categorizingall rail sector within the clean technology counter like Dow Jones Sustainability Index toraise capital and private investments for its operations and building additional revenuefrom non-fare based returns.Fifthly, to make urban rail as a complementary mode of transport to the variousmultimodes like airports, seaports and major public transportation hubs.In conclusion, the urban rail transportation in Asia Pacific is experiencing a stronggrowth and holds much promises for the various stakeholders to be involved and berewarded with good sustainable return for the next decade. Urban rail transportationwill be the key to various megacities search for improving the quality of life of its peopleand balancing that with the low carbon impact on the environment.Thank you very muchAuthor : ET Yew , Email : etyew@hotmail.com Kuala Lumpur, MalaysiaRennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 16
  • Rennaisance of Railways in Asia PacificWritten by : ET Yew All rights reserved Page 17