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The launch of the new $15 billion Taiwan High Speed Rail service, built with imported Japanese high-velocity-train technology, on Jan. 5 once again confirmed the Asia's economic dynamism.
And global engineering and transportation companies sure hope the Taiwanese bullet train (which will cut travel time between Taipei and the southern port city of Kaohsiung from four hours to 90 minutes) heralds the start of a 21st century build-out of the region's public rail transport systems.
In many ways, Asia should be an ideal staging ground for next-generation train systems now being pitched by Japanese firms such as Mitsui and Kawasaki Heavy Industries as well as European players such as Germany's Siemens and Alstom of France.
A group of Japanese companies led by Central Japan Railway Company is developing a lightning-fast, superconducting magnetic levitation train called the JR-Maglev MLX01 that has reached record speeds of 361 mph (581 km/h) in test runs. Since 2004, the Shanghai Maglev Train-built with German technology-in China has delivered passengers from Pudong International Airport to the Longyang Road Station, a downtown subway station, in about eight minutes.
High Hopes in Japan
The region is economically prosperous, densely populated, and eager to connect major urban centers to boost development. Japan pretty much invented high-speed rail service-generally defined as trains that clock speeds in excess of 125 mph (200 km/h)-in 1964 with the debut of its first bullet-shaped train, the Tokaido Shinkansen, which connected Tokyo, Nagoya, and Kyoto.
And in Japan there are big hopes that Kawasaki and others will cash in on proposed high-speed train projects in China, India, and other emerging markets such as Russia. Kawasaki Heavy, for instance, manufactured train cars for the Taiwan bullet train, and is selling other transportation gear in China.
"The Taiwan Shinkansen is the first case (for Kawasaki) to export and it is symbolic as a trigger," points out Nomura Securities analyst Shigeki Okazaki in Tokyo. "In the future, there are good prospects in India and Russia."
All that may be true, but there are good reasons to think the Japanese and European high-tech train manufacturers won't exactly waltz through the region picking up big contracts.
For one thing, these massive, big-ticket, public transportation projects can take ages to design and build. Taiwan conceived its bullet train system back in 1980, and successive governments dithered over project details and then abruptly dumped French and German contractors for the Japanese team in 2000.
Sure, Asia contracts can be lucrative, but South Korea and China have pressured foreign companies to agree to technology-transfer clauses to build up their own industries.
Focus on Tech Transfer
Back in 2004, South Korea became the second Asian nation after Japan to build a high-speed train service between major cities. The Korean KTX (Korean Train Express) high-speed rail service is based largely on France's TGV technology developed by Alstom.
But the South Koreans insisted upon and won technology transfer rights as part of the project. Now, the government and private companies such as Hyundai Motor Group unit Rotem are working on next-generation high-speed train systems
"We now have high-speed train technology that could be offered in export markets," says Bang Yoon Sock, deputy director at the Ministry of Construction and Transportation's railway industry division.
With its vast build-out of national rail networks, China also has extraordinary leverage to extract technology-sharing concessions.
True, there have been some big contract wins by foreigners on the mainland. Siemens, one of the big overseas suppliers to the mainland's rail industry, played a big role in the Maglev project in Shanghai, and in late 2004 won an order from the Chinese Railway Ministry to build 180 double locomotives in a contract valued at roughly $487 million at current exchange rates.
Decrease in China Sales?
More recently, it has received contracts for signaling and power systems on a new, high-speed, passenger rail line between Beijing and Tianjin expected to be completed ahead of the 2008 Beijing Olympic Games. And just last month, French engineering group Alstom was awarded a $4.75 billion government contract to supply 1,500 freight locomotives.
Japan's Kawasaki has also nailed contract work and, along with Canada's Bombardier and Alstom, has agreed to help Chinese rail companies improve their manufacturing know-how. Already China firms and the government are working on a domestically designed (the government owns the intellectual property rights) next-generation railway locomotive.
For that reason, Nomura analyst Okazaki thinks that foreign "sales to China will gradually decrease because the Chinese government aims to produce domestically."
Other high-speed railway projects in Asia are looking promising but will take time to develop-that is if they materialize at all. Last June, Malaysian infrastructure group YTL Corp proposed a high-speed train linking Singapore and the Malaysian capital, Kuala Lumpur. "What takes about four and half hours by road or 50 minutes by plane, you could do it in less than 90 minutes by train from central Kuala Lumpur to downtown Singapore," says YTL Chief Executive Officer Francis Yeoh.
There is even talk of extending the rail network to Bangkok and thereby connecting three major business hubs in Southeast Asia. Yet Malaysia and Singapore aren't on the best of diplomatic terms, and it could be years before such a project got government approval; and it would take even more time to design, test, and construct.
Reluctant to Spend Billions
Then there is India, a country with vast infrastructure needs not just for rail but also roads, shipping ports, and airports. The Japanese would love to export their Shinkansen technology into such a rapidly developing economy. But the Indian government isn't all that keen to spend the billions it would take to connect major urban centers in such a vast country.
"We don't need such fast trains as it's too expensive to lay those tracks all the way," says Rajiv Lall, managing director of the government's Infrastructure Development Finance Corp.-though he thinks a high-speed line between Mumbai and nearby Pune might make sense down the road.
Even companies with extensive business ties in the country, such as Siemens, which has built signaling and telecom systems for the New Delhi Metro, think the appetite for big-ticket, high-speed train networks is quite modest. "I would love to see the high-speed train happening in India, but it's not a priority for the country now," says V.B. Parulekar, executive vice-president with Siemens Transportation Systems in India.
Unlike these high-speed locomotives that represent the cutting edge of rail technology, the actual roll-out of these multi-billion systems is going to be slow going in Asia.
With Hiroko Tashiro in Tokyo, Moon Ihlwan in Seoul, Nandini Lakshman in Mumbai, and Assif Shameen in Singapore.