2009 04 growth opportunities in asia pacific rail markets frost & sullivan

Growth Opportunities in Asia Pacific Rail Markets: The Track Ahead

Rohit Gunavanthe, Consultant

Transportation & Logistics Practice

Asia Pacific2nd April, 2009

2

Current Economic ScenarioCurrent Economic Scenario

222 World and Asia Pacific Rail Market – An Overview

333 Current Trends in Railway Industry

iii Passenger Movement Trends (current and expected trends)

444 Market Dynamics (Drivers and Challenges)

Focus Points

iiiiii Freight Movement Trends (current and expected trends)

iiiiiiiii Technology Trends (current and expected trends)

111

555 Opportunities for the Rail Industry Participants

3

Economic Downturn – The Recession: How it all began…

Withdrawal of FII

inflows: currency

depreciation

Lower exports from

Asia due to lower

American and

European demand

Unwinding of Yen

Carry trade & FII

withdrawals

European Banks

withdraw investments in

eastern Europe

European Banks

lose money on sub

prime mortgages

Oil prices drop on

slower growth in

Europe and USA

Credit markets still remain tight

Consumer spending is gradually dwindling

Crisis has gone global

Employment creation has hit the bottom

Industrial production has decrease significantly

4

Economic Scenario – The Recession: What lies ahead…

Consumers activity, aided by fiscal stimulus, will boost industrial output, ultimately aiding recovery

Easing of inflationary and liquidity pressures

Decline in commodity and oil prices leading to a tax break stimulus

What Lies Ahead…

Companies to focus on better & more productive means of getting products & services to their customers

Recovery of industrial output by end 2009, despite lower Automotive growth

New US government to focus on

creating up to 2 million jobs in

infrastructure, energy, medical

technology and infrastructure

Unprecedented focus worldwide on addressing the economic situation

Strong demand from emerging

Asian nations will be a factor in

reviving the global economy

Industrial output to rebound from

recent lows

5

Current Economic Scenario

222 World and Asia Pacific Rail Market – An OverviewWorld and Asia Pacific Rail Market – An Overview




Focus Points



111


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%

� 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

marketSource: Frost & Sullivan

World Rail Market($284.24 billion)World Rail Market($284.24 billion)

Rail Service($162.80 billion)Rail Service

($162.80 billion)

Rolling Stock($54.05 billion)Rolling Stock

($54.05 billion)

Rail Infrastructure($41.38 billion)Rail Infrastructure

($41.38 billion)

Rail Control Systems

($26.01 billion)

Rail Control Systems

($26.01 billion)

7

Rail Market SegmentationThe rail market in Asia Pacific comprises of four market segment -

RAILWAY ASSOCIATIONS

RAILWAY ASSOCIATIONS

Rail Locomotive / Coach SuppliersRail Locomotive / Coach Suppliers

Rail Equipment Suppliers

Rail Equipment Suppliers

Rail Control System / Technology

Suppliers

Rail Control System / Technology

Suppliers

Passenger and Freight Services

Passenger and Freight Services

Rolling Stock & Rail EquipmentRolling Stock & Rail Equipment

Rail Control System

Rail Control System

Railway Infrastructure

Railway Infrastructure

Railway Supply Chain Members Railway Supply Chain Members

Railway Segments Railway Segments

Handle passenger and freight movement

Represent all powered & unpowered vehicles that move on a railway

Manages all railway related infrastructure

operations

Is a centralised rail traffic control

system

8



333 Current Trends in Railway IndustryCurrent Trends in Railway Industry



Focus Points



111


9

Passenger Transportation Trends

1,6990.04Malaysia

4,0710.05Thailand

33,8190.62Australia

3,4720.99South Korea

76,6001.36China

63,3326.29India

29,6828.78Japan

Country Passengers Transported (Billions) Railway Network (Kilometers)

� 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

Note: Figures are as of March 2008 for the year 2007 (March 2006 to April 2007)

10

Growth in Key Rail Markets across Asia PacificIndia, China and Japan expect the highest growth rates in the rail industry

� Passenger growth of 8.5% in 2008

� Significant growth potential for High Speed trains (200-250 Kms/hr)


� Significant growth potential for High Speed trains (200 Kms/hr)

Main Line Service


� Moderate growth potential for Very High Speed trains (over 300 Km/hr)

� Significant growth potential in Beijing, Shanghai, Guangzhou & Shenzhen

� Over 1,700 Kms of urban line by 2015

� Significant growth potential in Delhi, Mumbai and Bangalore urban cities for Metro rail and Monorail services

� Available urban market of 320 million people across India (est. 2008)

Urban Transport Service

� Comparatively lower growth for urban rail systems

� 14 key private operators, operating urban trains over 2,000 Kms

11

Projected Growth in Passenger Services

Rail Network Expansion

Service Enhancement

International Rail Networks

Dedicated Lines

� Significant rail network expansion expected across in India, China, Japan, Australia, Malaysia and Thailand

� 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 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, 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

� China, India and Thailand expected to plan for country-wide dedicated intercity and interstate lines for passenger and freight transport services by 2012

12






Focus Points



111


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

14

Freight Transportation Trends

1,6991.36Malaysia

3,47211.61South Korea

29,68225.32Japan

33,81946.04Australia

63,332726.00India

76,6002379.70China

Country Freight Transported (Million ton per Km) Railway Network (Kilometers)

� 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

Note: Figures are as of March 2008 for the year 2007 (March 2006 to April 2007)

15

Key Asian Rail Markets – Composition of Freight Transported

China Coal, Iron ore, Steel and Food grains

Top 3 commodities TransportedCountries

India Coal, Iron ore, Steel and Chemicals

72%

% of Freight

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

Adoption of railways as a freight transportation mode by these sectors estimated to rise by ~ 5% by 2012

All these industries are currently witnessing & expected to witness steady growth post 2010

16

India

Australia

Malaysia

Thailand

Indonesia

Japan

South Korea

China

Expected Developments - Rail Freight Services

� A high-speed passenger rail link under construction from

Beijing to Qingdao, and Shanghai

� The total length of railways in operation expected to

reach 100,000 kilometers by 2020

China

� Building dedicated lines for freight trains connecting Delhi,

Mumbai and Kolkata (north-west-east)

� Constructing dedicated freight corridors in north-south, east-west,

east-south by 2010

� Open up rail freight segment for private operators

India

� 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

Thailand

17

India

Australia

Malaysia

Thailand

Indonesia

Japan

South Korea

China

Expected Developments - Rail Freight Services

� Government to invest AUD$165.0 million to upgrade rail

connections in southern Australia

� Construction of a new dedicated freight line into Sydney

called the Southern Sydney Freight Line, which began

in 2007 is expected to allow for the operation of freight

trains into Sydney.

Australia

� Rehabilitation of 134 kilometers of railway line linking in the

interior of Sabah state (east Malaysia) to boost trade in East

Malaysia

� Expand intercity freight line network between Penang, Kuala

Lumpur and Johor

Malaysia

� PT Kereta Api to expand cargo capacity and operate more freight

trains in 17 corridors in Java, Sumatra, and Borneo, by 2010

Indonesia

18






Focus Points



111


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

20

Need for Technology Improvement –Example of an accident and communication failure

Incident Occurs Information Gathering Incident Response

Information of the incident’s

impact on passengers not well

captured & handled verbally

Focus on “getting trains

moving”; Passengers

information a lower priority

Group calls to multiple

stations in order to

communicate the incident,

wastes precious time

Passenger Address

Equipment on the train

has poor audibility

3 to 4 lines of verbal

communications before

train driver & guards

receive information

Fear of complaints and

lack of information

means, officials do not

make announcements

Incident Solved ?

21

Need for Technology Improvement –What is driving the demand for technology?

Key Drivers for Technology ImprovementsKey Drivers for Technology Improvements

Accident free rail operation

system

Safety

Communication application between stations, drivers & other interlink rail network security

personnel

For Passenger & Freight

Security

Terrorist threat detection,

evacuation system, security of freight

Accurate information to passengers &

operators

Real Time Communication

Real time feedback on arrival time, freight tracking

Eliminate downtime and

ensure profitable operation

Reliable & Efficient System

Efficient traffic management while achieving maximum

trip

For passengers comforts & connectivity

Value Added Services

Ticketing, mobility coverage, Traffic

management

22

Technology Assistance for Railways

Safety

Passenger

Avoid derailments, collisions

and real-time communication

Freight

Real-time communication for

effective route information

Efficient train communication system and prevention measures

in rail operation will reduce rail accident probability to zero

Security

Passenger

People scanning, CCTVs &

communication (driver-stations-

control room)

Freight

Scanning technology, Cargo &

coach tracking and details

Rail security management system are commonly integrated with passenger information system

Real Time Communication

Passenger

Access to schedules & real-time

information

Communication System

Accuracy to enable tracking,

security & traffic management

Real time communication is the key to modern rail system

Reliable & Efficient System

Urban Line

Reliable, efficient, robust to

include disturbance time

Main Line

High speed technology, better

all-round service

Efficiency of urban train operations will not only translate to profitability

to the operator but will positively impact the economy

23

Technology Applications in Railways –For Passenger and Freight Transportation

Passenger

Transport

Benefits for Railways

On-board passenger information & communication

On-board CCTV Cameras for passenger safety

On-board wireless broadband internet access

Waiting list confirmation via mobile phones

Online ticketing / e-ticketing system / mobile ticketing

Freight

Transport

Freight carriage monitoring & control systems

On-board CCTV Cameras for freight security

Online information access of freight’s schedule

Freight Management System for effective online e-booking & e-payment

Status alerts to consignor & consignee on consignments

Enhanced on-board connectivity

High passenger safety & security

Convenient ticketing & confirmation

Added revenue source

Establish rail as a freight transport mode

Enhanced freight safety & security

Facilitate Multi-modal transportation

National to international freight

24





444 Market Dynamics (Drivers and Challenges)Market Dynamics (Drivers and Challenges)

Focus Points



111


25

Railway Industry Market Drivers – Passenger Transport

Growth of GDP and resulting rapid industrial growth

KEY DRIVERS FOR GROWTH

High urbanization leading to major road congestion problems

Political / Govt. support for railways across countries

Increased private participation in Govt. managed rail markets

Rail transport price-to-cost factor (cheaper mode of transport)

Urban Transport Growth Drivers

Urban Line

Main Line

� Need for urban transport systems is increasing

faster than main line services

� Growth is mainly through ratio of passengers-

transported-per-kilometer

Main Line Growth Drivers

� Growth in locomotives, rail control systems,

electrification and use of IP-based applications

for enhanced services

6.8%

2.5%

26

Railway Industry Market Drivers – Freight Transport

Increase in regional and global trade within the Asia Pacific region

KEY DRIVERS FOR GROWTH

High urbanization leading to major road congestion problems

Demand for multimodal transport –Rail a critical factor

Increased private participation in Govt. managed rail markets – better services

Rail transport price-to-cost factor (cheaper mode of transport)

� Trans Asia Railway Link expected to increase

international freight movement by 2015

� Asia Pacific countries covered – Singapore,

Malaysia, Thailand, Cambodia, Vietnam, China,

Bangladesh, Myanmar, India and Pakistan

Trans Asia Railway Link

� To form a continuous rail link from Singapore to

China

� To facilitate multimodal transportation from

Singapore

� Project includes constructing railway stations

and related infrastructure such as freight depots

Singapore – Kunming Rail Link

27

The Trans Asia Railway Network Map

Source: United Nations

28

Railway Industry Market Challenges

PASSENGER

OPERATIONAL

FREIGHT

� 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

� Lack of funds for Govt. rail operators

� Lack of staff training initiatives to manage

advanced systems

� Lack of or no communication, time lag in

communication or too much communication

when an incident occurs – number of

channels involved

� Freight loading and unloading time,

delays overall delivery time

� Single tracks for passenger as

freight services delay both service

modes

� Government procedures slow down

decision making & implementation

processes

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

� Japanese Railways have already reached saturation in terms of growth

India

30






Focus Points



111

555 Opportunities for the Rail Industry ParticipantsOpportunities for the Rail Industry Participants

31

Opportunities for Railway IndustryHigh business opportunities for (rail) freight operators (who have ability to partner with the primary rail operator)

� 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 to target Logistics Service Providers

Opportunities for Logistics Services

� Provide integrated and advanced warehousing system through container ports, inland container depots and freight terminals

� Multi-modal: Integration of Ocean-Rail, Air-Rail and Road-Rail services

� Deployment of latest technologies to build supply chain efficiency – Freight Management System

� Integration of rail freight systems with other logistics systems to achieve efficient integrated multimodal logistics (similar to the shipping / aviation industry)

Opportunities for Technology Services

32

Opportunities for Advanced Technology in Railways

Urban rail as a freight transportation

mode

Managed services (services

outsourced and managed by

experts)

Integrated communication

and rail control systems

across borders

IP-based applications from current

GSM-R based technology

Example of an Urban Cargo Train in Zurich

33

THANK YOU

We Accelerate Growth

34

Next Steps

� Register for Frost & Sullivan’s Growth Opportunity Newsletter and keepabreast 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 [email protected])

35

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36

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Account Manager

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DID: +65 6890 0997

Mob: +65 9199 4566

eMail: [email protected]

2009 04 growth opportunities in asia pacific rail markets frost & sullivan

Documents

centralised rail

rail market segmentation

world rail market revenues

world rail revenues

rail control systems

technology trends current

rail industry participants8

rail industry participants2