university of tsukuba graduate school of humanities and...
TRANSCRIPT
i
University of Tsukuba
Graduate School of Humanities and Social Sciences
Master Thesis Submitted in Partial Fulfillment of the Requirements to be
Awarded the Degree of
Master of Arts in International Public Policy
International Technology Transfers and the Role of Governments:
A Study on Japanese Official Development Assistance to the Railway Sector
in India
by
Radhakrishnan DINAKAR
(Master‘s Program in International Public Policy)
January, 2011
ii
Table of Contents
Abstract …………………………………………………………………………………………... i
Acknowledgements ……………………………………………………………………..…………ii
List of Tables & Figures ……………………………………………………………..…………..iii
List of Abbreviations ………………………………………………………………….……. …..iv
CHAPTER I: INTRODUCTION ………………………………………………………….. 1
1.1 Technology Transfer ………………………………………………………..…2
1.2 Acquisition of Foreign Technology – Past & Present ……………............3
1.3 Development Assistance and Technology Transfer ………………..……..4
1.4 Theoretical Framework ………………………………………………….…. 6
1.5 Statement of the Problem, Research Question & Hypothesis ……….. 8
1.6 Methodology ..………………………………………………………….............9
CHAPTER II: THEORITICAL & ANALYTICAL FRAMEWORK …………………12
2.1 Introduction…………………………………………………………….........12
2.2 Dependency Theory, Path Dependence and ODA ……………………...14
2.3 Analytical Framework ………………………………………………...........17
CHAPTER III: LITERATURE REVIEW: TECHNOLOGY TRANSFER AND THE
ROLE OF GOVERNMENTS ……………………………………………………………..19
3.1 Role of Governments in Nurturing Science, Technology & Innovation
………………………………………………….………………………………. ..19
3.1.1 Japan: Role of Government in Technology Transfer…...............
23
3.1.2 India: Role of Government in Technology Transfer ……...
…….27
3.2 Role of Multilateral and Bilateral ODA …………………………….……..30
3.3 Literature Gap ……………………….…………………………….. …….....31
CHAPTER IV: RAILWAYS AND PATH DEPENDENCY
iii
4.1 Transportation and Development …………………………………………33
4.2 Railways in India: Introduction & Development …………………….....33
4.3 Railways in Japan: Introduction & Development ………….…………37
4.4 Path Dependency and Railways …………………………………………39
CHAPTER V: COMPARATIVE ANALYSIS: ODA vs. PRIVATE LICENCING
5.1 Technology Transfer Through ODA
5.1.1 Case 1: The World Bank ODA & Japan‘s Shinkansen Project ……..42
5.1.1.1 Background……………………………………………………………..43
5.1.1.2 Conception of the Shinkansen Project………………………………46
5.1.1.3 ODA: Terms & Conditions………………..…………...……………..47
5.1.1.4 Project Implementation & Technology Transfer…….…..………..50
5.1.1.5 Project Impact………………………………………………..…..........55
5.1.1.6 Summary …………………………………………………..……..........58
5.1.1 Case 2: JBIC/JICA ODA and Delhi Metro Project in India………..59
5.1.1.1 Background……………………………………………......................59
5.1.1.2 Conception of Delhi Metro ………………………………………….59
5.1.1.3 ODA: Terms & Conditions …………………………….. ………….63
5.1.1.4 Project Implementation & Technology Transfer …… ………….64
5.1.1.5 Project Impact …………………………………………… …………..73
5.1.1.6 Summary ………………………………………………… …………...76
5.1.2 Case Comparison: Technology Transfer in ODA for Public Sector
Projects …………………………………………………………................76
5.2 Technology Transfer through Private Licensing
5.2.1 Case 3: Private Licensing in Japan– Hiroshima LRT and Siemens.79
5.2.1.1 Background ………………………………………………………….. 79
5.2.1.2 Licensing Agreement …………………………… ………………….83
5.2.1.3 Project Implementation & Technology Adaptation …………….84
5.2.1.4 Impact ………………………………………………………………….88
5.2.1.5 Summary ………………………………………………………..........89
iv
5.2.2 Case 4: Private Licensing in India – Integral Coach Factory (India)
and SWS (Switzerland) ………………………………………………… 90
5.2.2.1 Background ………………………………………………………….. 90
5.2.2.2 Technology Licensing Agreement ………………………………… 91
5.2.2.3 Project Implementation & Technology Adaptation ……………..93
5.2.2.4 Impact ………………………………………………………………… 96
5.2.2.5 Summary ……………………………………………………………... 97
5.2.3 Case Comparison: Technology Transfer through Private Licensing.98
5.3 Summary ……………………………………………………………………….99
CHAPTER VI: CONCLUSION …………………………………………………………101
BIBLIOGRAPHY …………………………………………………………………………105
Annex I …………………………………………………………………………………......114
Annex II …………………………………………………………….………………………115
Annex III …………………………………………………………………………………...116
v
Abstract
International Technology Transfers and the Role of Governments:
A Study on Japanese Official Development Assistance to the Railway Sector
in India
Radhakrishnan DINAKAR
There exists a strong correlation between the material prosperity & global
competitiveness of any country and its ability to master science &
technology. Countries that lack the ability to acquire it tend to be poor and
underdeveloped while those that are able to adapt, innovate and create new
technologies, are able to produce competitive goods and services. However,
less than 1% of global research and development is currently spent on
technological innovations for poor countries. United Nations and other
donor agencies are therefore increasingly using concepts like ―Knowledge
Aid‖ and ―Technological Learning‖, to address a host of development issues.
This research examines the role of governments and Official Development
Assistance (ODA) in the transfer of technology to developing countries.
Using the framework of dependency theory and path dependency, it
compares four cases of technology transfer in a public utility service -
Railways - in Japan and India. Of the four cases, two involve the use of
ODA: the World Bank loan for the Shinkansen project in Japan (1960-64)
and the Delhi Metro Project in India using JBIC/JICA loans (1998-2008). In
the remaining two cases we compare technology transfer in railways using
private licensing agreements between of Hiroshima LRT & Siemens
(Germany) and India‘s Integral Coach Factory & SWS (Switzerland). The
conclusion is that the effectiveness of ODA in technology transfer depends to
a large extent on how recipient governments encourage indigenous research
& development institutions, as well as competition & collaboration amongst
domestic engineering firms.
vi
Acknowledgements
I would like to express my sincere gratitude to my advisory committee at the
University of Tsukuba - this research would not have been possible without
their sustained guidance and encouragement.
First of all, my main advisor, Prof. H. Klienschmidt, for his inspiring
breadth of knowledge and the clarity with which he explained everything
from international relations to the rigors of academic writing; To Prof. S.
Kitta for his emphasis on practical knowledge and for sharing his
experiences in managing ODA projects in India, East Asia and other parts of
the world; To Prof. A-J. Louis, for setting high expectations and for his
detailed, critical feedback, and to Prof. L. Pan, whose lectures on modern
Japanese history led me to take a closer look at the role of technology
transfer in the transformation of nations.
It is the JJ/WBGSP scholarship that enabled me to study again, and I am
grateful to all those who considered me worthy of this mid-career program.
It has afforded me the opportunity to introspect, as well as the time &
environment to learn with an amazing cohort, faculty and staff-members,
drawn from all across the world.
My greatest debt is to my family – especially my wife, Maya, who set aside
her own career to be with me here, to manage the household and to put up
with my erratic schedules. I dedicate this research to her, and to our
children, Diya and Divyang.
vii
List of Tables & Figures
Table 3.1 Role of NIE Governments in Facilitating Technology Transfer 22
Table 3.2 Japan: Role of Government in Promoting Domestic Science &
Technology (1880-1950)
25
Table 5.1 Aid from USA During the Post-war Period (1945-1953 in
US$ million)
44
Table 5.2 Description of Loan No. P-246 – ‗New Tokaido Railway Line‘ 47
Table 5.3 Railway Technology & its Source for the Shinkansen Project 51
Table 5.4 Summary of Innovative Technology Introduced in the Shinkansen
Project
52
Table 5.5 Description of JBIC Loan for Delhi Mass Rapid Transport System 61
Table 5.6 JBIC/JICA Funding Plan– Delhi Metro Phase-I and Phase-II 62
Table 5.7 Railway Technology & its Sources for the Delhi Metro Project 65
Table 5.8 Summary of New Technology Introduced in the Delhi Metro
Project
66
Table 5.9 Overview of Delhi Metro Project - Phase I & II 67
Table 5.10 Leading LRT Tram Manufacturers 79
Table 5.11 Summary of car-designs used by HERC (1985-present) 82
Table 5.12 Comparison of Siemens Combinos and JTram‘s GreenMover Max 83
Table 5.13 Components of the IR-SWS Technology Transfer Agreement 88
Figure 1 Original Alignment of WB-funded Shinkansen Line 49
Figure 2 Shinkansen ―0‖ Series, launched in 1964 51
Figure 3 Shinkansen Poster at World Bank, Tokyo Office 57
Figure 4 Delhi Metro – A Train Set in Operation 60
Figure 5 Layout of Delhi Metro Routes in Phase-I and Phase-II 62
Figure 6 Evolution of Rail Streetcars in Hiroshima (1925-1991) 81
Figure 7 A Siemens Combino at Hiroshima 84
Figure 8 GreenMover Max by J-Tram 86
viii
List of Abbreviations
AC Alternating Current
DAC Development Assistance Committee (of OECD)
DC Direct Current
FDI Foreign Direct Investment
GBP Great Britain Pounds
HERC Hiroshima Electric Railway Company Limited
h.p Horse Power
IR Indian Railways
JBIC Japan Bank for International Cooperation
JICA Japan International Cooperation Agency
JNR Japan National Railways
JR Japan Railways
kV Kilo Volt (1000 Volts)
KFW Kreditanstalt für Wiederaufbau (Germany)
LDC Less Developed Country
ODA Official Development Assistance
OECD Organization for Economic Cooperation and Development
LF-LRT Low-Floor Light Rail Transit
LRT Light Rail Transit
MLIT Ministry for Land Infrastructure and Transport (Japan)
MNC Multi-National Company
NIE Newly Industrialized Economies
RB Railway Board (India)
RDSO Railway Design & Standards Organization (India)
RTRI Railway Technical Research Institute (Japan)
SCAP Supreme Commander of Allied Powers (also known as GHQ)
TA Technical Assistance
TC Technical Cooperation
TRIPS Trade-Related aspects of Intellectual Property Rights
UNFCCC United Nations Framework Convention on Climate Change
UNCTAD United Nations Conference on Trade and Development
URL Uniform Resource Locator
ix
WTO World Trade Organization
1
CHAPTER I
Introduction
Give a man a fish and you feed him for a day.
Teach a man to fish and you feed him for a lifetime.
– Chinese Proverb
-
The difference between a gift and a skill is expressed by this adage rather
succinctly. It also points to the long-term, transformational impact of
acquiring practical knowledge, or, in other words, technology.
Technology, however, is rarely given as a gift. In an industrialized world it
is the bedrock of competitive advantage. So it is hardly surprising that there
exists a strong correlation between the material prosperity and global
competitiveness of any country with its ability to master science &
technology (GCR1 2010-2011). Countries that lack the ability to acquire it
tend to be poor and underdeveloped while those that are able to adapt,
innovate and create new technologies, not only produce competitive goods
and services but also to effectively govern an increasingly networked
populace. However, less than 1% of global research and development is
currently spent on technological innovations for poor countries (Donald
1999:1).
At the United Nations and other donor agencies working towards a more
equitable world, terms like ―Knowledge Aid‖ and ―Technological Learning‖
are now being used with increasing frequency, to address a host of livelihood
issues, as well as trans-border problems like AIDS and Global Warming.
1 The Global Competitiveness Report published by the World Economic Forum (WEF) also
links education, research & development capacity and infrastructure, among others, to a
country‘s GDP. Details at URL - http://gcr.weforum.org/gcr2010/
2
This research examines effectiveness of Official Development Assistance
(ODA2) as a tool for skill or technology transfer.
1.1 Technology Transfer
The OECD defines technology as the state of knowledge concerning ways of
converting resources into outputs 3 . It is, however, a broad concept,
encompassing legal terms such as patents, trademark and licenses; some
conceives it as techniques, advertising, management, manufacturing while
some others conceive it as products, tools, equipment or machinery. In fact,
it is the integration of the understanding of equipments, information and
knowledge about equipment, marketing, management and organizational
understanding. Countries with obsolete technology, poor management of
technology, and obsolescent production processes struggle to survive in
highly competitive globalized world.
While science, in a broad sense, is the search for knowledge, and that search
is based on observed facts and truths, technology is the application of new
knowledge learned through science to some practical problem. Technological
change is the rate at which new knowledge is diffused and put into use in
the economy (Audretsch 2002: 156). Technology is about how to make things
and services that are useful and enjoyable, that is, it is about production
(Mokyr, 1990: 7). Indigenization is the processing of making technologies
appropriate for the situations where they are applied: for the local people
keeping in view their specific needs, requirements, economic, political
2 The Organization for Economic Cooperation and Development – Development Assistance Committee
(OECD-DAC) defines ODA as -“Flows of official financing administered with the promotion of the
economic development and welfare of developing countries as the main objective, and which are
concessional in character with a grant element of at least 25 %”
3 OECD Glossary of Statistical Terms URL (30 May 2010) -
http://stats.oecd.org/glossary/detail.asp?ID=2692
3
system, social, cultural background, and also their regional and working
environment.
Since the advent of the Industrial Revolution in Europe, technology has
given many of the ‗early starters‘, not only the economic dominance that
came from mechanized mass production of goods but also the military
prowess to impose a political framework that continues to be the bedrock of
the ‗world order‘ today.
1.2 Acquisition of Foreign Technology – Past & Present
Ever since technology was recognized as an important factor of productivity
and economic competitiveness, people have strived to acquire it. Since it is
essentially a combination of knowledge and skill embodied in machinery,
one of the earliest methods of acquiring it has been through reverse
engineering. The other methods included outright purchase through
commercial transactions, licensing agreements, hiring of consultants,
purchase of blueprints and materials.
Foreign Direct Investment (FDI) is another important channel of technology
transfer. Foreign firms often bring new ways of doing business to host
countries. These might include not only new technology but also new
management and marketing techniques and production and inventory
control methods (Goto 1993: 281). Other channels include academic and
trade journals, exhibitions, and trade shows. Multinational corporations
often establish research laboratories worldwide in order to adapt products to
local conditions and to monitor the R&D activities of local firms and
research institutions.
4
The enforcement of the WTO-TRIPS4 agreement is now increasing the price
poor countries pay to gain access to new, patented technologies. In the pre-
WTO era, quite often, merely imports provided a basis for technology
absorption. On the basis of imports of locomotives in the late 1820s and
1830s, it was possible for the USA to copy and improve them and thus ‗a
locomotive-building industry sprang up in the US almost at once‘ (Wilkins
1974: 174). Despite an embargo, substantial number of British machines
reached US to be copied and, more importantly, modified to suit US
requirements. Since the 1980s, however, USA has been pushing for stricter
a global IPR control which has made it difficult for developing countries to
access new technologies. As Benjamin Coriat (2002: 18) notes:
‗If the world‘s economies have truly become more knowledge-intensive,
cutting off access to knowledge (through an extension of patents, which
are nothing but pure institutional barriers) is surely not the most
suitable way to help developing countries to grow so that they are able
to stand on their own two feet and make their own contribution to the
overall growth and Welfare that we should be envisaging‘.
Among firms as well as nations, hiring of foreign engineers has been a
popular method of acquiring foreign technology – the experimental German
Otto engine was the basis for the French and American auto designs.
During the Meiji-period5, Japan, as a developing country, made a conscious
and deliberate effort to develop an industrial design and lab-analytic
capabilities for adapting modern technology, by hiring over 3000 Western
engineers and technicians6.
4 World Trade Organization‘s Trade Related Intellectual Property Rights Agreement.
Details at URL - http://www.wto.org/english/tratop_e/trips_e/trips_e.htm
5 Also known as Meiji-jidai (明治時代), it extended from 1868 until 1912
6 The specific term for them in Japan was – ―Oyatoi-Gaikokujin(お雇い外国人) or ‗hired
foreigners‘.
5
The present-day developing countries, however, are facing a technology
problem which is qualitatively different from that faced by the nineteenth
century developing countries: Engineering and technology research has
become immensely complex and knowledge-based, requiring high level
scientific and technical manpower for its growth and operations. It is
capital-, scale- and skill-intensive because it is intended to meet
simultaneously a wide variety of functional, aesthetic, comfort and status
needs and wants (Bhatt 1975: 655).
1.3 Development Assistance and Technology Transfer
According to Dickson (2010), the biggest single factor limiting developing
countries‘ potential for achieving sustainable economic growth is their
ability to access and apply the fruits of modern science and technology.
Given the proprietary nature of technical know-how and institutional
factors that impede the free flow of technology across borders, governments
try to play a proactive role in encouraging Foreign Direct Investment (FDI),
outsourcing and technology licensing by providing fiscal and other
incentives to organizations that create new technologies.
In developed countries, the government is also an influential stakeholder in
the process of technology creation & transfer. So an alternative way of
bridging the technology-gap is through inter-governmental development
assistance. UNCTAD, for instance, has been advocating the use of
‗knowledge-aid‘ and aid concerned with science, technology and innovation
(STI) to strengthen productive capacities in the LDCs7 via ‗technological
7 Least Developed Country (LDC) is the name given to a country which, according to the
United Nations, exhibits the lowest indicators of socioeconomic development, with the
lowest Human Development Index ratings of all countries in the world. Details at UN
website - http://www.un.org/special-rep/ohrlls/ldc/ldc%20criteria.htm
6
learning‘ and the accumulation of technological capabilities (Bell 2007: 4).
The United Nations has also been supporting efforts towards ―creating
conditions in developing countries conducive to foreign investment and
building capabilities to absorb and utilize imported
technologies‖(UNFCCC8).
Such international development assistance, of course, comes in many shapes
and forms, but in general terms, it flows from industrially and
technologically advanced countries to less developed ones in the form of
capital, goods or services. It is either administered directly by the
governments in the form of ODA or by non-governmental agencies, with the
broad goal of making poor countries wealthy (Rothschild 2007: 1).
Japan has been providing ODA under the OECD-DAC umbrella since 1960.
Even though the stated objective of ODA is the ―promotion of economic
development and welfare of developing countries‖, in practice, it has been
used as a tool for promoting stronger economic linkages with recipient
countries. Brooks (1985) identifies four distinct yet overlapping phases in
the evolution of Japanese foreign assistance: (1) war reparations, from
roughly the mid-1950s until 1965 (2) excessively tied aid used primarily as a
means to promote exports, particularly in Southeast Asia, from the mid-
1950s to the early 1970s; (3) concentration of aid in the 1970s on resource-
rich countries and countries along shipping routes in order to achieve
economic interdependence; (4) emphasis in aid policy, since the late 1970s,
on basic human needs, poorer countries, and to the humanitarian needs of
countries of strategic importance.
8
United Nations Framework Convention on Climate Change; URL (1 June 2010) -
http://unfccc.int/2860.php
7
From the outset, Japanese ODA has been conceived as a form of long-term
strategic ‗investment‘ oriented towards economic goals – securing raw
materials (Resource Diplomacy) as well as the creation of captive markets
for its goods and services. Its ODA budget was being administered by quasi-
autonomous organizations (JICA, JBIC) with the bureaucracy drawn from
as many as 12 different ministries. Among JICA‘s various ODA schemes,
Technical Cooperation (TC) was meant for the transfer of technical know-
how though capacity-building exercises. The TC scheme is also used to make
the other two schemes – Grant-Assistance and Yen Loans – sustainable in
the long run (JICA 2008).
1.4 Theoretical Framework
There are two ways of looking at foreign aid: the traditional, prescriptive
approach and the more recent – and arguably less popular – positivist one.
Under the prescriptive approach, foreign aid is conceived as income flows
from wealthy to poor countries for development purposes (Rothschild 2007).
It is represented by campaigns to ―make poverty history,‖ the Doha
―development round‖ of WTO talks, and Gordon Brown‘s ―Marshall Plan for
Africa‖. They all imply that foreign aid exists as a means of helping the
world‘s poorest people escape the ravages of poverty. This approach is
exemplified by the massive aid-based development plans by Jeffrey Sachs‘s
End of Poverty. It is also used to explain why such plans are futile as in
William Easterly‘s The White Man‘s Burden (2006).
The positivist approach, on the other hand, examines foreign aid for what it
has been, not for what it should be. Lancaster argues that the idea of aid
began in earnest as a realpolitik diplomatic tool in the early days of the Cold
War (Rothschild 2007: 2). Modeled after the small, limited humanitarian
programs for ―underdeveloped countries‖ run by the Scandinavian states,
the United States and European countries began similar programs to fight
the spread of communism. Similarly, the Soviet Union used aid to advance
8
its geopolitical goals, giving three quarters of its aid to communist
developing countries (ibid.).
The Marxist theories provide a framework for examining the complexities
involved in the interactions between countries – the developed vs. the
developing; the technology leaders vs. followers, etc. These theories focus on
economic and material aspects of interactions between countries, as opposed
to the liberal-realist view of state conflict and cooperation. Of special
relevance here is the doctrine of Unequal Exchange and the Dependency
Theory which argues that capitalist developed countries (the core), depend
on raw materials from under-developed or developing countries (the
periphery). Using political advisors, missionaries, experts and MNCs, the
core tries to integrate the periphery into the capitalist system in order to
appropriate natural resources and to foster dependence.
With regard to technology transfer, one of the arguments of dependency
theorists is that suppliers and economic interests from developed countries
tend to "dump" outmoded equipment and technology on poor countries, so
that they cannot compete effectively in international markets or grow very
fast (Amin 1969 and Sau 1978 quoted by Barett & Whyte 1892: 1071). In the
absence of adequate capacity to absorb and adapt technology, developing
countries tend to become dependent on foreign suppliers. This is a form of
path dependency is perhaps more explicit in bilateral aid, as observed in the
ways in which French social elites and Japanese business elites have helped
craft aid policies as organs of cultural and commercial hegemony,
respectively (Rothschild 2007: 3).
While it was still a developing country, Japan earned a unique record in the
area of international technology transfers. Ever since European trading
ships docked at her ports in the 16th century it has been a recipient of
foreign technology. Having systematically learnt, assimilated and improved
9
upon Western technical innovations to achieve rapid economic development,
it is now a leading source of international development assistance.
1.5 Statement of the Problem, Research Question & Hypothesis
Technology transfer involves more than hardware supply; it includes the
complex processes of sharing knowledge and adapting technology to meeting
local conditions. The effectiveness with which technology can be absorbed
and adapted depends on domestic technical and managerial capacities, as
well as institutions and investments in technological learning. On one hand
it is apparent that Japan has successfully learnt how to create the
institutional and human capacity to absorb and adapt technology but on the
other, it is unclear whether it has been able to teach other countries the
lessons it learnt along the way.
In the process of technology creation & transfer governments, governments,
with their monopoly over public funds and resources, tend to be influential
stakeholders. This influence is wielded through budgetary controls - powers
to apportion funds for research or purchase of foreign equipment and know-
how; through the tax and legal systems, as well as negotiations with foreign
donors over ODA terms and conditions.
Using the cases of India and Japan, this thesis attempts to answer the
question: Is ODA an effective conduit for international technology transfers?
The hypothesis being tested here is: ODA is not an effective tool for
international technology transfers because the institutional frame-work,
under which it is administered, is geared towards short-term, tangible
outcomes favoring domestic stakeholders, rather than the long-term
capacity-building needs of recipient countries.
10
1.6 Methodology
In this study, we compare Japan in the late 1950s and India in the late
1990s, which presents an interesting study of similarities in national
development. During this period, both fell into the category of ―developing
countries‖ on the verge of rapid economic development; both were recipients
of ODA from developed countries even though their ability to absorb and
utilize new technology was fairly well developed. In both countries, the
railway system was under the complete control of the government, and
struggling to modernize, in order to cope with the demands of a growing
economy.
There are two key elements in this research – firstly, governments that are
recipients of ODA, and secondly, the process of international technology
transfers. We examine the interaction of these two elements by examining
role of governments in exercising control over technology transfers so as to
minimize dependence on foreign technology, and to build domestic
capabilities.
With regard to the role of governments in ODA and technology transfer, we
examine their role as (i) initiators, (ii) coordinators, (iii) catalyzers, and
(iv)obstructers, in the creation of a path dependent relationship. Since ODA
programs usually translate into projects, we will study the following types of
technology transfer as related to projects: (i) experimental technology, (ii)
advancement of technology, (iii) modification of standard technologies,
(iv)adaptation of existing technologies, and (v) one-to-one transfer of
existing technologies.
As mentioned earlier, technical know-how is usually proprietary in nature
and closely guarded by private interests. However, when it comes to public
utilities (especially transport, power and communications) governments
11
tend to exercise a high degree of control, either indirectly using legal
measures, or directly, by nationalizing and operating public utilities by
themselves.
The focus of this research is on railways primarily because of their status as
public utilities requiring high levels of investment, and because they are
usually built on public land, using public funds. Therefore, governments
tend to exercise either full direct control or at least a strong indirect
influence over the railways, through equity holdings or through statutory
methods. In the case of India and Japan – the two countries being examined
– the railway sector has been under the direct control of the respective
governments during the period: 1947-2008 in India and 1947-1987 in Japan.
Despite the difference in scale and sophistication of the railway network in
Japan and India today, both countries counties share many similarities in
the origins and evolution of their railway industries. While British
engineers & consultants played a key role in both countries, in Japan, they
were employed by the Meiji government whereas in India, they served the
economic and military interests of the colonial power. Driven by strategic
and economic concerns, Japan began its efforts at reverse-engineering and
technology indigenization much earlier than India, and its railway system is
widely considered a global benchmark for speed and efficiency (UIC 2003).
Four cases of international technology transfers, which are widely regarded
as ―successful‖9 in the recipient countries, are being compared here. In the
first two cases would look at how both Japan and India used ODA as a
facilitator for technology transfer, while in the remaining two, we would
examine the role of private sector technology-licensing agreements as a tool
for technology transfer in India and Japan respectively. This would be
followed by a cross-comparison of both sets.
9 Detailed discussion in Chapter V
12
The two cases of ODA for railway development are the World Bank funded
New Tokaido Line Project, 1961 (better known by its popular name - the
Shinkansen Project), and the JBIC-funded Delhi Metro Project, 1997. Both
projects were implemented using ODA funds when basic infrastructure in
both countries was still being developed, using expertise that was not
available domestically. Also, both projects were used to introduce new
technology and went on to spur the development of railways in Japan and
India.
For comparing the use of private licensing for railway technology transfer,
we consider two cases- again one each from India and Japan respectively.
The first case is the collaboration between Hiroshima Electric Railway
Company (HERC) and Siemens Aktiengesellschaft (Siemens AG), Germany,
and the second case is the collaboration between Indian Railways and
Schweiserische Wagons- und Aufzügefabrik Aktiengesellschaft (Swiss Car &
Elevator Company or SWS).
Based on availability of relevant data and reports, the following measures of
effectiveness in technology transfer used in this study are:
1. Time taken for developing indigenous capabilities: The timeframe
across which a high level of self-sufficiency was developed for a
particular technology. This would be reflected in data on the number
of foreign engineers/consultants employed
2. Imports: Increase or decrease in import of hardware or rolling stock,
as opposed to domestic manufacture of the same. This would be
obtained from annual reports and press-reports.
3. Service Levels: Difference in level of services before and after
introduction of a new technology
4. Institutional Capacities: Comparison of institutional capacities for
training research & development.
13
The research is mainly based on secondary sources - published papers,
official websites, news & magazine articles, documentaries and market
surveys. This has been complemented, wherever possible, through direct
interviews with key decision makers (serving and retired officials).
In the chapters to follow, we will first elaborate on the theoretical and
analytical framework of this study (Chapter II), then examine the existing
body of research on ODA and the role of governments in technology transfer
(Chapter III) and select a set of technologies that are amenable to
comparisons across countries. The evolution of this set of technologies would
then be examined under the ‗degrees of path dependence‘ postulated by
Liebowitz and Margolis (Chapter IV), followed by analysis of specific
projects in order to understand the dynamics of technology transfer under
ODA (Chapter V).
● ……………Ж ……………●
14
CHAPTER II
Theoretical and Analytical Framework
2.1 Introduction
In order to analyze the link between technology transfer and ODA, we
essentially seek to understand transactions and interactions between
governments or countries as sovereign entities. Such interactions take place
through institutions, and for this reason this research does not use the
neoclassical theories which are build on an implicit set of assumptions that
are derived from the rationality postulate of economic theory. In the world of
instrumental rationality institutions are unnecessary, ideas and ideologies
don't matter, and efficient markets -- both political and economic --
characterize economies (North 1994:10).
This brings us to the theories on Political Economy 10 which covers the
relationship between economics and politics in nation states or across
different nation states. The theory of political economy draws heavily on the
subject of economics, political science, law, history and sociology to explain
the politico-economic behavior of a country. Within this array of choices, we
can examine technology transfer and ODA, either through axiomatic
methods and fundamental techniques of mathematics, to understand the
functioning of the economy, or we could use the logic of International
Political Economy (IPE), the discipline within social sciences that analyses
international relations in combination with political economy. Since the
‗international technology transfer‘ implies a strong element of socio-
economic transactions that take place across borders, and due to non-
10 Political Economy is a combination of Greek words ―polis‖(city or state) and ―oikonomos‖(one who
manages the household)
15
availability of data on technology transfers, this research relies more on the
logic of IPE than on axiomatic or mathematical models.
Under the broad umbrellas of IPE and International Relations Theory, there
are many - often conflicting - ways of thinking about sovereignty and these
include three broad categories – positivist, post-positivist theories, the
Marxist theories and the Leadership Theories.
Positivist theories aim to replicate the methods of the natural sciences by
analyzing the impact of material forces. The various types of positivist
theories are -
1. Realism: Focuses on state security and power over all else
(Thucydides, Machiavelli, Hobbes, Carr, Morgenthau)
2. Liberalism / Idealism / Liberal Internationalism – ―war is
destructive; states gain from cooperation‖ (Woodrow Wilson, Norman
Angell)
3. Neo-liberalism: Accepts neo-realism presumption that states are the
key actors in international relations but maintains that non-state
actors (NSAs) and international NGOs (IGOs) matter,
4. Regime Theory: International institutions or regimes affect the
behavior of states. ‗Regimes‘ in this case refers to institutions
processing norms, decision rules, and procedures which facilitates
convergence of expectations.
Post-positivist theories, on the other hand, reject the idea that the social
world can be studied in an objective, value-free way. Instead, they seek to
explain by stressing the importance of norms and values. The current types
of post-positivist theories are -
16
1. International Society Theory (English School): Focuses on shared
norms and values of states and how they regulate international
relations (diplomacy, order, and international law)
2. Social Constructivism: Broad range of theories that aim to address
questions of Ontology (state of being/reality)
3. Critical Theory: Focus on need for human emancipation from states
The second body of theories originated from Marxism. Here the focus is on
economic and material aspects of inter-state relationships and it rejects the
liberal and realist-liberal view of state conflict and cooperation. This
includes the Dependency Theory, which states that developed countries, in
their pursuit of power, penetrate developing countries through political
advisors, missionaries, experts and MNC‘s to integrate them into the
capitalist system in order to appropriate their natural resources and foster
dependence.
Finally we have the third broad category - Leadership Theory. It includes
the Interest Group Perspective, which states the driving force behind state
behavior is sub-state interest groups (lobbyists, military, corporate sector),
and the Strategic Perspective, according to which individuals chose actions
with the intention of maximizing their own welfare.
2.2 Dependency Theory, Path Dependence and ODA
When we examine the existing body of theories with the task at hand – that
of examining the role of ODA in international technology transfers - we
notice that the key-words, ―assistance‖ and ―transfer‖, indicate the
existence of the an unequal socio-economic relationship. If we were to
examine this unequal relationship under the rubric of positivist theories, it
17
would be akin to examining the effect or symptom of power struggles rather
than the cause itself. Similarly, the post-positivist theories, with their focus
on norms, values, and ontology, leave little room for going beyond conflict
and cooperation to analyze the transfer of knowledge and skills through
development assistance.
The Marxist theories, provide a broader framework by examining both
economic and material aspects of inter-state relationships, and allows us to
dwell deeper into the dynamics of international technology transfers
through ODA. Among Marxist theories, the Dependency theorists have
produced voluminous literature describing the exploitation and consequent
underdevelopment of the Third World by the advanced capitalist countries.
The major thesis of dependency theory is that the rise of foreign trade and
the arrival of foreign capital from the "core" lie at the heart of under-
development in the "periphery". A range of views have been articulated by
Paul Baran, Andre Gunder Frank, Samir Amin, and Immanuel Wallerstein,
but one central theme unifies them all: that underdevelopment exists
because the situation of the Third World (periphery) in capitalism on a
world scale has left it dependent on the advanced capitalist countries (the
core) (Amsden 1979: 371).
Conventional explanations provided by neoclassical economists featured the
misguided interventionist policies of Third World nationalist governments,
which impeded the market from doing its job, along with primitive social
structures, which awaited "modernization."' Such explanations ignored
important lessons in economic history and the realities of Third World
economies, and dependency theorists took the very welcome step of
introducing imperialism into the growth equation. Foreign trade and
investment, two concrete expressions of imperialism, are seen as the
18
primary categories by which exploitation is perpetrated and by which
dependency and underdevelopment are perpetuated.
Barrett and Whyte (1982: 1070-1079) provide a useful summary of the
arguments by which dependency fosters economic inequality:
1. Dependent countries suffer from direct exploitation. Foreign firms
repatriate profits overseas, rather than reinvest them in the
domestic economy, thus limiting the growth that can be achieved
2. Foreign suppliers and economic interests tend to "dump" outmoded
equipment and technology on poor countries, so that they cannot
compete effectively in international markets or grow very fast
3. Dependency on foreign interests and foreign economic penetration
keep the state weak and prevent it from effectively playing its
necessary role in protecting domestic industry and fostering
economic growth
4. Dependency leads to susceptibility to price manipulations in the
domestic and overseas markets. The domestic market becomes
flooded with imported consumer goods, while exports to pay for
them are harmed by the instability of world demand and prices. The
result is often trade deficits, growing indebtedness, and less capital
to invest in economic growth.
5. Dependency causes such economic growth as occurs to be confined
to small enclaves, and these enclaves and the native bourgeoisie in
them are more oriented to foreign economic interests than domestic
ones. Linkages with the rest of the domestic economy are minimized,
reducing the multiplier effects of foreign investment. The result is
unbalanced development or economic dualism, with a division
between a small modern economic sector and the remaining
backward parts of the economy becoming more pronounced.
19
6. Dependence on foreign aid and credit reduces domestic capital
formation, resulting in a lower rate of economic growth.
The aforesaid arguments were presented to explain the underdevelopment
of countries in South America and Africa. It has also been used to highlight
the unique set of historical circumstances leading to the rapid development
of countries like Taiwan in South-East Asia.
With regard to technology transfer, one of the arguments of dependency
theorists is that suppliers and economic interests from developed countries
(the core) tend to "dump" outmoded equipment and technology on poor
countries (the periphery), so that they cannot compete effectively in
international markets or grow very fast (Amin 1969 and Sau 1978 quoted in
Barett & Whyte 1982: 1071). If one examines this process of ―dumping‖ of
technology and equipment in developing countries, there seems to lead to a
form of ―lock-in‖ wherein the recipients find it too expensive to move out of a
dependent relationship with the original suppliers. Also it appears that
governments of developed countries have a significant role in promoting the
‗economic interests‘ of their own domestic companies in underdeveloped
countries. Often, it is Official Development Assistance (ODA) by way of
discounted, long-term loans, supply of free equipment and training
personnel that forms the mechanism for transfer of such technology, which
seems to lead to path dependence.
2.3 Analytical Framework
Path dependence implies that the direction and scope of institutional change
cannot be easily or costlessly divorced from its early direction (North 1990,
1994: 10). Once donor agencies and their donors have gone down one path of
development, the probability of reversing along that path becomes
20
increasingly unlikely because of the entrenchment of perverse bureaucratic
interests (Araral 2005: 132). In their paper, titled, "Path Dependence, Lock-
in and History", Liebowitz and Margolis (1995: 205), present path
dependence as an "alternate analytical perspective for economics and a
revolutionary formulation of the neoclassical paradigm", and identify three
distinct forms or degrees of dependence which are related to technology
transfer:
First Degree Path Dependency - Information is perfect and does not
result in any loss of efficiency. For e.g., the system for powering
machinery in a plant may not be a factor in adopting more efficient
machinery
Second Degree path Dependency - Information is imperfect but
inferiority of a chosen path is un-knowable at the time a choice is made.
Third Degree Path Dependency - Sensitive dependence on initial
conditions leads to an outcome that is inefficient. In this case, a
consumer or firm may be considered "locked-in" to an inferior
technology, e.g. the choice between video formats VHS vs. Betamax11.
According to Carol Lancaster (2000: 78-79) bilateral aid has served a
multitude of often conflicting purposes in the last sixty years.
Understanding the intellectual and political histories of foreign aid – and
the path dependency issues that impact the institutions and ideas behind it
– is necessary to analyze current and future aid policies. With regard to
path dependence, it was Brian Arthur (1989: 117) who first examined it in
the context of adoption of competing technologies. Modern complex
technologies often display increasing returns in that the more they are
adopted, the more experience gained with them, and the more they are
improved (Rosenberg 1982:120). When two or more increasing return
technologies ‗compete‘ then, for a ‗market ’ of potential adopters,
11 Details on the ‗format-war‘ between VHS and Betamax can be found at URL -
http://www.mediacollege.com/video/format/compare/betamax-vhs.html
21
insignificant events may by chance give one of them an initial advantage in
adoptions. This technology may then improve more than the others, so it
may appeal to a wider proportion of potential adopters. It may therefore
become further adopted and further improved. Thus a technology that by
chance gains an early lead in adoption may eventually ‗corner the market‘ of
potential adopters, with other techniques becoming locked out (Arthur
1989:116).
In this research we will examine cases of technology transfer in ODA to see
which type of path dependence leads to long term relationship of
dependence to firms or governments in developed countries. We take a
closer look at what Arthur called ‗chance` in a path dependent process, and
argue that in ODA funded projects, donors seek to influence this ‗chance‘
element by facilitating the adoption of technologies which help firms in the
donor countries in cornering the market in recipient countries. This, in turn,
facilitates a technology lock-in and makes it difficult for recipients to shift to
cheaper and more efficient alternatives, when they become available.
In the chapters that follow, we will first examine the existing body of
research on ODA and the role of governments in technology transfer
(Chapter III) and select a set of technologies that are amenable to
comparisons across countries. The evolution of this set of technologies would
then be examined under ‗degrees of path dependence‘ postulated by
Liebowitz and Margolis (Chapter IV), followed by analysis of specific
projects in order to understand the dynamics of technology transfer under
ODA (Chapter V).
● ……………Ж ……………●
22
CHAPTER III
Literature Review: Technology Transfer and the Role of
Governments
Governments, with their monopoly over public funds and resources, tend to
be influential stakeholders in the process of technology creation & transfer –
especially with powers to divert funds for research or procurement of foreign
equipment and technology.
It becomes necessary for the government to play a proactive role in
international technology transfers because, in the present context, the
technology absorption and diffusion problem different from that faced by the
nineteenth-century developing countries such as France, Germany and
Czarist Russia. Modern technology has long outgrown the stage when the
scientists learnt from engineering and technological research; it has become
immensely complex and knowledge-based, requiring high-level scientific and
technological manpower for both growth and operation. It has also become
capital, scale and skill-intensive.
There is a wealth of literature on the role of governments in nurturing
science & technology. They dwell on the issue of self-reliance; the impact of
imported technology on domestic industry and protection of domestic
markets and institutions. In the following sections we first look at general
literature on the role of governments and ODA in nurturing science,
technology and innovation and then study the existing body of work
specifically related to Japan and India.
3.1 Role of Governments in Nurturing Science, Technology & Innovation
In his paper, ‗Catching Up, Forging Ahead and Falling Behind’, Moses
23
Abramovitz (1986: 390) examines the role of governments in technology
transfer. According to him, a combination of technological gap and social
capability defines a country‘s potentiality for productivity advance by way of
catch-up, in the long run. He identifies three factors that govern the rate of
realization of potential:
1. The facilities for the diffusion of knowledge - channels of technical
communication, MNCs, state of international trade and capital
investment
2. Conditions facilitating or hindering structural change in the
composition of output - labor distribution, geographical location,
migration, etc.,
3. Macroeconomic and monetary conditions affecting capital
investment and demand.
Stoneman and Diederen (1994: 929) emphasized the need for technology
diffusion policies in addition to R&D policies since, ‗the tapestry of economic
and social environment within which technological change takes place is
rich and varied, it is necessary to have policies that reflect the diversity and
heterogeneity of markets, environments and objectives‘.
There has been research on the relationship between domestic research and
development and imports of technology. Blumenthal (1979: 306) noted that a
significant positive relationship exists only in a limited number of countries.
His study considered only six countries - Australia, France, Germany, Italy,
Japan and Sweden, but among them, Japan not only had the highest annual
R&D expenditure - US$ 5,055 million (1973) but also the highest payment
for technological imports at US$ 793 million. He also tries to distinguish
between "absorptive" and "creative" R&D, the former being directed to the
adoption of foreign technology and its adaptation to domestic needs while
the latter is directed to more original inventions. From this, Goto (1993:
24
292) concluded that the very existence of a base for active R&D enabled
Japan to quickly absorb imported technology.
According to Blumenthal (1980: 306), the choice of technology is a long-
range decision because changes in technology take a long time to be
implemented. The reason lies in the need to disseminate information, train
labor, overcome vested interests, change the attitude of management, and
create the necessary physical capital in which new technology is embodied.
An early introduction of capital-intensive techniques, though inefficient in
the short run, prepares the economy for the time when changing factor
proportions set in. Moreover, capital-intensive technology imported from
more advanced countries may well have a quicker pace of technological
improvement since such improvements, made in the exporting country, can
also be introduced. The long-term dynamic advantage more than offsets the
static disadvantage.
On ‗Technological Learning’ through private investment, there have been
studies in which successes in technological adaptation have been directly
ascribed to research & development (R&D) back-up (Morehouse 1982); Lall
(1982) argued that technological change often requires innovation and skill
development while Bell (1982) concurred that ‗learning by doing‘ results in
incremental learning of a highly significant nature. Walker (1987) also
concludes from his study that ‗technological learning’ is intimately linked
to indigenous R&D capacity, especially where technology is sophisticated.
Effective R&D is necessary both for the adaptation of imported technology
and for its development. Also, defective imported technology can stimulate
R&D in the recipient firm.
Technology Transfer per se is a much researched topic – especially in the
firm-to-firm and lab-to-firm scenarios. The vast majority of papers are
focused on the first category - firm-to-firm technology transfers, or transfers
25
within the private sector. It was Atkinson and Stiglitz (1969) who published
one of the earliest papers examining the role of governments in firm-to-firm
technology transfers in underdeveloped countries. They argued out that
countries trying to encourage infant industries ought to be concerned with
subsidizing infant techniques rather than infant industries because the use
of intermediate technologies and labor-intensive process would help them
increase technical knowledge through experience in production – or
‗learning by doing’ - and indigenous research activities (Atkinson and
Stiglitz 1969: 574). Other papers on this topic include the works of Link
(1982) and Audretsch (2002).
Under the second category, lab-to-firm technology transfers, Bozeman (2000:
634-638) reviews recent literature on domestic technology transfer from
universities and government laboratories and focuses on technology
transfer‘s impact and effectiveness. His model considers a number of
determinants of effectiveness, including various characteristics of the
technology, the transfer agent and the technology recipient, and contends
that technology transfer effectiveness can have several meanings, including
market impacts, political impacts, impacts on personnel involved and
impacts on resources available for other purposes and other scientific and
technical objectives.
In 1985, Davidson and McFetridge studied a sample of 1226 cases of
international technology transfers and found that wherever there is a choice
between licensing and direct investment as a vehicle for technology
transfers, the characteristics of the individual technology and the parent
corporation are more significant than host country characteristics.
Much of the research is related to advocacy for a strong technology policy in
developing countries. For instance, Bhatt (1980) expounds that less
developed countries with all their handicaps of a late start have one critical
26
advantage and that is related to the accumulated and growing scientific
technological knowledge. But to use this knowledge creatively for solving
their own problems, they need to develop competence in the field of
technology through an institutionalized technology policy12. Sophisticated
techniques for planning or project evaluation are not - and cannot be - a
substitute for such a technology policy.
The role of government in promoting technology transfer has been studies
by Lall (1995) for a number of countries in Asia – especially those of the so-
called Newly Industrialized Economies (NIEs). An overview of the some of
the fastest growing economies in East Asia illustrates the importance of
government intervention in the acquisition of technology:
Table 3.1: Role of NIE Governments in Facilitating Technology Transfer
Country Steps Taken by Governments
1 Hong Kong Continuation of British colonial laissez-faire approach to trade and
investments
2 Singapore Strong interventionist policy regarding FDI and industrial
targeting, combined with free trade
3 Korea,
Republic of
Detailed and pervasive interventions13 focused primarily on capital
goods imports, technology licensing and other tech transfer
agreements to acquire technology. Support to reverse engineering,
adaptation and own product development
4 Taiwan Government did not promote large conglomerates, and instead
12 Bhatt recommends the establishment of Technology Consultancy Development Centers
(TCSC) – details in Bhatt 1980
13 Specific interventions included - pressure on the industry cartels (Chaebols) to establish vendor
networks - effective in rapid localization of components among subcontractors; Enacted law to
promote subcontracting by Chaebol - designated parts from SMEs (by 1987 about 1299 items were so
designated, involving 337 principle firms and some 2,200 subcontractors, mainly in the machinery,
electrical, electronic and shipbuilding fields); Generous financial support for operations, process &
product development; Exemption from stamp-duty and granted tax deductions for certain
investments in lab and inspection equipment; Establishment of councils in each industrial sub-sector
to represent interests of SMEs, to arbitrate disputes and monitor contract implementation; Guiding of
education curriculum in the directions directions needed by the industrial policy (Lall 1995).
27
aimed at SMEs by implementing programs to promote
subcontracting ‗Centre-Satellite Factory Promotion Program`. As a
result there are around 700,000 small and medium-sized
enterprises, accounting for 70% of employment, 55% of GNP and
62% of manufacturing exports
Source: Lall (1995)
As seen in the above table, the role of governments in most of the NIEs is
essentially in the ‗Developmental State` model, where the state assumes a
proactive role in speeding up economic growth through direct and indirect
interventions.
3.1.1 Japan: Role of Government in Technology Transfer
Modern industry in Japan started with government incentive and
ownership. Shipbuilding, iron and steel, and machinery are examples of
industries founded by the government. Most of them were later sold to
private business before the turn of the century; this, however, did not stop
government assistance and control. In the case of the shipbuilding industry,
the government influenced the industry's development and modernization to
a large degree by a subsidy system for shipbuilding and shipping, which was
―biased‖ in favor of larger and more modern Japanese-made ships
(Blumenthal 1980: 557)
When Chalmers Johnson (1982, 1995) coined the term ‗Developmental
State`, it was Japan that he chose as an example to illustrate the dynamics
and growing prevalence of state-led industrial and trade and finance policy
to speed up economic growth (Clemons 2010). He also brought out the
complex web of inter-linkages between the elite bureaucracy and businesses
(amakudari) which had a telling impact on transfer of foreign technology to
Japan.
Goto (1993) and Odagiri (1996) have studied the trends of technology
28
transfer from foreign firms to Japan, starting with the pre-Meiji era.
Several patterns have been found: the predominant role of foreign
consultants during the early Meiji period; purchase of blueprints during the
later Meiji period; the preference for entering into technological agreements
with American and Europeans firms in the post-war era; the strong role
played by trade associations and institutions like the Japan Productivity
Centre (Nihon Seisansei-honbu) which organized ‗missions` to study
technological trends and business practices abroad.
The Japanese government also influenced technology imports by setting the
policy for payment of foreign exchange and accounting of technology assets
under investment law. MITI 14 controlled the Foreign Investment Board
(Gaishi-Shingikai) which, in turn, was the final authority that cleared
application for technology imports (Goto 1993: 294).
The role played by government of Japan in importing technology and
building a base for science research and development (R&D) has been
extensively studied –in the post Tokugawa Era (1603-1668); following the
Meiji restoration in 1867, as well as in post-World War-II years. This
includes much of the ‗catching-up‘ literature (Abramovitz 1986: 388) which
examines the ways which the Japanese government facilitated the import of
the ‗backlog` of technologies before and during the war, and, then, as the
economy recovered and started to grow at exceptionally high rates, the way
it prevented domestic companies from outbidding each other for purchasing
foreign technology; or permitted certain selected firms to use scarce foreign
currency to purchase technology abroad; or, in some cases, intervened in the
negotiation process between foreign firms and Japanese firms to ensure that
Japanese firms could obtain technology on favorable terms (Goto 1993: 300)
14 The Ministry for International Trade and Industry (MITI) of Japan was renamed as the Ministry
for Economy Trade and Industry (METI) in 2001. Details at -
http://www.fas.org/irp/world/japan/miti.htm
29
Table 3.2: Japan: Role of Government in Promoting Domestic Science & Technology (1880-1950)
Intervention Impact
1
Interventions for
supporting demand;
promoting industries
- Increased public investment and consumption -- investment to
create telegraph service led to an expanding demand in telegraph
equipment and wire, and that for the railways in rolling stock and
rails
- Military procurement
- Procurement by semi-government organizations: Nihon
Denshin Denwa (Nippon Telegraph & Telephone, better known
as NTT)
2
Introduction of patent
system in 1885
- During the period July 1885 - Feb 1902, 4817 patents were
granted, of which 45% related to machinery, 15% for chemicals,
1% for electrical equipment and 39% for miscellaneous. So we
can infer that machinery was the most active sector.
- Academic associations were formed and professional journals
started. Access for foreign information became easier through
access to foreign books, journals, and through trading companies.
3
Founding of National
Research Institutions
- 38 national research labs founded during 1914-30
- Denki Shikensho (Electric Lab) dated back to 1875 when
Kobusho started a small lab to test insulators
- 1900 - Kogyo Shikensho - Industrial Research Institution – the
predecessor to Agency for Industrial Science & Tech (AIST)
established with 20 staff
- 1917 - Founding of Riken - Rikagaku Kenkyusho (Institute of
Physical and Chemical Research) - aim - fostering scientific
progress - not purely academic but also practical -- funded by
government and private sector (50:50). By 1945 it had already
published 2004 academic papers in Japanese and 1164 in English
-- chemical products, vitamins & sensitive paper, and machinery
such as piston rings and measuring equipment
- 1933 - Gakushin - Gakujutsu Shinkokai (Science Council),
again public-private -- to increase research at universities and to
promote inter-agency research collaboration
4 Support to Private
Research Labs
1923 - already 162 private R&D labs affiliated to companies,
cooperative and private foundations
5
Channelising Windfalls -
Korean War Demand 1950
Procurement demand of $ 600-800 million /year - export $1.2to
1.3 billion - this brought in valuable foreign exchange with
which to import fuel, materials and intermediate goods
Source: Odagiri (1996)
30
Japan‘s R&D expenditures continue to be among the highest in the world.
According to research published by OECD (2006: 151-152), during the
period 1972-2002, for Japan, the ratio of R&D expenditure to GDP has risen
with approximately half of all government R&D funding allotted to
universities - the highest among all OECD countries.
Cohen and Levinthal have studied the role of ‗absorptive capacity‘ (1990)
with respect to technology transfers and the role of innovation & learning in
R&D (1989). Ali and Park (2008) have suggested a ‗Spiral Model‘ of
indigenous technological innovation capabilities that rests on the imitation-
to-innovation approach. Cohen, Goto and others (2002) have compared this
process across two countries – Japan and USA. Here again, while discussing
the role of governments in technology transfer、the focus remains on the
firm-level.
Technology Choice is also a topic that has been widely researched. In a book
edited by Ohkawa, Ranis & Meissner (1985), a number of papers are
presented for a comparative analysis of Japan`s historical development
experience with contemporary developing countries. However, the focus is
mainly on agriculture, textiles, steel and banking.
Odagiri & Goto （1996） studied the import of foreign technology to Japan
and came to the conclusion that the choice of technology cannot be free from
the environment in which it is to be adopted. An efficient production facility
in one country may not work well in another with differences in the quality
of natural resources, climatic conditions, and levels of infrastructure. It can
be inefficient due to differences between relative factor prices, labor systems,
or skills accumulated by the workers. Therefore imported technology,
however modern and mechanically superior, had to be modified and adapted
to local conditions before it could yield the expected contribution. Continuity
with existing technologies played a role because those technologies survived
31
exactly because they fitted local conditions. Some of the local conditions, in
turn, were affected by these technologies. For instance, supply of certain
resources may be strengthened, or transportation and distribution systems
may be established.
3.1.2 India: Role of Governments in Technology Transfer
In the one paper that compares India and Japan, Mody, Mundle and Raj
(1985) compare resource flows for agriculture in both the countries, and
come to the conclusion that savings flows from agriculture made a
significant contribution to industrial growth in Japan, with no
corresponding trends in India.
On the nature or policy action required in LDCs to enable them to make
effective and efficient choices with regard to technology and organization,
Bhatt (1982) notes two approaches to this problem - the approach of the
equilibrium economists through the price mechanism (especially cost-benefit
analysis), and that of the evolutionists through a technology policy.
Bhatt (1975-82) has written extensively about the institutional aspects of
technology policy. In the context of development strategies, he argues that
the technology-gap problem differs from that faced by nineteenth-century
developing countries. Therefore it is not possible to identify specific
technology gaps and devise a suitable technology policy without creating
suitable institutions that can take up this role (Bhatt 1975). He illustrates
this point with the case of Bio-gas Projects in India.
Until the late 1950s, bio-gas plants were promoted as a solution to the
energy and fertilizer shortage problem in rural India. Breakthroughs
achieved by the Indian Institute Science in design-engineering of bio-gas
plants were frittered away by an ―imitative elite‖ who neglected this work in
32
favor of rural electrification on conventional lines and fertilizer production
in large naphtha-based plants.
Bagchi (1982) does a comparison between Japan and India's policies in the
field of import of foreign technology. He links India‘s ‗propensity to
collaborate‘ with foreign firms with its balance of payment crisis in 1957,
and says that while the Japanese allowed free import of foreign technology
and then proceeded to use it intensively, the Indians permitted the import of
foreign technology only in a trickle and then failed to utilize even that
trickle fully. The conclusion is that there has certainly been under-
utilization of imported technology as indeed of local technology, capital and
manpower in India.
On the question of whether the Indian economy can attain a much higher
rate of growth in the long run without running into severe problems of
technological dependence, he comes to the conclusion that they have not
been effective in achieving higher employment or in rendering India
technologically more self-reliant. The sectors he used for comparative study
were public sector (government) enterprises in coal, mining, steel, petroleum,
chemicals & fertilizers, pharmaceuticals, heavy engineering, transportation
equipment (in general - not specific to railways), textiles and consumer
goods.
In the case of India, Bhatt (1975) has compared the roles of private
investment and government initiative with four cases:
1. Baby-food Project: Foreign technology had been available only for
reducing cow`s milk into powder form for baby-foods. Since
production and consumption of buffalo-milk was far higher than
cow`s milk, the research problem was to reduce the curd-tension in
buffalo milk to eliminate the digestive difficulties in babies. This
33
was achieved by a national laboratory (CFTRI) and adopted a
large farmers-cooperative (AMUL)
2. Protein Isolate Project: There was a need to eliminate protein
deficiency in the predominantly vegetarian Indian diet. Since
multinational companies (MNCs) were not attracted by the project
idea, it was CFTRI that developed such foods from plant protiens.
3. Swaraj Tractor Project: For the small farms in India it was
essential to have low-horse-power, multi-purpose tractors but the
MNCs were producing only tractors of 30 h.p. and above. Since
foreign technology (Russian, Czechoslovakian) was found to be too
expensive, the Central Mechanical Engineering Research Institute
(CMERI) developed a design which was successfully adopted by a
Indian manufacturer, Swaraj Tractors (for details, refer Bhatt
1978).
5. Bokaro Steel Plant: The first three integrated steel plants in India
had been built using expensive foreign-licensed technology15 In an
attempt to develop Indian engineering skills, the Finance Ministry
persuaded an eminent scientist of Indian origin, M.N. Dastur to
set-up a steel consultancy firm in India. This company - DasturCo
- was instrumental in setting up the first steel plant based on
Indian design.
Despite inefficiencies in domestic manufacturing, India has still become the
most prominent Third World exporter of technology, offering the greatest
range of fundamental technologies, often in forms well suited to developing
economies (Lall 1982).
15 For instance, consulting, management and designing fees by US Steel Corp was $ 104.4 million in
the 1960s - as much as 15 % of the total plant cost (Bhatt 1975)
34
3.2 Role of Multilateral and Bilateral ODA
The United Nations is perhaps the leading multinational agency advocating
international technology transfers as a means to fight global inequality and
poverty. UNCTAD has been advocating the use of ‗knowledge-aid‘ and aid
concerned with science, technology and innovation (STI) to strengthen
productive capacities in the LDC‘s via ‗technological learning‘ and the
accumulation of technological capabilities (Bell 2007).
The United Nations has also been supporting efforts towards "creating
conditions in developing countries conducive to foreign investment and
building capabilities to absorb and utilize imported technologies" (UNFCCC).
The United Nations Economic and Social Commission for Asia and the
Pacific (UN-ESCAP) has a branch dedicated to the dissemination of
technologies, called the Asian and Pacific Centre for Transfer of Technology
(APCTT). This organization helps member countries in ‗strengthening
capabilities of develop and manage national innovation systems; develop,
transfer, adapt and apply technology; improve the terms of transfer of
technology; and identify and promote the development and transfer of
technologies relevant to the region" (APCTT 2010). Apart from staging
events, this agency acts as a meeting point for technology vendors and
potential customers. Most of the technology on offer, however, are basic ones
for - food processing, paper recycling, etc., while the requests are in the area
of energy, chemicals, agro-forestry etc.,
In the case of bilateral ODA for technology transfer, Lancaster (2000: 77-78)
writes about it in the context of US-aid and calls it a tool with which poor
countries can position themselves to exploit trade, investment and growth
opportunities that globalization offers. According to her, it can also reduce
the long-term costs of resolving global problems, such as developing and
35
disseminating technologies that reduce carbon-producing gases, and to
conserve increasingly scarce water resources.
With respect to India, there is a study by Mehrotra (1990: 88-112) on
technology transfer from the former Soviet Union to India, in the capital
goods sector (heavy electrical, coal-mining machinery, heavy engineering),
intermediate goods (steel and oil industries) and consumer goods sector
(drugs & pharmaceuticals). A report by Ockwell et al. (2007) looks at UK-
India collaboration to identify the barriers to the transfer of low-carbon
energy technology.
In the case of Japanese ODA and technology transfer, Stewart (1985: 5)
notes that the contribution of JICA to economic development and technology
transfer is largely a by-product of its pursuit of two goals: supplies of needed
resources, and overseas market for Japanese firms. A paper by Peter Evans
(1999: 826) titled, ‗Japan‘s Green Aid Plan: The Limits of State-Led
Technology Transfer‘. It examines the effectiveness of MITIs program (1993-
1998) to support the diffusion of clean coal technologies for steel, cement,
petrochemical and other industries with low levels of energy efficiency, and
comes to the conclusion that environmental technology transfer to the
developing countries on preferential terms are less successful than desired.
No studies were found on Japanese technology transfer to India under its
ODA schemes, either for transportation sector in general or for the railways
in particular.
3.3 Literature Gap
Even if technology transfer per se is a much researched topic, literature on
the role of governments in technology transfer – especially those of
developing countries – is however, limited. Available research in this area
36
discusses the role of governments in sectors such as agriculture, textiles,
iron & steel. Sectors such as transportation (road, rail, air) which form a
critical element in the efficiency of national economy, have however, not
been examined so far.
Research on the role of governments is centered mainly around the concept
of the ‗developmental state‘, with its emphasis on the proactive role played
by governments in the absorption of foreign technology, and the ways in
which policy interventions promote certain industries to make them
competitive in the international markets.
Even though ODA is being publicized as one of the means of bridging the
technology-gap that exists between the developed and developing / poor
countries, there seems to be a gap with regard to its actual long term impact.
The role of governments in international technology transfers using ODA, is
one area where there has not been much research, and even more scarce are
studies covering cross country comparison on the utilization of ODA for
technology transfer.
Similarly, technology transfer to India has spawned a large literature on
steel manufacturing and agriculture, but the transport-sector in general,
and railways in particular, have been neglected. This is rather surprising,
considering the fact that Indian Railways make up the second largest
centralized railway system in the world and the largest publicly owned
domestic corporation.
This study proposes to bridge that gap by examining the role of
governments and ODA in technology transfer with respect to the railway
sector in Japan and India.
● ……………Ж ……………●
37
CHAPTER IV
Railways and Path Dependency
4.1 Transportation and Development
The importance of transport infrastructure in effective and sustainable
development has been underscored by all the major ODA-related
organizations, including the UN, World Bank, ADB, as well as bilateral
agencies like JICA, USAID, KFW and DFID. The World Bank (WDR 2005:
133) refers to it as a means of ―overcoming the tyranny of distance‖ and
reckons that a reduction in transportation cost by 10 percent leads to a 20
percent increase in trade.
Transport infrastructure includes inland systems (rail, road), shipping and
air-transport infrastructure. While road transport may be ideal for short
distances, railways have long been recognized as a more efficient way of
moving passengers and freight across long distances. According to
Ramanathan (1999: 743), even in developing countries like India, road
transportation in 1993-94 was only 63% as energy efficient compared to rail
transport that year.
In this chapter we examine the evolution of railway systems in India and
Japan to understand the extent to which technology choices lead to long-
term, path dependent consequences.
4.2 Railways in India: Introduction & Development
The railways are a by-product of the industrial revolution that swept
Europe in the early 19th century. In 1825, George Stephenson built the
38
Locomotion for the Stockton and Darlington Railway, north east England,
which was the first public steam railway in the world. By 1845, two
companies, the East Indian Railway Company operating from Calcutta, and
the Great Indian Peninsula Railway (GIPR) operating from Bombay, were
formed. The first train in India was operational on December 22, 1851, used
for the hauling of construction material in Roorkee. A few months later, on
April 16, 1853, the first passenger train between Bori Bunder, Bombay and
Thane covering a distance of 34 km (21 miles) was inaugurated, formally
heralding the birth of railways in India (Macpherson 1955).
In India, the British Colonial administration was quick to realize that
utility of machine that could help overcome the vast distances of the Indian
sub-continent. Macpherson (1955: 178) records that the colonial government
‗frequently showed concern about the need to facilitate the transport of
primary commodities for both the internal and export market. Internally,
salt and coal were the main products which influenced railway construction`.
The railways were invaluable not only in funneling out raw materials, but
also an efficient way to transport large contingents of troops from one region
to another. The latter was especially useful because the British East India
Company had suffered a serious setback to its commercial operations on
account of the Sepoy Mutiny of 1857 and its holding had been taken over by
the British government's ―Raj‖. Substantial funds were invested by British
companies in Indian Railways, reflecting the anticipated economic utility of
this invention. Between 1845 and 1875 it received a sum of GBP 95 million
(Macpherson 1955: 185). Of the GBP 271 million invested in India before
1911, approximately 74% or GBP 200 million, was invested in the Indian
Railways alone (Tomlinson 1979).
Yet the impact of such a vast railway enterprise on the industrialization and
economic growth of the Indian subcontinent was rather insignificant
compared to other nations where the rail-road revolution was central to the
39
modernization and development process (Sethia 1991). Unlike in the United
States, where railroads stimulated the growth of national markets and
industrial concerns, railways in India were introduced by the British as a
commercial enterprise during the age of ―imperialism of free trade‖.
However, the Indian railways were never a free enterprise but remained
subject to governmental control. Railways were the tools for promoting the
economic prosperity of empire and for consolidating the British Raj in India.
It opened the interiors of the subcontinent, not only as important sources of
raw materials but also as markets for British manufactured goods (Sethia
1991).
Since they were instruments for imperial control and for accomplishing
political and economic interests, the introduction of railways in India was
not a response to the local politics or needs but originated from the needs
and interests of several groups in England. This tussle between various
special interest groups and lobbies such as the railway interests, the cotton
interests, and the Peninsular & Oriental (P&O) made it difficult for the
British to have a consistent railway policy for India (ibid). Yet it provided
the British a sound opportunity for investment on which a steady return
was guaranteed at the cost of Indian revenues. There were, of course, hardly
any Indians who could invest in Indian Railways - in 1870 there were only
368 Indian shareholders as against 51,519 British shareholders in Indian
Railways (Rungta 1970: 54).
Tracks constructed in low-profit areas (but strategically important for the
military), had to be cross-subsidized. The unprofitable lines - those earning
less than 5% in the years 1879 to 1900 and requiring a subsidy - accounted
in 1900 for 70% of the total length of track and 43% of the earnings of the
entire railway system. Also, Indians paid more to ship goods by rail than did
customers in those countries which competed directly with India in
international trade. For example, the cost per ton km to ship grain for
40
export was, in absolute terms, 40-60% lower in the US than in India at the
prevailing exchange rates (Kumar 1983: 752).
All the equipment, machinery, materials and technology were imported
from Britain, while British engineers and technicians supervised the
railway construction in India. The railway workshops in India could repair
and maintain rolling stock and assemble carriages16 but were not allowed to
construct locomotives or build any but the smallest and most crude prime
movers (ibid. 599). While Indian Railways became instrumental to the
growth of the British industry, they did not stimulate industrial
development in India. For instance, even though the Byculla-based
(Bombay) locomotive industry was producing comparable locomotives at
comparable rates, it could not sell its locomotives because the railway
companies preferred to buy British. Consequently more than one-fifth of the
locomotives produced in Britain found a ready market in India (ibid.: 749).
Since it was the colonial government that chose the routes of the railways,
the gauge to be adopted for their construction, and the territories to be
traversed by them, many lines were constructed as un-remunerative
military lines that further drained the Indian revenues (Sethia 1991).
A process of standardization had been initiated long before independence in
1947. Under this, the broad-gauge had been standardized as early as 1856
(Macgeorge 1894: 318-319). From 1903, the Indian Railways Conference
Association controlled rates and charges, procedures for inter-line transfers
and numerous other matters, including dimensions for standard design of
16 Carriages are also called ―Coaches‖ or ―Cars‖. It is a piece of railway rolling stock that is
designed to carry passengers or goods. Until the 1920s coaches were made of wood and iron-
beams which made them not only heavy but also proved fatal in case of accident or fire. The
first steel coaches were introduced in the 1930s and due to their relative lightness, trains
were able to haul many more coaches then before.
41
wagons. A committee of the British Engineering Standards Organization
(BESA, later British Standards Institute) designed a series of standard
locomotives in 1903, 1906 and 1910. In 1925, the Railway Board set up a
series of standing committees on standards for locomotives, carriages and
wagons, tracks, signaling and bridges. Standardization of design served
British manufacturers as well as local operators. It permitted simplified
tooling, as well as repair and maintenance of pooled rolling stock (Walker
1987: 104).
Thus we see that even though railways were commissioned in India very
early – just within a few years of their introduction in England, its
development was deliberately stunted to serve the interests of the colonial
administration. Most of the critical hardware – locomotives, signaling and
communications equipment – were imported from Britain; standards and
designs were set at BESA, London and domestic manufacture of locomotives
was actively discouraged. As a result, at the time of India‘s independence in
1947, Indian Railways continued to be completely dependent on British
manufacturers until steps were taken to diversify and indigenize domestic
production capabilities.
4.3 Railways in Japan: Introduction and Development
In Japan, the first railway, connecting Shinagawa (in Tokyo) with
Yokohama, was inaugurated in 1870. The technology was entirely British:
the line, which had been built under the supervision of an Englishman,
Edmund Morel; it was operated by British drivers and fuelled by Welsh coal.
Morel, reputedly because of his earlier experience of railway construction
across similar mountainous terrain in New Zealand, built the railway to the
economic narrow gauge of 3 ft 6 in. (1,067 mm), a gauge which is still used
today on the so-called conventional lines (i.e. non-Shinkansen lines) in
Japan (Smith 2003: 224)
42
The Tokyo to Yokohama line was only 29 km long. By 1877 Japan had a
total of merely fifty miles (80 km), compared with 16,000 km in France and
nearly 24,000 km in Britain. After these small and late beginnings, the
railway slowly spread to the outlying areas of Japan. The island of
Hokkaido adopted American railway technology, and on this northern
outpost coal became the most important freight. On the main island of
Honshu, the trunk lines spread from the Tokyo centre. The main trunk
route, the approximately 500 km long Tokaido, was completed in 1889,
linking Tokyo to the port of Kobe, via Yokohama, Nagoya, Kyoto and
Osaka.
Although the earliest railways were state-promoted and state-owned,
privately managed lines played an important role in the expansion of the
network. In 1906 the government, recognizing the strategic military
importance of the railways, nationalized the private main lines, and the
newly created Japanese Imperial Railway then had a network of just over
7,000 km. Some local lines remained in private ownership and others were
built later to serve the rapidly expanding urban areas, particularly around
Tokyo, Nagoya and Osaka in the 1920s and 1930s (Smith 2003: 224).
The early decades of the twentieth century saw a continuing expansion of
the railway network without serious competition from the automobile until
as late as the 1960s. Some limited electric traction was introduced as early
as 1895, but its use was largely confined to urban railways (the subway in
Tokyo first operated in 1927) until much later. Although limited numbers
of diesel trains were operated, indigenous coal was Japan‘s main power
source and steam traction was dominant well into the early 1970‘s (ibid.).
One interesting technical feature which is often overlooked was the
introduction of automatic couplers – developed indigenously - on all freight
43
wagons in 1926, well in advance of similar moves in Europe. This change
increased both efficiency and safety, the latter having become the
hallmark of Japanese railway operations in the last few decades. The
Tsubame (‗Swallow‘) expresses, introduced in 1930, reduced the time from
Tokyo to Kobe to nine hours – a significant reduction from the twenty hours
required in 1889 and fifteen in 1903. Infrastructure improvements
included the completion of double track over the Tokaido route in 1913 and
the opening of the 7.8 km long Tanna tunnel in 1934, which shortened the
route by omitting a detour round the mountains between Atami and
Numazu (Smith 2003: 225)
Throughout this period, more and more traffic was carried along this vital
artery. The need for expansion of capacity was recognized, and work
actually started on a new standard-gauge (4 ft 81⁄2 in. or 1,435 mm) line in
1940. A key part of the motivation behind this new line was to link Tokyo
with the western part of Japan, which, in turn, linked up with Japanese-
held territory in China and Korea. It was planned that fast electric trains,
already nicknamed Dangan Ressha (Bullet Trains), would speed along this
line towards Kyushu and perhaps even through an undersea tunnel to the
Asian mainland via the Korean peninsula. Although the undersea
Kanmon tunnel was completed between Honshu and Kyushu in 1942, thus
directly linking two of Japan‘s four main islands for the first time, the
Pacific war had started in 1941 and it was to be some time before the
railway network could be further expanded.
Following the war, Japanese Government Railways (JGR) was among the
many national institutions restructured by SCAP. It was now called
Japanese National Railways (JNR) and was initially meant to provide for
the welfare of the general public and the Railway Nationalization Act (RNA)
denoted railways as the ‗property of the nation‘. JNR was a special public
corporation (Tokushu houjin). In 1964, coinciding with the launch of the
44
Shinkansen trains (discussed in detail in Chapter V), and development of
auto-transport, JNR suffered a budget deficit of Yen 20 billion, which kept
growing annually till reserves were completely used by 1966. In 1971 – huge
op loss of Yen 234 billion, and after the after the oil-crisis deficits of over
Yen 1 trillion were regular. These deficit financed by borrowing, long-term
liabilities mounted and National deficit was attributed to three K‘s:
Kokutetsu (JNR), Kempo (Healthcare system) and Kome (Food management
law) (Ishikawa & Matsuhide 1998).
By 1981 JNR was unable fund its operating costs from its revenue from
fares. At this time it was also one of the largest employers in Japan with
over 400,000 employees. When restructuring became inevitable, JNR was
privatized in 1987 and split into over ten different regional companies: East
Japan JR, Tokai JR, West Japan JR, Hokkaido JR, Shikoku JR, Kyushu JR,
JR Freight, Shinkansen Holding Corporation, JNR Settlement Corporation
and a few foundations etc., Within three years of privatization the newly
formed JR companies were able to record better-than-predicted results but
this has been during the period of economic prosperity. Today the JR
Railways network still remains the leader in urban and inter-city
transportation (Ishikawa & Matsuhide 1998).
The development of railways in Japan followed a path that was quite
different from colonial India. Here, British engineers and technicians were
recruited by the Meiji administration in the 1870s and put in leadership
positions until local talent could replace them. But even after Japanese
engineers and managers had assumed full control of the national railway
network, the standards set by Morel continued to be adopted for all
subsequent urban railway networks – especially the narrow gauge tracks
and rolling stock specifications continued to be built on British standards
well until the Shinkansen‘s were introduced in 1964.
45
4.4 Path Dependency and Railways
In the case of India and Japan, we see the two different ―tracks‖ or ways in
which path dependence evolves. Under a colonial administration Indian
Railways standards set by designers in London (eg., the ―broad gauge‖
system in 1856), formed the basis of all the subsequent railway development.
Changing the system would have required enormous investments which a
newly independent nation could not have afforded in 1947, so it continued to
be the basis on which the entire railway system developed. Japan, on the
other hand, independently adopted a ―narrow gauge‖ system but having
escaped colonization, it not only evolved its own set of rolling stock,
equipment and infrastructure, but also changed established standards when
it was deemed necessary (as in the Shinkansen lines). Both countries were,
at the outset, passive recipients of prevailing rail technology but Japan went
on to avoid dependence by extensively modifying and adapting standard
technologies and associated administrative systems (the nationalized JNR
to privatized JR) as per its own needs and requirements.
As an independent nation, USA too was able to avoid the negative effects of
path dependence and evolve its own standards. As noted by Puffert (2000:
934), the case of railway track gauge offers an opportunity to test and add
empirical content to the theoretical arguments that are made regarding
path dependence. He studies the standardization of track gauge on North
American Railways (1830-1890) and noted that even though there were nine
distinct common-gauge regions by the 1860s, growing demand for
interregional traffic and increasing cooperation among railways yielded
incentives to resolve this diversity, and the specific regional pattern of
gauges led to selection of 4'8.5 " as the continental standard. This was
possible despite the fact that "there is no reason to see 4'8.5" as technically
or economically optimal for railways, whether given the operating conditions
of 1830, 1890, or 2000" (ibid. 956).
46
In most former colonies, however, the standards set by the colonial
administration remained unchanged. The French, for instance, built a
railroad network of 1,172 km in what in now North Vietnam. This system -
the Hanoi-Nam Wuan railroad - consisting of single-track meter-gauge lines,
went on to link up with the Chinese railroad system and provide an
overland route to the Soviet Union and Eastern Europe, thus connecting
North Vietnam with the other countries of the communist block. The French
role was later taken over by the Soviet Union and China which supplied
North Vietnam with technical assistance and equipment for its development
program and with the capital goods that it is unable to produce (Shabad
1958: 39).
The most recent cases of standard-setting driven by the self-interest of
foreign powers, is perhaps the role of Chinese government in developing
railway networks in Africa. Naim (2007) notes the example of Nigeria,
which after being refused a $ 5 million loan by the World Bank, went on to
sign a deal with China, under which the Chinese government offered
Nigeria $9 billion to rebuild the entire rail network with out any pre-
conditions —no bids, no conditions, and no need to reform. He refers to this
as Rouge Aid - development assistance that is non-democratic in origin and
nontransparent in practice; one that is driven by availability of money, the
need to access raw materials and international politics.
Thus we see that the tendency among colonial powers to foster a dependent
relationship using railways as a tool is now being adopted by donor
countries using ODA. In the next chapter we will examine specific cases of
rail-related technology transfer using ODA, and compare it with private-
licensing of railway technology, to determine if ODA is an effective tool for
international technology transfers.
● ……………Ж ……………●
47
CHAPTER-V
Comparative Analysis of International Technology Transfers:
ODA vs. Private Licensing
In this chapter, we examine four cases of international technology transfers
– two each for ODA and private licensing, for India and Japan respectively.
In the first two cases would look at how both countries used ODA as a
facilitator for technology transfer, while in the remaining two, we would
examine the role of private sector technology-licensing agreements as a tool
for technology transfer.
The two cases of ODA for railway development are the World Bank funded
New Tokaido Line Project, 1961 (hereinafter referred by its popular name -
the Shinkansen Project), and the JBIC-funded Delhi Metro Project, 1997.
For comparing the use of private licensing for railway technology transfer,
we consider two cases- again one each from India and Japan respectively.
The first case is the collaboration between Hiroshima Electric Railway
Company (HERC) and Siemens Aktiengesellschaft (Siemens AG), Germany,
and the second case is the collaboration between Indian Railways and
Schweiserische Wagons- und Aufzügefabrik Aktiengesellschaft (Swiss Car &
Elevator Company, hereinafter referred to as SWS).
For each of the above cases, we will first examine the background and
circumstances under which the project was conceived; the respective terms
and conditions; technology transfer component in the project
implementation and project impact. ODA and private-licensing projects
would be then analyzed separately and then compared to determine the
degree of path dependency and effectiveness in technology transfers.
48
5.1 Technology Transfer Through ODA
5.1.1 Case 1: The World Bank ODA & Japan‘s Shinkansen Project
5.1.1.1 Background
As discussed in the previous section (4.3), Japan had already developed a
competent and technologically independent railway industry by the 1930s.
Next to the military, the national railways had the largest number of
engineers (Shima 1994: 45) who not only ran a complex railway network,
but also designed & fabricated standard automobiles. The network of
national railways and its subsidiaries ran the length of the country, as well
colonial railway lines in Taiwan, Korea, and the then worlds fastest freight
railways – the Mantetsu – in occupied Manchuria, China.
Japan had already created a rail network of over 7000 km. before the start
of the Pacific war in 1941. Following the nationalization of railways in 1906,
and the creation of Japanese Government Railways (JGR, also known as
"Ministry Lines" - 省線, shōsen), the Tokaido route had been upgraded to a
double-track (1913); automatic couplers were introduced on all freight
wagons (1926); the Tsubame (Swallow) expresses were introduced (1930s)
between Tokyo and Kobe, reducing the travel-time to nine hours; the 7.8km
long Tanna tunnel was completed (1934), and plans were already afoot to
create Dagan Ressha (Bullet Trains) linking Japan to its territories in Korea
(Smith 2003: 225).
During the course of World War II, extensive Allied bombing raids had all
but destroyed Japans railway infrastructure. Over sixty cities had been
seriously damaged and the railways had been crippled by shortages in
equipment and spares. During the occupation period (1945-52), the railways
began to operate and rebuild the only available form of mass-transportation
available to the vast majority of its war-ravaged population. Overcrowding
49
was the norm; there was an unprecedented level of labor unrest, which
occasionally led to acts of sabotage on the railway, strikes were common and
railway accidents17 frequent (Shima 1994: 45; Smith 2003: 225).
While Europe was being rebuilt under the Marshall Plan18 (US$12.7 billion
1948-51), Asia also received US$ 5.9 billion (June 1945 – 1953) by way of
grants, credits and technical assistance from the US government (US-BoC
1954). Of this, Japan received US$ 2.44 billion – more than 41% of the total
assistance that came into Asia. The total US assistance in terms of constant
2005 dollars during the period FY-1946-52 amounted to US$ 15.15 billion
(Serafino et al. 2006).
Table 5.1: Aid from USA During the Post-war Period (1945-1953 in US$ million)
Country /
Region
Total
post-war
Aid
July
1945
-Dec.
1946
1947 1948 1949 1950 1951 1952 1953
Western
Europe &
Dependencies
24,759 4,310 4,458 3,966 4,344 2,826 2,302 1,593 960
Asia &
Pacific
5,904 1,058 914 827 901 607 622 478 497
Japan 2,444 388 487 423 550 247 279 64 5
India 255 20 0 0 0 1 108 94 37
Source: US Department of Census, Statistical Abstract 1954 (Table 1075)
The aforesaid aid flow was part of with the SCAP 19 policy of ―Long-
17 The Hachiko Line Derailment on 25 Feb., 1947, for instance, resulted in 184 deaths and
495 injuries. This accident led JGR to persuade SCAP approval in replacing about 3000
wooden cars with steel ones within a few years (Shima 1997)
18 Marshall Plan – officially known as the European Recovery Program (ERP), was an aid
program implemented by USA to facilitate the post-war recovery of Europe. For details
please see ―The Marshall Plan – America, Britain and the Reconstruction of Europe (1947-
52)‖ by Michael Hogal (1987, Cambridge University Press)
19 The Supreme Command for Allied Powers (SCAP) was headed by Gen. McArthur. It was
50
Termism‖ in Japan which aimed at a long-term reorganization of the nation
around capital accumulation and industrial reinvestment.
Despite the extensive damage to infrastructure and hardware, the ‗software‘
had remained more or less intact: most of the key railway personnel –
planners, managers, engineers, technicians, had survived (Shima 1994: 45).
As the economy recovered, teams of highly skilled engineers were drawn
into the railway industry. These included not only men who had been
involved with Japan‘s first super-express Mantetsu trains in Manchuria
(Smith 2003: 226) but also former aircraft designers and engineers. Since
the U.S occupation strictly prohibited all types of research and development
in aeronautics and aircraft production, many of them moved to the railway
industry in 1945-1952. As a result, the Shinkansen project came to
represent cross-disciplinary technology transfer and a ‗successful marriage
between aeronautical and railroad technology‘ (Nishiyama 2003: 306).
By 1949 the State-owned railway system became Japanese National
Railways (JNR), with over 21,000 km of route, whilst the remaining, largely
urban, private railways ran over some 5,500 km. JNR was founded as a
public corporation, but in reality there was always some ambiguity in its
relationship with the government and it was by no means fully autonomous.
Modernization and improvement were slow at first but rapidly gathered
pace as the economy expanded during the Korean War (1950–53) (Smith
2003: 225).
By the early 1950s the Tokaido line20 had enhanced its position as the main
artery of Japan. Although it was only 3% of the railway system by length, it
a coalition of countries that occupied Japan in the wake of her defeat in World War -II
20 The Tokaido Line (556km) runs along the main industrial corridor of Japan. Although it comprises
only 16 % of Japan‘s land area, even in the 1960s, it contains 40 % of her population and accounted for
70 % of her industrial production. (IBRD 1961a)
51
carried 24% of JNRs passenger traffic and 23% of its freight, and the rate of
growth was higher than any other line in the country (Smith 2003: 225).
Lack of adequate transport facilities was becoming an obstacle to the
general economic development of the region. Highways in the area were
continually congested and the existing narrow gauge railway was operating
at maximum capacity with as many as 186 passenger trains and 124 freight
trains traversing the double-track section each day (WB 2003). Such high
utilization of track could scarcely be exceeded, due to the necessary mixture
of fast passenger and slower freight trains on the same right-of-way. The
other transport artery, a national highway, was almost continuously
congested. (IBRD 1961a: 4).
This set the stage for the creation of a new trunk line (shin-kan-sen 新幹線),
as a long-term solution to the growing traffic bottlenecks in the Tokaido
region.
5.1.1.2 Conception of the Shinkansen Project
From the very outset, the main driving force behind the Shinkansen project
was a bureaucrat named Shinji Sogo, the fourth president (1955-1963) of
JNR. Sogo had joined the Railway Agency in 1909, and served as the
Director of South Manchuria Railways (Mantetsu) before heading JNR. He,
in turn, persuaded an experienced railway designer and engineer, Hideo
Shima, to join the Shinkansen project as its Chief Engineer. (Shima 1994:
45; Hood 2007)
Japanese National railways set up a team to begin the feasibility study for
the project on May 10, 1956. The project was authorized on December 19,
1958 (WB 2003). Based on studies presented at the Railway Technical
Research Institute (RTRI21) in 1957, the idea was to create a trunk line
21 Details of RTRI can be accessed at its website - http://www.rtri.or.jp/
52
based on completely new technology and standards for both rolling stock
and non-rolling stock, far in advance of traditional railway concepts. A
commission under the Minister of Transport was instituted which proposed
the building of a new Tokaido line of standard gauge, and in December 1958
the government accepted the plans, aiming at completion within the
remarkably short period of five years. During this time, many new
technologies were to be developed, simultaneously with major civil
engineering work, including the building of the Shin-Tanna tunnel, which,
at a length of 7,950m, was to unblock a major bottleneck of the whole line,
and reduce the route-length by about 60 km.(Smith 2003: 227).
5.1.1.3 ODA: Terms & Conditions
The Shinkansen Project – officially known as the ‗New Tokaido Railway
Line Project‘ was the 24th project undertaken under the aegis of World Bank
(World Bank 2010). Earlier ODA loans had been directed towards building
industrial capacity (especially power & steel) through the Japan
Development Bank (JDB). In the 1960s, WB had turned its focus on
transport infrastructure sector, starting with the road sector, and then
moving to railways with the Shinkansen Project.
Negotiations were conducted directly with JNR, and not through Japan
Development Bank (JDB). An appraisal mission visited Japan in May/June
1960, followed by negotiations at Washington in January 196122 (WB-IBRD
Annual Report 1961). Initially, WB was not convinced about the need for
adopting the standard gauge, the plan for a wide turning radius and
expressed its concern that the new project may be a burden to JNR which
was still under reconstruction. These objections were withdrawn in the
22 The appraisal mission was headed by JNR‘s Executive Director, Kanemitsu and the
subsequent one (1961) by Hideo Nagashima. The WB appraisal mission was headed by Van
Helden (WB 1991: 73)
53
subsequent discussions (WB 1991: 73).
The agreed terms & conditions of the ODA project were as follows:
Table 5.2: Description of Loan No. P-246 – New Tokaido Railway Line
Borrower Japanese National Railways
Guarantor Government of Japan
Loan Agreement 2 May, 1961*
Amount The equivalent of various currencies of $80million
(exchange rate 1 US$ = ¥ 360)
26.43% of total project cost**
Amortization 20 years, including a grace-period of 3.5 years. 34
semi-annual installments from 15 Nov., 1964 to 15
May 1981
Interest Rate 5.75% (IBRD 1961c: 2)
Commitment Charge ¾ of 1% per annum
Payment dates 15 May and 15 Nov.
Role of WB Experts Project monitoring, advisory services
Special Clauses ―No experimental techniques; guarantee by GoJ; top
priority for project completion‖
Sources - IBRD 1961a, IBRD 1961b, IBRD 1961c, WB Annual Reports (1963-65), WB (1991: 74)
* Note: The signatories were- Asakai (Japanese ambassador to USA), Black (WB President) and S.
Sogo
** Note: Later, by 1963, it was clear that the total project cost estimates had been kept deliberately
low to obtain necessary political clearances.
In addition to the Loan and Guarantee agreements in the usual form, the
Loan Agreements had two extra clauses – (1) that the borrower shall given
priority to the project in its construction program (Section 5.07), and (2) a
guarantee of performance and an undertaking by the Guarantor
(Government of Japan) to make arrangements for the funds necessary for
the completion of the project (Sections 2.02 and 3.01) (IBRD 1961a: 2). Both
these clauses apparently, had been Sogo‘s in order to ensure domestic
political commitment for the Shinkansen project (Shima 1994: 48).
Even though the World Bank terms and conditions clearly excluded
experimental techniques in the project, Sogo was able to persuade the World
Bank that the Shinkansen would include no experimental features, but was
54
an integration of proven advanced technologies achieved under an existing
JNR Safety First programme (Smith 2003: 227).
In reality, however, the whole venture was a big, risky experiment. This was
the first time that trains were being introduced with radically different
designs, for high speeds that had not been attained in any country, let alone
one that was prone to frequent earthquakes and typhoons. The project
essentially rested on the self-confidence of JNR, its railway engineers and
local equipment suppliers. Until 1961 JNR did not invite tenders from
foreign contractors or suppliers but the Bank obtained a letter from the
Railways in which it agreed to have international competitive bidding for
this project (IBRD 1961: c ii), for purchase of materials exceeding ¥ 200
million, rolling stock purchases over ¥ 500 million, and for civil work
contracts exceeding ¥ 500 million (WB 1991: 72).
Figure 1: The Original Alignment of WB-funded Shinkansen Line
Source: IBRD(a) 1961
55
World Bank Loan number P-246 for ¥ 28, 800 million ($80 million) was
approved on May 1, 1961. This ODA component was to supplement a much
larger, continuing railway development program to be completed during the
five-year period from 1961/62 to 1965/66 at estimated to cost of ¥ 801,5O
million, or US$2,226 million equivalent. Thus the share of World Bank ODA
for the Shinkansen project was 26.43%.
The stated purpose of the loan was to assist the financing of the new $548
million New Tokaido Line, a 311-mile express railway serving the cities of
Tokyo, Yokohama, Nagoya, Kyoto and Osaka, providing what was at the
time the fastest train service in the world. The project was in addition to a
much larger continuing railway development program (WB 2003).
5.1.1.4 Project Implementation & Technology Transfer
The New Tokaido Line was designed as an electrified system with standard
gauge double track throughout. The track was composed of long welded rails,
each measuring about a mile in length and linked together by expansion
joints with double elastic fastenings on pre-stressed concrete ties. The
curves of the track were designed to be gentle, permitting the maintenance
of higher speeds (WB 2003).
Five companies were involved in building the Shinkansen trains - Nippon
Sharyo, Hitachi, Kawasaki Heavy Industry (KHI), Kinki Sharyo, and Tokyu
Car Corporation (Freemark 2008). Three technology elements were critical
for the success of the Shinkansen project - dedicated high-quality tracks,
minimal curves along the route and the special rolling-stock. Unlike
conventional railways, the Shinkansen trains did not have dedicated
engines - they relied on ―distributed power‖ with the motors and axles all
along the train, rather than concentrated at either end. Distributed power
evens out the weight along the train, reducing track wear and tear. It also
56
reduces the risk of the train slipping and improves reliability (Wright 2009).
Figure 2: Shinkansen ―0‖ Series, launched in 1964
Source: Wikipedia Commons (GNU Free Documentation License)
RTRI-JNR also conducted extensive research to create lightweight bogies.
Bodies were made of aluminum rather than steel; special welding
techniques were used to remove the need for heavy filler in the body shell;
and axles had been strengthened by metallurgical treatments to avoid the
need for extra weight (Wright 2009). To ensure maximum safety, a
considerable amount of testing and research was done by RTRI-JNR before
the New Tokaido Line began operation. Several different prototypes of rail
cars were designed and tested and considerable time was spent in
researching the best possible design of track (WB 2003). It is worth noting
here that none of this R&D and testing involved any of the leading Western
railroad companies.
The following is a summary of technologies and their sources with respect to
JNRs New Tokaido Line Project:
57
Table 5.3: Railway Technology & its Source for the Shinkansen Project
Hardware /
Software
Categories Technology Components Source
Rolling Stock
Rail Cars
Construction, materials,
control, dynamics,
inspection &
maintenance
RTRI (JNR), Japan
Passenger
Sections
Construction, materials,
control, dynamics,
inspection &
maintenance
RTRI (JNR), Japan
Non-Rolling Stock
Track
Construction
Track technology.
Overhead wires, tunnels,
bridges, viaducts,
signaling, power supply,
workshops & bases,
disaster prevention
RTRI (JNR), Japan
Steel for bridges
supplied by Danto
Shipruz, France
Operating
System
Rolling stock control
technology, weather
information,
transportation plans,
safety / accident
prevention, power supply
plans, noise & vibration
measures
RTRI (JNR), Japan
Passenger
Utilization
Section
Construction technology,
station design, disaster
prevention/response,
space utilization,
ticketing, passenger
facilities, business inside
stations, reservation
systems
Manix 23 , Canada
(civil works
consultant for
bridges)
WB Consultants:
Modern
management
systems approach,
ticket pricing
Source: WB-IBRD Annual Reports (1961-1965), JR-RTRI 2010, WB-1991, WB-2003, MLIT-2009
Other key technology features included: the use of 25 kV AC power to
23 Manix withdrew after being awarded the contract, and JNR, with WB consent, appointed
a Japanese company instead. (WB 1991: 72)
58
overcome the low power limitation of the 1,500 V DC24 supply used on the
existing electrified narrow-gauge system, the abolition of line-side signals,
with all necessary indications for the driver inside the cab, the adoption of a
comprehensive system of Automatic Train Protection, the use of
distributed power along the axles of the train to reduce the heavy axle
loads under single power cars and new types of track, which in many
places ran along considerable lengths of low viaduct. (Smith 2003: 227).
Since most of the aforementioned technology had been developed by RTRI-
JNR, specifically tailored for domestic needs, inputs from the World Bank
were largely limited to provision of funds and advise on project management.
Shinji Sogo, the president of JNR, insisted on adopting the standard gauge
despite much opposition. His reason was that he firmly believed the
international standard gauge was indispensable to radical improvement of
Japanese railways (Smith 2003: 227). The rolling stock on the new line
consisted of multiple unit electric rail cars of lightweight construction and
equipped with a motor on each axle. To ensure safety and riding comfort, the
cars were provided with devices to eliminate vibration, noise and heat
transfer. The cars were air tight to protect the passengers from unpleasant
effects when entering tunnels at high speeds or passing another train going
in the opposite direction (WB 2003).
Some of the new technologies introduced in the ODA project were:
Table 5.4: Summary of Innovative Technology Introduced in the Shinkansen Project
New Technology Introduced Purpose
1 25kV AC power Lower transmission loss of power
2 Standard gauge Stability at high-speeds
3 Dispersion of engine power
across bogies (EMUs)
Faster acceleration and braking
4 Aerodynamic design To facilitate high speeds
5 Welded rails Smoother movement at high speeds
24 For electric railway systems, Alternating Current (AC) is considered advantageous over
Direct Current (DC) mainly because of lower transmission losses across distances.
59
6 Block signaling
More efficient traffic management
7 Gradient Controls gentle curves, even gradient, extensive tunneling
allowed radii to be eased to a minimum of 4 km
instead of the 2.5 km on the earlier line
8 Management Techniques cost-benefit analysis, rational project analysis,
ticketing, perspective planning
The passenger trains could be made up to a maximum of sixteen units with
a seating capacity of 1,250. For the initial service, the trains traveled
between Tokyo and Osaka every thirty minutes beginning at 6:00AM. Half
of the trains were Super Expresses named Hikari with stops at Nagoya and
Kyoto. The other trains stop at all the larger stations between Osaka and
Tokyo (WB 2003). The initial plan was to use the new lines to transfer
passengers during the daytime and freight during the night (WB-IBRD
1961c: 12), but subsequently, freight was completely excluded from the
Shinkansen lines.
Japan Transport Consultants Inc. (Nippon Kotsu Gijitsu K.K or JTC) won
the international competitive bid for design and supervision of the
Shinkansen project. Incidentally, this company had been founded just after
WB was approached for funds, in 1958, by a former president of JNR –M.
Fujii (JTC 2010). Strong influence of JTC as an ―independent, external‖
consultant can be gauged from the fact that this big-budget Shinkansen
project was the first assignment of this new consulting company.
Mieko Nishimizu, Vice President (SAR) of the World Bank, in an interview
(WB 2003) recalled the self-confidence of Japanese engineers. Her maternal
uncle, a railway engineer assigned to the Shinkansen project, defended
Nishimizu‘s decision to leave a professorship to join the World Bank by
telling the family members:
You are very crazy if you think that the World Bank is a money lender.
60
Don‘t you know that the World Bank was a great teacher to our
country?…
"Of course, engineering we knew everything about and we didn‘t have
to learn from the World Bank engineers. But they taught us how to
think about the project, they taught us about rational project analysis,
they taught us cost-benefit analysis, they taught us how to think about
pricing train tickets in the context of the Shinkansen Project, and they
taught us how to think, most of all, about a railway line project, not
just in the context of the railway system of our country, but in the
context of the entire transport system of Japan.‖
According to Nishimizu, the lessons learnt from the World Bank consultants
have been used in all subsequent projects -
"..the things we learnt from the great teacher called the World Bank
have, in fact, been applied to every single project that we executed and
to every single marginal extension of the Bullet Train system."
The first portion of the construction began on April 20, 1959. By October
1961 the route between Tokyo and Osaka was finalized. Service on the line
began October 1, 1961 (WB 2003), and the whole section was opened to open
to traffic on 1 October 1964.
5.1.1.5 Project Impact
With the successful implementation of the Shinkansen project, Japanese
National Railway (JNR) came to be regarded as the pinnacle of Japan‘s civil
engineering pyramid. Contractors who took part in JNR construction
projects were said to have demonstrated 10% or even 20% higher
performance than required by contract specifications (Griffy-Brown et al,
61
2000).
Ridership on the Tokaido Shinkansen built up rapidly after its opening. The
hundred million-th passenger was recorded shortly after construction work
on the westward extension to Kobe and Okayama began in March 1966. The
terrain on this section is such that 58% of the route is on viaducts or bridges
and 35% is in tunnels. This naturally increased the construction cost, but
allowed radii to be eased to a minimum of 4 km instead of the 2.5 km on the
earlier line. The maximum speed could therefore be raised to 260 km hr
shortly after the line opened in March 1972 (Smith 2003: 228).
In 1969 a National Development Plan had been approved by the Cabinet,
which included the construction of a Shinkansen network of 7,200 km. As
the years passed, the plan began to turn into reality. By 1982 the Tokoku
and Joetsu services started operation (Smith 2003: 228). The World Bank
loan was repaid in 1982, eighteen years after the opening of the line (WB
2010).
However, the actual budget for construction turned out nearly double the
budget approved by the Cabinet at ¥ 380 billion. Sogo was charged with
misleading the government and had to resign just before the completion of
the project. Neither the ‘political father‘ of the Shinkansen, Sogo, nor its
‗technical father‘, Shima, attended the formal opening in 1964. (Smith 2003:
227). Controversy surrounding Sogo‘s role did not deter his successors from
expanding the Shinkansen network. Between 1969 and 1999 the passengers
on the Tokaido Shinkansen increased from 66 million to 130 million per
year, i.e., doubled (Smith 2003, 231). More than 3200 of ―0‖ Series
Shinkansen cars were built between 1963 and 1986, operating on the
original Tokaido Shinkansen in 12-car and later 16-car formations, which
remained in service until December 2009 (RGI 2009).
During this period (1969-1999), Japan‘s GDP trebled. Many graphs have
62
been produced showing the close linkage of transport-usage with GDP, and
the government has always held the view that transport infrastructure is an
enabler of economic growth. Studies conducted by the government revealed
that the shift from traffic from road & conventional rail had resulted in the
annual time saving of approximately 400 million hours. In GDP per capita
terms, this time-savings was valued at approximately ¥500 billion per year
(Smith 2003: 231). Recognizing the economic value of this railway
‗experiment‘, the Government of Japan went on to enact a law – the
Shinkansen Railway Development Act (1970), which, among other things,
laid guidelines on ―matters related to development of technologies and
facilities and train vehicles‖ (Article I.iii, SDA Act, 1970). This set the
standards for competition among private manufacturers and encouraged
further development and expansion of the Shinkansen lines.
The World Bank too began to advertise the Shinkansen project as a ―model‖,
showcasing the positive, long-term impact of its loan operations, and
portrayed on brochures and posters with the caption, ―Japan is World
Bank‘s Example of Success‖.
63
Figure 3: Shinkansen Poster at World Bank, Tokyo Office
Source: Author
It is important to note that all the key decisions for the Shinkansen –
technical as well as financial – were taken by Japanese experts and
managers who had a clear understanding of their own strengths and
capabilities. The level of Japanese ownership and emotional capital vested
in this project has been rightly summed up on the commemorative plaque at
Tokyo Central station, which calls the project a ‗Product of the wisdom and
effort of the Japanese people‘
5.1.1.6 Summary
At the time when Japan applied for World Bank ODA assistance for the
64
Shinkansen project, JNR was still in the process of reconstructing a railway
network that had been crippled during the war. Yet, it managed to convince
World Bank that it had the expertise and the institutional support structure
for executing a complex project utilizing path-breaking technologies.
Organizations like JR and RTRI used ODA funds primarily to finance the
construction while depending on in-house technical expertise to develop the
innovations required for the high-speed railway corridor project.
In the WB-funded Shinkansen project, most of the technology transfer was
domestic in nature – from national research laboratories to Japanese
companies. The role of World Bank experts was restricted to advice on
management and operational efficiency in terms of ticketing and national-
level planning.
Thus, for this ODA project, the Government of Japan played a proactive role
as Initiator, by approaching WB with a request to fund a part of its
Shinkansen project, and as an active Coordinator, by clarifying at each
stage, what form of interventions were needed or not needed from foreign
experts. With respect to technology transfer, the government stayed clear of
any external pressures for the purchase of existing, proven technology that
had been tried and tested in Western countries, and instead, reposed their
faith in a set of experimental technologies developed by Japanese engineers
themselves. It was therefore a case of First Degree Path Dependency where
the information was perfect and did not result in any loss of efficiency.
65
5.1.2 Case 2: JBIC/JICA25 ODA and Delhi Metro Project in India
5.1.2.1 Background
The first Metro 26 system in India was introduced in Kolkata (formerly
Calcutta), with Soviet collaboration in the 1980s but it was 22 years before
the project got completed (Bloomberg 2007), at a cost that was way beyond
budget estimates. This experience seriously undermined the confidence of
the government and people in Metro systems. India thus lagged behind the
rest of the world in the field of urban public transport, until 1987 when a
government-sponsored study recommended the metro system as an answer
to the mounting traffic congestion problems of New Delhi city (Sreedharan
1987: 30).
5.1.2.2 Conception of Delhi Metro
Apart from being the capital city of India, New Delhi was beset with a
number of problems that made it necessary for the government to invest in
a reliable urban transportation system. Delhi‘s population increased from
6.20 million in 1981 to reach 13.70 million in 2001 (representing a
population density of 9,340 people/sq. km). Because the number of buses and
private vehicles had also increased, the average vehicle speed on city streets
is 13 km/h. Economic loss due to traffic congestion as well as health damage
due to vehicle emissions such as air and noise pollution were becoming
25 The loan operations of Japan Bank for International Cooperation (JBIC) were merged
into Japan International Cooperation Agency (JICA) with effect from October 2008.
26 A ‗Metro‘ is an electrically powered train operating on reserved tracks in urban areas. Due to the
rising cost of building such reserved tracks overland, in 1863, the first underground railway was
constructed between Paddington and Farringdon (6km) in London. Since then about 120 cities in
Europe, Asia and America have built their own Metro systems.
66
increasingly critical (JBIC 2006).
This urban sprawl had more than vehicles on the road (over 4 million) than
the other three Indian metropolises Mumbai, Kolkata and Chennai
combined. Motorized vehicles – buses, cars, scooters, motorcycles and others
– were responsible for 70% of the total air pollution (MoEF 1998). A
comprehensive traffic and transportation study completed in 1990
highlighted the urgent need for a rail-based transit system comprising a
network of underground, elevated and surface corridors to meet the traffic
demand projected for 2021.
Figure 4: Delhi Metro – A Train Set in Operation
Source: Wikipedia Commons (GNU Free Documentation License)
It was decided by the Government of India, that in order to avoid the time
and cost overruns experienced by Calcutta Metro, the Delhi Metro project,
from the outset, would be planned, executed and operated by a new
autonomous entity. So a new legislation was enacted by the Indian
parliament - the Metro Railways (Operation and Maintenance) Ordinance
2002 – which ensured autonomy of operation & maintenance, for Delhi
Metro. This Presidential Ordinance replaced the Metro Railways
67
(Construction of Works) 1978 Act (HT 2002). A new, autonomous agency was
created - the Delhi Metro Rail Corporation (DMRC) - which was
independent, not only of the behemoth, Indian Railways, but also outside
the control of the Transport Department of the Delhi state government.
DMRC was formed as a 50:50 joint venture between the Delhi state and
central governments. Since India‘s domestic expertise in building and
managing underground metro-railway systems was limited, the government
also decided to acquire it under an ODA loan package offered by the
Government of Japan. This package was preferred over loans from
multilateral agencies like World Bank or ADB because it offered a ‗general
untied‘, without any explicit conditions at competitive rates27 (Interview
2010a). The Japan Bank for International Cooperation (JBIC), on behalf of
Government of Japan, thus emerged as the main source of project funds
with the balance coming from the Indian central government and Delhi‘s
state government.
As per this plan, 64% of the project costs were to be provided as ODA28, in
the form of concessional loans from JBIC; 28% of the project costs was
financed through equal equity contributions provided by Central and Delhi
state governments; both levels of government agreed to finance a further 5%
through an interest-free subordinate loan to cover land acquisition, and the
27 It is important to note that ODA loans differ in their terms and conditions (T&C). World Bank
offers two sets of T&C under IBRD and IDA respectively with the latter always having lower interest
rates and longer repayment periods. Similarly, ADB offers the equivalent of IDA rates through its
ADF loans which are drawn from its member-contributions‘ corpus, while the ―normal‖ ADB loans
have higher rates and shorter tenures, since they are based on bonds. In this case, JBIC offered T&C
that was similar to IDA and ADF, without any stringent pre-conditions typical of WB or ADB loans.
28 As per the initial agreement, while both partners were to pitch in equity funds worth Rs 1,458
Crore, the major chunk of Rs. 3,402 Crore was to be a loan from Japan (HT 2002).
68
final 3% of costs were to be raised through property development
(Siemiatycki 2006: 280).
The Delhi Metro was planned and developed as a technology exchange,
whereby international firms with expertise in the development of metro
railways were contracted to aid with specific tasks such as general planning,
station design, construction management and rolling stock production.
These international firms from countries such as Japan, Korea, France and
the USA, were required to partner and transfer their expertise to Indian
firms, so that indigenous companies could take a lead role in the later stages
of Delhi Metro project. It was also planned that the indigenous firms would
later be able to disseminate their knowledge to other cities in India that
opted to develop metro railways (Siemiatycki 2006: 280).
Figure 5: Layout of Delhi Metro Routes in Phase-I and Phase-II
Source: DMRC
In terms of technical parameters, Delhi Metro was to use the unique ‗broad-
gauge‘ system being used in Indian Railways. At 1,676mm (5 ft. 6 inches),
69
this was wider than the standard gauge (1,435 mm or 4ft. 8.5 inches), and
allowed not only a better stability with its lower centre of gravity, but also
wider bogies with higher passenger capacity (RGI 2007).
5.1.2.3 ODA: Terms & Conditions
The Delhi Metro project was the 131st project implemented using Japanese
ODA, and the 5th such loan for the Railway sector (see Annex I). The loan
agreement was signed on 25th February 1997, according to which, it was to
be a long-term loan for a period of 30 years, with a grace period of 10 years.
After the completion of the grace-period (usually, the project construction
period), government of India was to repay the principal and interest at the
rate of 2.3% per annum.
Table 5.5: Description of JBIC Loan for Delhi Mass Rapid Transport System
Loan Details Terms & Conditions
Borrower Delhi Metro Rail Corporation (DMRC)
Guarantor Government of India
Amount US $ 3 billion# - equivalent of ¥ 253.434 billion
Phase-I: ¥ 162.751 billion (64% of project cost)
Phase-II (2006-2011) - ¥ 90.673 billion (48 % of cost)
Amortization 30 years, with a 10 year ‗grace-period‘
Interest Rate 2.3 % - 1.2% per annum
Commitment Charge Nil (This project was in the ―General Untied‖ category)
Payment dates Bi-annual
Role of JBIC/JICA
Experts
Recommendation of consultants, Project monitoring,
advisory services
Source – JBIC 2002
# Rate – ¥ 100=1.2 US$
For Phase-I, JBIC lent ¥ 162.751 billion to DMRC, covering 64% of the
project cost. This loan was divided into six tranches for which the interest
rate ranged from 1.3% to 2.3%, reflecting the variations in the world
currency markets.
70
Details of Phase-I and Phase-II of JBIC‘s ODA funding for the Delhi Metro
project was as follows, during the ten-year period 1997-2008:
Table 5.6: JBIC/JICA Funding Plan– Delhi Metro Phase-I and Phase-II
Source: JICA homepage- http://www.jica.go.jp
The repayment period was 40 years inclusive of the 10 year grace-period. As
per the standard JBIC procedures, DMRC was expected to appoint a general
consultant for the project, and the payment for the consultant was included
in the loan tranche‘s numbered I, V and VI. A consortium led by a Japanese
major, Pacific Consultants International (PCI) was appointed as the main
consultant to the mega project (HT 2002)
5.1.2.4 Project Implementation & Technology Transfer
In 1998, after nearly 30 years of planning (details in Annex II), construction
began for the Delhi Metro. Each loan-tranche for the Delhi Metro project
was sliced into tranches with each trance being further subdivided into
71
contracts for specific components. Bidders had to go through a three stage
process:
1. Expression of Interest (EoI) – in response to a public advertisement
2. Submission of Technical Bids
3. Submission of Financial Bids (by those who cleared the technical
bids)
Any contract which was valued over Rs.50 Crore‘s (approx. US$ 11million),
was to go through an additional level of approvals, both by DMRC as well as
JBIC/JICA. This was to ensure that the contract was awarded to the most
competent supplier.
Implementation of an urban, underground railway project, using the latest
available technology needed a set of skills and expertise that was not
available within the Indian Railways. These technology lacunae requiring
foreign expertise was divided into four broad categories – electrical
engineering, signal & telecom, civil works and architecture. Since the new
lines were to run exclusively on electric traction, electrical engineering
included not only the design and testing of rolling stock, but also power
supply and over-head electrical (OHE) systems. While Indian engineers
were familiar with electric traction, it was in specialized civil works and
architecture that India lacked any expertise – especially in tunneling29, and
design of underground passenger utilities.
Therefore a number of tasks were contracted by DMRC to foreign
consultants, some of which are listed below (Interview DMRC 2010b):
29 In the first Indian metro-rail project at Kolkata, only ‗cut & cover‘ method was used and
this had proved to be extremely disruptive in densely populated areas. Delhi Metro avoided
using this method and used Tunnel Boring Machines (TBMs) for the first time.
72
ELECTRICAL ENGINEERING
Rolling Stock:
1. Review of design, tendering, contract management for procurement of Rolling
Stock
2. Monitoring the production schedule of trains to match the requirement of
rolling stock required for opening of different Lines/sections of Delhi Metro
3. Testing & Commissioning of Rolling Stock
4. Planning, construction & commissioning of Depots for Rolling Stock
Maintenance
5. Performance monitoring of Rolling Stock under revenue service
6. Planning and arranging spares for rolling stock maintenance
7. Monitoring the required modifications in the Rolling Stock to eliminate
equipments failures observed so far
Traction & Auxiliary Power Supply:
1. Planning for Power Supply Installations - Receiving cum Traction Sub-stations,
Auxiliary Sub-stations, Switching Stations, High voltage cabling network
2. Traction Power Control system
3. 25 KV AC Overhead Traction Equipment
4. Coordination for sanctioning of Power Supply System from CMRS
5. Planning & commissioning of over-head electricals (OHE) Maintenance Depots
Air Conditioning & Ventilation System:
1. Planning, Review of design, Tendering, Contract management, Construction
and commissioning of the following : Station ventilation, air conditioning &
Smoke extraction system; Tunnel ventilation system; Testing ,installation and
commissioning of the system; Coordination for sanctioning of VAC System from
CMRS
Electrical & Mechanical System and Environment Control System:
1. Planning, Construction and commissioning of Power Supply Arrangement at
Stations, U.P.Ss, Lighting, Fans, Pumping System etc.
2. Building Management System
3. Fire Detection & Fighting System
4. Emergency and rescue arrangement
73
SIGNAL & TELECOM and AUTOMATIC FARE COLLECTION
1. Signaling/Train Control Systems - automatic train operation, protection,
supervision; Solid State Interlocking; Point Machines / Signals /Track Circuits
2. Telecommunication Systems - Fiber Optic system : SDH/Access, Passenger
Information Display System, NP-SCADA system
3. Automatic Fare Collection System comprising of: Automatic Fare Collection
Gates, Ticket Office Machines, Pre and Post Installation, commissioning and
integration tests, Planning and execution of ERP system and office telecom
network and office computers
CIVIL (WORKS) - Geotechnical investigation, tunneling work, launching girders,
alignment, exposing and stressing
CIVIL (DESIGN) - Preparations of design criteria and standard drawing of Civil
Engineering structures to be followed in DMRC.
ARCHITECTURE - Architectural planning and design of all stations on Delhi Metro
As per JBIC guidelines, DMRC appointed a general consultant to coordinate
the aforementioned inputs required for the Delhi Metro project. DMRC
awarded a general consultancy contract for Phase-I to a consortium of
Pacific Consultants International (Japan), Parsons Brinckerhoff
International, Japan International Technical Services (Japan), Tonichi
Engineering Consultants (Japan) and RITES (India). Later, on 21 August
2006, the contract for Phase-II also went to the same PCI-led consortium.
Their task was to ‗assist‘ DMRC with project planning and quality
assurance, with a focus on underground construction, signaling, telecoms,
fare-collection, safety and rolling stock (RGI 2006).
The following table lists the technologies used for the Delhi Metro project
and its sources:
74
Table 5.7: Railway Technology & its Sources for the Delhi Metro Project
Hardware /
Software
Categories Technology
Components
Source
Rolling Stock
Rail Cars
Construction,
materials, control,
dynamics, inspection
& maintenance
PCI (Japan) Consortium
Bombardier-Germany, CAF-
Spain
Passenger
Sections
Construction,
materials, control,
dynamics, inspection
& maintenance
PCI (Japan) Consortium
Mitsubishi Electric Corp.
(Melco), Mitsubishi Corp.
Hyundai-Rotem, BEML (60
cars, Phase-I; 616 for Phase-
II)
Non-Rolling
Stock
Track
Construction
Track technology.
Overhead wires,
tunnels, bridges,
viaducts, signaling,
power supply,
workshops & bases,
disaster prevention
PCI (Japan) Consortium
Robbins EPBM 30 (USA) –
tunneling technology
Systra, France (Bridges)
Bombardier Transportation
(Signaling - ‗CityFlo 350‘
System)
RailOne GmBH, Germany
(RHEDA-2000 ballastless
track technology) for Airport
Express Link, Phase-II
Operating
System
Rolling stock control
technology, weather
information,
transportation plans,
safety / accident
prevention, power
supply plans, noise &
vibration measures
PCI (Japan) Consortium
Alstom (France) (ATC)
Siemens Transportation
Systems (automatic train
control)
Passenger
Utilization
Section
Construction
technology, station
design, disaster
prevention/response,
space utilization,
ticketing, passenger
facilities, business
inside stations,
reservation systems
PCI (Japan) Consortium
Dalal Scott MacDonald PL
(Eg., Mandi House Station)
Sources: RGI (2005, 2007), Railway-Technology.com (2010), WebIndia123 (2009), Bloomberg (2007),
Robbins (2006), Staff Reporter (2009)
Some of the foreign firms involved: IJM Infra PL (Malaysia), Shanghai Urban Construction Group;
30 EPBM stands for Earth Pressure Balance Machines, a technology that used in Tunnel
Boring machines (TBMs). For the Delhi Metro project, these machines are being leased by
the contractors CES-Shoma Enterprises
75
Indian Firms: IDEB Projects, and SimplexInfra PL.
India‘s main R&D agency for railways – the RDSO31 – did not have a
significant role in the development of equipment for Delhi Metro – its role
was limited to conducting trails in two stages. The first train was built and
dispatched from the Changwon factory in South Korea in July 2002, and
flagged off in its ceremonial trail-run on 17 September 2002 by the then
Deputy Prime Minister, L.K. Advani.
Table 5.8: Summary of New Technology Introduced in the Delhi Metro Project
New Technology Introduced Purpose
1 Head Hardened Rails Durability – ability to withstand high-traffic
load operations
2 Modern passengers cars/coaches Greater passenger comfort, safety
3 New-type Bridges (extra-dosed)
and Viaducts
Non-disruptive construction over operational
railway lines and vehicular traffic
4 Signaling Efficient train operation and control
5 Centralized Automatic Train
Control (CATC)*
Cost and energy efficient train operations,
accident prevention
6 Regenerative Braking# Recycling heat generated during braking into
electrical energy for reuse in train operations
7 Automatic Ticketing** Enables faster flow of passengers through the
gates
Source: Sreedharan (2004), DMRC (2010), #PTI (2009), **ToI (2009)
* CATC includes three components - automatic train operation (ATO), automatic train protection
(ATP) and automatic train signaling (ATS) systems.
The Rs.105.6 billion (US$ 2.3 billion) Phase-I was completed in December
2005, on budget and three years ahead of schedule (RTI 2006, Bloomberg
2007). Similarly the 55km length of Phase-II was completed at the cost of
Rs.83.3 billion, well in time for the 2010 Commonwealth Games in Delhi.
For Phase-II, DMRC placed orders for 616 coaches, of which 424 were
standard gauge and 192, broad gauge. The standard-gauge coaches are
31 Research Design and Standards Organization (RDSO), Lucknow, is the main R&D agency for
Indian Railways. Details at URL - http://www.rdso.indianrailways.gov.in/
76
made by a consortium of Mitsubishi Corp, Mitsubishi Electric Corp.,
ROTEM and BEML. All 48 train-sets have four coaches each. The first
train-sets were manufactured in Korea and the rest assembled /
manufactured at BEMLs factory in Bangalore. Broad gauge coaches were
manufactured by Bombardier Transportation of Germany of which the first
37 train-sets of four coaches and 46 train-sets of six coaches. The first nine
train sets were manufactured in Germany but in 2009, Bombardier started
manufacturing metro cars (Movia brand) at Savli, Gujarat. The first 36 of
424 Movia cars ordered by Delhi Metro were built in Germany, the rest at
Savli, (RGI 2009, ENS 2009)
It is worth noting here that until March 2009, Delhi Metro insisted on
having only broad gauge lines (1676mm or 5 ft. 6 inches) but subsequently,
three lines of Phase-II were built on standard gauge (1435mm or 4 ft. 8.5
inches) - Inderlok-Mundka, Central Secretariat-Badarpur and the Airport
Express Line. In all 48-standard gauge trains were purchased from a
consortium of Mitsubishi Corp., ROTEM, Mitsubishi Electric Corporation
and Bharat Earth Movers Ltd (BEML). While 46 trains have four coaches
each, two trains have six coaches each (WebIndia 2009). This change over
was attributed by the DMRC spokesperson, to ‗advise‘ from the general
consultants (Interview DMRC 2010b), and has been referred to as India‘s
―first step to integrate with international Metro track technology‖ (DMRC
2009).
The following table provides and overview of the project implemented under
Phase-I and Phase-II –
77
Table 5.9: Overview of Delhi Metro Project - Phase I & II
PHASE-I
Lines Length
(Kms)
No. of
Stations
Line No.1- Shahdara-Tri Nagar-Rithala 22.06 18
Line No.2- Vishwa Vidyalaya-Central
Secretariat (2 Jul., 2005)
10.84 10
Line No.3- Indraprastha-Barakhamba Road-
Dwarka Sub City (1 April 2006)
32 31
Sub-Total 65.00 59
PHASE-II
Shahdara – Dilshad Garden 3.09 3
Indraprastha – Noida Sector 32 City Centre 15.07 11
Yamuna Bank – Anand Vihar ISBT 6.17 5
Vishwavidyalaya – Jahangir Puri 6.36 5
Inderlok – Kirti Nagar -Mundka 18.46 15
Central Secretariat – HUDA City Centre 27.45 19
Dwarka Sector 9 to Dwarka Sector 21 2.76 2
Airport Express Line 22.70 6
Anand Vihar – KB Vaishali 2.57 2
Central Secretariat – Badarpur 20.04 15
Sub-Total 124.63 83
Source: DMRC Homepage URL - http://www.delhimetrorail.com/project_updates.aspx
By 1997, the Metro network spreads across 65.1 km in New Delhi and
connected some of its most populated areas. Of this, 47.43 km are elevated,
13.17 km are underground and 4.5 km are at ground level. It is the largest
urban intervention in the transportation sector in India since Independence
and has completely changed the way the city travels (Sreedharan 1997).
In the subsequent project – Phase-II (2006-2011) – JBIC‘s Yen-loan portion
was much lower at ¥ 90.673 billion (US$ 1.084 billion32) and it applied to
civil engineering works for the underground portions; electrical, signaling,
and telecommunication-related matters for all lines; rolling stock
procurement; and consulting services. This represented 49.19% of the total
¥ 188,377 billion (US$ 2.253 billion) cost (Staff Reporter 2010).
32 At current value: 1 US$ = ¥ 83.587
78
Much of the credit for the efficient implementation of the Delhi Metro
project has been attributed to its managing director, Dr. E. Sreedharan
(Economist 2006, Polgreen 2010). According to Bloomberg (2007),
Sreedharan did three things to get the project done:
a. First, with infrastructure projects languishing all over India for
lack of funds, he went overseas, tapping the Japan Bank of
International Cooperation for loans to cover 60% of the cost. By
comparison, it took the city of Kolkata 22 years to build its own
metro because of a paucity of funds.
b. Second, he scoured the world for top companies with extensive
experience in the field. Pacific Consultants International from
Japan advised on the engineering matters, Koreas Rotem and
Japans Mitsubishi supplied the initial shipment of coaches,
while France‘s Alstom led the consortium responsible for the
design of the automatic train control system.
c. Most importantly, Sreedharan got the various Indian
government agencies to work together. Initially there was a
disagreement between the Delhi Metro Corp. and its partner,
Indian Railways, about what kind of tracks to use. But after
intense discussion, the contractors came up with a plan to
assemble the metro carriages in Bangalore and roll them on
Indian Railways track straight to the New Delhi metro.
By 2005, an average of 500,000 commuters traveled underground daily
instead of driving their own cars and scooters or packing into buses. As a
result, authorities say, pollution levels in Delhi are down by a third, and
they see no need to add to the city‘s fleet of 7,500 buses. Congestion has
eased to where those buses now travel an average of 11 mph. That‘s up from
around 8 mph before the metro was built—a serious achievement in a city
with world-class traffic jams (Bloomberg 2007).
79
The first section of the Delhi Metro was opened to the public on 25
December 2002. Over the next four years, newer sections were regularly
opened. The last section of Phase I was opened on 11 November 2006 and
today this phase is fully operational. Even though the whole scope of the
work was changed from the original proposal, DMRC was able to complete
Phase I in seven years and nine months as opposed to the projected ten-year
period. (Sreedharan 1997: 31).
During the construction period, DMRC made extensive use of Tunnel Boring
Machines (both conventional and earth pressure-balance type) (RGI 2004),
which minimized traffic the traffic disruptions from cut-and-cover that had
been the cause of much angst in the Calcutta Metro project. Delhi Metro
also created the first extra-dosed bridge in India – a cross between a girder
and a cable-stayed design. This 93 meter span bridge was built over a five-
track electrified main line operated by Indian Railways at Pragati Maidan,
without interrupting IRs regular services. It was designed by Systra-France
(RGI 2007).
Towards the end of the project, BEML-India emerged as a manufacturer of
metro train-sets. Starting with the manufacture of 60 train-sets for Phase-I
as a part of the Rotem-Mitsubishi consortium, it went on to supply 196
stainless-steel cars for Phase-II. In 2008, it secured an order worth Rs.520
billion to design and build eight low-cost cars which were used to lengthen
trains from four to six cars. It also won an Rs.16.7 billion order to supply
150 cars for the Bangalore Metro (RGI 2009).
5.1.2.5 Project Impact
As a solution to urban transportation problems, Delhi Metro has been
widely hailed as a success (Economist 2006). DMRC‘s Annual Report (2009)
80
notes that 0.85 million passengers use the metro services every day. It
claims to have prevented 28,800 tons of carbon dioxide from being emitted
into the atmosphere every year; more than 700 lives saved which otherwise
would have been lost due to fatal road accidents, as also the benefit of fewer
vehicles plying of Delhi roads, resulting in lower fuel consumption and
lesser import of fossil fuel (DMRC 2009).
It has added to the confidence of DMRC in managing large scale projects. It
is now confident of completing Phase-III by 2016 and Phase-IV would bring
the network to 250km by 2021. DMRC Managing Director told the Metro
Rail conference on March 28, 2006, that he would eventually like to see the
metro reach 400 route-km, putting a station within 500m of every one of
Delhi‘s 13.8 million inhabitants (RGI 2006).
According to Siemiatycki (2006: 286), the new lines has become a tangible
symbol of hope for the local populace that technology can alleviate may of
the challenges associated with a rapidly growing population, such as
provision of efficient urban mobility, sanitary living conditions, employment
opportunity and security. At the same time the project is also being cited as
an example of opportunism permeating development. ODA financing from
JBIC has accounted for 64% of the total development costs. While this
finance has come under the auspice that the soft loan assistance package is
part of a critical investment in the social sector of Delhi, it has been
accompanied by a series of contracts going to Japanese firms. This has given
the Japanese authorities added incentive to make the deal, knowing that
not only did the Indian government guarantee the loan, but its own
domestic firms would have a chance to obtain some financial benefits
(Siemiatycki 2006: 289).
It is also important to note here that introduction of new technologies by
Delhi Metro did not necessarily mean that they has been successfully learnt
81
and assimilated by DMRC. During the years (1998-2009) that this author33
handled the Delhi Metro project at JICA India Office, DMRC had repeatedly
sought Japanese government assistance for solving technical problems
confronting Delhi Metro operation & maintenance.
Consider, for instance, the case of ―head-hardened rails‖ (HHR) – tracks
made of specially treated steel, which makes them withstand intensive,
supra-normal usage in urban railway systems. Delhi Metro had imported
HHR‘s for Phase-I and Phase-II lines but within three years of operation, in
2006, micro-cracks were detected on some stretches, during regular
inspections. Having failed to obtain a solution from the national rail R&D
facility at RDSO Lucknow, the problem was referred to the original
Japanese supplier who quoted a price which DMRC found to be too high.
Since DMRC was barely making an operational profit from the metro
operation, it could not afford the quoted price, and requested JBIC/JICA to
send railway-exports to solve this problem. The Japanese Ministry of Land
Infrastructure and Transport (MLIT) was, however, unable to find a suitable
expert in government service, and said that there was no alternative for
DMRC, but to buy the concerned Japanese company on a commercial basis.
Ultimately, DMRC portrayed a worst-case scenario of a fatal accident,
leading to bad publicity for JBIC/JICA (while the loan project was still on),
and this helped in MLIT in ―persuading‖ the technology supplier to offer a
―special discount‖ rate to DMRC. Subsequently, retired engineers from
Tokyo Metro were also sent to DMRC as ‗JICA Experts‘.
Such methods can only be effective as long as the technology recipient has
some form of leverage in the form of future contracts for the technology
33 The author worked with JICA India Office during the period 1997-2009. Technical
Cooperation for the Delhi Metro was one of the projects he handled as a Senior
Development Specialist (Infrastructure and Private Sector Development).
82
supplier. But as soon as the ODA project is completed, this leverage
vanishes and there is no alternative but to be dependent on the technology
supplier – at least until in-house expertise rises to face such technical
challenges.
According to Anuj Dayal, spokesperson of DMRC, ―Indigenization is one of
the main tools to control cost escalations in technologically complicated
projects such as the Metro. In case of Delhi Metro also, utmost efforts have
been made to ensure that more and more equipments and technologies are
indigenized so that costs can be effectively controlled‖.
Asked how much these efforts have yielded, the reply was more circumspect
- ―In the rolling stock sector, for the second phase of Metros expansion, 131
new train sets were ordered. For the manufacturing and assembly of trains,
two new factories have set up at Sangli near Vadodara and Bangalore.
While Bombardier transportation has built the Gujarat factory, the one in
Bangalore has been built by public sector major Bharat Earth Movers
Limited (BEML). The establishment of these factories will help in bringing
down the manufacturing and procurement cost of the trains‖ (Interview –
DMRC 2010).
In other words, out of the five technology categories listed in Table 5.7,
DMRC has been able to obtain indigenously produced machinery only for
one component in rolling stock – manufacturing and assembly of passenger
cars. For the rest of the hardware, software and technology, Delhi Metro
remains completely dependent on foreign suppliers. This was therefore a
case of Third Degree Path Dependency where the project was sensitive to
initial conditions, leading to a ―lock-in‖ to a set of technologies owned by
foreign companies.
83
5.1.2.6 Summary
Even though India started its first Metro construction project with foreign
collaboration (USSR) in the 1973 at Kolkata, its main agency for railway
related research – the RDSO did not attempt developing the necessary
technology on its own. As a result the subsequent Delhi Metro project had to
be completely dependent on foreign technology, purchased under the
guidance of consultants appointed under the JBIC ODA loan project.
In this project even though the government was an Initiator in the sense
that it sought foreign assistance for technology transfer, it proved to be a
poor Coordinator or Catalyzer by failing to take adequate measures to
develop indigenous capabilities for R&D in metro rail construction. About 25
years after the earlier metro project, it still sought the transfer of existing,
proven technology, rather than sharpening its own domestic capabilities by
attempting to modify or adapt existing technologies to suit its own special
requirements.
Thus, in terms of technology transfer, adaptation and indigenization, the
impact of Delhi Metro has been rather limited. Unlike in earlier railway
projects, the project continues to be heavily dependent on foreign
consultants and manufacturers for all the mission critical aspects of the
railway network.
5.1.3 Case Comparison:Technology Transfer in ODA for Public Sector
Projects
Even though railways were introduced much earlier in India compared to
Japan, the habits of dependence acquired during the colonial period seem to
have stifled institutional R&D capabilities in India. By the 1950s, both
84
India and Japan had created specialized research bodies – the RDSO and
RTRI respectively - for railway development. While the Japanese
government reposed great trust in RTRI‘s capabilities to come up with
breakthrough innovations and technology, the RDSO developed more as a
passive agency for testing and certification rather than technology
development. As a result, the government of India continued to be
dependent on foreign technology suppliers for its second urban metro rail
project. It was content in its role as an agency that tested and ‗approved‘
imported equipment and material for ‗Indian running conditions‘ (RDSO
2007).
In the two specific projects being compared here, the Shinkansen project
received ODA from the World Bank for a long-distance trunk-line, while
Delhi Metro received Japanese ODA for an urban metro rail system. Critical
technologies for the Shinkansen project – train design, engineering,
signaling & control and civil works – were all developed, tested and
implemented by Japanese companies, while for Delhi Metro, all critical
technologies were purchased off-the-shelf from foreign companies. The
system continues to be dependent on these companies for critical elements
like such as urban-tunneling, HDD tracks, and signaling & control.
As in the case of the Shinkansen project, the government of India decided
that the Delhi Metro project had to be planned, executed and operated as a
new entity which was not tied down by ‗old habits‘. Therefore a new,
autonomous agency was created - the Delhi Metro Rail Corporation (DMRC)
- which was independent, not only of the behemoth, Indian Railways, but
also outside the control of the Transport Department of the Delhi state
government. However, unlike the Shinkansen Project, Indian domestic
expertise in building and managing underground metro-railway systems
was limited. India therefore used the ODA loan to import much of the
technology and hardware required for the project. Also, the quantum of ODA
85
loan in the project was much higher at 64%, giving the financers a strong
voice in the choice of consultants and technology for the project.
Japan with its long experience and expertise in the railway sector had built
the necessary institutional capacity in JNR and RTRI, not only to be self-
sufficient in R&D for making path-breaking technical innovations, but also
to have the autonomy in deciding what it would accept under the World
Bank ODA package. In the Shinkansen project, the role of foreign experts
was restricted peripheral technological inputs such as ticketing systems and
management consultancy. In the Delhi Metro project, however, it was the
foreign consultants who played a key role in the selection and installation of
core technological inputs such as rolling stock, electrical and signaling
equipment.
While the Shinkansen project incorporated many new - and even partially
experimental - technologies using World Bank, and used the expertise thus
gained to start similar high-speed lines along other routes, the Delhi Metro
project used only ―proven‖ technologies off the shelf. The only equipment
that is being indigenously manufactured in India for the Delhi Metro project
is one component of the rolling stock – passenger-cars. By all accounts, this
would hardly qualify as critical high-tech compared to, say, urban rail-
tunneling, HHD tracks, traction technology, automatic train control or
signaling equipment – for most of which, DMRC continues to be dependent
on foreign suppliers – especially on companies based in Japan.
Therefore one can conclude that while DMRC ―owns‖ and operates the
hardware for the new metro system, it is yet to fully understand or
assimilate the technology behind it. Success of the Shinkansen led to the
rapid development of the JNR network, with the introduction of faster and
more efficient trains and expansion of the high-speed network. Delhi Metro
on the other hand, had only spawned a metro consultancy market where
86
DMRC continues to depend on the technology suppliers – especially
Japanese companies – for solving critical technical issues.
5.2 Technology Transfer through Private Licensing
5.2.1 Case 3: Private Licensing in Japan - Hiroshima LRT and
Siemens AG
5.2.1.1 Background
Hiroshima Electric Railway Co., Ltd. (HERC or 広島電鉄株式会社 ,
Hiroshima Dentetsu Kabushiki-Kaisha) is a Japanese transportation
company established on June 18, 1910, that operates streetcars and buses in
and around Hiroshima city. It is also known as ―Hiroden‖ (広電) for short.
The company‘s rolling stock includes an eclectic range of trams
manufactured from across Japan and Europe, earning it the nickname "The
Moving Streetcar Museum".
Hiroshima is a city of 1.1 million inhabitants, and the capital of Hiroshima
prefecture. It has a long history as a prominent port city in Western Japan
and is has long been a centre for international trade and commerce, as well
as a military arsenal and munitions centre, which is perhaps one of the
reasons why, during World War II, this city was targeted first by extensive
incendiary bombing, followed by the first atomic bombing in August 1945.
Hiroshima‘s tramways were one of the first public services that were
restored in a city devastated by the atomic bomb. Unlike in other Japanese
cities, the tramway services operated by HERC Hiroshima, is a vital urban
infrastructure mainly because it connects the city centre to the JR railways
stations, located several kilometers away at Nishi-Hiroshima, Yokogawa and
Hiroshima Central.
87
HERC is also the largest of Japan‘s 19 light rail operators. It alone runs 266
cars out of a national total of around 1000 (RGI 2005). The total length of
the network today is 34.9 km, of which 16.1 km (the section between Nishi-
Hiroshima and Miyajimaguchi) is classified as railway with speeds up to 70
km/h. In the city, trams do not run faster than 40 km/h. All lines are
standard gauge (1,435 mm), and are electrified at 600 V DC In 2000, a total
of 60 million people used the trams. There are three depots: Eba (terminus
of routes 8 and 6), Senda (also headquarters of Hiroden; on routes 1 and 3
south of Kamiyacho) and Arate along the Miyajima line.
The Hiroshima city tramway network consists of seven lines:
Line No. Route
1 Hiroshima station - Kamiyacho - Hiroshima-ko
2 Hiroshima station - Nishi-Hiroshima - Miyajimaguchi
3 Nishi-Hiroshima - Kamiyacho - Hiroshima-ko
5 Hiroshima station - Hiroshima-ko
6 Hiroshima station - Kamiyacho - Eba
7 Yokogawa - Eba
8 Hakushima - Hatchobori
Source: RGI 2005
In keeping with Hiroshima city‘s ‗moving streetcar museum‘34 concept, the
seven lines listed above include not only the old-fashioned single-car
tramway systems but also the latest Light Rail Transits (LRTs) which is
essentially railways for short and intermediate distances (Uneda et al. 2003).
34 The city is considered a treasure-trove of old and new streetcars
88
Figure 6: Evolution of Rail Streetcars in Hiroshima (1925-1991)
Description Image
Car #101, originally built in 1925
(at Eba depot)
Car #238, built in 1927. Imported from Hanover
in Germany(at Fukuromachi)
Car #772, built in 1950 and brought in from
Osaka (Senda depot)
Hitachi 3006, built in 1964 with articulated
cars (Fukuromachi)
Car #713 - Hiroshima's original, built by Alna-
Koki in 1985 (at Enkobashi)
Car #804, built by Alna-Koki in 1991 built (at
Chuden-mae tram stop)
Source: Mayer 2004
From the time the tramways were introduced in 1912 the vehicles were
single cars, about 13 meters long – much like buses – until 1998 when the
first ―articulated‖ or interlinked, multiple-cars were introduced to increase
The following table gives a summary of tramcars used by HERC during the
past twenty five years:
89
Table 5.10: Summary of car-designs used by HERC (1985-present)
700-Type 1985 Alna Sharyo Single-unit cars
800-Type 1983-97 Alna Sharyo Single-unit cars
3500-Type 1980 Kawasaki Heavy Ind. Single-unit cars
3700-Type 1984-87 Alna Sharyo Single-unit cars
3800-Type 1987-89 Alna Sharyo Single-unit cars
3900-Type 1990-96 Alna Sharyo Single-unit cars
3950-Type 1997-98 Alna Sharyo Single-unit cars
Combino 1998-2002 Siemens (Germany) Articulated LF-LRV
GreenMover Max 2002- J-Tram Consortium Articulated LF-LRV
Source: Hattori (2004), Siemens (2002), Hoshi (2006)
Many trams were built for Hiroshima, but many others came second-hand
from other systems when they closed. Series 570 and 1150 is from Kobe, 750
and 900 from Osaka, 1900 from Kyoto, and 3000 from Fukuoka. Hiroshima
has a number of relatively new trams, built since 1982, which are series 700,
750 and 800, and also articulated cars 3700 to 3950 (Mayer 2004).
Since the 1980s, modular design has become the de facto standard for LRT
manufacturers worldwide (RGI 2005). There are several suppliers for LRT
streetcars that can be expanded in a modular form:
Table 5.11: Leading LRT Tram Manufacturers
Manufacturer Light Rail Transit (LRT) Tram Model
1 Alstom, France Citadis
2 Breda, Italy Sirio
3 Bombardier, Canada Flexity
4 Inekon, Czech Republic Astra (with Skoda, Sweden); Trio (with Ostrava)
5 J-Tram, Japan GreenMover Max
6 Seimens AG, Germany Combino, Ultra Low Floor Combino
Source: RGI 2005
Some of the above models are also called ‗100% low floor ‘ or LF-LRTs. This
is because they are quite unlike conventional cars where the platform level
is below the level of the floor of passenger cars, forcing passengers to step up
from platform level - leading to slower boarding times, which are important
for high-capacity systems. The low floor enables easy access for bicycles,
90
strollers, suitcases, wheelchairs and those with disabilities, which is
otherwise not always convenient or even possible with the traditional
passenger car design.
5.2.1.2 Technology Licensing Agreement
Japan has had a long association with German streetcar manufacturers.
Tram type-238 was built in 1928 for the German city of Hanover and is now
used for special services (and sometimes on route 9) in Hiroshima, the sister
city of Hanover (HCPRO 2010). Two other used German trams are from
Dortmund, 76 and 77 (built 1959), which came to Hiroshima in the 1980s.
Originally it was planned to buy more used German trams to replace older
Japanese rolling stock, but the performance of the trains was not as
expected, and with additional air-conditioning devices on the roof the cars
became rather instable. As or 2004, 76 German-built cars were still
serviceable for charters (Mayer 2004). So when HERC wanted to replace its
aging fleet of single-car trams, the German firm, Siemens, was a strong
contender since the local service engineers were already well acquainted
with German tram-car technology.
In 1998, Siemens won a contract from HERC for supplying what was at the
time, its latest line of LF-LRT streetcars called the Combino‘s. HERC was
also the first operator outside Germany to purchase Combino‘s, starting
with 12 units (Siemens 2002).
91
Figure 7: A Siemens Combino at Hiroshima
Source: Mayer 2004
As per the requirements of HERC, the LRVs were 30-meter, five-section
vehicles designed for double ended operation. It had a special car-width of
2.45 meters, customized front-end, fully air-conditioned passenger car
compartments, Japanese ticketing equipment, and was designed for left-
hand driving. Deliveries were completed in 2002 (Siemens 2002). The
technology licensing covered only operation and maintenance, supported by
service-engineers from the local representative office of Siemens.
5.2.1.3 Project Implementation & Technology Adaptation
According to Hattori (2004: 34), Japanese development of LF-LRVs was
delayed by several factors: overseas manufacturers held patents on many of
the basic technologies; low domestic demand increased development risks:
and established fare-collection protocols. This poor development
environment changed in November 2000 when the Barrier-Free
Transportation Law was passed. This law required that operators respect
accessibility standards when introducing new rolling stock and provided
92
subsidies as tax-relief and tax-exemptions to compensate for the price
differences between conventional cars and the more expensive barrier-free
designs.
Providentially for the Japanese manufacturers, the Combino‘s started giving
problems within a couple of years. For cars that had run more 150,000 km,
cracks were reported on the connections between the sidewalls and the roof
girders such that the safety of passengers in the wheel-less modules could
not be assured in the event of a severe collision.
This was not a problem specific to HERC of Hiroshima - similar problems
were reported in other cities that had adopted the Siemens-Combinos, such
as Dusseldorf, Freiburg, Augsburg, Erfurt, Nordhausen, Basel, Potsdam
Bern, Amsterdam and Melbourne. In March 2004 Siemens Transport
Systems confirmed that body-shell problems were emerging at high
mileages and it advised all operators to take out about 400 Combino‘s that
had run more than 120,000 km (RGI 2004).
The very next year, in March 2005, HERC put into service the first 100%
low-floor ultra-low-floor articulated LRV to be built entirely in Japan. It was
designated U3-ALFA (U3 being derived from the words "Ultimate," "Urban"
and "User friendly"), and developed jointly by Kinki Sharyo Co., Mitsubishi
Heavy Industries, and Toyo Electric Co. It consisted of five articulated
sections on three bogies, two of which were powered. The motors and gears
were mounted outside the wheels, allowing them to rotate independently
(RGI 2005) – as in the case of the Combino‘s.
A completely new vehicle was, of course, not achieved in one year‘s time.
Japan‘s Ministry of Land, Infrastructure and Transport (MLIT) had brought
together a group of eight manufacturers in 2001 itself (RGI 2005). It was
93
this group35 that worked on the Combino design to develop a fully Japanese
product, which incorporated and improved upon many Combino features
such as low-floor (now down to 360mm; 330mm at doorways); VVF (variable
voltage frequency) motor capable of regenerative braking, maximum service
speeds of 80km/h, and LRVs for both standard gauge (1435mm) and narrow
gauge (1067mm) (RGI 2005).
Figure 8: GreenMover Max by J-Tram
Source: Kinki Sharyo URL - http://www.kinkisharyo.co.jp/
Three Japanese companies had formed a consortium for creating an
improved LRT that was better adapted for local running conditions - Kinki
Sharyo Co., Mitsubishi Heavy Industries, and Toyo Electric Co. Christened
as the "U3 Project", the aim of this collaborative effort was to create a "100%
ultra-low-floor articulated LRV" that would be the "Ultimate", "Urban",
"User-friendly" Light Rail Vehicle (KS 2010). HERC was closely involved in
this project as its ―operation-service‖ advisor (Hoshi 2006: 1).
Project U3 wanted to create a vehicle that was more spacious in terms of
35 MLIT called this group the ―Technical Research Institute for Low-Floor LRV Bogie (Hoshi
2006)
94
passenger capacity, more reliable, and, for which, most of the components
could be manufacturer in Japan itself. Specific tasks were allotted to each of
the four collaborators - MHI took over bogies, brakes, and inner/outer
riggings; Kinki Sharyo focused on design, car body, articulations, and
drivers cabin; while Toyo Denki Seizo took responsibility for electric parts
and control and drive units The result was the "GreenMover Max", a vehicle
that had more passenger seats, wider Aisles (830mm – to enable movement
of wheelchairs, see Annex III) and lower dependence on foreign patented
technology & component makers.
Hattori (2006: 31) notes that the key to the development of an indigenous,
100% LF-LRV was the bogie with an independent wheel system, similar to
the shaft-less wheel connection to the Combino‘s. Also similar was the
placement of motor and drive unit installed to the outer side of the wheel,
which helped in achieving a low-floor vehicle. Other modifications were:
The bogie structure was made compact to allow the aisle width of 880
mm, 50 mm wider than the Combino;
Motor-less bogie, resulting in drastically increased width of aisle up to
1120 mm and thus contributing to smooth movement of boarding and
alighting passengers while ensuring wider and unobstructed view from
the passenger room;
Number of seats on the bogie was made 20% larger than that of the
Combino;
Elastic wheels were adopted for the bogie to reduce noise and vibration.
Three types of brakes were used - electric, hydraulic, and rail - to allow
mode change with less shock to bring the car to a safe stop under any
conditions.
95
The following is a comparison of the two models -
Table 5.12: Comparison of Siemens Combinos and JTram‘s GreenMover Max
Model Siemens Combino JTram GreenMover
Type Five-section articulated low-floor
vehicle for double-ended
operation
Five-section articulated
low-floor vehicle for double-
ended operation
Track Gauge 1430 mm (standard gauge) 1430 mm (standard gauge)
Vehicle length 30.520m 30 m
Vehicle width 2450 mm 2450mm
Boarding height 300mm 330mm
Voltage system 600 V DC 600 V DC
Traction rating 4 x 100 kW 4 x 100 kW
Maximum speed 70 kmph 80 kmph
Empty weight 35 tons 33.9 tons
Passenger capacity 187, including 52 seated 149, including seating 56
Customization Japanese signboards Wider aisles for
wheelchairs
Source: Siemens (2002), J-Tram (2006), Hoshi (2006)
As is obvious from the above table, the Japanese manufacturers came up
with a product that was almost identical to the Siemens Combino. It was
marginally shorter and lighter; the boarding height was higher and the
seating capacity lower than that of the Combino‘s. But the very fact that it
had been developed without patent-related claims from Siemens is
testimony to the care taken by the Japanese consortium in assimilating and
suitably modifying the new technology.
5.2.1.4 Impact
HERC‘s tram fleet is today dominated by the locally manufactured
‗GreenMovers‘, while the Siemens Combino‘s has a token presence – it
seems to have become yet another exhibit in the ‗living-tramcar-museum‘
city.
The Green Mover T-5000 soon evolved into T5100 which had even better
96
specifications - the seat were made more comfortable with particularly
spacious sofa seats being used in the front cars and the number of seats was
increased from 52 to 62. Under the Car E, the middle car, the bogie which is
designed to be as compact as possible, is fitted with longer seats.
The T5100 had wider aisles: 830mm in the 5000 series to 880mm in the
front cars and 1120mm in Car E, the middle car, of the 5100 series, making
for a smoother flow of passengers through the cars. It was more comfortable
for both seated and standing passengers. Also most components are made
in Japan, thereby providing reliability and enhanced maintenance (KS
2010).
5.2.1.5 Summary
In this case, there were two critical factor that enabled Japanese companies
to develop a competitive urban LF-LRT - the first was a legislation: the
Barrier Free Transportation Law (2000) which provided subsidies and tax-
incentives for developing barrier-free trams, and the second was the
initiative taken by MLIT in bringing together eight manufacturers in 2001
and setting them to the task of developing a fully Japanese product.
HERC had been operating urban tramways for over 60 years when it
decided to award the contract for the LRTs system to the German
manufacturer, Siemens, in 1998. This was mainly because the local
manufacturers were unable to come up with a competent product that
matched the Siemens Combinos – a vehicle that was not only modular and
articulate but also offered a design that was more appealing to HERC.
However, within two years of operating Combino‘s, it was clear that the
vehicles were not quite suitable for local conditions. Problems arose with not
only the control systems but also with air-conditioning and riding comfort.
97
Within three years the HERC-Siemens agreement for purchase of the
Combino models, the Japanese government (MLIT) brought together eight
local manufacturers to develop an indigenous alternative to the imported
Siemens-Combino‘s. So by the time the Combino‘s were reported for
technical problems in 2003, a home-built LF-LRT – the GreenMover Max -
was already underway. This model exceeded the technical specifications of
the Combino‘s and was better adapted to local needs and habits.
The Japanese consortium, J-Tram, was now able to convince HERC to
replace the Siemens Combino‘s with the Green Movers, which have
dominated the LRT market in Hiroshima city since 2008.
5.2.2 Case 4: Private Licensing in India - Integral Coach Factory
(India) and SWS (Switzerland)
5.2.2.1 Background
The concept of an ‗integral‘ coach – an all-steel coach design - was pioneered
in the 1920s by the Swiss rolling-stock manufacturer, Schweiserische
Wagons- und Aufzügefabrik AG36 (Swiss Car & Elevator Co., hereinafter
referred to as SWS), based at Schlieren, in Zurich, Switzerland. The Swiss
principle was based on aircraft design – body structure was treated
dynamically, and unlike the traditional static, component-by-component
approach, the whole shell was treated as a hollow girder, a gigantic tube.
The new coach weighed 35.5 tons as against the 42.5 tons of the equivalent
conventional coach (7 tons savings for every coach – one extra coach could be
added for every five). This design offered great compression strength – ends
36 The company is commonly known as ―Schlieren‖ after the place where its main factory was located
Switzerland. The company itself was founded in 1895 and underwent numerous name-changes until
it was taken over by the Schindler Group in 1956. Following the restructuring of the Swiss rolling
stock industry in 1981, SWS was closed down in 1985.
98
designed to deform on severe impacts.
This innovation had been discussed in detail, in a technical paper by Nichols
H.J (1938), a document that was widely read planners and policy makers in
India. In 1944, India‘s Railway Board (RB) had embarked on a project to
improve the service and amenities offered by Indian Railways – especially
III Class; increased legroom, more and better toilets, improved safety
standards.
RB was quite clear about its technical requirements - safety dictated
substitution of steel for wooden construction. Steel offered the additional
advantage of lower weight, which in turn permitted larger dimensions and
all-steel light-weight construction, could lower the tare weight per
passenger and increase the number of seats per coach. Lighter stock would
also permit longer trains; fewer trains would be needed for a given number
of passengers and less additional investment would be needed to expand
line capacity. The key was to the key was to build coaches as single units, in
other words, ‗integral coaches‘.
Proposals for this project were invited from leading international firms, as
well as domestic public-sector companies such as Hindustan Aeronautics
Ltd (HAL), Jessops and BBCI Railway. The designs were to be prepared for
broad gauge stock and the narrow-gauge stock – standardized by RB in 1950.
Identification of technical requirements greatly eased the selection of the
supplier, and the technology licensing agreement was awarded to SWS in
1949. The choice to collaborate with SWS was, in a sense, predetermined by
the choice of technology – they were the only one source of ‗know-how‘.
99
5.2.2.2 Technology Licensing Agreement
The agreement signed between Indian Railways and SWS covered a range of
separate projects spread across a ten-year period.
In the initial years, SWS was to supply completely knocked-down (CKD)
kits to be assembled by their Indian counterparts. This was to be followed
by training of Indian personnel at SWS Switzerland, as well as the
establishment of a new factory – the Integral Coach Factory – at Perambur,
Tamil Nadu State.
The following table summarizes the activities covered under the licensing
agreement:
Table 5.13: Components of the IR-SWS Technology Transfer Agreement
Year Milestone as per Tech-Transfer Agreement
1949 Agreement signed for technology-transfer:
Initial supply of CKD kits
Training of Indian personnel at Schlieren works (16
technical, 2 senior)
Swiss technical experts arrive for setting up the initial
production at Perambur (40 experts in 1956-7, falling
to 10 by mid-1958)
1951 RB decided to standardize the light-weight coach for future
construction and establish a factory at Perambur, madras, near the
existing workshops of the Madras & Southern Mahrattha Railway
1952 Construction of factory commenced
1955, Oct 2 Production commences with 200 knocked-down kits imported from
Switzerland
1956 Indian manufacturing commences without foreign assistance,
starting with the annual capacity of 350 shells
Installation of furnishing division
1959 Introduction of double shift
1961 May Termination of agreement
The agreement was spaced out across ten years, giving the Indian side
sufficient time to get adapted to the new technology and manufacturing
100
environment. The presence of Swiss experts was to be reduced step-by-step
as Indian engineers were trained in increasing numbers until they could run
the whole factory independently.
5.2.2.3 Project Implementation / Technology Adaptation
As mentioned earlier, the Integral Coach Factory project was part of a larger
strategy for improving the service and efficiency of Indian Railways. A
process of standardization had been initiated long before independence in
1947. Under this, the broad-gauge had been standardized as early as 1856
(Macgeorge 1894: 318-319).
From 1903, the Indian Railways Conference Association controlled rates and
charges, procedures for inter-line transfers and numerous other matters,
including dimensions for standard design of wagons. A committee of the
British Engineering Standards Organization (BESA, later British
Standards Institute) designed a series of standard locomotives in 1903, 1906
and 1910. In 1925, the Railway Board set up a series of standing committees
on standards for locomotives, carriages and wagons, tracks, signaling and
bridges. Standardization of design served British manufacturers as well as
local operators. It permitted simplified tooling, as well as repair and
maintenance of pooled rolling stock. (Walker 1987: 104)
To achieve full technological independence, it was necessary for the Railway
Board to break free of the monopoly of British suppliers. This was to be
achieved by creating indigenous facilities for research and development. A
Central Standards Office (SCO) had been established in 1930; the Railway
Testing and Research Centre (RTRC) followed in 1952. By 1955 it was
possible to dispense with the London consultants. In 1957, CSO was merged
with RTRC to form the Research Design and Standards Organization
(RDSO).
101
Production of broad gauge integral coaches began on 2 October 1955 using a
total of 200 knocked-down kits from Switzerland. Meanwhile, the master set
of drawings was received from SWS, and these were worked over to suit ICF
production as well as Indian Railway specifications.
More than 140 Indian engineers and managers were trained by SWS in
Switzerland during the agreement period - sixteen technical and two senior
staff trained each year, from 1949-50 to 1957-8. A large contingent of SWS
engineers was also sent to India. The maximum number of Swiss technical
staff at Perambur was 40 during 1956-57, falling to ten by mid-1958, the
end of the intensive phase of the collaboration (ICF 1957-8:2 in Walker
1987: 109). Walker also records that ICF Annual Reports repeatedly
emphasized the smoothness of the collaboration. The Swiss firms were
punctilious in fulfilling their obligations, the collaboration proceeded on
schedule, and no serious difficulties arose during the training.
From the middle of 1956, new designs were introduced – initially for a 3rd
class guards and luggage van, followed by new designs for I class, postal,
air-conditioned dining and restaurant cars. Two and three-tier sleepers were
introduced during 1960-61. Manufacture of Electric Multiple Units (EMUs)
began in 1962-63; integral meter-gauge stock in 1963-64. A two-shift work
schedule was introduced in 1959. Gradually, the yearly output was
expanded from 350 shells to 750 by 1980.
Adaptation of SWS technology to local conditions:
Factory Design & Planning: In designing the new ICW factory, the Indian
side worked over 428 drawings from SWS and prepared 326 new ones out of
a total 846 required. For jig and tools section 36 SWS drawings were
modified and 98 new ones were prepared. One of the main changes in the
102
original SWS design was with the layout of the factory. The original plan
had envisaged ‗several workshops under same roof ‘. This was deemed to be
totally unsuitable for Indian conditions and the plans were altered to place
shops in separate buildings for better ventilation. Overhead glazing in these
shops was also reduced to match Indian lighting conditions where there
were much less seasonal variations in daylight (Walker 1987:108).
Construction: Welding was applied to both shells and bogies since it
permitted fabrication of components from sheet rather than rolled sections
Corrosion & Toilets: In the original SWS design, toilets had been placed at
the centre of the coaches. This layout proved to be detrimental for Indian
conditions where the copious use of water in toilets led to structural
weaknesses from corrosion. The toilets were therefore shifted to the ends of
each car with additional provisions for quick drainage of waste-water.
Redesigning of Fittings: The original Swiss coaches made extensive use of
aluminum and its alloys, which, unfortunately, turned out to be attractive to
thieves. These were replaced with heavier, standardized, iron and steel
fittings which were not only resistant to pilferage but also more durable.
Towards the end of the agreement period in 1960, a modern factory for mass
production had been laid out according to the flow of work; ten workshops
covered 864,666 square feet and manufacturing had started with the use of
production line methods
Indian input in the project was substantial, covering dimensions, layout and
basic equipment. Planned ‗de-sophistication‘ was done to enhance durability
and maintainability of both equipment and buildings.
103
5.2.2.4 Impact
Since the completion of the technology licensing agreement-period, ICF has
been completely manned by Indian engineers, technicians and managers.
The last of the SWS consultants left in 1962.
Indian manufacture commenced in November 1966, and soon reached its
annual capacity of 350 shells. Production started with bare shells which
were to be furnished by the recipient railway division, and later, as soon as
ICF built its own furnishing division adjacent to the main plant in 1962, it
started supplying fully furnished coaches.
A major success came with the manufacture of air-conditioned stock for
high-speed Rajdhani Expresses, which was introduced on the Delhi-Calcutta
run in 1966-67, and on the Bombay-Delhi one in 1970-71. Indigenous
designs for air-conditioning and components for EMUs followed in 1970-71,
resulting in not only considerable savings (in terms of import costs), but also
improved performance. In 1972-73 ICF and RDSO designed experimental
double-deck cars. A couple of years later, in 1972, ICF started
manufacturing locally designed cars for India‘s first underground urban
railway services - Calcutta Metro. This was in collaboration with two other
public-sector firms – Bharat Electricals Ltd., and Calcutta Metropolitan Rail
Corporation.
ICF has now been entrusted with practically all the new innovative
production tasks for Indian Railways. This has been achieved in conjunction
with the Carriage and Wagon Design Wing of the RDSO at Lucknow, which
fixes the broad design of new stock and submits layouts, new features etc.,
to the Railway Board for approval. The ICF then takes up the detailed
design and production.
104
The total area of the factory and township has expanded to 190.64 hectares
(500 acres) of which 152,8000 sq.m., was covered workshops. In the year
2007-08, ICF created a milestone by producing 1291 railway passenger
coaches, coaches per annum (Special Correspondent 2008). It employs about
13,000 persons. Nearly 1336 coaches are manufactured every year, and 6
coaches are manufactured per day. Today the coach factory produces more
than 1600 coaches of more than 170 types (ICF 2010).
ICF began exporting its coaches in April 1967 with the supply of two meter-
gauge bogies to Thailand; further orders for Thailand, Burma and Taiwan
followed. Orders for Zambia, Uganda, the Philippines, Vietnam, Taiwan and
Tanzania were executed between 1968 and 1980. By 1981, 359 carriages had
been exported; trade in parts and components, was brisk (ICF 2010).
Exports also provided an important stimulus for developing innovative
techniques for handling unfamiliar materials such as the melamine-coated
aluminum used in Taiwanese coaches. New designs developed for
ventilators for the export market was subsequently applied to domestic sub-
urban EMU stock.
As an engineering enterprise, the ICF has been a considerable success. A
World Bank Mission to India in 1976-77 rated it the best among railway
production units and other industrial establishments surveyed by the
Mission.
5.2.2.5 Summary
In this case, a ―proven‖ integral-coach technology was selected by Indian
railways domestic use. Even though integral designs had been in use in
Switzerland for over 20 years by the time ICF came into production, the
Swiss experience was significantly different from Indian conditions since
105
they operated smaller vehicles, shorter hauls, less overcrowding and higher
maintenance standards.
An extended period of technology transfer ensured successful adaptation
and assimilation of the foreign technology to Indian conditions. Locally
available materials were substituted for exotic ones; production methods
and techniques were adapted to available skills and equipment.
Indian input in this project was substantial, covering dimensions, layout
and basic equipment. This helped ICF in refining and developing the
original designs of the shell, bogies and components, not only to meet the
demands of the domestic railway market, but also to venture into the
competitive world of international exports.
5.2.3 Case Comparison: Railway Technology Transfer through Private
Licensing
One aspect that clearly stands out in both the cases is the role of
governments. In the case of Hiroshima LRT, the Japanese government
always played the role of an external Initiator, Coordinator and Catalyzer. It
never got into the task of setting up manufacturing firms on its own but
relied on private companies to compete amongst themselves to develop
products that were most suitable to local operating conditions. Even when
HERC signed an agreement with a German manufacturer (Siemens), it
encouraged local companies to come up with a product that would out-class
foreign imports.
The government of Japan played a much more proactive role in building the
technology-competency of local manufacturing firms by enacting a special
law and providing necessary incentives to local manufacturers. The
Ministry of Land, Infrastructure and Transport (MLIT) was instrumental in
106
bringing together private manufacturing firms and encouraging them to
pool their specialized technical competencies for creating an indigenous
model – the GreenMover Max.
The Indian government, in contrast, was not an external Initiator. Instead
of encouraging the numerous domestic engineering firms to take on the task
of manufacturing railway wagons, it assumed the role of a manufacturer
and established a public-sector company which was to have a monopoly in
this area. The Integral Coach Factory at Perambur was thus built from
scratch under a technology licensing agreement with SWS of Switzerland.
At the end of the agreement period, ICF was able to produce increasingly
sophisticated railway carriages, shells and furnishings on its own, without
any further technical assistance from foreign firms. However, in the absence
of private competition could be one of the reasons for the stagnation of
railway technology and continuing dependence on foreign know-how for
each stage of modernization.
The end result has been that while Japan has a thriving railway and rail-
ancillary industry propelled by domestic competition, in India there were
few incentives for private engineering firms to enter an industry dominated
by state-run enterprises like ICF.
5.3 Summary
In the four railway-cases we have compared in this chapter, the level of
preparedness seems critical, not only to the success of any international
technology transfer initiative, but also to avoid long-term dependence on
foreign manufacturers.
Success of the WB-Shinkansen rested on the competence of RTRI-JNR in
107
developing and testing experimental technology developed in-house.
Similarly, when HERC-Hiroshima discovered flaws in the German LRT-
trams, the government had already rallied domestic manufacturers and
they were ready to offer a product, better suited to local operating
environment.
In India, however, RDSO, the institution equivalent to RTRI was unable to
develop an adequate in-house base for railway technology. As a result, the
ODA project for Delhi Metro had to rely heavily on foreign suppliers for a
range of critical inputs and this dependency continues as the project
expands.
Also, unlike in Japan, the Indian government created monopolies of public-
sector railway companies, rather than encouraging competition among
private companies. This has limited the success of the technology transfer
agreement between ICF India and SWS Switzerland.
● ……………Ж ……………●
108
CHAPTER VI
Conclusion
By failing to prepare, you are preparing to fail.
- Benjamin Franklin (1706-1790)
Success in learning a new technology is the result of preparation, hard work
and the ability to learn from failure. Governments have a strong role to play
in this process by nurturing not only institutions for education, research and
development, but also by encouraging competition amongst domestic
engineering firms.
The railways have built-in path-dependency characteristics. Since the
investment requirement is huge, so are the costs of success and failure. Just
as track-gauge cannot be changed easily, rolling stock too has to be custom-
made to suit the configurations of the stations, the bridges, underpasses and
tunnels. When we compare the process of technology transfer through the
ODA-avenue or the Private Licensing-avenue, there are several aspects that
stand out.
Capacity of national institutions – especially those dedicated to technical
research & development - is a critical factor in the success of international
technology transfers. In the case of the Shinkansen project, Japan was
ready with a critical mass of technical capability through its premier rail
R&D agency – RTRI. It was this agency that conceived the idea and pushed
for its implementation using the ODA funds from World Bank. The funds
were used to bridge the gap in domestic finances, and more importantly, as
109
a tool for obtaining long-term domestic political commitment for the project.
Technology transfer from WB experts was limited to non-core components
such as ticketing and operations management.
In the case of the Delhi Metro project, existing local R&D capacity at RDSO
was underutilized while the foreign project consultants steered project funds
towards multinational firms who had the technology and management
capacity to implement the project within time. The end result is a project
which is functional and efficient but almost entirely dependent on foreign
technology that has not yet been completely assimilated. This is leading to a
semi-permanent dependence on relatively expensive equipment and
services- at least until agencies like RDSO reinvent themselves.
Hiroshima LRT project could perhaps serve as a classic example of how
governments can intervene to avoid path dependency in international
technology transfers. Even while Hiroshima city authorities (HERC) were
negotiating with Siemens for the supply of the latest technology in urban
rail transport, the relevant ministry (MLIT) informally brought together
domestic equipment manufacturers and provided them with the necessary
fiscal incentives for developing an indigenous technology. The result was the
U3 project and ―100% LF-LRV‖ – the GreenMover Max which soon edged
out Siemens Combino‘s from the Japanese market.
In the case of private licensing of technology, for both HERC Japan and ICF
India, it was a case of Second Degree Path Dependency – the inferiority of a
chosen path was un-knowable at the of making the choice. However, the
drive for creating products custom-built for domestic requirements was
stronger on the Japanese side. Well planned technology-licensing
agreements with private technology suppliers do result in long-term benefits
and minimal dependency. This is what is clear from the case of ICH-SWS
collaboration in setting up India‘s first Integral Coach Factory. A completely
110
new technology was adapted to local requirements and assimilated by the
Indian manufacturer in a step-by-step manner, leading to a point where it
could create its own designs without being dependent on foreign expertise or
equipment.
In the cross-sector comparisons, it seems that India is now paying the price
for keeping private engineering firms out of the railway industry. By
reserving this sector for public-sector companies like ICF, it has diluted the
force of competitive pressures which, in Japan, has been a strong incentive
for encouraging innovation and development of local technical competencies.
In order to avoid path dependency when it comes to technology related to
infrastructure development in general, and for railways in particular, it
would be useful for India to adapt Japan‘s own policy response to similar
pressure. This is to proactively encourage domestic firms to seek the best
foreign expertise on one hand, and, in parallel to develop domestic
capabilities to assimilate and adapt the new technology to suit domestic
requirements.
In the final reckoning, it would be incorrect to claim that ODA by itself is an
ineffective tool for international technology transfers. Despite the fact that
it comes with terms and conditions that may favor foreign firms, it presents
an opportunity to countries that are well prepared to develop their own
domestic capabilities. In countries that are not adequately prepared ODA
projects merely facilitates the entrenchment of foreign firms, with an
inevitable ―lock-in‖ with proprietary technology, leading to path dependency,
as apparent in the Delhi Metro project.
A significant part of this preparedness lies, not in the government ministries
or public-sector companies but in the competitiveness of private
manufacturing firms. The government can create an enabling environment
111
for these firms that encourages competition and results in the creation of
products with technology better adapted to local conditions, as in the case of
the Shinkansen trains and HERC‘s GreenMover trams.
In the original Chinese adage, if you teach a man to fish, you can feed him
for a lifetime. Yet, the fact remains that you can teach him only if he is
prepared to learn by himself.
● ……………Ж ……………●
112
Bibliography
Abramovitz, Moses (1986). Catching Up, Forging Ahead, and Falling Behind. The
Journal of Economic History, Vol.46, No.2, The Tasks of Economic History (Jun., 1986),
pp. 385-406.
Amsden, A.H. (1979). Taiwan‘s Economic History: A Case of Etatisme and a Challenge
to Dependency Theory. Modern China, Vol. 5, No. 3, Symposium on Taiwan: Society
and Economy (Jul., 1979), pp. 341-379.
Ali Murad and Park Kichan (2008), The Spiral Model of Indigenous Technological
Innovation Capabilities for Developing Countries. 6th International Conference, Izmir
University of Economics, Izmir Turkey, 2008.
Araral, Eduardo Jr. (2005). Bureaucratic incentives, path dependence, and foreign aid:
An empirical institutional analysis of irrigation in the Philippines. Policy Sciences
(2005) Vol.38, pp. 131–157.
Arthur, Brian (1989). Competing Technologies, Increasing Returns, and Lock-In by
Historical Events. The Economic Journal, Vol. 99, No. 394 (Mar., 1989), pp. 116-131.
Atkinson, A.B. and Stiglitz, Joseph E. (1969). A New View of Technological Change.
The Economic Journal, Vol. 79, No. 315 (Sep., 1969), pp. 573-578.
Asia and Pacific Centre for Transfer of Technology (2010). UN-ESCAP APCTT -
Organization Description. URL accessed on 29 Nov 2010 - http://www.apctt.org/ .
Audretsch, D.B., Bozeman, B., Combs, K.L., Feldman, M., Link, A.N., Siegal, D.S.,
Stephan, P., Tassey, G., and Wessner, C. (2002). The Economics of Technology Transfer.
The Journal of Technology Transfer, 27, 155-203, 2002.
113
Bagchi, Amiya Kumar (1982). Public Sector Industry and Quest for Self-Reliance in
India. Economic and Political Weekly, Vol.17, No. 14/16, Annual Number (Apr., 1982),
pp. 615-628.
Barrett, R.E. and Whyte, M.K. (1982). Dependency Theory and Taiwan: Analysis of a
Deviant Case. The American Journal of Sociology, Vol. 87, No. 5 (Mar., 1982), pp. 1064-
1089.
Bell, Martin (2007), Technological Learning and the Development of Production and
Innovative Capacities in the Industry and Infrastructure Sectors of the Least
Developed Countries: What Roles for ODA?, UNCTAD The Least Developed Countries
Report 2007.
Bhatt, V.V. (1975). On Technology Policy and its Institutional Framework. World
Development, Vol.3, No.9, Sep. 1975, pp. 651-663.
___________ (1978). Decision Making in the Public Sector - Case Study of Swaraj
Tractor. Economic and Political Weekly, Vol.13, No.21, May 27, 1978, pp. M30 to M45.
___________ (1980). Financial Institutions and Technology Policy. Economic and
Political Weekly, Vol.15, No.22, May 31, 1980, pp. M45 to M52.
___________ (1981). Financial Institutions and Technical Consultancy Services -
Experiment in Small Enterprise Promotion. Economic and Political Weekly, Vol.16,
No.48, Nov. 28, 1981, pp. M141 to M152.
___________ (1982). Project Evaluation Criteria and Technology Policy. Economic and
Political Weekly, Vol.17, No.22, May 29, 1982, pp. E38-E42.
___________ (1982).Development Problem, Strategy, and Technological Choice:
Sarvodaya and Socialist Approaches in India. Economic Development and Cultural
Change, Vol.31, No.1, Oct., 1982, pp. 85-89.
Bloomberg BusinessWeek (2007). The Miracle-Worker of the Delhi Metro. (Nandini
Laxman), 19 March 2007, Bloomberg Businessweek URL accessed on 17 Nov., 2010 -
http://www.businessweek.com/magazine/content/07_12/b4026009.htm .
Blumenthal, Tuvia (1979). A Note on the Relationship between Domestic Research and
Development and Imports of Technology. Economic Development and Cultural Change,
Vol.27, No.2 (Jan., 1979), pp.303-306.
114
Brooks, William L. and Orr, Robert M. Jr. (1985), Japan‘s Foreign Economic Assistance,
Asian Survey, Vol. 25, No. 3 (Mar., 1985), pp. 322-340, University of California Press.
Clemons, Steve (2010). The Impact Today and Tomorrow of Chalmers Johnson. The
Washington Note, 21 Nov., 2010. URL accessed on 26 Nov., 2010 -
http://www.thewashingtonnote.com/archives/2010/11/the_impact_toda .
Cohen, Wesley M. and Levinthal, Daniel A. (1990). Absorptive Capacity: A New
Perspective on Learning and Innovation. Administrative Science Quarterly, Vol. 35, No.
1, Special Issue: Technology,Organizations, and Innovation (Mar., 1990), pp. 128-152.
Cohen, Wesley M., Goto, A., Akiya, N., Nelson, R.A and Walsh, J.P. (2001). R&D
Spillovers, Patents and the Incentives to Innovate in Japan and the United States.
Research Policy Vol.31 2001, pp. 1349-1367.
Coriat, Benjamin (2002). The New Global Intellectual Property Rights Regime and its
Imperial Dimension. Paper prepared for the 50th BNDS Anniversary Seminar, Rio de
Janeiro, Brazil, September, 2002.
Davidson, W.H and McFetridge (1985). Key Characteristics in the Choice of
International Technology Transfer Mode. Journal of International Business Studies,
Vol. 16, No. 2 (Summer, 1985), pp. 5-21.
Delhi Metro Rail Corporation (2010) Background of Delhi Metro Project: Slideshow.
URL accessed on 8 Oct., 2010 -
http://www.delhimetrorail.com/OtherDocuments/metro_museum/slideshow.html .
Dickson, David (2010). Science, Communication, Aid and Diplomacy. Science and
Development Network, 16 July 2010. URL accessed on 27 July 2010 -
http://www.scidev.net/en/editorials/science-communication-aid-and-diplomacy.html
Donald, Anna (1999), Political Economy of Technology Transfer, British Medical
Journal 1999 November 13; 319(7220): 1298.
Easterly, William (2006). The White Man‘s Burden. Penguin Press, New York, 2006.
115
Economist (2006). Making Trains Run on Time. 16 Feb., 2006. URL accessed on 20 Nov.,
2010 - http://www.economist.com/node/5519214.
Economist (2010). The Economist Debates – Africa and China, 10 February 2010. URL
accessed on 24 Oct., 2010 - http://www.economist.com/debate/days/view/468 .
Evans, Peter (1999). Japans Green Aid Plan: The Limits of State-Led Technology
Transfer. Asian Survey, Vol. 39, No. 6 (Nov. - Dec., 1999), pp. 825-844.
Express News Service (2009). Made-in-India coaches to run on Metro track for the first
time. The Indian Express, April 27, 2009. URL accessed on 20 Nov., 2010 -
http://www.expressindia.com/latest-news/madeinindia-coaches-to-run-on-metro-track-
for-the-first-time/451615/.
Frank, Andre Gunder (1998), ReOrient – Global Economy in the Asian Age, University
of California Press, 1998.
Freemark, Yonah (2008). Meet the Train-Makers, part 4: The Japanese. The
Infrastructurist, 19 Nov., 2008. URL accessed on 21 Nov., 2010 -
http://www.infrastructurist.com/2009/11/10/meet-the-train-makers-part-4-the-
japanese/ .
Global Competitiveness Report 2010-2011. Scatter Plot Comparisons. World Economic
Forum (WEF) URL accessed on 3 December 2010 - http://gcr.weforum.org/gcr2010/ .
Goto, Akira (1993). Technology Importation: Japan‘s Postwar Experience in The
Japanese Experience in Economic Reforms, edited by Teranishi J and Kosai Y. St.
Martin Press, London, 1993.
Griffy-Brown, C., Zhu B., and Watanabe C. (2000). Do Japans High Tech Failures Open
Doors for Western Firms? Graziardo Business Review, Vol.3, Issue 3, 2000. URL
accessed on 21 Nov., 2010 - http://gbr.pepperdine.edu/2010/08/japans-failures/#data.
Hattori, S.(2004). New Promise of LRT Systems - Trams Making Way for Light Rail
Transit. Japan Railway & Transportation Review, Vol.38, March 2004.
116
Hindustan Times (2002). New Ordinance for Delhi Metro. 21 October 2002 .
Hood, Christopher P. (2007). Shinkansen – From Bullet Train to Symbol of Modern
Japan. Routledge, London. pp. 34-53.
Integral Coach Factory, Perambur, Chennai (2010). Organization Profile 2010. Accessed
from official website on 23 Nov., 2010, URL -
http://www.icf.indianrailways.gov.in/icf/html/ICF%20Profilenew.htm .
International Bank for Reconstruction and Development (a) (1961). Preliminary Report
of the President to the Executive Directors on a Proposed Loan to the Japanese
National Railways for the New Tokaido Railway Line (Restricted Report No. P-246
Vol.1) , 23 March 1961.
International Bank for Reconstruction and Development (b)(1961). Appraisal of the
Japanese National Railways for the New Tokaido Railway Line (Restricted Report No.
TO-266a, Department of Technical Operations), 24 March 1961.
International Bank for Reconstruction and Development (c)(1961). Supplemental
Report and Recommendations of the President to the Executive Directors on a
Proposed Loan to the Japanese National Railways for the New Tokaido Railway Line
(Restricted Report No. P-246 Vol.2), 24 April 1961.
Interview (2010a) with Mr. S. Kitta, former Chief Representative of JBIC India Office
(1994-1997), on 15 December 2010.
Interview (2010b) with Mr. Anuj Dayal, Spokesperson on DMRC Delhi. Email response
received on 19 November 2010.
Ishikawa, Tatsujiro and Imashiro Mitsuhide (1998). The Privatization of Japanese
National Railways: Railway Management, Market and Policy. The Athlone Press,
London, 1998.
Japan Bank for International Cooperation (JBIC 2006). Ex-Ante Evaluation - Delhi
Mass Rapid Transport System Project (Phase 2) (I). 31 March 2006.
117
Japan International Cooperation Agency (2008). JICA Annual Report 2008. URL
accessed on 24 Oct., 2010 -
http://www.jica.go.jp/english/publications/reports/annual/2008/ .
Johnson, Chalmers (1995). MITI and the Japanese Miracle: The Growth of Industrial
Policy (1925-1975). Stanford University Press, Stanford, USA, 1982.
Johnson, Chalmers (1995). Japan - Who Governs? The Rise of the Developmental State.
W.W. Norton & Company, New York, 1995.
Kinki Sharyo (2010). Rolling Stock Products - Domestic. Company URL accessed on 12
Nov., 2010 - http://www.kinkisharyo.co.jp/eng/e_products/sh/e_sharyoukokunai.htm.
Kumar Dharma (1983), The Cambridge Economic History of India Vol.2 c.1757-c.1970,
Cambridge University Press 1983.
Lall, Sanjaya (1995). Strategy and Policies on Foreign Direct Investment in East Asia.
UNCTAD, Transnational Corporations, 1995.
Lancaster Carol (2000). Redesigning Foreign Aid. Foreign Affairs, Vol. 79, No. 5 (Sep. -
Oct., 2000), pp. 74-88.
Lancaster, Carol (2007), Foreign Aid: Diplomacy, Development and Domestic Politics,
University of Chicago Press, 2007.
Liebowitz S.J. and Margolis S.E. (1995). Path Dependence, Loc-in and History. Journal
of Law, Economics, & Organization, Vol. 11, No. 1 (Apr., 1995), pp. 205-226.
Link, Albert N. (1982). Inter-firm Technology Flows and Productivity Growth (1982.
Economics Letters. Volume 11, Issues 1-2, 1983, Pages 179-184.
Macgeorge, G.W (1894). Ways and Works in India. Westminister: Archibald Constable
Accessed at Google Books on 14 Nov., 2010.
Macpherson, W.J (1955). Investment in Indian Railways, 1845-1875. The Economic
History Review, New Series, Vol.8, No.2 (1955), pp.177-186
Mayer, Oliver (2004). Hiroshima – Japans Largest Tramway System, Japanese
118
Railway Society URL accessed on 13 Nov., 2010 -
http://www.japaneserailwaysociety.com/jrs/members/oliver/hiroden/hiroden.htm .
Mehrotra, S. (1990). India and the Soviet Union: Trade and Technology Transfer.
Cambridge University Press, 1990.
Ministry of Environment & Forests (1998). White Paper on Pollution in Delhi With an
Action Plan. Government of India, 1998. URL accessed on 4 Nov., 2010 at -
http://envfor.nic.in/divisions/cpoll/delpolln.html .
Mody, A., Mundle, S, and Raj, K.N (1985). Resource Flows from Agriculture: Japan and
India, in Ohkawa Kazushi and Ranis Gustav with Larry Meissner (1985). Japan and
the Developing Countries. International Development Centre of Japan and Economic
Growth Centre of Yale University, Basil Blackwell Ltd., 1985.
Mokyr, Joel (1990), The Lever of Riches – Technological Creativity and Economic
Progress, Oxford University Press, 1990.
Naim, Moses (2007). Rogue Aid. Foreign Policy 2007, URL Accessed on 23 Aug., 2010 -
https://woc.uc.pt/feuc/course/MRI/2007-2008/Naim%20-%20Rogue%20Aid.doc .
Nichols, H.J (1938). The Development of Passenger Rolling Stock. Journal of the
Institution of Locomotive Engineers, Vol.28,, pp.198-236.
Nishimaya, Takashi (2003). Cross-Disciplinary Technology Transfer in Trans-World
War II Japan: The Japanese High-Speed Bullet Train as a Case Study. Comparative
Technology Transfer and Society, Vol.1, No.3, December 2003, pp. 305-27.
North, Douglass C. (1990). Institutions, Institutional Change and Economic
Performance. New York: Cambridge University Press, 1990.
___________ (1994). Institutions and Credible Government. Economic History no.
9412002, Working Paper. pp.1-24.
119
Ockwell, D., Watson J., MacKerron, G., Pal P., Yamin, F., Vasudevan, N., and Mohanty,
P. (2007). UK-India Collaboration to Identify the Barriers to the Transfer of Low-
Carbon Energy Technology. University of Sussex, TERI and IDA, 2007.
Odagiri, Hiroyuki and Goto, Akira (1996). Technology and Industrial Development in
Japan - Building Capabilities by Learning Innovation and Public Policy. Oxford
University Press Inc., New York, 1996.
Organization for Economic Cooperation and Development (2006). Chapter-8:
Behavioral Additionality of Public R&D Funding in Japan. Government R&D and
Company Behavior, 2006. pp.151-166.
Polgreen, Lydia (2010). In India, Hitching Hopes on a Subway. New York Times, 13
May 2010. URL accessed on 1 Nov. 2010 -
http://www.nytimes.com/2010/05/14/world/asia/14delhi.html .
Press Trust of India (2009). Advanced Coaches for Delhi Metro Arrives From Germany.
The Hindu - Thursday, February 26, 2009. URL accessed on 20 Nov., 2010 -
http://www.hindu.com/thehindu/holnus/004200902261780.htm .
Radelet, Steven (2003), Challenging Foreign Aid: A Policymakers Guide to the
Millennium Challenge Corporation, Center for Global Development, Washington DC,
2003.
Research Designs and Standards Organization (2007). Annual Report 2006-2007. URL
accessed on 23 Nov., 2010 -
http://www.rdso.indianrailways.gov.in/library_publications/publications/index.jsp .
Railway Gazette International (2004). Delhi Holes Through. October 2004, Vol. 160, 10,
ProQuest European Business pp.664.
__________ (2004). Combino‘s Withdrawn. April 2004, Vol. 160, 4, ProQuest European
Business pp.186.
__________ (2005). Hiroshima Develops Low-floor LRV; January 2005; 161, 7; Proquest
European Business, pp. 10.
__________ (2005). (2005) Delhi Metro Awards Contract, July 2005; 161, 7; Proquest
120
European Business, pp. 416.
__________ (2006). Delhi Aims for 400 route-Km. May 2006; 162, 5; Proquest European
Business, pp. 245.
__________ (2006). Delhi Calls for 400 Cars. October (2006); 162, 10. ProQuest
European Business pp. 645.
__________ (2007). Delhi Metro Launches Second Phase; Jan., 2005; 163, 1; ProQuest
European Business, pp. 27.
__________ (2007). Delhi Handover; Oct., 2009; 165, 10; ProQuest European Business,
pp. 16.
__________ (2009).Series 0 Bows Out; Feb., 2009; 165, 2; ProQuest European Business,
pp. 63.
__________ (2009).Indian-built car unveiled; Jul., 2009; 165, 7; ProQuest European
Business, pp. 13.
Railway-Technology.com (2010). Delhi Metro, India. URL accessed on 20 Nov. 2010 -
http://www.railway-technology.com/projects/delhi/.
Ramanathan, R. (1999). A Holistic Approach to Compare Energy Efficiencies of
Different Transport Modes. Energy Policy 28 (2000), pp.743-747.
Robbins Underground Innovations (2008). Autumn 2008. URL accessed on 20
November, 2010- http://www.robbinstbm.com/wp-
content/uploads/2010/09/Newsletter_Q4_2008_forweb.pdf .
Rothschild, Daniel M. (2007), Book Review of Carol Lancaster ‘s Foreign Aid: Diplomacy,
Development and Domestic Politics, Michigan Journal of Public Affairs – Volume 4,
Spring 2007.
Rungta, Radhe Shyam (1970). The Rise of Business Corporations in India, 1851-1900.
Cambridge University Press, 1970.
Sethia, Tara (1991) in Railway Imperialism, eds. Davis C.B., Wilburn K.E. Jr.,
Robinson R.E. (Greenwood Press, New York, 1991).
Shabad, Theodore (1958). Economic Developments in North Vietnam. Pacific Affairs,
Vol.31. No.1 (Mar., 1958) pp.36-53.
121
Shima, Hideo. "Birth of the Shinkansen - A Memoir". Japan Railway & Transport
Review (EJRCF) 11: 45-48.
Shinkansen Development Act (1970). English translation accessed on 21 Nov. 2010, at -
http://www.mlit.go.jp/english/2006/h_railway_bureau/Laws_concerning/07.pdf.
Siemiatycki, Matti (2006), Message in a Metro: Building Urban Rail Infrastructure and
Image in Delhi, India. International Journal of Urban and Regional Research, Vol. 30.2,
June 2006 pp. 277-92.
Smith, Roderick A. (2003). The Japanese Shinkansen. Journal of Transport History,
24/2, 2003, pp. 222-237.
Special Correspondent (2008). Railway Week Celebrated at ICF. The Hindu 13 Apr.,
2008. URL accessed on 23 Nov., 2010 -
http://www.hindu.com/2008/04/13/stories/2008041358840500.htm.
Staff Reporter (2010). Delhi Metro pays back loan to Japanese agency. The Hindu, 7
August 2010. URL accessed on 21 Dec., 2010 -
http://www.thehindu.com/news/cities/Delhi/article557992.ece.
Sreedharan, E. (2008). Delhi Metro – The Changing Face of Urban Public Transport in
India, Public Transport International (PTI), November – December 2007, pp. 30-32.
Staff Reporter (2009), New technology for faster travel at the Metro Airport Express
Link. The Hindu, 25 Aug., 2009.
Staff Reporter (2010). Delhi Metro pays back loan to Japanese agency. The Hindu, 7
August 2010. URL accessed on 21 Dec., 2010 -
http://www.thehindu.com/news/cities/Delhi/article557992.ece .
Stewart, Charles T. (1985). Comparing Japanese and U.S. Technology Transfer to Less-
Developed Countries. East Asia, Vol.4, No.1, pp.3-19
Stoneman, Paul and Diederen, Paul (1994). Technology Diffusion and Public Policy. The
122
Economic Journal, Vol. 104, No.425 (Jul.1994). pp.918-930.
Times of India (2009). Automated Ticketing at 16 Busy Stations for Now. TNN, Mar 26,
2009. URL accessed on 20 Nov., 2010 -
http://timesofindia.indiatimes.com/Cities/Automated-ticketing-at-16-busy-stations-for-
now/articleshow/4320370.cms .
Tomlinson, BR (1979), The Political Economy of the Raj, 1914-1947: The Economics of
Decolonization in India (London: Macmillan, 1979), in Sethia, Tara (1991) in Railway
Imperialism, eds. Davis CB, Wilburn KE Jr., Robinson RE (Greenwood Press, New
York, 1991).
UIC – International Union of Railways (2003). Energy Efficient Technology for
Railways. URL accessed on 25 October 2010 - http://www.railway-
energy.org/tfee/index.php?ID=110 .
U.S. Bureau of the Census, Statistical Abstract of the United States: 1954 (1955) table
1075 pp. 899-902. URL accessed on 6 Oct. 2010 -
http://www2.census.gov/prod2/statcomp/documents/1954-08.pdf .
Uneda, T., Furuya, J., Noguchi, N., Fujita, I., and Hibino, Y. (2003). Land Transportation Systems
and Their Future. MHIL Technical Review Vol.40 No.1 (February 2003).
Walker, K.J. (1987). Technology Transfer to India: The Case of the Integral Coach
Factory. Development & Change (SAGE London, Newbury Park, Beverly Hills and
New Delhi), Vol.18 (1987), pp.99-127.
WebIndia123.com (2009). Metros first standard gauge train arrives in city. Thursday,
Mar 26 2009. URL accessed on 20 Nov., 2010 -
http://news.webindia123.com/news/ar_showdetails.asp?id=903260671&cat=&n_date=2
0090326 .
World Bank – International Bank for Reconstruction and Development (WB-IBRD) (1961-62),
Seventeenth Annual Report, World Bank, Washington-DC.
__________ WB-IBRD Annual Report (1962-63).
__________ WB-IBRD Annual Report (1963-64).
123
__________ WB-IBRD Annual Report (1964-65).
World Bank (1991). Monograph WB Loan Projects in Japan (in Japanese). Published on 10 Nov.,
1991 by World Bank, Tokyo Office.
World Bank (2003). Pages from World Bank History: The Bank and Japans Bullet Trains World
Bank Archives 21 Feb., 2003. URL accessed on 20 Dec., 2010 -
http://www.h2.dion.ne.jp/~dajf/byunbyun/.
World Bank (2010). World Banks Loans to Japan. URL accessed on 20 Dec., 2010 -
http://go.worldbank.org/9J0TYP38K0 .
World Development Report (2005) WDR: A Better Investment Climate for Everyone, World Bank
2005.
Wright, Robert (2009). Smooth Ride in These Rocky Times. Financial Times (London) - Special
Report on the Rail Industry, June 8, 2009.
● ……………Ж ……………●