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Growth Opportunities in Asia Pacific
  Rail Markets: The Track Ahead
        Rohit Gunavanthe, Consultant
      Transportation & Logistics Practice
                 Asia Pacific
                 2nd April, 2009
Focus Points

1
1          Current Economic Scenario
           Current Economic Scenario


2
2          World and Asia Pacific Rail Market – An Overview


3
3          Current Trends in Railway Industry


     ii        Passenger Movement Trends (current and expected trends)


    ii
    ii         Freight Movement Trends (current and expected trends)

    iiii
      ii       Technology Trends (current and expected trends)


4
4          Market Dynamics (Drivers and Challenges)



5
5          Opportunities for the Rail Industry Participants


                                                                         2
Economic Downturn – The Recession: How it all began…
                                                      European Banks
                                European Banks withdraw investments in
                               lose money on sub       eastern Europe
                                prime mortgages                 Unwinding of Yen
                                                                Carry trade & FII
                                                                  withdrawals
                                                              Lower exports from
                                          Oil prices drop on Asia due to lower
                                           slower growth in      American and
                                           Europe and USA European demand


                             Withdrawal of FII
                             inflows: currency
                               depreciation




                             Crisis has gone global
                             Employment creation has hit the bottom
                             Industrial production has decrease significantly
                             Consumer spending is gradually dwindling
                             Credit markets still remain tight


                                                                                3
Economic Scenario – The Recession: What lies ahead…

                  Unprecedented focus worldwide on addressing the economic situation



                                      Industrial output to rebound from
                                                  recent lows

          New US government to focus on
                                                                      Strong demand from emerging
          creating up to 2 million jobs in
                                                                      Asian nations will be a factor in
          infrastructure, energy, medical
                                                                      reviving the global economy
          technology and infrastructure



                                             What Lies Ahead…
Easing of inflationary and liquidity pressures
Decline in commodity and oil prices leading to a tax break stimulus
Recovery of industrial output by end 2009, despite lower Automotive growth
Consumers activity, aided by fiscal stimulus, will boost industrial output, ultimately aiding recovery
Companies to focus on better & more productive means of getting products & services to their customers

                                                                                                          4
Focus Points

1
1          Current Economic Scenario


2
2          World and Asia Pacific Rail Market – An Overview
           World and Asia Pacific Rail Market – An Overview


3
3          Current Trends in Railway Industry


     ii        Passenger Movement Trends (current and expected trends)


    ii
    ii         Freight Movement Trends (current and expected trends)

    iiii
      ii       Technology Trends (current and expected trends)


4
4          Market Dynamics (Drivers and Challenges)



5
5          Opportunities for the Rail Industry Participants


                                                                         5
World Rail Market revenues stood at US$284.24 billion in
2007 – Asia Pacific accounted for 23.9% of it
Passenger and freight services contributed 57.2%, rolling stock 19.0%, rail infrastructure, 14.5%, rail control systems
9.1% of total revenue

Till 2012, the world rail market is expected to exhibit an annual growth of 1.5% to 2.0%



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



                                                                                             Rail Control
         Rail Service               Rolling Stock            Rail Infrastructure               Rail Control
          Rail Service                Rolling Stock           Rail Infrastructure              Systems
      ($162.80 billion)            ($54.05 billion)           ($41.38 billion)                  Systems
        ($162.80 billion)            ($54.05 billion)           ($41.38 billion)           ($26.01 billion)
                                                                                             ($26.01 billion)



Asia Pacific is one of the highest contributors to world rail revenues in 2007, accounting for 23.9% of the world rail
market, worth US $67.9 billion

Asia is the most important growth market in the long term, with an estimated annual growth rate of 2% to 3%
Development of rail infrastructure and extension of routes in China and India to be major growth drivers for APAC rail
                                                                                                  Source: Frost & Sullivan
market
                                                                                                                        6
Rail Market Segmentation
The rail market in Asia Pacific comprises of four market segment -

                                                                             Rail Control System
                                                                              Rail Control System
          Rail Locomotive / /
           Rail Locomotive                     Rail Equipment
                                                Rail Equipment                  / /Technology
                                                                                    Technology
          Coach Suppliers
           Coach Suppliers                       Suppliers
                                                   Suppliers                       Suppliers
                                                                                    Suppliers

                           Railway Supply Chain Members   Railway Supply Chain Members




                                             RAILWAY
                                              RAILWAY
                                           ASSOCIATIONS
                                           ASSOCIATIONS
                                    Railway Segments                Railway Segments




        Passenger and
         Passenger and              Rolling Stock &
                                     Rolling Stock &                Railway
                                                                     Railway               Rail Control
                                                                                            Rail Control
       Freight Services
        Freight Services            Rail Equipment
                                     Rail Equipment              Infrastructure
                                                                  Infrastructure             System
                                                                                              System


       Handle passenger          Represent all powered       Manages all railway         Is a centralised rail
          and freight            & unpowered vehicles       related infrastructure          traffic control
          movement               that move on a railway           operations                    system

                                                                                                                 7
Focus Points

1
1          Current Economic Scenario


2
2          World and Asia Pacific Rail Market – An Overview


3
3          Current Trends in Railway Industry
           Current Trends in Railway Industry

     ii        Passenger Movement Trends (current and expected trends)


    ii
    ii         Freight Movement Trends (current and expected trends)

    iiii
      ii       Technology Trends (current and expected trends)


4
4          Market Dynamics (Drivers and Challenges)



5
5          Opportunities for the Rail Industry Participants


                                                                         8
Passenger Transportation Trends

                 Country                           Passengers Transported (Billions)   Railway Network (Kilometers)
Japan                                                                  8.78                      29,682
India                                                                  6.29                      63,332
China                                                                  1.36                      76,600
South Korea                                                            0.99                       3,472
Australia                                                              0.62                      33,819
Thailand                                                               0.05                       4,071
Malaysia                                                               0.04                       1,699
Note: Figures are as of March 2008 for the year 2007 (March 2006 to April 2007)


    Japan has the highest number of passenger-to-rail network length ratio with 295,622 passenger per
    kilometer.
    China, though has vast network, has low passenger-to-rail network length ratio of just 16,450
    passenger per kilometer.
    South Korea’s rail network though considerably smaller, has the 2nd highest rail passengers-to-rail
    network length ratio of 285,138 passengers per kilometer in 2008
    India has the 2nd longest rail network and stands 2nd in passenger transported in 2008


                                                                                                                      9
Growth in Key Rail Markets across Asia Pacific
India, China and Japan expect the highest growth rates in the rail industry

                          Main Line Service                    Urban Transport Service


                  Passenger growth of 8.5% in 2008        Significant growth potential in Beijing,
                  Significant growth potential for High   Shanghai, Guangzhou & Shenzhen
                  Speed trains (200-250 Kms/hr)           Over 1,700 Kms of urban line by 2015



                                                          Significant growth potential in Delhi,
                  Passenger growth of 12.9% in 2008       Mumbai and Bangalore urban cities for
                  Significant growth potential for High   Metro rail and Monorail services
                  Speed trains (200 Kms/hr)               Available urban market of 320 million
                                                          people across India (est. 2008)




                                                          Comparatively lower growth for urban
                  Passenger growth of 3.0% in 2008
                                                          rail systems
                  Moderate growth potential for Very
                                                          14 key private operators, operating
                  High Speed trains (over 300 Km/hr)
                                                          urban trains over 2,000 Kms



                                                                                                10
Projected Growth in Passenger Services

                Significant rail network expansion expected across in India, China, Japan, Australia,
Rail Network    Malaysia and Thailand
 Expansion
                Rail network expansion projects throughout the region, to focus largely on Main Line
                Services


                High Speed to Very High Speed rail service projects to be implemented in China and
  Service
Enhancement     Japan
                Rail infrastructure revamping includes advanced coaches, electrification, new signaling
                systems to the immediate focus areas


                Trans-Asia railway network to be setup by 2015 across four regions: Southeast Asia,
International
Rail Networks   Northeast Asia, Central Asia-Caucasus and South Asia-Iran-Turkey
                Kuala Lumpur-Singapore high speed rail network post 2012 jointly developed by the
                Ministry of Transport, Singapore & Malaysia



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



                                                                                                          11
Focus Points

1
1          Current Economic Scenario


2
2          World and Asia Pacific Rail Market – An Overview


3
3          Current Trends in Railway Industry
           Current Trends in Railway Industry

     ii        Passenger Movement Trends (current and expected trends)


    ii
    ii         Freight Movement Trends (current and expected trends)

    iiii
      ii       Technology Trends (current and expected trends)


4
4          Market Dynamics (Drivers and Challenges)



5
5          Opportunities for the Rail Industry Participants


                                                                         12
Poll Question 1


Considering that Rail is assumed to be a cheaper mode of freight
transportation, do you think the current recession would have a positive
impact on growth of the rail freight market across Asia Pacific?


          Yes - significant impact
          No - no impact at all
          Negative – negative impact similar to other sectors
          No answer – cannot conclude




                                                                       13
Freight Transportation Trends

Country                                          Freight Transported (Million ton per Km)   Railway Network (Kilometers)
China                                                                   2379.70                       76,600
India                                                                   726.00                        63,332
Australia                                                                46.04                        33,819
Japan                                                                    25.32                        29,682
South Korea                                                              11.61                         3,472
Malaysia                                                                  1.36                         1,699
Note: Figures are as of March 2008 for the year 2007 (March 2006 to April 2007)


   China with highest freight traffic, transports ~ 31,000 tons per kilometer, followed by India with ~
   11,400 million tons per kilometer
   Japan the most developed passenger rail network, has relatively low freight volume with 853 tons per
   kilometer
   Across the region, Coal, minerals, steel, fertilizers, chemicals, petroleum products, agricultural
   products are most transported commodities through rail – Coal, Crude Oil and steel make up the bulk
   of the rail commodities
   Sustained economic growth in China and India to facilitate steady rail freight volume growth

                                                                                                                           14
Key Asian Rail Markets – Composition of Freight Transported

        Countries                      Top 3 commodities Transported                          % of Freight

China                        Coal, Iron ore, Steel and Food grains                               72%

India                        Coal, Iron ore, Steel and Chemicals                                  87%

Australia                    Crude Oil, Steel, Livestock                                          69%

Japan                        Automobiles, Auto parts, Cement                                      70%

South Korea                  Coal, Steel, Automobiles                                             90%

Thailand                     Cement, Chemicals, Fertilizers                                       71%

Malaysia                     Cement, Containers, Petroleum                                        83%


Cement & Steel (for construction), Coal, Iron ore and Chemicals are key commodities transported through
railways in the Asian region

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

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



                                                                                                             15
Expected Developments - Rail Freight Services

China
A high-speed passenger rail link under construction from
Beijing to Qingdao, and Shanghai
The total length of railways in operation expected to                                                            Japan
                                                                                 China
reach 100,000 kilometers by 2020                                                                    South
                                                                                                    Korea

                                                                      India

India                                                                         Thailand


Building dedicated lines for freight trains connecting Delhi,                            Malaysia

Mumbai and Kolkata (north-west-east)
                                                                                  Indonesia
Constructing dedicated freight corridors in north-south, east-west,
east-south by 2010
Open up rail freight segment for private operators                                                   Australia



Thailand

Revamp rail freight infrastructure by 2015 for carriages, track
lines, handling personnel and so on
Strengthen freight rail link from Bangkok to Malaysia by 2012

                                                                                                                         16
Expected Developments - Rail Freight Services

Australia
Government to invest AUD$165.0 million to upgrade rail
connections in southern Australia
Construction of a new dedicated freight line into Sydney                                                     Japan
                                                                             China
called the Southern Sydney Freight Line, which began                                            South
in 2007 is expected to allow for the operation of freight                                       Korea

trains into Sydney.                                               India

                                                                          Thailand

Malaysia                                                                             Malaysia

Rehabilitation of 134 kilometers of railway line linking in the
                                                                              Indonesia
interior of Sabah state (east Malaysia) to boost trade in East
Malaysia
Expand intercity freight line network between Penang, Kuala
                                                                                                 Australia
Lumpur and Johor


Indonesia

PT Kereta Api to expand cargo capacity and operate more freight
trains in 17 corridors in Java, Sumatra, and Borneo, by 2010


                                                                                                                     17
Focus Points

1
1          Current Economic Scenario


2
2          World and Asia Pacific Rail Market – An Overview


3
3          Current Trends in Railway Industry
           Current Trends in Railway Industry

     ii        Passenger Movement Trends (current and expected trends)


    ii
    ii         Freight Movement Trends (current and expected trends)

    iiii
      ii       Technology Trends (current and expected trends)


4
4          Market Dynamics (Drivers and Challenges)



5
5          Opportunities for the Rail Industry Participants


                                                                         18
Poll Question 2


Which application of technology is likely to witness the maximum
demand for railways?

           Real-Time Communication
           E-Ticketing & Ticket Confirmations
           Integrated CCTV Security System
           Signaling System




                                                                   19
Need for Technology Improvement –
 Example of an accident and communication failure


      Incident Occurs            Information Gathering         Incident Response   Incident Solved      ?


                                          Focus on “getting trains
                                            moving”; Passengers
                                        information a lower priority
 Information of the incident’s                                                         Fear of complaints and
impact on passengers not well                                                            lack of information
 captured & handled verbally               Group calls to multiple                     means, officials do not
                                             stations in order to                       make announcements
                                         communicate the incident,
                                            wastes precious time
                                                                                       3 to 4 lines of verbal
                                                                                      communications before
                                                                                       train driver & guards
                                                                                        receive information


                                               Passenger Address
                                             Equipment on the train
                                               has poor audibility


                                                                                                            20
Need for Technology Improvement –
What is driving the demand for technology?


                         Key Drivers for Technology Improvements


                                                                        Reliable &
                                                   Real Time                                Value Added
       Safety                Security                                    Efficient
                                                Communication                                 Services
                                                                         System


                                                                         Eliminate
                                                    Accurate
   Accident free                                                       downtime and        For passengers
                          For Passenger          information to
   rail operation                                                         ensure             comforts &
                            & Freight            passengers &
       system                                                            profitable         connectivity
                                                    operators
                                                                         operation

   Communication           Terrorist threat     Real time feedback     Efficient traffic   Ticketing, mobility
 application between         detection,           on arrival time,   management while      coverage, Traffic
  stations, drivers &    evacuation system,       freight tracking   achieving maximum       management
  other interlink rail    security of freight                                trip
   network security
       personnel




                                                                                                                 21
Technology Assistance for Railways

                                                                                        Efficient train communication
                            Passenger                           Freight
                                                                                      system and prevention measures
    Safety          Avoid derailments, collisions     Real-time communication for      in rail operation will reduce rail
                    and real-time communication        effective route information
                                                                                         accident probability to zero


                            Passenger
                                                                Freight               Rail security management system
   Security          People scanning, CCTVs &                                          are commonly integrated with
                                                      Scanning technology, Cargo &
                   communication (driver-stations-
                                                        coach tracking and details     passenger information system
                           control room)




                            Passenger                 Communication System
  Real Time                                                                             Real time communication is the
Communication      Access to schedules & real-time     Accuracy to enable tracking,       key to modern rail system
                             information              security & traffic management




                            Urban Line                        Main Line
                                                                                      Efficiency of urban train operations
   Reliable &                                                                         will not only translate to profitability
Efficient System     Reliable, efficient, robust to   High speed technology, better    to the operator but will positively
                      include disturbance time              all-round service                  impact the economy




                                                                                                                             22
Technology Applications in Railways –
 For Passenger and Freight Transportation
                                                                           Benefits for Railways

            Online ticketing / e-ticketing system / mobile ticketing    Enhanced on-board connectivity

            Waiting list confirmation via mobile phones
Passenger                                                               High passenger safety & security
Transport   On-board wireless broadband internet access
                                                                       Convenient ticketing & confirmation
            On-board passenger information & communication

            On-board CCTV Cameras for passenger safety                       Added revenue source



            Status alerts to consignor & consignee on consignments     Establish rail as a freight transport
                                                                                       mode
            Freight Management System for effective online e-
 Freight    booking & e-payment                                        Enhanced freight safety & security
Transport   Online information access of freight’s schedule
                                                                       Facilitate Multi-modal transportation
            Freight carriage monitoring & control systems

            On-board CCTV Cameras for freight security                   National to international freight




                                                                                                             23
Focus Points

1
1         Current Economic Scenario


2
2         World and Asia Pacific Rail Market – An Overview


3
3         Current Trends in Railway Industry


    ii        Passenger Movement Trends (current and expected trends)


    ii
    ii        Freight Movement Trends (current and expected trends)

    iii
    iii       Technology Trends (current and expected trends)


4
4         Market Dynamics (Drivers and Challenges)
          Market Dynamics (Drivers and Challenges)



5
5         Opportunities for the Rail Industry Participants


                                                                        24
Railway Industry Market Drivers – Passenger Transport

   KEY DRIVERS FOR GROWTH                                      6.8%

                                                                            2.5%
Growth of GDP and resulting rapid industrial
growth

                                                             Urban          Main
Rail transport price-to-cost factor (cheaper                  Line          Line
mode of transport)
                                                Urban Transport Growth Drivers

                                                Need for urban transport systems is increasing
High urbanization leading to major road         faster than main line services
congestion problems
                                                Growth is mainly through ratio of passengers-
                                                transported-per-kilometer
Increased private participation in Govt.
managed rail markets                            Main Line Growth Drivers
                                                Growth in locomotives, rail control systems,
Political / Govt. support for railways across   electrification and use of IP-based applications
countries                                       for enhanced services



                                                                                              25
Railway Industry Market Drivers – Freight Transport

                                               Trans Asia Railway Link
      KEY DRIVERS FOR
          GROWTH
                                               Trans Asia Railway Link expected to increase
                                               international freight movement by 2015
Increase in regional and global trade          Asia Pacific countries covered – Singapore,
within the Asia Pacific region
                                               Malaysia, Thailand, Cambodia, Vietnam, China,
                                               Bangladesh, Myanmar, India and Pakistan
Rail transport price-to-cost factor (cheaper
mode of transport)


High urbanization leading to major road        Singapore – Kunming Rail Link
congestion problems
                                                To form a continuous rail link from Singapore to
                                                China
Increased private participation in Govt.
managed rail markets – better services          To facilitate multimodal transportation from
                                                Singapore

Demand for multimodal transport –               Project includes constructing railway stations
Rail a critical factor                          and related infrastructure such as freight depots




                                                                                              26
The Trans Asia Railway Network Map




                  Source: United Nations



                                           27
Railway Industry Market Challenges

 PASSENGER

              Rising railways accidents especially during
              peak hours
              Passenger safety issues due to vandalism
              and robbery on intercity and interstate trains
              Increase frequency of trains during peak
              hours and effectively manage it

                                                                            FREIGHT


                                                               Freight loading and unloading time,
OPERATIONAL   Lack of funds for Govt. rail operators           delays overall delivery time

              Lack of staff training initiatives to manage     Single   tracks   for   passenger   as
              advanced systems                                 freight services delay both service

              Lack of or no communication, time lag in         modes

              communication or too much communication          Government procedures slow down
              when an incident occurs – number of              decision making & implementation
              channels involved                                processes



                                                                                                   28
Country Specific Challenges for Rail Freight Market

              Railways in several Asia Pacific countries are subject to relatively strict government
              control

              Rail freight transport in several Asia Pacific countries is less popular than road
              transport



               Regions in the west of China do not have adequate links to the railway network




               Current level of investment in rail infrastructure is inadequate to cater to the
               rising demand

    India




               Japanese Railways have already reached saturation in terms of growth




                                                                                                       29
Focus Points

1
1          Current Economic Scenario


2
2          World and Asia Pacific Rail Market – An Overview


3
3          Current Trends in Railway Industry


     ii        Passenger Movement Trends (current and expected trends)


    ii
    ii         Freight Movement Trends (current and expected trends)

    iiii
      ii       Technology Trends (current and expected trends)


4
4          Market Dynamics (Drivers and Challenges)



5
5          Opportunities for the Rail Industry Participants
           Opportunities for the Rail Industry Participants


                                                                         30
Opportunities for Railway Industry
 High business opportunities for (rail) freight operators (who have ability to
 partner with the primary rail operator)
                                          Opportunities to target Logistics Service Providers

                                          Road congestion issues leading to higher operational
                                          costs for logistics companies
                                          Increased business opportunities for local providers in
                                          regional, global markets (Trans-Asia)
                                          Rising competency in technology industry to enhance
                                          productive for integrated rail logistics operations
                                          High business opportunities for (rail) freight operators
                                          (who have ability to partner with the primary rail
                                          operator)


Opportunities for Logistics Services       Opportunities for Technology Services
                                            Deployment of latest technologies to build supply
 Provide integrated and advanced            chain efficiency – Freight Management System
 warehousing      system      through       Integration of rail freight systems with other logistics
 container ports, inland container          systems to achieve efficient integrated multimodal
 depots and freight terminals               logistics (similar to the shipping / aviation industry)
 Multi-modal: Integration of Ocean-
 Rail, Air-Rail and Road-Rail services


                                                                                                     31
Opportunities for Advanced Technology in Railways


                            Urban rail as a freight transportation
                                            mode


                                                                      Example of an Urban Cargo Train in Zurich




Integrated communication                                             Managed services             (services
 and rail control systems                                               outsourced and managed by
      across borders                                                             experts)




                              IP-based applications from current
                                  GSM-R based technology


                                                                                                            32
THANK YOU




We Accelerate Growth
                       33
Next Steps

 Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep
 abreast of innovative growth opportunities
 (www.frost.com/news)

 Register for the next Chairman’s Series on Growth on 21 April 2009 (Tue)
 11am SGT: Investing in Your Company’s Growth Potential: Plotting Your Course
 Along the Growth Excellence Matrix
 ( visit http://www.frost.com/growthapac)

 Join us at a Growth, Innovation and Leadership 2009: A Frost & Sullivan
 Global Congress on Corporate Growth (visit www.frost-gil.coml)

 Request a proposal for a Growth Partnership Service to support you and your
 team to accelerate the growth of your company.
 (email apacfrost@frost.com)




                                                                                34
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           What would you like to see from Frost & Sullivan?

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Other?




                                                               35
Contact Us

    If you have questions or would like further information about anything we
    discussed, please send your query to the email provided below and we will
    get back to you shortly.




                         Alvin Chua
                         Account Manager
                         Automotive, Transportation & Logistics
                         DID: +65 6890 0997
                         Mob: +65 9199 4566
                         eMail: alvin.chua@frost.com




                                                                                36

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

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