Yellow Light for High-Speed-Train Deals in Asia

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Siemens, one of the big overseas suppliers to the mainland's rail industry, played a big role in the Maglev project in Shanghai, and in late 2004 won an order from the Chinese Railway Ministry to build 180 double locomotives in a contract valued at roughly $487 million at current exchange rates.

Decrease in China Sales?

More recently, it has received contracts for signaling and power systems on a new, high-speed, passenger rail line between Beijing and Tianjin expected to be completed ahead of the 2008 Beijing Olympic Games. And just last month, French engineering group Alstom was awarded a $4.75 billion government contract to supply 1,500 freight locomotives.

Japan's Kawasaki has also nailed contract work and, along with Canada's Bombardier and Alstom, has agreed to help Chinese rail companies improve their manufacturing know-how. Already China firms and the government are working on a domestically designed (the government owns the intellectual property rights) next-generation railway locomotive. For that reason, Nomura analyst Okazaki thinks that foreign "…sales to China will gradually decrease because the Chinese government aims to produce domestically."

Other high-speed railway projects in Asia are looking promising but will take time to develop—that is if they materialize at all. Last June, Malaysian infrastructure group YTL Corp proposed a high-speed train linking Singapore and the Malaysian capital, Kuala Lumpur. "What takes about four and half hours by road or 50 minutes by plane, you could do it in less than 90 minutes by train from central Kuala Lumpur to downtown Singapore," says YTL Chief Executive Officer Francis Yeoh,

There is even talk of extending the rail network to Bangkok and thereby connecting three major business hubs in Southeast Asia. Yet Malaysia and Singapore aren't on the best of diplomatic terms, and it could be years before such a project got government approval; and it would take even more time to design, test, and construct.

Reluctant to Spend Billions

Then there is India, a country with vast infrastructure needs not just for rail but also roads, shipping ports, and airports. The Japanese would love to export their Shinkansen technology into such a rapidly developing economy. But the Indian government isn't all that keen to spend the billions it would take to connect major urban centers in such a vast country.

"We don't need such fast trains as it's too expensive to lay those tracks all the way," says Rajiv Lall, managing director of the government's Infrastructure Development Finance Corp.—though he thinks a high-speed line between Mumbai and nearby Pune might make sense down the road.

Even companies with extensive business ties in the country, such as Siemens, which has built signaling and telecom systems for the New Delhi Metro, think the appetite for big-ticket, high-speed train networks is quite modest. "I would love to see the high-speed train happening in India, but it's not a priority for the country now," says V.B. Parulekar, executive vice-president with Siemens Transportation Systems in India.

Unlike these high-speed locomotives that represent the cutting edge of rail technology, the actual roll-out of these multi-billion systems is going to be slow going in Asia.

Click here for a slide show fo the the world's speediest trains

Bremner is the Asia Regional Editor for BusinessWeek
With Hiroko Tashiro in Tokyo, Moon Ihlwan in Seoul, Nandini Lakshman in Mumbai, and Assif Shameen in Singapore