Possibilities for Asia’s rail network are great but hurdles exist

As emerging markets mature and regionalisation trends take hold, railroads are under review. Historically Asian railroads operated under government control and mostly transported bulk commodities but now, as domestic demand and regionalisation gather pace, the potential to transport other goods by this means is being explored.

For example, India’s Indian Railway has introduced a plan to set up what it calls “The Logistics Corporation of India”, a proposed one-stop solution for all its logistics needs involving both road and rail. The proposal would involve a public-private partnership across 28 cities where traffic volume is more than 2m tonnes a year. Although the plan appears to be a good move, it is just that, only a plan at this point. India’s government is well-known for bureaucratic red-tape and combined with the country’s existing infrastructure problems it is questionable how successful this current plan will be.

Meanwhile, despite spinning off China rail from the government’s Ministry of Railways, troubles persist. According to local press, rates have been increased “unfairly and dramatically”. This may be one of the affects from the lifting of official controls on freight rates. In February, the China Rail Corporation gave each division it oversees, including Zhengzhou Railway and Guangzhou Shenzhen Railway, the power to set rates based on supply and demand.

According to one financial report, this hike in rates combined with the economic slowdown in the country is expected to reduce rail freight volumes at least in the short-term. Indeed, as noted in Ti’s Dashboard Chart – China: Rail Freight Volumes, for the first four months of this year, in terms of 100m ton-km, rail freight is down almost 6.0%.

Recently published May rail freight data suggests only slight improvements. While volume increased month-to-month, the downturn as recorded for the past few months persists.

So, yet another new plan has been announced. Effective July 1 the China Railway Corporation announced plans to boost the country’s main lines and cargo services. Included in the plan is the addition of 121 trains to improve capacity and link Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Harbin, Shijiazhuang and Taiyuan.

Also, 118 freight trains will operate across the country including three trains between China and Europe with top speed of 120 mph.

Another interesting addition involves e-commerce. The China Railway Corporation plans to open six one-stop direct cargo trains between Beijing, Shanghai, Guangzhou and Shenzhen to move goods more quickly.

China had a combined railway network of over 100,000 km in total length and plans to increase the total railway mileage to 120,000 km by 2020. While expanding the network has proven relative easy, privatisation of the network is still a “work in progress” and will likely take considerably longer; particularly in a country that is accustomed to government control of such entities.

Despite current bumps, railroads will play a bigger role in Asia’s road freight network. Investments in infrastructure, encouragement to work jointly with other modal transports and loosening of government control will be needed to allow rail to grow. Such moves would allow rail to develop into a complete freight transport option, connecting points across the region and perhaps beyond.