Asia is embracing bullet trains like never before.
Singapore and Malaysia signed an agreement that will take a high-speed rail link to Kuala Lumpur by 2026. The long-envisioned plan, six years behind an earlier target completion date, follows a $5.5 billion project underway in Indonesia. India last year chose Japan to build a $15 billion network, its first.
Asian nations are modernizing their transport infrastructure while China has set up the world's biggest high-speed rail network. Japan has been running bullet trains for more than five decades now. As countries embrace the latest technology, it's also pitting Chinese and Japanese manufacturers of super-fast trains against rivals such as Siemens AG and Bombardier Inc.
"It's a good sign because generally investors are looking to see more inter-connectivity across Southeast Asia," said Alan Richardson, a Hong Kong-based fund manager at Samsung Asset Management. That "will help to provide greater resilience to, or less reliance on other developed economies and also should provide a more stable geopolitical environment with increasing inter-connectivity," he said.
The memorandum of understanding on the rail line was signed in the presence of Singapore Prime Minister Lee Hsien Loong and his counterpart Najib Razak in the Malaysian administrative capital of Putrajaya. The agreement will pave the way for final negotiations on the development and execution of the 185-mile line connecting Singapore and Kuala Lumpur. A tender for the project will be issued next year, Najib told reporters last week.
Last year, Singapore and Malaysia said they would reassess the 2020 target for the completion of the project because of the scale and complexity of the venture. Leaders of the two countries had announced in 2013 that the rail link may be completed by the end of this decade, with Najib calling it a "huge game-changer" that will transform the way the neighbors do business.
"The high-speed rail is a key bilateral project for both countries," Lee's office said in a July 18 statement. "The two governments' commitment to this project is a reflection of our strong bilateral ties and our continued efforts to deepen relations. When completed, the HSR will boost connectivity, strengthen economic ties and forge closer people-to-people linkages."
A joint project team will call for an international tender next month for a development partner to provide technical support to both of the countries, according to a statement from Malaysia's Land Public Transport Commission and Singapore's Land Transport Authority. It is too early to discuss the cost of the project, Najib said.
The high-speed rail line will trim the land journey between the two Southeast Asian cities to 90 minutes, from about five hours now. It will also challenge budget carriers such as AirAsia Bhd. and Singapore Airlines Ltd.'s Tiger Airways, which fly passengers from Singapore to Kuala Lumpur in about an hour. Trains will run at a top speed of more than 186 miles an hour, the two governments said.
"The Singapore-Malaysia sector has among the largest airline capacity within the region," said John Mathai, Bloomberg Intelligence's Singapore-based transport analyst. "A high-speed rail could service some of the traffic within that segment, reducing congestion at airports."
Asia's appetite for high-speed rail has also pitted Chinese rail giants such as CRRC Corp., and Japanese manufacturers Hitachi Ltd. and Mitsubishi Heavy Industries Ltd. against European rivals.
Japan, which built the world's first high-speed train more than half a century ago, is stepping up efforts to export its bullet-train technology to meet a pledge by Prime Minister Shinzo Abe to triple infrastructure exports to $284 billion by 2020. China, home to the world's biggest high-speed rail network, has identified the sector as one of 10 focus industries in a blueprint for economic development.
Japan aims to sell bullet trains to the project, and the government supports bids by its companies, Transport Minister Keiichi Ishii said in December. The country beat out China to secure a $15 billion rail project in India.
Chinese Premier Li Keqiang is leading his nation's overseas push by train equipment makers as part of the government's broader strategy to turn the country into an advanced industrial nation. He has targeted emerging markets in Africa, Latin America and Southeast Asia for rail-related orders, while also bidding for high-profile contracts in the developed world.
In October, a subsidiary of China Railway Group Ltd. partnered with local companies to win the rights to build a $5.5 billion high-speed railway line in Indonesia, the country's first.
Information for this article was contributed by Chong Pooi Koon and Manirajan Ramasamy of Bloomberg News.
SundayMonday Business on 07/24/2016