INTERVIEW-IBM opens China rail centre, eyes $731 bln in spending
* Opens IBM's first rail innovation centre
* Sees opportunities in China's $731 bln railway spending
* Eying joint ventures, other cooperative arrangements
By Michael Wei and Kirby Chien
BEIJING, June 11 (Reuters) -IBM's (IBM.N) first rail innovation centre will help it tap into China's 5 trillion yuan ($731 billion) spending in the sector, the firm said on Thursday at the centre's official opening.
The products and services developed at the centre for China also could be applied to markets around the world, said Keith Dierkx, the director of the Global Rail Innovation Centre, which opened in Beijing on Thursday.
"If you can build them for China, everything else is easier," Dierkx told Reuters in an interview.
IBM is working extensively with China's Ministry of Railways on projects dealing with system optimisation, digital video surveillance and asset management programs, he said, adding that IBM hopes the initial advisory role will develop into other commercial opportunities.
"There are potentially joint-venture types of things that could be done," he said.
China's planned investment over the next two years could make up more than half of the world's total railway equipment market, consisting of mostly rolling stock and wagons, according to consultancy McKinsey & Co.
The rising populations of the world's major cities are straining transportation networks and energy resources, forcing state planners to consider building smart and efficient infrastructure to cope with the challenges, Dierkx said.
IBM commissioned a report two years ago on railroads as investors such as Warren Buffett took big stakes in Northern Santa Fe Corp BNI.N and Union Pacific Corp (UNP.N), and knew that "something was going to happen" in the industry, Dierkx said.
"Rail obviously has a high level of focus for IBM," he said, without detailing the sector's contribution to IBM's business.
Railroads were not good investments for a long time, but now investors realise railways can ease urban traffic congestion, improve fuel efficiency and reduce carbon emissions, he said.
IBM said in March that Netherlands Railways was using IBM products to match schedules of more than 4,800 trains per day with forecasts of passenger traffic across its system.
For its part, China plans to spend $731 billion until 2020, adding 41,000 km
(25,480 miles) to its already massive rail network, as the government tries to boost domestic demand and ease strains on a jammed system. [nPEK280781]
Beijing has also been spending billions to build out its air and water transport networks, hoping to improve access to China's vast and underdeveloped inland regions. "In terms of their commitment and in terms of their vision, they intend to be a global leader," said Dierkx, referring to Beijing's ambitious plans to modernise its rail network.
IBM will be looking at a broad range of collaborative efforts with China in the rail sector, starting with the new centre and a focus, at least initially, as an adviser.
McKinsey said the railroad industry is the heart and soul of China's economic development, and the severe winter storms last year that paralysed a large swath of the country's rail system was a wakeup call.
"China needs greater efficiency and reliability in its railway system," said Evan Auyang, an associate partner at McKinsey.
About half of China's railway system is dedicated to hauling coal -- the source of about 75 percent of the country's electricity -- while 90 percent transports bulk cargo.
McKinsey reckons that foreign commercial participation in China's railway system is only about 1.5 percent currently and even domestic private investment is only 5 percent, percentages that could rise sharply as Beijing modernises its rail network.
(Editing by Ken Wills)
($=6.83 yuan)
((michael.wei@thomsonreuters.com; +8610 6627 1003; Reuters Messaging: michael.wei.reuters.com@reuters.net))
((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com)) Keywords: IBM CHINA/RAILCENTRE
(C) Reuters 2009. All rights reserved. Republication or redistribution ofReuters content, including by caching, framing or similar means, is expresslyprohibited without the prior written consent of Reuters. Reuters and the Reuterssphere logo are registered trademarks and trademarks of the Reuters group ofcompanies around the world.nPEK11054
- Tweet this
- Link this
- Share this
- Digg this
- Reprints
Follow Reuters