US President Barack Obama has released a strategic plan to develop high-speed rail in the US. A Visionfor High-Speed Rail in America identifies 10 potential corridors in the country. BMI, however, isconcerned for the feasibility of the ambitious plans considering the level of cost and planning associatedwith developing high-speed rail. Obama announced the plans to develop a network of high-speed railroutes across the country in an attempt to revolutionise the US transport network. The project is hoped toboost the economy, create jobs, reduce dependence on oil and make transport more 'green' in America.
The proposal includes 10 high-speed rail corridors, crossing more than 20 states and plans to upgrade theexisting high-speed line. In the federal stimulus package, US$8bn has been allocated to developing highspeedrail; an additional US$1bn will come from the budget each year, proposed under the FY2010budget, for the next five years to support the plans. However, there are concerns, which BMI echoes, thatthis is not nearly enough funding. The US currently has only one high-speed line: Amtrak's AcelaExpress, which links Boston to Washington DC via New York. However, the line tends to travel slowerthan the 125mph needed to classify it as 'high speed'. This is compared to 1,180miles of high-speed rail inFrance, a country roughly the size of Texas. There are plans underway in California already to develop ahigh-speed railway stretching 800 miles, linking San Francisco to Los Angeles. That project alone isestimated to cost around US$45bn, far more than the entire amount allocated from the federal stimulus for10 corridors, indeed the cost for all 10 would amount to around half of the federal stimulus package. Thiscomparison highlights the fundamental financial issues that BMI warns of. There are plans to involve theprivate sector in the proposal, something BMI believes will be necessary to get the projects on track. Bestestimates for the California rail put full operation in 2020, and this is a project that has already been inplanning for some time. The strategic plan for the development of high-speed rail will concentrate onprojects that can be completed quickly and provide job creation sooner rather than later. In light of this,BMI believes that it may be decades before some of the planned corridors come to light, if at all.
This latest issue of BMI’s US Transport Report predicts that over the 2009-2013 forecast period, overallfreight carried across all transport modes will grow by an annual average of 1.2%, measured in milliontonnes-km (mntkm). This will lag predicted economic growth which we see averaging 1.4%. Bothnumbers have been pulled down by the recession that we see as being the dominant story of 2009-2010.
By transport mode, we see growth being led by railfreight (1.6% per annum), followed by airfreight(1.4%), road haulage (1.2%), shipping (0.9%) and pipeline throughput (0.7%). Companies will bemonitoring the fall in demand for freight to assess when the bottom of the cycle has been reached andwhen to anticipate a possible recovery. We expect transport and communications GDP to grow toUS$1.143trn by 2013, representing 6.6% of US GDP.
The protectionist trend in US freight transport first hit the headlines early in 2006, when US Congressbroke ranks with President George W. Bush and successfully opposed the sale of a controlling interest insix key ports (including New York, Philadelphia, and Miami) to Dubai Ports World (DPW) on securitygrounds. Under intense political pressure DPW, which acquired the ports through its takeover of LondonbasedPeninsular & Oriental (P&O), then agreed to sell its US interests to a third party, an AmericanInternational Group (AIG) unit. Similar protectionist trends have shown up in the aviation sector, whereCongress and trade unions tried to hold back plans to give foreign investors a greater say in the running ofUS-based airlines. At the beginning of 2009 another international player, Deutsche Post-owned DHL,withdrew from the domestic US express delivery market after years of losses. The exception, perhapsbecause it has gone largely unnoticed, has been road transport, where a series of foreign toll-roadoperators have been buying large stakes in US roads. But here too there are signs of greater caution. BMIbelieves the new government will be under continuing pressure to take a protectionist stance on a range oftrade and transport issues, but since taking office has shown itself minded to hold back from moving farin that direction.
As the largest economy in the world, it could be argued that there is already enough internally-generatedcompetitive drive in the US freight business. BMI disagrees, taking the view that even major UScompanies could improve their performance by being exposed to greater external competition. Major USairlines have, despite some exceptions and recent improvements, piled up massive losses and have been inand out of bankruptcy protection. There has been a notorious lack of new investment in the country’spipeline and refinery infrastructure, exposed during Hurricane Katrina.
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