Railways: Open season on tendering

The negotiators working on an EPA/FTA between the European Union and Japan still have plenty of work ahead. But at least one of the EBC committees is already reaping a tangible benefit from the on-going free trade talks. The Railway Committee has long recommended that Japan’s rail-industry projects — in particular, ones that call out to foreign vendors — should be opened to tender.

The committee is finally seeing its efforts produce results. In English-language press releases since last year, the East Japan Railway Company (JR East) has offered international tenders, inviting suppliers to participate in the bidding process. In addition, JR East and the two other JRs — West Japan Railway Company (JR West) and Central Japan Railway (JR Tokai) — along with Tokyo Metro subway lines, have launched websites disclosing their procurement activities. Rail suppliers from Europe and elsewhere outside Japan are free to sign-up and introduce themselves on the sites, with the aim of becoming listed manufacturers.

“Basically, this is due to the FTA,” says committee chairman Shigetoshi Kawahara.

Japanese and European officials made a deal to make this happen. Both sides are signatories to an agreement on government procurement under the World Trade Organisation. But Japan negotiated to have the three JR companies exempted from that agreement, under a “safety clause”. The Europeans saw the move as an attempt to shield Japan’s rail industry from foreign competition. They dropped their objection to the delisting last summer, on the condition the JR companies become more open with their procurement.

“They promised to offer more tenders and to be more open and transparent,” Kawahara explains.

The new openness is embodied in a couple of recent news releases. In one dated 28 November last year, JR East announced an international tender to supply 18 diesel cars for the Hachinohe Line. The service, which runs along the Pacific coast of the Tohoku region, was damaged in the 2011 earthquake-tsunami.

“JR East is looking forward to receiving many applications from all over the world”, the release states.

The committee welcomes the new attitude. Even so, Kawahara sees it as more of a gesture than an opening of the floodgates. He points out that the two tender offers so far have failed to provide much to vendors outside Japan.

The problem with the Hachinohe Line project is its small scale. “Eighteen diesel cars is nothing,” the committee chairman says. “It’s not like [a foreign vendor] would have the trains already made. They would need to check specifications, and the [track] gauge is different. Lots of modifications would be needed.

“If it were 180 cars, they might consider it.”

Indeed, no foreign vendors participated in the tender.

Deadlines are another problem. The project gives interested companies three months to file their applications. A more recent tender offer, dated in May, involves 62 cars, making it more attractive in terms of scale — but gives applicants a mere two months.

“That’s not very comfortable for foreign manufacturers, who have to make all the various calculations,” Kawahara says. “JR East is showing openness, but it’s also not being very helpful.”

Still, the committee chairman sees the offers as symbolising the start of what promises to be a growing trend towards openness.

The committee has long had a fairly busy advocacy agenda. It holds regular meetings that bring members face to face with officials from the JR companies, plus Tokyo Metro. On 31 August, members plan to board a bullet train to Mishima, Shizuoka prefecture, and meet with their Japanese industry counterparts at an office of JR Tokai.

Topping the agenda will be certification issues. Specifically, the committee members plan to renew their call for “conformity assessment”. This is a process demonstrating that specified requirements relating to a product, process, system, person or body are fulfilled.

“In Japan, if you look at the electrical appliance or medical device industries, you have conformity assessment schemes in place. But not with railways,” committee member Roberto Lorenzoni says.

For instance, the three JR companies maintain separate, distinct and opaque testing and product approval procedures for components. The committee has been proposing they work on ways of eventually accepting each other’s test results, so that duplicate testing is eliminated and manufacturers can easily acquire technical information.

“We want to ask them to sit together, to understand how conformity assessment can be used to their benefit, [and] to try to align their requirements,” says Lorenzoni, explaining his hopes for the August meeting.

The proposal is about creating a framework of transparency for testing requirements of suppliers’ products. When a JR company tests and accepts certain components from manufacturers, they would disclose, what Lorenzoni calls, “evidence” — or testing data — that would allow the other two JRs to accept the results without having to do their own testing.

The August meeting won’t be the first time the committee makes this proposal. But members are hoping that their call for creating a more technically standardised domestic railway industry will eventually gain traction.

“I don’t think they are going to agree immediately; it will take years,” Kawahara says. “But if we don’t start saying something, it’s never going to happen.”

Key advocacy points

Open integrated railway systems – The government should promote such systems, which would give manufacturers the freedom of devising their own optimal solutions, rather than having to adhere to pre-set specifications set by rail operators.

Conformity assessment and mutual recognition – The government should encourage rail operators to identify minimum common requirements.

Tenders – Rail operators should follow the example of JR East and start using tendering, an approach that would lead to competition in Japan’s domestic market.

© Japan Today