competitiveness inthe global environmental technology and services...

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Pc-kAW -5 If'7 DENNIS A. RONDINELLI U.S. CompetitiveneSs in the Global Environmental Technology and Services Industry Environmental management is rapidly becoming an important worldwide industry in which the Unit- ed States has developed strong global competitive advantages. Currently, environmental-protection equipment is one industry in which the United States has attained a positive balance of trade by export- ing far more than it imports. This industry will become more important in the future because the global market for environmental technology and services will continue to expand rapidly over the next decade. The Organization for Economic Co- operation and Development (OECD) estimated that the worldwide market for environmental equipment and services reached more than $200 billion in 1990 and could increase to about $300 billion by the year 2000.1 International Finance Corporation projec- tions indicate that the global market for environ- mental equipment and services - only one segment of the environmental management market - could grow from $300 billion to $600 billion by end of the 1990s if current demand accelerates and gov- ernments around the world adopt and enforce more stringent environmental-protection regulations.' Although the United States claims a strong position in the global environmental market, the competitiveness of U.S. environmental goods and services industry is beginning to weaken in some re- gions. Noting that competition - especially from Japanese, German and other European compa- nies - has become more fierce in recent years, the U.S. Congressional Office of Technology Assess- ment(OTA) reports that "the U.S. environmental in- dustry's overall international performance is mixed. In many foreign markets, U.S. firms remain com- petitive but not dominant; in other areas, the U.S. position has eroded." 3 The competitive position of U.S. firms has become weaker, for example, in the environmentally related capital goods and physical- infrastructure segments in Asia and the Pacific Rim, one of the world's fastest growing markets. At the same time, Japanese and European firms are be- ginning to penetrate the United States market. The OTA notes that foreign-owned companies now are the ten largest manufacturers of wastewater treat- ment equipment in the United States. To maintain and increase their competitive. ness, United States companies must learn how to explore foreign-market opportunities and to follow through with market leads more effectively. Match- ing global-market potential with the competitive ad- vantages of U.S. companies, however, will require coherent and systematic efforts by entrepreneurial Dennis A.Rondinelli isGlaxo Distinguished International Professor of Management at the Kenan-Flagler Business School and director of the Center for Global Business Research at the Kenan InstituteofPrivate Enterprise, University of North Carolina at Chapel Hill, North Carolina, U.S.A. BUSINESS & THE CONTEipORARY WORLD .2 1995 119

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Page 1: CompetitiveneSs inthe Global Environmental Technology and Services Industrypdf.usaid.gov/pdf_docs/PCAAA547.pdf ·  · 2010-07-20CompetitiveneSs inthe Global Environmental . Technology

Pc-kAW -5 If7

DENNIS A RONDINELLI

US CompetitiveneSs inthe Global Environmental Technology and Services Industry

Environmental management israpidly becoming animportant worldwide industry in which the Unit-ed States has developed strong global competitiveadvantages Currently environmental-protectionequipment isone industry in which the United Stateshas attained a positive balance of trade by export-ing far more than it imports This industry will become more important in the future because theglobal market for environmental technology and services will continue to expand rapidly over the next decade The Organization for Economic Co-operation and Development (OECD) estimated that the worldwide market for environmental equipmentand services reached more than $200 billion in 1990and could increase to about $300 billion by the year20001 International Finance Corporation projec-tions indicate that the global market for environ-mental equipment and services - only one segmentof the environmental management market shy could grow from $300 billion to $600 billion by end ofthe 1990s if current demand accelerates and gov-ernments around the world adopt and enforce morestringent environmental-protection regulations

Although the United States claims a strongposition in the global environmental market thecompetitiveness of US environmental goods and

services industry isbeginning to weaken in some reshygions Noting that competition - especially fromJapanese German and other European compashynies - has become more fierce in recent yearsthe US Congressional Office of Technology Assessshyment(OTA) reports that the US environmental inshydustrys overall international performance ismixed In many foreign markets US firms remain comshypetitive but not dominant in other areas the US position has eroded 3 The competitive position ofUS firms has become weaker for example in theenvironmentally related capital goods and physicalshyinfrastructure segments in Asia and the Pacific Rim one of the worlds fastest growing markets At the same time Japanese and European firms are beshyginning to penetrate the United States market TheOTA notes that foreign-owned companies now arethe ten largest manufacturers of wastewater treatshyment equipment in the United States

To maintain and increase their competitive ness United States companies must learn how toexplore foreign-market opportunities and to followthrough with market leads more effectively Matchshying global-market potential with the competitive adshyvantages of US companies however will requirecoherent and systematic efforts by entrepreneurial

Dennis ARondinelli isGlaxo DistinguishedInternationalProfessorofManagement at the Kenan-Flagler BusinessSchooland directorofthe Center for GlobalBusiness Research at the Kenan InstituteofPrivate Enterprise Universityof North Carolina at Chapel HillNorth Carolina USA

BUSINESS ampTHE CONTEipORARY WORLD 2 1995 119

DENNIS A RONDINELLI

firms federal and state governments foreign trade and investment organizations as well as industry as-sociations to more actively promote business linkshyages between US companies and users of environshymental technology and services abroad US tech-nology for water supply wastewater treatment andsolid and hazardous waste disposal for example is as good as or better than Japanese German British or French technology Often the major problem withUS technology is that it may be too advanced or too costly for many foreign customers especially in de-veloping and emerging market countries where the demand isgrowing rapidly US companies must be-come more concerned with adaptingUS technolo-gy to local needs and financial capabilities indevel-oping and emerging market countries

Most small- and medium-sized US environ-mental firms do not know how to compete in for-eign markets New efforts at information dissemina-tion training institutional development and facili-tation of business transactions must be made to helpUS environmental companies enter and competeeffectively abroad Small- and medium-sized com-panies especially require assistance in (1) identify-ing new markets (2) assessing market segments in which US technology iscompetitive (3)making efshyfective contacts with government and private-sector purchasers and distributors of environmental techshynology and equipment (4)selecting appropriate and effective foreign trade and investment entry chan-nels (5) adapting technology equipment and ser-vices to foreign market requirements and (6)stay-ing abreast of new and emerging market opportuni-ties

This article explores the worldwide demand for environmental technology equipment and ser-vices and for US-made environmental goods and services examines the factors driving global demand in the industry describes the factors that could in-hibit US competitiveness in the future and outlines ways in which the US government istrying to assist US firms to become more competitive in exportsforeign-direct investment and participation in envi-ronmentally related infrastructure projects overseas

and the other actions that are needed to improve US competitiveness in the future

Demand for Environmental

Technology Equipment and Services

Although by estimates the market for environmenshytal technology equipment and services is growingworldwide the size of the market has never been acshycurately measured Three obstacles remain to meashysuring global demand One isthat the environmenshytal goods-and-services industry remains ill-defined both in the United States and inother countries Anshyother isthat lacking a well-defined structure for the industry reports on production and sales are scatshytered over standard industrial codes (SIC) and are hidden among industries that are more encompassshying The third isthat all estimates of future demand rely on economic growth and social developmentprojections that are difficult to make and inevitably imprecise

Estimates of Worldwide Demand

Although rough estimates by the OECD placed the size of the global market for environmental goodsand services in 1990 at about $200 billion this unshyderestimates true demand because the OECD limitshyed its studies to waste treatmentmanagement airshyquality control and similar equipment It also did not take into consideration the wide range of enshyergy equipment many types of environmental sershyvices and physical infrastructure related to envishyronmental healthsafety Important environmental industry segments include not only equipment for air-pollution control water treatment water supshyply sanitation trash disposal and waste recyclingbut also systems for hazardous waste treatment and disposal clean-energy provisiondistribution and environmental-consultancy services for the public and private sectors An emerging but not yet wellshy

120 BUSINESS amp THE CONTEMPORARY WORLD 02 1995

defined segment of the market (clean manufactur-ing and processing technology that prevents envi-ronmental degradation rather than relying on end-of-pipe environmental controls) is usually excluded from estimates of demand for environmental prod-ucts

Neither is the energy-efficiency industrywhich includes makers of environmentally effec-tive windows lighting products motors and ap-pliances nor energy-service companies included in estimates of worldwide markets for environmental goods and services Energy-efficiency equipment is a least-cost alternative to building new and very ex-pensive energy-generation capacity it therefore con-tributes to environmental protection both by low-ering energy use and by reducing the need for newfossil-fuel-burning generation plants The Interna-tional Institute for Energy Conservation notes that based on available data from a variety of sourcesthe estimated global market for energy-efficiencyproducts and services currently totals $84 billion peryear but that such products are not included in trade statistics as environmental products4

The accuracy of the International Finance Corporations estimate thethat environmental goods and services market could grow to from $300 billion to $600 billion by the turn of the century de-pends on how seriously governments around the world develop and enforce effective environmen-tal regulations a factor that will depend in turn on progress toward worldwide economic growth andincreases in per-capita incomes Experts estimated the market for environmental goods and services in Western Europe at $94 billion in 1992 and growingat about 7 percent a year

Central and Eastern Europe promise substan-tial markets in the future as former socialist coun-tries are forced to deal with more than forty years of extensive and unattended air and water pollution as well as new requirements for hazardous-waste dis-posal and cleanup Polands Central Statistical Of-fice for example estimates the cost of cleaning upthe countrys environmental problems at $20 bil-lion to 100 billion6 Industry analysts claim that the Latin American market for environmental goods

US COMPETITIVENESS

and services could exceed $10 billion by the end of the 1990s Brazil Argentina and Chile now absorb about $2 billion worth of tnvironmental productsand the market isestimated to be growing by 25 pershycent to 30 percent a year Mexico purchases more than $1 billion worth of environmental goods andservices a year and the market is likely to increase to $3 billion annually by the end of this decade

All estimates agree that the fastest growingmarket for environmental goods and services durshying the next decade will be in the Asian Pacific Rim countries Some industry associations estimate the current market for environmental goods and services in Asia at about $31 billion and predictthat regional demand will grow by 16 percent to 35 percent a year Clearly the potential marketfor environmental-management equipment and sershyvices in Asia iseven larger if one takes into considshyeration the development of environmentally relatshyed infrastructure deg Hong Kong Taiwan Singaporeand South Korea are large buyers of environmenshytal goods and services as increasingly are ThailandIndonesia and Malaysia China Vietnam and the Philippines are likely to offer new opportunities as their economies develop China announced in 1993 a major effort to clean up its environmental probshylems reduce energy consumption and air pollutioncreate a stronger environmental legal frameworkand reduce sulfur dioxide emissions China budgetshyed nearly $14 billion for environmental spendingfor the 1990-1995 period and isseeking foreign asshysistance in environmental management The offishycial plans of Hong Kong Taiwan and South Korea were to spend more than $5 billion on waste disshyposal during the first half of the 1990s Equipmentsuppliers for incinerators emission-control technolshyogy furnaces and waste-to-energy power generashytion systems as well as for garbage collection trucks and refuse transfer stations along with companiesspecializing in landfill construction and operationcould all participate in the growing waste disposal industry in Asia

Thailand offers one of the potentiallyfastest growing new markets for multinational companies1 2 Currently the market for pollution-

BUSINESS 8 THE CONTEMPORARY WORLD 2 1995 121

DENNIS A RONDINELLI

control equipment alone in Thailand isestimated at more than $210 million a year and is expected to grow by 20 percent to 25 percent annually until the year 2000 when spending in this segment of the in-dustry islikely to reach $15 billion Moreover the government of Thailand recognizing the adverse impacts that environmental pollution hazardous-waste problems and environmental degradation are having on the Thai economy and on the health of the Thai people is committed to heavy investnent in environmental-protection facilities Thai officials estimate the demand for all types of environmental technology and services at nearly $10 billion duringthe next decade This includes $3billion for energy-efficient products $2 billion each for municipal wa-ter supply and vehicle-air-pollution equipment and more than $25 billion for municipal and industrial wastewater-treatment facilities industrial air pollu-tion and solid and hazardous waste disposal 13

Thus despite problems of identifying precise-ly the scope and size of the industry and of measur-ing accurately the size of the market for environmen-tal goods and services substantial evidence supportsthe claim that global demand islarge and growingrapidly

Demand for US Environmental Technology and Services

The environmental industry in the United States has developed a strong competitive position the US Office of Technology Assessment reports because it has been able to establish itself in a large domestic market It has a head start in developing productsthat meet the toughest environmental standards and a high level of technical capability and research and development capacity in the industry1 The same research and development has been supported byfederal and state governments universities and the entrepreneurial efforts of many small innovative firms

Market studies show that the United States has become a major exporter of environmental-protection technology - especially of air and water

pollution control and cleanup equipment The most recent estimates by the US Department of Conshymerce indicate that US exports of environmentalshyprotection equipment grew from $975 million in 1989 to $17 billion in 1991 It yielded a positivetrade balance that grew from $565 million to $11 billion over the three-year period Although theystill remain a relatively small portion of total US exports the US Environmental Protection Agency(EPA) reports that US exports of environmentalshyprotection equipment grew substantially during the 1980s and totaled more than $95 biilion between 1980 and 199116 In 1990 the volume of exportsin environmental-protection equipment was comshyparable to that of machine tools book publishshying fabricated textile products or the sporting- and athletic-goods industries However neithcr the Deshypartment of Commerce nor the EPA offers inforshymation on other components of the environmentalshymanagement industry (such as equipment and deshyvices that prevent pollution rather than control it) environmental-management services aboutor foreign-direct investment by US environmental firms in foreign countries

The information that is available indicates that since 1980 Canada has been the single largestimporter of US-made air- and water-pollutionshycontrol equipment France Germany and the Unitshyed Kingdom also imported significant amounts17 In recent years however Japan Mexico South Korea and the Peoples Republic of China have purchasedlarger amounts of air and water pollution equipshyment as well as presumably other environmental products and services The government of China has estimated that it will need to spend about $35 billion to fit old Chinese factories which are major producshyers of geenhouse gases with air-pollution-control equipment 8 In Latin America the US Overseas Private Investment Corporation (OPIC) has offered about $17 billion in financing and insurance for US environmental companies to export or invest OPIC saw the potential for substantial growth inexshyports of US environmental goods and services in Central and Eastern Europe It has committed $12 billion in financing and insurance to US compa-

BUSINESS ampTHE CONTEMPORARY WORLD e20 1995 122

US COMPETITIVENESS

nies involved in projects in Poland Hungary andthe Czech Republic and isreviewing projects worth more than $6 billion in the Czech Republic andSlovakia20

Market Drivers for Environmental Technology and Services

Despite its comparative advantages in some seg-ments of the market the global competitiveness ofthe US environmental industry in the future willdepend on the continued strength of forces drivingworldwide demand for environmental goods andservices These include the following

Continued Growth of World Trade andInvestment Important factors driving the market for environ-mental equipment and services have been the openshying of world trade in new areas with environmen-tal problems as well as trade and investment poli-cies that allow US companies to take advantageof growing foreign demand The opening over the past decade of many developing and emerging mar-ket countries in Asia Latin America and EasternEurope to trade and foreign investment has creat-ed new opportunities for US environmental firmsIn formerly socialist countries such as Poland Hun-gary the Czech and Slovak Republics and Chinademand is driven as well by the privatization oftheir infrastructure development equipment com-panics and energy industries Continued expansionof world trade and investment will allow the USenvironmental-goods-and-services industry to inter-nationalize through acquiring foreign firms licens-ing to and from abroad and attaining greater ac-cess to government procurement and contractingopportunities21

The new World Trade Organization that isscheduled to replace the General Agreement onTariffs and Trade (GAFT) in 1995 will have an

environmental-affairs committee that focuses attenshytion on environmental-trade matters The approvalof the North American Free Trade Agreement (NAF-TA) has focused US and Mexican leaders attenshytion on environmental hazards along the border and within Mexico It will also give Mexican compashynies increased access to international capital to purshychase pollution control equipment require the Unitshyed States and Mexico to commit hundreds of milshylions of dollars to the US-Mexico Integrated Borshyder Environmental Plan attract new private capitaland World Bank funding for environmental projectsin Mexico NAFTAs lower tariffs and freer tradeconditions will increase the ability of US compashynies to penetrate Mexican markets with environshymental products and services 2

Increasing Public Awareness andConcern for Environmental Hazards Inmuch of the rest of the world as in North Amershyica and Europe public demand for environmental protection increases with growing public awarenessand concern about environmental hazards 23 Pubshylic concern about environmental protection increasshyes with expanding public awareness of the adversehealth impacts of environmental degradation andpollution This concern also rises with improvedtechnical capability to detect toxic substances in the environment at lower concentrations Demand forenforcing more stringent environmental regulationsisenhanced by growing public fear and resistance toaccepting involuntary environmental risks as well asby more public emphasis on industrial responsibilshyity for the health and environmental impacts of itsoperations and products These are two trends that are becoming stronger in Europe North Americaand Japan As public awareness and concern for enshyvironmental hazards spreads incountries with risingper-capita incomes and growing middle classes such as Japan Korea Taiwan and Singapore public deshymand for environmental protection increases24

BUSINESS ampTHE CONTEMPORARY WORLD 02 1995 123

DENNIS ARONDINELLI

Enactment and Enforcement of Environmental Regulations

Experience in North America and Europe suggeststhat the single strongest factor affecting demand for environmental management isenactment and effec-tive enforcement of environmental-protection laws and policies Improvements in environmental pro-tection require at a minimum effective and ap-propriate environmental-protection laws and regu-lations as well as institutional structures that can monitor and assess environmental conditions and enforce those environmental-protection regulationsEffective laws and institutions for environmental management depend on political will to enact and enforce environmental-protection laws This de-pends in turn on public perceptions about the need for stronger environmental policy2SIn China new environmental-protection regulations are beingadopted because of increasing evidence that pollu-tion and environmental degradation are iriposingeconomic losses The government estimates that $11 billion a year in economic losses - nearly 7 per-cent of Chinas gross domestic product - can be at-tributed to the effects of environmentally related ill-nesses and diseases tainted water and destruction of fisheries forests and crops 6 Enforcement of Chinas regulations to clean up polluting industries could generate a $23 billion market for pollution-control equipment over the next decade In Chileregulations adopted by presidential decree and new environmental-protection laws under consideration by the Chilean Congress are likewise creating sub-stantal markets for pollution control and abate-ment equipment solid and hazardous waste man-agement air water and waste cleanup projects2 7

Acceptance of Market-Oriented Approaches to Environmental Management

In the United States and Western Europe the trend toward market-oriented approaches is emerging from the realization that regulation ond control

alone are insufficient for effective environmental management Regulation requires stringent monishytoring and assessment which is difficult to achieve even in Western industrial countries Regulations are often more difficult to implement and enforce in many developing and emerging market countriesespecially where corruption undermines the processMoreover responsibilities for implementation are usually fragmented among a wide variety of governshyment agencies More importantly a purely regulatoshyry approach simply reinforces an adversary relationshyship between government and business

A market-oriented approach on the other hand emphasizes a combination of policies that internalizes the costs of pollution relies on intershyventions that do not depend primarily on enforceshyment of regulationscontrols and creates value for the private sector in environmental protection and cleanup28 Such an approach uses a judicious combishynation of regulation and incentives It focuses on the use of such market-based instruments as pollutersshypay programs emissions-permit trading location incentives and fees development of industrial esshytates with adequate environmental infrastructure advertising and persuasion property rights as aconshys-rvation and protection device commercialization of environmental services (especially waste disposal water supply and sanitation)

Western European countries are increasinglyadopting such market-oriented measures as charges on packaging to promote recycling and reduce the solid-waste stream Denmark has adopted charges on glass and plastic beverage containers metal bevshyerage cans cardboard and laminated beverage packshyaging and liquid-dairy-products containers Belgiumplaces charges on packaging waste and Sweden on returnable glass and aluminum beverage containers Australia Canada Germany and the United Stateshave turned to tradeable permit systems to reduce air pollution and water pollution 9 In its unified inshyvestment code Tunisia isproviding financial incenshytives to new investors for environmental cleanupuse of air- and water-pollution-protection equipshyment and treatmentrecycling of waste products Market-oriented policies are likely to attract more

124 BUSINESS amp THE CONTEMPORARY WORLD 2 1995

households and businesses to adopt environmental-ly friendly practices and to seek new environmental technology and services

Pressures and Incentives from International Development Agencies

The demand for environmental technology equip-ment and services is also being driven by pres-sures of international-funding institutions (eg the United Nations and the World Bank with its reshygional counterparts - such as the Asian Developshyment Bank and the European Bank for Reconstruc-tion and Development) on national governments to give environmental protection and cleanup a highshyer priority for investment These pressures are ac-companied by larger numbers of loans for environ-mental projects that require new technology and equipment In 1994 the United States and other in-dustrial countries pledged more than $2 billion in contributions to the Global Environmental Facility (GEF) to finance environmental projects in develop-ing countries that were identified at the United Na-tions 1992 Earth Summit3 The GEF will focus on reducing environmental problems that produce (1) climate change (2) the destruction of biodiversity (3)pollution of international waters and (4) ozone depletion32

Furthermore between 1989 and 1992 the World Bank made nearly $15 billion in loans to developing countries for environmental cleanup industrial-pollution control water-supply and sewage systems waste disposal and energy-resource management3 3 In 1993 it added nearly $13 billion in loan commitments to Brazil China India South Korea Mexico and Turkey for simi-lar projects From 1989 to 1993 it made another nearly $2 billion in loans for natural-resource man-agement in developing countries that will also spur demand for environmental technology equipment and services

The World Banks pressures on governments of developing countries to promote environmental-ly sustainable development expand the market for

US COMPETITIVENESS

environmental goods and services In addition the Banks requirements that environmental impact asshysessments be done on its own development projectsalso have made as one group of analysts concludes a start in incorporating environmental concerns into project design - potentially affecting an annual pipeline of more than 200 investment projects worth over $11 billion34 More environmentally sustainshyable development projects are likely to increase deshymand for equipment to prevent pollution and clean up hazardous conditions

Spread of the Industrial EcologyMovement

The demand for environmental-technology equipshyment and services isalso being driven by the indusshytrial ecology movement3 The willingness of manushyfacturing and processing industries to comply with environmental laws and regulations and to adjust their business practices depends on making busishyness leaders aware of the impacts of environmenshyta degradation on their operations and profits The major trends that are likely to contribute to greater private-sector responsiveness to environmental polshyicy include growing public demands for businessshyes to take responsibility for their environmental imshypacts the growing realization among business leadshyers that their environmental practices and their enshyvironmental image will affect their companies profshyitability and the increasing costs of not complying with environmental regulations3 The private secshytor responds more effectively to environmental regshyulations as it incurs legal and financial liabilities for environmental hazards and insurers financial instishytutions and shareholders become increasingly sensishytive to company environmental practices Industrial firms also become more sensitive to environmental issues as hey incur increasing costs of end-of-pipe pollution control and waste disposal

The growing awareness of the potential sayshyings from pollution prevention rather than cleanup through in-process changes in manufacturing and distribution are leading an increasing number of

BUSINESSamp THE CONTEMPORARY WORLD 2 1995 125

DENNIS ARONDINELLI

manufacturing companies to address environmental problem more directly A primary incentive is the potential for companies to save money by buildingenvironmental considerations into their productiondistribution and processing systems to prevent pol-lution rather than attempting to control end-of-pipe emissions or end-of-distribution wastes Faced with increasing public hostility to their factories and in-creasing threats of legal liabilities the chemical in-dustries in most industrial countries have adoptedthe principles of the Chemical Industries Associa-tions responsible care program 37 Large multina-tional companies such as Volvo Allied-Signal 3M and Union Carbide have adopted environmental au-diting programs in their worldwide operations to maintain central control over their companies com-pliance with regulatory standards in the countries in which they have manufacturing plants Many multi-national companies - such as IBMs subsidiaries in Argentina and Chevrons in Nigeria - have devised their own safe hazardous-waste-disposal arrange-ments in countries lacking adequate facilities38

The leading companies in he industrial ecol-ogy movement - including McDonalds Kodakand ATampT - are examining ways of creating an environmental value chain that includes (1) source reduction of environmentally sensitive in-puts and use of recycled materials (2) cradle-to-grave product design to eliminate waste in pro-duction and at the end of product-life (3)emission and waste reduction in manufacturing (4)volume reduction and recyclability in packaging (5)greenlabeling and product marketing (6)consumer ed-ucation and environmental advertising (7)collec-tion of used or replaced products and (8)post-useproduct recycling39 The spread of the industrial-ecology movement is likely to expand the market for environmental goods and services among privatefirms and generate new environmental products as multinational and domestic companies test innova-tive ways to prevent and control pollution

Increasing Interest In Public-Private Partnerships

The movement toward the use of public-privatepartnerships will change the way in which govshyernments expand environmental services and fishynance and operate large-scale environmental infrashystructure and service facilities Governments in Eushyrope Asia and Latin America are involving nonshygovernment organizations (NGOs) not-for-profitorganizations and private businesses as partners in a variety of environmental services These include water provision sanitation garbagetrash collection and energy generationdistribution Build-operate transfer (BOTs) and build-operate-own (BOO) arshyrangements between government and private conshysortia are now being widely used to expand infrashystructure and facilities for water supply and enershygy provision Malaysia for example has made use of BOTs for privatizing water supply in its Labuan Ipoh and Larut-Matang projects

Increasingly governments are looking to the privatization of services including environmental services as an important instrument of public polshyicy Privatization includes a whole range of altershynatives - from sale of state enterprises to conshycession arrangements with private companies and from management contracts providing public sershyvices to deregulation of service industries 41 Conshytracting and concessions are increasingly being used for water supply sanitation recycling environmenshytal monitoring and assessment and energy generashytiondistribution in such countries as Chile Guinea-Bissau and the CotedIvoire42 The increasing use of both privatization and public-private partnershipsfor providing environmental infrastructure and sershyvices will open more opportunities for both the public and private sectors to acquire environmental technology and equipment and for US companies to supply them

BUSI SampTHE CONTEMPORARY WORLD 2 1995

not aveaccest inormaionabot maketop-other hand often keeps an arms length relationshynot have access to information about market o_ pany to win its bids The US government on the

Forces Inhibiting US Competitiveness in Global Markets

The US environmental industrys competitive ad-aTge oUSenvir lymentinstrys comettentvantagespniesdecade unless it recognizes and corrects its poten-tial weaknesses in an expanded world market The Office of Technology Assessment identified a longlist of weakness that could undermine the US com-petitive position in environmental markets includ-ing (1)US companies reluctance to export because of their large domestic market (2) overseas per_ ceptions that US technology is too expensive orsophisticated (3) weak public-private links in re-sohiserchatd (3)eveakloulic-priv inlk r nsearch and development and in export promotion(4) slow transfer of technology to the marketplace(5) limited efforts to understand foreign cultures and business practices and (6) the limited role of environmental-industry associations intrade and re-

development4 3search and deve lo st

The most crucial obstacle to stronger comn-petitiveness seems to be the reluctance of US com-panies to explore foreign-mark et opportu nitie s and to follow through with market leads Aside froma few large US-based multinational engineering

a fe lageSbasd mltintioal ngieerngconstruction and waste-collection companies manysmall- and medium-sized US environmental firms donBritish markets In many developing and emerging market economies for example small US companies do

portunities until project plans are well under way or tenders are actually let which in nearly all casshyes is too late for a US company to respond effec-tively The US Congressional Office of Technolo-

tivey he SCongessonaf Tchnlo-Oficegy Assessment concluded that US government and private organizations are behind their competitorsin Europe in providing specific market information and leads to potential foreign customers and that the that do exist are often less am bitiousthanprogramsprograms incompetitor countriesdeg

Uanprogrmscompio aen donothees networSofcop tso do th vetpensamenetworks of contacts as do their European and

US COMPETITIVENESS

Japanese competitors in the appropriate ministries (or with local companies that do have such conshytacts) to be able to get the information and establishthemselves as serious contenders for contracts on large environmental infrastructure projects Manysmall- and medium-sized US environmental comshydo not have local offices branchesor agents who can deethve local ofe s f time relashy

who eal peod otie reacan devl tionships with the influential people inthe ministries or agencies who will review and decide on contract proposals abroad they often do not receive the same level of support from the US government that foreign competitors receive through their governments in (1) facilitating trade missions (2) providing inforshymation (3) assigning embassy staff to companiesww alk em o anstarket i es to walk them through the marketing and bidding process (4) tying aid grants to US procurementand (5) restricting the use of US loans or grantsto specific types of projects in which US compashynies would have competitive advantages The USGeneral Accounting Office reports that the numberof foreign commercial service officers in US Emshyo s nd a ounoffmco he m e in rel ati oa bassies abroad and the amount of money inrelationto gross domestic product spent on commercialshyservice staffing is far less than that of France Gershymany talye than t at anceGe manyit rthe United Kingdom and Japan 4 The

French and Japanese governments often give preference on each large contract to one or two of their companies and then work with that comshy

shp h Amen copanies ntrarelotship with American companies and rarely promotes

national championsFinally US companies often do not undershystand the subtleties of the political situation in forshyeign countries or the way to work the political sysshyter in order to get a competitive edge MoreoverUS companies competitors are not constrained bythe US Foreign Corrupt Practices Act which proshyt US o e os ma i n es t o orshyhibits US companies from making payments to forshy

eign government officials in return for favorableconsideration on contracts Japanese companies onthe other hand are often able to provide gifts to gov-

BUSINESS ampTHE CONTEMPORARY WORLD 201995 127

DENNIS A RONDINELLI

ernment officials in the forms of trips abroad over-seas training or assistance to their families in get-ting jobs or higher education

Improving CompetitivenessGovernment Support for Environmental Exports and Investment

In order to overcome some of the obstacles to competitiveness of US firms in the global en-vironmental technology equipment and services industry the US government is seeking to pro-vide greater assistance and support for export-ing forming joint ventures and participating in environmental-infrastructure projects abroad In 1994 the Clinton administration announced the Technology for a Sustainable Future Program that will promote the export of US environmental and energy technologies4 The program seeks to helpUS companies compete in international markets more effectively by (1)facilitating innovation and technological development (2) encouraging new ap-proaches to environmental protection through regu-latory policy market stimulation and fiscal policy in other countries (3) supporting companies export-ing US environmental technologies (4) workingwith domestic and foreign organizations throughpartnerships and collaboration on environmental education training and information dissemination Technology development and dissemination will fo-cus on remediation and restoration of environmen-tal resources environmental pollution control en-vironmental monitoringassessment and avoidance of environmental hazards and degradation

The administrations program will supple-ment and help coordinate government efforts in pro-viding four existing types of support (1) informa-tion services (2) export support (3)financial assis-tance for pre-feasibility analyses and (4) loan guar-antees and concessionary lending47

Information Services and Technical Assistance

A large number of US government agencies are now providing infomnation and technical assistance to US environmental companies interested in forshyeign trade and investment

Trade Leads and Business Information US companies can obtain trade leads and informashytion on potential environmental business opportunishyties including infrastructure development from theUS Department of Commerce (DOC) the State Deshypartment and the Departments of Agriculture Lashybor and Energy as well as from the Overseas Private Investment Corporation (OPIC) and the US-Asia Environmental Program (US-AEP) The US-AEP for example assists US companies to identify the marshykets in Asia for environmental products and sershyvices in solid- and toxic-waste disposal industrial and transportation pollution water and wastewater treatment energy efficiency and forestry US-AEP has initiated an information service through its netshywork of business representatives in Asia an inforshymation clearinghouse in Washington and a tradeshyleads system that informs US companies of busishyness opportunities for environmental infrastructure and services in Asia It provides companies with advanced notice of opportunities for infrastructure projects assistance in identifying and obtaining fishynancing from public and private sources and access to US government-assistance programs

Export Counseling and Services EPA asshysists foreign governments in developing sound enshyvironmental policies and in solving environmental problems in order to create more demand for US environmental exports In addition EPA promotesthe adoption and sale of US environmental techshynologies that can be part of infrastructure systems in foreign countries The Export-Import Bank of the United States and the US Trade and Developshyment Program (TDP)provide export counseling sershyvices The US Agency for International Developshyment (AID) has created a Center for Trade and Inshyvestment Services (CTIS) that provides individual

BUSINESS amp THE CONTEMPORARY WORLD 201995 128

US COMPETITIVENESS

counseling and information to companies interested in environmental energy and other types of projectsthat are supported by the foreign-aid program in developing countries The US Small Business Ad-ministration also offers advice to small companies on the legal aspects of exporting technology equip-ment or other goods abroad

The US Department of Commerce throughits International Trade Administration (ITA) isnow helping US environmental firms to obtain the assisshytance they need to compete for large infrastructure projects outside the United States ITA identifies and provides information about proposed or sched-uled infrastructure projects offers individual busi-ness counseling and monitors developments in spe-cific sectors

Support for Export of US Goods andServices

Other forms of support are also available to US companies interested in following up on trade and investment opportunities

Assessment of Foreign Business Condi-tions The US Department of Energy helps energy sector exporters to identify overseas opportunitiesand discriminatory trade barriers to identify financ-ing alternatives and to work with US governmentagencies to find markets for energy technology and equipment DOC and OPIC both support overseas trade missions that can help US companies to un-derstand foreign business conditions tariff and non-tariff barriers and opportunities for participating in infrastructure-development projects or for transfer-ring environmental technology and equipment that can be used in infrastructure systems US contrac-tors and exporters seeking to expand their activi-ties in developing countries can obtain political-riskinsurance and other forms of specialized insurance and financing services from OPIC

Coordination of Assistance Resources US-AEP follows up on specific environmental-infrastructure projects and coordinates the appro-priate US government technical and financial re-

sources that are available to help US environmen tal companies penetrate markets in Asia AIDs cornshymodity import program and its project-procurementactivities can open new opportunities for companiesinterested in participating in infrastructure projectsin developing countries

Pre-feasibility Analysis Assistance

Several US government agencies also assist foreigngovernments and private organizations to assess the feasibility of proposed infrastructure-developmentprojects using US consulting and service firms

Financial Assistance for Pre-feasibilityStudies To countries eligible for US bilateral assistance TDP provides non-reimbursable grantfunding for studies and consultancies to determinethe technical economic and financial feasibility of projects in which US technological expertise can help to accelerate the development process The grants focus on a wide range of environmental infrashystructure including energy water supply and wasteshymanagement systems TDP sends US technical speshycialists to developing countries to gather informashytion on the proposed project to work with local authorities to create the scope of work and budgetfor the feasibility study or consultancy and to make recommendations concerning TDP support for the study The host countrys grant-recipient organizashytion (apublic agency or private sector organization)selects the US firm to conduct the study under apshyproved compettive bidding procedures TDP paysgrantee-approved invoices for the expenses of the feasibility study directly to the contractor Up to 20 percent of the grant can be used to enlist the particishypation of the host countrys private-sector expertise to work with the US contractor a provision that encourages joint venture cooperation

OPIC and the US-AEP jointly operate the Environmental Enterprises Development Initiative (EEDI) which provides pre-investment assistance toUS companies that are establishing or expandingenvironmental infrastructure projects in Asian and Pacific countries EEDI offers assistance to private-

BUSINESS amp THE CONTEMPORARY WORLD 0201995 129

DENNIS A RONDINELLI

sector companies that are at least 25 percent US-owned and whose activities in Asia do not result in diversion of US jobs or negative environmental impacts in the host country The activities eligiblefor funding include market-entry assessments in-vestor reviews business plans technology reviews prototype or pilot-project implementation and oth-er types of pre-investment analysis

Cost-Sharing of Feasibility Analyses TDP can also share the costs of feasibility studies un-dertaken by US private-sector investors or sup-pliers that are proposing to develop a project on an unsolicited sole source basis 48 It also main-tains technical-assistance trust funds to finance con-sultancies and feasibility studies by US consult-ing firms through the World Bank and the Interna-tional Finance Corporation for a variety of project-preparation activities The US Export-Import Bank also funds feasibility studies inconjunction with itsinsurance programs loan guarantees and exportercredits Fixed-rate medium-term loans to help fi-nance feasibility studies and pre-construction designand engineering services for up to $10 million are available through Eximbanks Engineering Multipli-er Program which can be used to cover up to 85 pershycent of the US costs

Concessionary Lending and LoanGuarantees

Finally the US government is encouraging the private sector to participate in environmental and infrastructure projects through concessionary lend-ing and loan guarantees Eximbank offers finan-cial assistance to promote the exports of US com-panies with capital equipment or services related to infrastructure-development projects that are nor-mally financed for a period of longer than one yearIt will provide credit or guarantees for up to 85 per-cent of the US export alue of each transaction Re-payment terms range from two to ten years Exim-bank assistance comes in the form of direct loans to public or private organizations abroad purchasingUS equipment or services loans to financial inter-

mediaries who re-lend to international buyers and guarantees to those who lend to foreign buyers Exshyimbank also offers loans and guarantees for up to 85 percent of the export value of US companies opshyerations and maintenance (OampM) contracts This is an effective means of promoting the participation ofUS companies with the technical expertise inmainshytaining environmental infrastructure or in establishshying maintenance systems

US-AEP has also created an Infrastructure Project Promotion Fund to support creative publicshyprivate partnerships that will develop new forms of financing arrangements and reduce the risks of US technology transfers in energy and environmentalshyinfrastructure projects The infrastructure-finance advisory service provides a one-stop clearinghousefor financial advice and assistance to US compashynies seeking to participate in Asian environmental infrastructure projects The services are aimed atUS equipment manufacturers contractors projectdevelopers and service providers that are interestshyed in bidding on public tenders in Asia developingprivate build-own-operate or build-operate-transferprojects or establishing joint ventures

Conclusions

Although the US government is now doing a lot to help US companies to maintain and strengthshyen their competitiveness in the global environmenshytal markets it is far less than what some other countries are doing to support their environmental technology equipment and service industries Othshyer means are needed to expand the participation of US environmental firms in foreign trade and inshyvestment The industry itself and its trade associashytions must take a stronger role in promoting exportsand foreign direct investment Both government and industry associations must help US companies to get supply contracts for backward and forward linkage equipment technical assistance or composhynents from Japanese British or French companierthat are successful in winning large environmental-

BUSINESS 8c THE CONTEMPORARY WORLD 2 1995 130

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

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DENNIS A RONDINELLI

firms federal and state governments foreign trade and investment organizations as well as industry as-sociations to more actively promote business linkshyages between US companies and users of environshymental technology and services abroad US tech-nology for water supply wastewater treatment andsolid and hazardous waste disposal for example is as good as or better than Japanese German British or French technology Often the major problem withUS technology is that it may be too advanced or too costly for many foreign customers especially in de-veloping and emerging market countries where the demand isgrowing rapidly US companies must be-come more concerned with adaptingUS technolo-gy to local needs and financial capabilities indevel-oping and emerging market countries

Most small- and medium-sized US environ-mental firms do not know how to compete in for-eign markets New efforts at information dissemina-tion training institutional development and facili-tation of business transactions must be made to helpUS environmental companies enter and competeeffectively abroad Small- and medium-sized com-panies especially require assistance in (1) identify-ing new markets (2) assessing market segments in which US technology iscompetitive (3)making efshyfective contacts with government and private-sector purchasers and distributors of environmental techshynology and equipment (4)selecting appropriate and effective foreign trade and investment entry chan-nels (5) adapting technology equipment and ser-vices to foreign market requirements and (6)stay-ing abreast of new and emerging market opportuni-ties

This article explores the worldwide demand for environmental technology equipment and ser-vices and for US-made environmental goods and services examines the factors driving global demand in the industry describes the factors that could in-hibit US competitiveness in the future and outlines ways in which the US government istrying to assist US firms to become more competitive in exportsforeign-direct investment and participation in envi-ronmentally related infrastructure projects overseas

and the other actions that are needed to improve US competitiveness in the future

Demand for Environmental

Technology Equipment and Services

Although by estimates the market for environmenshytal technology equipment and services is growingworldwide the size of the market has never been acshycurately measured Three obstacles remain to meashysuring global demand One isthat the environmenshytal goods-and-services industry remains ill-defined both in the United States and inother countries Anshyother isthat lacking a well-defined structure for the industry reports on production and sales are scatshytered over standard industrial codes (SIC) and are hidden among industries that are more encompassshying The third isthat all estimates of future demand rely on economic growth and social developmentprojections that are difficult to make and inevitably imprecise

Estimates of Worldwide Demand

Although rough estimates by the OECD placed the size of the global market for environmental goodsand services in 1990 at about $200 billion this unshyderestimates true demand because the OECD limitshyed its studies to waste treatmentmanagement airshyquality control and similar equipment It also did not take into consideration the wide range of enshyergy equipment many types of environmental sershyvices and physical infrastructure related to envishyronmental healthsafety Important environmental industry segments include not only equipment for air-pollution control water treatment water supshyply sanitation trash disposal and waste recyclingbut also systems for hazardous waste treatment and disposal clean-energy provisiondistribution and environmental-consultancy services for the public and private sectors An emerging but not yet wellshy

120 BUSINESS amp THE CONTEMPORARY WORLD 02 1995

defined segment of the market (clean manufactur-ing and processing technology that prevents envi-ronmental degradation rather than relying on end-of-pipe environmental controls) is usually excluded from estimates of demand for environmental prod-ucts

Neither is the energy-efficiency industrywhich includes makers of environmentally effec-tive windows lighting products motors and ap-pliances nor energy-service companies included in estimates of worldwide markets for environmental goods and services Energy-efficiency equipment is a least-cost alternative to building new and very ex-pensive energy-generation capacity it therefore con-tributes to environmental protection both by low-ering energy use and by reducing the need for newfossil-fuel-burning generation plants The Interna-tional Institute for Energy Conservation notes that based on available data from a variety of sourcesthe estimated global market for energy-efficiencyproducts and services currently totals $84 billion peryear but that such products are not included in trade statistics as environmental products4

The accuracy of the International Finance Corporations estimate thethat environmental goods and services market could grow to from $300 billion to $600 billion by the turn of the century de-pends on how seriously governments around the world develop and enforce effective environmen-tal regulations a factor that will depend in turn on progress toward worldwide economic growth andincreases in per-capita incomes Experts estimated the market for environmental goods and services in Western Europe at $94 billion in 1992 and growingat about 7 percent a year

Central and Eastern Europe promise substan-tial markets in the future as former socialist coun-tries are forced to deal with more than forty years of extensive and unattended air and water pollution as well as new requirements for hazardous-waste dis-posal and cleanup Polands Central Statistical Of-fice for example estimates the cost of cleaning upthe countrys environmental problems at $20 bil-lion to 100 billion6 Industry analysts claim that the Latin American market for environmental goods

US COMPETITIVENESS

and services could exceed $10 billion by the end of the 1990s Brazil Argentina and Chile now absorb about $2 billion worth of tnvironmental productsand the market isestimated to be growing by 25 pershycent to 30 percent a year Mexico purchases more than $1 billion worth of environmental goods andservices a year and the market is likely to increase to $3 billion annually by the end of this decade

All estimates agree that the fastest growingmarket for environmental goods and services durshying the next decade will be in the Asian Pacific Rim countries Some industry associations estimate the current market for environmental goods and services in Asia at about $31 billion and predictthat regional demand will grow by 16 percent to 35 percent a year Clearly the potential marketfor environmental-management equipment and sershyvices in Asia iseven larger if one takes into considshyeration the development of environmentally relatshyed infrastructure deg Hong Kong Taiwan Singaporeand South Korea are large buyers of environmenshytal goods and services as increasingly are ThailandIndonesia and Malaysia China Vietnam and the Philippines are likely to offer new opportunities as their economies develop China announced in 1993 a major effort to clean up its environmental probshylems reduce energy consumption and air pollutioncreate a stronger environmental legal frameworkand reduce sulfur dioxide emissions China budgetshyed nearly $14 billion for environmental spendingfor the 1990-1995 period and isseeking foreign asshysistance in environmental management The offishycial plans of Hong Kong Taiwan and South Korea were to spend more than $5 billion on waste disshyposal during the first half of the 1990s Equipmentsuppliers for incinerators emission-control technolshyogy furnaces and waste-to-energy power generashytion systems as well as for garbage collection trucks and refuse transfer stations along with companiesspecializing in landfill construction and operationcould all participate in the growing waste disposal industry in Asia

Thailand offers one of the potentiallyfastest growing new markets for multinational companies1 2 Currently the market for pollution-

BUSINESS 8 THE CONTEMPORARY WORLD 2 1995 121

DENNIS A RONDINELLI

control equipment alone in Thailand isestimated at more than $210 million a year and is expected to grow by 20 percent to 25 percent annually until the year 2000 when spending in this segment of the in-dustry islikely to reach $15 billion Moreover the government of Thailand recognizing the adverse impacts that environmental pollution hazardous-waste problems and environmental degradation are having on the Thai economy and on the health of the Thai people is committed to heavy investnent in environmental-protection facilities Thai officials estimate the demand for all types of environmental technology and services at nearly $10 billion duringthe next decade This includes $3billion for energy-efficient products $2 billion each for municipal wa-ter supply and vehicle-air-pollution equipment and more than $25 billion for municipal and industrial wastewater-treatment facilities industrial air pollu-tion and solid and hazardous waste disposal 13

Thus despite problems of identifying precise-ly the scope and size of the industry and of measur-ing accurately the size of the market for environmen-tal goods and services substantial evidence supportsthe claim that global demand islarge and growingrapidly

Demand for US Environmental Technology and Services

The environmental industry in the United States has developed a strong competitive position the US Office of Technology Assessment reports because it has been able to establish itself in a large domestic market It has a head start in developing productsthat meet the toughest environmental standards and a high level of technical capability and research and development capacity in the industry1 The same research and development has been supported byfederal and state governments universities and the entrepreneurial efforts of many small innovative firms

Market studies show that the United States has become a major exporter of environmental-protection technology - especially of air and water

pollution control and cleanup equipment The most recent estimates by the US Department of Conshymerce indicate that US exports of environmentalshyprotection equipment grew from $975 million in 1989 to $17 billion in 1991 It yielded a positivetrade balance that grew from $565 million to $11 billion over the three-year period Although theystill remain a relatively small portion of total US exports the US Environmental Protection Agency(EPA) reports that US exports of environmentalshyprotection equipment grew substantially during the 1980s and totaled more than $95 biilion between 1980 and 199116 In 1990 the volume of exportsin environmental-protection equipment was comshyparable to that of machine tools book publishshying fabricated textile products or the sporting- and athletic-goods industries However neithcr the Deshypartment of Commerce nor the EPA offers inforshymation on other components of the environmentalshymanagement industry (such as equipment and deshyvices that prevent pollution rather than control it) environmental-management services aboutor foreign-direct investment by US environmental firms in foreign countries

The information that is available indicates that since 1980 Canada has been the single largestimporter of US-made air- and water-pollutionshycontrol equipment France Germany and the Unitshyed Kingdom also imported significant amounts17 In recent years however Japan Mexico South Korea and the Peoples Republic of China have purchasedlarger amounts of air and water pollution equipshyment as well as presumably other environmental products and services The government of China has estimated that it will need to spend about $35 billion to fit old Chinese factories which are major producshyers of geenhouse gases with air-pollution-control equipment 8 In Latin America the US Overseas Private Investment Corporation (OPIC) has offered about $17 billion in financing and insurance for US environmental companies to export or invest OPIC saw the potential for substantial growth inexshyports of US environmental goods and services in Central and Eastern Europe It has committed $12 billion in financing and insurance to US compa-

BUSINESS ampTHE CONTEMPORARY WORLD e20 1995 122

US COMPETITIVENESS

nies involved in projects in Poland Hungary andthe Czech Republic and isreviewing projects worth more than $6 billion in the Czech Republic andSlovakia20

Market Drivers for Environmental Technology and Services

Despite its comparative advantages in some seg-ments of the market the global competitiveness ofthe US environmental industry in the future willdepend on the continued strength of forces drivingworldwide demand for environmental goods andservices These include the following

Continued Growth of World Trade andInvestment Important factors driving the market for environ-mental equipment and services have been the openshying of world trade in new areas with environmen-tal problems as well as trade and investment poli-cies that allow US companies to take advantageof growing foreign demand The opening over the past decade of many developing and emerging mar-ket countries in Asia Latin America and EasternEurope to trade and foreign investment has creat-ed new opportunities for US environmental firmsIn formerly socialist countries such as Poland Hun-gary the Czech and Slovak Republics and Chinademand is driven as well by the privatization oftheir infrastructure development equipment com-panics and energy industries Continued expansionof world trade and investment will allow the USenvironmental-goods-and-services industry to inter-nationalize through acquiring foreign firms licens-ing to and from abroad and attaining greater ac-cess to government procurement and contractingopportunities21

The new World Trade Organization that isscheduled to replace the General Agreement onTariffs and Trade (GAFT) in 1995 will have an

environmental-affairs committee that focuses attenshytion on environmental-trade matters The approvalof the North American Free Trade Agreement (NAF-TA) has focused US and Mexican leaders attenshytion on environmental hazards along the border and within Mexico It will also give Mexican compashynies increased access to international capital to purshychase pollution control equipment require the Unitshyed States and Mexico to commit hundreds of milshylions of dollars to the US-Mexico Integrated Borshyder Environmental Plan attract new private capitaland World Bank funding for environmental projectsin Mexico NAFTAs lower tariffs and freer tradeconditions will increase the ability of US compashynies to penetrate Mexican markets with environshymental products and services 2

Increasing Public Awareness andConcern for Environmental Hazards Inmuch of the rest of the world as in North Amershyica and Europe public demand for environmental protection increases with growing public awarenessand concern about environmental hazards 23 Pubshylic concern about environmental protection increasshyes with expanding public awareness of the adversehealth impacts of environmental degradation andpollution This concern also rises with improvedtechnical capability to detect toxic substances in the environment at lower concentrations Demand forenforcing more stringent environmental regulationsisenhanced by growing public fear and resistance toaccepting involuntary environmental risks as well asby more public emphasis on industrial responsibilshyity for the health and environmental impacts of itsoperations and products These are two trends that are becoming stronger in Europe North Americaand Japan As public awareness and concern for enshyvironmental hazards spreads incountries with risingper-capita incomes and growing middle classes such as Japan Korea Taiwan and Singapore public deshymand for environmental protection increases24

BUSINESS ampTHE CONTEMPORARY WORLD 02 1995 123

DENNIS ARONDINELLI

Enactment and Enforcement of Environmental Regulations

Experience in North America and Europe suggeststhat the single strongest factor affecting demand for environmental management isenactment and effec-tive enforcement of environmental-protection laws and policies Improvements in environmental pro-tection require at a minimum effective and ap-propriate environmental-protection laws and regu-lations as well as institutional structures that can monitor and assess environmental conditions and enforce those environmental-protection regulationsEffective laws and institutions for environmental management depend on political will to enact and enforce environmental-protection laws This de-pends in turn on public perceptions about the need for stronger environmental policy2SIn China new environmental-protection regulations are beingadopted because of increasing evidence that pollu-tion and environmental degradation are iriposingeconomic losses The government estimates that $11 billion a year in economic losses - nearly 7 per-cent of Chinas gross domestic product - can be at-tributed to the effects of environmentally related ill-nesses and diseases tainted water and destruction of fisheries forests and crops 6 Enforcement of Chinas regulations to clean up polluting industries could generate a $23 billion market for pollution-control equipment over the next decade In Chileregulations adopted by presidential decree and new environmental-protection laws under consideration by the Chilean Congress are likewise creating sub-stantal markets for pollution control and abate-ment equipment solid and hazardous waste man-agement air water and waste cleanup projects2 7

Acceptance of Market-Oriented Approaches to Environmental Management

In the United States and Western Europe the trend toward market-oriented approaches is emerging from the realization that regulation ond control

alone are insufficient for effective environmental management Regulation requires stringent monishytoring and assessment which is difficult to achieve even in Western industrial countries Regulations are often more difficult to implement and enforce in many developing and emerging market countriesespecially where corruption undermines the processMoreover responsibilities for implementation are usually fragmented among a wide variety of governshyment agencies More importantly a purely regulatoshyry approach simply reinforces an adversary relationshyship between government and business

A market-oriented approach on the other hand emphasizes a combination of policies that internalizes the costs of pollution relies on intershyventions that do not depend primarily on enforceshyment of regulationscontrols and creates value for the private sector in environmental protection and cleanup28 Such an approach uses a judicious combishynation of regulation and incentives It focuses on the use of such market-based instruments as pollutersshypay programs emissions-permit trading location incentives and fees development of industrial esshytates with adequate environmental infrastructure advertising and persuasion property rights as aconshys-rvation and protection device commercialization of environmental services (especially waste disposal water supply and sanitation)

Western European countries are increasinglyadopting such market-oriented measures as charges on packaging to promote recycling and reduce the solid-waste stream Denmark has adopted charges on glass and plastic beverage containers metal bevshyerage cans cardboard and laminated beverage packshyaging and liquid-dairy-products containers Belgiumplaces charges on packaging waste and Sweden on returnable glass and aluminum beverage containers Australia Canada Germany and the United Stateshave turned to tradeable permit systems to reduce air pollution and water pollution 9 In its unified inshyvestment code Tunisia isproviding financial incenshytives to new investors for environmental cleanupuse of air- and water-pollution-protection equipshyment and treatmentrecycling of waste products Market-oriented policies are likely to attract more

124 BUSINESS amp THE CONTEMPORARY WORLD 2 1995

households and businesses to adopt environmental-ly friendly practices and to seek new environmental technology and services

Pressures and Incentives from International Development Agencies

The demand for environmental technology equip-ment and services is also being driven by pres-sures of international-funding institutions (eg the United Nations and the World Bank with its reshygional counterparts - such as the Asian Developshyment Bank and the European Bank for Reconstruc-tion and Development) on national governments to give environmental protection and cleanup a highshyer priority for investment These pressures are ac-companied by larger numbers of loans for environ-mental projects that require new technology and equipment In 1994 the United States and other in-dustrial countries pledged more than $2 billion in contributions to the Global Environmental Facility (GEF) to finance environmental projects in develop-ing countries that were identified at the United Na-tions 1992 Earth Summit3 The GEF will focus on reducing environmental problems that produce (1) climate change (2) the destruction of biodiversity (3)pollution of international waters and (4) ozone depletion32

Furthermore between 1989 and 1992 the World Bank made nearly $15 billion in loans to developing countries for environmental cleanup industrial-pollution control water-supply and sewage systems waste disposal and energy-resource management3 3 In 1993 it added nearly $13 billion in loan commitments to Brazil China India South Korea Mexico and Turkey for simi-lar projects From 1989 to 1993 it made another nearly $2 billion in loans for natural-resource man-agement in developing countries that will also spur demand for environmental technology equipment and services

The World Banks pressures on governments of developing countries to promote environmental-ly sustainable development expand the market for

US COMPETITIVENESS

environmental goods and services In addition the Banks requirements that environmental impact asshysessments be done on its own development projectsalso have made as one group of analysts concludes a start in incorporating environmental concerns into project design - potentially affecting an annual pipeline of more than 200 investment projects worth over $11 billion34 More environmentally sustainshyable development projects are likely to increase deshymand for equipment to prevent pollution and clean up hazardous conditions

Spread of the Industrial EcologyMovement

The demand for environmental-technology equipshyment and services isalso being driven by the indusshytrial ecology movement3 The willingness of manushyfacturing and processing industries to comply with environmental laws and regulations and to adjust their business practices depends on making busishyness leaders aware of the impacts of environmenshyta degradation on their operations and profits The major trends that are likely to contribute to greater private-sector responsiveness to environmental polshyicy include growing public demands for businessshyes to take responsibility for their environmental imshypacts the growing realization among business leadshyers that their environmental practices and their enshyvironmental image will affect their companies profshyitability and the increasing costs of not complying with environmental regulations3 The private secshytor responds more effectively to environmental regshyulations as it incurs legal and financial liabilities for environmental hazards and insurers financial instishytutions and shareholders become increasingly sensishytive to company environmental practices Industrial firms also become more sensitive to environmental issues as hey incur increasing costs of end-of-pipe pollution control and waste disposal

The growing awareness of the potential sayshyings from pollution prevention rather than cleanup through in-process changes in manufacturing and distribution are leading an increasing number of

BUSINESSamp THE CONTEMPORARY WORLD 2 1995 125

DENNIS ARONDINELLI

manufacturing companies to address environmental problem more directly A primary incentive is the potential for companies to save money by buildingenvironmental considerations into their productiondistribution and processing systems to prevent pol-lution rather than attempting to control end-of-pipe emissions or end-of-distribution wastes Faced with increasing public hostility to their factories and in-creasing threats of legal liabilities the chemical in-dustries in most industrial countries have adoptedthe principles of the Chemical Industries Associa-tions responsible care program 37 Large multina-tional companies such as Volvo Allied-Signal 3M and Union Carbide have adopted environmental au-diting programs in their worldwide operations to maintain central control over their companies com-pliance with regulatory standards in the countries in which they have manufacturing plants Many multi-national companies - such as IBMs subsidiaries in Argentina and Chevrons in Nigeria - have devised their own safe hazardous-waste-disposal arrange-ments in countries lacking adequate facilities38

The leading companies in he industrial ecol-ogy movement - including McDonalds Kodakand ATampT - are examining ways of creating an environmental value chain that includes (1) source reduction of environmentally sensitive in-puts and use of recycled materials (2) cradle-to-grave product design to eliminate waste in pro-duction and at the end of product-life (3)emission and waste reduction in manufacturing (4)volume reduction and recyclability in packaging (5)greenlabeling and product marketing (6)consumer ed-ucation and environmental advertising (7)collec-tion of used or replaced products and (8)post-useproduct recycling39 The spread of the industrial-ecology movement is likely to expand the market for environmental goods and services among privatefirms and generate new environmental products as multinational and domestic companies test innova-tive ways to prevent and control pollution

Increasing Interest In Public-Private Partnerships

The movement toward the use of public-privatepartnerships will change the way in which govshyernments expand environmental services and fishynance and operate large-scale environmental infrashystructure and service facilities Governments in Eushyrope Asia and Latin America are involving nonshygovernment organizations (NGOs) not-for-profitorganizations and private businesses as partners in a variety of environmental services These include water provision sanitation garbagetrash collection and energy generationdistribution Build-operate transfer (BOTs) and build-operate-own (BOO) arshyrangements between government and private conshysortia are now being widely used to expand infrashystructure and facilities for water supply and enershygy provision Malaysia for example has made use of BOTs for privatizing water supply in its Labuan Ipoh and Larut-Matang projects

Increasingly governments are looking to the privatization of services including environmental services as an important instrument of public polshyicy Privatization includes a whole range of altershynatives - from sale of state enterprises to conshycession arrangements with private companies and from management contracts providing public sershyvices to deregulation of service industries 41 Conshytracting and concessions are increasingly being used for water supply sanitation recycling environmenshytal monitoring and assessment and energy generashytiondistribution in such countries as Chile Guinea-Bissau and the CotedIvoire42 The increasing use of both privatization and public-private partnershipsfor providing environmental infrastructure and sershyvices will open more opportunities for both the public and private sectors to acquire environmental technology and equipment and for US companies to supply them

BUSI SampTHE CONTEMPORARY WORLD 2 1995

not aveaccest inormaionabot maketop-other hand often keeps an arms length relationshynot have access to information about market o_ pany to win its bids The US government on the

Forces Inhibiting US Competitiveness in Global Markets

The US environmental industrys competitive ad-aTge oUSenvir lymentinstrys comettentvantagespniesdecade unless it recognizes and corrects its poten-tial weaknesses in an expanded world market The Office of Technology Assessment identified a longlist of weakness that could undermine the US com-petitive position in environmental markets includ-ing (1)US companies reluctance to export because of their large domestic market (2) overseas per_ ceptions that US technology is too expensive orsophisticated (3) weak public-private links in re-sohiserchatd (3)eveakloulic-priv inlk r nsearch and development and in export promotion(4) slow transfer of technology to the marketplace(5) limited efforts to understand foreign cultures and business practices and (6) the limited role of environmental-industry associations intrade and re-

development4 3search and deve lo st

The most crucial obstacle to stronger comn-petitiveness seems to be the reluctance of US com-panies to explore foreign-mark et opportu nitie s and to follow through with market leads Aside froma few large US-based multinational engineering

a fe lageSbasd mltintioal ngieerngconstruction and waste-collection companies manysmall- and medium-sized US environmental firms donBritish markets In many developing and emerging market economies for example small US companies do

portunities until project plans are well under way or tenders are actually let which in nearly all casshyes is too late for a US company to respond effec-tively The US Congressional Office of Technolo-

tivey he SCongessonaf Tchnlo-Oficegy Assessment concluded that US government and private organizations are behind their competitorsin Europe in providing specific market information and leads to potential foreign customers and that the that do exist are often less am bitiousthanprogramsprograms incompetitor countriesdeg

Uanprogrmscompio aen donothees networSofcop tso do th vetpensamenetworks of contacts as do their European and

US COMPETITIVENESS

Japanese competitors in the appropriate ministries (or with local companies that do have such conshytacts) to be able to get the information and establishthemselves as serious contenders for contracts on large environmental infrastructure projects Manysmall- and medium-sized US environmental comshydo not have local offices branchesor agents who can deethve local ofe s f time relashy

who eal peod otie reacan devl tionships with the influential people inthe ministries or agencies who will review and decide on contract proposals abroad they often do not receive the same level of support from the US government that foreign competitors receive through their governments in (1) facilitating trade missions (2) providing inforshymation (3) assigning embassy staff to companiesww alk em o anstarket i es to walk them through the marketing and bidding process (4) tying aid grants to US procurementand (5) restricting the use of US loans or grantsto specific types of projects in which US compashynies would have competitive advantages The USGeneral Accounting Office reports that the numberof foreign commercial service officers in US Emshyo s nd a ounoffmco he m e in rel ati oa bassies abroad and the amount of money inrelationto gross domestic product spent on commercialshyservice staffing is far less than that of France Gershymany talye than t at anceGe manyit rthe United Kingdom and Japan 4 The

French and Japanese governments often give preference on each large contract to one or two of their companies and then work with that comshy

shp h Amen copanies ntrarelotship with American companies and rarely promotes

national championsFinally US companies often do not undershystand the subtleties of the political situation in forshyeign countries or the way to work the political sysshyter in order to get a competitive edge MoreoverUS companies competitors are not constrained bythe US Foreign Corrupt Practices Act which proshyt US o e os ma i n es t o orshyhibits US companies from making payments to forshy

eign government officials in return for favorableconsideration on contracts Japanese companies onthe other hand are often able to provide gifts to gov-

BUSINESS ampTHE CONTEMPORARY WORLD 201995 127

DENNIS A RONDINELLI

ernment officials in the forms of trips abroad over-seas training or assistance to their families in get-ting jobs or higher education

Improving CompetitivenessGovernment Support for Environmental Exports and Investment

In order to overcome some of the obstacles to competitiveness of US firms in the global en-vironmental technology equipment and services industry the US government is seeking to pro-vide greater assistance and support for export-ing forming joint ventures and participating in environmental-infrastructure projects abroad In 1994 the Clinton administration announced the Technology for a Sustainable Future Program that will promote the export of US environmental and energy technologies4 The program seeks to helpUS companies compete in international markets more effectively by (1)facilitating innovation and technological development (2) encouraging new ap-proaches to environmental protection through regu-latory policy market stimulation and fiscal policy in other countries (3) supporting companies export-ing US environmental technologies (4) workingwith domestic and foreign organizations throughpartnerships and collaboration on environmental education training and information dissemination Technology development and dissemination will fo-cus on remediation and restoration of environmen-tal resources environmental pollution control en-vironmental monitoringassessment and avoidance of environmental hazards and degradation

The administrations program will supple-ment and help coordinate government efforts in pro-viding four existing types of support (1) informa-tion services (2) export support (3)financial assis-tance for pre-feasibility analyses and (4) loan guar-antees and concessionary lending47

Information Services and Technical Assistance

A large number of US government agencies are now providing infomnation and technical assistance to US environmental companies interested in forshyeign trade and investment

Trade Leads and Business Information US companies can obtain trade leads and informashytion on potential environmental business opportunishyties including infrastructure development from theUS Department of Commerce (DOC) the State Deshypartment and the Departments of Agriculture Lashybor and Energy as well as from the Overseas Private Investment Corporation (OPIC) and the US-Asia Environmental Program (US-AEP) The US-AEP for example assists US companies to identify the marshykets in Asia for environmental products and sershyvices in solid- and toxic-waste disposal industrial and transportation pollution water and wastewater treatment energy efficiency and forestry US-AEP has initiated an information service through its netshywork of business representatives in Asia an inforshymation clearinghouse in Washington and a tradeshyleads system that informs US companies of busishyness opportunities for environmental infrastructure and services in Asia It provides companies with advanced notice of opportunities for infrastructure projects assistance in identifying and obtaining fishynancing from public and private sources and access to US government-assistance programs

Export Counseling and Services EPA asshysists foreign governments in developing sound enshyvironmental policies and in solving environmental problems in order to create more demand for US environmental exports In addition EPA promotesthe adoption and sale of US environmental techshynologies that can be part of infrastructure systems in foreign countries The Export-Import Bank of the United States and the US Trade and Developshyment Program (TDP)provide export counseling sershyvices The US Agency for International Developshyment (AID) has created a Center for Trade and Inshyvestment Services (CTIS) that provides individual

BUSINESS amp THE CONTEMPORARY WORLD 201995 128

US COMPETITIVENESS

counseling and information to companies interested in environmental energy and other types of projectsthat are supported by the foreign-aid program in developing countries The US Small Business Ad-ministration also offers advice to small companies on the legal aspects of exporting technology equip-ment or other goods abroad

The US Department of Commerce throughits International Trade Administration (ITA) isnow helping US environmental firms to obtain the assisshytance they need to compete for large infrastructure projects outside the United States ITA identifies and provides information about proposed or sched-uled infrastructure projects offers individual busi-ness counseling and monitors developments in spe-cific sectors

Support for Export of US Goods andServices

Other forms of support are also available to US companies interested in following up on trade and investment opportunities

Assessment of Foreign Business Condi-tions The US Department of Energy helps energy sector exporters to identify overseas opportunitiesand discriminatory trade barriers to identify financ-ing alternatives and to work with US governmentagencies to find markets for energy technology and equipment DOC and OPIC both support overseas trade missions that can help US companies to un-derstand foreign business conditions tariff and non-tariff barriers and opportunities for participating in infrastructure-development projects or for transfer-ring environmental technology and equipment that can be used in infrastructure systems US contrac-tors and exporters seeking to expand their activi-ties in developing countries can obtain political-riskinsurance and other forms of specialized insurance and financing services from OPIC

Coordination of Assistance Resources US-AEP follows up on specific environmental-infrastructure projects and coordinates the appro-priate US government technical and financial re-

sources that are available to help US environmen tal companies penetrate markets in Asia AIDs cornshymodity import program and its project-procurementactivities can open new opportunities for companiesinterested in participating in infrastructure projectsin developing countries

Pre-feasibility Analysis Assistance

Several US government agencies also assist foreigngovernments and private organizations to assess the feasibility of proposed infrastructure-developmentprojects using US consulting and service firms

Financial Assistance for Pre-feasibilityStudies To countries eligible for US bilateral assistance TDP provides non-reimbursable grantfunding for studies and consultancies to determinethe technical economic and financial feasibility of projects in which US technological expertise can help to accelerate the development process The grants focus on a wide range of environmental infrashystructure including energy water supply and wasteshymanagement systems TDP sends US technical speshycialists to developing countries to gather informashytion on the proposed project to work with local authorities to create the scope of work and budgetfor the feasibility study or consultancy and to make recommendations concerning TDP support for the study The host countrys grant-recipient organizashytion (apublic agency or private sector organization)selects the US firm to conduct the study under apshyproved compettive bidding procedures TDP paysgrantee-approved invoices for the expenses of the feasibility study directly to the contractor Up to 20 percent of the grant can be used to enlist the particishypation of the host countrys private-sector expertise to work with the US contractor a provision that encourages joint venture cooperation

OPIC and the US-AEP jointly operate the Environmental Enterprises Development Initiative (EEDI) which provides pre-investment assistance toUS companies that are establishing or expandingenvironmental infrastructure projects in Asian and Pacific countries EEDI offers assistance to private-

BUSINESS amp THE CONTEMPORARY WORLD 0201995 129

DENNIS A RONDINELLI

sector companies that are at least 25 percent US-owned and whose activities in Asia do not result in diversion of US jobs or negative environmental impacts in the host country The activities eligiblefor funding include market-entry assessments in-vestor reviews business plans technology reviews prototype or pilot-project implementation and oth-er types of pre-investment analysis

Cost-Sharing of Feasibility Analyses TDP can also share the costs of feasibility studies un-dertaken by US private-sector investors or sup-pliers that are proposing to develop a project on an unsolicited sole source basis 48 It also main-tains technical-assistance trust funds to finance con-sultancies and feasibility studies by US consult-ing firms through the World Bank and the Interna-tional Finance Corporation for a variety of project-preparation activities The US Export-Import Bank also funds feasibility studies inconjunction with itsinsurance programs loan guarantees and exportercredits Fixed-rate medium-term loans to help fi-nance feasibility studies and pre-construction designand engineering services for up to $10 million are available through Eximbanks Engineering Multipli-er Program which can be used to cover up to 85 pershycent of the US costs

Concessionary Lending and LoanGuarantees

Finally the US government is encouraging the private sector to participate in environmental and infrastructure projects through concessionary lend-ing and loan guarantees Eximbank offers finan-cial assistance to promote the exports of US com-panies with capital equipment or services related to infrastructure-development projects that are nor-mally financed for a period of longer than one yearIt will provide credit or guarantees for up to 85 per-cent of the US export alue of each transaction Re-payment terms range from two to ten years Exim-bank assistance comes in the form of direct loans to public or private organizations abroad purchasingUS equipment or services loans to financial inter-

mediaries who re-lend to international buyers and guarantees to those who lend to foreign buyers Exshyimbank also offers loans and guarantees for up to 85 percent of the export value of US companies opshyerations and maintenance (OampM) contracts This is an effective means of promoting the participation ofUS companies with the technical expertise inmainshytaining environmental infrastructure or in establishshying maintenance systems

US-AEP has also created an Infrastructure Project Promotion Fund to support creative publicshyprivate partnerships that will develop new forms of financing arrangements and reduce the risks of US technology transfers in energy and environmentalshyinfrastructure projects The infrastructure-finance advisory service provides a one-stop clearinghousefor financial advice and assistance to US compashynies seeking to participate in Asian environmental infrastructure projects The services are aimed atUS equipment manufacturers contractors projectdevelopers and service providers that are interestshyed in bidding on public tenders in Asia developingprivate build-own-operate or build-operate-transferprojects or establishing joint ventures

Conclusions

Although the US government is now doing a lot to help US companies to maintain and strengthshyen their competitiveness in the global environmenshytal markets it is far less than what some other countries are doing to support their environmental technology equipment and service industries Othshyer means are needed to expand the participation of US environmental firms in foreign trade and inshyvestment The industry itself and its trade associashytions must take a stronger role in promoting exportsand foreign direct investment Both government and industry associations must help US companies to get supply contracts for backward and forward linkage equipment technical assistance or composhynents from Japanese British or French companierthat are successful in winning large environmental-

BUSINESS 8c THE CONTEMPORARY WORLD 2 1995 130

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

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45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

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defined segment of the market (clean manufactur-ing and processing technology that prevents envi-ronmental degradation rather than relying on end-of-pipe environmental controls) is usually excluded from estimates of demand for environmental prod-ucts

Neither is the energy-efficiency industrywhich includes makers of environmentally effec-tive windows lighting products motors and ap-pliances nor energy-service companies included in estimates of worldwide markets for environmental goods and services Energy-efficiency equipment is a least-cost alternative to building new and very ex-pensive energy-generation capacity it therefore con-tributes to environmental protection both by low-ering energy use and by reducing the need for newfossil-fuel-burning generation plants The Interna-tional Institute for Energy Conservation notes that based on available data from a variety of sourcesthe estimated global market for energy-efficiencyproducts and services currently totals $84 billion peryear but that such products are not included in trade statistics as environmental products4

The accuracy of the International Finance Corporations estimate thethat environmental goods and services market could grow to from $300 billion to $600 billion by the turn of the century de-pends on how seriously governments around the world develop and enforce effective environmen-tal regulations a factor that will depend in turn on progress toward worldwide economic growth andincreases in per-capita incomes Experts estimated the market for environmental goods and services in Western Europe at $94 billion in 1992 and growingat about 7 percent a year

Central and Eastern Europe promise substan-tial markets in the future as former socialist coun-tries are forced to deal with more than forty years of extensive and unattended air and water pollution as well as new requirements for hazardous-waste dis-posal and cleanup Polands Central Statistical Of-fice for example estimates the cost of cleaning upthe countrys environmental problems at $20 bil-lion to 100 billion6 Industry analysts claim that the Latin American market for environmental goods

US COMPETITIVENESS

and services could exceed $10 billion by the end of the 1990s Brazil Argentina and Chile now absorb about $2 billion worth of tnvironmental productsand the market isestimated to be growing by 25 pershycent to 30 percent a year Mexico purchases more than $1 billion worth of environmental goods andservices a year and the market is likely to increase to $3 billion annually by the end of this decade

All estimates agree that the fastest growingmarket for environmental goods and services durshying the next decade will be in the Asian Pacific Rim countries Some industry associations estimate the current market for environmental goods and services in Asia at about $31 billion and predictthat regional demand will grow by 16 percent to 35 percent a year Clearly the potential marketfor environmental-management equipment and sershyvices in Asia iseven larger if one takes into considshyeration the development of environmentally relatshyed infrastructure deg Hong Kong Taiwan Singaporeand South Korea are large buyers of environmenshytal goods and services as increasingly are ThailandIndonesia and Malaysia China Vietnam and the Philippines are likely to offer new opportunities as their economies develop China announced in 1993 a major effort to clean up its environmental probshylems reduce energy consumption and air pollutioncreate a stronger environmental legal frameworkand reduce sulfur dioxide emissions China budgetshyed nearly $14 billion for environmental spendingfor the 1990-1995 period and isseeking foreign asshysistance in environmental management The offishycial plans of Hong Kong Taiwan and South Korea were to spend more than $5 billion on waste disshyposal during the first half of the 1990s Equipmentsuppliers for incinerators emission-control technolshyogy furnaces and waste-to-energy power generashytion systems as well as for garbage collection trucks and refuse transfer stations along with companiesspecializing in landfill construction and operationcould all participate in the growing waste disposal industry in Asia

Thailand offers one of the potentiallyfastest growing new markets for multinational companies1 2 Currently the market for pollution-

BUSINESS 8 THE CONTEMPORARY WORLD 2 1995 121

DENNIS A RONDINELLI

control equipment alone in Thailand isestimated at more than $210 million a year and is expected to grow by 20 percent to 25 percent annually until the year 2000 when spending in this segment of the in-dustry islikely to reach $15 billion Moreover the government of Thailand recognizing the adverse impacts that environmental pollution hazardous-waste problems and environmental degradation are having on the Thai economy and on the health of the Thai people is committed to heavy investnent in environmental-protection facilities Thai officials estimate the demand for all types of environmental technology and services at nearly $10 billion duringthe next decade This includes $3billion for energy-efficient products $2 billion each for municipal wa-ter supply and vehicle-air-pollution equipment and more than $25 billion for municipal and industrial wastewater-treatment facilities industrial air pollu-tion and solid and hazardous waste disposal 13

Thus despite problems of identifying precise-ly the scope and size of the industry and of measur-ing accurately the size of the market for environmen-tal goods and services substantial evidence supportsthe claim that global demand islarge and growingrapidly

Demand for US Environmental Technology and Services

The environmental industry in the United States has developed a strong competitive position the US Office of Technology Assessment reports because it has been able to establish itself in a large domestic market It has a head start in developing productsthat meet the toughest environmental standards and a high level of technical capability and research and development capacity in the industry1 The same research and development has been supported byfederal and state governments universities and the entrepreneurial efforts of many small innovative firms

Market studies show that the United States has become a major exporter of environmental-protection technology - especially of air and water

pollution control and cleanup equipment The most recent estimates by the US Department of Conshymerce indicate that US exports of environmentalshyprotection equipment grew from $975 million in 1989 to $17 billion in 1991 It yielded a positivetrade balance that grew from $565 million to $11 billion over the three-year period Although theystill remain a relatively small portion of total US exports the US Environmental Protection Agency(EPA) reports that US exports of environmentalshyprotection equipment grew substantially during the 1980s and totaled more than $95 biilion between 1980 and 199116 In 1990 the volume of exportsin environmental-protection equipment was comshyparable to that of machine tools book publishshying fabricated textile products or the sporting- and athletic-goods industries However neithcr the Deshypartment of Commerce nor the EPA offers inforshymation on other components of the environmentalshymanagement industry (such as equipment and deshyvices that prevent pollution rather than control it) environmental-management services aboutor foreign-direct investment by US environmental firms in foreign countries

The information that is available indicates that since 1980 Canada has been the single largestimporter of US-made air- and water-pollutionshycontrol equipment France Germany and the Unitshyed Kingdom also imported significant amounts17 In recent years however Japan Mexico South Korea and the Peoples Republic of China have purchasedlarger amounts of air and water pollution equipshyment as well as presumably other environmental products and services The government of China has estimated that it will need to spend about $35 billion to fit old Chinese factories which are major producshyers of geenhouse gases with air-pollution-control equipment 8 In Latin America the US Overseas Private Investment Corporation (OPIC) has offered about $17 billion in financing and insurance for US environmental companies to export or invest OPIC saw the potential for substantial growth inexshyports of US environmental goods and services in Central and Eastern Europe It has committed $12 billion in financing and insurance to US compa-

BUSINESS ampTHE CONTEMPORARY WORLD e20 1995 122

US COMPETITIVENESS

nies involved in projects in Poland Hungary andthe Czech Republic and isreviewing projects worth more than $6 billion in the Czech Republic andSlovakia20

Market Drivers for Environmental Technology and Services

Despite its comparative advantages in some seg-ments of the market the global competitiveness ofthe US environmental industry in the future willdepend on the continued strength of forces drivingworldwide demand for environmental goods andservices These include the following

Continued Growth of World Trade andInvestment Important factors driving the market for environ-mental equipment and services have been the openshying of world trade in new areas with environmen-tal problems as well as trade and investment poli-cies that allow US companies to take advantageof growing foreign demand The opening over the past decade of many developing and emerging mar-ket countries in Asia Latin America and EasternEurope to trade and foreign investment has creat-ed new opportunities for US environmental firmsIn formerly socialist countries such as Poland Hun-gary the Czech and Slovak Republics and Chinademand is driven as well by the privatization oftheir infrastructure development equipment com-panics and energy industries Continued expansionof world trade and investment will allow the USenvironmental-goods-and-services industry to inter-nationalize through acquiring foreign firms licens-ing to and from abroad and attaining greater ac-cess to government procurement and contractingopportunities21

The new World Trade Organization that isscheduled to replace the General Agreement onTariffs and Trade (GAFT) in 1995 will have an

environmental-affairs committee that focuses attenshytion on environmental-trade matters The approvalof the North American Free Trade Agreement (NAF-TA) has focused US and Mexican leaders attenshytion on environmental hazards along the border and within Mexico It will also give Mexican compashynies increased access to international capital to purshychase pollution control equipment require the Unitshyed States and Mexico to commit hundreds of milshylions of dollars to the US-Mexico Integrated Borshyder Environmental Plan attract new private capitaland World Bank funding for environmental projectsin Mexico NAFTAs lower tariffs and freer tradeconditions will increase the ability of US compashynies to penetrate Mexican markets with environshymental products and services 2

Increasing Public Awareness andConcern for Environmental Hazards Inmuch of the rest of the world as in North Amershyica and Europe public demand for environmental protection increases with growing public awarenessand concern about environmental hazards 23 Pubshylic concern about environmental protection increasshyes with expanding public awareness of the adversehealth impacts of environmental degradation andpollution This concern also rises with improvedtechnical capability to detect toxic substances in the environment at lower concentrations Demand forenforcing more stringent environmental regulationsisenhanced by growing public fear and resistance toaccepting involuntary environmental risks as well asby more public emphasis on industrial responsibilshyity for the health and environmental impacts of itsoperations and products These are two trends that are becoming stronger in Europe North Americaand Japan As public awareness and concern for enshyvironmental hazards spreads incountries with risingper-capita incomes and growing middle classes such as Japan Korea Taiwan and Singapore public deshymand for environmental protection increases24

BUSINESS ampTHE CONTEMPORARY WORLD 02 1995 123

DENNIS ARONDINELLI

Enactment and Enforcement of Environmental Regulations

Experience in North America and Europe suggeststhat the single strongest factor affecting demand for environmental management isenactment and effec-tive enforcement of environmental-protection laws and policies Improvements in environmental pro-tection require at a minimum effective and ap-propriate environmental-protection laws and regu-lations as well as institutional structures that can monitor and assess environmental conditions and enforce those environmental-protection regulationsEffective laws and institutions for environmental management depend on political will to enact and enforce environmental-protection laws This de-pends in turn on public perceptions about the need for stronger environmental policy2SIn China new environmental-protection regulations are beingadopted because of increasing evidence that pollu-tion and environmental degradation are iriposingeconomic losses The government estimates that $11 billion a year in economic losses - nearly 7 per-cent of Chinas gross domestic product - can be at-tributed to the effects of environmentally related ill-nesses and diseases tainted water and destruction of fisheries forests and crops 6 Enforcement of Chinas regulations to clean up polluting industries could generate a $23 billion market for pollution-control equipment over the next decade In Chileregulations adopted by presidential decree and new environmental-protection laws under consideration by the Chilean Congress are likewise creating sub-stantal markets for pollution control and abate-ment equipment solid and hazardous waste man-agement air water and waste cleanup projects2 7

Acceptance of Market-Oriented Approaches to Environmental Management

In the United States and Western Europe the trend toward market-oriented approaches is emerging from the realization that regulation ond control

alone are insufficient for effective environmental management Regulation requires stringent monishytoring and assessment which is difficult to achieve even in Western industrial countries Regulations are often more difficult to implement and enforce in many developing and emerging market countriesespecially where corruption undermines the processMoreover responsibilities for implementation are usually fragmented among a wide variety of governshyment agencies More importantly a purely regulatoshyry approach simply reinforces an adversary relationshyship between government and business

A market-oriented approach on the other hand emphasizes a combination of policies that internalizes the costs of pollution relies on intershyventions that do not depend primarily on enforceshyment of regulationscontrols and creates value for the private sector in environmental protection and cleanup28 Such an approach uses a judicious combishynation of regulation and incentives It focuses on the use of such market-based instruments as pollutersshypay programs emissions-permit trading location incentives and fees development of industrial esshytates with adequate environmental infrastructure advertising and persuasion property rights as aconshys-rvation and protection device commercialization of environmental services (especially waste disposal water supply and sanitation)

Western European countries are increasinglyadopting such market-oriented measures as charges on packaging to promote recycling and reduce the solid-waste stream Denmark has adopted charges on glass and plastic beverage containers metal bevshyerage cans cardboard and laminated beverage packshyaging and liquid-dairy-products containers Belgiumplaces charges on packaging waste and Sweden on returnable glass and aluminum beverage containers Australia Canada Germany and the United Stateshave turned to tradeable permit systems to reduce air pollution and water pollution 9 In its unified inshyvestment code Tunisia isproviding financial incenshytives to new investors for environmental cleanupuse of air- and water-pollution-protection equipshyment and treatmentrecycling of waste products Market-oriented policies are likely to attract more

124 BUSINESS amp THE CONTEMPORARY WORLD 2 1995

households and businesses to adopt environmental-ly friendly practices and to seek new environmental technology and services

Pressures and Incentives from International Development Agencies

The demand for environmental technology equip-ment and services is also being driven by pres-sures of international-funding institutions (eg the United Nations and the World Bank with its reshygional counterparts - such as the Asian Developshyment Bank and the European Bank for Reconstruc-tion and Development) on national governments to give environmental protection and cleanup a highshyer priority for investment These pressures are ac-companied by larger numbers of loans for environ-mental projects that require new technology and equipment In 1994 the United States and other in-dustrial countries pledged more than $2 billion in contributions to the Global Environmental Facility (GEF) to finance environmental projects in develop-ing countries that were identified at the United Na-tions 1992 Earth Summit3 The GEF will focus on reducing environmental problems that produce (1) climate change (2) the destruction of biodiversity (3)pollution of international waters and (4) ozone depletion32

Furthermore between 1989 and 1992 the World Bank made nearly $15 billion in loans to developing countries for environmental cleanup industrial-pollution control water-supply and sewage systems waste disposal and energy-resource management3 3 In 1993 it added nearly $13 billion in loan commitments to Brazil China India South Korea Mexico and Turkey for simi-lar projects From 1989 to 1993 it made another nearly $2 billion in loans for natural-resource man-agement in developing countries that will also spur demand for environmental technology equipment and services

The World Banks pressures on governments of developing countries to promote environmental-ly sustainable development expand the market for

US COMPETITIVENESS

environmental goods and services In addition the Banks requirements that environmental impact asshysessments be done on its own development projectsalso have made as one group of analysts concludes a start in incorporating environmental concerns into project design - potentially affecting an annual pipeline of more than 200 investment projects worth over $11 billion34 More environmentally sustainshyable development projects are likely to increase deshymand for equipment to prevent pollution and clean up hazardous conditions

Spread of the Industrial EcologyMovement

The demand for environmental-technology equipshyment and services isalso being driven by the indusshytrial ecology movement3 The willingness of manushyfacturing and processing industries to comply with environmental laws and regulations and to adjust their business practices depends on making busishyness leaders aware of the impacts of environmenshyta degradation on their operations and profits The major trends that are likely to contribute to greater private-sector responsiveness to environmental polshyicy include growing public demands for businessshyes to take responsibility for their environmental imshypacts the growing realization among business leadshyers that their environmental practices and their enshyvironmental image will affect their companies profshyitability and the increasing costs of not complying with environmental regulations3 The private secshytor responds more effectively to environmental regshyulations as it incurs legal and financial liabilities for environmental hazards and insurers financial instishytutions and shareholders become increasingly sensishytive to company environmental practices Industrial firms also become more sensitive to environmental issues as hey incur increasing costs of end-of-pipe pollution control and waste disposal

The growing awareness of the potential sayshyings from pollution prevention rather than cleanup through in-process changes in manufacturing and distribution are leading an increasing number of

BUSINESSamp THE CONTEMPORARY WORLD 2 1995 125

DENNIS ARONDINELLI

manufacturing companies to address environmental problem more directly A primary incentive is the potential for companies to save money by buildingenvironmental considerations into their productiondistribution and processing systems to prevent pol-lution rather than attempting to control end-of-pipe emissions or end-of-distribution wastes Faced with increasing public hostility to their factories and in-creasing threats of legal liabilities the chemical in-dustries in most industrial countries have adoptedthe principles of the Chemical Industries Associa-tions responsible care program 37 Large multina-tional companies such as Volvo Allied-Signal 3M and Union Carbide have adopted environmental au-diting programs in their worldwide operations to maintain central control over their companies com-pliance with regulatory standards in the countries in which they have manufacturing plants Many multi-national companies - such as IBMs subsidiaries in Argentina and Chevrons in Nigeria - have devised their own safe hazardous-waste-disposal arrange-ments in countries lacking adequate facilities38

The leading companies in he industrial ecol-ogy movement - including McDonalds Kodakand ATampT - are examining ways of creating an environmental value chain that includes (1) source reduction of environmentally sensitive in-puts and use of recycled materials (2) cradle-to-grave product design to eliminate waste in pro-duction and at the end of product-life (3)emission and waste reduction in manufacturing (4)volume reduction and recyclability in packaging (5)greenlabeling and product marketing (6)consumer ed-ucation and environmental advertising (7)collec-tion of used or replaced products and (8)post-useproduct recycling39 The spread of the industrial-ecology movement is likely to expand the market for environmental goods and services among privatefirms and generate new environmental products as multinational and domestic companies test innova-tive ways to prevent and control pollution

Increasing Interest In Public-Private Partnerships

The movement toward the use of public-privatepartnerships will change the way in which govshyernments expand environmental services and fishynance and operate large-scale environmental infrashystructure and service facilities Governments in Eushyrope Asia and Latin America are involving nonshygovernment organizations (NGOs) not-for-profitorganizations and private businesses as partners in a variety of environmental services These include water provision sanitation garbagetrash collection and energy generationdistribution Build-operate transfer (BOTs) and build-operate-own (BOO) arshyrangements between government and private conshysortia are now being widely used to expand infrashystructure and facilities for water supply and enershygy provision Malaysia for example has made use of BOTs for privatizing water supply in its Labuan Ipoh and Larut-Matang projects

Increasingly governments are looking to the privatization of services including environmental services as an important instrument of public polshyicy Privatization includes a whole range of altershynatives - from sale of state enterprises to conshycession arrangements with private companies and from management contracts providing public sershyvices to deregulation of service industries 41 Conshytracting and concessions are increasingly being used for water supply sanitation recycling environmenshytal monitoring and assessment and energy generashytiondistribution in such countries as Chile Guinea-Bissau and the CotedIvoire42 The increasing use of both privatization and public-private partnershipsfor providing environmental infrastructure and sershyvices will open more opportunities for both the public and private sectors to acquire environmental technology and equipment and for US companies to supply them

BUSI SampTHE CONTEMPORARY WORLD 2 1995

not aveaccest inormaionabot maketop-other hand often keeps an arms length relationshynot have access to information about market o_ pany to win its bids The US government on the

Forces Inhibiting US Competitiveness in Global Markets

The US environmental industrys competitive ad-aTge oUSenvir lymentinstrys comettentvantagespniesdecade unless it recognizes and corrects its poten-tial weaknesses in an expanded world market The Office of Technology Assessment identified a longlist of weakness that could undermine the US com-petitive position in environmental markets includ-ing (1)US companies reluctance to export because of their large domestic market (2) overseas per_ ceptions that US technology is too expensive orsophisticated (3) weak public-private links in re-sohiserchatd (3)eveakloulic-priv inlk r nsearch and development and in export promotion(4) slow transfer of technology to the marketplace(5) limited efforts to understand foreign cultures and business practices and (6) the limited role of environmental-industry associations intrade and re-

development4 3search and deve lo st

The most crucial obstacle to stronger comn-petitiveness seems to be the reluctance of US com-panies to explore foreign-mark et opportu nitie s and to follow through with market leads Aside froma few large US-based multinational engineering

a fe lageSbasd mltintioal ngieerngconstruction and waste-collection companies manysmall- and medium-sized US environmental firms donBritish markets In many developing and emerging market economies for example small US companies do

portunities until project plans are well under way or tenders are actually let which in nearly all casshyes is too late for a US company to respond effec-tively The US Congressional Office of Technolo-

tivey he SCongessonaf Tchnlo-Oficegy Assessment concluded that US government and private organizations are behind their competitorsin Europe in providing specific market information and leads to potential foreign customers and that the that do exist are often less am bitiousthanprogramsprograms incompetitor countriesdeg

Uanprogrmscompio aen donothees networSofcop tso do th vetpensamenetworks of contacts as do their European and

US COMPETITIVENESS

Japanese competitors in the appropriate ministries (or with local companies that do have such conshytacts) to be able to get the information and establishthemselves as serious contenders for contracts on large environmental infrastructure projects Manysmall- and medium-sized US environmental comshydo not have local offices branchesor agents who can deethve local ofe s f time relashy

who eal peod otie reacan devl tionships with the influential people inthe ministries or agencies who will review and decide on contract proposals abroad they often do not receive the same level of support from the US government that foreign competitors receive through their governments in (1) facilitating trade missions (2) providing inforshymation (3) assigning embassy staff to companiesww alk em o anstarket i es to walk them through the marketing and bidding process (4) tying aid grants to US procurementand (5) restricting the use of US loans or grantsto specific types of projects in which US compashynies would have competitive advantages The USGeneral Accounting Office reports that the numberof foreign commercial service officers in US Emshyo s nd a ounoffmco he m e in rel ati oa bassies abroad and the amount of money inrelationto gross domestic product spent on commercialshyservice staffing is far less than that of France Gershymany talye than t at anceGe manyit rthe United Kingdom and Japan 4 The

French and Japanese governments often give preference on each large contract to one or two of their companies and then work with that comshy

shp h Amen copanies ntrarelotship with American companies and rarely promotes

national championsFinally US companies often do not undershystand the subtleties of the political situation in forshyeign countries or the way to work the political sysshyter in order to get a competitive edge MoreoverUS companies competitors are not constrained bythe US Foreign Corrupt Practices Act which proshyt US o e os ma i n es t o orshyhibits US companies from making payments to forshy

eign government officials in return for favorableconsideration on contracts Japanese companies onthe other hand are often able to provide gifts to gov-

BUSINESS ampTHE CONTEMPORARY WORLD 201995 127

DENNIS A RONDINELLI

ernment officials in the forms of trips abroad over-seas training or assistance to their families in get-ting jobs or higher education

Improving CompetitivenessGovernment Support for Environmental Exports and Investment

In order to overcome some of the obstacles to competitiveness of US firms in the global en-vironmental technology equipment and services industry the US government is seeking to pro-vide greater assistance and support for export-ing forming joint ventures and participating in environmental-infrastructure projects abroad In 1994 the Clinton administration announced the Technology for a Sustainable Future Program that will promote the export of US environmental and energy technologies4 The program seeks to helpUS companies compete in international markets more effectively by (1)facilitating innovation and technological development (2) encouraging new ap-proaches to environmental protection through regu-latory policy market stimulation and fiscal policy in other countries (3) supporting companies export-ing US environmental technologies (4) workingwith domestic and foreign organizations throughpartnerships and collaboration on environmental education training and information dissemination Technology development and dissemination will fo-cus on remediation and restoration of environmen-tal resources environmental pollution control en-vironmental monitoringassessment and avoidance of environmental hazards and degradation

The administrations program will supple-ment and help coordinate government efforts in pro-viding four existing types of support (1) informa-tion services (2) export support (3)financial assis-tance for pre-feasibility analyses and (4) loan guar-antees and concessionary lending47

Information Services and Technical Assistance

A large number of US government agencies are now providing infomnation and technical assistance to US environmental companies interested in forshyeign trade and investment

Trade Leads and Business Information US companies can obtain trade leads and informashytion on potential environmental business opportunishyties including infrastructure development from theUS Department of Commerce (DOC) the State Deshypartment and the Departments of Agriculture Lashybor and Energy as well as from the Overseas Private Investment Corporation (OPIC) and the US-Asia Environmental Program (US-AEP) The US-AEP for example assists US companies to identify the marshykets in Asia for environmental products and sershyvices in solid- and toxic-waste disposal industrial and transportation pollution water and wastewater treatment energy efficiency and forestry US-AEP has initiated an information service through its netshywork of business representatives in Asia an inforshymation clearinghouse in Washington and a tradeshyleads system that informs US companies of busishyness opportunities for environmental infrastructure and services in Asia It provides companies with advanced notice of opportunities for infrastructure projects assistance in identifying and obtaining fishynancing from public and private sources and access to US government-assistance programs

Export Counseling and Services EPA asshysists foreign governments in developing sound enshyvironmental policies and in solving environmental problems in order to create more demand for US environmental exports In addition EPA promotesthe adoption and sale of US environmental techshynologies that can be part of infrastructure systems in foreign countries The Export-Import Bank of the United States and the US Trade and Developshyment Program (TDP)provide export counseling sershyvices The US Agency for International Developshyment (AID) has created a Center for Trade and Inshyvestment Services (CTIS) that provides individual

BUSINESS amp THE CONTEMPORARY WORLD 201995 128

US COMPETITIVENESS

counseling and information to companies interested in environmental energy and other types of projectsthat are supported by the foreign-aid program in developing countries The US Small Business Ad-ministration also offers advice to small companies on the legal aspects of exporting technology equip-ment or other goods abroad

The US Department of Commerce throughits International Trade Administration (ITA) isnow helping US environmental firms to obtain the assisshytance they need to compete for large infrastructure projects outside the United States ITA identifies and provides information about proposed or sched-uled infrastructure projects offers individual busi-ness counseling and monitors developments in spe-cific sectors

Support for Export of US Goods andServices

Other forms of support are also available to US companies interested in following up on trade and investment opportunities

Assessment of Foreign Business Condi-tions The US Department of Energy helps energy sector exporters to identify overseas opportunitiesand discriminatory trade barriers to identify financ-ing alternatives and to work with US governmentagencies to find markets for energy technology and equipment DOC and OPIC both support overseas trade missions that can help US companies to un-derstand foreign business conditions tariff and non-tariff barriers and opportunities for participating in infrastructure-development projects or for transfer-ring environmental technology and equipment that can be used in infrastructure systems US contrac-tors and exporters seeking to expand their activi-ties in developing countries can obtain political-riskinsurance and other forms of specialized insurance and financing services from OPIC

Coordination of Assistance Resources US-AEP follows up on specific environmental-infrastructure projects and coordinates the appro-priate US government technical and financial re-

sources that are available to help US environmen tal companies penetrate markets in Asia AIDs cornshymodity import program and its project-procurementactivities can open new opportunities for companiesinterested in participating in infrastructure projectsin developing countries

Pre-feasibility Analysis Assistance

Several US government agencies also assist foreigngovernments and private organizations to assess the feasibility of proposed infrastructure-developmentprojects using US consulting and service firms

Financial Assistance for Pre-feasibilityStudies To countries eligible for US bilateral assistance TDP provides non-reimbursable grantfunding for studies and consultancies to determinethe technical economic and financial feasibility of projects in which US technological expertise can help to accelerate the development process The grants focus on a wide range of environmental infrashystructure including energy water supply and wasteshymanagement systems TDP sends US technical speshycialists to developing countries to gather informashytion on the proposed project to work with local authorities to create the scope of work and budgetfor the feasibility study or consultancy and to make recommendations concerning TDP support for the study The host countrys grant-recipient organizashytion (apublic agency or private sector organization)selects the US firm to conduct the study under apshyproved compettive bidding procedures TDP paysgrantee-approved invoices for the expenses of the feasibility study directly to the contractor Up to 20 percent of the grant can be used to enlist the particishypation of the host countrys private-sector expertise to work with the US contractor a provision that encourages joint venture cooperation

OPIC and the US-AEP jointly operate the Environmental Enterprises Development Initiative (EEDI) which provides pre-investment assistance toUS companies that are establishing or expandingenvironmental infrastructure projects in Asian and Pacific countries EEDI offers assistance to private-

BUSINESS amp THE CONTEMPORARY WORLD 0201995 129

DENNIS A RONDINELLI

sector companies that are at least 25 percent US-owned and whose activities in Asia do not result in diversion of US jobs or negative environmental impacts in the host country The activities eligiblefor funding include market-entry assessments in-vestor reviews business plans technology reviews prototype or pilot-project implementation and oth-er types of pre-investment analysis

Cost-Sharing of Feasibility Analyses TDP can also share the costs of feasibility studies un-dertaken by US private-sector investors or sup-pliers that are proposing to develop a project on an unsolicited sole source basis 48 It also main-tains technical-assistance trust funds to finance con-sultancies and feasibility studies by US consult-ing firms through the World Bank and the Interna-tional Finance Corporation for a variety of project-preparation activities The US Export-Import Bank also funds feasibility studies inconjunction with itsinsurance programs loan guarantees and exportercredits Fixed-rate medium-term loans to help fi-nance feasibility studies and pre-construction designand engineering services for up to $10 million are available through Eximbanks Engineering Multipli-er Program which can be used to cover up to 85 pershycent of the US costs

Concessionary Lending and LoanGuarantees

Finally the US government is encouraging the private sector to participate in environmental and infrastructure projects through concessionary lend-ing and loan guarantees Eximbank offers finan-cial assistance to promote the exports of US com-panies with capital equipment or services related to infrastructure-development projects that are nor-mally financed for a period of longer than one yearIt will provide credit or guarantees for up to 85 per-cent of the US export alue of each transaction Re-payment terms range from two to ten years Exim-bank assistance comes in the form of direct loans to public or private organizations abroad purchasingUS equipment or services loans to financial inter-

mediaries who re-lend to international buyers and guarantees to those who lend to foreign buyers Exshyimbank also offers loans and guarantees for up to 85 percent of the export value of US companies opshyerations and maintenance (OampM) contracts This is an effective means of promoting the participation ofUS companies with the technical expertise inmainshytaining environmental infrastructure or in establishshying maintenance systems

US-AEP has also created an Infrastructure Project Promotion Fund to support creative publicshyprivate partnerships that will develop new forms of financing arrangements and reduce the risks of US technology transfers in energy and environmentalshyinfrastructure projects The infrastructure-finance advisory service provides a one-stop clearinghousefor financial advice and assistance to US compashynies seeking to participate in Asian environmental infrastructure projects The services are aimed atUS equipment manufacturers contractors projectdevelopers and service providers that are interestshyed in bidding on public tenders in Asia developingprivate build-own-operate or build-operate-transferprojects or establishing joint ventures

Conclusions

Although the US government is now doing a lot to help US companies to maintain and strengthshyen their competitiveness in the global environmenshytal markets it is far less than what some other countries are doing to support their environmental technology equipment and service industries Othshyer means are needed to expand the participation of US environmental firms in foreign trade and inshyvestment The industry itself and its trade associashytions must take a stronger role in promoting exportsand foreign direct investment Both government and industry associations must help US companies to get supply contracts for backward and forward linkage equipment technical assistance or composhynents from Japanese British or French companierthat are successful in winning large environmental-

BUSINESS 8c THE CONTEMPORARY WORLD 2 1995 130

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

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DENNIS A RONDINELLI

control equipment alone in Thailand isestimated at more than $210 million a year and is expected to grow by 20 percent to 25 percent annually until the year 2000 when spending in this segment of the in-dustry islikely to reach $15 billion Moreover the government of Thailand recognizing the adverse impacts that environmental pollution hazardous-waste problems and environmental degradation are having on the Thai economy and on the health of the Thai people is committed to heavy investnent in environmental-protection facilities Thai officials estimate the demand for all types of environmental technology and services at nearly $10 billion duringthe next decade This includes $3billion for energy-efficient products $2 billion each for municipal wa-ter supply and vehicle-air-pollution equipment and more than $25 billion for municipal and industrial wastewater-treatment facilities industrial air pollu-tion and solid and hazardous waste disposal 13

Thus despite problems of identifying precise-ly the scope and size of the industry and of measur-ing accurately the size of the market for environmen-tal goods and services substantial evidence supportsthe claim that global demand islarge and growingrapidly

Demand for US Environmental Technology and Services

The environmental industry in the United States has developed a strong competitive position the US Office of Technology Assessment reports because it has been able to establish itself in a large domestic market It has a head start in developing productsthat meet the toughest environmental standards and a high level of technical capability and research and development capacity in the industry1 The same research and development has been supported byfederal and state governments universities and the entrepreneurial efforts of many small innovative firms

Market studies show that the United States has become a major exporter of environmental-protection technology - especially of air and water

pollution control and cleanup equipment The most recent estimates by the US Department of Conshymerce indicate that US exports of environmentalshyprotection equipment grew from $975 million in 1989 to $17 billion in 1991 It yielded a positivetrade balance that grew from $565 million to $11 billion over the three-year period Although theystill remain a relatively small portion of total US exports the US Environmental Protection Agency(EPA) reports that US exports of environmentalshyprotection equipment grew substantially during the 1980s and totaled more than $95 biilion between 1980 and 199116 In 1990 the volume of exportsin environmental-protection equipment was comshyparable to that of machine tools book publishshying fabricated textile products or the sporting- and athletic-goods industries However neithcr the Deshypartment of Commerce nor the EPA offers inforshymation on other components of the environmentalshymanagement industry (such as equipment and deshyvices that prevent pollution rather than control it) environmental-management services aboutor foreign-direct investment by US environmental firms in foreign countries

The information that is available indicates that since 1980 Canada has been the single largestimporter of US-made air- and water-pollutionshycontrol equipment France Germany and the Unitshyed Kingdom also imported significant amounts17 In recent years however Japan Mexico South Korea and the Peoples Republic of China have purchasedlarger amounts of air and water pollution equipshyment as well as presumably other environmental products and services The government of China has estimated that it will need to spend about $35 billion to fit old Chinese factories which are major producshyers of geenhouse gases with air-pollution-control equipment 8 In Latin America the US Overseas Private Investment Corporation (OPIC) has offered about $17 billion in financing and insurance for US environmental companies to export or invest OPIC saw the potential for substantial growth inexshyports of US environmental goods and services in Central and Eastern Europe It has committed $12 billion in financing and insurance to US compa-

BUSINESS ampTHE CONTEMPORARY WORLD e20 1995 122

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nies involved in projects in Poland Hungary andthe Czech Republic and isreviewing projects worth more than $6 billion in the Czech Republic andSlovakia20

Market Drivers for Environmental Technology and Services

Despite its comparative advantages in some seg-ments of the market the global competitiveness ofthe US environmental industry in the future willdepend on the continued strength of forces drivingworldwide demand for environmental goods andservices These include the following

Continued Growth of World Trade andInvestment Important factors driving the market for environ-mental equipment and services have been the openshying of world trade in new areas with environmen-tal problems as well as trade and investment poli-cies that allow US companies to take advantageof growing foreign demand The opening over the past decade of many developing and emerging mar-ket countries in Asia Latin America and EasternEurope to trade and foreign investment has creat-ed new opportunities for US environmental firmsIn formerly socialist countries such as Poland Hun-gary the Czech and Slovak Republics and Chinademand is driven as well by the privatization oftheir infrastructure development equipment com-panics and energy industries Continued expansionof world trade and investment will allow the USenvironmental-goods-and-services industry to inter-nationalize through acquiring foreign firms licens-ing to and from abroad and attaining greater ac-cess to government procurement and contractingopportunities21

The new World Trade Organization that isscheduled to replace the General Agreement onTariffs and Trade (GAFT) in 1995 will have an

environmental-affairs committee that focuses attenshytion on environmental-trade matters The approvalof the North American Free Trade Agreement (NAF-TA) has focused US and Mexican leaders attenshytion on environmental hazards along the border and within Mexico It will also give Mexican compashynies increased access to international capital to purshychase pollution control equipment require the Unitshyed States and Mexico to commit hundreds of milshylions of dollars to the US-Mexico Integrated Borshyder Environmental Plan attract new private capitaland World Bank funding for environmental projectsin Mexico NAFTAs lower tariffs and freer tradeconditions will increase the ability of US compashynies to penetrate Mexican markets with environshymental products and services 2

Increasing Public Awareness andConcern for Environmental Hazards Inmuch of the rest of the world as in North Amershyica and Europe public demand for environmental protection increases with growing public awarenessand concern about environmental hazards 23 Pubshylic concern about environmental protection increasshyes with expanding public awareness of the adversehealth impacts of environmental degradation andpollution This concern also rises with improvedtechnical capability to detect toxic substances in the environment at lower concentrations Demand forenforcing more stringent environmental regulationsisenhanced by growing public fear and resistance toaccepting involuntary environmental risks as well asby more public emphasis on industrial responsibilshyity for the health and environmental impacts of itsoperations and products These are two trends that are becoming stronger in Europe North Americaand Japan As public awareness and concern for enshyvironmental hazards spreads incountries with risingper-capita incomes and growing middle classes such as Japan Korea Taiwan and Singapore public deshymand for environmental protection increases24

BUSINESS ampTHE CONTEMPORARY WORLD 02 1995 123

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Enactment and Enforcement of Environmental Regulations

Experience in North America and Europe suggeststhat the single strongest factor affecting demand for environmental management isenactment and effec-tive enforcement of environmental-protection laws and policies Improvements in environmental pro-tection require at a minimum effective and ap-propriate environmental-protection laws and regu-lations as well as institutional structures that can monitor and assess environmental conditions and enforce those environmental-protection regulationsEffective laws and institutions for environmental management depend on political will to enact and enforce environmental-protection laws This de-pends in turn on public perceptions about the need for stronger environmental policy2SIn China new environmental-protection regulations are beingadopted because of increasing evidence that pollu-tion and environmental degradation are iriposingeconomic losses The government estimates that $11 billion a year in economic losses - nearly 7 per-cent of Chinas gross domestic product - can be at-tributed to the effects of environmentally related ill-nesses and diseases tainted water and destruction of fisheries forests and crops 6 Enforcement of Chinas regulations to clean up polluting industries could generate a $23 billion market for pollution-control equipment over the next decade In Chileregulations adopted by presidential decree and new environmental-protection laws under consideration by the Chilean Congress are likewise creating sub-stantal markets for pollution control and abate-ment equipment solid and hazardous waste man-agement air water and waste cleanup projects2 7

Acceptance of Market-Oriented Approaches to Environmental Management

In the United States and Western Europe the trend toward market-oriented approaches is emerging from the realization that regulation ond control

alone are insufficient for effective environmental management Regulation requires stringent monishytoring and assessment which is difficult to achieve even in Western industrial countries Regulations are often more difficult to implement and enforce in many developing and emerging market countriesespecially where corruption undermines the processMoreover responsibilities for implementation are usually fragmented among a wide variety of governshyment agencies More importantly a purely regulatoshyry approach simply reinforces an adversary relationshyship between government and business

A market-oriented approach on the other hand emphasizes a combination of policies that internalizes the costs of pollution relies on intershyventions that do not depend primarily on enforceshyment of regulationscontrols and creates value for the private sector in environmental protection and cleanup28 Such an approach uses a judicious combishynation of regulation and incentives It focuses on the use of such market-based instruments as pollutersshypay programs emissions-permit trading location incentives and fees development of industrial esshytates with adequate environmental infrastructure advertising and persuasion property rights as aconshys-rvation and protection device commercialization of environmental services (especially waste disposal water supply and sanitation)

Western European countries are increasinglyadopting such market-oriented measures as charges on packaging to promote recycling and reduce the solid-waste stream Denmark has adopted charges on glass and plastic beverage containers metal bevshyerage cans cardboard and laminated beverage packshyaging and liquid-dairy-products containers Belgiumplaces charges on packaging waste and Sweden on returnable glass and aluminum beverage containers Australia Canada Germany and the United Stateshave turned to tradeable permit systems to reduce air pollution and water pollution 9 In its unified inshyvestment code Tunisia isproviding financial incenshytives to new investors for environmental cleanupuse of air- and water-pollution-protection equipshyment and treatmentrecycling of waste products Market-oriented policies are likely to attract more

124 BUSINESS amp THE CONTEMPORARY WORLD 2 1995

households and businesses to adopt environmental-ly friendly practices and to seek new environmental technology and services

Pressures and Incentives from International Development Agencies

The demand for environmental technology equip-ment and services is also being driven by pres-sures of international-funding institutions (eg the United Nations and the World Bank with its reshygional counterparts - such as the Asian Developshyment Bank and the European Bank for Reconstruc-tion and Development) on national governments to give environmental protection and cleanup a highshyer priority for investment These pressures are ac-companied by larger numbers of loans for environ-mental projects that require new technology and equipment In 1994 the United States and other in-dustrial countries pledged more than $2 billion in contributions to the Global Environmental Facility (GEF) to finance environmental projects in develop-ing countries that were identified at the United Na-tions 1992 Earth Summit3 The GEF will focus on reducing environmental problems that produce (1) climate change (2) the destruction of biodiversity (3)pollution of international waters and (4) ozone depletion32

Furthermore between 1989 and 1992 the World Bank made nearly $15 billion in loans to developing countries for environmental cleanup industrial-pollution control water-supply and sewage systems waste disposal and energy-resource management3 3 In 1993 it added nearly $13 billion in loan commitments to Brazil China India South Korea Mexico and Turkey for simi-lar projects From 1989 to 1993 it made another nearly $2 billion in loans for natural-resource man-agement in developing countries that will also spur demand for environmental technology equipment and services

The World Banks pressures on governments of developing countries to promote environmental-ly sustainable development expand the market for

US COMPETITIVENESS

environmental goods and services In addition the Banks requirements that environmental impact asshysessments be done on its own development projectsalso have made as one group of analysts concludes a start in incorporating environmental concerns into project design - potentially affecting an annual pipeline of more than 200 investment projects worth over $11 billion34 More environmentally sustainshyable development projects are likely to increase deshymand for equipment to prevent pollution and clean up hazardous conditions

Spread of the Industrial EcologyMovement

The demand for environmental-technology equipshyment and services isalso being driven by the indusshytrial ecology movement3 The willingness of manushyfacturing and processing industries to comply with environmental laws and regulations and to adjust their business practices depends on making busishyness leaders aware of the impacts of environmenshyta degradation on their operations and profits The major trends that are likely to contribute to greater private-sector responsiveness to environmental polshyicy include growing public demands for businessshyes to take responsibility for their environmental imshypacts the growing realization among business leadshyers that their environmental practices and their enshyvironmental image will affect their companies profshyitability and the increasing costs of not complying with environmental regulations3 The private secshytor responds more effectively to environmental regshyulations as it incurs legal and financial liabilities for environmental hazards and insurers financial instishytutions and shareholders become increasingly sensishytive to company environmental practices Industrial firms also become more sensitive to environmental issues as hey incur increasing costs of end-of-pipe pollution control and waste disposal

The growing awareness of the potential sayshyings from pollution prevention rather than cleanup through in-process changes in manufacturing and distribution are leading an increasing number of

BUSINESSamp THE CONTEMPORARY WORLD 2 1995 125

DENNIS ARONDINELLI

manufacturing companies to address environmental problem more directly A primary incentive is the potential for companies to save money by buildingenvironmental considerations into their productiondistribution and processing systems to prevent pol-lution rather than attempting to control end-of-pipe emissions or end-of-distribution wastes Faced with increasing public hostility to their factories and in-creasing threats of legal liabilities the chemical in-dustries in most industrial countries have adoptedthe principles of the Chemical Industries Associa-tions responsible care program 37 Large multina-tional companies such as Volvo Allied-Signal 3M and Union Carbide have adopted environmental au-diting programs in their worldwide operations to maintain central control over their companies com-pliance with regulatory standards in the countries in which they have manufacturing plants Many multi-national companies - such as IBMs subsidiaries in Argentina and Chevrons in Nigeria - have devised their own safe hazardous-waste-disposal arrange-ments in countries lacking adequate facilities38

The leading companies in he industrial ecol-ogy movement - including McDonalds Kodakand ATampT - are examining ways of creating an environmental value chain that includes (1) source reduction of environmentally sensitive in-puts and use of recycled materials (2) cradle-to-grave product design to eliminate waste in pro-duction and at the end of product-life (3)emission and waste reduction in manufacturing (4)volume reduction and recyclability in packaging (5)greenlabeling and product marketing (6)consumer ed-ucation and environmental advertising (7)collec-tion of used or replaced products and (8)post-useproduct recycling39 The spread of the industrial-ecology movement is likely to expand the market for environmental goods and services among privatefirms and generate new environmental products as multinational and domestic companies test innova-tive ways to prevent and control pollution

Increasing Interest In Public-Private Partnerships

The movement toward the use of public-privatepartnerships will change the way in which govshyernments expand environmental services and fishynance and operate large-scale environmental infrashystructure and service facilities Governments in Eushyrope Asia and Latin America are involving nonshygovernment organizations (NGOs) not-for-profitorganizations and private businesses as partners in a variety of environmental services These include water provision sanitation garbagetrash collection and energy generationdistribution Build-operate transfer (BOTs) and build-operate-own (BOO) arshyrangements between government and private conshysortia are now being widely used to expand infrashystructure and facilities for water supply and enershygy provision Malaysia for example has made use of BOTs for privatizing water supply in its Labuan Ipoh and Larut-Matang projects

Increasingly governments are looking to the privatization of services including environmental services as an important instrument of public polshyicy Privatization includes a whole range of altershynatives - from sale of state enterprises to conshycession arrangements with private companies and from management contracts providing public sershyvices to deregulation of service industries 41 Conshytracting and concessions are increasingly being used for water supply sanitation recycling environmenshytal monitoring and assessment and energy generashytiondistribution in such countries as Chile Guinea-Bissau and the CotedIvoire42 The increasing use of both privatization and public-private partnershipsfor providing environmental infrastructure and sershyvices will open more opportunities for both the public and private sectors to acquire environmental technology and equipment and for US companies to supply them

BUSI SampTHE CONTEMPORARY WORLD 2 1995

not aveaccest inormaionabot maketop-other hand often keeps an arms length relationshynot have access to information about market o_ pany to win its bids The US government on the

Forces Inhibiting US Competitiveness in Global Markets

The US environmental industrys competitive ad-aTge oUSenvir lymentinstrys comettentvantagespniesdecade unless it recognizes and corrects its poten-tial weaknesses in an expanded world market The Office of Technology Assessment identified a longlist of weakness that could undermine the US com-petitive position in environmental markets includ-ing (1)US companies reluctance to export because of their large domestic market (2) overseas per_ ceptions that US technology is too expensive orsophisticated (3) weak public-private links in re-sohiserchatd (3)eveakloulic-priv inlk r nsearch and development and in export promotion(4) slow transfer of technology to the marketplace(5) limited efforts to understand foreign cultures and business practices and (6) the limited role of environmental-industry associations intrade and re-

development4 3search and deve lo st

The most crucial obstacle to stronger comn-petitiveness seems to be the reluctance of US com-panies to explore foreign-mark et opportu nitie s and to follow through with market leads Aside froma few large US-based multinational engineering

a fe lageSbasd mltintioal ngieerngconstruction and waste-collection companies manysmall- and medium-sized US environmental firms donBritish markets In many developing and emerging market economies for example small US companies do

portunities until project plans are well under way or tenders are actually let which in nearly all casshyes is too late for a US company to respond effec-tively The US Congressional Office of Technolo-

tivey he SCongessonaf Tchnlo-Oficegy Assessment concluded that US government and private organizations are behind their competitorsin Europe in providing specific market information and leads to potential foreign customers and that the that do exist are often less am bitiousthanprogramsprograms incompetitor countriesdeg

Uanprogrmscompio aen donothees networSofcop tso do th vetpensamenetworks of contacts as do their European and

US COMPETITIVENESS

Japanese competitors in the appropriate ministries (or with local companies that do have such conshytacts) to be able to get the information and establishthemselves as serious contenders for contracts on large environmental infrastructure projects Manysmall- and medium-sized US environmental comshydo not have local offices branchesor agents who can deethve local ofe s f time relashy

who eal peod otie reacan devl tionships with the influential people inthe ministries or agencies who will review and decide on contract proposals abroad they often do not receive the same level of support from the US government that foreign competitors receive through their governments in (1) facilitating trade missions (2) providing inforshymation (3) assigning embassy staff to companiesww alk em o anstarket i es to walk them through the marketing and bidding process (4) tying aid grants to US procurementand (5) restricting the use of US loans or grantsto specific types of projects in which US compashynies would have competitive advantages The USGeneral Accounting Office reports that the numberof foreign commercial service officers in US Emshyo s nd a ounoffmco he m e in rel ati oa bassies abroad and the amount of money inrelationto gross domestic product spent on commercialshyservice staffing is far less than that of France Gershymany talye than t at anceGe manyit rthe United Kingdom and Japan 4 The

French and Japanese governments often give preference on each large contract to one or two of their companies and then work with that comshy

shp h Amen copanies ntrarelotship with American companies and rarely promotes

national championsFinally US companies often do not undershystand the subtleties of the political situation in forshyeign countries or the way to work the political sysshyter in order to get a competitive edge MoreoverUS companies competitors are not constrained bythe US Foreign Corrupt Practices Act which proshyt US o e os ma i n es t o orshyhibits US companies from making payments to forshy

eign government officials in return for favorableconsideration on contracts Japanese companies onthe other hand are often able to provide gifts to gov-

BUSINESS ampTHE CONTEMPORARY WORLD 201995 127

DENNIS A RONDINELLI

ernment officials in the forms of trips abroad over-seas training or assistance to their families in get-ting jobs or higher education

Improving CompetitivenessGovernment Support for Environmental Exports and Investment

In order to overcome some of the obstacles to competitiveness of US firms in the global en-vironmental technology equipment and services industry the US government is seeking to pro-vide greater assistance and support for export-ing forming joint ventures and participating in environmental-infrastructure projects abroad In 1994 the Clinton administration announced the Technology for a Sustainable Future Program that will promote the export of US environmental and energy technologies4 The program seeks to helpUS companies compete in international markets more effectively by (1)facilitating innovation and technological development (2) encouraging new ap-proaches to environmental protection through regu-latory policy market stimulation and fiscal policy in other countries (3) supporting companies export-ing US environmental technologies (4) workingwith domestic and foreign organizations throughpartnerships and collaboration on environmental education training and information dissemination Technology development and dissemination will fo-cus on remediation and restoration of environmen-tal resources environmental pollution control en-vironmental monitoringassessment and avoidance of environmental hazards and degradation

The administrations program will supple-ment and help coordinate government efforts in pro-viding four existing types of support (1) informa-tion services (2) export support (3)financial assis-tance for pre-feasibility analyses and (4) loan guar-antees and concessionary lending47

Information Services and Technical Assistance

A large number of US government agencies are now providing infomnation and technical assistance to US environmental companies interested in forshyeign trade and investment

Trade Leads and Business Information US companies can obtain trade leads and informashytion on potential environmental business opportunishyties including infrastructure development from theUS Department of Commerce (DOC) the State Deshypartment and the Departments of Agriculture Lashybor and Energy as well as from the Overseas Private Investment Corporation (OPIC) and the US-Asia Environmental Program (US-AEP) The US-AEP for example assists US companies to identify the marshykets in Asia for environmental products and sershyvices in solid- and toxic-waste disposal industrial and transportation pollution water and wastewater treatment energy efficiency and forestry US-AEP has initiated an information service through its netshywork of business representatives in Asia an inforshymation clearinghouse in Washington and a tradeshyleads system that informs US companies of busishyness opportunities for environmental infrastructure and services in Asia It provides companies with advanced notice of opportunities for infrastructure projects assistance in identifying and obtaining fishynancing from public and private sources and access to US government-assistance programs

Export Counseling and Services EPA asshysists foreign governments in developing sound enshyvironmental policies and in solving environmental problems in order to create more demand for US environmental exports In addition EPA promotesthe adoption and sale of US environmental techshynologies that can be part of infrastructure systems in foreign countries The Export-Import Bank of the United States and the US Trade and Developshyment Program (TDP)provide export counseling sershyvices The US Agency for International Developshyment (AID) has created a Center for Trade and Inshyvestment Services (CTIS) that provides individual

BUSINESS amp THE CONTEMPORARY WORLD 201995 128

US COMPETITIVENESS

counseling and information to companies interested in environmental energy and other types of projectsthat are supported by the foreign-aid program in developing countries The US Small Business Ad-ministration also offers advice to small companies on the legal aspects of exporting technology equip-ment or other goods abroad

The US Department of Commerce throughits International Trade Administration (ITA) isnow helping US environmental firms to obtain the assisshytance they need to compete for large infrastructure projects outside the United States ITA identifies and provides information about proposed or sched-uled infrastructure projects offers individual busi-ness counseling and monitors developments in spe-cific sectors

Support for Export of US Goods andServices

Other forms of support are also available to US companies interested in following up on trade and investment opportunities

Assessment of Foreign Business Condi-tions The US Department of Energy helps energy sector exporters to identify overseas opportunitiesand discriminatory trade barriers to identify financ-ing alternatives and to work with US governmentagencies to find markets for energy technology and equipment DOC and OPIC both support overseas trade missions that can help US companies to un-derstand foreign business conditions tariff and non-tariff barriers and opportunities for participating in infrastructure-development projects or for transfer-ring environmental technology and equipment that can be used in infrastructure systems US contrac-tors and exporters seeking to expand their activi-ties in developing countries can obtain political-riskinsurance and other forms of specialized insurance and financing services from OPIC

Coordination of Assistance Resources US-AEP follows up on specific environmental-infrastructure projects and coordinates the appro-priate US government technical and financial re-

sources that are available to help US environmen tal companies penetrate markets in Asia AIDs cornshymodity import program and its project-procurementactivities can open new opportunities for companiesinterested in participating in infrastructure projectsin developing countries

Pre-feasibility Analysis Assistance

Several US government agencies also assist foreigngovernments and private organizations to assess the feasibility of proposed infrastructure-developmentprojects using US consulting and service firms

Financial Assistance for Pre-feasibilityStudies To countries eligible for US bilateral assistance TDP provides non-reimbursable grantfunding for studies and consultancies to determinethe technical economic and financial feasibility of projects in which US technological expertise can help to accelerate the development process The grants focus on a wide range of environmental infrashystructure including energy water supply and wasteshymanagement systems TDP sends US technical speshycialists to developing countries to gather informashytion on the proposed project to work with local authorities to create the scope of work and budgetfor the feasibility study or consultancy and to make recommendations concerning TDP support for the study The host countrys grant-recipient organizashytion (apublic agency or private sector organization)selects the US firm to conduct the study under apshyproved compettive bidding procedures TDP paysgrantee-approved invoices for the expenses of the feasibility study directly to the contractor Up to 20 percent of the grant can be used to enlist the particishypation of the host countrys private-sector expertise to work with the US contractor a provision that encourages joint venture cooperation

OPIC and the US-AEP jointly operate the Environmental Enterprises Development Initiative (EEDI) which provides pre-investment assistance toUS companies that are establishing or expandingenvironmental infrastructure projects in Asian and Pacific countries EEDI offers assistance to private-

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DENNIS A RONDINELLI

sector companies that are at least 25 percent US-owned and whose activities in Asia do not result in diversion of US jobs or negative environmental impacts in the host country The activities eligiblefor funding include market-entry assessments in-vestor reviews business plans technology reviews prototype or pilot-project implementation and oth-er types of pre-investment analysis

Cost-Sharing of Feasibility Analyses TDP can also share the costs of feasibility studies un-dertaken by US private-sector investors or sup-pliers that are proposing to develop a project on an unsolicited sole source basis 48 It also main-tains technical-assistance trust funds to finance con-sultancies and feasibility studies by US consult-ing firms through the World Bank and the Interna-tional Finance Corporation for a variety of project-preparation activities The US Export-Import Bank also funds feasibility studies inconjunction with itsinsurance programs loan guarantees and exportercredits Fixed-rate medium-term loans to help fi-nance feasibility studies and pre-construction designand engineering services for up to $10 million are available through Eximbanks Engineering Multipli-er Program which can be used to cover up to 85 pershycent of the US costs

Concessionary Lending and LoanGuarantees

Finally the US government is encouraging the private sector to participate in environmental and infrastructure projects through concessionary lend-ing and loan guarantees Eximbank offers finan-cial assistance to promote the exports of US com-panies with capital equipment or services related to infrastructure-development projects that are nor-mally financed for a period of longer than one yearIt will provide credit or guarantees for up to 85 per-cent of the US export alue of each transaction Re-payment terms range from two to ten years Exim-bank assistance comes in the form of direct loans to public or private organizations abroad purchasingUS equipment or services loans to financial inter-

mediaries who re-lend to international buyers and guarantees to those who lend to foreign buyers Exshyimbank also offers loans and guarantees for up to 85 percent of the export value of US companies opshyerations and maintenance (OampM) contracts This is an effective means of promoting the participation ofUS companies with the technical expertise inmainshytaining environmental infrastructure or in establishshying maintenance systems

US-AEP has also created an Infrastructure Project Promotion Fund to support creative publicshyprivate partnerships that will develop new forms of financing arrangements and reduce the risks of US technology transfers in energy and environmentalshyinfrastructure projects The infrastructure-finance advisory service provides a one-stop clearinghousefor financial advice and assistance to US compashynies seeking to participate in Asian environmental infrastructure projects The services are aimed atUS equipment manufacturers contractors projectdevelopers and service providers that are interestshyed in bidding on public tenders in Asia developingprivate build-own-operate or build-operate-transferprojects or establishing joint ventures

Conclusions

Although the US government is now doing a lot to help US companies to maintain and strengthshyen their competitiveness in the global environmenshytal markets it is far less than what some other countries are doing to support their environmental technology equipment and service industries Othshyer means are needed to expand the participation of US environmental firms in foreign trade and inshyvestment The industry itself and its trade associashytions must take a stronger role in promoting exportsand foreign direct investment Both government and industry associations must help US companies to get supply contracts for backward and forward linkage equipment technical assistance or composhynents from Japanese British or French companierthat are successful in winning large environmental-

BUSINESS 8c THE CONTEMPORARY WORLD 2 1995 130

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

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US COMPETITIVENESS

nies involved in projects in Poland Hungary andthe Czech Republic and isreviewing projects worth more than $6 billion in the Czech Republic andSlovakia20

Market Drivers for Environmental Technology and Services

Despite its comparative advantages in some seg-ments of the market the global competitiveness ofthe US environmental industry in the future willdepend on the continued strength of forces drivingworldwide demand for environmental goods andservices These include the following

Continued Growth of World Trade andInvestment Important factors driving the market for environ-mental equipment and services have been the openshying of world trade in new areas with environmen-tal problems as well as trade and investment poli-cies that allow US companies to take advantageof growing foreign demand The opening over the past decade of many developing and emerging mar-ket countries in Asia Latin America and EasternEurope to trade and foreign investment has creat-ed new opportunities for US environmental firmsIn formerly socialist countries such as Poland Hun-gary the Czech and Slovak Republics and Chinademand is driven as well by the privatization oftheir infrastructure development equipment com-panics and energy industries Continued expansionof world trade and investment will allow the USenvironmental-goods-and-services industry to inter-nationalize through acquiring foreign firms licens-ing to and from abroad and attaining greater ac-cess to government procurement and contractingopportunities21

The new World Trade Organization that isscheduled to replace the General Agreement onTariffs and Trade (GAFT) in 1995 will have an

environmental-affairs committee that focuses attenshytion on environmental-trade matters The approvalof the North American Free Trade Agreement (NAF-TA) has focused US and Mexican leaders attenshytion on environmental hazards along the border and within Mexico It will also give Mexican compashynies increased access to international capital to purshychase pollution control equipment require the Unitshyed States and Mexico to commit hundreds of milshylions of dollars to the US-Mexico Integrated Borshyder Environmental Plan attract new private capitaland World Bank funding for environmental projectsin Mexico NAFTAs lower tariffs and freer tradeconditions will increase the ability of US compashynies to penetrate Mexican markets with environshymental products and services 2

Increasing Public Awareness andConcern for Environmental Hazards Inmuch of the rest of the world as in North Amershyica and Europe public demand for environmental protection increases with growing public awarenessand concern about environmental hazards 23 Pubshylic concern about environmental protection increasshyes with expanding public awareness of the adversehealth impacts of environmental degradation andpollution This concern also rises with improvedtechnical capability to detect toxic substances in the environment at lower concentrations Demand forenforcing more stringent environmental regulationsisenhanced by growing public fear and resistance toaccepting involuntary environmental risks as well asby more public emphasis on industrial responsibilshyity for the health and environmental impacts of itsoperations and products These are two trends that are becoming stronger in Europe North Americaand Japan As public awareness and concern for enshyvironmental hazards spreads incountries with risingper-capita incomes and growing middle classes such as Japan Korea Taiwan and Singapore public deshymand for environmental protection increases24

BUSINESS ampTHE CONTEMPORARY WORLD 02 1995 123

DENNIS ARONDINELLI

Enactment and Enforcement of Environmental Regulations

Experience in North America and Europe suggeststhat the single strongest factor affecting demand for environmental management isenactment and effec-tive enforcement of environmental-protection laws and policies Improvements in environmental pro-tection require at a minimum effective and ap-propriate environmental-protection laws and regu-lations as well as institutional structures that can monitor and assess environmental conditions and enforce those environmental-protection regulationsEffective laws and institutions for environmental management depend on political will to enact and enforce environmental-protection laws This de-pends in turn on public perceptions about the need for stronger environmental policy2SIn China new environmental-protection regulations are beingadopted because of increasing evidence that pollu-tion and environmental degradation are iriposingeconomic losses The government estimates that $11 billion a year in economic losses - nearly 7 per-cent of Chinas gross domestic product - can be at-tributed to the effects of environmentally related ill-nesses and diseases tainted water and destruction of fisheries forests and crops 6 Enforcement of Chinas regulations to clean up polluting industries could generate a $23 billion market for pollution-control equipment over the next decade In Chileregulations adopted by presidential decree and new environmental-protection laws under consideration by the Chilean Congress are likewise creating sub-stantal markets for pollution control and abate-ment equipment solid and hazardous waste man-agement air water and waste cleanup projects2 7

Acceptance of Market-Oriented Approaches to Environmental Management

In the United States and Western Europe the trend toward market-oriented approaches is emerging from the realization that regulation ond control

alone are insufficient for effective environmental management Regulation requires stringent monishytoring and assessment which is difficult to achieve even in Western industrial countries Regulations are often more difficult to implement and enforce in many developing and emerging market countriesespecially where corruption undermines the processMoreover responsibilities for implementation are usually fragmented among a wide variety of governshyment agencies More importantly a purely regulatoshyry approach simply reinforces an adversary relationshyship between government and business

A market-oriented approach on the other hand emphasizes a combination of policies that internalizes the costs of pollution relies on intershyventions that do not depend primarily on enforceshyment of regulationscontrols and creates value for the private sector in environmental protection and cleanup28 Such an approach uses a judicious combishynation of regulation and incentives It focuses on the use of such market-based instruments as pollutersshypay programs emissions-permit trading location incentives and fees development of industrial esshytates with adequate environmental infrastructure advertising and persuasion property rights as aconshys-rvation and protection device commercialization of environmental services (especially waste disposal water supply and sanitation)

Western European countries are increasinglyadopting such market-oriented measures as charges on packaging to promote recycling and reduce the solid-waste stream Denmark has adopted charges on glass and plastic beverage containers metal bevshyerage cans cardboard and laminated beverage packshyaging and liquid-dairy-products containers Belgiumplaces charges on packaging waste and Sweden on returnable glass and aluminum beverage containers Australia Canada Germany and the United Stateshave turned to tradeable permit systems to reduce air pollution and water pollution 9 In its unified inshyvestment code Tunisia isproviding financial incenshytives to new investors for environmental cleanupuse of air- and water-pollution-protection equipshyment and treatmentrecycling of waste products Market-oriented policies are likely to attract more

124 BUSINESS amp THE CONTEMPORARY WORLD 2 1995

households and businesses to adopt environmental-ly friendly practices and to seek new environmental technology and services

Pressures and Incentives from International Development Agencies

The demand for environmental technology equip-ment and services is also being driven by pres-sures of international-funding institutions (eg the United Nations and the World Bank with its reshygional counterparts - such as the Asian Developshyment Bank and the European Bank for Reconstruc-tion and Development) on national governments to give environmental protection and cleanup a highshyer priority for investment These pressures are ac-companied by larger numbers of loans for environ-mental projects that require new technology and equipment In 1994 the United States and other in-dustrial countries pledged more than $2 billion in contributions to the Global Environmental Facility (GEF) to finance environmental projects in develop-ing countries that were identified at the United Na-tions 1992 Earth Summit3 The GEF will focus on reducing environmental problems that produce (1) climate change (2) the destruction of biodiversity (3)pollution of international waters and (4) ozone depletion32

Furthermore between 1989 and 1992 the World Bank made nearly $15 billion in loans to developing countries for environmental cleanup industrial-pollution control water-supply and sewage systems waste disposal and energy-resource management3 3 In 1993 it added nearly $13 billion in loan commitments to Brazil China India South Korea Mexico and Turkey for simi-lar projects From 1989 to 1993 it made another nearly $2 billion in loans for natural-resource man-agement in developing countries that will also spur demand for environmental technology equipment and services

The World Banks pressures on governments of developing countries to promote environmental-ly sustainable development expand the market for

US COMPETITIVENESS

environmental goods and services In addition the Banks requirements that environmental impact asshysessments be done on its own development projectsalso have made as one group of analysts concludes a start in incorporating environmental concerns into project design - potentially affecting an annual pipeline of more than 200 investment projects worth over $11 billion34 More environmentally sustainshyable development projects are likely to increase deshymand for equipment to prevent pollution and clean up hazardous conditions

Spread of the Industrial EcologyMovement

The demand for environmental-technology equipshyment and services isalso being driven by the indusshytrial ecology movement3 The willingness of manushyfacturing and processing industries to comply with environmental laws and regulations and to adjust their business practices depends on making busishyness leaders aware of the impacts of environmenshyta degradation on their operations and profits The major trends that are likely to contribute to greater private-sector responsiveness to environmental polshyicy include growing public demands for businessshyes to take responsibility for their environmental imshypacts the growing realization among business leadshyers that their environmental practices and their enshyvironmental image will affect their companies profshyitability and the increasing costs of not complying with environmental regulations3 The private secshytor responds more effectively to environmental regshyulations as it incurs legal and financial liabilities for environmental hazards and insurers financial instishytutions and shareholders become increasingly sensishytive to company environmental practices Industrial firms also become more sensitive to environmental issues as hey incur increasing costs of end-of-pipe pollution control and waste disposal

The growing awareness of the potential sayshyings from pollution prevention rather than cleanup through in-process changes in manufacturing and distribution are leading an increasing number of

BUSINESSamp THE CONTEMPORARY WORLD 2 1995 125

DENNIS ARONDINELLI

manufacturing companies to address environmental problem more directly A primary incentive is the potential for companies to save money by buildingenvironmental considerations into their productiondistribution and processing systems to prevent pol-lution rather than attempting to control end-of-pipe emissions or end-of-distribution wastes Faced with increasing public hostility to their factories and in-creasing threats of legal liabilities the chemical in-dustries in most industrial countries have adoptedthe principles of the Chemical Industries Associa-tions responsible care program 37 Large multina-tional companies such as Volvo Allied-Signal 3M and Union Carbide have adopted environmental au-diting programs in their worldwide operations to maintain central control over their companies com-pliance with regulatory standards in the countries in which they have manufacturing plants Many multi-national companies - such as IBMs subsidiaries in Argentina and Chevrons in Nigeria - have devised their own safe hazardous-waste-disposal arrange-ments in countries lacking adequate facilities38

The leading companies in he industrial ecol-ogy movement - including McDonalds Kodakand ATampT - are examining ways of creating an environmental value chain that includes (1) source reduction of environmentally sensitive in-puts and use of recycled materials (2) cradle-to-grave product design to eliminate waste in pro-duction and at the end of product-life (3)emission and waste reduction in manufacturing (4)volume reduction and recyclability in packaging (5)greenlabeling and product marketing (6)consumer ed-ucation and environmental advertising (7)collec-tion of used or replaced products and (8)post-useproduct recycling39 The spread of the industrial-ecology movement is likely to expand the market for environmental goods and services among privatefirms and generate new environmental products as multinational and domestic companies test innova-tive ways to prevent and control pollution

Increasing Interest In Public-Private Partnerships

The movement toward the use of public-privatepartnerships will change the way in which govshyernments expand environmental services and fishynance and operate large-scale environmental infrashystructure and service facilities Governments in Eushyrope Asia and Latin America are involving nonshygovernment organizations (NGOs) not-for-profitorganizations and private businesses as partners in a variety of environmental services These include water provision sanitation garbagetrash collection and energy generationdistribution Build-operate transfer (BOTs) and build-operate-own (BOO) arshyrangements between government and private conshysortia are now being widely used to expand infrashystructure and facilities for water supply and enershygy provision Malaysia for example has made use of BOTs for privatizing water supply in its Labuan Ipoh and Larut-Matang projects

Increasingly governments are looking to the privatization of services including environmental services as an important instrument of public polshyicy Privatization includes a whole range of altershynatives - from sale of state enterprises to conshycession arrangements with private companies and from management contracts providing public sershyvices to deregulation of service industries 41 Conshytracting and concessions are increasingly being used for water supply sanitation recycling environmenshytal monitoring and assessment and energy generashytiondistribution in such countries as Chile Guinea-Bissau and the CotedIvoire42 The increasing use of both privatization and public-private partnershipsfor providing environmental infrastructure and sershyvices will open more opportunities for both the public and private sectors to acquire environmental technology and equipment and for US companies to supply them

BUSI SampTHE CONTEMPORARY WORLD 2 1995

not aveaccest inormaionabot maketop-other hand often keeps an arms length relationshynot have access to information about market o_ pany to win its bids The US government on the

Forces Inhibiting US Competitiveness in Global Markets

The US environmental industrys competitive ad-aTge oUSenvir lymentinstrys comettentvantagespniesdecade unless it recognizes and corrects its poten-tial weaknesses in an expanded world market The Office of Technology Assessment identified a longlist of weakness that could undermine the US com-petitive position in environmental markets includ-ing (1)US companies reluctance to export because of their large domestic market (2) overseas per_ ceptions that US technology is too expensive orsophisticated (3) weak public-private links in re-sohiserchatd (3)eveakloulic-priv inlk r nsearch and development and in export promotion(4) slow transfer of technology to the marketplace(5) limited efforts to understand foreign cultures and business practices and (6) the limited role of environmental-industry associations intrade and re-

development4 3search and deve lo st

The most crucial obstacle to stronger comn-petitiveness seems to be the reluctance of US com-panies to explore foreign-mark et opportu nitie s and to follow through with market leads Aside froma few large US-based multinational engineering

a fe lageSbasd mltintioal ngieerngconstruction and waste-collection companies manysmall- and medium-sized US environmental firms donBritish markets In many developing and emerging market economies for example small US companies do

portunities until project plans are well under way or tenders are actually let which in nearly all casshyes is too late for a US company to respond effec-tively The US Congressional Office of Technolo-

tivey he SCongessonaf Tchnlo-Oficegy Assessment concluded that US government and private organizations are behind their competitorsin Europe in providing specific market information and leads to potential foreign customers and that the that do exist are often less am bitiousthanprogramsprograms incompetitor countriesdeg

Uanprogrmscompio aen donothees networSofcop tso do th vetpensamenetworks of contacts as do their European and

US COMPETITIVENESS

Japanese competitors in the appropriate ministries (or with local companies that do have such conshytacts) to be able to get the information and establishthemselves as serious contenders for contracts on large environmental infrastructure projects Manysmall- and medium-sized US environmental comshydo not have local offices branchesor agents who can deethve local ofe s f time relashy

who eal peod otie reacan devl tionships with the influential people inthe ministries or agencies who will review and decide on contract proposals abroad they often do not receive the same level of support from the US government that foreign competitors receive through their governments in (1) facilitating trade missions (2) providing inforshymation (3) assigning embassy staff to companiesww alk em o anstarket i es to walk them through the marketing and bidding process (4) tying aid grants to US procurementand (5) restricting the use of US loans or grantsto specific types of projects in which US compashynies would have competitive advantages The USGeneral Accounting Office reports that the numberof foreign commercial service officers in US Emshyo s nd a ounoffmco he m e in rel ati oa bassies abroad and the amount of money inrelationto gross domestic product spent on commercialshyservice staffing is far less than that of France Gershymany talye than t at anceGe manyit rthe United Kingdom and Japan 4 The

French and Japanese governments often give preference on each large contract to one or two of their companies and then work with that comshy

shp h Amen copanies ntrarelotship with American companies and rarely promotes

national championsFinally US companies often do not undershystand the subtleties of the political situation in forshyeign countries or the way to work the political sysshyter in order to get a competitive edge MoreoverUS companies competitors are not constrained bythe US Foreign Corrupt Practices Act which proshyt US o e os ma i n es t o orshyhibits US companies from making payments to forshy

eign government officials in return for favorableconsideration on contracts Japanese companies onthe other hand are often able to provide gifts to gov-

BUSINESS ampTHE CONTEMPORARY WORLD 201995 127

DENNIS A RONDINELLI

ernment officials in the forms of trips abroad over-seas training or assistance to their families in get-ting jobs or higher education

Improving CompetitivenessGovernment Support for Environmental Exports and Investment

In order to overcome some of the obstacles to competitiveness of US firms in the global en-vironmental technology equipment and services industry the US government is seeking to pro-vide greater assistance and support for export-ing forming joint ventures and participating in environmental-infrastructure projects abroad In 1994 the Clinton administration announced the Technology for a Sustainable Future Program that will promote the export of US environmental and energy technologies4 The program seeks to helpUS companies compete in international markets more effectively by (1)facilitating innovation and technological development (2) encouraging new ap-proaches to environmental protection through regu-latory policy market stimulation and fiscal policy in other countries (3) supporting companies export-ing US environmental technologies (4) workingwith domestic and foreign organizations throughpartnerships and collaboration on environmental education training and information dissemination Technology development and dissemination will fo-cus on remediation and restoration of environmen-tal resources environmental pollution control en-vironmental monitoringassessment and avoidance of environmental hazards and degradation

The administrations program will supple-ment and help coordinate government efforts in pro-viding four existing types of support (1) informa-tion services (2) export support (3)financial assis-tance for pre-feasibility analyses and (4) loan guar-antees and concessionary lending47

Information Services and Technical Assistance

A large number of US government agencies are now providing infomnation and technical assistance to US environmental companies interested in forshyeign trade and investment

Trade Leads and Business Information US companies can obtain trade leads and informashytion on potential environmental business opportunishyties including infrastructure development from theUS Department of Commerce (DOC) the State Deshypartment and the Departments of Agriculture Lashybor and Energy as well as from the Overseas Private Investment Corporation (OPIC) and the US-Asia Environmental Program (US-AEP) The US-AEP for example assists US companies to identify the marshykets in Asia for environmental products and sershyvices in solid- and toxic-waste disposal industrial and transportation pollution water and wastewater treatment energy efficiency and forestry US-AEP has initiated an information service through its netshywork of business representatives in Asia an inforshymation clearinghouse in Washington and a tradeshyleads system that informs US companies of busishyness opportunities for environmental infrastructure and services in Asia It provides companies with advanced notice of opportunities for infrastructure projects assistance in identifying and obtaining fishynancing from public and private sources and access to US government-assistance programs

Export Counseling and Services EPA asshysists foreign governments in developing sound enshyvironmental policies and in solving environmental problems in order to create more demand for US environmental exports In addition EPA promotesthe adoption and sale of US environmental techshynologies that can be part of infrastructure systems in foreign countries The Export-Import Bank of the United States and the US Trade and Developshyment Program (TDP)provide export counseling sershyvices The US Agency for International Developshyment (AID) has created a Center for Trade and Inshyvestment Services (CTIS) that provides individual

BUSINESS amp THE CONTEMPORARY WORLD 201995 128

US COMPETITIVENESS

counseling and information to companies interested in environmental energy and other types of projectsthat are supported by the foreign-aid program in developing countries The US Small Business Ad-ministration also offers advice to small companies on the legal aspects of exporting technology equip-ment or other goods abroad

The US Department of Commerce throughits International Trade Administration (ITA) isnow helping US environmental firms to obtain the assisshytance they need to compete for large infrastructure projects outside the United States ITA identifies and provides information about proposed or sched-uled infrastructure projects offers individual busi-ness counseling and monitors developments in spe-cific sectors

Support for Export of US Goods andServices

Other forms of support are also available to US companies interested in following up on trade and investment opportunities

Assessment of Foreign Business Condi-tions The US Department of Energy helps energy sector exporters to identify overseas opportunitiesand discriminatory trade barriers to identify financ-ing alternatives and to work with US governmentagencies to find markets for energy technology and equipment DOC and OPIC both support overseas trade missions that can help US companies to un-derstand foreign business conditions tariff and non-tariff barriers and opportunities for participating in infrastructure-development projects or for transfer-ring environmental technology and equipment that can be used in infrastructure systems US contrac-tors and exporters seeking to expand their activi-ties in developing countries can obtain political-riskinsurance and other forms of specialized insurance and financing services from OPIC

Coordination of Assistance Resources US-AEP follows up on specific environmental-infrastructure projects and coordinates the appro-priate US government technical and financial re-

sources that are available to help US environmen tal companies penetrate markets in Asia AIDs cornshymodity import program and its project-procurementactivities can open new opportunities for companiesinterested in participating in infrastructure projectsin developing countries

Pre-feasibility Analysis Assistance

Several US government agencies also assist foreigngovernments and private organizations to assess the feasibility of proposed infrastructure-developmentprojects using US consulting and service firms

Financial Assistance for Pre-feasibilityStudies To countries eligible for US bilateral assistance TDP provides non-reimbursable grantfunding for studies and consultancies to determinethe technical economic and financial feasibility of projects in which US technological expertise can help to accelerate the development process The grants focus on a wide range of environmental infrashystructure including energy water supply and wasteshymanagement systems TDP sends US technical speshycialists to developing countries to gather informashytion on the proposed project to work with local authorities to create the scope of work and budgetfor the feasibility study or consultancy and to make recommendations concerning TDP support for the study The host countrys grant-recipient organizashytion (apublic agency or private sector organization)selects the US firm to conduct the study under apshyproved compettive bidding procedures TDP paysgrantee-approved invoices for the expenses of the feasibility study directly to the contractor Up to 20 percent of the grant can be used to enlist the particishypation of the host countrys private-sector expertise to work with the US contractor a provision that encourages joint venture cooperation

OPIC and the US-AEP jointly operate the Environmental Enterprises Development Initiative (EEDI) which provides pre-investment assistance toUS companies that are establishing or expandingenvironmental infrastructure projects in Asian and Pacific countries EEDI offers assistance to private-

BUSINESS amp THE CONTEMPORARY WORLD 0201995 129

DENNIS A RONDINELLI

sector companies that are at least 25 percent US-owned and whose activities in Asia do not result in diversion of US jobs or negative environmental impacts in the host country The activities eligiblefor funding include market-entry assessments in-vestor reviews business plans technology reviews prototype or pilot-project implementation and oth-er types of pre-investment analysis

Cost-Sharing of Feasibility Analyses TDP can also share the costs of feasibility studies un-dertaken by US private-sector investors or sup-pliers that are proposing to develop a project on an unsolicited sole source basis 48 It also main-tains technical-assistance trust funds to finance con-sultancies and feasibility studies by US consult-ing firms through the World Bank and the Interna-tional Finance Corporation for a variety of project-preparation activities The US Export-Import Bank also funds feasibility studies inconjunction with itsinsurance programs loan guarantees and exportercredits Fixed-rate medium-term loans to help fi-nance feasibility studies and pre-construction designand engineering services for up to $10 million are available through Eximbanks Engineering Multipli-er Program which can be used to cover up to 85 pershycent of the US costs

Concessionary Lending and LoanGuarantees

Finally the US government is encouraging the private sector to participate in environmental and infrastructure projects through concessionary lend-ing and loan guarantees Eximbank offers finan-cial assistance to promote the exports of US com-panies with capital equipment or services related to infrastructure-development projects that are nor-mally financed for a period of longer than one yearIt will provide credit or guarantees for up to 85 per-cent of the US export alue of each transaction Re-payment terms range from two to ten years Exim-bank assistance comes in the form of direct loans to public or private organizations abroad purchasingUS equipment or services loans to financial inter-

mediaries who re-lend to international buyers and guarantees to those who lend to foreign buyers Exshyimbank also offers loans and guarantees for up to 85 percent of the export value of US companies opshyerations and maintenance (OampM) contracts This is an effective means of promoting the participation ofUS companies with the technical expertise inmainshytaining environmental infrastructure or in establishshying maintenance systems

US-AEP has also created an Infrastructure Project Promotion Fund to support creative publicshyprivate partnerships that will develop new forms of financing arrangements and reduce the risks of US technology transfers in energy and environmentalshyinfrastructure projects The infrastructure-finance advisory service provides a one-stop clearinghousefor financial advice and assistance to US compashynies seeking to participate in Asian environmental infrastructure projects The services are aimed atUS equipment manufacturers contractors projectdevelopers and service providers that are interestshyed in bidding on public tenders in Asia developingprivate build-own-operate or build-operate-transferprojects or establishing joint ventures

Conclusions

Although the US government is now doing a lot to help US companies to maintain and strengthshyen their competitiveness in the global environmenshytal markets it is far less than what some other countries are doing to support their environmental technology equipment and service industries Othshyer means are needed to expand the participation of US environmental firms in foreign trade and inshyvestment The industry itself and its trade associashytions must take a stronger role in promoting exportsand foreign direct investment Both government and industry associations must help US companies to get supply contracts for backward and forward linkage equipment technical assistance or composhynents from Japanese British or French companierthat are successful in winning large environmental-

BUSINESS 8c THE CONTEMPORARY WORLD 2 1995 130

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

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DENNIS ARONDINELLI

Enactment and Enforcement of Environmental Regulations

Experience in North America and Europe suggeststhat the single strongest factor affecting demand for environmental management isenactment and effec-tive enforcement of environmental-protection laws and policies Improvements in environmental pro-tection require at a minimum effective and ap-propriate environmental-protection laws and regu-lations as well as institutional structures that can monitor and assess environmental conditions and enforce those environmental-protection regulationsEffective laws and institutions for environmental management depend on political will to enact and enforce environmental-protection laws This de-pends in turn on public perceptions about the need for stronger environmental policy2SIn China new environmental-protection regulations are beingadopted because of increasing evidence that pollu-tion and environmental degradation are iriposingeconomic losses The government estimates that $11 billion a year in economic losses - nearly 7 per-cent of Chinas gross domestic product - can be at-tributed to the effects of environmentally related ill-nesses and diseases tainted water and destruction of fisheries forests and crops 6 Enforcement of Chinas regulations to clean up polluting industries could generate a $23 billion market for pollution-control equipment over the next decade In Chileregulations adopted by presidential decree and new environmental-protection laws under consideration by the Chilean Congress are likewise creating sub-stantal markets for pollution control and abate-ment equipment solid and hazardous waste man-agement air water and waste cleanup projects2 7

Acceptance of Market-Oriented Approaches to Environmental Management

In the United States and Western Europe the trend toward market-oriented approaches is emerging from the realization that regulation ond control

alone are insufficient for effective environmental management Regulation requires stringent monishytoring and assessment which is difficult to achieve even in Western industrial countries Regulations are often more difficult to implement and enforce in many developing and emerging market countriesespecially where corruption undermines the processMoreover responsibilities for implementation are usually fragmented among a wide variety of governshyment agencies More importantly a purely regulatoshyry approach simply reinforces an adversary relationshyship between government and business

A market-oriented approach on the other hand emphasizes a combination of policies that internalizes the costs of pollution relies on intershyventions that do not depend primarily on enforceshyment of regulationscontrols and creates value for the private sector in environmental protection and cleanup28 Such an approach uses a judicious combishynation of regulation and incentives It focuses on the use of such market-based instruments as pollutersshypay programs emissions-permit trading location incentives and fees development of industrial esshytates with adequate environmental infrastructure advertising and persuasion property rights as aconshys-rvation and protection device commercialization of environmental services (especially waste disposal water supply and sanitation)

Western European countries are increasinglyadopting such market-oriented measures as charges on packaging to promote recycling and reduce the solid-waste stream Denmark has adopted charges on glass and plastic beverage containers metal bevshyerage cans cardboard and laminated beverage packshyaging and liquid-dairy-products containers Belgiumplaces charges on packaging waste and Sweden on returnable glass and aluminum beverage containers Australia Canada Germany and the United Stateshave turned to tradeable permit systems to reduce air pollution and water pollution 9 In its unified inshyvestment code Tunisia isproviding financial incenshytives to new investors for environmental cleanupuse of air- and water-pollution-protection equipshyment and treatmentrecycling of waste products Market-oriented policies are likely to attract more

124 BUSINESS amp THE CONTEMPORARY WORLD 2 1995

households and businesses to adopt environmental-ly friendly practices and to seek new environmental technology and services

Pressures and Incentives from International Development Agencies

The demand for environmental technology equip-ment and services is also being driven by pres-sures of international-funding institutions (eg the United Nations and the World Bank with its reshygional counterparts - such as the Asian Developshyment Bank and the European Bank for Reconstruc-tion and Development) on national governments to give environmental protection and cleanup a highshyer priority for investment These pressures are ac-companied by larger numbers of loans for environ-mental projects that require new technology and equipment In 1994 the United States and other in-dustrial countries pledged more than $2 billion in contributions to the Global Environmental Facility (GEF) to finance environmental projects in develop-ing countries that were identified at the United Na-tions 1992 Earth Summit3 The GEF will focus on reducing environmental problems that produce (1) climate change (2) the destruction of biodiversity (3)pollution of international waters and (4) ozone depletion32

Furthermore between 1989 and 1992 the World Bank made nearly $15 billion in loans to developing countries for environmental cleanup industrial-pollution control water-supply and sewage systems waste disposal and energy-resource management3 3 In 1993 it added nearly $13 billion in loan commitments to Brazil China India South Korea Mexico and Turkey for simi-lar projects From 1989 to 1993 it made another nearly $2 billion in loans for natural-resource man-agement in developing countries that will also spur demand for environmental technology equipment and services

The World Banks pressures on governments of developing countries to promote environmental-ly sustainable development expand the market for

US COMPETITIVENESS

environmental goods and services In addition the Banks requirements that environmental impact asshysessments be done on its own development projectsalso have made as one group of analysts concludes a start in incorporating environmental concerns into project design - potentially affecting an annual pipeline of more than 200 investment projects worth over $11 billion34 More environmentally sustainshyable development projects are likely to increase deshymand for equipment to prevent pollution and clean up hazardous conditions

Spread of the Industrial EcologyMovement

The demand for environmental-technology equipshyment and services isalso being driven by the indusshytrial ecology movement3 The willingness of manushyfacturing and processing industries to comply with environmental laws and regulations and to adjust their business practices depends on making busishyness leaders aware of the impacts of environmenshyta degradation on their operations and profits The major trends that are likely to contribute to greater private-sector responsiveness to environmental polshyicy include growing public demands for businessshyes to take responsibility for their environmental imshypacts the growing realization among business leadshyers that their environmental practices and their enshyvironmental image will affect their companies profshyitability and the increasing costs of not complying with environmental regulations3 The private secshytor responds more effectively to environmental regshyulations as it incurs legal and financial liabilities for environmental hazards and insurers financial instishytutions and shareholders become increasingly sensishytive to company environmental practices Industrial firms also become more sensitive to environmental issues as hey incur increasing costs of end-of-pipe pollution control and waste disposal

The growing awareness of the potential sayshyings from pollution prevention rather than cleanup through in-process changes in manufacturing and distribution are leading an increasing number of

BUSINESSamp THE CONTEMPORARY WORLD 2 1995 125

DENNIS ARONDINELLI

manufacturing companies to address environmental problem more directly A primary incentive is the potential for companies to save money by buildingenvironmental considerations into their productiondistribution and processing systems to prevent pol-lution rather than attempting to control end-of-pipe emissions or end-of-distribution wastes Faced with increasing public hostility to their factories and in-creasing threats of legal liabilities the chemical in-dustries in most industrial countries have adoptedthe principles of the Chemical Industries Associa-tions responsible care program 37 Large multina-tional companies such as Volvo Allied-Signal 3M and Union Carbide have adopted environmental au-diting programs in their worldwide operations to maintain central control over their companies com-pliance with regulatory standards in the countries in which they have manufacturing plants Many multi-national companies - such as IBMs subsidiaries in Argentina and Chevrons in Nigeria - have devised their own safe hazardous-waste-disposal arrange-ments in countries lacking adequate facilities38

The leading companies in he industrial ecol-ogy movement - including McDonalds Kodakand ATampT - are examining ways of creating an environmental value chain that includes (1) source reduction of environmentally sensitive in-puts and use of recycled materials (2) cradle-to-grave product design to eliminate waste in pro-duction and at the end of product-life (3)emission and waste reduction in manufacturing (4)volume reduction and recyclability in packaging (5)greenlabeling and product marketing (6)consumer ed-ucation and environmental advertising (7)collec-tion of used or replaced products and (8)post-useproduct recycling39 The spread of the industrial-ecology movement is likely to expand the market for environmental goods and services among privatefirms and generate new environmental products as multinational and domestic companies test innova-tive ways to prevent and control pollution

Increasing Interest In Public-Private Partnerships

The movement toward the use of public-privatepartnerships will change the way in which govshyernments expand environmental services and fishynance and operate large-scale environmental infrashystructure and service facilities Governments in Eushyrope Asia and Latin America are involving nonshygovernment organizations (NGOs) not-for-profitorganizations and private businesses as partners in a variety of environmental services These include water provision sanitation garbagetrash collection and energy generationdistribution Build-operate transfer (BOTs) and build-operate-own (BOO) arshyrangements between government and private conshysortia are now being widely used to expand infrashystructure and facilities for water supply and enershygy provision Malaysia for example has made use of BOTs for privatizing water supply in its Labuan Ipoh and Larut-Matang projects

Increasingly governments are looking to the privatization of services including environmental services as an important instrument of public polshyicy Privatization includes a whole range of altershynatives - from sale of state enterprises to conshycession arrangements with private companies and from management contracts providing public sershyvices to deregulation of service industries 41 Conshytracting and concessions are increasingly being used for water supply sanitation recycling environmenshytal monitoring and assessment and energy generashytiondistribution in such countries as Chile Guinea-Bissau and the CotedIvoire42 The increasing use of both privatization and public-private partnershipsfor providing environmental infrastructure and sershyvices will open more opportunities for both the public and private sectors to acquire environmental technology and equipment and for US companies to supply them

BUSI SampTHE CONTEMPORARY WORLD 2 1995

not aveaccest inormaionabot maketop-other hand often keeps an arms length relationshynot have access to information about market o_ pany to win its bids The US government on the

Forces Inhibiting US Competitiveness in Global Markets

The US environmental industrys competitive ad-aTge oUSenvir lymentinstrys comettentvantagespniesdecade unless it recognizes and corrects its poten-tial weaknesses in an expanded world market The Office of Technology Assessment identified a longlist of weakness that could undermine the US com-petitive position in environmental markets includ-ing (1)US companies reluctance to export because of their large domestic market (2) overseas per_ ceptions that US technology is too expensive orsophisticated (3) weak public-private links in re-sohiserchatd (3)eveakloulic-priv inlk r nsearch and development and in export promotion(4) slow transfer of technology to the marketplace(5) limited efforts to understand foreign cultures and business practices and (6) the limited role of environmental-industry associations intrade and re-

development4 3search and deve lo st

The most crucial obstacle to stronger comn-petitiveness seems to be the reluctance of US com-panies to explore foreign-mark et opportu nitie s and to follow through with market leads Aside froma few large US-based multinational engineering

a fe lageSbasd mltintioal ngieerngconstruction and waste-collection companies manysmall- and medium-sized US environmental firms donBritish markets In many developing and emerging market economies for example small US companies do

portunities until project plans are well under way or tenders are actually let which in nearly all casshyes is too late for a US company to respond effec-tively The US Congressional Office of Technolo-

tivey he SCongessonaf Tchnlo-Oficegy Assessment concluded that US government and private organizations are behind their competitorsin Europe in providing specific market information and leads to potential foreign customers and that the that do exist are often less am bitiousthanprogramsprograms incompetitor countriesdeg

Uanprogrmscompio aen donothees networSofcop tso do th vetpensamenetworks of contacts as do their European and

US COMPETITIVENESS

Japanese competitors in the appropriate ministries (or with local companies that do have such conshytacts) to be able to get the information and establishthemselves as serious contenders for contracts on large environmental infrastructure projects Manysmall- and medium-sized US environmental comshydo not have local offices branchesor agents who can deethve local ofe s f time relashy

who eal peod otie reacan devl tionships with the influential people inthe ministries or agencies who will review and decide on contract proposals abroad they often do not receive the same level of support from the US government that foreign competitors receive through their governments in (1) facilitating trade missions (2) providing inforshymation (3) assigning embassy staff to companiesww alk em o anstarket i es to walk them through the marketing and bidding process (4) tying aid grants to US procurementand (5) restricting the use of US loans or grantsto specific types of projects in which US compashynies would have competitive advantages The USGeneral Accounting Office reports that the numberof foreign commercial service officers in US Emshyo s nd a ounoffmco he m e in rel ati oa bassies abroad and the amount of money inrelationto gross domestic product spent on commercialshyservice staffing is far less than that of France Gershymany talye than t at anceGe manyit rthe United Kingdom and Japan 4 The

French and Japanese governments often give preference on each large contract to one or two of their companies and then work with that comshy

shp h Amen copanies ntrarelotship with American companies and rarely promotes

national championsFinally US companies often do not undershystand the subtleties of the political situation in forshyeign countries or the way to work the political sysshyter in order to get a competitive edge MoreoverUS companies competitors are not constrained bythe US Foreign Corrupt Practices Act which proshyt US o e os ma i n es t o orshyhibits US companies from making payments to forshy

eign government officials in return for favorableconsideration on contracts Japanese companies onthe other hand are often able to provide gifts to gov-

BUSINESS ampTHE CONTEMPORARY WORLD 201995 127

DENNIS A RONDINELLI

ernment officials in the forms of trips abroad over-seas training or assistance to their families in get-ting jobs or higher education

Improving CompetitivenessGovernment Support for Environmental Exports and Investment

In order to overcome some of the obstacles to competitiveness of US firms in the global en-vironmental technology equipment and services industry the US government is seeking to pro-vide greater assistance and support for export-ing forming joint ventures and participating in environmental-infrastructure projects abroad In 1994 the Clinton administration announced the Technology for a Sustainable Future Program that will promote the export of US environmental and energy technologies4 The program seeks to helpUS companies compete in international markets more effectively by (1)facilitating innovation and technological development (2) encouraging new ap-proaches to environmental protection through regu-latory policy market stimulation and fiscal policy in other countries (3) supporting companies export-ing US environmental technologies (4) workingwith domestic and foreign organizations throughpartnerships and collaboration on environmental education training and information dissemination Technology development and dissemination will fo-cus on remediation and restoration of environmen-tal resources environmental pollution control en-vironmental monitoringassessment and avoidance of environmental hazards and degradation

The administrations program will supple-ment and help coordinate government efforts in pro-viding four existing types of support (1) informa-tion services (2) export support (3)financial assis-tance for pre-feasibility analyses and (4) loan guar-antees and concessionary lending47

Information Services and Technical Assistance

A large number of US government agencies are now providing infomnation and technical assistance to US environmental companies interested in forshyeign trade and investment

Trade Leads and Business Information US companies can obtain trade leads and informashytion on potential environmental business opportunishyties including infrastructure development from theUS Department of Commerce (DOC) the State Deshypartment and the Departments of Agriculture Lashybor and Energy as well as from the Overseas Private Investment Corporation (OPIC) and the US-Asia Environmental Program (US-AEP) The US-AEP for example assists US companies to identify the marshykets in Asia for environmental products and sershyvices in solid- and toxic-waste disposal industrial and transportation pollution water and wastewater treatment energy efficiency and forestry US-AEP has initiated an information service through its netshywork of business representatives in Asia an inforshymation clearinghouse in Washington and a tradeshyleads system that informs US companies of busishyness opportunities for environmental infrastructure and services in Asia It provides companies with advanced notice of opportunities for infrastructure projects assistance in identifying and obtaining fishynancing from public and private sources and access to US government-assistance programs

Export Counseling and Services EPA asshysists foreign governments in developing sound enshyvironmental policies and in solving environmental problems in order to create more demand for US environmental exports In addition EPA promotesthe adoption and sale of US environmental techshynologies that can be part of infrastructure systems in foreign countries The Export-Import Bank of the United States and the US Trade and Developshyment Program (TDP)provide export counseling sershyvices The US Agency for International Developshyment (AID) has created a Center for Trade and Inshyvestment Services (CTIS) that provides individual

BUSINESS amp THE CONTEMPORARY WORLD 201995 128

US COMPETITIVENESS

counseling and information to companies interested in environmental energy and other types of projectsthat are supported by the foreign-aid program in developing countries The US Small Business Ad-ministration also offers advice to small companies on the legal aspects of exporting technology equip-ment or other goods abroad

The US Department of Commerce throughits International Trade Administration (ITA) isnow helping US environmental firms to obtain the assisshytance they need to compete for large infrastructure projects outside the United States ITA identifies and provides information about proposed or sched-uled infrastructure projects offers individual busi-ness counseling and monitors developments in spe-cific sectors

Support for Export of US Goods andServices

Other forms of support are also available to US companies interested in following up on trade and investment opportunities

Assessment of Foreign Business Condi-tions The US Department of Energy helps energy sector exporters to identify overseas opportunitiesand discriminatory trade barriers to identify financ-ing alternatives and to work with US governmentagencies to find markets for energy technology and equipment DOC and OPIC both support overseas trade missions that can help US companies to un-derstand foreign business conditions tariff and non-tariff barriers and opportunities for participating in infrastructure-development projects or for transfer-ring environmental technology and equipment that can be used in infrastructure systems US contrac-tors and exporters seeking to expand their activi-ties in developing countries can obtain political-riskinsurance and other forms of specialized insurance and financing services from OPIC

Coordination of Assistance Resources US-AEP follows up on specific environmental-infrastructure projects and coordinates the appro-priate US government technical and financial re-

sources that are available to help US environmen tal companies penetrate markets in Asia AIDs cornshymodity import program and its project-procurementactivities can open new opportunities for companiesinterested in participating in infrastructure projectsin developing countries

Pre-feasibility Analysis Assistance

Several US government agencies also assist foreigngovernments and private organizations to assess the feasibility of proposed infrastructure-developmentprojects using US consulting and service firms

Financial Assistance for Pre-feasibilityStudies To countries eligible for US bilateral assistance TDP provides non-reimbursable grantfunding for studies and consultancies to determinethe technical economic and financial feasibility of projects in which US technological expertise can help to accelerate the development process The grants focus on a wide range of environmental infrashystructure including energy water supply and wasteshymanagement systems TDP sends US technical speshycialists to developing countries to gather informashytion on the proposed project to work with local authorities to create the scope of work and budgetfor the feasibility study or consultancy and to make recommendations concerning TDP support for the study The host countrys grant-recipient organizashytion (apublic agency or private sector organization)selects the US firm to conduct the study under apshyproved compettive bidding procedures TDP paysgrantee-approved invoices for the expenses of the feasibility study directly to the contractor Up to 20 percent of the grant can be used to enlist the particishypation of the host countrys private-sector expertise to work with the US contractor a provision that encourages joint venture cooperation

OPIC and the US-AEP jointly operate the Environmental Enterprises Development Initiative (EEDI) which provides pre-investment assistance toUS companies that are establishing or expandingenvironmental infrastructure projects in Asian and Pacific countries EEDI offers assistance to private-

BUSINESS amp THE CONTEMPORARY WORLD 0201995 129

DENNIS A RONDINELLI

sector companies that are at least 25 percent US-owned and whose activities in Asia do not result in diversion of US jobs or negative environmental impacts in the host country The activities eligiblefor funding include market-entry assessments in-vestor reviews business plans technology reviews prototype or pilot-project implementation and oth-er types of pre-investment analysis

Cost-Sharing of Feasibility Analyses TDP can also share the costs of feasibility studies un-dertaken by US private-sector investors or sup-pliers that are proposing to develop a project on an unsolicited sole source basis 48 It also main-tains technical-assistance trust funds to finance con-sultancies and feasibility studies by US consult-ing firms through the World Bank and the Interna-tional Finance Corporation for a variety of project-preparation activities The US Export-Import Bank also funds feasibility studies inconjunction with itsinsurance programs loan guarantees and exportercredits Fixed-rate medium-term loans to help fi-nance feasibility studies and pre-construction designand engineering services for up to $10 million are available through Eximbanks Engineering Multipli-er Program which can be used to cover up to 85 pershycent of the US costs

Concessionary Lending and LoanGuarantees

Finally the US government is encouraging the private sector to participate in environmental and infrastructure projects through concessionary lend-ing and loan guarantees Eximbank offers finan-cial assistance to promote the exports of US com-panies with capital equipment or services related to infrastructure-development projects that are nor-mally financed for a period of longer than one yearIt will provide credit or guarantees for up to 85 per-cent of the US export alue of each transaction Re-payment terms range from two to ten years Exim-bank assistance comes in the form of direct loans to public or private organizations abroad purchasingUS equipment or services loans to financial inter-

mediaries who re-lend to international buyers and guarantees to those who lend to foreign buyers Exshyimbank also offers loans and guarantees for up to 85 percent of the export value of US companies opshyerations and maintenance (OampM) contracts This is an effective means of promoting the participation ofUS companies with the technical expertise inmainshytaining environmental infrastructure or in establishshying maintenance systems

US-AEP has also created an Infrastructure Project Promotion Fund to support creative publicshyprivate partnerships that will develop new forms of financing arrangements and reduce the risks of US technology transfers in energy and environmentalshyinfrastructure projects The infrastructure-finance advisory service provides a one-stop clearinghousefor financial advice and assistance to US compashynies seeking to participate in Asian environmental infrastructure projects The services are aimed atUS equipment manufacturers contractors projectdevelopers and service providers that are interestshyed in bidding on public tenders in Asia developingprivate build-own-operate or build-operate-transferprojects or establishing joint ventures

Conclusions

Although the US government is now doing a lot to help US companies to maintain and strengthshyen their competitiveness in the global environmenshytal markets it is far less than what some other countries are doing to support their environmental technology equipment and service industries Othshyer means are needed to expand the participation of US environmental firms in foreign trade and inshyvestment The industry itself and its trade associashytions must take a stronger role in promoting exportsand foreign direct investment Both government and industry associations must help US companies to get supply contracts for backward and forward linkage equipment technical assistance or composhynents from Japanese British or French companierthat are successful in winning large environmental-

BUSINESS 8c THE CONTEMPORARY WORLD 2 1995 130

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

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households and businesses to adopt environmental-ly friendly practices and to seek new environmental technology and services

Pressures and Incentives from International Development Agencies

The demand for environmental technology equip-ment and services is also being driven by pres-sures of international-funding institutions (eg the United Nations and the World Bank with its reshygional counterparts - such as the Asian Developshyment Bank and the European Bank for Reconstruc-tion and Development) on national governments to give environmental protection and cleanup a highshyer priority for investment These pressures are ac-companied by larger numbers of loans for environ-mental projects that require new technology and equipment In 1994 the United States and other in-dustrial countries pledged more than $2 billion in contributions to the Global Environmental Facility (GEF) to finance environmental projects in develop-ing countries that were identified at the United Na-tions 1992 Earth Summit3 The GEF will focus on reducing environmental problems that produce (1) climate change (2) the destruction of biodiversity (3)pollution of international waters and (4) ozone depletion32

Furthermore between 1989 and 1992 the World Bank made nearly $15 billion in loans to developing countries for environmental cleanup industrial-pollution control water-supply and sewage systems waste disposal and energy-resource management3 3 In 1993 it added nearly $13 billion in loan commitments to Brazil China India South Korea Mexico and Turkey for simi-lar projects From 1989 to 1993 it made another nearly $2 billion in loans for natural-resource man-agement in developing countries that will also spur demand for environmental technology equipment and services

The World Banks pressures on governments of developing countries to promote environmental-ly sustainable development expand the market for

US COMPETITIVENESS

environmental goods and services In addition the Banks requirements that environmental impact asshysessments be done on its own development projectsalso have made as one group of analysts concludes a start in incorporating environmental concerns into project design - potentially affecting an annual pipeline of more than 200 investment projects worth over $11 billion34 More environmentally sustainshyable development projects are likely to increase deshymand for equipment to prevent pollution and clean up hazardous conditions

Spread of the Industrial EcologyMovement

The demand for environmental-technology equipshyment and services isalso being driven by the indusshytrial ecology movement3 The willingness of manushyfacturing and processing industries to comply with environmental laws and regulations and to adjust their business practices depends on making busishyness leaders aware of the impacts of environmenshyta degradation on their operations and profits The major trends that are likely to contribute to greater private-sector responsiveness to environmental polshyicy include growing public demands for businessshyes to take responsibility for their environmental imshypacts the growing realization among business leadshyers that their environmental practices and their enshyvironmental image will affect their companies profshyitability and the increasing costs of not complying with environmental regulations3 The private secshytor responds more effectively to environmental regshyulations as it incurs legal and financial liabilities for environmental hazards and insurers financial instishytutions and shareholders become increasingly sensishytive to company environmental practices Industrial firms also become more sensitive to environmental issues as hey incur increasing costs of end-of-pipe pollution control and waste disposal

The growing awareness of the potential sayshyings from pollution prevention rather than cleanup through in-process changes in manufacturing and distribution are leading an increasing number of

BUSINESSamp THE CONTEMPORARY WORLD 2 1995 125

DENNIS ARONDINELLI

manufacturing companies to address environmental problem more directly A primary incentive is the potential for companies to save money by buildingenvironmental considerations into their productiondistribution and processing systems to prevent pol-lution rather than attempting to control end-of-pipe emissions or end-of-distribution wastes Faced with increasing public hostility to their factories and in-creasing threats of legal liabilities the chemical in-dustries in most industrial countries have adoptedthe principles of the Chemical Industries Associa-tions responsible care program 37 Large multina-tional companies such as Volvo Allied-Signal 3M and Union Carbide have adopted environmental au-diting programs in their worldwide operations to maintain central control over their companies com-pliance with regulatory standards in the countries in which they have manufacturing plants Many multi-national companies - such as IBMs subsidiaries in Argentina and Chevrons in Nigeria - have devised their own safe hazardous-waste-disposal arrange-ments in countries lacking adequate facilities38

The leading companies in he industrial ecol-ogy movement - including McDonalds Kodakand ATampT - are examining ways of creating an environmental value chain that includes (1) source reduction of environmentally sensitive in-puts and use of recycled materials (2) cradle-to-grave product design to eliminate waste in pro-duction and at the end of product-life (3)emission and waste reduction in manufacturing (4)volume reduction and recyclability in packaging (5)greenlabeling and product marketing (6)consumer ed-ucation and environmental advertising (7)collec-tion of used or replaced products and (8)post-useproduct recycling39 The spread of the industrial-ecology movement is likely to expand the market for environmental goods and services among privatefirms and generate new environmental products as multinational and domestic companies test innova-tive ways to prevent and control pollution

Increasing Interest In Public-Private Partnerships

The movement toward the use of public-privatepartnerships will change the way in which govshyernments expand environmental services and fishynance and operate large-scale environmental infrashystructure and service facilities Governments in Eushyrope Asia and Latin America are involving nonshygovernment organizations (NGOs) not-for-profitorganizations and private businesses as partners in a variety of environmental services These include water provision sanitation garbagetrash collection and energy generationdistribution Build-operate transfer (BOTs) and build-operate-own (BOO) arshyrangements between government and private conshysortia are now being widely used to expand infrashystructure and facilities for water supply and enershygy provision Malaysia for example has made use of BOTs for privatizing water supply in its Labuan Ipoh and Larut-Matang projects

Increasingly governments are looking to the privatization of services including environmental services as an important instrument of public polshyicy Privatization includes a whole range of altershynatives - from sale of state enterprises to conshycession arrangements with private companies and from management contracts providing public sershyvices to deregulation of service industries 41 Conshytracting and concessions are increasingly being used for water supply sanitation recycling environmenshytal monitoring and assessment and energy generashytiondistribution in such countries as Chile Guinea-Bissau and the CotedIvoire42 The increasing use of both privatization and public-private partnershipsfor providing environmental infrastructure and sershyvices will open more opportunities for both the public and private sectors to acquire environmental technology and equipment and for US companies to supply them

BUSI SampTHE CONTEMPORARY WORLD 2 1995

not aveaccest inormaionabot maketop-other hand often keeps an arms length relationshynot have access to information about market o_ pany to win its bids The US government on the

Forces Inhibiting US Competitiveness in Global Markets

The US environmental industrys competitive ad-aTge oUSenvir lymentinstrys comettentvantagespniesdecade unless it recognizes and corrects its poten-tial weaknesses in an expanded world market The Office of Technology Assessment identified a longlist of weakness that could undermine the US com-petitive position in environmental markets includ-ing (1)US companies reluctance to export because of their large domestic market (2) overseas per_ ceptions that US technology is too expensive orsophisticated (3) weak public-private links in re-sohiserchatd (3)eveakloulic-priv inlk r nsearch and development and in export promotion(4) slow transfer of technology to the marketplace(5) limited efforts to understand foreign cultures and business practices and (6) the limited role of environmental-industry associations intrade and re-

development4 3search and deve lo st

The most crucial obstacle to stronger comn-petitiveness seems to be the reluctance of US com-panies to explore foreign-mark et opportu nitie s and to follow through with market leads Aside froma few large US-based multinational engineering

a fe lageSbasd mltintioal ngieerngconstruction and waste-collection companies manysmall- and medium-sized US environmental firms donBritish markets In many developing and emerging market economies for example small US companies do

portunities until project plans are well under way or tenders are actually let which in nearly all casshyes is too late for a US company to respond effec-tively The US Congressional Office of Technolo-

tivey he SCongessonaf Tchnlo-Oficegy Assessment concluded that US government and private organizations are behind their competitorsin Europe in providing specific market information and leads to potential foreign customers and that the that do exist are often less am bitiousthanprogramsprograms incompetitor countriesdeg

Uanprogrmscompio aen donothees networSofcop tso do th vetpensamenetworks of contacts as do their European and

US COMPETITIVENESS

Japanese competitors in the appropriate ministries (or with local companies that do have such conshytacts) to be able to get the information and establishthemselves as serious contenders for contracts on large environmental infrastructure projects Manysmall- and medium-sized US environmental comshydo not have local offices branchesor agents who can deethve local ofe s f time relashy

who eal peod otie reacan devl tionships with the influential people inthe ministries or agencies who will review and decide on contract proposals abroad they often do not receive the same level of support from the US government that foreign competitors receive through their governments in (1) facilitating trade missions (2) providing inforshymation (3) assigning embassy staff to companiesww alk em o anstarket i es to walk them through the marketing and bidding process (4) tying aid grants to US procurementand (5) restricting the use of US loans or grantsto specific types of projects in which US compashynies would have competitive advantages The USGeneral Accounting Office reports that the numberof foreign commercial service officers in US Emshyo s nd a ounoffmco he m e in rel ati oa bassies abroad and the amount of money inrelationto gross domestic product spent on commercialshyservice staffing is far less than that of France Gershymany talye than t at anceGe manyit rthe United Kingdom and Japan 4 The

French and Japanese governments often give preference on each large contract to one or two of their companies and then work with that comshy

shp h Amen copanies ntrarelotship with American companies and rarely promotes

national championsFinally US companies often do not undershystand the subtleties of the political situation in forshyeign countries or the way to work the political sysshyter in order to get a competitive edge MoreoverUS companies competitors are not constrained bythe US Foreign Corrupt Practices Act which proshyt US o e os ma i n es t o orshyhibits US companies from making payments to forshy

eign government officials in return for favorableconsideration on contracts Japanese companies onthe other hand are often able to provide gifts to gov-

BUSINESS ampTHE CONTEMPORARY WORLD 201995 127

DENNIS A RONDINELLI

ernment officials in the forms of trips abroad over-seas training or assistance to their families in get-ting jobs or higher education

Improving CompetitivenessGovernment Support for Environmental Exports and Investment

In order to overcome some of the obstacles to competitiveness of US firms in the global en-vironmental technology equipment and services industry the US government is seeking to pro-vide greater assistance and support for export-ing forming joint ventures and participating in environmental-infrastructure projects abroad In 1994 the Clinton administration announced the Technology for a Sustainable Future Program that will promote the export of US environmental and energy technologies4 The program seeks to helpUS companies compete in international markets more effectively by (1)facilitating innovation and technological development (2) encouraging new ap-proaches to environmental protection through regu-latory policy market stimulation and fiscal policy in other countries (3) supporting companies export-ing US environmental technologies (4) workingwith domestic and foreign organizations throughpartnerships and collaboration on environmental education training and information dissemination Technology development and dissemination will fo-cus on remediation and restoration of environmen-tal resources environmental pollution control en-vironmental monitoringassessment and avoidance of environmental hazards and degradation

The administrations program will supple-ment and help coordinate government efforts in pro-viding four existing types of support (1) informa-tion services (2) export support (3)financial assis-tance for pre-feasibility analyses and (4) loan guar-antees and concessionary lending47

Information Services and Technical Assistance

A large number of US government agencies are now providing infomnation and technical assistance to US environmental companies interested in forshyeign trade and investment

Trade Leads and Business Information US companies can obtain trade leads and informashytion on potential environmental business opportunishyties including infrastructure development from theUS Department of Commerce (DOC) the State Deshypartment and the Departments of Agriculture Lashybor and Energy as well as from the Overseas Private Investment Corporation (OPIC) and the US-Asia Environmental Program (US-AEP) The US-AEP for example assists US companies to identify the marshykets in Asia for environmental products and sershyvices in solid- and toxic-waste disposal industrial and transportation pollution water and wastewater treatment energy efficiency and forestry US-AEP has initiated an information service through its netshywork of business representatives in Asia an inforshymation clearinghouse in Washington and a tradeshyleads system that informs US companies of busishyness opportunities for environmental infrastructure and services in Asia It provides companies with advanced notice of opportunities for infrastructure projects assistance in identifying and obtaining fishynancing from public and private sources and access to US government-assistance programs

Export Counseling and Services EPA asshysists foreign governments in developing sound enshyvironmental policies and in solving environmental problems in order to create more demand for US environmental exports In addition EPA promotesthe adoption and sale of US environmental techshynologies that can be part of infrastructure systems in foreign countries The Export-Import Bank of the United States and the US Trade and Developshyment Program (TDP)provide export counseling sershyvices The US Agency for International Developshyment (AID) has created a Center for Trade and Inshyvestment Services (CTIS) that provides individual

BUSINESS amp THE CONTEMPORARY WORLD 201995 128

US COMPETITIVENESS

counseling and information to companies interested in environmental energy and other types of projectsthat are supported by the foreign-aid program in developing countries The US Small Business Ad-ministration also offers advice to small companies on the legal aspects of exporting technology equip-ment or other goods abroad

The US Department of Commerce throughits International Trade Administration (ITA) isnow helping US environmental firms to obtain the assisshytance they need to compete for large infrastructure projects outside the United States ITA identifies and provides information about proposed or sched-uled infrastructure projects offers individual busi-ness counseling and monitors developments in spe-cific sectors

Support for Export of US Goods andServices

Other forms of support are also available to US companies interested in following up on trade and investment opportunities

Assessment of Foreign Business Condi-tions The US Department of Energy helps energy sector exporters to identify overseas opportunitiesand discriminatory trade barriers to identify financ-ing alternatives and to work with US governmentagencies to find markets for energy technology and equipment DOC and OPIC both support overseas trade missions that can help US companies to un-derstand foreign business conditions tariff and non-tariff barriers and opportunities for participating in infrastructure-development projects or for transfer-ring environmental technology and equipment that can be used in infrastructure systems US contrac-tors and exporters seeking to expand their activi-ties in developing countries can obtain political-riskinsurance and other forms of specialized insurance and financing services from OPIC

Coordination of Assistance Resources US-AEP follows up on specific environmental-infrastructure projects and coordinates the appro-priate US government technical and financial re-

sources that are available to help US environmen tal companies penetrate markets in Asia AIDs cornshymodity import program and its project-procurementactivities can open new opportunities for companiesinterested in participating in infrastructure projectsin developing countries

Pre-feasibility Analysis Assistance

Several US government agencies also assist foreigngovernments and private organizations to assess the feasibility of proposed infrastructure-developmentprojects using US consulting and service firms

Financial Assistance for Pre-feasibilityStudies To countries eligible for US bilateral assistance TDP provides non-reimbursable grantfunding for studies and consultancies to determinethe technical economic and financial feasibility of projects in which US technological expertise can help to accelerate the development process The grants focus on a wide range of environmental infrashystructure including energy water supply and wasteshymanagement systems TDP sends US technical speshycialists to developing countries to gather informashytion on the proposed project to work with local authorities to create the scope of work and budgetfor the feasibility study or consultancy and to make recommendations concerning TDP support for the study The host countrys grant-recipient organizashytion (apublic agency or private sector organization)selects the US firm to conduct the study under apshyproved compettive bidding procedures TDP paysgrantee-approved invoices for the expenses of the feasibility study directly to the contractor Up to 20 percent of the grant can be used to enlist the particishypation of the host countrys private-sector expertise to work with the US contractor a provision that encourages joint venture cooperation

OPIC and the US-AEP jointly operate the Environmental Enterprises Development Initiative (EEDI) which provides pre-investment assistance toUS companies that are establishing or expandingenvironmental infrastructure projects in Asian and Pacific countries EEDI offers assistance to private-

BUSINESS amp THE CONTEMPORARY WORLD 0201995 129

DENNIS A RONDINELLI

sector companies that are at least 25 percent US-owned and whose activities in Asia do not result in diversion of US jobs or negative environmental impacts in the host country The activities eligiblefor funding include market-entry assessments in-vestor reviews business plans technology reviews prototype or pilot-project implementation and oth-er types of pre-investment analysis

Cost-Sharing of Feasibility Analyses TDP can also share the costs of feasibility studies un-dertaken by US private-sector investors or sup-pliers that are proposing to develop a project on an unsolicited sole source basis 48 It also main-tains technical-assistance trust funds to finance con-sultancies and feasibility studies by US consult-ing firms through the World Bank and the Interna-tional Finance Corporation for a variety of project-preparation activities The US Export-Import Bank also funds feasibility studies inconjunction with itsinsurance programs loan guarantees and exportercredits Fixed-rate medium-term loans to help fi-nance feasibility studies and pre-construction designand engineering services for up to $10 million are available through Eximbanks Engineering Multipli-er Program which can be used to cover up to 85 pershycent of the US costs

Concessionary Lending and LoanGuarantees

Finally the US government is encouraging the private sector to participate in environmental and infrastructure projects through concessionary lend-ing and loan guarantees Eximbank offers finan-cial assistance to promote the exports of US com-panies with capital equipment or services related to infrastructure-development projects that are nor-mally financed for a period of longer than one yearIt will provide credit or guarantees for up to 85 per-cent of the US export alue of each transaction Re-payment terms range from two to ten years Exim-bank assistance comes in the form of direct loans to public or private organizations abroad purchasingUS equipment or services loans to financial inter-

mediaries who re-lend to international buyers and guarantees to those who lend to foreign buyers Exshyimbank also offers loans and guarantees for up to 85 percent of the export value of US companies opshyerations and maintenance (OampM) contracts This is an effective means of promoting the participation ofUS companies with the technical expertise inmainshytaining environmental infrastructure or in establishshying maintenance systems

US-AEP has also created an Infrastructure Project Promotion Fund to support creative publicshyprivate partnerships that will develop new forms of financing arrangements and reduce the risks of US technology transfers in energy and environmentalshyinfrastructure projects The infrastructure-finance advisory service provides a one-stop clearinghousefor financial advice and assistance to US compashynies seeking to participate in Asian environmental infrastructure projects The services are aimed atUS equipment manufacturers contractors projectdevelopers and service providers that are interestshyed in bidding on public tenders in Asia developingprivate build-own-operate or build-operate-transferprojects or establishing joint ventures

Conclusions

Although the US government is now doing a lot to help US companies to maintain and strengthshyen their competitiveness in the global environmenshytal markets it is far less than what some other countries are doing to support their environmental technology equipment and service industries Othshyer means are needed to expand the participation of US environmental firms in foreign trade and inshyvestment The industry itself and its trade associashytions must take a stronger role in promoting exportsand foreign direct investment Both government and industry associations must help US companies to get supply contracts for backward and forward linkage equipment technical assistance or composhynents from Japanese British or French companierthat are successful in winning large environmental-

BUSINESS 8c THE CONTEMPORARY WORLD 2 1995 130

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

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DENNIS ARONDINELLI

manufacturing companies to address environmental problem more directly A primary incentive is the potential for companies to save money by buildingenvironmental considerations into their productiondistribution and processing systems to prevent pol-lution rather than attempting to control end-of-pipe emissions or end-of-distribution wastes Faced with increasing public hostility to their factories and in-creasing threats of legal liabilities the chemical in-dustries in most industrial countries have adoptedthe principles of the Chemical Industries Associa-tions responsible care program 37 Large multina-tional companies such as Volvo Allied-Signal 3M and Union Carbide have adopted environmental au-diting programs in their worldwide operations to maintain central control over their companies com-pliance with regulatory standards in the countries in which they have manufacturing plants Many multi-national companies - such as IBMs subsidiaries in Argentina and Chevrons in Nigeria - have devised their own safe hazardous-waste-disposal arrange-ments in countries lacking adequate facilities38

The leading companies in he industrial ecol-ogy movement - including McDonalds Kodakand ATampT - are examining ways of creating an environmental value chain that includes (1) source reduction of environmentally sensitive in-puts and use of recycled materials (2) cradle-to-grave product design to eliminate waste in pro-duction and at the end of product-life (3)emission and waste reduction in manufacturing (4)volume reduction and recyclability in packaging (5)greenlabeling and product marketing (6)consumer ed-ucation and environmental advertising (7)collec-tion of used or replaced products and (8)post-useproduct recycling39 The spread of the industrial-ecology movement is likely to expand the market for environmental goods and services among privatefirms and generate new environmental products as multinational and domestic companies test innova-tive ways to prevent and control pollution

Increasing Interest In Public-Private Partnerships

The movement toward the use of public-privatepartnerships will change the way in which govshyernments expand environmental services and fishynance and operate large-scale environmental infrashystructure and service facilities Governments in Eushyrope Asia and Latin America are involving nonshygovernment organizations (NGOs) not-for-profitorganizations and private businesses as partners in a variety of environmental services These include water provision sanitation garbagetrash collection and energy generationdistribution Build-operate transfer (BOTs) and build-operate-own (BOO) arshyrangements between government and private conshysortia are now being widely used to expand infrashystructure and facilities for water supply and enershygy provision Malaysia for example has made use of BOTs for privatizing water supply in its Labuan Ipoh and Larut-Matang projects

Increasingly governments are looking to the privatization of services including environmental services as an important instrument of public polshyicy Privatization includes a whole range of altershynatives - from sale of state enterprises to conshycession arrangements with private companies and from management contracts providing public sershyvices to deregulation of service industries 41 Conshytracting and concessions are increasingly being used for water supply sanitation recycling environmenshytal monitoring and assessment and energy generashytiondistribution in such countries as Chile Guinea-Bissau and the CotedIvoire42 The increasing use of both privatization and public-private partnershipsfor providing environmental infrastructure and sershyvices will open more opportunities for both the public and private sectors to acquire environmental technology and equipment and for US companies to supply them

BUSI SampTHE CONTEMPORARY WORLD 2 1995

not aveaccest inormaionabot maketop-other hand often keeps an arms length relationshynot have access to information about market o_ pany to win its bids The US government on the

Forces Inhibiting US Competitiveness in Global Markets

The US environmental industrys competitive ad-aTge oUSenvir lymentinstrys comettentvantagespniesdecade unless it recognizes and corrects its poten-tial weaknesses in an expanded world market The Office of Technology Assessment identified a longlist of weakness that could undermine the US com-petitive position in environmental markets includ-ing (1)US companies reluctance to export because of their large domestic market (2) overseas per_ ceptions that US technology is too expensive orsophisticated (3) weak public-private links in re-sohiserchatd (3)eveakloulic-priv inlk r nsearch and development and in export promotion(4) slow transfer of technology to the marketplace(5) limited efforts to understand foreign cultures and business practices and (6) the limited role of environmental-industry associations intrade and re-

development4 3search and deve lo st

The most crucial obstacle to stronger comn-petitiveness seems to be the reluctance of US com-panies to explore foreign-mark et opportu nitie s and to follow through with market leads Aside froma few large US-based multinational engineering

a fe lageSbasd mltintioal ngieerngconstruction and waste-collection companies manysmall- and medium-sized US environmental firms donBritish markets In many developing and emerging market economies for example small US companies do

portunities until project plans are well under way or tenders are actually let which in nearly all casshyes is too late for a US company to respond effec-tively The US Congressional Office of Technolo-

tivey he SCongessonaf Tchnlo-Oficegy Assessment concluded that US government and private organizations are behind their competitorsin Europe in providing specific market information and leads to potential foreign customers and that the that do exist are often less am bitiousthanprogramsprograms incompetitor countriesdeg

Uanprogrmscompio aen donothees networSofcop tso do th vetpensamenetworks of contacts as do their European and

US COMPETITIVENESS

Japanese competitors in the appropriate ministries (or with local companies that do have such conshytacts) to be able to get the information and establishthemselves as serious contenders for contracts on large environmental infrastructure projects Manysmall- and medium-sized US environmental comshydo not have local offices branchesor agents who can deethve local ofe s f time relashy

who eal peod otie reacan devl tionships with the influential people inthe ministries or agencies who will review and decide on contract proposals abroad they often do not receive the same level of support from the US government that foreign competitors receive through their governments in (1) facilitating trade missions (2) providing inforshymation (3) assigning embassy staff to companiesww alk em o anstarket i es to walk them through the marketing and bidding process (4) tying aid grants to US procurementand (5) restricting the use of US loans or grantsto specific types of projects in which US compashynies would have competitive advantages The USGeneral Accounting Office reports that the numberof foreign commercial service officers in US Emshyo s nd a ounoffmco he m e in rel ati oa bassies abroad and the amount of money inrelationto gross domestic product spent on commercialshyservice staffing is far less than that of France Gershymany talye than t at anceGe manyit rthe United Kingdom and Japan 4 The

French and Japanese governments often give preference on each large contract to one or two of their companies and then work with that comshy

shp h Amen copanies ntrarelotship with American companies and rarely promotes

national championsFinally US companies often do not undershystand the subtleties of the political situation in forshyeign countries or the way to work the political sysshyter in order to get a competitive edge MoreoverUS companies competitors are not constrained bythe US Foreign Corrupt Practices Act which proshyt US o e os ma i n es t o orshyhibits US companies from making payments to forshy

eign government officials in return for favorableconsideration on contracts Japanese companies onthe other hand are often able to provide gifts to gov-

BUSINESS ampTHE CONTEMPORARY WORLD 201995 127

DENNIS A RONDINELLI

ernment officials in the forms of trips abroad over-seas training or assistance to their families in get-ting jobs or higher education

Improving CompetitivenessGovernment Support for Environmental Exports and Investment

In order to overcome some of the obstacles to competitiveness of US firms in the global en-vironmental technology equipment and services industry the US government is seeking to pro-vide greater assistance and support for export-ing forming joint ventures and participating in environmental-infrastructure projects abroad In 1994 the Clinton administration announced the Technology for a Sustainable Future Program that will promote the export of US environmental and energy technologies4 The program seeks to helpUS companies compete in international markets more effectively by (1)facilitating innovation and technological development (2) encouraging new ap-proaches to environmental protection through regu-latory policy market stimulation and fiscal policy in other countries (3) supporting companies export-ing US environmental technologies (4) workingwith domestic and foreign organizations throughpartnerships and collaboration on environmental education training and information dissemination Technology development and dissemination will fo-cus on remediation and restoration of environmen-tal resources environmental pollution control en-vironmental monitoringassessment and avoidance of environmental hazards and degradation

The administrations program will supple-ment and help coordinate government efforts in pro-viding four existing types of support (1) informa-tion services (2) export support (3)financial assis-tance for pre-feasibility analyses and (4) loan guar-antees and concessionary lending47

Information Services and Technical Assistance

A large number of US government agencies are now providing infomnation and technical assistance to US environmental companies interested in forshyeign trade and investment

Trade Leads and Business Information US companies can obtain trade leads and informashytion on potential environmental business opportunishyties including infrastructure development from theUS Department of Commerce (DOC) the State Deshypartment and the Departments of Agriculture Lashybor and Energy as well as from the Overseas Private Investment Corporation (OPIC) and the US-Asia Environmental Program (US-AEP) The US-AEP for example assists US companies to identify the marshykets in Asia for environmental products and sershyvices in solid- and toxic-waste disposal industrial and transportation pollution water and wastewater treatment energy efficiency and forestry US-AEP has initiated an information service through its netshywork of business representatives in Asia an inforshymation clearinghouse in Washington and a tradeshyleads system that informs US companies of busishyness opportunities for environmental infrastructure and services in Asia It provides companies with advanced notice of opportunities for infrastructure projects assistance in identifying and obtaining fishynancing from public and private sources and access to US government-assistance programs

Export Counseling and Services EPA asshysists foreign governments in developing sound enshyvironmental policies and in solving environmental problems in order to create more demand for US environmental exports In addition EPA promotesthe adoption and sale of US environmental techshynologies that can be part of infrastructure systems in foreign countries The Export-Import Bank of the United States and the US Trade and Developshyment Program (TDP)provide export counseling sershyvices The US Agency for International Developshyment (AID) has created a Center for Trade and Inshyvestment Services (CTIS) that provides individual

BUSINESS amp THE CONTEMPORARY WORLD 201995 128

US COMPETITIVENESS

counseling and information to companies interested in environmental energy and other types of projectsthat are supported by the foreign-aid program in developing countries The US Small Business Ad-ministration also offers advice to small companies on the legal aspects of exporting technology equip-ment or other goods abroad

The US Department of Commerce throughits International Trade Administration (ITA) isnow helping US environmental firms to obtain the assisshytance they need to compete for large infrastructure projects outside the United States ITA identifies and provides information about proposed or sched-uled infrastructure projects offers individual busi-ness counseling and monitors developments in spe-cific sectors

Support for Export of US Goods andServices

Other forms of support are also available to US companies interested in following up on trade and investment opportunities

Assessment of Foreign Business Condi-tions The US Department of Energy helps energy sector exporters to identify overseas opportunitiesand discriminatory trade barriers to identify financ-ing alternatives and to work with US governmentagencies to find markets for energy technology and equipment DOC and OPIC both support overseas trade missions that can help US companies to un-derstand foreign business conditions tariff and non-tariff barriers and opportunities for participating in infrastructure-development projects or for transfer-ring environmental technology and equipment that can be used in infrastructure systems US contrac-tors and exporters seeking to expand their activi-ties in developing countries can obtain political-riskinsurance and other forms of specialized insurance and financing services from OPIC

Coordination of Assistance Resources US-AEP follows up on specific environmental-infrastructure projects and coordinates the appro-priate US government technical and financial re-

sources that are available to help US environmen tal companies penetrate markets in Asia AIDs cornshymodity import program and its project-procurementactivities can open new opportunities for companiesinterested in participating in infrastructure projectsin developing countries

Pre-feasibility Analysis Assistance

Several US government agencies also assist foreigngovernments and private organizations to assess the feasibility of proposed infrastructure-developmentprojects using US consulting and service firms

Financial Assistance for Pre-feasibilityStudies To countries eligible for US bilateral assistance TDP provides non-reimbursable grantfunding for studies and consultancies to determinethe technical economic and financial feasibility of projects in which US technological expertise can help to accelerate the development process The grants focus on a wide range of environmental infrashystructure including energy water supply and wasteshymanagement systems TDP sends US technical speshycialists to developing countries to gather informashytion on the proposed project to work with local authorities to create the scope of work and budgetfor the feasibility study or consultancy and to make recommendations concerning TDP support for the study The host countrys grant-recipient organizashytion (apublic agency or private sector organization)selects the US firm to conduct the study under apshyproved compettive bidding procedures TDP paysgrantee-approved invoices for the expenses of the feasibility study directly to the contractor Up to 20 percent of the grant can be used to enlist the particishypation of the host countrys private-sector expertise to work with the US contractor a provision that encourages joint venture cooperation

OPIC and the US-AEP jointly operate the Environmental Enterprises Development Initiative (EEDI) which provides pre-investment assistance toUS companies that are establishing or expandingenvironmental infrastructure projects in Asian and Pacific countries EEDI offers assistance to private-

BUSINESS amp THE CONTEMPORARY WORLD 0201995 129

DENNIS A RONDINELLI

sector companies that are at least 25 percent US-owned and whose activities in Asia do not result in diversion of US jobs or negative environmental impacts in the host country The activities eligiblefor funding include market-entry assessments in-vestor reviews business plans technology reviews prototype or pilot-project implementation and oth-er types of pre-investment analysis

Cost-Sharing of Feasibility Analyses TDP can also share the costs of feasibility studies un-dertaken by US private-sector investors or sup-pliers that are proposing to develop a project on an unsolicited sole source basis 48 It also main-tains technical-assistance trust funds to finance con-sultancies and feasibility studies by US consult-ing firms through the World Bank and the Interna-tional Finance Corporation for a variety of project-preparation activities The US Export-Import Bank also funds feasibility studies inconjunction with itsinsurance programs loan guarantees and exportercredits Fixed-rate medium-term loans to help fi-nance feasibility studies and pre-construction designand engineering services for up to $10 million are available through Eximbanks Engineering Multipli-er Program which can be used to cover up to 85 pershycent of the US costs

Concessionary Lending and LoanGuarantees

Finally the US government is encouraging the private sector to participate in environmental and infrastructure projects through concessionary lend-ing and loan guarantees Eximbank offers finan-cial assistance to promote the exports of US com-panies with capital equipment or services related to infrastructure-development projects that are nor-mally financed for a period of longer than one yearIt will provide credit or guarantees for up to 85 per-cent of the US export alue of each transaction Re-payment terms range from two to ten years Exim-bank assistance comes in the form of direct loans to public or private organizations abroad purchasingUS equipment or services loans to financial inter-

mediaries who re-lend to international buyers and guarantees to those who lend to foreign buyers Exshyimbank also offers loans and guarantees for up to 85 percent of the export value of US companies opshyerations and maintenance (OampM) contracts This is an effective means of promoting the participation ofUS companies with the technical expertise inmainshytaining environmental infrastructure or in establishshying maintenance systems

US-AEP has also created an Infrastructure Project Promotion Fund to support creative publicshyprivate partnerships that will develop new forms of financing arrangements and reduce the risks of US technology transfers in energy and environmentalshyinfrastructure projects The infrastructure-finance advisory service provides a one-stop clearinghousefor financial advice and assistance to US compashynies seeking to participate in Asian environmental infrastructure projects The services are aimed atUS equipment manufacturers contractors projectdevelopers and service providers that are interestshyed in bidding on public tenders in Asia developingprivate build-own-operate or build-operate-transferprojects or establishing joint ventures

Conclusions

Although the US government is now doing a lot to help US companies to maintain and strengthshyen their competitiveness in the global environmenshytal markets it is far less than what some other countries are doing to support their environmental technology equipment and service industries Othshyer means are needed to expand the participation of US environmental firms in foreign trade and inshyvestment The industry itself and its trade associashytions must take a stronger role in promoting exportsand foreign direct investment Both government and industry associations must help US companies to get supply contracts for backward and forward linkage equipment technical assistance or composhynents from Japanese British or French companierthat are successful in winning large environmental-

BUSINESS 8c THE CONTEMPORARY WORLD 2 1995 130

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

Page 9: CompetitiveneSs inthe Global Environmental Technology and Services Industrypdf.usaid.gov/pdf_docs/PCAAA547.pdf ·  · 2010-07-20CompetitiveneSs inthe Global Environmental . Technology

not aveaccest inormaionabot maketop-other hand often keeps an arms length relationshynot have access to information about market o_ pany to win its bids The US government on the

Forces Inhibiting US Competitiveness in Global Markets

The US environmental industrys competitive ad-aTge oUSenvir lymentinstrys comettentvantagespniesdecade unless it recognizes and corrects its poten-tial weaknesses in an expanded world market The Office of Technology Assessment identified a longlist of weakness that could undermine the US com-petitive position in environmental markets includ-ing (1)US companies reluctance to export because of their large domestic market (2) overseas per_ ceptions that US technology is too expensive orsophisticated (3) weak public-private links in re-sohiserchatd (3)eveakloulic-priv inlk r nsearch and development and in export promotion(4) slow transfer of technology to the marketplace(5) limited efforts to understand foreign cultures and business practices and (6) the limited role of environmental-industry associations intrade and re-

development4 3search and deve lo st

The most crucial obstacle to stronger comn-petitiveness seems to be the reluctance of US com-panies to explore foreign-mark et opportu nitie s and to follow through with market leads Aside froma few large US-based multinational engineering

a fe lageSbasd mltintioal ngieerngconstruction and waste-collection companies manysmall- and medium-sized US environmental firms donBritish markets In many developing and emerging market economies for example small US companies do

portunities until project plans are well under way or tenders are actually let which in nearly all casshyes is too late for a US company to respond effec-tively The US Congressional Office of Technolo-

tivey he SCongessonaf Tchnlo-Oficegy Assessment concluded that US government and private organizations are behind their competitorsin Europe in providing specific market information and leads to potential foreign customers and that the that do exist are often less am bitiousthanprogramsprograms incompetitor countriesdeg

Uanprogrmscompio aen donothees networSofcop tso do th vetpensamenetworks of contacts as do their European and

US COMPETITIVENESS

Japanese competitors in the appropriate ministries (or with local companies that do have such conshytacts) to be able to get the information and establishthemselves as serious contenders for contracts on large environmental infrastructure projects Manysmall- and medium-sized US environmental comshydo not have local offices branchesor agents who can deethve local ofe s f time relashy

who eal peod otie reacan devl tionships with the influential people inthe ministries or agencies who will review and decide on contract proposals abroad they often do not receive the same level of support from the US government that foreign competitors receive through their governments in (1) facilitating trade missions (2) providing inforshymation (3) assigning embassy staff to companiesww alk em o anstarket i es to walk them through the marketing and bidding process (4) tying aid grants to US procurementand (5) restricting the use of US loans or grantsto specific types of projects in which US compashynies would have competitive advantages The USGeneral Accounting Office reports that the numberof foreign commercial service officers in US Emshyo s nd a ounoffmco he m e in rel ati oa bassies abroad and the amount of money inrelationto gross domestic product spent on commercialshyservice staffing is far less than that of France Gershymany talye than t at anceGe manyit rthe United Kingdom and Japan 4 The

French and Japanese governments often give preference on each large contract to one or two of their companies and then work with that comshy

shp h Amen copanies ntrarelotship with American companies and rarely promotes

national championsFinally US companies often do not undershystand the subtleties of the political situation in forshyeign countries or the way to work the political sysshyter in order to get a competitive edge MoreoverUS companies competitors are not constrained bythe US Foreign Corrupt Practices Act which proshyt US o e os ma i n es t o orshyhibits US companies from making payments to forshy

eign government officials in return for favorableconsideration on contracts Japanese companies onthe other hand are often able to provide gifts to gov-

BUSINESS ampTHE CONTEMPORARY WORLD 201995 127

DENNIS A RONDINELLI

ernment officials in the forms of trips abroad over-seas training or assistance to their families in get-ting jobs or higher education

Improving CompetitivenessGovernment Support for Environmental Exports and Investment

In order to overcome some of the obstacles to competitiveness of US firms in the global en-vironmental technology equipment and services industry the US government is seeking to pro-vide greater assistance and support for export-ing forming joint ventures and participating in environmental-infrastructure projects abroad In 1994 the Clinton administration announced the Technology for a Sustainable Future Program that will promote the export of US environmental and energy technologies4 The program seeks to helpUS companies compete in international markets more effectively by (1)facilitating innovation and technological development (2) encouraging new ap-proaches to environmental protection through regu-latory policy market stimulation and fiscal policy in other countries (3) supporting companies export-ing US environmental technologies (4) workingwith domestic and foreign organizations throughpartnerships and collaboration on environmental education training and information dissemination Technology development and dissemination will fo-cus on remediation and restoration of environmen-tal resources environmental pollution control en-vironmental monitoringassessment and avoidance of environmental hazards and degradation

The administrations program will supple-ment and help coordinate government efforts in pro-viding four existing types of support (1) informa-tion services (2) export support (3)financial assis-tance for pre-feasibility analyses and (4) loan guar-antees and concessionary lending47

Information Services and Technical Assistance

A large number of US government agencies are now providing infomnation and technical assistance to US environmental companies interested in forshyeign trade and investment

Trade Leads and Business Information US companies can obtain trade leads and informashytion on potential environmental business opportunishyties including infrastructure development from theUS Department of Commerce (DOC) the State Deshypartment and the Departments of Agriculture Lashybor and Energy as well as from the Overseas Private Investment Corporation (OPIC) and the US-Asia Environmental Program (US-AEP) The US-AEP for example assists US companies to identify the marshykets in Asia for environmental products and sershyvices in solid- and toxic-waste disposal industrial and transportation pollution water and wastewater treatment energy efficiency and forestry US-AEP has initiated an information service through its netshywork of business representatives in Asia an inforshymation clearinghouse in Washington and a tradeshyleads system that informs US companies of busishyness opportunities for environmental infrastructure and services in Asia It provides companies with advanced notice of opportunities for infrastructure projects assistance in identifying and obtaining fishynancing from public and private sources and access to US government-assistance programs

Export Counseling and Services EPA asshysists foreign governments in developing sound enshyvironmental policies and in solving environmental problems in order to create more demand for US environmental exports In addition EPA promotesthe adoption and sale of US environmental techshynologies that can be part of infrastructure systems in foreign countries The Export-Import Bank of the United States and the US Trade and Developshyment Program (TDP)provide export counseling sershyvices The US Agency for International Developshyment (AID) has created a Center for Trade and Inshyvestment Services (CTIS) that provides individual

BUSINESS amp THE CONTEMPORARY WORLD 201995 128

US COMPETITIVENESS

counseling and information to companies interested in environmental energy and other types of projectsthat are supported by the foreign-aid program in developing countries The US Small Business Ad-ministration also offers advice to small companies on the legal aspects of exporting technology equip-ment or other goods abroad

The US Department of Commerce throughits International Trade Administration (ITA) isnow helping US environmental firms to obtain the assisshytance they need to compete for large infrastructure projects outside the United States ITA identifies and provides information about proposed or sched-uled infrastructure projects offers individual busi-ness counseling and monitors developments in spe-cific sectors

Support for Export of US Goods andServices

Other forms of support are also available to US companies interested in following up on trade and investment opportunities

Assessment of Foreign Business Condi-tions The US Department of Energy helps energy sector exporters to identify overseas opportunitiesand discriminatory trade barriers to identify financ-ing alternatives and to work with US governmentagencies to find markets for energy technology and equipment DOC and OPIC both support overseas trade missions that can help US companies to un-derstand foreign business conditions tariff and non-tariff barriers and opportunities for participating in infrastructure-development projects or for transfer-ring environmental technology and equipment that can be used in infrastructure systems US contrac-tors and exporters seeking to expand their activi-ties in developing countries can obtain political-riskinsurance and other forms of specialized insurance and financing services from OPIC

Coordination of Assistance Resources US-AEP follows up on specific environmental-infrastructure projects and coordinates the appro-priate US government technical and financial re-

sources that are available to help US environmen tal companies penetrate markets in Asia AIDs cornshymodity import program and its project-procurementactivities can open new opportunities for companiesinterested in participating in infrastructure projectsin developing countries

Pre-feasibility Analysis Assistance

Several US government agencies also assist foreigngovernments and private organizations to assess the feasibility of proposed infrastructure-developmentprojects using US consulting and service firms

Financial Assistance for Pre-feasibilityStudies To countries eligible for US bilateral assistance TDP provides non-reimbursable grantfunding for studies and consultancies to determinethe technical economic and financial feasibility of projects in which US technological expertise can help to accelerate the development process The grants focus on a wide range of environmental infrashystructure including energy water supply and wasteshymanagement systems TDP sends US technical speshycialists to developing countries to gather informashytion on the proposed project to work with local authorities to create the scope of work and budgetfor the feasibility study or consultancy and to make recommendations concerning TDP support for the study The host countrys grant-recipient organizashytion (apublic agency or private sector organization)selects the US firm to conduct the study under apshyproved compettive bidding procedures TDP paysgrantee-approved invoices for the expenses of the feasibility study directly to the contractor Up to 20 percent of the grant can be used to enlist the particishypation of the host countrys private-sector expertise to work with the US contractor a provision that encourages joint venture cooperation

OPIC and the US-AEP jointly operate the Environmental Enterprises Development Initiative (EEDI) which provides pre-investment assistance toUS companies that are establishing or expandingenvironmental infrastructure projects in Asian and Pacific countries EEDI offers assistance to private-

BUSINESS amp THE CONTEMPORARY WORLD 0201995 129

DENNIS A RONDINELLI

sector companies that are at least 25 percent US-owned and whose activities in Asia do not result in diversion of US jobs or negative environmental impacts in the host country The activities eligiblefor funding include market-entry assessments in-vestor reviews business plans technology reviews prototype or pilot-project implementation and oth-er types of pre-investment analysis

Cost-Sharing of Feasibility Analyses TDP can also share the costs of feasibility studies un-dertaken by US private-sector investors or sup-pliers that are proposing to develop a project on an unsolicited sole source basis 48 It also main-tains technical-assistance trust funds to finance con-sultancies and feasibility studies by US consult-ing firms through the World Bank and the Interna-tional Finance Corporation for a variety of project-preparation activities The US Export-Import Bank also funds feasibility studies inconjunction with itsinsurance programs loan guarantees and exportercredits Fixed-rate medium-term loans to help fi-nance feasibility studies and pre-construction designand engineering services for up to $10 million are available through Eximbanks Engineering Multipli-er Program which can be used to cover up to 85 pershycent of the US costs

Concessionary Lending and LoanGuarantees

Finally the US government is encouraging the private sector to participate in environmental and infrastructure projects through concessionary lend-ing and loan guarantees Eximbank offers finan-cial assistance to promote the exports of US com-panies with capital equipment or services related to infrastructure-development projects that are nor-mally financed for a period of longer than one yearIt will provide credit or guarantees for up to 85 per-cent of the US export alue of each transaction Re-payment terms range from two to ten years Exim-bank assistance comes in the form of direct loans to public or private organizations abroad purchasingUS equipment or services loans to financial inter-

mediaries who re-lend to international buyers and guarantees to those who lend to foreign buyers Exshyimbank also offers loans and guarantees for up to 85 percent of the export value of US companies opshyerations and maintenance (OampM) contracts This is an effective means of promoting the participation ofUS companies with the technical expertise inmainshytaining environmental infrastructure or in establishshying maintenance systems

US-AEP has also created an Infrastructure Project Promotion Fund to support creative publicshyprivate partnerships that will develop new forms of financing arrangements and reduce the risks of US technology transfers in energy and environmentalshyinfrastructure projects The infrastructure-finance advisory service provides a one-stop clearinghousefor financial advice and assistance to US compashynies seeking to participate in Asian environmental infrastructure projects The services are aimed atUS equipment manufacturers contractors projectdevelopers and service providers that are interestshyed in bidding on public tenders in Asia developingprivate build-own-operate or build-operate-transferprojects or establishing joint ventures

Conclusions

Although the US government is now doing a lot to help US companies to maintain and strengthshyen their competitiveness in the global environmenshytal markets it is far less than what some other countries are doing to support their environmental technology equipment and service industries Othshyer means are needed to expand the participation of US environmental firms in foreign trade and inshyvestment The industry itself and its trade associashytions must take a stronger role in promoting exportsand foreign direct investment Both government and industry associations must help US companies to get supply contracts for backward and forward linkage equipment technical assistance or composhynents from Japanese British or French companierthat are successful in winning large environmental-

BUSINESS 8c THE CONTEMPORARY WORLD 2 1995 130

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

Page 10: CompetitiveneSs inthe Global Environmental Technology and Services Industrypdf.usaid.gov/pdf_docs/PCAAA547.pdf ·  · 2010-07-20CompetitiveneSs inthe Global Environmental . Technology

DENNIS A RONDINELLI

ernment officials in the forms of trips abroad over-seas training or assistance to their families in get-ting jobs or higher education

Improving CompetitivenessGovernment Support for Environmental Exports and Investment

In order to overcome some of the obstacles to competitiveness of US firms in the global en-vironmental technology equipment and services industry the US government is seeking to pro-vide greater assistance and support for export-ing forming joint ventures and participating in environmental-infrastructure projects abroad In 1994 the Clinton administration announced the Technology for a Sustainable Future Program that will promote the export of US environmental and energy technologies4 The program seeks to helpUS companies compete in international markets more effectively by (1)facilitating innovation and technological development (2) encouraging new ap-proaches to environmental protection through regu-latory policy market stimulation and fiscal policy in other countries (3) supporting companies export-ing US environmental technologies (4) workingwith domestic and foreign organizations throughpartnerships and collaboration on environmental education training and information dissemination Technology development and dissemination will fo-cus on remediation and restoration of environmen-tal resources environmental pollution control en-vironmental monitoringassessment and avoidance of environmental hazards and degradation

The administrations program will supple-ment and help coordinate government efforts in pro-viding four existing types of support (1) informa-tion services (2) export support (3)financial assis-tance for pre-feasibility analyses and (4) loan guar-antees and concessionary lending47

Information Services and Technical Assistance

A large number of US government agencies are now providing infomnation and technical assistance to US environmental companies interested in forshyeign trade and investment

Trade Leads and Business Information US companies can obtain trade leads and informashytion on potential environmental business opportunishyties including infrastructure development from theUS Department of Commerce (DOC) the State Deshypartment and the Departments of Agriculture Lashybor and Energy as well as from the Overseas Private Investment Corporation (OPIC) and the US-Asia Environmental Program (US-AEP) The US-AEP for example assists US companies to identify the marshykets in Asia for environmental products and sershyvices in solid- and toxic-waste disposal industrial and transportation pollution water and wastewater treatment energy efficiency and forestry US-AEP has initiated an information service through its netshywork of business representatives in Asia an inforshymation clearinghouse in Washington and a tradeshyleads system that informs US companies of busishyness opportunities for environmental infrastructure and services in Asia It provides companies with advanced notice of opportunities for infrastructure projects assistance in identifying and obtaining fishynancing from public and private sources and access to US government-assistance programs

Export Counseling and Services EPA asshysists foreign governments in developing sound enshyvironmental policies and in solving environmental problems in order to create more demand for US environmental exports In addition EPA promotesthe adoption and sale of US environmental techshynologies that can be part of infrastructure systems in foreign countries The Export-Import Bank of the United States and the US Trade and Developshyment Program (TDP)provide export counseling sershyvices The US Agency for International Developshyment (AID) has created a Center for Trade and Inshyvestment Services (CTIS) that provides individual

BUSINESS amp THE CONTEMPORARY WORLD 201995 128

US COMPETITIVENESS

counseling and information to companies interested in environmental energy and other types of projectsthat are supported by the foreign-aid program in developing countries The US Small Business Ad-ministration also offers advice to small companies on the legal aspects of exporting technology equip-ment or other goods abroad

The US Department of Commerce throughits International Trade Administration (ITA) isnow helping US environmental firms to obtain the assisshytance they need to compete for large infrastructure projects outside the United States ITA identifies and provides information about proposed or sched-uled infrastructure projects offers individual busi-ness counseling and monitors developments in spe-cific sectors

Support for Export of US Goods andServices

Other forms of support are also available to US companies interested in following up on trade and investment opportunities

Assessment of Foreign Business Condi-tions The US Department of Energy helps energy sector exporters to identify overseas opportunitiesand discriminatory trade barriers to identify financ-ing alternatives and to work with US governmentagencies to find markets for energy technology and equipment DOC and OPIC both support overseas trade missions that can help US companies to un-derstand foreign business conditions tariff and non-tariff barriers and opportunities for participating in infrastructure-development projects or for transfer-ring environmental technology and equipment that can be used in infrastructure systems US contrac-tors and exporters seeking to expand their activi-ties in developing countries can obtain political-riskinsurance and other forms of specialized insurance and financing services from OPIC

Coordination of Assistance Resources US-AEP follows up on specific environmental-infrastructure projects and coordinates the appro-priate US government technical and financial re-

sources that are available to help US environmen tal companies penetrate markets in Asia AIDs cornshymodity import program and its project-procurementactivities can open new opportunities for companiesinterested in participating in infrastructure projectsin developing countries

Pre-feasibility Analysis Assistance

Several US government agencies also assist foreigngovernments and private organizations to assess the feasibility of proposed infrastructure-developmentprojects using US consulting and service firms

Financial Assistance for Pre-feasibilityStudies To countries eligible for US bilateral assistance TDP provides non-reimbursable grantfunding for studies and consultancies to determinethe technical economic and financial feasibility of projects in which US technological expertise can help to accelerate the development process The grants focus on a wide range of environmental infrashystructure including energy water supply and wasteshymanagement systems TDP sends US technical speshycialists to developing countries to gather informashytion on the proposed project to work with local authorities to create the scope of work and budgetfor the feasibility study or consultancy and to make recommendations concerning TDP support for the study The host countrys grant-recipient organizashytion (apublic agency or private sector organization)selects the US firm to conduct the study under apshyproved compettive bidding procedures TDP paysgrantee-approved invoices for the expenses of the feasibility study directly to the contractor Up to 20 percent of the grant can be used to enlist the particishypation of the host countrys private-sector expertise to work with the US contractor a provision that encourages joint venture cooperation

OPIC and the US-AEP jointly operate the Environmental Enterprises Development Initiative (EEDI) which provides pre-investment assistance toUS companies that are establishing or expandingenvironmental infrastructure projects in Asian and Pacific countries EEDI offers assistance to private-

BUSINESS amp THE CONTEMPORARY WORLD 0201995 129

DENNIS A RONDINELLI

sector companies that are at least 25 percent US-owned and whose activities in Asia do not result in diversion of US jobs or negative environmental impacts in the host country The activities eligiblefor funding include market-entry assessments in-vestor reviews business plans technology reviews prototype or pilot-project implementation and oth-er types of pre-investment analysis

Cost-Sharing of Feasibility Analyses TDP can also share the costs of feasibility studies un-dertaken by US private-sector investors or sup-pliers that are proposing to develop a project on an unsolicited sole source basis 48 It also main-tains technical-assistance trust funds to finance con-sultancies and feasibility studies by US consult-ing firms through the World Bank and the Interna-tional Finance Corporation for a variety of project-preparation activities The US Export-Import Bank also funds feasibility studies inconjunction with itsinsurance programs loan guarantees and exportercredits Fixed-rate medium-term loans to help fi-nance feasibility studies and pre-construction designand engineering services for up to $10 million are available through Eximbanks Engineering Multipli-er Program which can be used to cover up to 85 pershycent of the US costs

Concessionary Lending and LoanGuarantees

Finally the US government is encouraging the private sector to participate in environmental and infrastructure projects through concessionary lend-ing and loan guarantees Eximbank offers finan-cial assistance to promote the exports of US com-panies with capital equipment or services related to infrastructure-development projects that are nor-mally financed for a period of longer than one yearIt will provide credit or guarantees for up to 85 per-cent of the US export alue of each transaction Re-payment terms range from two to ten years Exim-bank assistance comes in the form of direct loans to public or private organizations abroad purchasingUS equipment or services loans to financial inter-

mediaries who re-lend to international buyers and guarantees to those who lend to foreign buyers Exshyimbank also offers loans and guarantees for up to 85 percent of the export value of US companies opshyerations and maintenance (OampM) contracts This is an effective means of promoting the participation ofUS companies with the technical expertise inmainshytaining environmental infrastructure or in establishshying maintenance systems

US-AEP has also created an Infrastructure Project Promotion Fund to support creative publicshyprivate partnerships that will develop new forms of financing arrangements and reduce the risks of US technology transfers in energy and environmentalshyinfrastructure projects The infrastructure-finance advisory service provides a one-stop clearinghousefor financial advice and assistance to US compashynies seeking to participate in Asian environmental infrastructure projects The services are aimed atUS equipment manufacturers contractors projectdevelopers and service providers that are interestshyed in bidding on public tenders in Asia developingprivate build-own-operate or build-operate-transferprojects or establishing joint ventures

Conclusions

Although the US government is now doing a lot to help US companies to maintain and strengthshyen their competitiveness in the global environmenshytal markets it is far less than what some other countries are doing to support their environmental technology equipment and service industries Othshyer means are needed to expand the participation of US environmental firms in foreign trade and inshyvestment The industry itself and its trade associashytions must take a stronger role in promoting exportsand foreign direct investment Both government and industry associations must help US companies to get supply contracts for backward and forward linkage equipment technical assistance or composhynents from Japanese British or French companierthat are successful in winning large environmental-

BUSINESS 8c THE CONTEMPORARY WORLD 2 1995 130

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

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US COMPETITIVENESS

counseling and information to companies interested in environmental energy and other types of projectsthat are supported by the foreign-aid program in developing countries The US Small Business Ad-ministration also offers advice to small companies on the legal aspects of exporting technology equip-ment or other goods abroad

The US Department of Commerce throughits International Trade Administration (ITA) isnow helping US environmental firms to obtain the assisshytance they need to compete for large infrastructure projects outside the United States ITA identifies and provides information about proposed or sched-uled infrastructure projects offers individual busi-ness counseling and monitors developments in spe-cific sectors

Support for Export of US Goods andServices

Other forms of support are also available to US companies interested in following up on trade and investment opportunities

Assessment of Foreign Business Condi-tions The US Department of Energy helps energy sector exporters to identify overseas opportunitiesand discriminatory trade barriers to identify financ-ing alternatives and to work with US governmentagencies to find markets for energy technology and equipment DOC and OPIC both support overseas trade missions that can help US companies to un-derstand foreign business conditions tariff and non-tariff barriers and opportunities for participating in infrastructure-development projects or for transfer-ring environmental technology and equipment that can be used in infrastructure systems US contrac-tors and exporters seeking to expand their activi-ties in developing countries can obtain political-riskinsurance and other forms of specialized insurance and financing services from OPIC

Coordination of Assistance Resources US-AEP follows up on specific environmental-infrastructure projects and coordinates the appro-priate US government technical and financial re-

sources that are available to help US environmen tal companies penetrate markets in Asia AIDs cornshymodity import program and its project-procurementactivities can open new opportunities for companiesinterested in participating in infrastructure projectsin developing countries

Pre-feasibility Analysis Assistance

Several US government agencies also assist foreigngovernments and private organizations to assess the feasibility of proposed infrastructure-developmentprojects using US consulting and service firms

Financial Assistance for Pre-feasibilityStudies To countries eligible for US bilateral assistance TDP provides non-reimbursable grantfunding for studies and consultancies to determinethe technical economic and financial feasibility of projects in which US technological expertise can help to accelerate the development process The grants focus on a wide range of environmental infrashystructure including energy water supply and wasteshymanagement systems TDP sends US technical speshycialists to developing countries to gather informashytion on the proposed project to work with local authorities to create the scope of work and budgetfor the feasibility study or consultancy and to make recommendations concerning TDP support for the study The host countrys grant-recipient organizashytion (apublic agency or private sector organization)selects the US firm to conduct the study under apshyproved compettive bidding procedures TDP paysgrantee-approved invoices for the expenses of the feasibility study directly to the contractor Up to 20 percent of the grant can be used to enlist the particishypation of the host countrys private-sector expertise to work with the US contractor a provision that encourages joint venture cooperation

OPIC and the US-AEP jointly operate the Environmental Enterprises Development Initiative (EEDI) which provides pre-investment assistance toUS companies that are establishing or expandingenvironmental infrastructure projects in Asian and Pacific countries EEDI offers assistance to private-

BUSINESS amp THE CONTEMPORARY WORLD 0201995 129

DENNIS A RONDINELLI

sector companies that are at least 25 percent US-owned and whose activities in Asia do not result in diversion of US jobs or negative environmental impacts in the host country The activities eligiblefor funding include market-entry assessments in-vestor reviews business plans technology reviews prototype or pilot-project implementation and oth-er types of pre-investment analysis

Cost-Sharing of Feasibility Analyses TDP can also share the costs of feasibility studies un-dertaken by US private-sector investors or sup-pliers that are proposing to develop a project on an unsolicited sole source basis 48 It also main-tains technical-assistance trust funds to finance con-sultancies and feasibility studies by US consult-ing firms through the World Bank and the Interna-tional Finance Corporation for a variety of project-preparation activities The US Export-Import Bank also funds feasibility studies inconjunction with itsinsurance programs loan guarantees and exportercredits Fixed-rate medium-term loans to help fi-nance feasibility studies and pre-construction designand engineering services for up to $10 million are available through Eximbanks Engineering Multipli-er Program which can be used to cover up to 85 pershycent of the US costs

Concessionary Lending and LoanGuarantees

Finally the US government is encouraging the private sector to participate in environmental and infrastructure projects through concessionary lend-ing and loan guarantees Eximbank offers finan-cial assistance to promote the exports of US com-panies with capital equipment or services related to infrastructure-development projects that are nor-mally financed for a period of longer than one yearIt will provide credit or guarantees for up to 85 per-cent of the US export alue of each transaction Re-payment terms range from two to ten years Exim-bank assistance comes in the form of direct loans to public or private organizations abroad purchasingUS equipment or services loans to financial inter-

mediaries who re-lend to international buyers and guarantees to those who lend to foreign buyers Exshyimbank also offers loans and guarantees for up to 85 percent of the export value of US companies opshyerations and maintenance (OampM) contracts This is an effective means of promoting the participation ofUS companies with the technical expertise inmainshytaining environmental infrastructure or in establishshying maintenance systems

US-AEP has also created an Infrastructure Project Promotion Fund to support creative publicshyprivate partnerships that will develop new forms of financing arrangements and reduce the risks of US technology transfers in energy and environmentalshyinfrastructure projects The infrastructure-finance advisory service provides a one-stop clearinghousefor financial advice and assistance to US compashynies seeking to participate in Asian environmental infrastructure projects The services are aimed atUS equipment manufacturers contractors projectdevelopers and service providers that are interestshyed in bidding on public tenders in Asia developingprivate build-own-operate or build-operate-transferprojects or establishing joint ventures

Conclusions

Although the US government is now doing a lot to help US companies to maintain and strengthshyen their competitiveness in the global environmenshytal markets it is far less than what some other countries are doing to support their environmental technology equipment and service industries Othshyer means are needed to expand the participation of US environmental firms in foreign trade and inshyvestment The industry itself and its trade associashytions must take a stronger role in promoting exportsand foreign direct investment Both government and industry associations must help US companies to get supply contracts for backward and forward linkage equipment technical assistance or composhynents from Japanese British or French companierthat are successful in winning large environmental-

BUSINESS 8c THE CONTEMPORARY WORLD 2 1995 130

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

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DENNIS A RONDINELLI

sector companies that are at least 25 percent US-owned and whose activities in Asia do not result in diversion of US jobs or negative environmental impacts in the host country The activities eligiblefor funding include market-entry assessments in-vestor reviews business plans technology reviews prototype or pilot-project implementation and oth-er types of pre-investment analysis

Cost-Sharing of Feasibility Analyses TDP can also share the costs of feasibility studies un-dertaken by US private-sector investors or sup-pliers that are proposing to develop a project on an unsolicited sole source basis 48 It also main-tains technical-assistance trust funds to finance con-sultancies and feasibility studies by US consult-ing firms through the World Bank and the Interna-tional Finance Corporation for a variety of project-preparation activities The US Export-Import Bank also funds feasibility studies inconjunction with itsinsurance programs loan guarantees and exportercredits Fixed-rate medium-term loans to help fi-nance feasibility studies and pre-construction designand engineering services for up to $10 million are available through Eximbanks Engineering Multipli-er Program which can be used to cover up to 85 pershycent of the US costs

Concessionary Lending and LoanGuarantees

Finally the US government is encouraging the private sector to participate in environmental and infrastructure projects through concessionary lend-ing and loan guarantees Eximbank offers finan-cial assistance to promote the exports of US com-panies with capital equipment or services related to infrastructure-development projects that are nor-mally financed for a period of longer than one yearIt will provide credit or guarantees for up to 85 per-cent of the US export alue of each transaction Re-payment terms range from two to ten years Exim-bank assistance comes in the form of direct loans to public or private organizations abroad purchasingUS equipment or services loans to financial inter-

mediaries who re-lend to international buyers and guarantees to those who lend to foreign buyers Exshyimbank also offers loans and guarantees for up to 85 percent of the export value of US companies opshyerations and maintenance (OampM) contracts This is an effective means of promoting the participation ofUS companies with the technical expertise inmainshytaining environmental infrastructure or in establishshying maintenance systems

US-AEP has also created an Infrastructure Project Promotion Fund to support creative publicshyprivate partnerships that will develop new forms of financing arrangements and reduce the risks of US technology transfers in energy and environmentalshyinfrastructure projects The infrastructure-finance advisory service provides a one-stop clearinghousefor financial advice and assistance to US compashynies seeking to participate in Asian environmental infrastructure projects The services are aimed atUS equipment manufacturers contractors projectdevelopers and service providers that are interestshyed in bidding on public tenders in Asia developingprivate build-own-operate or build-operate-transferprojects or establishing joint ventures

Conclusions

Although the US government is now doing a lot to help US companies to maintain and strengthshyen their competitiveness in the global environmenshytal markets it is far less than what some other countries are doing to support their environmental technology equipment and service industries Othshyer means are needed to expand the participation of US environmental firms in foreign trade and inshyvestment The industry itself and its trade associashytions must take a stronger role in promoting exportsand foreign direct investment Both government and industry associations must help US companies to get supply contracts for backward and forward linkage equipment technical assistance or composhynents from Japanese British or French companierthat are successful in winning large environmental-

BUSINESS 8c THE CONTEMPORARY WORLD 2 1995 130

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

Page 13: CompetitiveneSs inthe Global Environmental Technology and Services Industrypdf.usaid.gov/pdf_docs/PCAAA547.pdf ·  · 2010-07-20CompetitiveneSs inthe Global Environmental . Technology

infrastructure-project bids in Asia Eastern Europeand Africa

Small- and medium-sized US companiesneed help in developing effective licensing agree-ments manufacturing agreements or joint yen-tures with foreign firms that are likely to be sub-contractors or suppliers on large environmental infrastructure projects because of government lo-cal content or local participation requirementsConsortia or associations of US environmental companies need to develop a long-term presencein the largest overseas markets in order to be able to obtain the information and establish the relation-ships that are necessary to take advantage of poten-tial export or investment opportunities Opportuni-ties may exist for larger US companies to establish export trading companies to expand the exportsof small environmental technology and equipmentproducers Although the United States has a techno-logical competitive advantage for many types of air-and water-pollution abatement monitoring and cleanup equipment and services Japanese and Eu-ropean companies are often better organized andtherefore make larger and faster inroads into the most lucrative markets especially inAsia and Cen-tral and Eastern Europe Their advantages derive not from the superiority of their products but fror

Notes

US COMPETITIVENESS

their ability to exploit market opportunities more effectively than US companies shy that istheir abilshyity to seek out and close business transactions more successfully in foreign markets

Helping the US environmental industry to become more competitive will require careful marshyket analyses that are targeted on specific productsAlthough early warning information now providshyed by several US government agencies about longshyterm potential projects will be useful to large US multinationals many of the small- and mediumshysized suppliers will not be able to respond effectiveshyly Most of these companies do not have the financshying trained staff and marketing network needed to track and prepare for long-term opportunitiesThere is a real danger that unless promotional acshytivities focus on immediate and specific export conshytractual or investment opportunities many smallshyer US environmental companies will not respondAlthough the global market for environmental techshynology services and equipment is large and growshying the competitiveness of US companies in the fushyture is not assured unless strong efforts are made jointly by environmental companies governmentand industry associations to pursue worldwide opshyportunities more vigorously

1 Organization for Economic Cooperation and Development The OECD EnvironmentIndustrySituation Prosshypects and GovernmentPolicies (Paris OECD 1992)2 International Finance Corporation Investing inthe EnvironmentBusiness Opportunitiesin DevelopingCountries(Washington DC IFC 1992)3 US Congress Office of Technology Assessment IndustryTechnology andthe Environment Competitive Challenges and Business Opportunities(Washington DC US Government Printing Office 1994) quote on 44 Russell Sturm Deirdre Lord and Lynn Wagner Seizing the Moment Global Opportunitiesfor the US EnergyEfficiency Induiny (Washington DC International Institute for Energy Conservation 1992) quote on 35 Unsigned article Pollution The Money inEuropes Muck The Economist 20 November 1993 81-826 Unsigned article Poland Offers Many Opportunities for Environmental Improvements EasternEurope Busishyness Bulletin (November 1993) 37 Ruth RHarkin Aiding Environmental Exports The JournalofCommerce (December 21993) 6-A8Jay LCamillo North American Free Trade and the Environment Business America 18 October 1993 38-419 KT Arasu US Eyes Bulging Asian Market for Environmental Technology The journalof Commerce (Septemshyber 23 1993) 4-A10 For an assessment of the situation inAsia see Dennis ARondinelli Business and Environmental Protection TheEmerging Investment Opportunities inAsia Business amp the ContemporaryWorld 4no 4(1992) 144-61

BUSINESS ampTHE CONTIEMPORARY WORLD 2o 1995 131

DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

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DENNIS ARONDINELLI

11 PT Bangsberg China Begins Major Drive to Clean Up Environment The JournalofCommerce (November 1 1993) IA 5A

12 See Dennis ARondinelli Thailands Expanding Markets for Environmental Technology and Services Opportushynities for US Trade and Investment Journal ofAsian Business in press

13 Brian Johns Thailand Seeks Help to Get Environmental House in Order The Journalof Commerce (October15 1993) IA 8A

14 US Congress Office of Technology Assessment Industr Technology and the Environment 17IS US Department of Commerce US IndustrialOutlook 1994 (Washington DC USDOC 1994) 19-5 and 19-6 16 For an analysis of US trade inthe environmental industry see US Environmental Protection Agency International

Tradein EnvironmentalProtectionEquipmentAn Assessment ofExisting Data(Washington DC USEPA 1degP3)17 US Environmental Protection Agency InternationalTrade in EnvironmentalProtectionEquipment 17-20 18 Bangsberg 5A 19 Harkin 6-A 14 20 Michele Kayal OPIC Green Area is Kiy to Gold in Czech Republic The Journalof Commerce (June 17

1994) 5A 21 US Congress Office of Technology Assessment IndustryTechnology and the Environment 15-16 22 Camillo 3941 23 The trends are identified in Gas Research Institute Environmental Trends and Issues at the Research Horizon

(Chicago Gas Research Institute 1992)24 See Dennis A Rondinelli Business and Environmental Protection The Emerging Investment Opportunities in

Asia 144-61 25 See Gas Research Institute EnvironmentalTrends andIssues at the Research Horizon 26 Unsigned article China Totes Up Pollution Costs WallStreetJournal20 September 1994 A19 27 Lauren Bradbury Environmental Reform IsUnder Way in Chile Business America August 1993 6-7 28 For a more detailed explanation see Theordore Panayotou Green Markets The Economics of SustainableDevelshy

opment (San Francisco ICS Press 1993)29 Organization for Economic Cooperation and Development Managingthe Environment The Role of Economic

Instruments (Paris OECD 1994)30 Corey D Wright Tunesias Plans to Improve the Environment Provide Excellent Business Projects Business

America 29 November 1993 25-27 31 Unsigned article Global Environmental Fund Wall Streetjournal17 March 1994 A12 32 Mohamed EI-Ashry The New Global Environment Facility Financeand Development 31 no 2 (June 1994)

48 33 World Bank The World Bank and the Environment Fiscal1993 (Washington DC World Bank 1993)34 Mohan Munashinghe Wilfrido Cruz and Jeremy Warford Are Economywide Policies Good for the Environshy

ment Financeand Development September 1993 40-43 35 Johan Schot and Kurt Fischer The Greening of the Industrial Firm EnvironmentalStrategiesfor IndustryKFisshy

cher and J Schot eds (Washington DC Island Press 1993) 3-33 36 See HE Williams J Jedhurst and K Drew Corporate Strategies for a Sustainable Future Environmental

Strategiesfor IndustryKurt Fischer and Johan Schot eds (Washington DC Island Press 1992) 117-46 37 See Paul Abrams Stark Choice Clean Up Or Be Wiped Out FinancialTimes 18 June 1993 M-1 38 Business International Managingthe GlobalEnvironmentalChallenge(New York Business International Corposhy

ration 1992) 55-57 39 Pieter Winsemius and Walter Hahn Environmental Option Assessment ColumbiaJournalof World Business

27 nos 3 and 4 (1992) 248-66 40 Matthew L Hensley and Edward PWhite The Privatization Experience in Malaysia Integrating Build-Operate-

Own and Build-Operate-Transfer Techniques within the National Privatization Strategy ColumbiaJournalof WorldBusine 28 no 1 (1993) 70-82

41 Dennis A Rondinelli Business Participation in the Public Services Industry in Southeast Asia Accelerating the Pace of Privatization JournalofSoutheast Asia Business 7 no 3 (1991) 1-13

42 World Bank World Development Report 1994 Infrastructurefor Development (Washington DC World Bank 1994)

43 US Congress Office of Technology Assessment IndustryTechnology andthe Environment 17 44 US Congress Office of Technology Assessment IndustryTechnology andthe Environment165

132 BUSINESS 8c THE CONTEMPORARY WORLD 2 1995

US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133

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US COMPETITIVENESS

45 US General Accounting Office Export PromotionA Comparisonof Programsin Five IndWusrializedNationsReport GGC92-97 (Washington DC GAO 1992)46 US National Science and Technology Council Technology for a Sustainable Future A Framework for Action(Washington DC NSTC 1994)47 For more detailed information on these programs see Tom Cox Where to Get Export Assistance BusinessAmericaApril 1994 11-30 William ADelphos Financing Business America 25 March 1991 18-23 and the pubshylications of the specific agencies whose programs are described here48 US Trade and Development Program The Trade and Development Programin Asia-Pacific(Washington DCUSTDP 1992) TDP has provided grants for example to study the feasibility of the java-Sumatera high-voltage inshyterconnection project the Central Java telecommunications system the Jakarta mass-rapid-railway transit-systemtunnelling project and the integrated-air-transport project in Indonesia It has also funded feasibility szudies forgeothermal and oil-fired-energy projects data-communications networks and power-plant rehabilitation projectsin the Philippines power projects sludge-management plans industrial water-treatment facilities and energyshyinfrastructure projects in Thailand and wastewater power plant and communications-system projects in Singashy

pore

BUSINESS amp THE CONTEMPORARY WORLD 0201995 133