Intermediate report presented at the 6th International Workshop for ECO ASIA Long-term Perspective Project, 10 March 1999, Tokyo, Japan. This study was financed by the Environment Agency of Japan. |
Yuji Mizuno
Senior Consultant
Nomura Research Institute, Ltd.
Contact:
Yuji Mizuno (Mr.) Senior Consultant, Nomura Research Institute Ltd.
FAX: 81-3-5203-0783 E-mail: y-mizuno@nri.co.jp |
1. Introduction
ECO ASIA Long-term Perspective Project, organized by the Environment Agency of Japan, aims to provide decision makers in the region, specifically the Ministers in Environment Congress for Asia and the Pacific (ECO ASIA), with a continuously improved scientific basis for policy formulation to achieve sustainable development. The Project was launched at the ECO ASIA congress in 1993, and has been developed through the four expert workshops in 1994, 1995, and 1996. The phase I of the Project finished in 1996 and phase II started in 1998 by adopted the Work Plan for Phase II at the 5th Workshop and reported to ECO ASIA '98.
The 6th International Workshop on ECO ASIA Long-term Perspective Project took place in Tokyo, Japan, from 10 to 11 March 1999. The objectives of the workshop were to share information on progress made in research on the four Eco-concepts which are Eco-Consciousness, Eco-Policy Linkage, Eco-Partnership, and Eco-Technology/Eco-Investment, to receive input from participants on each research activity, to discuss measures for reactivating the project, including re-establishment of the steering committee, and to discuss the future direction of advancement. At the workshop, several presentations were made for concurrent studies under the work plan for phase II. This paper is based on presentation made at the 6th workshop for developing the concept of Eco-Technology/Eco-Investment.
This paper describes classification of Eco-Technology, the experience in Japan concerning Eco-Technology and Eco-Investment, efforts implemented in Malaysia and Thailand concerning Eco-Technology and Eco-Investment, and conclusion.¹
2. Classification of Eco-Technology
As indicated in phase I of this project, Eco-Technology is one of the key issues to realize sustainable development. To disseminate Eco-technology, a certain amount of investment will be needed. However, when one talks about Eco-Technology, it is classified into two different types. One is End of Pipe (EOP); and the other is Clean Technology (CT), which is receiving attention as a new concept. CT is technology that makes industry itself friendly to the environment.
The table 1 shows a comparison between EOP and CT. EOP requires additional costs; whereas CT is technology that reduces costs because it reduces the amount of energy to be used and the amount of waste materials. Even if investment is made, EOP does not influence overall productivity; but CT improves productivity because CT requires less material to be used. Therefore, EOP has an element of "obliged to use," whereas CT has the element "Own motivation to use." EOP is indispensable not only for the private sector but also for the public sector, such as waste water and waste materials' processing. The rapid implementation of EOP is being sought in the AP area. On the other hand, CT is applicable mainly to the private sector, and it will be the case that the need for it has begun to be perceived only recently.
3. Experience in Japan
Concerning those two Eco-Technologies, the analysis was carried out based on the experience in Japan. The figure 1 shows the past production level of environmental equipment in Japan. In this figure, environmental equipment means EOP equipment. In the early 1970's, environmental pollution became a major social issue in Japan. For the private sector, the level of production of environmental equipment peaked in 1974; whereas the level for the public sector was small during the 1970s, but has increased greatly in recent times.
The figure 2 shows the cumulative amounts for both technologies. EOP used in the private sector constitutes only 1/3 of the total. Thus, the main users of EOP has been in the public sector, where it is used mainly for waste water and waste materials processing equipment, etc.
Of the equipment investment made by Japan's private sector, the bottom line in the figure 3 describes the investment ratio related to Pollution Prevention, which is also EOP. During the 1970s, the ratio of equipment investment in Pollution Prevention is very high. However, in recent times, it constitutes only less than 5% of the total. Though, if we add to this Energy Conservation & Alternative Energies, which have CT elements, then the ratio goes up somewhat as is showed by the middle line in the figure 3. Furthermore, if Rationalization & Labor Saving is added to this, then one can see as the top line in the figure 3 that it reaches the Pollution Prevention ratio of the 1970s. ²
Also, the figure 4 shows actual investment amounts, rather than equipment investment ratios. The investment level for Pollution Prevention peaked during the 1970s. But if we add Energy Conservation & Alternative Energy and Rationalization & Laborsaving, the investment amount far exceeds that of the 1970s.
Needless to say, Rationalization & Laborsaving is not necessarily CT. However, it is a fact that CT has an aspect that needs to be rationalized. It will be stressed that while the amount of investment made in EOP by the private sector is limited, the amount of investment in production processes is relatively large. And incorporating the element of "cleaning up" will lead to the promotion of Eco-Technology and Eco-Investment.
In summary, there has been a huge investment for EOP so far in Japan, mainly by the Public Sector. To meet the continuous need for Eco-Investment, CT is essential for industry.
4. Efforts Implemented in Malaysia
Japan could conquer industrial pollution problems not only by regulation but also through financial incentives, public lending, training, R&D, etc. In other words, it is difficult to promote Eco-Technology and Eco-Investment only by the stick called regulation. The carrot called Financial Support needs to be available at the same time. It is important that promotion involve a "set." Such a program has already been introduced in this Region. So, efforts implemented in Malaysia will be described in this section, followed by efforts in Thailand in the next section.
4.1 Promotion measures by the government
As a promotion measures by the Malaysian government for EOP, there are Incentives for Investment. To be specific, for companies involved in the storage, treatment, and disposal of toxic and hazardous wastes, income tax will be charged on only 30% of the statutory income for 5 years, or a 60% investment tax allowance will be given for capital expenditures for 5 years. Furthermore, import taxes and sales taxes will be exempted for such machinery, equipment, raw materials, and components.
Aside from toxic and hazardous waste-related matters, environmental protection equipment is given an initial tax credit of 40% and an annual credit of 20% for 5 years. In addition to such tax credits, a commendation is awarded to companies which contribute to environmental protection. Called the Hibiscus Award and it will be elevated beginning in this year to the Prime Minister's Hibiscus Award.
4.2 Promotion of CT
Also, efforts are under way to promote CT. For example, from 1996 to 1998 a program called The Promotion of Cleaner Technology in Malaysian Industry was conducted by Standards and Industrial Research Institute of Malaysia (SIRIM), in cooperation with Danish cooperation for Environment and Development (DANCED). This program involved consultation with small and medium size enterprises (SMEs), demonstration projects, workshops, etc., aimed at the dissemination of CT. The target industries were food, textiles and electroplating. The results of those actions have been summarized in the table 2.
The Food Industry, for example, reduced its consumption of electricity and water following the introduction of CT. The initial investment required for the introduction of CT was recovered within 0.5 - 1.5 years. The Textile Industry reduced its consumption of light fuel oil and water, recovering its investment within 1 - 1.5 years. The Electroplating Industry reduced its consumption of additive chemicals and water, recovering its investment within 3 months. It is apparent that CT reduces production costs; and economically speaking it is technology worth the investment.
Although the concept is a little bit wider than that of CT, certification according to the ISO14000 series, which is an environmental control standard, is being encouraged; and the number of certifications is on the rise (Figure 5).
The simple use of CT does not by itself guarantee approval in accordance with the ISO14000 series. However, ISO14001 encourages the use of the best available technology to protect the environment; and the companies which receive approvals have presumably introduced CT. The companies that have obtained ISO14000 series certification are mostly those involved in export activities having a joint venture relationship with foreign capital; but it is desirable that domestic corporations, including medium and small corporations, also obtain certification.
4.3 Organization of the Eco-Industry
This sub section introduces the systemization of the environmental industry in Malaysia. The Association of Environmental Consultants and Contractors of Malaysia (AECCOM) was launched in 1994. There are 100 approved companies/institutions at present. To be an approved member, certain skills and ethical practices are required. Therefore, membership in AECCOM is proof that one will provide services at standards beyond a certain level. Thus, users can rest easy when seeking environmental protection engineering and consultation services, thereby promoting Eco-Technology and Eco-Investment.
Also, the Environmental Management and Research Association of Malaysia (ENSEARCH) was established in 1984. It is a non-profit professional organization of all those who are interested in the field of environmental management, research, and development. It has individual members as well as institutional members providing environmental services.
5. Efforts Implemented in Thailand
5.1 Promotion measures by the government
Concerning promotion measures by the government, an environmental fund was set up in 1992 with a capital of 5,000 million Baht. The fund provides low interest rate loans and grants support to local administrations, state enterprises, the private sector and NGOs for the promotion of investment in EOP. It is managed and run by the Office of Environmental Policy and Planning (OEPP), the Krung Thai Bank Public Company and the Industrial Finance Corporation of Thailand.
There is a similar system called the energy conservation promotion fund. This fund provides financial support to the public and private sectors to invest for energy conservation, R&D, demonstrations, training, and PR. It is managed and run by the Ministry of Finance (MOF), and the Department of Energy Development and Promotion (DEDP). Furthermore, as a tax credit, customs duties are reduced for importing machinery, materials, and equipment for energy saving and environmental conservation. Therefore, these systems incorporate the CT concept, not just EOP.
5.2 Promotion of CT
Regarding CT, there is a program called Project for Promotion of Cleaner Technology in Thai Industry. It is conducted by the Thailand Environment Institute (TEI), the Industrial Environment Institute (IEI) of the Federation of Thai Industries (FTI), in cooperation with DANCED. During 1996 to 1998, it conducted consultations with SMEs, carried out demonstration projects, and held workshops. The target industries were food, textiles, and electroplating. The results of those projects have been summarized in the table 3.
In terms of the results from such actions, the food industry reduced its consumption of electricity and starch, recovering its initial investment within 3.4 years following the introduction of CT. The textile industry reduced its consumption of chemicals and water, recovering its investment within 1.3 years. The electroplating industry reduced its consumption of utilities and chemicals, recovering its investment within 0.9 years. Here again, CT reduced production costs; and economically speaking it is technology worth the investment.
There is a unique project called A Participatory Approach to Environmental Management and Clean-up in the Samutprakan Project. It is implemented by TEI, supported by the European Commission. This project involves an area in which pollution is an issue. All the stakeholders, such as the residents, corporations, local governments, NGOs, etc. are trying to solve their problems through this project. CT demonstration projects have been implemented for the auto parts industry and pesticide industry sectors. As a result of such actions, TEI has a web site on the Internet called the Cleaner Technology Information Center. Its address is http://www.tei.or.th/ctic/.
The next program described in this section is TLC (Training Lead for Consulting). This program is intended to help provide support to SMEs to get ISO 14000 series certification. It is implemented by Thailand Industrial Standards Institution (TISI). Training is provided to SMEs through consultancy paid by TISI. Ten companies in the same industry comprise one group, through which the program is carried out. However, it is conducted on the condition that trained SMEs should get ISO 14000 series certification. Therefore, unless there is a strong desire to obtain ISO certification, one cannot participate in this program even though the consultation costs are free.
In summary, various measures have been implemented to promote Eco-Technology and Eco-Investment in Malaysia and Thailand. Disseminating EOP has been and will be top priority in this region, and attention to CT is rising because it can increase competetiveness and reduce environmental impact.
1. The author would like to express sincere appreciation to Insinyur Lee Heng Keng, Department of Environment, Malaysia and Dr. Saksit Tridech, Ministry of Science, Technology and the Environment, Thailand in collecting the information.
Source: Nomura Research Institute (NRI)
EOP CT Additional Cost Cost Reduction Same Productivity Productivity Increase Obliged to Use Own Motivation to Use For Both Public and Private Mainly for Private Industry
2. Because of statistical limitations, it was impossible to illustrate the investment ratios for Energy Conservation & Alternative Energy or Rationalization & Laborsaving investment in the 1970s and early the 1980s.
Source: SIRIM
Industry Reduction Pay back time Food 150,000kWh of electricity 4,200m³ of water 0.5 - 1.5 years Textiles 136m³ of light fuel oil 8,000m³ of water 1 - 1.5 years Electroplating Subsidiary chemical 75% of water < 3 months
Source: Case Study: Cleaner Technology by TEI, FTI/IEI and DANCED
Industry Reduction Pay back time Food 50% of electricity
48.3% of starch3.4 years Textiles 43% of chemicals
100% of water1.3 years Electroplating 6% of utilities
40% of chemicals0.9 years