Environmental Technologies Industries
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Aid to Trade
Chapter 4 - Selected Country Markets

This chapter describes existing and prospective opportunities for U.S. environmental technologies
exports created or enhanced by U.S. Government assistance in five countries: Egypt, India, Mexico, the Philippines, and Ukraine. In these countries, U.S.-funded environmental and energy programs serve as a major market driver and create competitive advantages for U.S. companies through technology transfer and direct equipment procurement.


Business Climate

By far the largest Arab country by population, Egypt is in the heart of the Middle East and represents a significant and growing market for U.S. trade and investment. Moreover, given its strategic position in the region, Egypt continues to benefit from strong donor support, including about $2 billion annually in U.S. economic and military assistance.

Egypt enjoys political stability (President Mubarak was overwhelmingly reelected for a third term in 1999) and a growing, if still transitional, economy that is increasingly open to the global market. In 1991, the Egyptian Government launched a comprehensive Economic Reform and Structural Adjustment Program supported by the International Monetary Fund (IMF), the World Bank, and other international donors. The program has focused on macroeconomic stabilization, reduction of inflation rates, and structural adjustments to encourage economic growth.

The government’s economic reform policies have achieved significant success. Egypt’s gross domestic product grows at a steady rate of about 5 percent per year. Inflation was well under control at 4 percent in 1998 and should remain low. In 1996, the government started selling state-owned enterprises, which signaled a major change from years past when it was reluctant to privatize its extensive public holdings. Share sales through the capital market—to Egyptian and foreign investors—are growing steadily, demonstrating confidence by the private sector in the government’s
reform program.

A variety of economic laws have been passed or introduced to facilitate private sector activity in Egypt. A new Tenders Law, passed in 1998, lends greater transparency and predictability to the bidding process. The new Investment Law of 1997 reaffirms basic guarantees for investors and clarifies the framework for investment incentives.

The other key area of Egypt’s economic policy reform has been trade liberalization. In 1995, Egypt
joined the World Trade Organization. Egypt and the United States agreed in May 1998 to begin talks on a Trade and Investment Framework Agreement (TIFA). The TIFA is expected to be an intermediary step before starting talks on a free trade area agreement at some future date. Egypt has been in negotiations with the European Union on an association agreement under the Mediterranean initiative since 1995. New import and export regulations adopted in January 1998 reduced import duties and eliminated some nontariff trade barriers. However, Egypt has yet to change many of its protectionist policies.

Red tape remains a key business impediment in Egypt, including a multiplicity of regulations and
regulatory agencies, delays in clearing goods through customs, arbitrary decision-making, high-market-entry transaction costs, and a generally unresponsive commercial court system.

The U.S.-Egypt Partnership for Economic Growth and Development, sponsored by U.S. Vice President Gore and President Mubarak, was created in 1994 as a mechanism to promote stability and prosperity in Egypt. The partnership initiative offers a framework within which U.S. and Egyptian companies can build stronger trade and investment ties.

In fiscal year (FY) 1999, the U.S. Congress reduced the amount of aid under the Egypt Economic Support Fund, with the objective of moving the U.S.-Egypt partnership from an aid-based relationship to more mature cooperation based on trade. Nonetheless, Egypt remains the world’s largest recipient of U.S. foreign assistance, with over $700 million worth of aid expected in FY 2000.

Major U.S. Assistance-Driven Market Opportunities and Trends

The U.S. Agency for International Development’s Egypt Mission (USAID/Egypt) operates the largest environmental program of all USAID Missions. The United States is also by far the biggest donor for environmental initiatives in Egypt. The U.S.-Egyptian Partnership for Economic Growth and Development serves as a forum for setting a joint environmental agenda for bilateral assistance. USAID/Egypt focuses its environmental activities in three areas: water and wastewater, air pollution (particularly in Cairo), and industrial energy efficiency and pollution prevention (including environmentally sustainable tourism). In recent years, it also worked extensively to promote
energy efficiency and pollution prevention in the industrial sector. USAID seeks to facilitate increased
private investment in Egypt’s environmental sector and works with relevant Egyptian regulatory agencies to support the implementation of the recently enacted comprehensive national environmental law.

Water Supply and Wastewater Management. The water supply and wastewater management sector represents enormous opportunities for U.S. suppliers of water and wastewater treatment systems, water pumps and pumping stations, pipes, and other related equipment, mostly through direct USAID procurement. USAID’s water/wastewater program also supports the commercialization of water and wastewater management through private sector participation, including greater autonomy for utilities in planning, construction, and financial management, as well as an improved regulatory climate for private investment in the sector.

Over the past 20 years, USAID has invested approximately $2.7 billion in Egypt’s water and wastewater infrastructure (planned funding for FY 2000 is $92.5 million). The following are USAID/Egypt’s largest recently completed and ongoing projects in this sector, all of which involved extensive procurement of U.S. equipment:

Under the Secondary Cities Development project (1994-2002, $215 million), USAID is expanding water and wastewater infrastructure investments to reach the communities of Mansoura, Nuweiba, Luxor, and the Aswan group of Nasr City, Kom Ombo, and Darawo City. Water and wastewater treatment works include collection/distribution pipeline networks, pumping stations, and storage tanks.

The Cairo Water Supply II project (1988-1997, $145 million) involved the rehabilitation and expansion of the southern portion of the Cairo water system, including the installation of 53 kilometers of distribution and transmission pipes, construction of four ground-level concrete reservoirs, construction of two pumping stations, rehabilitation of four pumping stations, and
establishment of a central water quality laboratory.

The Canal Cities Water and Wastewater II initiative (1987-1999, $380 million) provided for the design, construction, operation, and maintenance of wastewater treatment facilities for the three canal cities of Suez, Ismailia, and Port Said. It also supported the construction of a pump station at Qantara to increase the raw water supply to Port Said, along with related institutional development and training. The program also funded limited rehabilitation of three sewer collection systems to reduce infiltration.

Cairo Sewerage II program (1984-1998, $784 million) funded the construction of wastewater
collection, treatment, and disposal facilities on the West Bank of Cairo, along with institutional and operations and maintenance technical assistance. The investments included two wastewater treatment plants ($73 million and $114 million), more than 300 miles of sewers ($115 million), eight pumping stations ($79 million), a sludge handling facility ($42 million), etc.

Working with the General Organization for Sanitary Drainage of Alexandria (AGOSD), USAID has invested $425 million in the design, construction, and start-up of a sewerage system for approximately 75 percent of the city since 1978. The investment covered 211 kilometers of sewers, six major pumping stations, two primary treatment plants, and one sludge dewatering and disposal facility. The current Alexandria Wastewater System Expansion II program (1998-2002, $90 million) will double the capacity of the two treatment plants, upgrade the pumping stations, and improve the sludge disposal systems to accommodate the projected population growth. The Alexandria Drinking Water initiative (1998-2002, $200 million) will assist the Alexandria Water General Authority (AWGA) in implementing its water supply and distribution systems master plan.

The three newly formed Economic General Authorities for Water Supply and Sanitary Drainage in
the governorates (provinces) of Fayoum, Beni Suef, and Minya have recently entered into an agreement with USAID for a new program—Egypt Utilities Management (EUM, 1997-2004, $215 million)—to provide water and wastewater services for their residents. EUM builds upon previous USAID support in Middle Egypt under the Provincial Cities Development Project (1982-1997, $104 million). The same program is also working with AWGA to improve its operations and management.

U.S. companies have a lead in Egypt’s water and wastewater sector, mostly due to the large USAID
procurements. French firms are the main competitors of U.S. suppliers of water supply equipment, while British companies have a high profile in the municipal wastewater treatment market. U.S. companies active in this market include Camp Dresser & McKee, CH2M HILL, Metcalf & Eddy, Montgomery Watson, Black & Veatch, Harbert Jones, Fru-Con, Morrison Knudsen, and ABB-SUSA.

It should be noted that USAID/Egypt is gradually moving away from infrastructure construction and
technology demonstration in the water sector toward greater policy assistance to manage the systems created through past capital investments.

Air Pollution. Air pollution from suspended particulates and lead is the most acute health hazard in
Egyptian cities, especially in Cairo. The Cairo Air Improvement Project (CAIP, 1995-2002, $60 million) directly addresses air pollution issues by demonstrating technologically and economically viable environmental solutions. Activities include:
• Introduction of compressed natural gas (CNG) fuel technology for Cairo’s municipal bus fleet
(including the procurement of CNG-fueled buses);
• Implementation of the Egyptian Government’s Lead Smelter Action Plan to reduce lead
emissions—a major smelter is being relocated outside of central Cairo where it will operate
with state-of-the-art emission reduction technology (assistance is also being provided
to upgrade the technologies and emission controls of smaller operations);
• A city-wide vehicle tune-up, emission inspection, and certification program;
• Air quality monitoring and analysis; and
• Public awareness and communications campaigns.

Industrial Energy Efficiency and Pollution Prevention. The Energy Conservation and Environmental Protection Project (ECEP, 1988-1998, $67.5 million) was USAID’s single largest country-specific industrial energy efficiency program. ECEP provided technical assistance and some $19 million worth of energy efficiency equipment (boilers, waste heat recovery systems, motors, energy-efficient lighting, gas analyzers, etc.) to over 150 industrial and commercial facilities. It was executed in collaboration with the global Environmental Pollution Prevention Project (EP3), whose Egypt program (1994-1998) provided $7.3 million worth of technical assistance to 74 Egyptian industrial facilities in the textile, food processing, pulp and paper, metal finishing, chemical, and electronics assembly, and tourism sectors.

The current Egypt Environmental Policy Program (1998-2002, $170 million) encourages and supports jointly agreed-to policy and institutional reforms aimed at removing obstacles to sound environmental management. This effort is focusing on such areas as energy efficiency, industrial pollution control and prevention, solid waste management, and environmentally sustainable tourism. The program supports a combination of policy reform initiatives, technical support, institutional strengthening, selected pilot activities and a comprehensive public awareness program to inform and motivate stakeholders to support investments in environmental improvements.

Tourism is the fastest-growing sector of the Egyptian economy and is one of three priority areas of USAID bilateral assistance to Egypt. In 1996-1998, USAID/Egypt supported a pilot Environmentally Sustainable Tourism program ($6.35 million) to help preserve and protect the natural and cultural environment along the Red Sea coast through promoting environmentally appropriate tourism activities. The subsequent program, Red Sea Sustainable Tourism Initiative (1999-2001, $3.5 million) will further assist Egypt to implement reforms to promote sustainable management of Red Sea coast resources. The assistance addresses, among others, cross-cutting policy issues that constrain effective environmental management; policies that adequately protect Red Sea coral reefs and islands and critical coastal zones; sound development of Red Sea properties; management training for the tourism sector, etc. The project has a $125,000 procurement budget for water and energy conservation equipment and auditing equipment for hotels.

Egypt joined the Technology Cooperation Agreement Pilot Project (TCAPP), a collaborative global effort between USAID, U.S. Department of Energy, and U.S. Environmental Protection Agency, in September 1999. The Egyptian Environmental Affairs Agency has the lead role for TCAPP in Egypt. The initial meetings under the project resulted in the selection of four candidate technology areas—subject to the endorsement of Egypt’s National Committee on Climate Change—which will be the focus of the project’s technology transfer activities:
• Industrial energy efficiency measures and fuel switching to natural gas;
• Lighting efficiency technologies and renewable-powered lighting in semi-remote applications;
• Renewable energy applications in rural areas; and
• Small-scale cogeneration applications.

Commodity Import Program. The Commodity Import Program (CIP), instituted in 1975 in conjunction with the start-up of U.S. economic assistance to Egypt, has accounted for $5.4 billion or about one-fourth of all assistance provided to Egypt. Today, the U.S. Congress earmarks $250 million every year for the financing of commodities through the CIP, the only USAID program of its kind.

Initially, the CIP financed public sector purchases of U.S.-manufactured products to meet critical import needs of the Egyptian Government. Later, when USAID/Egypt’s country strategy focused greater attention on the promotion of private sector participation in the economy, some CIP resources was expanded to support private sector enterprises as well. In recent years, all funds earmarked under the CIP are directed to support the private sector through the Private Sector Commodity Import Program (PRCIP). So far, about $2 billion have been spent under PRCIP.

PRCIP funds are accessible through over 30 participating Egyptian commercial banks for short and
medium-term trade and investment financing for purchases of equipment and materials from the United States. Interest-free grace periods and special financing terms provided by PRCIP make possible an accelerated pace of private sector investment in Egypt. The importers’ loan repayments in local currency are deposited into a special Central Bank account and used by the Government of Egypt to finance development activities supported by USAID.

Under the present PRCIP, financing is available for transactions valued as low as $10,000, thereby
encouraging small or emerging private sector businesses to participate and take advantage of the financing provided. Preferential terms are now available to encourage investments in Upper Egypt and businesses that predominately export their products.

About 1,100 Egyptian private sector importers had used PRCIP resources by 1998 (USAID/Egypt 1998 Status Report). These transactions have involved 1,200 U.S. manufacturers and suppliers. Of the participating U.S. suppliers contacted during the recent program evaluation, 46 percent were introduced to the Egyptian marketplace through PRCIP.

Best Prospects: Environmental Equipment Procurement under the Private Sector Commodity Import Program

PRCIP has a special schedule for environmental equipment which lists all types of products procured under the program, as follows:

Monitoring equipment: conductivity meters, PH meters, water sampling kits, spectrometers, ambient air analyzers, stack monitoring systems, water flow meters, chromatographs, gas analyzers, and laboratory equipment.

Pollution control equipment: oil/water separators, water filters, filter presses, screens, cooling
towers, chemical injection systems, clarifiers, neutralization basins (for water pollution control); and
baghouses, scrubbers, electrostatic precipitators and air filters.

Renewable energy equipment: photovoltaic and solar-thermal systems, wind turbines, multifuel
boilers, biomass digesters, etc.

Source: Rules and Procedures for Utilization of Funds under PRCIP, General Circular No. 1, Egyptian Ministry of International Cooperation


Business Climate

India is one of the largest economies of the world, yet its per capita GDP is one of the lowest at just over $400. Despite heavy investment in the industrial sector, the Indian economy is still based on agriculture, which employs 70 percent of the country’s work force. Unemployment is very high—22.5 percent.

An economic reform program to move India from a planned to a market economy was initiated in 1991. The reforms have led to stronger economic growth, higher investment flows, and growth in trade. Gross domestic product growth was 5.5 percent in the Indian fiscal year 1998-1999, with moderate, 6.8 percent inflation. India’s modest current account deficit and its low level of short-term foreign debt enabled the country to withstand the pressure of the Asian economic and financial crisis with only a modest impact.

The government continues to be the largest player in India’s economy. A very limited public sector
disinvestment program seeks to gradually diminish this role. Although the government has recognized the need for privatization of its almost 250 public sector companies, political sensitivities regarding the
importance of the public sector and the issue of employment are slowing the process down. There is
also opposition to the reductions of subsidies to state-owned enterprises.

India’s new Export-Import Policy announced in April 1999 signifies a move in the direction of a more
liberal trade regime. India has recently reduced tariffs and removed quantitative restrictions on many items. Import tariff rates have been reduced from a peak rate of 300 percent in 1991 to a ceiling of 30 percent in the 1999/2000 budget. India is committed to a phased reduction in duty rates in line with its membership in the World Trade Organization.

The new industrial policy introduced in 1991 marked a major shift in India’s investment climate,
relaxing or eliminating many restrictions on investment and simplifying the investment approval process. The government has expanded the list of industries eligible for automatic approval of foreign investments and also raised the upper level of foreign investments from 51 to 100 percent in 1998. Although the current government led by the Bharatiya Janata Party (BJP) has taken a more
nationalistic stand and advocated a protectionist “swadeshi” (made in India) approach to the economy, it continues to encourage foreign investment in core infrastructure sectors. The BJP government was reelected with a large margin of votes in October 1999.

Whichever party is in power, India’s pluralistic politics and democracy make all major policy decisions open to a long stakeholder dialogue. Disagreements and bargaining between the federal and state governments are common, slowing down the adoption and implementation of government programs. Even though the general economic course is likely to remain intact under a new government, the change may significantly affect the business climate in India.

As part of its long-time confrontation with Pakistan, India conducted a series of nuclear tests in May 1998 which resulted in the imposition of economic sanctions by many countries, including the United States. Although the Indian Government is trying to downplay the negative effect of the sanctions (they were somewhat eased in October 1998), they are certainly taking a toll on the country’s economy as a whole (due to the reduced foreign assistance) and the U.S.-India trade and investment climate.

The United States continues to be India’s largest trade and investment partner. The potential for expanded trade and investment is enormous but dependent on the future of Indian economic reforms. Under a bilateral trade agreement signed in January 2000, India has agreed to lift more than 1,400 specific trade restrictions for U.S. products by April 2001. However, India is not a member
of the Paris Convention on intellectual property protection and does not have a bilateral patent agreement with the United States, which hampers U.S. investment in India.

Major U.S. Assistance-Driven Market Opportunities and Trends

India is a major recipient of U.S. foreign assistance. The U.S. Agency for International Development’s India Mission (USAID/India) will provide $28.7 million worth of development assistance in FY 2000. Of this amount, $10 million will be allocated to energy and environmental programs 4 . Due to the existing U.S. sanctions on India, foreign assistance is limited to activities that reduce the threat of global climate change or address humanitarian needs. This limitation has decreased the level of U.S. Government-funded activities in other environmental areas, such as wastewater treatment and solid and hazardous waste management. This section describes the recent and ongoing U.S. bilateral environmental assistance programs that are most relevant in terms of generating equipment export
opportunities for U.S. companies.

Energy Efficiency and Climate Change Mitigation. Climate change is an increasingly important issue in
U.S.-India bilateral relations. The U.S. Government is providing technical assistance and technology in order to encourage India’s participation in a global effort to reduce greenhouse gas emissions. This assistance in generating substantial opportunities for U.S. companies in energy efficiency, renewable energy, and clean coal technologies.

USAID and the U.S. Department of Energy are collaborating on a series of activities under the $19
million Greenhouse Gas Environmental Pollution Prevention Project (GEP, 1995-2002). This major
assistance program consists of activities to increase efficiency in coal-fired power plants, promote
cogeneration in the sugar industry, encourage energy efficiency and demand-side management, promote climate change awareness, and build capacity within key Indian institutions for participating in future climate change programs.

In an effort to increase efficiency of coal-fired power plants, USAID/India provides technical assistance and training to the National Thermal Power Corporation (NTPC), whose 17 plants generate 25 percent of India’s electric power. Under this program, USAID funded training and technical assistance activities at the Dadri power plant of NTPC. The installation of efficient coal generation technologies has led to a 2.5 percent overall efficiency improvement since March 1997. Encouraged by these results, NTPC decided to expand the program to all of its power plants and invest $2.5 million in 1998 alone in clean coal technologies imported from the United States. Due to USAID’s technical assistance, NTPC and another private utility are now funding a detailed feasibility study on a potential investment in these technologies for all their new power plants. USAID has also supported the establishment of the Center for Power Efficiency and Environment Protection (CENPEEP) as a national center for providing technical leadership and advice to the power sector.

Through the Bagasse Cogeneration Project under GEP, USAID has helped open the market for heat and power cogeneration in India. The program supported policy studies that have led to appropriate government regulations and tariffs for cogenerated power. In addition, the program helped design direct incentives for investments in bagasse (waste from sugar cane crushing) cogeneration projects. To date, USAID has supported three private firms to develop and construct sugar cane cogeneration facilities, and several additional projects are under way. Almost 300 MW of installed cogeneration capacity, as well as the potential investment in an additional 200 MW in cogeneration facilities, in
India can be tied to USAID’s assistance. Nine sugar mills will set up bagasse cogeneration units to supply power to the area grid. Of these nine sugar cogeneration facilities, four were commissioned in 1998.

The Climate Change Outreach and Awareness Activity (1998-2000), which is complementary to GEP, seeks to increase the level of awareness, understanding, and institutional capacity within key Indian institutions and sectors on the issue of global climate change. A Climate Change Information Center that provides outreach and assistance to Indian industry on climate change policies and greenhouse gas (GHG) mitigation project development was established in cooperation with the Confederation of Indian Industries (CII). A second initiative under this activity, an ongoing Indo-U.S. Business Dialogue on Global Climate Change, is providing an opportunity for leading Indian and U.S. businesses to share views and experiences on climate change mitigation actions, demonstrate energy-efficient technologies, and forge partnerships among business leaders interested in joint climate change projects associated with the future Clean Development Mechanism.

Best Prospects: Energy Efficiency/Renewables

Clean coal technologies (coal washing, fluidized bed combustion), power transmission and distribution improvements, renewable energy technologies, and industrial cogeneration.

The $22 million Energy Management Consultation and Training Project (EMCAT), initiated in 1992 and scheduled for completion in 2000, helps the Government of India improve the management of energy supply and end-use.

EMCAT has two components. The first one, the India Private Power Initiative (IPPI), supports
regulatory reform, restructuring, and privatization of India’s power sector. These activities help create markets for more efficient power generation technologies. Currently, USAID is assisting in regulatory reform and restructuring efforts in the state of Haryana and is pursuing opportunities for leveraging a $600 million World Bank 10-year loan program that is supporting the restructuring of Haryana’s ailing power sector over the next eight to ten years.

The second component, the Energy Efficiency and Demand-Side Management Program, has been promoting the demand-side management (DSM) approach for power utilities. The program helped the Ahmedabad Electricity Company (AEC), a private utility in the state of Gujarat, design an effective DSM program. A number of pilot DSM projects have been initiated by AEC in the industrial and residential sectors. USAID also provided technical assistance on DSM to utilities in the states of Haryana and Tamil Nadu. In Tamil Nadu, this assistance has led to energy efficiency projects worth about $30 million. USAID also supported the design and adoption of an energy efficiency label by the Bureau of Indian Standards that will increase demand for energy-efficient consumer appliances and electronic equipment.

Several other USAID initiatives help create opportunities for U.S. vendors of energy efficiency and
clean energy equipment. The Renewable Energy Project Support Office (REPSO) funded by USAID’s Global Bureau provides technical and financial assistance to identify and evaluate viable renewable energy projects. The seven-year project (1995-2002) has provided domestic lighting for nearly 2,500 rural homes using solar photovoltaic technology and accelerated the commercialization of these lighting systems. The program has also fostered commercial sales of photovoltaic irrigation water pumping systems in the state of Tamil Nadu.

The USAID-funded Sustainable Cities Initiative (SCI) in Ahmedabad (1998-2000) has provided technical assistance to support an energy management program at the local power utility. USAID/India is currently funding the expansion of this activity in two other Indian cities, Chennai and Pune. In Chennai, USAID is helping the state utility, the Tamil Nadu Electricity Board, to implement a DSM pilot project. In Pune, the team is working with the Pune Municipal Corporation to launch a water pumping efficiency project. SCI is also implementing a small technical assistance project to help the Vadodara Municipal Corporation in the city of Vadodara to improve its pumping efficiency programs.

Under the global Energy Partnership Program, USAID, in cooperation with the United States Energy Association (USEA), matches Indian State Electricity Boards and newly formed State Electricity Regulatory Commissions (SERCs) with U.S. utilities and regulatory commissions to engage in cooperative activities. The program has established eight partnerships in the country, three of which are regulatory partnerships that complement USAID/India’s regulatory reform activities.

To promote climate change mitigation in the transportation sector, USAID is funding the Electric
Vehicles Program to leverage public and private investments in electric vehicles. The two studies funded under this activity, “Electric Vehicle Investment Opportunities in India” and “Electric Vehicle Alternatives and a Directory of U.S. Electric Vehicle Industry,” have helped U.S. and Indian industries explore business partnership opportunities. For example, USAID assistance helped Amerigon Inc., of California and the Maini Group of companies in Bangalore to establish a joint venture company, REVA Electric Car Company, to manufacture electric cars in India.

USAID’s Global Bureau and USAID/India have also launched the India Zero Emissions Transportation (IZET) demonstration program for electric two and three-wheelers in collaboration with Bajaj Auto Ltd. in Pune and New Generation Motors of Ashburn, Virginia. The Tricon Restaurants (Pizza Hut, Delhi) and Welcome Group Hotels (Mughal Sheraton, Agra) are other partners in IZET.

Technology Exports under the Energy Partnership Programs

As a result of a partnership formed between the Karnartaka Electricity Board (KEB) of India and Duqesne Light of Pittsburgh, PA, KEB signed an $800,000 contract with Energy Line, a California and Illinois-based company specializing in automated distribution controls. Energy Line will supply KEB with equipment to improve distributional efficiency and reliability for KEB’s generating facility and
transmission equipment in Bangalore.

Source: USEA, 1999

Industrial Cleaner Technologies. USAID’s Clean Technologies Initiative (CTI, 1992-2002, $30 million) helps Indian industries adopt environmental management systems (EMSs) and enhances the capacity of industry to incorporate environmentally sound technologies and practices. CTI is promoting the adoption of the ISO 14001 voluntary EMS standard, which will serve as an incentive for participating industries to invest in clean and climate friendly technologies. CTI’s ISO 14001 program currently focuses on the automotive, pulp and paper, steel, and textiles sectors. With technical assistance from CTI, nine facilities in these sectors are expected to become ISO 14001 certified by December 1999. CTI’s EMS component will be expanded to other sectors based on first results. CTI is also promoting supply chain management, an approach to leverage the influence of large manufacturing companies to encourage improved environmental performance of their suppliers.

CTI contributes to the improved dissemination of information on cleaner technologies and best environmental management practices in India. It facilitates the interaction among private and public enterprises, centers of technology excellence, and financial institutions in order to accelerate the adoption of appropriate cleaner technologies, particularly those that help reduce GHG emissions. CTI also provides technical and financial assistance to enable cleaner technology investments by
Indian industry. For example, the project is working with the Steel Authority of India (SAIL), the country’s largest steel producer, to promote pollution prevention and energy efficiency.

The U.S.-Asia Environmental Partnership in India sponsors workshops, conferences, technology demonstrations and study tours to provide interested Indian stakeholders with information on the latest in environmental management strategies, technologies, and regulation. While these activities are intended to build capacity among interested Indian stakeholders for promoting a cleaner environment in India, they also create opportunities for exports. US-AEP assistance programs help participating U.S. companies build relationships with potential customers in Asia. Since 1993, US-AEP has catalyzed over $38 million in U.S. exports to India.

Water Supply and Sanitation. Under USAID’s Urban and Environmental Credit Program, a loan
guarantee of about $25 million helped launch South Asia’s first municipal bond for improvement of water, sewerage, and waste collection systems. This bond, for the city of Ahmedabad, has encouraged 13 other Indian cities to seek credit ratings for future bonds or other debt instruments to finance environmental infrastructure projects. USAID assistance also helped catalyze a $330 million, 30-year build-operate-transfer project on water supply and sewerage in the city of Tirupur, Tamil Nadu. The project will supply 185 million liters of drinking water per day and will build a 55 km-long pipeline and about 350 km of water distribution network, drinking water and wastewater treatment plants, pumping stations, and conveyance facilities. The U.S. engineering firm, Bechtel, is part of the consortium that was awarded this project.

Gaining a Foothold in the Indian Market: Sanitec

Sanitec International Holdings, a manufacturer of microwave medical waste treatment systems based in West Caldwell, NJ, participated in a series of US-AEP training workshops and study tours on hospital waste. The activities provided Indian hospital administrators and regulators with information about alternative hospital waste management technologies and strategies. The workshops contributed to new guidelines on hospital waste disinfection in India, which created a significant market opportunity for Sanitec.

Through its involvement in these activities, Sanitec was able to build lasting relationships with
potential customers in Baroda, Chennai, Calcutta, and Bangalore. The company is represented throughout India by AMEXP Waste Management of Mumbai and expects at least $20 million worth of bio-medical waste management projects in the country over the next two to three years. Just for West Bengal, Sanitec expects sales of about $5-7 million over the next one or two years.

Source: Sanitec International Holdings, 1999


Business Climate

The Mexican economy is completing an impressive recovery following a severe recession triggered by a sharp devaluation of its currency, the peso, at the end of 1994. The Mexican Government has implemented a series of economic and institutional reforms designed to keep the economy on a path of steady growth. Macroeconomic stabilization and floating exchange rates have cut inflation to 4-5 percent, and interest rates have also moderated substantially. Mexico’s gross domestic product (GDP) growth was 4.8 percent in 1998 and is projected at 2.8 percent in 1999. GDP per capita surpassed $4,000 in 1998 and continues to grow. Mexico’s political stability also has had a positive effect on its economic performance.

In June 1997, the Mexican Government released its economic policy framework and projections through the year 2000 as part of the National Program for Development Finance (PRONAFIDE). PRONAFIDE envisions an average annual GDP growth of 5 percent and the creation of one million formal sector jobs per year, supported by growing domestic savings, a high level of foreign direct investment, and responsible monetary and fiscal policy. The program was well received both domestically and internationally. The government also continues to pursue a policy of privatization and deregulation of the economy.

In 1998, Mexico was rated one of the three safest emerging markets for international investors. The 1993 foreign investment law has opened more areas of the economy to foreign ownership. It has also provided national treatment for most foreign investment, eliminated all performance requirements for foreign investment projects, and liberalized criteria for automatic approval of foreign investment proposals.

Mexico’s trade policy toward the United States has been influenced by the requirements of the North
American Free Trade Agreement (NAFTA) enacted in 1994. NAFTA continues to be a key factor in boosting Mexico’s imports and raising its overall level of economic activity, as well as spurring competitiveness and institutional reform. To comply with NAFTA requirements, Mexico has further lowered its tariffs on goods originating in the United States and Canada. Mexican tariffs on U.S. goods are now between zero and 10 percent of value. Eighty-five percent of U.S. goods now enter Mexico duty free. Additionally, Mexico has abolished its import licensing requirements for most U.S.-origin goods.

Mexico, with its 2,000 mile border with the United States, is a natural market for U.S. companies. U.S. exporters have a great competitive advantage in Mexico due to the political, economic, and cultural ties between the two countries. Underlying the strong U.S. position is also a genuine respect for and interest in U.S. products and companies. Mexico largely embraces U.S. standards, business practices, and consumer styles. Sales of U.S. goods and services to Mexico have been growing by over 20 percent annually over the past four years. In 1997, Mexico overtook Japan as the number two destination for U.S. exports, second only to Canada. In 1998, the United States accounted for 74 percent of Mexico’s imports.

Major U.S. Assistance-Driven Market Opportunities and Trends

The U.S. Agency for International Development (USAID) is the main U.S. Government agency engaged in environmental assistance in Mexico. EPA’s activities are mostly focused on the U.S.-Mexico border. In FY 2000, USAID’s Mexico Mission (USAID/Mexico) has allocated about $2.5 million for its environmental and energy programs, which comprise three major action areas:

• Demonstrating (through audits) cost efficiency of investment in proven energy efficiency, renewable energy, and industrial cleaner technologies;
• Attracting financing for cleaner technology investments; and
• Promoting government policies to encourage the adoption of such technologies.

USAID/Mexico’s programs involve little direct technology procurement, and their main impact on
technology transfer and market demand for U.S. equipment is in USAID’s substantial and continuous
support for relevant programs executed by Mexican Government agencies, public utilities, and other

Mexico is an active participant in the global Technology Cooperation Agreement Pilot Project
(TCAPP) sponsored by USAID, U.S. Department of Energy, and U.S. Environmental Protection Agency. TCAPP/Mexico has three priority technology transfer areas:

• Efficient lighting in public buildings;
• Solar water heating for residential and commercial uses; and
• Improved steam generation and distribution systems.

The principal U.S. Government activities in Mexico that promote energy efficiency, renewable energy, and industrial cleaner technologies are described in the following subsections.

Energy Efficiency. Between 1993 and 1998, USAID worked with the Mexican Energy Savings Trust Fund (FIDE) to promote energy-efficient industrial motors. The initial pilot activity included audits of 20 medium-sized industries and was the first industrial demand-side management (DSM) project in Mexico. FIDE worked to secure favorable financing for the implementation of the energy-efficient options identified in the audits, and it promoted those options to other industries. U.S. motor manufacturers and Mexican distributors also participated in the program. A result of these efforts was a large-scale national motors program, which constituted a major component of the $46.8 million DSM program launched in 1998 and jointly funded by FIDE, Mexico’s Federal Electric Commission
(CFE), and the Inter-American Development Bank. The program provides incentives for the manufacturing sector to purchase 155,000 energy-efficient electric motors and 6,000 efficient compressors.

Since 1995, USAID/Mexico has been working with the Mexican National Commission for Energy Conservation (CONAE) on a pilot project addressing energy efficiency in industrial steam generation and distribution systems. A total of 37 industrial facilities were audited under this activity and given comparative information about relevant equipment vendors. This initial work has led to the design with CONAE of additional programs in thermal energy efficiency, including pilot projects for steam system operation and maintenance, and boiler and steam technology upgrades, as well as the national Steam Generation and Distribution Systems Program. This program will also be supported by TCAPP/Mexico.

Currently, most of USAID/Mexico’s energy efficiency activities are carried out under the $4 million Resource Management Systems Initiative (RMSI, 1999-2001), which covers a wide range of technical assistance to FIDE, CONAE, and other agencies. Among other activities, USAID is supporting FIDE’s high efficiency label program (Sello FIDE) for energy-efficient equipment and appliances (air conditioners, refrigerators, etc.) that is modeled after U.S. EPA’s Energy Star program. USAID support includes analysis of potential markets for selected high-efficiency equipment in Mexico. As part of its environmental management program in Delegacion Tlalpan (a district of Mexico City), USAID also promotes lighting efficiency in the residential sector.

TCAPP/Mexico is planning activities to assist CONAE in the expansion of its Efficient Lighting Program (ELP). One of these actions is to conduct a pilot project that could involve energy service companies (ESCOs) in some of ELP’s sites. There are many U.S. and Mexican companies interested in pursuing ESCO work in Mexico, though ESCO presence is not strong in the country at this time.

In addition, under the Policy and Regulatory Support in the Electric Sector and Support for Clean Technologies Deployment initiative (preceded by the Energy Technology and Innovation Project), USAID/Mexico and USAID’s Global Environment Center are working together to:

• Develop updated and comprehensive information resources to facilitate investment in new, cleaner energy generation technologies;
• Conduct studies and support the development of policies and programs to promote the emergence of competitive, restructured energy markets;
• Conduct demonstration pilot projects to promote dissemination of clean energy technologies in the power and industrial sectors, and promote U.S. exports (one such technology is Reduced Emissions and Advanced Combustion Hardware, REACH—a technology for flame atomization in combustion systems for thermal power plants); and
• Conduct capacity building and training activities to disseminate technological and management

Under this initiative, USAID is working with CFE and PEMEX, Mexican National Petroleum Company.

USAID/Mexico’s new program, Identification of New Energy-Efficient Technologies, is helping FIDE launch an initiative to broaden the range of energy-efficient technologies supported by its various programs. This effort will include development of a methodology for identification, evaluation, and cataloging of new, almost exclusively U.S.-manufactured, energy-efficient technologies by FIDE. USAID will develop recommendations for integration of these technologies into existing or new FIDE programs based on adaptation of similar activities undertaken by U.S. utilities, and provide ongoing support for their implementation.

Renewable Energy. USAID/Mexico’s Renewable Energy Program (1993-2006) has installed approximately 350 photovoltaic systems in 12 Mexican states, providing about 250 kW of electricity. The program has worked with more than 40 U.S. and Mexican manufacturers and suppliers of renewable energy technologies. Through this program, USAID has also provided training for more than 1,600 engineers, equipment distributors, and decision-makers in renewable energy project implementation. This project will be reinforced by the Mexican Shared Risk Trust Fund’s $9 million renewable energy initiative supported by World Bank and Global Environment Facility (GEF) funding for about 3,000 renewable energy systems to be installed over five years nationwide. Almost all the equipment will be imported from the United States.

TCAPP/Mexico is going to support CONAE in developing a Solar Water Heating Program. TCAPP will develop a proposal, with World Bank support, for a large-scale program for the use of solar water heaters in the residential and commercial sectors in the Metropolitan Zone of the Valley of Mexico in order to reduce the use of fossil fuels and related emissions. TCAPP will also develop a set of voluntary standards for solar water heating systems, including their installation and maintenance procedures, and help secure financing for the program. To help promote U.S. solar technologies in Mexico, TCAPP will assist in the preparation of the Solar Millennium 2000 Forum in September 2000 in Mexico City. The forum is designed to attract to Mexico a broad range of renewable energy suppliers and investors.

Best Prospects: Energy Efficiency/Renewables

Advanced natural gas combustion technologies, renewable energy technologies (photovoltaics, solar water heaters), energy-efficient industrial motors, cogeneration, industrial process controls, lighting equipment.

Industrial Cleaner Technologies. Efforts to promote industrial cleaner production in Mexico were launched by the Environmental Pollution Prevention Project (EP3), USAID’s five-year global program that offered technical, policy, and training/information support to facilitate the adoption of pollution prevention approaches and technologies. EP3/Mexico (1996-1998) worked in close collaboration with the Mexican Center for Cleaner Production (Centro Mexicano para la Producción Más Limpia, CMP+L), which was established in January 1996 by the United Nations Industrial Development Organization (UNIDO) under its National Cleaner Production Program. This close collaboration between UNIDO and USAID was the first of its kind, and it proved to be an effective way to leverage the experience and resources of the two donors’ programs to promote cleaner production in Mexico (both USAID and UNIDO continue to fund CMP+L).

EP3/Mexico focused its efforts on the electroplating, chemical, and foundry sectors. EP3 and CMP+L experts conducted pollution prevention and energy efficiency audits at six small and medium-sized electroplating facilities and seven foundries, mostly in the Mexico City area. In the chemical sector, EP3 worked with Mexico’s National Chemical Industry Association to support its Responsible Care Program by assisting participating plants in the identification, evaluation, and implementation of cleaner production opportunities.

The Sustainable Cities Initiative in Monterrey, implemented by USAID’s global Energy Efficiency
Project and supported by EP3, provided technical assistance in several industrial sectors (meat processing, inorganic chemicals, foundry, electronics assembly, and glass manufacturing) to create demand for energy efficiency and pollution prevention technologies and services.

Cleaner Technology Demonstration Project

EP3 selected one of the plants that participated in the chemical sector activity, FARMEX pharmaceutical company in the city of Queretaro, to demonstrate the effectiveness of a particular cleaner technology. This technology demonstration was sponsored by U.S. EPA’s U.S. TIES project. EP3 procured from Fisher Rosemount and installed a technology that controls the feed rates of liquid bromine in the production process. With a payback period of only 2.5 months, this technology generated annual savings of over $1.6 million for the plant, making it very attractive for replication at other similar facilities in Mexico.

Source: EP3/Mexico: Clean Technology Demonstration
Project. Final Report, 1998

USAID’s industrial cleaner production activities in Mexico are continuing under RMSI, targeting small and medium-sized industries in Mexico City. In addition, USAID will work with CMP+L to provide technical support to Mexico’s sugar cane industry, integrating pollution prevention and energy efficiency audits with training, business exchanges, and technology demonstrations.

Water Supply and Sanitation. The U.S. Environmental Protection Agency (EPA), in cooperation with the North American Development Bank (NADBank) and the Border Environment Cooperation Commission (BECC), has made substantial investments in water supply and wastewater treatment infrastructure projects along the U.S.- Mexico border. EPA is represented on both the NADBank and the Border Commission’s board of directors and is the primary source of construction grants for the projects.

EPA grants are used to supplement funding for projects which cannot be completely financed by NADBank, state or local governments, or the private sector. The United States expects to provide $700 million in federal grants for construction over a seven-to-ten year period starting in fiscal year (FY) 1995; Mexico also provides significant grants.

To begin meeting the United States’ commitment, the U.S. Congress appropriated funds totaling $525 million for FY 1995 through 2000 to EPA for border drinking water and wastewater infrastructure funding: $100 million each year for FY 1995-FY 1998, $75 million in FY 1998, $50 million in 1999, and $100 million for 2000. A $170 million cooperative agreement between NADBank and EPA allows the use of NADBank as an agent to administer border grant funds, for which NADBank established its Border Environmental Infrastructure Fund, or BEIF.

Best Prospects: Water and Sanitation

Water supply and distribution systems, wastewater collection and treatment systems, pumps,
filtration equipment, PVC pipes, chlorinators, water meters.

There are now close to 20 projects under construction or completed along the border, including the Tijuana-South Bay International Wastewater Treatment Plant and wastewater treatment projects in Mexicali, Nogales, and other border cities.

The Philippines

Business Climate

Since 1992, the Philippines has embarked on a series of political and economic reforms that have resulted in growing interest from potential foreign investors and renewed investor confidence domestically. The Ramos administration (1992-1998) succeeded in liberalizing the trade, foreign exchange, and investment regimes; improving the country’s long-term fiscal stability; and implementing other market-based reforms. President Estrada, elected in May 1998, has expressed a commitment to continue the market-based reforms.

The Philippines was heavily affected by the Asian financial crisis of 1997, which caused the depreciation of the Philippine peso by 35 percent against the U.S. dollar. However, the prospects for resuming long-term economic growth are good, provided structural and market-based reforms continue. One positive indicator is that the International Monetary Fund pulled out of the Philippines in 1998 considering the country economically stable. In 1999, GDP growth is projected at 1.8-2.5 percent. Inflation has stabilized at 8-9 percent per year.

Prices of goods and services in the Philippines are generally determined by free market forces, with the exception of basic public utilities (transportation, water, and electricity) which are subject to government control. Limited financial resources have forced the government to increasingly turn to the private sector. The Ramos administration privatized a wide range of public sector-controlled firms, including water utilities. President Estrada has repeatedly vowed to expand his predecessor’s deregulation and liberalization policies, although vested interests continue to resist further privatization.

Since 1996, the Philippine Government has encouraged the build-operate-transfer (BOT) scheme as a means to attract private investment to carry out important infrastructure projects. The BOT program has created a more confident and optimistic business environment in the Philippines. As of March 1999, there were 83 BOT projects in the country. However, BOT contracts can be awarded only to companies that are at least 60 percent Filipino owned.

The Philippines is a founding member of the World Trade Organization (WTO). The Philippines’ average import tariff is expected to be lowered to 9 percent in 1999 (from almost 28 percent in 1990) and to a uniform 5 percent in 2004. As a member of the Asia Pacific Economic Cooperation (APEC) forum, the Philippines has committed to participate in the move toward the establishment of free trade in the region. APEC members have until the year 2020 to eliminate their trade barriers.

While progress in investment liberalization has been substantial, important barriers to foreign entry still remain. The Foreign Investment Act of 1991 limits foreign investment in a variety of ways. It imposes a 40 percent foreign ownership ceiling in certain sectors for reasons of national security, defense, public health, etc. Land ownership by foreign entities is also limited. However, the Philippine government recognizes the essential role that foreign investment plays in the development of the Philippine infrastructure and is continually working on liberalizing investment barriers. The Estrada administration has proposed to raise the 40 percent ceiling presently limiting foreign equity participation in joint ventures, a common method of investment in the Philippines.

Over the last decade, historically strong U.S.-Philippine relations have further improved and broadened, focusing more prominently on economic and commercial ties while maintaining security cooperation, despite recent closures of U.S. military bases in the Philippines. The United States is the Philippines’ largest foreign investor with an estimated 29.4 percent share of the country’s foreign direct investment in 1997. The United States accounted for 23 percent of Philippine imports in 1998.

Major U.S. Assistance-Driven Market Opportunities and Trends

The estimated FY 2000 environmental budget for the Philippines Mission of the U.S. Agency for International Development (USAID/Philippines) is $6 million. This amount is roughly 20 percent of the $28 million USAID/Philippines development assistance budget. U.S. Government programs foster increased demand for environmental and energy goods and services in the Philippines by building capacity for improved environmental protection, increasing awareness about energy efficiency and clean production, and facilitating investments in environmental and energy-efficient technologies.

U.S. Government environmental assistance activities over the past five years have focused on several key objectives:

• Reducing emissions of greenhouse gases (GHG) through energy efficiency and clean fuels;
• Improving water supply and sanitation infrastructure; and
• Fostering improved industrial environmental management.

Climate Change Mitigation: Energy Efficiency and Renewable Energy. As part of a global strategy to encourage developing countries to set targets for reducing greenhouse gas emissions, addressing climate change is a major objective of U.S. Government assistance in the Philippines. Relevant U.S. Government programs engage 12 Philippine Government agencies, numerous nongovernmental organizations, and the private sector. These activities promote GHG emissions reductions by developing a favorable regulatory framework, increasing the availability of financing from public and private sector institutions, building capacity within host-country organizations, and promoting the transfer of U.S. technologies and expertise. The result is significant opportunities for U.S. vendors of energy-efficient equipment in energy supply, manufacturing, and commercial and residential sectors, as well as renewable energy technologies. USAID’s technical assistance is also providing the basis for other multilateral (e.g., the World Bank and the Asian Development Bank) and bilateral (e.g., Japan) donors to extend loans for energy improvements and climate change mitigation in the Philippines.

In September 1996, USAID and the Government of the Philippines signed a five-year program of cooperation, the Strategic Objective Agreement for the Mitigation of Greenhouse Gases in the Philippines. Under this agreement, USAID provides support for a range of activities that reduce power sector GHG emissions through the Philippines Climate Change Mitigation Program (PCCMP). This $8.9 million, three-year (1998-2001) program provides technical assistance to promote clean fuel power generation systems, improve transmission and distribution systems, foster energy efficiency in the industrial and commercial sectors, and encourage regulatory reform in the Philippine power sector.

The clean fuels component of this activity is leading to an improved policy and regulatory climate to encourage investment in advanced natural gas combustion technologies (combined cycle and fuel cells) and renewables. The program has produced a market needs analysis for fuel cells in the Philippines. Based on this analysis, Toshiba, who purchases its fuel cells from the United States, has already proposed to purchase and donate six 200 kW fuel cells (1,200 kW total) as a demonstration project in the Philippines.

Under the regulatory reform component, USAID is providing ongoing support for the development of new legislation for power sector restructuring and privatization to increase demand for energy-efficient equipment and services, particularly among owners of major industries, commercial buildings (e.g., shopping malls), and major hotels. USAID has provided technical assistance for the development of the Omnibus Electric Power Industry Bill to promote these objectives. Although the legislation failed to pass in 1999, it is expected that major pieces of the legislation will be submitted again in the future.

Several other USAID initiatives are promoting renewable energy and energy efficiency. USAID supports a Renewable Energy Project Support Office (REPSO) in the Philippines to provide the technical and financial assistance necessary to help identify and evaluate renewable energy projects.

REPSO/Philippines provides support to U.S. and Philippine firms working to develop renewable energy projects, manages a renewable energy capital investment fund, supports U.S. firms exploring rural energy ventures, helps local industry and local government to introduce photovoltaic systems, supports an ongoing government effort on wind resource mapping, provides guidance on renewable energy policy and regulations, and coordinates renewable energy conferences and workshops.

Under the Green Malls Project, USAID/Philippines is providing assistance to the Manila Electric Company (MERALCO) to implement a Green Buildings program. In partnership with the International Institute for Energy Conservation, MERALCO has introduced a voluntary program to Philippine managers of shopping malls to implement energy efficiency measures and investments. A demonstration site to showcase Green Buildings is located in a high-profile shopping mall in the Metro Manila area, and more malls will be selected for similar activities in the near future.

The U.S. Department of Energy (DOE) is an important partner in the U.S. Government’s GHG mitigation efforts in the Philippines. DOE serves as source of technical expertise and information in all areas relevant to the energy sector and draws upon its large network of DOE offices and laboratories. The Philippine Sustainable Energy Development Program (1999-2001) is a joint effort of USAID and DOE. The program is supporting senior U.S. advisors who work with the Philippine Department of Energy on issues of clean coal technology, power sector restructuring, natural gas development, energy information systems, renewables, and energy planning and pricing.

Creating Renewable Energy Opportunities: REPSO/Philippines

Silk Roads, Ltd. (SRL) of San Francisco conducted a feasibility study, financed by REPSO/Philippines, on biogas-based energy systems using livestock manure and municipal kitchen and yard wastes. As a result, Silk Roads, Ltd. formed Philippine Bio-Sciences and Engineering Co., Ltd. (PhilBIO), a Filipino joint venture corporation, to provide design and engineering services for waste-to-energy facilities in the agricultural and livestock, municipal solid waste, and food and beverage processing sectors.

Silk Roads signed project contracts with Rocky Farms, a livestock operation in the Laguna de Bay area of Rizal. In addition, 8-9 other projects have been identified with good potential for development.

Source: Winrock International, 1999.

DOE’s Lawrence Berkeley National Laboratory (LBNL), with funding from the USAID Global Bureau and USAID/Philippines, implemented the Philippine Motor and Building Standards Enhancement Project (1997-1999). Under this program, LBNL provided technical assistance to develop a motor testing program, an energy labeling system, and standards for new motors. As a result of this program, the Philippine Government is moving toward instituting an energy efficiency standard for new motors that would increase demand for high-end, efficient motors for industrial and commercial applications.

Led by DOE’s National Renewable Energy Laboratory (NREL), Technology Cooperation Agreement Pilot Project (TCAPP) activities in the Philippines started in November 1997. Three priority areas are addressed by this project:
• Renewable energy for rural development (photovoltaics, wind energy);
• Energy efficiency and demand-side management (energy-efficient boilers, appliances, and
equipment); and
• Cross-cutting technology support and policy development for renewable energy and energy

To date, the Philippines TCAPP team, with NREL technical assistance, has developed the “Fast Track Action Recommendations” to identify a set of legislative and policy actions that the Philippine Department of Energy could take to stimulate the country’s renewable energy market. TCAPP/Philippines is planning to select priority investment actions that will remain focused on renewable energy for rural economic development.

NREL also provided assistance for renewable energy development through the Renewables for Sustainable Village Power initiative. As part of this project, NREL produced a sophisticated wind resource map for the Philippines. The project delineates the most favorable wind resource areas in order to facilitate investment in wind energy generating capacity.

The State Environmental Initiative (SEI) of the United States-Asia Environmental Partnership (US-AEP) is funding the Hawaii-Philippines Cooperation Project on Energy Efficiency and Renewable Energy. Through this activity, U.S. DOE, USAID, and the state of Hawaii are cooperating with the Philippines to promote environmentally sound energy efficiency and renewable energy policies and practices. A series of workshops and training events designed by the project partners; the state of Hawaii’s Department of Business, Economic Development and Tourism; and the Philippine Department of Energy (DOE), are promoting the use of advanced energy efficiency technologies, building codes and standards, demand-side management programs, and the expansion of a Filipino energy service company (ESCO) industry.

Best Prospects: Energy Efficiency/Renewables

Fuel-switching retrofits (from coal and oil to natural gas), advanced natural gas combustion technologies, heat rate improvements in power generation, renewable energy technologies, energy-efficient motors.

A second SEI project, the California-Philippines Distributed Power Generation for Agro- Energy Project, was initiated in 1999. This project seeks to accelerate the adoption of clean energy technologies for distributed energy generation in the Palawan Province and encourage the use of clean energy throughout the Philippines. The project will develop policy incentives to encourage adoption of clean energy adaptations, assist in the development strategies to finance clean energy projects, and provide technology demonstrations.

U.S. Environmental Protection Agency (EPA) is conducting the Landfill Gas Utilization Project to demonstrate methane recovery technologies for landfill gas cogeneration projects. To date, the project has carried out a feasibility study at select landfills in the Philippines to identify good candidates for project development. EPA is working with country representatives to select and facilitate a demonstration project at a landfill site.

Industrial Environmental Management. USAID’s four-year, $8.4 million Industrial Initiative for a Sustainable Environment (IISE) launched in FY 1999 promotes the adoption of environmental management systems and cleaner production practices among Philippine industries, especially those located along, or affecting, coastal areas in the Visayas and Mindanao. The initiative will engage a wide range of stakeholders to promote sound industrial environmental management practices, foster investment in clean technology, and integrate environmental regulatory activities at the local, provincial, and national levels. Additionally, the initiative seeks to empower local stakeholders to influence the environmental performance of local industry.

IISE is planning to provide technical assistance to about 400 plants within selected industrial sectors located in eight communities, and help 200 industrial facilities get certified to ISO 14001 or other applicable voluntary industrial standards. The program will work with Philippine and international financial institutions to encourage them to provide financing for cleaner production and EMS-related improvements by Philippine industries.

Since 1999, US-AEP’s Clean Technology and Environmental Management (CTEM) program has been working with the Philippines Industrial Technology Development Institute to establish an environmental technology verification program similar to the one conducted by the EPA. This program will help ensure that environmental technologies proposed for use in the Philippines meet specific performance requirements.

Water Supply. The USAID-funded Build-Operate-Transfer (BOT) Center facilitates BOT projects in the Philippines by providing information to potential investors interested in Philippine water sector projects. Two projects are currently being marketed by the BOT Center:

• The $19 million Bulacan Central Water Supply project to construct a centralized system that will serve 432,000 area residents and industries, and

• The Puerto Princesa Water Supply Improvement Project, a $10 million rehabilitation effort to improve the system that currently serves Puerto Princesa City.

Best Prospects: Water Supply

Water supply and distribution systems, pumps, disinfection and filtration equipment, and water
recycling technologies.

These and other BOT projects represent potential opportunities for U.S. water engineering firms and manufacturers of water supply equipment. To help U.S. companies take advantage of these opportunities, the U.S. Trade and Development Agency (TDA) is currently funding a $575,000 feasibility study for the Puerto Princesa Treated Bulk Water Supply and System Expansion Project and Metro Kidapawan Water District Concession. Recently, TDA also financed a $185,000 study of development and privatization of a bulk water supply and wastewater treatment system in Cavite.


Business Climate

Ukraine is a country of over 50 million people with substantial human, technical, and natural resources. Situated at the crossroads of Central Europe, Russia, Central Asia, and the Middle East, it holds great potential for becoming an important new market for U.S. trade and investment. Ukraine’s ultimate trade and investment potential depends on the success of its attempts to accelerate movement toward a market economy and develop a more conducive business environment.

Ukraine’s current economic reform policy was introduced by President Kuchma in 1994. So far, the government has had its greatest success in achieving macroeconomic stability (somewhat undermined by the August 1998 Russian financial crisis). Inflation, for example, was reduced from over 400 percent in 1994 to about 10 percent in 1997 (mainly due to Russia’s economic turmoil, the inflation rate rose again to 20 percent in 1998-1999). The country’s persistent decline in industrial output since 1991 has slowed in recent years. GDP fell by 1.7 percent in 1998 and is projected to have suffered another small drop in 1999 (U.S. Department of State, 1999).

Despite some progress in economic reform, Ukraine has not pursued the tough policy measures necessary to spur economic growth. The country’s leadership has demonstrated either a lack of commitment to reform or failure to obtain popular support for the reform policies. In addition, proposed positive changes are often blocked by political stalemates between the government and the parliament. The most pressing economic problems currently facing Ukraine are of a structural nature: slow privatization, little industrial restructuring, an unwieldy governmental apparatus, a narrow tax base, over-regulation, and widespread corruption. In 1998, the government proposed an extensive program of tax, regulatory, and budget reforms to address many of these problems, but its implementation, which largely depends on the availability of new International Monetary Fund loans, remains uncertain. Nevertheless, there are reasons to hope that President Kuchma’s reelection for a second five-year term in November 1999 will lead to the continuation and deepening of the reform process.

The Ukrainian Government maintains that it actively seeks foreign investment, but so far it has failed to create an attractive investment climate, in spite of recent numerous but uncoordinated steps in that direction. Investors have had difficulties in reaching agreements with individual enterprises, in part due to obstructions at the regional or local levels, problems with tax enforcement, and a lack of transparency in the legal system. As a result, since its independence in 1991, Ukraine has received a cumulative foreign investment of approximately $2.8 billion, among the lowest in the region (the United States accounts for 19 percent of the total). U.S. businesses could play a major role in providing capital investment and the know-how required to modernize and restructure Ukraine’s economy, but they must be prepared to deal with this very challenging business environment.

Efforts that Ukraine is taking to adapt its trade regime to conform with the WTO’s entry requirements are expected to have a positive effect for U.S. investors and exporters. However, the current combination of a value-added tax (20 percent), import taxes (ranging from 5 to 200 percent), and excise taxes (10-300 percent) presents a major obstacle to trade with Ukraine (U.S. Department of State, 1999).

The United States views Ukraine as its strategic partner and provides it with large amounts of development assistance ($219 million planned for FY 2000, making the United States the single largest donor in Ukraine). This cooperation is coordinated by the U.S.-Ukraine Binational (Gore-Kuchma) Commission. Established in 1996, the commission focuses on four main areas: trade and investment, economic reform, foreign policy, and security issues. Both sides have been paying special attention to improving the foreign investment climate in Ukraine and used the forum as a vehicle for addressing specific business disputes and removing obstacles in the development of new business ventures.

Major U.S. Assistance-Driven Market Opportunities and Trends

Environmental and energy programs are a major part of U.S. bilateral assistance to Ukraine. In FY 2000, the environmental budget of the U.S. Agency for International Development’s Ukraine Mission (USAID/Ukraine) is almost $2 million, complemented by $6.2 million in energy programs, which have a strong energy efficiency component 10 . U.S. Government assistance seeks to create the necessary conditions and incentives for a greater private sector role in environmental technology transfer, increase the technological know-how and environmental management capabilities of municipalities, promote environmentally friendly policy and regulatory reforms, and facilitate environmental investment financing.

Over the past five years, USAID-funded programs in Ukraine focused on the following issues relevant to technology transfer:

• Developing a safer and more sustainable drinking water infrastructure;
• Promoting sound environmental management in the industrial sector;
• Improving energy efficiency of industrial enterprises through energy audits and adoption of low-cost/no-cost efficiency measures;
• Improving energy efficiency in the residential and commercial sectors within municipalities; and
• Promoting private sector involvement in energy efficiency improvements through demand-side
management programs and development of private Ukrainian energy service companies (ESCOs).

The order of priority of USAID programs in Ukraine is determined every year in a series of meetings between USAID officials and their Ukrainian counterparts. Such planning meetings are usually tied to sessions of the Gore-Kuchma Commission on bilateral aid. For example, FY 1997 activities concentrated on addressing air pollution problems in the Donetsk and Dnipro-petrovsk regions in the steel and chemical sectors. The FY 1998 program focused on municipal drinking water issues in western Ukraine. Capacity building for climate change mitigation is at the center of the FY 2000 environmental program.

The main institutional mechanism for U.S.-Ukraine environmental cooperation under the Gore-Kuchma Commission is the Ukraine Council to Promote Sustainable Development (UCPSD) and its Work Groups. The UCPSD and Work Group members include high-level Ukrainian Government officials and representatives of nongovernmental organizations (NGOs), the Ukrainian private sector, the U.S. Government, and other international donors.

The UCPSD and the Work Groups were established by USAID’s Environmental Policy and Technology (EPT) Project (1993-1998). Geographically, EPT covered all Newly Independent States, but its Ukraine programs amounted to $5 million. EPT provided technical assistance on a variety of environmental technology, management, and policy issues. Individual Work Groups coordinated pilot projects that were conducted in municipal water supply, pesticide management, industrial environmental management, energy efficiency, and other areas. The UCPSD served as a mechanism to bring the legal, policy, and institutional barriers identified during pilot project implementation to the attention of national level decision-makers.

The UCPSD also coordinates environmental activities of various multilateral and bilateral donor agencies in Ukraine. As part of this effort, the council promotes the use of U.S. technologies, initially procured and demonstrated using USAID funds, in follow-on projects, including programs funded by the World Bank and the European Bank for Reconstruction and Development (EBRD). The U.S. Commercial Attache is one of the Council members. The UCPSD supported a few trade missions to several regions of Ukraine (Kharkiv, Lviv, Ivano-Frankivsk, and Dnipropetrovsk) where information was provided on planned and ongoing USAID funded projects to the American business community. Practically all equipment suppliers under USAID contracts in Ukraine have met with the Commercial Attache to discuss potential future business and trade opportunities.

Energy Efficiency and Climate Change Mitigation. There are a number of opportunities for U.S. suppliers of energy efficient technologies as a result of U.S.-funded energy and environmental programs in Ukraine, which focus mostly on low-cost energy efficiency improvements in industry and municipal district heating.

The broadest set of industries was covered by the $2 million Industrial Energy Efficiency Project (1997-1998) implemented by Burns and Roe Enterprises, Inc. Rapid energy savings were achieved at 24 small and medium-sized enterprises by installing $1 million worth of U.S.-manufactured low-cost energy equipment (testers, combustion analyzers, steam traps, control systems, etc.) and improving energy management at select facilities in the metallurgical, chemical, food processing, building materials, and electronics industries. In addition, the project helped establish eight private energy service companies (ESCOs) that are expected to expand energy efficiency improvement projects to other facilities and industrial sectors. The new ESCOs were provided with U.S.-made audit equipment and instrumentation to help them get started.

UkrEsco, the largest Ukrainian private energy service company (25 employees) established with support from USAID and U.S. Department of Energy (DOE), has now received a $30 million loan from EBRD to finance industrial energy efficiency projects that are being identified with the assistance from the Pacific Northwest National Laboratory (PNNL). UkrEsco is managed by Bechtel, a U.S. company, with participation of Econoler International (Canada).

The $15 million Industrial Energy Efficiency Financing Initiative (otherwise known as the new Industrial Energy Efficiency Project) launched jointly by USAID and DOE and implemented by PNNL is designed to help the most promising Ukrainian industrial enterprises obtain financing for energy efficiency improvements from international financial institutions such as EBRD, The International Finance Corporation, Export-Import Bank of the United States, and the Overseas Private Investment Corporation.

With PNNL support, six large Ukrainian factories have approved comprehensive packages of recommendations (with the largest one worth $20 million), including installation of 30-45 megawatts of cogeneration capacity in one facility and a multimillion dollar furnace in another. To date, the plants have invested $1.2 million of their own funds in the recommended energy efficiency measures, demonstrating a long-term commitment of these companies to such improvements.

In district heating, two major technology transfer projects have been implemented with U.S. assistance in the cities of Kiev and Lviv. The Kiev Institutional Building Assessment Project (KIBA) on energy efficiency in public buildings was funded by USAID and implemented by technical experts from DOE in cooperation with Ukrainian counterparts. The team of experts conducted several feasibility studies on potential energy savings in the heating systems and carried out four demonstration projects in public schools. A similar project under the Municipal-Based Energy Management Program promoted private maintenance and management for commercial and residential buildings as a means to improve their heat efficiency. Both initiatives will be followed up by large multilateral loans: from the World Bank in Kiev and from EBRD in Lviv.

Capitalizing on USAID Procurement: Honeywell

Honeywell, Inc. supplied heat meters, pressure valves, and heat control systems for the pilot demonstrations under the Kiev Institutional Building Assessment Project.

In 1999, based on the results demonstrated in the pilot projects, the World Bank approved a $200 million loan for the Kiev District Heating Improvement Project (including $40 million for improvements in public buildings). Honeywell will be one of the primary equipment suppliers for the World Bank project. Similar upcoming World Bank district heating projects in Kharkiv ($173 million) and Sevastopol ($30 million) represent further business opportunities.

Source: PNNL, 1999.

Recently, a new dimension has been added to the U.S. Government’s environmental and energy sector assistance to Ukraine: support for climate change mitigation policies and technologies. USAID, DOE, and U.S. Environmental Protection Agency (EPA) are all participating in an effort to build the Ukrainian government’s capacity to implement a national climate change program, as well as promote the use of clean energy technologies that could be financed through emissions trading and joint implementation mechanisms under the 1997 Kyoto Protocol. The USAID Mission’s new $1.6 million Climate Change Initiative will generate a pipeline of potential climate change mitigation projects in Ukraine (involving primarily energy efficiency improvements) and will work with U.S. private investors to facilitate financing of these projects.

In cooperation with the Ukrainian Government and USAID, EPA is providing technical assistance in the Donetsk region of Ukraine to capture methane, a powerful greenhouse gas, from Ukrainian coal mines, thereby reducing its emissions to the atmosphere. Direct technology transfer has been achieved through a joint-venture partnership between Ukrainian and U.S. coal bed methane developers. For the first time in Ukraine,in August 1998 three companies were issued licenses to drill for coal bed methane. U.S. coal bed methane producers, ICMG, Inc., of Alabama and Texas-based CBM Energy, Ltd., are joint venture partners in two of these concessions.

Best Prospects

Clean coal technologies, energy-efficient industrial motors, process controls, cogeneration systems, lighting equipment.

The market for energy-efficient technologies is further enhanced by USAID/Ukraine’s support for the development of a financially viable, competitive power market, including regulatory development, privatization, and business training for the power sector, starting with distribution companies.

U.S. Trade and Development agency (TDA) is also playing an active role in promoting U.S. private sector presence in Ukraine’s energy efficiency and climate change mitigation market. Over the past five years, TDA has funded several feasibility studies in Ukraine in this area, some of which have led to the projects described in this section (see table 5).

The U.S. suppliers present in Ukraine’s energy-efficient equipment market include Rockwell Inter-national; GE-Harris; Honeywell, Inc.; AIDCO (a window manufacturer); and FMCS (a California-based heat metering manufacturer). All of them have established significant business operations in Ukraine with the help of U.S. bilateral assistance projects.

Industrial Cleaner Production. In 1997, the World Environment Center, with USAID funding, conducted waste minimization audits at ten chemical and steel manufacturing facilities in the cities of Donetsk and Dnipropetrovsk to promote low-cost process improvements generating environmental and financial benefits. The equipment procurement under this $1 million program included combustion analyzers, pH meters, steam traps, etc.

Under USAID’s Environmental Policy and Technology Project (EPT), a pilot program was conducted at the large Azovstal steel manufacturing plant in Mariupol to design process changes to the pigiron mixing operations to reduce the plant’s air emissions. EPT also promoted ISO 14001 environmental management systems at several industrial facilities in Donetsk. However, USAID’s initiatives in Ukraine’s industrial sector have generated limited demand for process control

Water Supply. The Lviv Urban Water Program, which was part of EPT, improved the water delivery system for over 300,000 of the city’s residents by upgrading the pumping facility, refurbishing wells, replacing leaking water distribution pipes, installing booster pumps for high-rise apartment complexes, and connecting meters to monitor water use and enable consumption-based billing. About 90 percent of the procured equipment (such as energy efficient pumps, variable speed drives, water well-drilling equipment, pipe cleaning machines, and water gate meters) was supplied by various U.S. manufacturers. The experiences of this pilot project have been disseminated to several other Ukrainian cities with similar water supply problems, which may lead to future market opportunities for U.S. companies.

Table 5
Relevant TDA-Funded Feasibility Studies in Ukraine

Subject of Study
TDA Funding
Conducted by
Conversion of the ZALK aluminum smelter to pre-bake technology$240,900Kaiser Aluminum and Chemical Corp.
Production in Ukraine and Russia of vinyl windows from U.S.components$250,000ACRO Extrusion Corp.
Conversion of a coal-fired power plant in Dnipropetrovsk to natural gas$400,000NRG and Black &Veatch
Upgrading the Kiev district heating system$626,000Joseph Technology
Energy conservation investments at three public facilities$400,000Honeywell, Inc.
Development of coal bed methane in the Donetsk region$600,000 International Coalbed (ICMG)Methane Group

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