Environmental Technologies Industries
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Chapter 1 - Introduction

According to Environmental Business International, Inc., the estimated market size for environmental
technologies and services in the year 2000 is expected to exceed $540 billion per year, with growth
rates ranging from 3-4 percent in industrialized countries to as high as 16 percent in some developing
countries. These figures indicate significant opportunities for the export of environmental technologies to developing countries. However, the process of establishing a presence and pursuing a winning marketing strategy is very difficult for many small and medium-sized environmental technology companies, even though they may have the best, most desirable products on the market.

U.S. foreign assistance can be an important tool for opening new markets in developing countries for
U.S. environmental technology firms. U.S. foreign assistance can create competitive advantages for U.S. firms in these difficult markets. U.S. companies interested in pursuing growing market opportunities overseas can benefit from many U.S. foreign environmental assistance programs as part of their marketing strategies in developing countries by understanding how such programs are designed and by identifying strategic opportunities emerging from country-based programs and projects.

The objectives of this report are to inform U.S. companies about the principal markets affected by U.S. bilateral environmental aid programs and to examine how U.S. exporters of such technologies can take advantage of the opportunities generated by U.S. Government environmental initiatives. This report is designed for U.S. environmental technology equipment suppliers and does not address environmental services and consulting. U.S. environmental services and consulting firms receive the lion’s share of contracts for procurement of services funded by the U.S. Agency for International Development (USAID). These firms are usually well-versed in the procedures for administering foreign aid and comfortable with this market.

U.S. Bilateral Environmental Assistance: Market Opportunities and Market Drivers

In fiscal year 2000, the United States is planning to spend over $300 million on environmental assistance around the world. This money is almost exclusively administered by USAID, with limited international activities carried out by the U.S. Environmental Protection Agency (EPA), the Department of Energy (DOE), and a few other federal government agencies.

In general, there are three types of activities under U.S. bilateral environmental assistance that create
opportunities for U.S. environmental technology suppliers: direct procurement, technology transfer, and various types of technical assistance. U.S.-sponsored environmental programs comprise a combination of one or more of these types of activities. Procurement. Direct commodity procurement involves equipment and supplies bought directly by a U.S. Government agency or through a contractor to support a bilateral aid program in a specific country. Although most of its funds are spent on technical assistance to developing countries, the USAID agency also procures U.S. environmental technologies and equipment to support its own programmatic activities. With the exception of Egypt, the overall volume of equipment procurement is small. While direct procurement does not represent a significant market in itself, it offers U.S. companies a chance to demonstrate their technologies in developing country markets and to learn more about technology needs in those countries. It also allows companies to develop strategies to link USAID’s program objectives in specific countries and their own marketing efforts.

Technology Transfer. Some U.S. bilateral environmental programs explicitly emphasize environmental “technology transfer,” a term about which there is some confusion. Under technical transfer programs, foreign governments or companies do not necessarily directly purchase U.S. equipment (although that may be the case). Rather, such programs provide potential technology end-users in the private and public sectors in developing countries with information about the benefits and advantages of U.S. environmental technologies and link these end-users with specific U.S. companies. Many technology transfer programs also provide training, technical, and financing support to companies in developing countries to help them install and operate innovative environmental technologies.

Technical Assistance. While procurement and technology transfer programs create sales opportunities, technical assistance programs condition markets to better accept environmental technologies. USAID (and, on a smaller scale, EPA) uses three basic approaches to environmental technical assistance in developing countries. Each of these approaches contributes to enhanced demand for environmental technologies in general and U.S.-made technologies in particular:

• Technical assistance to industry (by means of environmental audits, technology demonstrations,
and other similar tools) is designed to help local companies recognize the need for and benefits of environmentally cleaner technologies. Technical assistance helps build foreign buyers’ capacity to make decisions based on sound scientific and technical criteria. The emphasis on using cost-effective technological improvements can stimulate demand for these technologies in developing countries.

• Policy programs help host country governments develop policies and regulations that use economic and other incentives to encourage sound environmental management practices. Such support is not limited to environmental regulatory strengthening but also includes assistance in energy and water sector restructuring and privatization, which in turn creates demand for more efficient and environmentally friendly operations.

• Information dissemination and training on best environmental management practices and innovative technical solutions for environmental problems target a broad range of recipients, including governmental agencies, nongovernmental organizations, public and private utilities, industrial associations, private consultants, and other stakeholders. Local awareness and technical capacity building increase end-user receptiveness to advanced environmental technologies.

In the water sector, additional emphasis is placed on expanding access of the population in developing countries to sound water supply and sewerage infrastructure. USAID is increasingly relying on technical assistance and capacity building (rather than direct funding for water and wastewater infrastructure development) as the main tools to achieve its water-related objectives.

Figure 1
Opportunities Generated by U.S. Environmental Assistance


- chance of sale opportunity 100%
- small share of funding
- small number of opportunities
- chance of sale opportunity is less than 25%
- significant share of funding - wide range of opportunities (e.g., trade leads, trade missions, demonstration projects and grants)
- chance of sale opportunity is less than 10%
- large share of funding
- little direct support to U.S.technology suppliers

U.S. Foreign Assistance: Issues and Problems

Tied Aid. Executives of U.S. environmental exporting companies complain that many foreign
governments spend far more on the support of exports of their national companies to developing countries, placing U.S. firms at a distinct disadvantage in the global market. Tied aid is government-to-government assistance, including loans, grants, or concessional (subsidized) financing, that is tied to, or conditioned on, the purchase of goods or services from the donor country and/or a restricted number of countries. Many industrialized countries (Japan, France, Germany, etc.) use tied aid as a subsidy program to facilitate market entry and expansion for their private companies.

However, the U.S. policy is not to engage in an expensive export subsidy race but to negotiate with other countries of the Organization for Economic Cooperation and Development (OECD) to minimize the use of trade-distorting tied aid. Successive rounds of multilateral negotiations led by the U.S. Department of the Treasury and the Export-Import Bank of the United States (Ex-Im Bank) produced the Helsinki Package, an agreement that went into effect in 1992 and established rules prohibiting tied aid for projects that are commercially viable, i.e., capable of generating cash flows sufficient to repay standard commercial loans.

While the Helsinki Package agreement has largely eliminated tied aid for commercially viable project, the Ex-Im Bank has also created the Tied Aid Capital Projects Fund to match other countries’ tied aid offers for certain key projects in order to counter and preempt foreign donor governments’ efforts to use aid to gain long-term commercial advantages for their exporters.

Coordination of Institutional Support. The U.S. Government has taken a range of organizational steps to establish the groundwork for the coordination of several U.S. Government agencies (e.g., USAID, U.S. Department of Commerce, and U.S. Trade and Development Agency), which are engaged in efforts to help U.S. firms enter and succeed in developing country markets, and support industry representatives in developing export promotion strategies. Congressional actions have included, among other program authorizations, passage of the Export Enhancement Act of 1992 (EEA). EEA codified the Trade Promotion Coordinating Committee (TPCC) that was established by an executive order in 1990. The Environmental Trade Working Group (ETWG) is responsible for the Trade Promotion Coordinating Committee’s (TPCC) environmental export promotion agenda. The 1994 Jobs Through Trade Expansion Act mandated establishment of the Environmental Technologies Trade Advisory Committee (ETTAC) that includes a broad representation of U.S. private sector companies.

Most U.S. environmental technology companies are not familiar with U.S. foreign assistance programs that may be relevant to their products. Those few that are aware of the general nature of USAID activities, generally regard them as just a source of occasional procurement opportunities. The perspective on U.S. foreign aid as a facilitator for market penetration has not been fully exploited by the U.S. private sector. This report is intended as a first step in trying to change this situation.

Structure of the Report

This report is based on interviews with representatives of key U.S. Government agencies sponsoring
environmental programs overseas (particularly USAID, but also EPA and DOE), principal contractor companies, and U.S. environmental technology suppliers that have benefitted from USAID programs, as well as extensive research of relevant government information sources and project documentation. It is structured as follows:

Chapter 2 analyzes the key categories of market opportunities created by U.S. donor funding for
environmental projects (in energy efficiency and renewable energy, industrial cleaner production, and
water supply and sanitation). It describes relevant projects that have or are expected to open doors for U.S. suppliers in developing country markets.

Chapter 3 provides recommendations for U.S. businesses trying to develop successful market strategies in developing countries using the competitive advantage created by U.S.-sponsored environmental projects and relevant U.S. technology promotion programs. It also guides U.S. companies to relevant information and assistance resources.

Chapter 4 presents brief case studies of several developing countries that enjoy substantial U.S. donor assistance for environmental initiatives and represent promising markets for U.S. environmental technologies exports: Egypt, India, Mexico, the Philippines, and Ukraine. Each market profile describes the general business climate for U.S. companies and particular market opportunities and trends as they relate to U.S. bilateral assistance.

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