Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Taiwan Environmental Export Market Plan

Chapter 8 - Services Market

Introduction
The services industry has long been one of the toughest sectors for international companies to crack. Local companies have developed solid capabilities through technology transfers and through the increasing number of overseas-trained engineers returning home. The number of international companies in Taiwan is relatively small. Numerous consulting and engineering (C&E) companies, including Ecology & Environment, Dames and Moore, among others, have come and gone. While the environmental equipment sector is considerably easier to penetrate for foreign companies, there are still some opportunities in the C&E sector.

Overall C&E Market Size
There are no reliable figures on the size of the C&E market. Government projects still make up a considerable amount of it, but the regular fluctuations in government budgets make it difficult to assign a dollar value. There are currently 383 registered C&E companies in Taiwan. Many of the companies were originally civil engineering companies who branched into environmental engineering and equipment manufacturing in the late 1980s and early 1990s.

Table 25 - Largest Local Environmental Equipment Manufacturers

	Capital	Product Catalogue
Nanya Plastics*	1,781,815	water, air, solid waste, noise
Taiwan Machinery Manufacturing*	641,256	solid waste incinerator
Tang Eng Iron Works*	586,054	water, air, solid waste, noise
BES Engineering*	330,000	water, air, incinerator, environment test
Chung Hsin Electrical & Machinery Manufacturing*	283,000	water, air, solid waste, noise
CTCI*	120,000	water, air, solid waste, noise
R.P.T. Intergroup International*	58,500	water, medical waste, incinerator
DaHin Co.	56,690	water, air, solid waste
Taiwan Agricultural & Industrial Development Corp.	52,000	water, air, incinerator
Yishen Engineering	48,000	water, solid waste
Goh Hsing Co.	32,000	water, air, solid waste, noise
Chang Fa Engineering	31,000	water
Taipei Iron Works	25,000	water, noise, incinerator
Pan Asia	20,415	water, incinerator
Shang-An Machinery	20,000	water, air, solid waste, noise
Kang Chuan	19,700	air, incinerator
Hwa Tech	19,500	water
Supermax	19,412	water, air, solid waste, noise
Kuang Cheng Industrial Engineering	19,000	water, air, solid waste, noise

Note: Many of the companies on the above list are also major players in the engineering market.
* Equipment manufacturer, not professional environmental engineering company.
Source: Energy & Environmental Protection Industry Magazine, Aug. 1997

Key Market Sectors
General Engineering
General engineering is probably the most difficult sector for foreign companies to enter. Local companies are fully capable of executing the basic run of projects and often have better connections than foreign firms. In addition, most foreign companies have relatively small offices (20 to 30 people) and cannot commit the resources of the larger, better staffed local companies. Often, long-standing local reputations carry more weight in industry circles than high-profile international reputations. Table 26 presents the major foreign companies with offices in Taiwan.

Overall, international C&E firms do not have a strong track record in obtaining projects in Taiwan. Many international companies with offices in Taiwan such as ERM and Camp-Dresser McKee have chosen to hire local Taiwanese to serve as general managers to strengthen their connections into the local business community. CH2M Hilland ICF Kaiser have been among the more successful international companies, and have obtained a number of government contracts in wastewater and solid waste facility design over the last few years.

Public Sector
Both central government agencies, such as the Taiwan Environmental Protection Administration (TEPA) and the Industrial Development Bureau (IDB), and local government agencies, such as county-level Environmental Protection Bureaus, contract the majority of their project design and implementation work to consulting firms. Government contracts are dominated by a handful of large companies, including BES, China Engineering, CTCI, and Sinotech. Several of the companies that dominate the government market such as CTCI are partially owned by the government or are state industries, making it difficult for other companies to break into the market. Surprisingly, a large number of local government engineering projects also go to small local engineering companies of 30 people or less.

Over the medium term, TEPA is likely to increase the number of air pollution and groundwater quality monitoring projects. The majority of projects will most likely go to local companies or academic institutions, but international companies with relevant experience may still be able to enter the market. Local companies that lack the know-how and technology in the more cutting-edge environmental sciences are interested in forming partnerships with overseas firms. Companies interested in government projects must begin building relationships with government officials and project consultants by sharing technology information early on in the process.

Private Sector
The industrial market tends to be smaller than the government market for engineering services, but there are still opportunities to be found. However, selling engineering services alone is very difficult. Local companies tend to feel that consulting and design services should be a free part of the engineering package.

Many foreign firms hope to use Taiwan as a springboard to mainland China and view their offices as part of a strategic investment. Taiwan is now the leading investor in China, and Taiwanese manufacturing facilities are relocating to China in increasing numbers. Firms such as ERM, Camp-Dresser McKee, and CH2M Hill take a regional approach to their planning.

Environmental Impact Assessments
Environmental impact assessments (EIAs) have become a growing environmental market area four years after passage of the 1994 law requiring them. Companies constructing new facilities or expanding existing facilities by more than 20 percent are usually required to submit EIAs to environmental agencies. In addition, applications to rezone land often require an EIA statement. The newest set of standards now requires certain government policies to undergo EIA reviews as well.

Table 26 - Major Foreign Companies with Offices in Taiwan

Camp-Dresser McKee

CH2M Hill

Cleanaway

ERM

ICF Kaiser

International Technology/Chi Mei (joint venture)

Lurgi

Montgomery-Watson

Rethmann

The EIA process in Taiwan is divided into two stages. Companies initially submit to environmental agencies addressing relevant concerns. Companies that pass this first stage may proceed with construction. Companies that fail are required to spend several months collecting data and preparing a more comprehensive report to undergo public review. All told, it is not unusual for EIAs to take more than a year and a half.

In recent months, the process has come under attack as being cumbersome and time consuming. TEPA has responded by introducing changes to the application process to help shorten the time required. In addition, TEPA is making moves to assist companies in selecting consultants. A hotline has been established to assist the industry with questions regarding the EIA process. TEPA has also begun reviewing previously submitted reports to grade consultants on the quality of these reports and offer examples of model reports. TEPA hopes the information will assist companies in choosing the best EIA consultants. Many industry members see the review as the first step toward establishing a certification system for EIA consulting companies.

Currently, ERM is the only international C&E company performing EIAs in Taiwan. Taiwan's environmental laws are extremely complex, and EIAs are highly political in nature. Entering into the EIA market requires highly localized expertise and experience in dealing with environmental issues at a community level.

ISO (International Standards Organization) 14000
ISO 14000 has become one of the hottest environmental trends in the business community. Taiwan is expected to have over 120 ISO-certified companies by the end of 1999 and has progressed farther with ISO implementation than many other industrialized countries. IDB recently projected that within three years there will be over 500 ISO-certified companies.

Much of the interest in ISO comes from Taiwan's dependence on exports, particularly computers and electronics, to fuel its economy. Most of the companies in the computer industry have either already obtained ISO certification or are in the process of applying. Local businessmen are highly concerned that ISO certification will soon become a prerequisite for entering overseas markets. Nike's announcement in late 1997 that the shoe giant was considering requiring all its suppliers to establish ISO 14000 systems received a high level of attention in local industry circles. Other international manufacturers of consumer products have also hinted at similar requirements for the future.

The Taiwanese Government is very serious about ISO and has developed a number of initiatives to assist local industry in developing programs. IDB has now entered into the second year of its program to fund ISO pilot projects. In addition, the Industrial Technology and Research Institute has set up an ISO newsletter, and IDB has begun holding regular courses on ISO 14000 implementation and consulting.

A large number of consulting companies have sprung up to provide ISO consulting services to local industry. The vast majority of the ISO consultants in Taiwan are local companies while the certification community is made up primarily of international companies, including BVQI, Lloyd's, SGS, and several others. Taiwan's first local certi-fication body was established earlier in 1998 in the form of a foundation. Concerned that the quality of ISO consulting might decrease with the growing number of consultants in the market, the IDB now requires ISO instructors to attend 120 hours of classes on ISO system design and implementation.

Government Support of ISO Certification

Concerned that Taiwan's export-dependent businesses may soon find themselves locked out of European and North American markets, the Taiwanese Government has become one of ISO's biggest proponents in Taiwan.

In 1995, the IDB launched a pilot program to assist local companies in obtaining ISO certification. Five companies from five separate industries were paired with local consultants to develop model programs with full funding from IDB. After a successful first year, the program was expanded to include 20 companies in 1996, and 40 more in 1997. Companies are required to pair with one of IDB's 24 recognized consulting companies.

With ISO certification well under way in Taiwan, the government is now debating whether or not to extend the program for a fourth year. Future efforts will likely focus on encouraging small- to medium- sized companies to develop ISO programs.

Competition
In general, the overall professional caliber of local environmental engineering companies has improved significantly, and over the last several years, a small group of highly competitive domestic engineering companies such as Super Max Engineering and Chi Mei Scientech/Entech has emerged. However, many Taiwanese and foreign profes-sionals in the industry feel that the majority of local companies are still not up to the standard of leading foreign companies. Nevertheless, the local competition is now technically competent enough to challenge the previous dominance of foreign companies. As a result, competition is based primarily on price and service.

The extremely stiff local competition in the service field often discourages international companies from entering it. To be competitive, foreign companies are forced to establish local offices or joint ventures with local companies. In some cases, foreign companies have been forced into project-specific partnering arrangements where they end up training local company staff and giving up technological advantage, and in the process, long-term market share. For example, to compete in the Taiwanese market a couple of years ago, the Japanese firm Fuji Kasui Engineering Co. had to share its state-of-the-art technology with Super Max Engineering Enterprise Co., one of the leading Taiwanese C&E firms.

Best Prospects for U.S. Firms
The best opportunities for U.S. consulting and engineering firms lie in providing niche services such as soil and groundwater remediation or hazardous waste treatment. For highly specialized fields, local firms often look for overseas partners that bring a high level of credibility to the table and often can be a significant help in strengthening a bid. Most engineering companies are still interested in technology transfer and are willing to work with overseas partners.

While the EIA and ISO consulting markets are likely to continue growing over the next few years, they are not likely to hold many opportunities for international companies as local capabilities will most likely keep pace with market growth. Exceptions to this rule can be found, however, in cases where multinationals show some advantage over local companies. ERM is just one example, having recently become involved in ISO projects. Better opportunities do exist for international consultants in specialized portions of EIA projects, e.g., marine ecology, because local residents often see foreign companies as being more impartial and professional.

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