Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Taiwan Environmental Export Market Plan

Chapter 4 - Water Pollution Control Market

Water Supply Shortage
While mounting piles of garbage still dominate Taiwan's environmental news headlines, water shortages and river pollution have quietly become the island's second and third most important environmental problems. The greatest long-term problem Taiwan faces in the water sector is ensuring an adequate supply of clean water.

Despite a seemingly heavy annual rainfall, Taiwan is actually considered a water-deficient country by international standards. Taiwan's per capita water supply is only 15 percent of the world standard. The relatively short length and high flow rate of Taiwan's rivers limit the amount of water available for human use.

Over the last 10 to 15 years, Taiwan's already limited supply of water has been under heavy assault from polluters. In 1987, 28 percent of Taiwan's rivers were considered polluted. By 1994, this figure had risen to 40 percent of the rivers. The few remaining clean rivers are mostly located along the eastern side of the island in areas that have seen limited industrial development.

The ability to guarantee clean water is extremely important for Taiwan in light of its desire to become a center for high-water-use industries such as semiconductors. Current plans to build a new “Silicon Valley” in the southern part of Tainan County are now threatened by water problems (see text box in the right column).

Water conservation and recycling are becoming increasingly high profile in the minds of both business and government. To encourage more controlled use of water, the government has already made plans to gradually raise the price of both tap water and nontap water over the next five years.

Major Regulations

Structure of Water Pollution Control Act
Water pollution is regulated by the Water Pollution Control Act, which became law in 1992. The Water Pollution Control Act contains three key elements: a permitting system, phased standards, and discharge fees.

The discharge permitting system forms the heart of the Water Pollution Control Act. Prior to constructing a new facility, companies are required to submit a water pollution control plan. Once construction is completed, factories are required to file for a water discharge permit to show that their effluent will meet discharge criteria established by the Taiwan Environmental Protection Administration (TEPA). Factories holding permits must sample their wastewater every four months and send the results to TEPA. To date, TEPA has issued permits to 10,618 factories; roughly 2,000 more applications are pending.

Can't Have It All

Taiwan's rapid development is finally pushing the limits of the island's natural resources. Clean water supplies in particular are becoming increasingly difficult to guarantee. Nowhere is the case more obvious than Tainan County, where water shortages are forcing the local government to make difficult choices.

Tainan County has developed an ambitious plan to construct two high-tech industrial parks over the next five years to establish Taiwan's new “Silicon Valley.” The high-tech parks are widely regarded in economic planning circles as key development projects for Taiwan's economic future.

In addition to developing these parks, Tainan County is also pushing forward with a plan to build a combination petrochemical and steel refining complex on one of the last remaining intact wetlands the western coast has to offer. According to the environmental impact assessment supplied by the companies, the facility will require 320,000 metric tons of water per day (roughly equivalent to the daily water usage of 1,333,000 people).

Tainan County currently uses 640,000 metric tons of water per day. The petrochemical/steel refining complex alone will demand half of Tainan County's water supply, leaving no water for the high-tech industrial parks. The county is currently evaluating its options, but with limited resources in the region, it appears the county may have to make a choice as to which development road it will follow.

In addition to establishing a permitting system, the Water Pollution Act also incorporates a combination of standards and fees to control effluent discharge levels. TEPA has promulgated industry-specific discharge standards based on concentration of wastewater pollutants. The first standard was promulgated in 1993, and most companies are now in compliance. The second standard was set for 1998 (see next subsection), but TEPA has moved the date back for select industry groups. To provide economic incentives to invest in water pollution control, the act also calls for assessing wastewater discharge fees. An important point regarding Taiwan's water pollution control regulations is that there are no standards for groundwater quality. Taiwan's regulatory structure only governs discharges to surface waters.

Upcoming Changes

1998 Effluent Standards
Effluent standards were tightened as of January 1, 1998, with the major changes being in chemical oxygen demand (COD), biological oxygen demand (BOD), and suspended solids (SS) (see table 11). Consequently, many companies have been forced to invest in tertiary (add-on) treatment equipment to meet the new standards. Following complaints by industry that the standards were too strict, and after more than a year of negotiations, TEPA agreed to offer certain industries a two-year moratorium on implementing the standards.

Table 11 - Sample of 1998 Standards for Select Industries (mg/liter)

Industry	BOD	COD	SS
Pharmaceuticals	30	100	30
Textiles	30	100	30
PC Board	50	120	50
Food Processing	30	100	30
Electroplating	100	/	30

Source: Taiwan Environmental Protection Agency

Water Discharge Fees
TEPA began levying discharge fees in July 1998. Fees will be charged to industrial facilities, livestock farms, and centralized treatment facilities in industrial parks based on COD, SS, or heavy metal content. The fee rates have been a highly contentious issue. TEPA has been under considerable pressure from opposing directions. Industry groups wish to reduce the rate as much as possible, and several key legislators want to use money collected by the fee to push development of the sewer system.

Institutional Structure for Regulating Water
Water is managed under a complex web of over 10 agencies with overlapping authorities. The two main players are TEPA and the Water Bureau in the Ministry of Economics Administration. TEPA is responsible for setting standards for water quality, and the Water Bureau manages use and development of water resources. In addition, there are a number of other agencies with niche responsibilities (i.e., groundwater). Implementing agencies for some of the major water development areas follow:
• Water Resource Management - The Water Bureau manages development and exploitation of water resources.
• Drinking Water - As with other pollution control areas, TEPA sets standards for drinking water, but the actual tap water system itself is maintained by the Taiwan Water Supply Corporation.
• Municipal Wastewater/Sewerage - TEPA sets standards for municipal wastewater discharges, but managing construction of the sewer system is primarily the responsibility of the Ministry of the Interior in conjunction with the Housing and Urban Development Bureau of the provincial government.
• Industrial Discharges - TEPA sets standards for industrial wastewater discharge levels and monitors compliance in conjunction with the Environmental Protection Bureaus of local governments.

Public-Sector Market

Drinking Water Treatment Facilities
TEPA has promulgated a series of phased requirements targeted at raising the quality of tap water supplied to households. The immediate priority is to improve the water quality in roughly a dozen plants around the island. The Taiwan Water Supply Corporation (TWSC), the entity responsible for managing Taiwan's drinking water facilities, submitted its implementation plans to TEPA in May 1998. There has also been word of a planned $40 million water treatment plant expansion for the greater Kaohsiung area. Technologies likely to be in demand will include biological and ozone treatment systems.

The second and third stages of the standard are set for the years 2000 and 2003, respectively. By 2000, drinking water plants will have to reduce turbidity by a factor of five. By 2003, water hardness will have to be lowered from the current average of 400–500 mg/liter to 150 mg/liter.

Over the long term, TEPA hopes to shift the emphasis on maintaining water quality away from purchasing treatment equipment for drinking water plants toward improving the quality of water sources. Future programs will increasingly focus on controlling pollution sources along the waterways that serve as sources for drinking water plants.

Pollution Fees

The pollution fees became effective July 1, 1998. Business enterprises (including farms), industrial parks, and public sewage treatment facilities are charged based on the volume of COD, SS, and heavy metals discharged. The fees are roughly $28 per 50 kg of COD, 1,000 kg of SS, or unit of heavy metals. Households are charged $.08 for every cubic meter of water used. TEPA expects to collect between $175 million and $385 million per year from the fee. Money will be applied to improving the quality of drinking water sources and speeding the construction of the sewer system. TEPA expects to collect approximately $42–147 million from industry, $15–73 million from farms, and $120–160 million from households.

Municipal Wastewater

Market Drivers
Although industrial pollution is still a considerable source of river contamination in Taiwan, municipal wastewater is the largest source (accounting for 40 percent) of the island's river pollution. Sewer system development has quickly become one of the main infrastructure priorities for the national government. Key government officials and members of the Legislative Assembly are calling for actions to speed development of an islandwide sewer system.

However, the government has received considerable criticism for the slow progress of Taiwan's sewer system development to date. In 1991, TEPA unveiled plans to spend $4.2 billion on sewer system development. Seven years later, following numerous budget cuts and problems in implementation, only 3.5 percent of the households in Taiwan are hooked up to sewer systems (of these households, roughly two-thirds are in Taipei City).

For those promoting Taiwan as a regional operating center, the low hookup rate serves as an embarrassment and detracts from Taiwan's image as a modern, developed country (Malaysia had a 15 percent hookup rate in 1980). Numerous environmental groups and legislators have put pressure on TEPA to implement discharge fees to obtain increased funding for sewer development.

Long-Term Plans
According to the Ministry of the Interior, the government plans to build 63 sewerage systems overall. Currently, there are 24 systems under construction designed to serve a total population of 17,223,630 people covering a total area of 235,839 hectares. Planning is complete on 20 other sewerage systems, and an additional 10 are in the planning and design phase. The sewerage systems under construction will most likely include at least 24 treatment plants. (See appendix A for a detailed list of sewerage projects by name.)

Calculating the exact number of sewer systems and projects can be a difficult venture. Project lists vary from agency to agency depending on how the specific agency breaks projects down into subunits for internal tracking purposes. For example, regional projects are often broken into subareas for implementation reasons. Lists with one government agency may be organized by regional project names, but a different agency may handle tracking at the subarea level.

As shown in table 12, in theory, the Council of Economic Planning and Development (CEPD) is supposed to design the overall national system, while local governments are supposed to take the lead in sewerage system designs. Designs submitted by local governments are reviewed by the provincial and central governments. Once approved, funding is distributed from the top downward. In reality, local governments often lack the resources and capabilities to design systems. As a result, the bulk of the work is done at the provincial level, with a few exceptions such as Taipei, Keelung, Taichung, and Tainan.

Table 12 - Government Agency Functions Related to Sewerage System Construction

Agency	Function
CEPD/Ministry of Interior	Planning of Taiwan's Sewerage Systems
Provincial Government	Design and Oversight of Construction
Local County Governments	Design and Oversight of Construction
Central TEPA	Design Pollution Control Policies

Short-Term Plans
To gain more immediate reductions in municipal wastewater, TEPA is now requiring communities of greater than 100 households or 500 residents that are not connected to an existing sewer system to install a wastewater treatment system. There are currently 723 systems installed in Taiwan, and TEPA expects the number to grow at an annual rate of 8 percent. Although most systems have installed secondary treatment equipment, they may have to add tertiary equipment to meet the new 1998 standards. TEPA estimates that investment per system averages around $90,000.

Competition

Drinking Water Treatment Facilities
Municipal drinking water treatment is a particularly difficult market to penetrate without good local connections. The TWSC has a reputation for being a very closed organization, and it is difficult to obtain information regarding their plans for upcoming expansions or upgrades.

Sewerage Systems
Local companies such as Sinotech or CTCI are capable of both construction and design. A few international companies such as CH2M Hill, Parsons, and Camp-Dresser McKee have obtained design contracts, but on the whole it is difficult for foreign firms to enter the sewerage systems market. The biggest weakness of local firms lies in providing advanced technologies for the wastewater treatment plants.

Best Opportunities for U.S. Firms
Virtually all of the construction contracts for sewers go to local firms. The best opportunities to enter into the sewer system market lie either in system design or in supplying technologies for the treatment plants. Since 1979, a total of 43 system designs have been completed, 18 of which were done by the provincial government and 25 by outside consultants. Companies interested in system design opportunities should contact the provincial government.

Industrial Wastewater Treatment Technologies Market
Although the sewer program has barely limped along, efforts to reduce industrial wastewater have been relatively successful. Estimates of the overall market size for the industrial wastewater sector vary from source to source. TEPA estimated the market for equipment at roughly $900 million in 1994 based on applications for tax exemptions on equipment purchases. Primary market opportunities lie in providing advanced (tertiary) treatment equipment or water recycling and purification technologies.

Existing Wastewater Treatment Facilities
Most factories installed primary or secondary wastewater treatment facilities in the early 1990s to meet the 1993 effluent standards. The low COD and BOD requirements in the 1998 standards are now forcing companies to invest in additional tertiary treatment systems.

Industrial Park Treatment Facilities
A large percentage of Taiwan's industrial manufacturing facilities are located within Taiwan's 95 industrial parks. Factories pay discharge fees to the industrial park based on flow rate and pollutants in the water; in return, they are required only to run their wastewater through simple pretreatment before discharging it into the park sewers. Forty of Taiwan's 95 industrial parks have installed centralized wastewater treatment facilities to collectively treat effluent from all the facilities located within the park, and two have access to regional treatment systems. Factories with access to centralized treatment systems do not need to invest heavily in treatment equipment and often only install basic equipment to meet the pretreatment standards of the park.

According to TEPA records, wastewater treatment facilities in 22 industrial parks currently require improvement or are already in the process of being upgraded. (See appendix A for a detailed list of industrial parks with centralized treatment plants.) The main drivers for the improvements are the need to replace aged or outdated equipment to meet the 1998 standards and the need to expand existing capacity. The Industrial Development Bureau (IDB) has established an Industrial Park Development Foundation responsible for managing upgrading and installation of facilities within parks.

Earlier in 1997, the IDB awarded a number of public tenders for installing complete systems in industrial parks. Another round of upgrades took place at the end of 1998. Upgrades would primarily entail installing secondary and tertiary treatment systems to lower COD, BOD, and SS counts as well as upgrading aged equipment.

Key Market Drivers
The 1998 standards are the key driver for the industrial wastewater treatment market. Environmental agencies informally estimate that up to 60 percent of the companies permitted in Taiwan are not capable of meeting the 1998
standards. With all the controversy surrounding the 1998 standards and the requests for extensions, many companies delayed investing in equipment over the last two years while they waited to see the outcome of the debate. Following passage of the regulations and their implementation beginning in July 1998, investment in the industrial wastewater treatment market will most likely increase. However, numerous technology providers have already entered or are already preparing to enter the market.

Economic forces are also beginning to play a growing role in driving the market. Starting next year, TEPA will begin collecting water discharge fees. Increasing discharge costs will prompt companies to reevaluate the economics of investing in pollution control. IDB raised discharge fees in industrial parks, causing many companies to rethink the economics associated with wastewater treatment and consider improving their on-site pretreatment facilities.

As economics and regulations take hold, the increasing use of ISO (International Standards Organization) 14000 or energy management systems around the island is spurring interest in environmental equipment. Many companies are upgrading their internal monitoring and control systems as a result of implementing ISO standards. Companies are showing increasing interest in reducing their wastewater effluents as one of the goals in their ISO systems.

Economic Incentives Increase Wastewater Treatment Equipment Purchases

Taiwan has 95 industrial parks, most of which are government owned. These parks house roughly 8 percent of the island's 90,000 factories, including most of the major electronics, chemical, and petrochemical producers. About 45 percent of these parks include some type of centralized treatment facilities, requiring dischargers to meet pretreatment standards and pay discharge fees. In efforts to increase the economic incentives for upgrading wastewater treatment, the parks have increased discharge fees by 10–40 percent. These increases are causing many companies to reassess their wastewater generation and treatment.

One such company is Nittobo Norplex, a joint venture between Allied Signal and Nitto Boseki (Japan). Prior to the fee increase, Nittobo discharged its wastewater directly to the centralized treatment plant (without any treatment) and paid about $25,000 every month. With the new discharge fees, these monthly payments would increase to more than $40,000. These increases forced Nittobo into considering pretreatment as an option to decrease these costs. A feasibility study determined that by decreasing the amount of wastewater generated and decreasing the COD and SS counts, fee payment could be reduced from $40,000 to below $25,000 (at payback of less than 1 year). Start-up of the new facility began in September 1997.

In the future, the most important impetus for wastewater treatment will most likely be Taiwan's water shortages. As the clean water supply becomes increasing unstable in parts of the island, companies are showing more interest in water recycling technologies. Water rationing has become frequent in southern Taiwan, causing companies to become concerned about potential problems with production. In addition, with increasing community concern regarding water supply, few companies want to gain the image of being part of a water-intensive industry.

Taiwan Companies Planning Wastewater Reuse

Like many Asian countries, Taiwan has not been blessed with a plentiful supply of natural resources. Taiwan's industrial growth--especially related to those industries that are heavy water users such as electronics and chemical manufacturing--and dry weather have exacerbated the island's water shortages. In light of this and the fact that water rates have increased by 40 percent (current price is approximately $0.38/m3) since 1989 and wastewater discharge fees have increased by 10–40 percent, government authorities and industry are increasingly emphasizing water reduction and reuse.
For example, Taiwan's Hsinchu Science Park--which houses many of the island's largest chip manufacturers and thus largest water users--requires all new and existing factories must attain a minimum 70 percent recycle/reuse rate. Many see this requirement as the beginning of a trend, with Taiwan's other industrial parks following suit. But given the economic and operational concerns, many companies are not waiting for the government stick to be applied. Many of Taiwan's largest companies are planning or implementing water reuse strategies, including Texas Instruments, ICI, Yuen Foong Yu Paper, and Chinese American Petrochemical.

Key Industries Targeted by TEPA
Industry sectors under the most immediate pressure to meet the 1998 effluent standards are the food processing, electroplating, pharmaceuticals, and semiconductor, and electronics sectors. Ten industry groups have been given a two-year extension for complying with the 1998 standards. The extension was based on conclusions from position papers submitted by industry associations to TEPA (see table 13). Capital cost in investing in tertiary treatment equipment was the prime concern raised by industry groups. Many companies have tried installing sieve filters as an end-of-pipe alternative to investing in more expensive equipment, but few are able to meet the standard by doing so.

Based on surveys by the Industrial Pollution Control Corps, the top five generators in COD discharge are the paper, canned food processing, soil/stone cutting, petrochemicals, and pharmaceuticals industries (see table 14 and figure 3). The top five generators of BOD are the paper, canned food, petrochemicals, pharmaceuticals, and frozen food industries (see table 15 and figure 4).

Table 13 - Sectors Granted Two-Year Extension to Meet TEPA’s 1998 Standard

Sectors		Interim standards (1998–2000)	(mg/liter)
	BOD	COD	SS
Painting Industry	30	180	30
Titanium Dioxide Industry	30	100	50
Man-made Fiber Industry	30	120	30
Plastic Raw Material Ind.	30	200	30
Paper Industry (I)	30	160	30
Paper Industry (II)	30	180	50
Pulp Manufacturing Ind.		180	50
Petrochemicals Industry		200	30
Livestock Industry	100	350	150
Tanning Industry	30	150	30
Printing & Dyeing Industry	40	180	50

Note: Paper Industry (II) - over 60 percent raw material is recycled waste paper.
Source: Monthly Report of Environmental Protection Statistics Taiwan Area, Republic of China, September 1997

Over the next two years, the 10 groups awarded the extension will come under increasing pressure to upgrade their facilities. Some, such as the petrochemicals industry, will most likely invest in new equipment. Other industries, such as paper or printing and dyeing, may simply accelerate the trend of shifting “dirty” production lines to China or other parts of Southeast Asia.

The livestock industry in particular will undergo significant changes. Earlier this year, the Council of Agriculture announced plans to consolidate the industry and reduce the number of hog farms from 26,000 to less than 15,000. The shift will require farms to either upgrade existing facilities or invest in new equipment. In particular, the industry will have to improve its control of nitrogen and phosphorus pollution.

Table 14 - 1995 COD Production Volume by Sector - Top 10

Sectors	Volume (m3)
Total Aggregate	1,091,277
Paper Industry	224,741
Canned Food Industry	178,774
Soil/Stone Cutting Industry	109,161
Petrochemicals Industry	84,668
Pharmaceuticals Industry	57,381
Dyeing Industry	51,638
Frozen Food Industry	43,050
Man-made Fiber Industry	37,924
Monosodium Glutamate Industry	28,689
Tanning Industry	27,892
Others	247,359

Source: 1997 Status of Taiwan Industrial Waste Water Prevention, IDB (1995 data)

Competition
Local engineering firms have developed strong capabilities in the wastewater treatment and monitoring arena by teaming up with foreign technology providers. Locals firms do most of the engineering work, and foreign partners provide the key elements of the sophisticated technologies. Local manufacturing firms have developed capabilities in producing low-tech components such as pumps and valves, but Taiwan's market has traditionally not been large enough to justify investing huge sums of capital into developing advanced technologies. However, many overseas companies take advantage of local capabilities to produce the low-tech components of their systems and limit overseas manufacturing to the sophisticated technology pieces.

American firms have established a strong foothold in the equipment market. Japanese firms also have a strong presence and have been positioning themselves to enter the water recycling market.

Best Opportunities for U.S. Firms in the Industrial Wastewater Sector
In general, companies with package systems with a small footprint that can be attached to existing treatment systems will have an advantage. Factory floor space in Taiwan is often very limited, and equipment has to be small and compact.

Water Recycling
The hottest new market in the future will likely be water recycling. Industries such as semiconductors/electronics, petrochemicals, electroplating, pulp and paper, steel, and dyeing are showing considerable interest in reducing water use and guaranteeing a steady supply.

The best immediate opportunities lie in the semiconductors and electronics industry. The semiconductors industry is particularly sensitive to the problem of water supply. The new science park meant to be Taiwan's “Silicon Valley” is located in Tainan County, where water shortages are a serious concern. Several companies have already reviewed or installed recycling equipment. Companies usually require a 75 percent recycling rate.

The electroplating industry is also undergoing structural changes and may become a major customer of water recycling technologies. Many electroplating companies are trying to shift to producing higher quality products and are simultaneously expanding their capacity. Companies are interested in water recycling as an alternative to new investment in treatment facilities.

Wastewater Treatment
Opportunities also still exist in supplying advanced treatment equipment for companies seeking to meet the 1998 standards. The best opportunities will most likely be with medium- and large-scale manufacturers in the paper, livestock, chemical engineering, petrochemicals, and synthetic fiber industries. However, even with the two-year extension, industries such as dyeing or tanning that are characterized primarily by small- to medium-sized manu-facturers will still have difficulty investing in equipment.

Industrial Park Water/Wastewater Treatment and Recycling
Government-operated industrial parks will have no choice but to meet the 1998 standards. In addition, industrial parks will also have to pay wastewater discharge fees. For example, the Hsinchu Science Park has already set a minimum standard of recycling 70 percent of its wastewater. The better near-term opportunities exist for suppliers of advanced tertiary treatment equipment to help lower COD, BOD, and SS levels. In the long term, industrial parks will likely show increasing interest in water recycling and reduction technologies.

Figure 3 - 1995 Industry COD Production by Sector

Figure 4 - 1995 Industry BOD Production by Sector