Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Malaysia Environmental Export Market Plan

Chapter 4 - Water and Wastewater Sector

Overview: Water Sector

Compared with neighboring countries such as Indonesia, Malaysia has placed a high priority on improving its water supply. Malaysia's urban and rural water supply coverage rose to 89 percent in 1995 from 80 percent in 1990. The goal for the year 2000 is to extend the coverage of safe drinking water to 95 percent of the population and to increase the hookup rate to adequate sewer systems to 79 percent.

The government's Seventh Five-Year Plan sets out the overall strategy and objectives for the period 1996-2000. By the year 2000, water consumption for domestic and industrial use is expected to grow to 3.7 billion cubic meters from 2.6 billion cubic meters in 1990, an average annual increase of 3.5 percent. During the same period, demand for irrigation water is expected to increase by roughly 15 percent, from 9.0 billion cubic meters to 10.4 billion cubic meters.

To meet targets for the current five-year plan, an estimated RM2.9 billion ($855 million) is required. In 1992, the government anticipated an excess supply over demand for water until the year 2000. This estimate has proved to be erroneous. Even with an economic slowdown in the near to medium term, significant new infrastructure will be needed to meet demand. For example, the need for adequate water supply will require the construction of dams farther upstream and increased use of groundwater.

With the current economic slowdown, however, the government faces the prospect of slowing development of new water supply. Some projects will involve heavy investment because water sources are more limited and remote; reticulation systems will be larger, and water treatment will cost more. Nonetheless, the government hopes to tap the private sector for the bulk of these investments. Officials anticipate that in the evolutionary stage water supply will be increasingly developed and managed by private operators.

The government plans to undertake a new National Water Resources Study to identify potential water resources, to carry out feasibility studies of water resource development projects in all states, and to formulate a long-term national master plan with an integrated approach.

Seventh Plan Program (1996-2000)

The Seventh Plan focuses more attention on long-term water resource planning and development. According to projections, the water-stressed states of Kedah, Pulau Pinang, and Selangor are expected to face water shortages after 2000. The Seventh Plan will review the 1982 National Water Resources Study and update information to facilitate more comprehensive long-term planning and development.

Given the accelerated growth of several states, authorities plan to introduce a more systematic design to coordinate the uneven distribution of water resources in the long term through interstate water transfer projects. These involve the construction of the Sungai Rui Dam in Perak to transfer raw water to Kedah, Pulau Pinang, and Perlis, and of the Kelau and Telemong dams in Pahang for water transfer to Selangor and Negeri Sembilan. These projects are in addition to the Sg. Buluh Dam and Kelinchi water transfer tunnel, which were completed in 1996. Other dams under construction are the Kelinchi Dam and the Gemencheh Dam, both in Negeri Sembilan, and Teluk Bahang Dam in Penang. One large water treatment facility under construction is the Sg. Selangor Phase 2 project, which will have a capacity of 950 million liters per day (mld). Stage I of this project (475 mld) will be completed in January 1999 and Stage II by the year 2000.

In addition, under an estimated RM475 million ($140 million) rehabilitation program, several treatment plants will be refurbished and upgraded to improve efficiency and expand capacity.

Under the Seventh Plan, an estimated RM2.9 billion has been allocated to implement 61 programs. The government plans to carry out several new water supply projects, including construction of treatment plants and reservoirs for Kuala Terengganu, Kuantan, and Sungai Terip. These projects will increase capacity by over 1,600 mld. To augment rural water supply, some 3,600 projects will be undertaken. These will cover mostly isolated rural areas and will benefit about 262,400 households.

The plan has targeted upgrading and rehabilitation works in 20 districts. Total production capacity is due to rise from 9,442 mld in 1995 to about 11,800 mld in 2000, while the quantity supplied to consumers is expected to increase from 7,704 mld to about 9,160 mld. In 1997, the total water supply and demand were 9,655 mld and 7,987 mld, respectively.

According to Malay government projections, about 95 percent of the population will have piped water supply by 2000. Urban coverage is expected to be complete in most states, while rural coverage is expected to increase from 77 percent in 1995 to 83 percent by 2000.

Water Quality

In general, the country's water quality meets World Health Organization (WHO) standards. However, with rapid economic development, river water quality has deteriorated, according to DOE data. Institutional weaknesses in enforcement and supervision receive much of the blame. The recent diesel spill in the Sungai Langat water supply, which resulted in contamination and closure of two water treatment plants in Selangor State, have underscored the problems in enforcement by local authorities.

Between 1988 and 1994, the water quality of only 17 rivers improved while that of 67 others deteriorated. Based on the National Water Quality Indices in 1996, 42 rivers were classified as clean, 61 as slightly polluted, and 13 as polluted. The major causes were silt from soil erosion, organic pollutants from partially treated sewage, and wastes from agro-based manufacturing and livestock. Measured by biochemical oxygen demand (BOD), 15 river catchments were heavily polluted from these sources; 8 of them had levels worse than the previous year.

OE reported that 34 percent of organic river pollutants resulted from livestock farming and domestic waste; 38 river catchments were heavily polluted by these sources. Johor had the most polluted river catchments, followed by Selangor and Pulau Pinang. The analysis of ammoniac-nitrogen pollution indicated that 23 rivers had deteriorated. Additionally, 57 major rivers were found to be heavily polluted by suspended solids, of which 38 rivers had shown further deterioration over previous levels.

Regulatory Drivers

Under the Malaysian Federal Constitution, water supply is the responsibility of the states. State governments are responsible for developing, operating, and maintaining water supplies. They exercise this responsibility through the State Public Works Department (PWD), the State Water Supply Department (WSD), the State Water Supply Board (WSB), or the State Water Supply Corporation.

The federal PWD, through its Water Supply Branch, provides consultation and technical advice to the state water supply authorities and coordinates all water supply projects funded by the federal government. It also plays an important role in setting engineering standards and standardizing engineering practice.

Since 1957, the jurisdiction and legislative powers in all aspects of water have been distributed between the federal and the state governments, in accordance with the Federal Constitution. The laws relevant to water sources include the following:

Waters Act 1920 (Revised 1989)
Geological Survey Act, 1974
Drainage Works Act, 1954
Streets, Drainage, and Buildings Act, 1974
Local Government Act, 1976
Environmental Quality Act, 1974 (EQA)

The EQA specifies standards for effluent discharge, while the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order, 1987 (EQO) lists the activities that require DOE approval of EIA reports before work can begin.
Legislation relevant to public water supply is as follows:

Water Supply Enactments (issued by certain states)
Proposed Safe Drinking Water Act

The Ministry of Health (MOH) is drafting this act to control the quality of drinking water.

Environmental concerns are formally addressed by the EQA and associated regulations. DOE’s water pollution control strategy encompasses both statutory and nonstatutory approaches. The strategy was developed to address the urgent pollution problems caused by rapidly expanding agro-based industries such as crude palm oil (CPO) and raw natural rubber (RNR), and also by manufacturing sectors and domestic sewage. There are six sets of regulations under the EQA for statutory control of water pollution:

Environmental Quality (Prescribed Premises) (Crude Palm Oil) Regulations, 1977
Environmental Quality (Prescribed Premises) (Raw Natural Rubber) Regulations, 1978
Environmental Quality (Prescribed Premises) (Sewage and Industrial Effluents) Regulations, 1979
Environmental Quality (Prescribed Premises) (Scheduled Waste Treatment and Disposal Facilities) Regulations, 1989
Environmental Quality (Prescribed Premises) (Scheduled Wastes) Regulations, 1989
Environmental Quality (Prescribed Premises) (Environmental Impact Assessment) Order, 1987

The current water effluent standards and parameters are contained in the Environmental Quality (Sewage and Industrial Effluents) Regulations 1979, along with a list of catchment areas where the standards apply. Under the regulations, the standard methods of analysis of effluents are to be made in accordance with the Standard Method of the Examination of Water and Wastewater published by the American Public Health Association, the American Water Works Association, and the Water Pollution Control Federation of the United States, or Analysis of Raw, Potable Water and Wastewater published by the Department of Environment of the United Kingdom.

Enforcement Trends

DOE has generally controlled industrial water pollution caused by crude palm oil (CPO) mills and raw natural rubber (RNR) mills. In 1996, 78.3 percent of the CPO mills were in compliance , a 3.3 percent improvement over 1995. RNR factories had an 88.6 percent compliance rate in 1996, up 9.2 percent from 1995. DOE withdrew the licenses of four palm oil mills and four rubber factories after repeated violations. Thirty-one RNR factories were taken to court for noncompliance violations, and suspensions were lifted only after problems had been corrected.

DOE has made much less progress in nonprescribed industries, such as the metal finishing and leather industries, that have been found in violation of sewage and industrial effluent standards (table 8). The attorney general is working on regulations to include these industries on the prescribed list. DOE recently announced regulations requiring small- to medium-sized metal finishing units to install their own wastewater treatment facilities or move to specialized industrial estates with centralized wastewater treatment facilities. Two new industrial estates are under way.

Table 8: Compliance Status of Manufacturing Industries, 1996

Industry Type	% of Compliance w/Environmental Quality (Sewage and Industrial Effluents Regulations of 1979	% of Compliance w/Environmental Quality (Clean Air Regulations of 1978)
Cement	74	84
Chemical-based	85	94
Electrical and electronics	91	96
Food and beverage	69	96
Leather	83	100
Machinery	100	89
Metal fabrication	92	87
Metal finishing and electroplating	66	93
Non-metallic mineral	95	87
Paper	79	97
Plastic	100	98
Quarry	91	76
Rubber-based	72	83
Textile	70	99
Vehicle	75	96
Wood	99	73
Others	89	72

Source: Department of Environment (Sewage and Industrial Effuents Regulations of 1979)

The MOH has a planned program, the National Drinking Water Quality Surveillance Program, to test raw and treated water regularly. Nationwide, there are 330 raw water sampling stations and 2,798 treated water sampling stations. Another 285 treated water stations are proposed. In 1996, the MOH monitored 331 water supply systems in peninsular Malaysia, 35 in Sabah, and 87 in Sarawak.

The MOH also surveys rivers upstream of water intakes to identify potential polluters and check for contaminants. DOE monitors rivers and measures the physical, chemical, and biological characteristics of the water. This covers 116 rivers and a catchment area of 654,708 square kilometers for the entire country.

The major sources of industrial water pollution are concentrated on the west coast of peninsular Malaysia in the states of Selangor, Johor, and Penang. One of the major challenges facing Malaysia is the problem of pollution discharges from small industrial enterprises that lack the financial resources to carry out on-site wastewater treatment. As a result, their discharges contain many pollutants. Overall, compliance is quite low, although the number of permit applications submitted to DOE for construction of industrial wastewater treatment facilities is rising, primarily in Johor State.

Recent incidents of water contamination have intensified pressures on the authorities to reinvigorate enforcement. In October 1997, two water treatment plants in Cheras were shut down because of bad raw water quality, namely diesel contamination and high ammonia levels at the treatment plants’ source, Sungai Langat. During the closure, the total water supply was reduced by over 400 mld. These plants are evidently vulnerable to pollution from many upstream industrial sites and quarries, as well as from squatter settlements. However effective enforcement typically relies on interagency cooperation, which is slow. Catchment area management belongs to several agencies, including the State Land and Mines Department, the Drainage and Irrigation Department, and the state waterworks agency.

In 1996, DOE initiated a new project for groundwater monitoring and reporting in peninsular Malaysia. This project enables DOE to monitor groundwater quality and recommend necessary measures for pollution abatement or prevention of groundwater contamination. In addition, DOE improved its enforcement by tightening up detention procedures related to marine pollution and instituted prosecution based on photographic evidence and testimony of observers. DOE is participating in a regional program funded by the Global Environment Fund and the United Nations Development Program to prevent and manage marine pollution in the East Asian Seas.

Expenditures

Public sector investments in Malaysia's five-year planning cycles have historically driven water supply and treatment markets. In the Sixth Malaysia Plan (1991-1995), total allotment for water resource development was $1.5 billion. Among major projects during this period was the $640-million Rural Water Supply and Sanitation program, which was completed in 1992 by the U.K.-Malay joint venture contractor Antah Biwater.

About RM2 billion-RM3 billion ($600-$900 million at RM3.3 to $1) is required to implement the Seventh Malaysia Plan water supply projects. The annual allocation for water supply projects for the country ranges from RM600 to RM800 million ($176-$235 million at RM3.3 to $1) (table 9).

Table 9: Water Supply Expenditure Under the 5-Year Malaysia Plans

5-Year Plan	Period (Year)	Expenditure (RM'000)
Third Malaysia Plan	1976-1980	538
Fourth Malaysia Plan	1981-1985	2,085
Fifth Malaysia Plan	1986-1990	2,348
Sixth Malaysia Plan	1991-1995	2,089
Seventh Malaysia Plan	1996-2000	2,907

Source: Department of Environment

In 1992 and 1993 the Asian Development Bank (ADB) provided technical assistance for feasibility studies in 32 districts in peninsular Malaysia. A total of RM714 million ($210 million) is needed to implement the proposed projects. The ADB has provided a $105-million loan to the federal government, which is distributed among the state water supply authorities. The federal government will provide the balance of funds to the state authorities as interest-free loans. The World Bank also provided a $146-million loan to implement the Second Johor Water Supply project, which was approved in 1996.

Privatization

Privatization of the rehabilitation-development and operation of water treatment plants began in 1989. Concessions have generally been undertaken on a build-operate-transfer (BOT) basis with Malaysian enterprises that are part- or majority-owned by either French or British water operators. Such contracts are for treatment plants or bulk water supply, while distribution remains under local control. For instance, Lyonnaise des Eaux’s (Paris) Malaysian unit has three 20-year contracts in Johor, Perak, and Sabah states for bulk water supply. A 20-year concession for water supply to two municipalities was awarded to Timach (Kuala Lumpur) by the Sabah State government. Timach expected to invest $47 million in an expansion program that included construction of a water treatment plant with a capacity of 40 mld. The Sabah government holds a 20 percent stake.

According to the Seventh Plan, privatization will be complete, covering all aspects of water supply, including distribution systems and billing. In addition, privatization of water supply in various states will be regulated by many authorities, which will be independent of each other and have different strengths and divergent standards.

In addition to privatization, the country is moving toward state ownership of incorporated water utilities-a relatively new trend in Asia-to improve efficiency in operating and maintaining treatment plants. In 1994, the Johor State Water Department became the first state water authority to be incorporated in Malaysia. Renamed Syarikat Air Johor Sdn. Bhd., the commercial company is fully owned by the state government of Johor. In 1995, the Water Supply Division of the Kelantan Public Works Department was privatized and renamed Kelantan Water (M) Sdn. Bhd. It is jointly owned by YAKIN, a subsidiary of the Kelantan state government, and Thames Water plc of the United Kingdom. In 1996, LAKU, a water company covering the areas of Miri, Bintulu, and Limbang in Sarawak, was formed.

Municipal Wastewater

Compared with water infrastructure development, sewerage investments have lagged. The government spent over $2 billion to develop drinking water infrastructure during the third thorough the sixth five-year plans, while spending only about $100 million on sewerage. Before 1996, only 1 percent of septic tanks were desludged, and sludge treatment was inadequate. About 80 percent of the more than 4,400 public sewage treatment plants were substandard or shut down.

More recently, Malaysia has been improving its sewerage coverage and developing various other solutions to the problem, including centralized sewerage facilities, individual septic tanks, and pour-flush latrines. The percentage of households covered had risen to 53 percent by 1995 from 42 percent in 1990.

In December 1993, the country privatized sewerage services in 144 of its local authority operational areas under the Sewerage Services Act 1993. The law covered domestic, government, and commercial sectors (table 10). Indah Water Konsortium (IWK), headed by United Utilities plc (formerly North West Water, Warrington, United Kingdom) and Berjaya Industrial Bhd., was awarded the concession to overhaul the country's aging sewerage system and to operate it for 28 years. Total investments were estimated at RM7 billion ($2.1 billion at RM3.3 to $1) spread over 18 years.

The Department of Sewerage Services (DSS) was established under the Ministry of Local Government and Housing to regulate and monitor. In addition, DOE monitors effluents from sewage treatment plants operated and maintained by IWK for compliance with prescribed standards. (Industrial wastewater discharges are not allowed into Malaysia's sewerage system. Wastewater from industries must be treated separately by on-site treatment plants.) The privatization project is the country's costliest and the biggest contract ever and is the largest such project in the world. It involves building a new “multipoint” sewerage system as well as upgrading and refurbishing existing systems, including more than 4,400 sewage treatment plants. By 1995, the management of the sewerage system in 82 of 143 local authorities had been handed over to private operators. The transfer of local services to IWK was completed in 1996.

Table 10: List of Privatized Treatment Plants

State/Treatment Plant Name	Capacity (mgd)	Concession Period	Operator's Name
	Selangor
1. Sg. Semenyih	120.0	1987-1997 (10 years)	Taliworks Consortium Sdn Bhd
2. Tg. Karang	6.0	1991-2001 (10 years)	Taliworks Consortium Sdn Bhd
3. Sg. Selangor	110.0	1994-2020 (26 years)	Taliworks Consortium Sdn Bhd
4. 26 treatment plants	205.9	1993-2003 (10 years)	Puncak Niaga (M) Sdn Bhd
	Negeri Simbilan
1. Sg. Terip	9.0	1989-1999 (10 years)	Taliworks Consortium (NS) Sdn Bhd
2. Kepis	0.7	1990-2000 (10 years)	Taliworks Consortium (NS) Sdn Bhd
	Kedah
1. Bukit Pinang	30.0	1990-2005 (15 years)	Sisma Management Sdn Bhd
2. Pelubang	30.0	1990-2005 (15 years)	Sisma Management Sdn Bhd
3. Sg. Ular	6.6	1990-2005 (15 years)	Sisma Management Sdn Bhd
4. Pinang Tunggal 1	7.5	1990-2005 (15 years)	Sisma Management Sdn Bhd
5. Pinang Tunggal 2	3.5	1990-2005 (5 years)	Sisma Management Sdn Bhd
6. Langkawi	9.0	1995-2020 (25 years)	Taliworks Consortium Sdn Bhd
	Perak
1. Sultan Idris Shah(a) Ulu Kinta(b) Parit	20.0 20.0	1989-2009 (20 years) 1989-2009 (20 years)	Metropolitan Utility Corp. Sdn Bhd Metropolitan Utility Corp. Sdn Bhd
2. Krian, Larut & Marang	16.0	1989-2009 (20 years)	GSL Water Sdn Bhd
	Labuan
1. New Labuan Supply	8.3	1988-2001 (13 years)	Labuan Water Supply
	Johor
1. Johor Bahru	100.0	1992-2012 (20 years)	Equiventures Sdn Bhd
	Lembaga Air Kuching Utara
1. Miri, Limbang & Bintulu	147.0	1996-2021 (25 years)	Luku Management Sdn Bhd
	Sabah
1. Kota Kinabalu	24.2	1992-2012 (20 years)	Jetama Sdn Bhd
2. Tawau/Sandakan	9.0	1993-2013 (20 years)	Timach Sdn Bhd
3. Lahat Datu, Semporna, Kunak, Pulau BumBum	20.59	1995-2014 (20 years)	Lahat Datu Water Supply Sdn Bhd
	Kelantan
1. Kelantan	38.0 (173.76)	1995-2020 (25 years)	Kelantan Water (M) Sdn Bhd

The plan for the nation's sewerage system is first to develop an improved, multipoint system nationwide, with treatment facilities in decentralized high-priority areas, and later to unite them in a centralized system. The multipoint sewerage system will be implemented in several phases. It involves laying 15,000 kilometers of sewer pipelines and maintaining 6,100 sewerage treatment plants. Both individual septic tanks and mechanical centralized sewerage treatment plants will be used. Currently, only a small percentage of Malaysia's 21 million population is served by centralized sewerage systems. Kuala Lumpur, the capital, has only a partially centralized collection system with stabilization ponds.

The procurement process for this project highlighted how large and politically well-connected groups with access to the country's top decision-makers secure key privatization deals under the government's first-come, first-served policy. While there is a broad consensus that drastic measures are needed to upgrade the nation's sewerage system, critics have questioned the efficacy of the award procedure and contract terms, claiming they encourage cronyism and discourage competitive pricing. For this massive project, the IWK was the only proposal considered.

Some of the sewage infrastructure projects are under way. The more strategically located units include the Labuan Town Network and Pump Stations, Port Dickson Town and Sungai Lukut Kechil, Seremban Town Package 104, Ipoh Town Sewerage Scheme Phase 1, Kelana Jaya Trunk Sewer, and Padang Matsirat and South West Coast Network.

By the year 2000, with new facilities in place, organic pollution from domestic and animal waste is expected to decline and water quality of the rivers is expected to improve. By then, 79 percent of the population is expected to be served with modern sanitary sewerage services. By the end of the concession period, Indah Water hopes to provide 85 percent of its customers in 49 of the larger local authorities with connected sewerage services and the remaining 15 percent with individual septic tank services. In 95 of the smaller local authorities, IWK aims to provide 30 percent of its customers with sewerage services and the remaining 70 percent with septic tank services.

Industrial Wastewater

Malaysia's primary sources of industrial wastewater pollution are on the west coast of peninsular Malaysia, with nearly 50 percent of the major sources in the states of Selangor, Johor, and Penang. The major industrial water polluters are food processors (40 percent), rubber and palm oil industries (35 percent), industrial chemicals and electronics (12 percent), and textiles (9 percent). These industries, while they make the greatest contribution to Malaysia's GDP, also discharge significant quantities of high level pollutants in their wastewater. Treatment methods are primarily conventional and include flocculation, sedimentation, gravity filtration, and disinfection.

Other major contributors to industrial wastewater pollution are small- to medium-sized factories, mainly electroplating and metalworks, printing, dyeing, and paper factories. Large factories generally do better. Smaller concerns do not have the space or the capital to install on-site wastewater treatment facilities. Most lack compact, cost-effective, and low-maintenance systems that comply with effluent standards.

Food and beverage processing plants account for 40 percent of industrial wastewater pollution, according to DOE estimates. In 1996, the lack of appropriate treatment technology, insufficient treatment capacity, and poor maintenance of existing treatment systems resulted in a compliance level of only about 69 percent for those industries. Most of the noncompliant factories do not have on-site treatment plants. Their wastewater discharges are known to have very high levels of chemical oxygen demand (COD), biochemical oxygen demand (BOD), oil, grease, and suspended-solid pollutants.

The metal finishing and electronics industries have similar problems. Only a few facilities were built with wastewater treatment equipment. This industrial sector recorded only 66 percent compliance in 1996, the lowest of all sectors. Industry trade groups, such as the Metal Finishing Society and the Electroplating Association of Malaysia, are discussing pollution abatement measures with DOE, including relocation to designated industrial estates with centralized treatment facilities.

The textile and dyeing industries generally operate without adequate treatment capabilities. These industries consist primarily of small- to medium-sized workshops that do not have enough resources to invest in treatment systems to treat COD and color contamination. The Malaysian Textile Manufacturers Association has a Pollution Control Technical Committee that advises members on compliance methods.

Almost all of the estimated 500 palm oil and rubber processing companies in Malaysia are equipped with primary wastewater treatment systems (usually anaerobic ponds). Most of them need technologies to recover the methane gas generated by the anaerobic wastewater treatment process and to reduce BOD levels from 500 to 100 parts per million. They also require advanced treatment and waste-to-energy technologies.

The paper processing industry also needs treatment technologies to curb its serious contamination of waterways with CODs and BODs. The agricultural sector (particularly animal husbandry and swine farms) contributes high levels of organic pollutants. Discharges from such farms are typically untreated. Aerated lagoons remain the prevalent treatment, although most of these are usually poorly maintained and inefficient.

Competitive Situation and Market Opportunities

The water and wastewater treatment market accounts for about two-thirds of the estimated $600 million Malaysian environmental market (not counting civil infrastructure costs) as estimated by Environmental Business International. Water utility revenues totaled over $300 million (at devalued rates). In recent years the market has grown an average of 15 to 20 percent annually. However, the 1997 currency devaluation and tight financial conditions will have an impact on growth in the near to medium term. The U.S. Department of Commerce estimated the Malaysian industrial wastewater treatment equipment market at $225 million in 1995, with imports growing at 20 percent per year over the next three years. Of this, U.S. imports account for approximately 10 to 15 percent.

The municipal water-wastewater market is saturated with domestic and foreign companies that are already well established and providing adequate supply-treatment services and equipment. The Association of Consulting Engineers has approximately 80 registered consultants providing water utilities with a broad range of products and services. Approximately 70 companies are registered equipment suppliers with the Water Supply Branch of the PWD.

Although the plum concessions have already been awarded, privatization initiatives are being pursued in the water-supply and wastewater treatment sector through unsolicited proposals under Malaysia's first-come, first-served policy. Contractors or concession holders periodically seek subcontractors for support services, new equipment, and equipment maintenance. For instance, the U.S. firms CH2M Hill and Woodward Clyde have assisted IWK, which operates the nationwide sewerage treatment system.

In the private sector, centralized water supply and treatment systems for large industrial facilities and housing estates, as well as tourist development projects, are lucrative areas for private investment. The International Finance Corporation projects that about $20 million will be invested in turnkey sewage treatment plants for housing estates in the next four to five years. Technology parks are sprouting throughout Malaysia, especially in the states of Johor, Sarawak, Melaka, and Pahang. These states, which have been competing for foreign investments by developing sophisticated communication and transportation systems, are also investing in comprehensive water treatment infrastructures. Housing estates also increasingly require more sophisticated systems, such as oxidation ponds and mechanical-biological package treatment plants.

Malaysia's domestic distributors, consulting, and engineering firms are extremely competitive and can provide a full range of products and services. Low-cost, large-volume products, such as screens, filters, pipes, and tanks, account for a majority of the domestic products in industrial wastewater treatment projects. Domestic production of more sophisticated wastewater equipment is fairly limited, although local capacity for manufacturing small and medium-sized presses, dryers, and pressure vessels is increasing. Wastewater treatment equipment is imported from the United Kingdom, Germany, Australia, and Japan, among other sources. Taiwanese, Korean, and local manufacturers are the major competitors for U.S. firms for low cost items such as screens, tanks, and primary wastewater treatment systems. In more advanced secondary and tertiary systems, German and British firms are the top competitors, followed by companies in Singapore that re-export goods manufactured outside its borders.

Three sectors offer the most attractive potential for environmental exports to Malaysia: public water supply, sewage treatment, and industrial wastewater treatment. These sectors account for over 60 percent of the equipment market and over 50 percent of all imported equipment. For instance, pumps are imported, mainly from Germany, the United Kingdom, Japan, and the United States, although there are some local assembly operations. Water meters are also imported, mostly from Germany and the United Kingdom. In addition, most water treatment chemicals are imported from the United States and Japan.

In the industrial water and wastewater markets, the best short-term prospects are in high-growth sectors, such as food processing, electronics, textiles, metal finishing, chemicals, and petrochemicals. Mid- to long-term opportunities exist in integrated wastewater services, including process design and engineering, pollution prevention technologies, and wastewater recycling. Advanced waste recovery systems for solvents, waste oil, acid, and metals are in demand in the printed circuit board, iron and steel, electronics, and semiconductor industries. Also in high demand are ultrapure water technologies, particularly in the semiconductor and electronics industries. Other opportunities are for high-tech water monitoring and analytical equipment, and oil-water separators.

Most advanced chemicals are imported mainly from Germany, the United Kingdom, and the United States. In 1994, Malaysia imported over 69 percent of its water treatment chemicals. U.S. firms have a 21 percent share of these imports. Overall market growth for wastewater treatment chemicals is estimated at 20 percent annually.

In terms of technology, industries are looking for compact biological treatment systems and aeration equipment systems. Activated sludge systems and aerated lagoons are becoming increasingly popular. Although space is a constraint, demand for advanced chemicals to treat wastewater is also rising among industrial users. Some of the best opportunities are in providing advanced wastewater treatment chemicals such as polyelectrolyte flocculent and aluminum chloride, which are mainly imported from Taiwan and the United Kingdom. Malaysia continues to import much of its water-wastewater treatment chemicals since local producers can provide only the basic chemicals, such as pH adjusters and alkali-based chemicals.

In the area of wastewater monitoring, numerous independent water laboratories compete primarily on cost. DOE requires industrial facilities to provide a monthly effluent analysis, which in part accounts for the increased demand for laboratory analytical services in recent years.

In the long term, opportunities for U.S. companies will probably be in integrated environmental services, including water resource recovery, pollution prevention, and advanced process technologies.

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