Korea is one of the largest markets for environmental products and technology in the Asia-Pacific region, with a total size of approximately $7.1 billion in 1999). In the 1990s, Korea’s environmental market grew at an annual average of around 16 percent, until 1997, when the financial and economic crisis hit the nation hard. In 1999, the market regained its growth as the national economy bounced back from the economic downturn and it is expected to reach $7.7 billion in 2000.
The Korean government’s spending on environmental investment and management totaled $3.9 billion in 1999, up approximately 7 percent from $3.7 billion in 1998, as the government continued to increase investment in environmental infrastructure including sewage systems and solid waste treatment facilities. The private sector’s total environmental spending increased around 9 percent to reach $3.2 billion in 1999, due largely to the enforcement of more demanding regulations for air quality preservation, beginning in January 1999.
Korea’s environmental market has advanced under the Korean government’s strong initiative to improve the nation’s environmental quality that had deteriorated significantly over the previous several decades of rapid industrialization and urbanization. The Korean government’s current environmental betterment drive is based on its “Green Vision 21,” a long-term environmental master plan for 1996 through 2005, and the revised second mid-term comprehensive plan for 1998 through 2002. Under the mid-term plan, the Korean government is undertaking 141 infrastructure projects with a total investment of $31 billion, the great majority of which were set aside for these sub-sectors: water quality ($13.0 billion), air quality ($8.3 billion), water supply ($5.6 billion) and solid waste treatment ($3.3 billion).
In spite of large investments in the environmental infrastructure construction and the strengthened enforcement of regulations, Korea’s general environmental quality does not meet the public’s needs for better environment, particularly drinking water and air quality. The government will continue to expand infrastructure investments in the water and wastewater sub-sectors and in solid waste treatment and to increase enforcement efforts in all sub-sectors of private industry including industrial waste and wastewater treatment, air pollution abatement, and energy conservation and recovery.
Korea’s environmental infrastructure market traditionally has been dominated by Korean engineering and construction companies, which have relied heavily on foreign engineering technologies and equipment. Japanese companies remain the most important foreign player in Korea’s market for environmental products and technology due to their geographical and cultural proximity and cost advantage. In recent years, however, the United States and European environmental companies have increased their business activities and market shares, primarily by penetrating the top-end of the market. Korean engineering and equipment suppliers have upgraded their technological capabilities by localizing the advanced technologies and equipment introduced through licensing, but they still need foreign sources for sophisticated environmental products and services.
For U.S. environmental companies, the Korean market will offer greater entry and growth opportunities throughout various fields. The Korean environmental authorities have recently adopted privatization programs for some infrastructure projects. Privatization will probably further expand in the waste and wastewater treatment sub-sectors because the government budget will not fully meet the increasing demand for environmental investments. In addition, the ongoing public-sector reform drive will require private industries to expand their participation in environmental infrastructure construction and operation. In line with the government’s accelerated market opening efforts to attract foreign capital, more opportunities will emerge for U.S. environmental engineering and service companies to expand their involvement in the Korean market. These moves will also stimulate the increased adoption of U.S. environmental equipment and components as well as U.S. environmental technologies.
Through the next several years, the Korean environmental market is projected to grow at an annual average of approximately 10 percent. Most of this market growth will be registered in the private rather than the public sector as the Korean government places more emphasis on pollution prevention or reduction, reuse, recycling, and energy recovery rather than public treatment such as landfill and incineration. But the government will also continue to construct new treatment and monitoring facilities and expand or upgrade existing facilities, many of which are woefully inadequate. Until the 1990s, the growth of Korea’s environmental market was driven by the increasing demand for infrastructure construction and related environmental equipment and machinery. In the 2000s, the demand for advanced engineering and other services, such as environmental consulting, environmental cleanup, environmental restoration and recycling, will grow at a much faster pace than for conventional end-of-pipe fields.
In order to take full advantage of market opportunities and to outperform Japanese and European competitors in the Korean environmental market, U.S. industries should increase market development and promotional efforts in a more proactive way. Identifying a capable and trustful local partner will be the first step in attaining sustainable growth and long-term success in this dynamic and challenging market.