Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

South Korea Environmental Export Market Plan

Chapter 4 - Water and Wastewater

Institutional Structure

Korea’s legal framework and government policy for the water and wastewater sub-sector saw great changes and advances in the 1990s. In 1990, the Water Quality Preservation Act spun off from the previous Environmental Preservation Act. In 1991, the Act on Treatment of Sewage, Excreta and Livestock Wastewater was separately enacted. In 1993, the Ministry of Environment established the Comprehensive Measures for Clean Water Supply for 1993-1997. At the same time, the Korean government streamlined the inter-agency complexities on environmental issues by rendering greater power to MOE to efficiently execute the policy measures. Meanwhile, a series of water pollution accidents in major rivers evoked national concerns about safety with drinking water. To effectively solve these problems, MOE took over the authority and responsibility on water supply and wastewater management from the Ministry of Construction, and it undertook those for managing drinking water from the Ministry of Health and Social Affairs.

In 1996, MOE established the Comprehensive Measures for Water Management for 1996 through 2005. Since then, MOE has implemented various measures to preserve the water environment and manage water resources. In 1998, the water quality of the Paldang Lake, the water resource for the Seoul Metropolitan area including the City of Inchon and Kyonggi-do, degraded to a serious level, and the press, non-governmental organizations (NGOs), and other opinion leaders brought this issue to the public’s attention. As a result, the Act on Improvement of Quality of Water Resources of the Han River was enacted in November 1998.

The MOE headquarters is responsible for establishing national environmental policies and action plans for environmental protection and pollution control. Of the six MOE bureaus, two are in charge of water and wastewater matters: the Water Quality Management Bureau and the Water Supply and Sewage Treatment Bureau. Each bureau consists of several divisions as follows:

There are four Environmental Management Offices (EMOs), the special executive agencies under the jurisdiction of MOE. They are the Han River Watershed EMO, the Nakdong River EMO, the Youngsan River EMO, and the Keum River EMO. Each EMO manages environmental issues for one of the four major rivers that are the main water sources in Korea. EMOs, except the Han River Watershed EMO, are responsible for all environmental matters on a regional level, including water, wastewater, air, solid waste and so forth, but some practical functions such as managing municipal wastewater are conducted by local governments. The Han River Watershed EMO is responsible for managing environmental issues involving the watershed only. Under EMOs, there are four Local Environmental Management Offices (LEMOs) and Environmental Branch Offices in eight locations.

Regional Environmental Management Offices (EMOs)

*Han River Watershed EMO*	*Nakdong River EMO*	*Youngsan River EMO*	*Keum River EMO*
Seoul Metro City	Pusan Metro City	Kwangju Metro City	Taejon Metro City
Inchon Metro City	Taegu Metro City	Chollanam-do	Chungehongnam-do
Kyonggi-do	Ulsan Metro City	Chollabuk-do	Chungehongbuk-do
Kangwon-do	Kyongsangnam-do	Cheju-do
	Kyongsangbuk-do

Source: MOE Website (September 2000)

Organizational Structure of EMOs

*Han River Watershed EMO*	*Regional EMO (Nakdong River, Youngsan River, Keum River)*
Watershed Management Bureau - Watershed Planning Division - Financial Planning Division - Water Supply Source Management Division - Regional Cooperation Division - Measurement and Analysis Division - General Affairs Division Han River Environmental Inspection Board	Operation Bureau - Operation Division - Natural Environment Division - Compliance Monitoring Division - Monitoring and Analysis Division - Administrative Management Division Environmental Branch Offices (8) Local Environmental Management Offices (4)

Source: MOE Website (September 2000)

Locations of Local Environmental Offices

*Local environmental* *management offices* *(LEMO)*	*Environmental Branch Offices*
Kyong-In (Seoul and Inchon) Wonju, Kangwon-do Chonju, Chollabuk-do Taegu Metro City	Kumi, Kyongsangbuk-do Pohang, Kyongsangbuk-do Ulsan Metro City Chongju, Chungchungbuk-do Yeosu, Chollanam-do Cheju, Cheju-do Ansan, Kyonggi-do Chunchon, Kangwon-do

Source: MOE Website (September 2000)

The framework of the current water environment policy consists of five elements:

Pollution prevention
Pollution abatement and reduction
River environment management
Surveillance and inspection of discharging establishments
Monitoring and assessment

Environmental Status of the Four Major Watershed Regions (1999)

*Region*	*Han River*	*Nakdong River*	*Keum River*	*Youngsan River*
Main watersheds Total length of watersheds (km) Area (sq. km) Annual average precipitation (mm) Population (million) Livestock head (thousand) Number of effluent facilities Ratio of wastewater treatment of total effluent Main water resources	BukHan River NamHan River Ansung-cheon 481.7 21,200 1,286 23.5 940 17,999 76.4 Paldang Lake Chamsil Water Resource	Nakdong River Taehwa River Hyongsan River 521.5 32,280 1,137 13.2 3,600 12,058 56.3 Mulgeum Maeri	Keum River Mankyong River Dongjin River Sapkyo-cheon 395.5 17,767 1,268 5.8 4,270 6,089 31.4 Daechon Lake	Youngsan River Seomjin River Tamjin River 136.0 16,886 1,400 4.3 2,820 3,793 43.8 Juam Lake

Source: “1999 Environment White Paper,” MOE, October 1999

Environmental Infrastructure

For the period 1993-1997, the government’s total spending on water and wastewater infrastructure projects totaled approximately $21 billion, of which $9.7 billion were spent on wastewater treatment, sewerage and other water quality improvement projects, and $11.1 billion on water supply and purification projects.

Under the current long-term plan, the Comprehensive Measures for Water Management for 1996-2005, MOE planned to invest approximately $25 billion through this period on infrastructure projects for water quality improvement. The goals of this long-term plan are as follows:

Major Goals of the Comprehensive Measures for Water Management (1996-2005)

*Indicator*	*1996*	*2005*	*Remark*
Ratio of municipal wastewater treatment (%) Ratio of livestock wastewater treatment (%) Ratio of industrial wastewater treatment	50 42 73	80 74 90	Based on population served by public treatment Based on public treatment Based on public treatment in industrial estates

Source: “1999 Environment White Paper,” MOE, October 1999

The tables below show the status of environmental infrastructure and investments in infrastructure projects in 1998:

Status of Environmental Infrastructure (1998)

(Capacity in thousand tons per day)

*Type*	*Total*	*Han River*	*Nak-dong River*	*Keum River*	*Young-san River*	*Other*
Total	No. plants Capacity	426 17,350.9	102 8,116.1	90 3,250.5	55 1,111	22 706.3 157 4,167.1
Wastewater treatment	No. plants Capacity	114 16,617.6	45 8,097	20 2,917	10 995	5 700 34 3,909
Night soil treatment	No. plants Capacity	183 28.4	45 10.6	32 3.6	20 1.5	8 1.0 78 11.7
Industrial waste-water treatment	No. plants Capacity	119 702.1	7 6.6	36 330	24 114.2	9 5.3 43 246
Livestock wastewater	No. plants Capacity	10 2.8	5 1.9	2 .3	1 .3	- - 2 .4

Source: “1999 Environment White Paper,” MOE, October 1999

Investments in Environmental Infrastructure Projects in 1998

*Type*	*Value* *(KrW billion)*	*Number of projects, etc.*	*Capacity* *(thousand tons)*
Total	2,454.6	32	1,581.3
Municipal wastewater treatment	1,322.8	21	1,578.6
Sewerage maintenance	915.0	(4,121*)	n.a.
Night soil treatment	44.0	7	1.2
Industrial wastewater treatment	85.9	1	1.0
Livestock wastewater treatment	41.4	3	.5
Cleaning of polluted rivers	45.5	(23**)	n.a.

*total length in kilometers; ** number of rivers; n.a. not applicable
Source: “1999 Environment White Paper,” MOE, October 1999
Note: Average exchange rate in 1998: US$1 = won 1,399

Water Supply

In Korea, water supply systems are classified into three categories: General (municipal), Industrial, and Private. The general or municipal water is further broken down into three categories: local, temporary, and regional. Local governments are responsible for supplying local municipal water and temporary water. The national government (the Ministry of Construction and Transportation) is responsible for supplying regional municipal water, but the management of regional municipal water is commissioned to the state-run Korea Water Resource Management Corporation. Building and operating local municipal water and temporary water systems require approval from the Ministry of Environment and the relevant regional government.

Thus local governments are responsible for managing all practical matters in the local level relating to the municipal water supply service, including planning water supply, maintaining and expanding water supply facilities, and determining fee rates. The national government is responsible for establishing comprehensive plans and policy measures for water supply and for supporting local governments on technological and financing issues. The Korea Water Resource Management Corporation manages all practical matters involving regional water systems based on the national government’s plans.

Until the mid-1990s, Korea’s water supply policy focused on urban areas. In Korea’s seven largest cities, around 98 percent of the population was served by the municipal water system in 1998, compared with 20.8 percent in agricultural areas and 88.6 percent in smaller cities. Over the next several years, the government plans to expand water supply capacity for these less developed areas.

Water Supply Development Plan for Agricultural Areas

	*1995-1998*	*1999*	*2000-2004*	*Total* *(1995-2004)*
No. of projects	78	12	125	215
Value of investment (KrW billion) Value of investment ($ million)	224 228	87 73	489 445	800 770

Source: “1999 Environment White Paper,” MOE, October 1999

Water Supply Development Plan for Medium and Small Cities

	*1995-1998*	*1999*	*2000-2004*	*Total* *(1995-2005)*
No. of projects	50	8	23	81
Value of investment (KrW billion) Value of investment ($ million)	243 247	144 121	530 482	917 883

Source: “1999 Environment White Paper,” MOE, October 1999

Water Supply Development Plan for Islands

	*1995-1998*	*1999*	*2000-2002*	*Total* *(1996-2002)*
No. of projects	36	8	21	65
Value of investment (KrW billion) Value of investment ($ million)	38 39	22 18	92 84	152 146

Source: “1999 Environment White Paper,” MOE, October 1999

As the quality of water sources deteriorated significantly, the Korean government decided to adopt advanced purification technology and equipment at 17 purification plants between 1996 and 2002. By 1999, 10 such projects were completed and the remaining 7 projects will be completed by 2002. The total budget for the 17 projects is $364 million. In addition, the government plans to spend a total of $2.8 billion between 2000 and 2011 to improve existing water supply facilities such as water pipelines, reservoirs, and purification plants.

Drinking Water

Korea’s current standard for municipal drinking water quality involves 45 different chemicals. Based on the recommendation of the World Health Organization and the United States standard, MOE has checked 301 chemicals at major purification plants nationwide since 1989 and continues to adopt higher standards to ensure high-quality municipal drinking water.

The government began regulating bottled drinking water in 1995 under the responsibility of regional governments. Currently, 51 chemicals are subject to the standards for bottled drinking water. In 1999, there were 73 licensed manufacturers of bottled water, and total sales were 940,356 tons or $82 million in In Korea, there are more than 3 million purifiers installed at homes since many consumers do not trust the quality of drinking tap water. The government began to regulate manufacturing, importation and sales of purifiers in 1997. The annual market size of home purifiers for 1998 was estimated at 260,000 units (including 30,000 units of imports) or $188 million, including $21 million of imports. The estimated market size for 1999 is $250 million.

Municipal Wastewater

Local governments are responsible for building and operating public sewage systems, while the Ministry of Environment has the authority to approve municipal wastewater treatment projects in consultation with the Ministry of Construction and Transportation. Some local governments also use their own companies to operate municipal sewage systems. Regional governments are responsible for issuing approval for sewerage pipeline projects.

The volume of municipal wastewater effluent has increased recently and now exceeds 16.3 million cubic meters a day. The Korean government began to increase investments in municipal wastewater treatment facilities in the earlier 1990s under its comprehensive measures to supply clean water for 1993-1997. As a result, there were 114 public sewage treatment plants operating nationwide in 1998, which treated 65.9 percent of the total municipal wastewater, up from only 38.8 percent in 1992.

In 1999, the Korean government invested approximately $1 billion for 44 sewage treatment projects (36 new projects and 8 expansion projects) for a total daily capacity of 1 million cubic meters. The government plans to raise the public treatment rate to 80 percent in 2005 under the current long-term water quality management plan. To that end, the government is building 165 new sewage treatment plants to increase the nation’s capacity by 12.7 million cubic meters per day by 2005. The tables below show the development of wastewater treatment infrastructure since 1992.

Trends in Public Sewage Treatment

	*1992*	*1994*	*1996*	*1997*	*1998*
Population – a) (thousand) Population treated – b (thousand) Number of plants Percentage of treatment (b/a) (%) Total capacity (thousand tons per day)	44,569 17,279 26 38.8 5,815	45,512 19,081 57 41.9 9,391	46,426 24,420 79 52.6 11,452	46,878 28,559 93 60.9 15,038	47,174 31,099 114 65.9 16,616

Source: “1999 Environment White Paper,” MOE, October 1999

Industrial Wastewater

Since the Water Quality Preservation Act was enacted in 1990 to effectively manage industrial wastewater, the Korean government has amended this act seven times to cope with changing environmental conditions and needs.

Based on this Act, the government manages industrial wastewater mainly through the following enforcement methods:

Regulations on construction permits for wastewater discharging facilities
Legal standards for industrial effluents
Guidance and inspection to make sure that polluters conform to the standards
Imposing discharge fees
Construction and operation of industrial waste treatment facilities in major industrial estates

Between 1983 and 1991, the national government built 6 public industrial wastewater treatment plants in major national industrial estates. Since then, the government adopted the “polluters pay” principle which requires polluters to build pollution treatment facilities with their own fund. Beginning in 1997, the government provides subsidy covering 50 percent of the total fund required for each project in selected industrial estates.

There are 39 industrial wastewater treatment plants nationwide with a total daily capacity of 728,000 tons (based on end-1998 data), representing approximately 80 percent of total industrial wastewater discharge. The government plans to have a total of 53 industrial wastewater treatment plants (i.e., 14 new plants) operating to raise the percentage of public treatment to 90 percent by 2005.

The Ministry of Environment surveys businesses discharging industrial wastewater each year and maintains a database. The number of discharging businesses grew to 39,939 in 1997 but declined to 37,621 in 1998 amid the economic crisis. Discharging businesses are categorized into five classes based on the volume of wastewater discharge. Major polluting industries are transportation equipment, metal, food and beverage, textile, leather, and paper. The following tables show the results of the survey conducted by the Ministry of Environment.

Status of Industrial Wastewater Discharge by Watershed Region (1998)

	*Han River*	*Nak-dong River*	*Keum River*	*Young-san River*	*Coastal areas*	*Other*	*Total*
Number of businesses Volume of discharge (m3 per day) BOD generated (kg per day) BOD discharged (kg per day)	10,558 384,416 380,227 13,042	5,690 490,620 511,914 23,070	3,137 195,923 282,741 7,707	1,381 53,574 84,786 2,105	11,206 1,140,342 971,145 36,167	5,649 349,305 398,264 15,166	37,621 2,614,180 2,629,077 97,257

Source: “1999 Environment White Paper,” MOE, October 1999

Number of Industrial Wastewater Discharging Establishments

*Year*	*Class 1* *2,000 m3* *or more per day*	*Class 2* *700 to less than 2,000 m3 per day*	*Class 3* *200 to less than 700 m3* *per day*	*Class 4* *50 to less than 200 m3* *per day*	*Class 5* *Less than* *50 m3* *per day*	*Total*
1995 1996 1997 1998	27,754 28,102 39,939 37,621	272 279 275 241	391 428 427 433	681 869 986 1,034	2,452 2,223 2,002 2,036	25,681 24,213 36,249 33,877

Source: “2000 Environmental Industry Yearbook,” Environmental Management Research Center, Seoul, Korea, December 1999 (Original Source: MOE)

Market Size, Competitive Situation, and Market Opportunities

Korea’s market for the water and wastewater sub-sector was estimated at $3.3 billion in 1999, representing 46 percent of the whole environmental market valued at $7.1 billion. In the same year, the government spent $2.2 billion for managing water quality and wastewater, and industries spent $0.9 billion for pollution control in the water and wastewater sub-sector.

Over the last several years, the Korean government’s investment in water and wastewater infrastructure increased from around $1.2 billion in 1995 to approximately $2 billion in In 1998, the equivalent government investment declined to $1.6 billion as the nation fell under the economic crisis. In 1999, the government’s investment in water and wastewater infrastructure increased 6.8 percent to mark $1.7 billion.

In the industry sector, total investment in wastewater treatment projects peaked at $498 million in 1996. It declined to $363 million in 1997 and $236 million in 1998, when Korean industries went through a severe economic downturn and corporate restructuring. In 1999, their investment in wastewater facilities further declined to $216 million, but they increased operational spending with environmental facilities by 9.8 percent from $553 million in 1998 to $607 million in 1999 as they expanded business activities.

MOE plans to invest a total of $230 million in developing environmental infrastructure for wastewater treatment between 2000 and 2005, consisting of $214 million in sewage treatment plants and $16 million in livestock wastewater treatment facilities. The budget for water quality and wastewater management allocated to the Ministry of Environment for 2000 is $364 million, up by 15 percent from $323 million in 1999.

According to the Korea Environmental Industry Association, in 1998 Korea’s pollution control industry conducted 1,427 water pollution control projects, both public and private, valued at $718 million. There are 775 companies that are licensed as pollution control contractors. Of these licensed contractors, 574 firms are qualified for the water/wastewater field. Major contractors typically hold licenses for all the fields of pollution control: Air, Water, and Noise/Vibration. There are 47 such general environmental contractors, many of which are divisions of major engineering and construction companies. Major players in the pollution control field are engineering and construction companies affiliated with Korean conglomerates, such as Samsung, Hyundai, LG, Lotte, Ssangyong, Keumho, Doosan and Dongbu, and several leading independent construction firms, such as Dong-Ah, Namkwang and Limkwang.

Foreign firms usually participate in pollution control projects in Korea, including sewage treatment infrastructure projects, as suppliers or subcontractors to Korean firms. They provide technology and/or equipment for specific areas, such as purification and sludge treatment, where Korean companies lack technological capability. Korea’s environmental technology has advanced largely through licensing from foreign firms. By 1996, there were 76 cases of license agreement reported in the water pollution control field. (Note: Statistics for licensing are not available for the years after 1996 when licensing arrangements were deregulated.) In the past, the market for foreign pollution control technologies, including water pollution control, was dominated by Japanese firms with an estimated share of 50 to 60 percent, followed by U.S. companies representing 20 to 25 percent. The remaining 20 percent or so were originated from European firms.

U.S. environmental companies that have been active in Korea as technology and equipment suppliers in the field of water and wastewater include CH2M Hill (water treatment), Romm & Hasy (filtering machines), Hydranautics (membrane products), Filterk Corp. (BMF products), VMT (pure water treatment), and Aeromix Systems (surface aerator). Japanese and European suppliers include Led Italia (Italy), Danish Hydraulic Institute (Denmark), Daiki (Japan), Rochem (Germany), TIA (France), Daiwa (Japan), NCE (Japan), Biothane System (Netherlands), Toyobo (Japan), Denka Engineering (Japan), Trailigas (France), Nitto Denko (Japan), Suirei (Japan), Nittetsu Chemical Engineering (Japan), and YIT (Finland).

Joint Venture and Licensing

Recently, several foreign firms have entered the Korean environmental infrastructure market by establishing partnerships with major Korean contractors. In January 2000, the Construction Division of Samsung Corporation announced that the company signed a joint venture agreement with Operation Management International, Inc. (OMI), a subsidiary of CH2M Hill that is a U.S.-based multinational engineering company, in order to pursue sewage treatment projects to be privatized. According to Samsung, OMI will not only provide financing but will also transfer advanced technologies for sewage treatment. LG Engineering & Construction has recently introduced technologies from several Japanese and U.S. companies in the fields of sewage treatment and solid waste incineration. Hyundai Engineering & Construction has pursued to form a joint venture with Generale Desaux of France, which specializes in water and wastewater treatment, for an infrastructure project in Kyongsangbuk-do.

Privatization

The Korean government decided to introduce private funds for local sewage treatment projects in the areas where the local government is not able to secure the local fund. The Ministry of Environment has selected 16 sewage treatment projects to be privatized. The privatization of a sewage treatment project is determined by an agreement among MOE, the local government, and the state-run Korea Environmental Management Corporation KEMC provides technical and operational supports to local governments in managing environmental infrastructures. As is the case with OMI partnered with Samsung, the privatization plan offers good opportunities for U.S. companies to enter or grow in the Korean environmental infrastructure market.

Upcoming Public Sewage Treatment Projects (2000-2005)

	*2000*	*2001*	*2002*	*2003*	*2004*	*2005*
Capacity (Thousand tons per day) Number of plants (projects) Planned investment (KrW billion) Planned investment* ($ million)	1,834 36 1,497 1,361	861 30 1,464 1,331	1,564 33 1,540 1,400	886 18 1,625 1,447	1,827 18 1,722 1,565	5,833 65 1,975 1,795

*Average exchange rate projection for 2000 through 2005: US$1 = won 1,100
Source: “2000 Environmental Industry Yearbook,” Environmental Management Research Center, Seoul, Korea, December 1999 (Original Source: MOE)

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