Chapter 2 - Overview of the Korean Market for Environmental Technologies
Chapter 2 - Overview of the Korean Market for Environmental Technologies
Korea has a relatively short history of environmental protection compared with major advanced nations such as the United States and the European countries. Korea’s environmental industry emerged in the 1970s, but environmental concerns were largely ignored at those times of rapid economic development, industrialization, and urbanization. For example, in the latter part of 1970s there arose serious pollution problems around the Ulsan Industrial Complex, one of the major industrial areas in Korea. Korea’s environmental market started growing after the Environmental Preservation Act of 1977 was enforced. In the 1980s, Korea’s environmental problems became more serious and developed in diverse forms as industrialization advanced at a fast pace. As a result, in 1980 its environmental law was separated into six different laws on the environmental policy, air, water, noise and vibration, hazardous substances, and environmental dispute settlement. Afterward, a number of other environmental laws followed to meet the new demands for effective management of diversifying environmental issues. Currently there are a total of 30 laws executed directly by the Ministry of Environment.
Market Opportunities and Potential
Korea’s environmental industry consists of 17 business categories and altogether approximately 12,400 companies engaging in environmental business. Based on the environmental spending data released by the Bank of Korea, the nation’s central bank, Korea’s environmental market had expanded at an annual average of 15 to 17 percent since 1990 to reach $7.7 billion in 1997, but the market shrunk to $6.6 billion in 1998 amid the financial and economic crisis that started in late 1997. In 1999, the market grew 7.8 percent over the previous year to $7.1 billion. In 1999, the government spent $3.9 billion, representing 55 percent of Korea’s total environmental expenditure, on environmental infrastructure construction and management, while the private sector spent $3.2 billion (45 percent) on environmental investment and management, broken down into $2.9 billion (40.7 percent) by industry and $0.3 billion (4.3 percent) by households. In 2000, Korea’s total environmental market is expected to grow approximately 7 percent to $7.7 billion.
In general, Korea is considered lagging far behind major advanced nations in terms of technological capability in the environmental sector. This can be largely attributed to its short history of environmental management and incapability to develop basic environmental technologies. Thus Korea’s environmental industry has largely depended on foreign sources in securing environmental technology, mainly from Japan, the United States, Germany and other European countries. The Ministry of Environment of Korea generally assesses the nation’s overall level of environmental technology to remain in the range from 30 to 70 percent of the most advanced level).
As a result of concerted efforts by both public and private sectors to improve and localize environmental technology, the Korean environmental industry now has its own technology in part of the so-called traditional “end-of-the pipe” fields, such as effluent and wastewater treatment and hazardous waste treatment. Some leading Korean environmental companies have recently started commercializing such technologies as dust filtration and desulfurization. The Korean industry still depends heavily on foreign sources of technology in the fields of engineering of core equipment and engineering/production of core parts. Most private environmental companies still tend to prefer adopting foreign technology, rather than developing original technology, when they conduct environmental projects or produce environmental equipment. In addition, Korea’s efforts to develop environmental technology are still focused on engineering and construction involving environmental infrastructure projects, such as municipal wastewater treatment plants and incinerators. Korea still remains at its infancy in more advanced fields, such as environmental cleanup, environmental recovery and recycling, which will lead the market for environmental technologies in the 21st century.
Since 1992, the Ministry of Environment has implemented a private-public joint research and development program to upgrade Korea’s environmental technology to an advanced level. Between 1992 and 1998, a total of over $300 million was spent under this program. As a result, 154 research and development (R&D) projects were completed and 294 projects were in progress as of the end of 1999. Since 1998, 140 projects have been conducted with an emphasis on commercializing the environmental technologies already developed through this program. The Ministry of Commerce, Industry and Energy (MOCIE) of Korea has also initiated and pursued environmental R&D programs in such fields as clean energy and clean manufacturing.
The General State of the Environment
The environment has become a core component in determining a nation’s international competitiveness as well as the level of national welfare. Internally, Koreans are increasingly conscious of environmental issues directly affecting their quality of life. At the same time, international pressures to preserve the environment on a global basis are accelerating. Even though the major advanced nations and international organizations call for institutionalizing higher standards of environmental protection on a global basis, the current state of environmental management in Korea does not seem to have effectively met the public’s need for a better environment. Air quality in the ozone layer continues to deteriorate in major urban areas, and water quality in the major water resources is still far less than what people desire as the number of polluting sources continues to increase. From the standard of major advanced nations, Korea still lacks environmental infrastructures such as wastewater and solid waste treatment facilities. In addition, the nation’s land development policy has not been pursued in a way to properly preserve the environment.
Environmental Investment Incentives
The Korean government offers two types of environmental investment incentives to industries: tax incentives and low-interest loans. First, the government grants customs-duty reductions or exemptions on pollution control equipment imports. In 1998, for instance, the government granted 93 cases of duty reduction or exemption in the total amount of $195 million. Second, the government offers long-term, low-interest loans to environmental investors and technology developers. In the same year, the government granted low-interest loans to industries on 1,040 environmental projects.
Near and Medium-Term Environmental Priorities
In April 1999, the Korean government confirmed the revised Second Mid-Term Comprehensive Plan for Environmental Improvement for 1998 to 2002. The original plan was established and confirmed in April 1997. As the Asian economic crisis hit the nation in late 1997, the government needed to make changes in the original plan to reflect changing economic situations. Even in the economic crisis, the government expanded the environmental budget and the number of projects in drafting the revision. This reflects the Korean government’s strong willingness to preserve the environment.
Under the revised second mid-term environmental plan, the government planned to initiate 141 infrastructure projects with a total budget of $33.2 billion for 1998 through 2002. Of the total budget, $23.9 billion were planned to come from the public fund, and $9.3 billion from the private fund. In the first mid-term (1992-1996), a total of $13.6 billion were invested on 117 projects.
The planned infrastructure investment for each sub-sector in the second mid-term (1998-2002) is:
Air quality preservation $8.9 billion
Water quality preservation $13.9 billion
Water supply management $6.0 billion
Waste management $3.5 billion
The second mid-term comprehensive plan is regarded as an action plan for the “Green Vision 21,” a long-term master plan for national environmental preservation for 1996-2005. The environmental plan is based on five strategic principles as follows:
Take “preventive,” rather than reactive, measures before pollution or environmental damage occurs.
Seek a balance between land development and environmental preservation.
Adopt the “polluters pay” principle.
Actively use economic or monetary incentives to lead the people to voluntarily make efforts to improve the environment.
Ensure transparency and public trust on environmental policy planning and implementation by sharing environmental information with the public and encouraging the public’s commitment in environmental issues.
Under the Green Vision 21, the government placed policy priorities on these issues:
Clean water and sufficient water supply
Cleaner air
Recycling and reuse of waste
Managing safety with chemical pollutants
Preservation of the natural environment
Strengthening international cooperation
Key Driving Forces
With the population approaching 47 million and a land area of merely 99,408 square kilometers, Korea has inherent problems in managing environmental issues. The rapid pace of industrialization and urbanization over the past four decades or so has further aggravated the nation’s environmental condition in major sub-sectors including water quality, air quality, solid waste management, and natural environment. Since the 1980s, the government has increased investment in environmental infrastructure and regulatory efforts to meet the growing demand for better environment from both the public and the international community.
In the meantime, the Korean environmental industry has grown mainly by localizing foreign technology and products, but Korean engineering firms and equipment manufacturers lack advanced technology required for modern environmental infrastructure, pollution control equipment, and other environmental devices. Since 1992, both industry and government have made joint efforts to upgrade environmental technology under the G-7 Environmental Engineering and Technology Development Program.
In an effort to expand the demand for the new domestic technology, the government began privatizing environmental infrastructures in 1999 and working towards attracting private capital into selected infrastructure projects. The Korean government also aims to develop the environmental industry as a strategic export industry by supporting environmental start-ups and increasing government-industry joint R&D efforts. Their future R&D efforts will be focused more on such fields as clean energy, abatement of global warming, low-pollution technologies for automobiles, environmental bio-engineering, hazardous fine chemicals, and measuring devices.
