The Regional Environmental Center for Central and Eastern Europe (REC) was invited by the Foreign Commercial Service and the Office of Environmental Technologies Exports of the US Department of Commerce to conduct a survey of demand for environmental technologies in the Czech Republic, Hungary, Poland, and Slovakia.
The main objective of the survey was to identify the demand for environmental technologies in each of the above countries. The secondary objectives of the project were to gauge the competitiveness of US environmental technology suppliers, and to assess how firms operating in the surveyed countries perceive American environmental technologies.
The content of the report is largely based on formal personal interviews with a cross-section of senior-level actors in the environmental technology market, principally from environmental businesses. Additional interviews were held with selected government agencies and with major environmental technology R&D centers. Up to 50 professionals were interviewed in each country, with about two-thirds from the business sector.
The research was carried out between October ‘96 and April ‘97. Overview of environmental problems and priorities
In all the surveyed countries, severe environmental damage has been sustained. The development of heavy industry and the energy sector based mainly on coal are among the key causes of pollution. Although there has been a decline in manufacturing activities, and a corresponding reduction in environmental pollution, environmental degradation still continues.
While air pollution and poor drinking water quality are the most frequently cited environmental problems, management of wastewater and solid waste, pollution from the transport sector, and environmental degradation related to the energy sector also represent major challenges. Environmental pollution is particularly heavy in industrialized areas.
In practically all the surveyed countries, the two major environmental priorities set by the government are air pollution control, and the protection of water resources and drinking water quality improvement. National environmental policies focus on emission sources, with the power generation sector and other large industrial emission sources (e.g., the chemical industry) being the main target of regulations. As regards protection of water resources, the primary goals are to increase the percentage of the population connected to sewage disposal facilities, increase the proportion of wastewater treated by biological processes, and to provide treatment of wastewater from industrial sources.
In the near future, air pollution control will continue to be a major priority area, although there is expected to be a gradual shift in focus towards small and medium-sized air pollution sources. Air pollution from traffic will grow in importance, and, in general, environmental impacts of the transport sector are expected to be more vigorously addressed. Water management, and particularly wastewater treatment, are likely to remain priority areas. The construction of modern landfills is an expected long-term opportunity area. Accumulated hazardous waste that needs treatment and removal, and waste disposal sites that need remediation are likely to remain a significant priority. Environmental expenditures
The distribution of environmental expenditures corresponds well with the priorities outlined above. Total environmental spending from both government and private sector in the surveyed countries exceeded 3 bln USD in 1995. It is expected that, in actual numbers, environmental expenditures will grow at the rate of between 6 and 12% annually. A major change is expected in the financing of environmental protection. Currently, the main sources of funds for environmental projects include the state budget (including State Environmental Protection Funds), municipal budgets, and investors’ own funds. In the coming years, the share of business contributions is expected to rise sharply, while contributions from the state budget are expected to decrease.
The bulk of total environmental spending is allocated to air pollution activities, and water and wastewater projects. Waste management activities are the third largest priority area. Most state financing tends to be allocated to the construction of wastewater treatment and sewage facilities, and public water supply projects, while the remainder is mainly allocated to air protection and waste management projects. Costs of projects in the latter two categories are covered mainly by individual industrial plants and municipalities. Demand for environmental technologies
The major end-user of environmental technologies as indicated by the survey are municipalities, the energy and power generation sector, and the chemical industry. Other major end-user categories were media specific. Aside from the ever-present financial constraints, purchasing environmental technologies does not pose any significant problem because of the wide range of products available on the market. In the opinion of many respondents, the environmental technology market is in fact saturated.
The demand for environmental technologies tends to be driven by current priorities in state environmental policy, and by applicable regulations. Overall, demand for environmental technologies was identified to be moderate in most categories, although some areas were identified where demand was high. Technologies related to waste management were high in demand in all countries except for the Czech Republic. Energy-related environmental technologies were found to be in high demand in Hungary and Poland, while technologies for water and wastewater treatment were in high demand in Poland and Slovakia. Demand in the category Noise, Vibration, and Occupational Health and Safety was much lower.
Technologies related to industrial wastewater and hazardous waste featured prominently among high-demand categories. Municipal wastewater related technologies were also in high demand. It is expected that within the next several years, the focus will remain on end-of-pipe environmental technologies. There will be a growing demand, however, for pollution prevention and waste minimization technologies. Information channels
In the surveyed countries, there are no effective formal channels for information concerning project opportunities. Personal and professional contacts, participation in environmental fairs, and business and environmental publications are among the primary sources of information used. Ministries of environment and other governmental bodies tend not to be considered reliable sources for project opportunities.
Each country has recently enacted public procurement legislation that requires the formal announcement of tenders for all planned acquisitions involving the use of public money. However, at this point, most experts were skeptical as to its usefulness in ensuring the availability of information on project opportunities. Competitiveness of foreign technologies
Most experts only rely on the use of best-technology or best-practice criteria when making purchasing decisions. The country of origin (domestic vs. foreign) of a particular environmental technology clearly is not a determining factor. There was a slight preference for buying foreign-manufactured environmental technology from domestic representatives compared with buying directly from the producer abroad. Product quality and reliability, warranty conditions, good value for money, lowest possible cost outlay in achieving the required standards, previous experience with a supplier, and references, are significant factors affecting purchasing decisions.
The high quality, and the reliability and durability of products were the main advantages of foreign environmental technologies compared to domestic products. Other, albeit less significant advantages, included “user-friendly technology, and “easy to customize and adapt for specific local needs.”
The greatest barrier to buying environmental technology from abroad was the high price. Many respondents were seriously concerned about the access to technical services, and considered it a significant disadvantage of foreign technologies. Two marketing-related problems were indicated as significant barriers by respondents, namely: “too little information about suppliers”, and “the lack of reliable product information.”
The environmental technology industry in the surveyed countries is clearly limited, and a common perception is that most high-quality products come from abroad. A significant number of Western environmental technology firms are active in the surveyed countries, through a permanent local presence, or by direct sales of their equipment. The foreign presence is particularly strong in the waste management sector, water supply, and wastewater treatment.
The market in all the countries is well penetrated by foreign suppliers, with firms from Austria and Germany most active and best known across all major technology sectors. German and Austrian firms hold the lead in supplying environmental technologies in terms of both quantity and quality, according to survey respondents. Other major foreign competitors varied depending on country and sector. French, and Danish companies had a strong local presence. French companies, along with American and Scandinavian, were well represented in the water and wastewater sector. Scandinavian (primarily Swedish) and American firms played an active role in the energy and air sectors. However, no single company dominates in any single country. Prospects for US Technologies
The prevailing picture emerging from the survey is that American environmental technologies are not widely known in the surveyed countries. However, American environmental technologies are considered reliable, durable, and of good quality, and are generally competitive with West European products in terms of price and quality. Increased exports are hampered by the limited direct market presence of US suppliers, and their poor knowledge of the CEE markets compared to suppliers from the EU. Other, less significant barriers, include compatibility problems resulting from differences in measurement systems, and the lack of reduced tariffs which are applied to EU products.
The key factor, indicated by the survey, behind a successful sale of American environmental technologies is an in-country representative office, and a reliable after-sales service. It is almost essential also to enter the market through an experienced local business partner. It was found that in most cases, the technical and environmental skills of local environmental professionals are well developed, and many firms are increasingly professional in their management and marketing approach.
Further improvements in sales prospects can result from an attractive financing package, such as low-interest foreign credit lines, partial refinancing of foreign deliveries, etc. There clearly is room for improvement in the marketing and circulation of information on foreign environmental technologies and suppliers. The significant influence of various forms of US assistance in environmental activities should also help the transfer of American environmental technologies. Conclusions
In conclusion, the environmental technology market in the surveyed countries is competitive, but opportunity exists for further foreign suppliers to become active in the region. The majority of purchases are based on the best-technology criteria, and the country of origin is not deemed a critical factor. Suppliers can expect market success if their products are of high quality and reliability (including warranty conditions).