Hong Kong: Environmental Market Analysis Addendum
Suggested Printing Layout: Landscape
|
Industry |
Value of
Domestic Exports, 1997 (billion HK$) |
Percent of
Total Exports |
|
Clothing |
$72.2 |
34.2% |
|
Electronics |
$56.5 |
26.7% |
|
Others |
$45.9 |
21.7% |
|
Textiles |
$12.7 |
6.0% |
|
Watches & Clocks |
$10.8 |
5.1% |
|
Chemicals |
$8.1 |
3.8% |
|
Jewelry |
$5.3 |
2.5% |
|
Source: Hong Kong Census & Statistics Department |
Industry Priority Ranking for US-AEP Business Development
|
Rank |
Industry |
Note |
|
1 |
Food & Beverage
Manufacturing |
Highest regulatory pressure, moderate economic
performance |
|
2 |
Textiles & Clothing |
Strong economic performance, significant regulatory
pressure |
|
3 |
Printing & Publishing |
Strongest economic performance, moderate regulatory
pressure, strong prospects for future growth |
|
4 |
Fabricated Metal
Products |
Strongest economic performance, moderate regulatory
pressure, unknown industry size |
|
5 |
Electronics |
Poor to moderate economic performance, unknown
regulatory pressure, large industry size |
|
6 |
Plastics |
Poor economic performance, low regulatory pressure,
small industry size |
|
7 |
Electrical Products |
Poorest economic performance, unknown regulatory
pressure, small industry size |
|
8 |
Restaurants |
Non-manufacturing, large number of small firms,
extremely high regulatory pressure |
|
9 |
Garages/Repair Services |
Non-manufacturing, large number of small firms,
extremely high regulatory pressure |
|
Source: ThomasAssociates, San Diego, CA |
Food and beverage processing/manufacturing is the highest priority target
for US-AEP business development efforts. Although this segment has shown
only moderate in-crisis economic performance, it was the overwhelming leader
in environment-related complaints in 1997. Also, Food & beverages is a
relatively large domestic industry. Environmental complaints were extremely
high in both the air and liquid waste media, implying a variety of business
development opportunities for environmental firms.
The second highest priority industry encompasses textile and cothing
manufacturing. Together, these two related segments accounted for
approximately 40% of the total value of output for all manufacturing
industries included in this analysis. The extremely large size of this
segment, along with its moderate to high economic performance and moderate
to high regulatory pressure make it an important focus for business
development activities. The textiles & clothing segment also had very high
numbers of complaints in both the air and liquid waste media, ranking 3rd
and 4th respectively.
Between 1997 and 1998, the Printing and Publishing industry suffered the
least decline in value of production (-1.4%) of all manufacturing industry
sectors.
Hong Kong is the world�s fourth largest printing and publishing center,
home to more than 30 daily newspapers; it is also the advertising center for
Asia. The printing sector, as a whole, is the second largest employer in
Hong Kong�s manufacturing industry and the third largest industry in terms
of output. In 1997, over 33 newspaper printing companies served the Hong
Kong market, employing over 8,500 people. Gross output totaled more than
US$880 million, representing 22.3 percent of the entire printing sector.
The future for the Hong Kong newsprint market appears to be very
promising. The demand for newsprint has been on the rise. Hong Kong
publishers are determined to develop the mainland China newspaper market.
Hong Kong�s flourishing newspaper printing sector is attributable to the
fact that Hong Kong offers a stable economic and political environment for
printers, including freedom of press. Major international publishers, such
as the Asian Wall Street Journal and International Herald
Tribune have established regional printing bases in Hong Kong. Indeed,
the International Herald Tribune and USA Today are both
sent via satellite to Hong Kong for printing. In the one-year period after
the reversion of Hong Kong to China, Beijing has honored its commitments to
the "one country, two systems" concept and Hong Kong maintains its high
degree of autonomy. It is widely considered that China, especially southern
China, will gradually open to Hong Kong�s magazines and newspapers. At that
time, instead of a potential readership of six million, Hong Kong�s
newspaper publishers will see a market of over 30 million.
In 1997, Hong Kong imported newsprint valued at US$209 million, and 13%
of these imports were from the United States. Before the recent economic
downturn, the total market for newsprint was expected to grow at rates of
greater than 5% per annum. With the current downturn, it is difficult to
make projections at this time.
Printing & publishing has been Hong Kong's star performer during the
ongoing economic crisis and is likely to do well into the future. The
segment shows moderate but significant enforcement pressure in air and
liquid waste, ranking 8th of 18 and 8th of 15 respectively.
Fabricated metal products ranks as the fourth highest priority for
business development because of its strong in-crisis economic performance
and moderate regulatory pressure. Metal fabricators were the targets of the
5th largest number of air-related complaints but received few complaints
regarding liquid waste. Environmental businesses should consider air-related
opportunities in this segment. Unfortunately, data is not available
describing the size of this manufacturing segment. An attempt to quantify
this segment's contribution to the total value of manufacturing is
recommended.
The EPD does not report enforcement activity for the electronics or
electrical products segments. For the purpose of this study, estimates were
made based on the environmental compliance track records of similar
industries in other economies. This analysis placed electronics under
moderate regulatory pressure. The size of the electronics segment is large,
representing nearly 31% of the total value of output for all manufacturing
industries included in this analysis. The segment would be a higher priority
for business development efforts if not for its relatively weak in-crisis
economic performance. Electrical products was the poorest in-crisis economic
performer and is a relatively small industry segment, making it a low
priority target for business development.
Although plastics & rubber manufacturers were 7th of 18 industrial
segments in terms of number of air-related environmental complaints, the
segment was not among those tracked under liquid waste. As a result, the
segment's overall regulatory pressure score is quite low. In addition, the
in-crisis economic performance of plastics & rubber has been relatively
poor. The small size of this segment also makes it a low priority for
business development.
Demand for environmental solutions among restaurants deserves special
attention. Restaurants are a service segment consisting of a large number of
very small businesses. For this reason, Restaurants were not included in the
main analysis presented above. However, as a segment, restaurants were the
focus of the single largest number of environment-related complaints - all
in the air medium. Available figures for the size of the restaurant industry
show it to have a total 1996 value of approximately HK$27 million, on par
with that of the printing & publishing segment.
Another service segment not included in this report's main analysis is
comprised of garages & repair services. Similar to restaurants, data is not
available for the size of the garages & repair services industry. However,
like restaurants, this segment shows very high rates of environmental
complaints, with the 3rd largest number in both air and liquid waste. The
segment undoubtedly consists of a large number of small companies.
The West Rail project of the Kowloon and Canton Railway (KCR) is under
construction. The West Rail is a major new link that will open
up the north-western part of the New Territories, an area previously only
reachable by road. The first phase, to be finished by 2003, will run from
West Kowloon to Tuen Mun, a distance of 30.5 km. The rail network will be
further enhanced by the Ma On Shan railway. Mr. Tung said he hoped that
construction of this project would begin in 2000.
Hong Kong�s Mass Transit Rapid (MTR) network will also be extended during
the forecast period, with the construction of the extension of the Tseung
Kwan O MTR line likely to be started before the end of 1998. The three
projects are estimated to cost HK$110 billion (US$14.2 billion), and would
begin to operate between 2002 and 2004.
Hong Kong�s roads will also be improved during the forecast period. Mr.
Tung outlined four major road projects on which construction is due to begin
between 2000 and 2004. The air infrastructure, already vastly improved with
the opening of the new International Airport at Chek Lap Kok in July 1997,
will be further developed with the opening of the airport�s second runway,
likely to occur in 1999.
Another area of emerging regulatory focus is regular environmental
reporting by private industry. Although there is no requirement that private
firms provide environmental disclosure, the EPD is attempting to encourage
voluntary reporting on ongoing operations. EPD sees environmental reporting
as an important part of building good corporate will, encouraging public and
investor support and reassuring potential business partners.
In October 1997, the government proposed a waste reduction plan that
includes a policy of waste avoidance, minimization and material recycling.
The goals are to
- reduce the amount of waste requiring disposal
- prolong the service life of landfills
- reduce the costs involved in transporting, disposing and treating the
waste.
To address Hong Kong�s worsening solid waste management problems, the
Planning, Environment and Lands Bureau has proposed a Waste Reduction
Framework Plan (WRFP) intended to conserve precious landfill space and
decrease overall waste management costs. The plan promotes waste
reduction programs and diverts waste to new waste-to-energy incinerators and
composting plants. The PRLB has estimated waste management costs through
2007, summarized below:
Total Waste Management Cost with WRFP (in $HKD millions
at 1996 prices)
|
1998 |
1999 |
2001 |
2003 |
2005 |
2007 |
|
2,209 |
2,247 |
2,313 |
2,456 |
2,817 |
2,998 |
|
Source: Planning, Environment and Lands Bureau |
To the extent that the WRFP is successfully implemented, there may be
significant opportunity for providers of recycling and waste reduction
technology/services and waste-to-energy facilities design and management. In
addition, if the WRFP postpones the closure of existing, near-capacity
landfills, it will ensure continued demand for landfill-related equipment
and services.
Other changes in waste-related regulation include refinements of fee
schedules for use of public waste facilities and the disposal of chemical
wastes. Increased fees faced by industrial polluters should increase demand
for waste reduction and handling technologies and services
Current developments in air regulation include the adoption of controls
on perchloroethylene emissions from dry cleaning facilities and controls on
benzene emissions during the loading of storage tanks at gasoline filling
stations. New laws are slated for implementation in 1999.
Current developments in noise regulation include the adoption of expanded
controls on automobile noise and a Noise Control Bill amendment requiring
the phasing out of diesel, pneumatic and steam-powered piling hammers during
construction in urban areas. New vehicle standards are currently under
review and piling hammer restrictions are now being implemented. The extent
to which these changes will result in new business opportunities for
environmental firms is unclear. There may be increased demand for vehicle
noise reduction equipment. With respect to construction noise, it is unclear
how construction firms will adjust. Alternative construction technologies
may be needed but the new technologies are not necessarily considered
environmental.
In 1996, the government implemented the water quality control zone (WCZ)
effluent discharge regulations for Hong Kong waters. However, enforcement of
the effluent discharge guidelines is taking effect slowly as a government
grace period expires and as enforcement becomes more stringent. The Hong
Kong Industry Department estimates that the total cost of compliance for
Hong Kong's 2,000 factories now affected by WCZ will reach US$200 million,
spread over a period of 5-8 years. The key industries needing wastewater
control equipment are electroplating, printed circuit board, bleaching and
dyeing, and food processing.
Water-related regulatory changes anticipated for 1999 are focused on
administrative improvements in the licensing control framework. The intended
outcome is more efficient monitoring and enforcement. This may result in
greater pressure on polluters who may, in turn, make investments in
water-related technologies.
In 1997, air-related complaints accounted for 44% of total complaints,
17% of convictions, but only 10% of the total value of fines. Nearly half of
air complaints were for vehicle emissions. Of the remainder, 20% were
focused on commercial (or retail) sources, industrial sources accounted for
45%, "nuisance" sources (e.g., construction, open burning, and
slaughterhouses) accounted for 33% and utilities accounted for less than 1%.
The most prosecuted air-related offense was emission of smoke, followed by
defective engineering, illegal installation/alteration and failure to use
required equipment. The opportunity for air-related environmental firms may
therefore lie in emissions reduction through better engineering, process
improvement and technical compliance.
Among industrial sources, food manufacturers and garages received the
most air-related complaints. (Food manufacturers accounted for 3% and
garages accounted for 2.5% of total air complaints.) The fact that "other"
industries accounted for as much as 13% of total air complaints probably
indicates that a significant number of air complaints were directed at
small, less well-defined industrial operations outside the major industry
categories. This may present a challenge for environmental technology
providers who may find it difficult to identify and market to potential
buyers.
Another category of air pollution sources tracked by EPD consists of
"nuisance" sources. Complaints in this category focused on construction (9%
of total air complaints), slaughterhouses (4% of total air complaints), and
open burning (4% of total air complaints).
Perhaps the most outstanding feature of the enforcement data is the
significant role that noise plays in the overall numbers. Not surprisingly,
noise represents a significant pollutant in Hong Kong's intensely urban
environment. In 1997, noise complaints represented 42% of all
complaints and 39% of convictions. Fines for noise violations represented
50% of total fines for that year. Air, by comparison, represented 44% of
complaints but only 10% of the total value of fines. Construction,
neighborhoods and public places accounted for approximately 50% of noise
complaints. Noise complaints focused on construction firms can represent a
fertile market. The remaining 50% of noise complaints that
relate to fixed facilities like industrial plants and transportation
facilities are even more likely to benefit from noise control technologies.
Industrial noise complaints are not listed by industry.
Analysis of water and liquid waste-related enforcement data presents a
particular challenge because EPD statistics do not consistently distinguish
between these two media types. The data presented above and discussed here
involve estimates of the value of fines per media category based on the
breakdown of water and liquid waste-related complaints. We assume that
conviction and fine figures parallel those of complaints.
The data show that for 1997 liquid waste accounted for 8% of complaints,
24% of total convictions and 29% of the total value of fines, indicating
that liquid waste may be a promising area for environmental companies. The
bulk of complaints are focused on industrial sources, which may simplify the
sales and marketing effort because customers tend to be concentrated in
identifiable sectors.
Most liquid waste complaints were directed at industrial sources, led by
food manufacturers (20% of total liquid waste complaints) and repair
services. The "other" category of industrial sources accounted for 40% of
total liquid waste complaints. Again, because the "other"
category is poorly defined, it may be difficult to identify and market to
potential buyers. Water pollution statistics show that of the nearly 300
convictions in 1997, industrial (manufacturing) and commercial violators
each represented nearly 50% of the total. Industrial fines were highest on
average, and in absolute terms, industrial polluters also had the highest
rate of repeat convictions.
Solid waste accounted for 5% of complaints, 20% of convictions and 9% of
the total value of fines. The most noteworthy aspect of the solid waste data
is the marked increase in the number of complaints between 1996 and 1997.
While all other media saw declines or no change, solid waste complaints rose
41%. To the extent that this emerges as a trend resulting from either
increased violations and/or better enforcement, then we might expect to see
convictions and fines also rise in the future as well.
The largest target of solid waste complaints is livestock, led by pigs.
Livestock accounted for 45% of total solid waste complaints. To the extent
that livestock facilities are large enough to have sufficient funds to
invest in solid waste solutions, they may constitute a significant market
opportunity.
The second largest target of solid waste related complaints was the
litter and refuse segment. Public areas attracted 295 complaints, accounting
for 36% of total solid waste complaints. Measures to reduce public littering
typically have more to do with public education and the placement of waste
receptacles than they have to do with environmental technologies. Also, it
is unlikely that individual, casual litterers would be buyers of waste
receptacles.
Industrial solid wastes attracted 15% of total solid waste complaints.
Included in that figure are chemical waste complaints. Although these
chemical waste complaints represent only 8% of total solid waste complaints,
fines for chemical waste violations represented as much as 32% of total
solid waste related fines. The relatively high cost of chemical violations
implies that chemical violators may be receptive to environmental solutions.
The EPD tracks registered chemical waste producers by industry and,
excluding the 25% of total producers in the "other" category, the leading
segments are petrol filling stations and vehicle maintenance facilities (18%
of registrations), printing and publishing (13% of registrations) and film
processing and photographic workshops (11% of registrations). These
relatively well-identified chemical waste producers are likely targets for
environmental companies. |
