Korea: Environmental Market Analysis Addendum
Explicit environmental enforcement data affecting the textile industry is
unavailable. But based on the relatively large environmental challenges
faced by textile industries in other economies, we have assumed a greater
than average level of environmental demand among textile manufacturers.
Typically, most environmental problems are focused on wastewater, where
textile dyeing and processing often have a large impact. Wearing apparel,
reported as a subsegment of textiles, typically faces less environmental
regulatory pressure.
In 1997, the textile segment registered US$18.3 billion in exports,
becoming the nation�s second largest export item after electronics,
including semiconductors. Production and profitability of the textile
industry decreased 12% and 5% respectively in the first half of 1998.
Exports of textiles fell 7.2% in January-September 1998, representing
US$12.8 billion. Export of textile yarn declined by 11%, amounting to US$1.2
billion. Decline in textile yarn is mainly associated with economic slowdown
in Hong Kong and China, the industry�s largest export markets.
In 1997, export of textile products (mainly clothing) amounted to US$4.1
billion, up 9.5% after a 2.6% decline in 1997. The increase in export of
textile products is associated with rising demand in overseas markets,
particularly in the U.S. and the European Union. Exchange rate conditions
will likely keep North American and European demand for textiles high
throughout 1999. The textile segment receives considerable attention from
government economic development authorities in the form of business
development and export assistance. The Korean government recently launched a
US$480 million "Milan Project" designed to establish the city of Taegu as a
world-class center of the textile industry on par with Milan.
No data is available regarding environmental enforcement among medical
(or any other) equipment manufacturers. It is assumed that environmental
problems in this segment are on par with those faced by machinery and
equipment manufacturers in general.
The Korean Institute for Industrial Economics and Trade lists Medical
Equipment as a subset of the Precision Machinery Industry (PMI). Overall,
PMI, consisting of a large number of small firms, is thought to be
undercapitalized and behind the manufacturing industry average for
productivity. Medical Equipment, however, is the best performing subsegment
of PMI and, in fact, was the manufacturing sector�s second best performer in
terms of 1998 profitability.
Environmental enforcement data related to pulp and paper producers is
unavailable. Generally, paper and paper-related industries in other
economies are significant polluters, particularly in wastewater.
In the first eight months of 1998, pulp, paper and paper products
production plummeted precipitously by 16%. In the same period, profitability
fell as much as 18%. Nevertheless, pulp and paper was the third
best performer among manufacturing industries. Prior to the onset of the
current economic crisis, Korea�s paper-related industry enjoyed strong
growth and significant export success. Despite relatively high debt ratios
among paper industry firms, general economic recovery is likely to see a
return to positive indicators for this segment.
MOE has clearly identified motor vehicles as major contributors to air
pollution. Significant reductions in vehicle emissions have been mandated
and several mechanisms intended to achieve new standards have been
developed, including higher gas prices, use of public transportation and car
pooling, promotion of natural gas vehicles, and use of emissions reduction
devices. The production of less-polluting vehicles should increase demand
for air-related environmental technologies among vehicle manufacturers.
Despite the regulatory focus on vehicle emissions reduction, however, the
dismal economic performance of motor vehicle manufactures in 1997/98 is
likely to leave that segment among the least likely buyers of imported
environmental technologies. Any demand that does prevail will derive, at
least in part, from the fact that automobile manufacturing represents a
large portion (upwards of 15%) of the total value of production of all
manufacturing. In addition to the demand associated with vehicle emissions
performance, auto production represents a large and complex manufacturing
process with a variety of related environmental problems across most media.
In 1997, automotive sales recorded 6.2% growth but profitability of the
sector declined by 2%. Since the onset of the financial crisis, both
production (January-September 1998) and profitability (January-June 1998)
have registered dramatic declines of 305% and 62% respectively. Domestic
sales have stagnated. From January to November 1998, total production and
total sales declined by 33% and 27% respectively. Domestic sales contracted
by 51% on an annual basis. According to forecasts, poor domestic sales are
expected to continue with no better than 4% average annual growth for
1996-2000.
In 1997, export of motor vehicles amounted to US$10.6 billion. In terms
of units, exports recorded a 1% increase in January-November 1998 on an
annual basis. However, in terms of value, total exports amounted to US$6.7
billion from January to September 1998, representing a 9.3% decline on an
annual basis. Korean auto exports recorded negative growth in 1998 for the
first time since 1991. In May 1998, automobile exports recorded 17% increase
compared to the previous month but showed a severe decline in June and July
of 14% and 21% respectively. Auto industry problems were aggravated by the
June 1998 labor strikes at Hyundai Motors, where 43% of the nation's autos
were produced in 1997.
Domestic competition in the auto industry was expected to increase in
1999. Samsung Motors started to produce cars in 1998, following on the heels
of Sangyang Motors, which began production in mid-1997. Imports are also a
threat to the domestic auto industry. Although imported automobiles were
only about 1.3% of total domestic demand in 1997, their share is expected to
increase after the planned elimination of the Korean Import Diversification
Program. The Import Diversification Program has been intended to restrict
imports of Japanese automobiles to counter Japan�s trade surplus with Korea.
Despite showing apparent signs of strength from the perspective of
production (up 32% in 1998), shipbuilding suffered severe profitability
losses like many other industries. Exports amounted to US$6.5 billion in
1997 and reached US$5.2 billion between January and September 1998, up 32.8%
on an annual basis. Profitability of the sector declined by 32% in
January-June 1998 on an annual basis. Cumulative orders for 1998 as of the
end of May showed a 7.9% increase on an annual basis.
Environmental enforcement data related to food & beverage manufacturing
is unavailable. Generally, food & beverage production in other economies is
associated with significant environmental management problems affecting air
(including odor), water and wastewater.
Koreas�s food & beverage manufacturing industry enjoyed 6% average annual
production growth during the first part of the 1990s. In 1997, however,
production fell by 10%, followed by an additional 10% decline in the first
eight months of 1998. Profitability during the same period declined 34%.
Like many Korean industries, the food & beverage sector is undergoing
significant restructuring. Faced with economic and financial difficulties,
the previously large number of small firms has been giving way to larger,
consolidated manufacturers.
Environmental enforcement data related to electronics manufacturing is
unavailable. Generally, electronics production in other economies is
associated with significant environmental management problems affecting air,
water and wastewater.
Production of electrical machinery and apparatus increased 0.5% in 1997.
Sales and profitability of the sector also increased 5.3% and 1.4%
respectively. However, production recorded a severe decline after the onset
of the current crisis and total production contracted by 30% during the
first eight months of 1998. Profitability of the sector declined by 42% in
the first half of 1998 on an annual basis.
Korea is not only a major exporter of electronic products but also a
major importer. Local producers need advanced components for production.
Lower production is associated with both a decline in domestic demand for
electronic products and a severe decline in imports. In 1997, imports
amounted to US$29.9 billion, of which US$17.8 billion were semiconductors.
However, in the first eight months of 1998, this number amounted to only
US$19.1 billion, of which US$8.8 billion were semiconductors. Imports
declined by 27% in the first eight months of 1998 on an annual basis.
Neither imports nor production of electrical products were expected to
increase substantially in 1999.
In 1997, electronics exports amounted to US$42.6 billion, of which
US$17.4 billion were semiconductors. During January-September 1998, exports
amounted to US$18.4 billion, of which 12.1 billion US$ were semiconductors.
Exports declined by 8.8% during the first eight months of 1998 on an annual
basis. Exports were expected to continue their downward slide in 1999-2000
due to declining demand in overseas markets for semiconductors and for home
appliances in Southeast Asia, Russia and Latin America, Korea's main
appliance export markets. However, a Russian moratorium on foreign payments
and the deteriorating economic situation in Latin America (especially after
the Brazilian government�s decision to float the Brazilian local currency)
was expected to aggravate Korean electronic export performance in 1999.
Environmental enforcement data related to metal manufacturing is
unavailable. Generally, metal processing and production in other economies
is associated with some environmental management problems affecting air and
wastewater.
The Korean steel industry has been highly dependent on imports for
production. In 1997, production and sales increased 5% and 11% respectively
but the profitability of the sector declined by 1.4%. Since the onset of the
economic crisis, the steel industry has suffered from a raw materials
shortage. Imports of raw material and semi-finished products such as iron,
ore, cooking coal, steel scrap, slab and billet have been reduced sharply
due to the Korean currency�s meltdown against the US dollar. Profitability
in basic metals and fabricated metal products recorded 44% and 61% declines
respectively in the first eight months of 1998.
During January-September 1998, imports of iron and steel products
amounted to US$3 billion and recorded a 42% decline on an annual basis. Due
to the raw material shortage, production of basic metals and fabricated
metals declined by 14% and 27% respectively from January to August 1998. The
domestic price of steel scrap mainly used by electric furnace-equipped
steelmakers has increased by as much as 50% since early 1997. In March 1998,
domestic prices of steel products rose by 10%, in addition to the price
hikes of 8% in January 1998.
In 1997, steel exports amounted to US$8.6 billion. From January to
September 1998, total exports amounted to US$7.5 billion. In the same
period, exports of metal products (US$1.3 billion) and exports of iron and
steel products (US$6.2 billion) increased by 1.1% and 26.6% respectively.
In addition to raw material shortages, steel manufacturers are also
suffering from financial difficulties. All major steel manufacturers have
frozen new investment plans. In 1997, four major steel manufacturers (Hanbo
Steel Co., Sammi Steel Co., Kia Steel Co., and Hwan-Young Steel Co.) went
bankrupt. The Hyundai Group also cancelled its US$6 billion integrated steel
complex construction project. The steel industry will likely suffer
throughout 1999-2000.
Environmental enforcement data related to machinery manufacturing is
unavailable. Generally, machinery production in other economies is
associated with some environmental management problems affecting air,
wastewater and some materials handling.
The machinery and equipment industry has been severely affected by the
crisis both in terms of production and profitability. Production decreased
32% in the first eight months of 1998. Profitability of the sector declined
54%. The decline in production is associated with the severe decline in
domestic demand, especially demand from the public sector, including
transportation and communications.
Exports in January-September 1998 increased both in general and precision
machinery by 6% and 23% respectively. The increase in exports is associated
with the increase in demand from the U.S. and the European Union, mainly for
chemical and metal manufacturing machinery.
Because of shrinking domestic facility investment, imports declined by
50% in 1998, following a 24% decline in 1997. Recovery in machinery sector
mainly depends on the restart of domestic investment, which is expected to
show some positive growth by 2000.
Environmental enforcement data related to chemical manufacturing is
unavailable. Generally, chemical production in other economies is associated
with significant environmental management problems affecting air, wastewater
and materials handling.
In 1997, total production in the chemical products industry, total sales
and profitability increased by 10%, 11.5% and 1.4% respectively. In 1997,
total exports amounted to US$115.2 billion and imports amounted to US$25.2
billion. In the first eight months of 1998, production recorded a 5.7%
decline. Exports in the first nine months of 1998 amounted to US$83.5
billion, down 18% on an annual basis. Imports in the same period amounted to
US$19.6 billion, down 48% on an annual basis. Profitability of the sector
also declined by 25% in the first eight months of 1998 owing to oversupply
and weak internal prices.
Chemical manufacturers actually increased their production facilities in
1998, but reduced operation levels to prevent product prices from falling
further. Lower production was most conspicuous in the areas of synthetic
rubber, synthetic material and synthetic resin. Since March 1998, excess
capacity and international competitiveness have brought pressure from the
Korean government to restructure the industry. As a result of the
government-initiated industrial restructuring drive, mainly aimed at
eliminating overlapping businesses, the three national industrial complexes
in Daesan of South Chungchong Province, Yeochon of South Cholla Province,
and Ulsan of South Kyongsang Province were slated for restructuring under a
series of mergers and asset swaps among the top five chaebols. The
restructuring is designed to resolve serious oversupply and declining
capacity utilization problems.
Consumers are encouraged to recycle through a deposit-refund system. A
waste disposal charge system covers waste not included in the deposit-refund
system. These systems are intended to promote waste reduction and shift
consumers toward more environmentally sound products. In 1997, waste
production charges were imposed on 15 products produced by nine industries.
Total charges were 24,123,000 won, 78% of which was levied against producers
of synthetic resins. Synthetic resin production has been one of the hardest
hit areas of chemical production since the onset of the economic crisis.
In 1995, a Water Quality Improvement Charge System was established and is
directed to levy fees on importers and producers of bottled water. Citing
the impact on water resources resulting from bottled water production, the
government adopted a system allowing for the collection of fees equal to 20%
of the sales price of bottled water. Of the funds collected, 10% goes to
program administration, 45% to the local government in the jurisdiction
where the water was drawn, and 45% to MOE. Since 1995, 35,104 million won
have been collected under this program. Approximately 99% was collected from
domestic bottled water producers.
An Environmental Impact Assessment (EIA) system was initially formulated
in 1977 as part of the national Environmental Preservation Act. However, the
EIA system has been largely ineffective. In 1997, a revised Environmental
Impact Assessment Act was promulgated that may be the first credible attempt
to enforce an impact assessment regime.
A project applicant is required to keep a record of consultations,
designate a person in charge of the record, and notify the results of
environmental impact after completion of the project to see that its
consultations were faithfully implemented. The project approval authority is
responsible for checking whether prior consultations were reflected and
supervising the applicant so that consultations are faithfully implemented.
The approval authority is empowered to take necessary steps for
implementation. It can suspend a project judged to have caused serious
environmental damage. Applicants that do not obey the order to suspend
operations may be subject to imprisonment for up to five years or penalties
of up to 50 million won.
The revised Act of 1997 further tightened regulations on violators. Those
who fail to notify the results of EIA after the completion of construction,
keep a record of prior consultation, or designate a person in charge of
records are subject to penalties of up to one million won.
MOE summarizes some of the other key elements of the revised act as
follows:
- Local governments are encouraged to make aggressive efforts to protect
the environment. Those development projects not included in the scope of
businesses subject to EIA are required to undergo assessment by municipal
or provincial regulations to minimize destruction of the environment.
- EIA will be conducted a second time to devise measures to reduce the
environmental impacts of accidents that were not predicted at the time of
the initial assessment and prior consultation.
- The Korea Environmental Technology Research Institute was expanded and
reorganized as the Korea Environment Institute, which specializes in
reviewing EIA documents and the development and distribution of assessment
techniques.
- Operators of wastewater discharging facilities that violate the
agreement on the degree of pollutant concentration in emissions made at a
prior consultation are subject to additional charges for the violation so
that agreements at the initial consultation will be faithfully
implemented.
- Those who prepared false EIA reports will be subject to criminal
punishment.
Air standards and regulations exist for several pollutants, including
nitrogen dioxide, suspended particulates, carbon monoxide, ozone, and lead.
As of 1996, over 31,000 business facilities were classified as air pollution
generators and therefore are subject to regulatory control. In the same
year, 50,256 facilities were inspected, resulting in 3,244 violations and
1,288 indictments. Unfortunately, information regarding the value of fines
and which industries were most targeted is unavailable.
In addition to the regulation of stationary sources of air pollution,
significant regulatory resources are aimed at mobile sources, primarily
automobiles.
An area of special consideration is underground spaces. Responding to air
quality issues affecting subterranean facilities such as transportation
stations, shopping centers, road crossings and tunnels, MOE has developed
regulatory measures to promote higher air quality standards. Specifically,
commercial buildings larger than 3,000 m3, public facilities
larger than 2,000 m3, underground construction sites larger than
1,000m3 and parking lots, tunnels and train stations are all
subject to some requirements regarding a range of air quality parameters.
In 1996, odor control efforts resulted in 21,967 inspections of
industrial and commercial sites. A total of 279 firms were instructed to
improve their odor control, suspend operations or pay fines. In 1997, 514
business establishments were classified as "Offensive Odor Special Control
Business Establishments" and became subject to additional monitoring and
enforcement. Of those businesses, 144 were industrial chemical producers; 67
were food producers; 40 were paper, pulp, tobacco and livestock feed
producers; and 11 were rubber and plastic plants.
MOE operates a network of noise and vibration monitoring stations. In
1996, 2,219 firms were identified as vibration (and probably noise)
generators. Industrial facilities that violate noise and/or vibration
standards may be required to relocate to areas where they will have less
impact. This is potentially a very costly process, the threat of which is a
strong motivator for investment in environmental solutions.
A wide range of water quality measures are subject to regulation. Quality
standards have been developed in the two main areas of wastewater emissions
and effluents. Wastewater standards apply to individual facilities that
generate wastewater while effluent standards apply to the final outflow at
wastewater treatment plants. In 1996, 1,379 monitoring sites were operating
at lakes, rivers, industrial sites, and water delivery and wastewater
facilities. In the same year, over 28,000 businesses were designated as
wastewater discharge facilities and subject to special control. Nearly 24%
of those facilities were located upstream on the Han River; most (89%)
were small businesses. Another 18% of wastewater discharge facilities were
located in the Nakdong River watershed; again, most were small businesses.
Between 70% and 90% of those facilities were engaged in such activities as
car washing, metal processing and textile dying.
Also in 1996, 93,014 inspections were conducted at designated discharge
facilities - 14% fewer than the number inspected in 1995. However, 6,204 of
those establishments were cited for violations, representing a 21% increase
in the ratio of citations to inspections. Inspection targets tend to be
large-volume generators and repeat violators.
In 1995, marine water quality monitoring was conducted at 251 coastal and
deep ocean sites. New survey ships have recently come online and are
expected to improve monitoring and regulatory capabilities significantly.
As of 1996, 532 toxic chemicals were subject to regulation. In the same
year, 3,860 firms were registered manufacturers, sellers or handlers of
controlled toxic chemicals.
Regulations governing the establishment of waste treatment facilities
have been simplified to encourage the establishment of more sites. The
transportation of wastes to those facilities has been increasingly regulated
as standards have been developed covering transport vehicles and methods.
Specific attention has been directed toward construction wastes, which have
long suffered from high rates of illegal dumping. In 1996, 30,132
inspections were conducted, revealing 2,354 violations.
In addition to general construction and industrial wastes, the government
also regulates "specified wastes." These wastes are subject to special
handling, transport and disposal regulations. In 1996, there were 50,000
recognized generators of such wastes. In the same year, 6,225 inspections
were conducted, resulting in 759 violations. |
