An Evaluation of Domestic and Trade Policies in Building Environmental Services Capacity in Asia: Balancing Diverse Interests and Priorities
The environmental sector is the oldest economic sector of every country, although its nomenclature and recognition as an independent industry is new. All economic activities either derive inputs from the resource base of the natural environment or generate wastes that impact the quality of the ecosystem. According to the OECD/Eurostat definition, the environment industry comprises goods and services which measure, prevent, limit, and correct environmental damage to air, water, and soil, including problems relating to waste, noise, and ecosystems. In particular, the environmental services sub-sector is measured by revenue generated by service activities, which reduce environmental risk, minimize pollution, and enable efficient resource use. In the GATS, environmental services are classified under: (A) sewage services; (A) refuse disposal services; (C) sanitation and similar services; and (D) other environmental services. The last category, namely other services include pollution abatement and environmental remediation services (like cleaning services of exhaust gases, noise abatement services, nature and landscape protection services, and other environmental protection services).
In 2005, the global environment industry was estimated to be about $600 billion, with the environmental services segment accounting for more than half of the total market.1 Water and wastewater management is by far the most significant environmental service segment, followed by solid waste management. These form part of the infrastructural services of an economy, and capacity-building in these sub-sectors is a critical challenge for developing countries in order to provide basic services to its population.
The global environmental services industry is dominated by the US, Western Europe and Japan, where large multinational service providers have the bulk of the market share. With maturity of the environment industry in these countries, the national market growth rates slowed down, and the businesses began looking towards countries where growth potential was high. In the 1990s, Latin America and Asia emerged as the most promising regions, where there is market excess demand for environmental infrastructure services, and resource remedial services are essential to alleviate the degraded state of the environment (like cleaning of contaminated rivers). In particular, the environmental services in developing Asia has been experiencing double-digit growth through the 1990s, due to increasing stringency of domestic environmental regulations, enforcement of international environmental standards, and privatization of public sector infrastructure services.
This paper provides an overview of the state of the environmental services sector in Asia, by focusing on the most significant segments of infrastructural services namely, water, sanitation and municipal waste management. Although the WTO GATS definition of environmental services does not include all infrastructural essential services (in particular GATS excludes collection, purification & distribution services of water, and construction repair and alteration of sewers, while the OECD/Eurostat definition includes “water for human use” and all sewerage services), these services have taken centre stage in both the recent reform and liberalization policies in Asia as also in the GATS negotiations. Thus water treatment and distribution services are included in this paper. The analysis looks at the trade and environmental initiatives adopted in selected Asian countries in the development of their environmental services capacity. Section 2 gives a position of the Asian environmental market in the global environment industry and the significance of the different service segments. Nine countries are selected in discussing the Asian profile of current domestic environmental services provision in essential services like water and sanitation, and factors driving growth of these services. Section 3 gives an illustration of various environmental policy measures in selected countries that affected the domestic supply and export capacity in environmental services. Section 4 outlines the trade and investment regime in environmental services, and in particular foreign investment in water and sewage services.
In promoting the development of environmental services industry in developing Asia through import liberalization, a relevant issue is whether such policy instruments are consistent with the objectives of environmental protection, building a competitive domestic capacity, and encouraging small and medium enterprises. Section 5 addresses this issue through an analysis of cases of private contracts in drinking water, waste-water and sanitation services in Asia.
The current supply capacity in the environmental sector of the different countries is discussed briefly in Section 6, including the significant role of small and medium enterprises (SMEs) for increasing the coverage in essential services like water. This section also provides a summary table which classifies the different countries by their trade regime and links them to the nature of domestic supportive policies and indigenous environmental industry. Section 7 concludes with the future prospects for the creation of environmental services capacities in the region particularly in the context of the ongoing WTO negotiations.