FCR: Is there a role for international waste management firms in the local market?
Michael Lai: For solid waste disposal, the government has outlined a policy for developing privately owned and operated incinerators on the basis of Build-Operate-Transfer or Build-Operate-Own [BOT or BOO]. So there should be some good opportunities here for international waste management companies. Taiwan has only five incinerators in operation, and they’re not making much of a dent in the island’s disposal requirements. But when all the incinerators called for under the government’s waste management program are completed, incineration should handle about 60 to 70 percent of the waste.
Why has construction of these incinerators been so slow?
A sense of urgency has always been there, but it’s a matter of implementation. The first stage provides for construction of twenty-two incinerators. Five have been completed, and contracts for another six have already been awarded to two local companies, but two have already been cancelled due to lack of performance on the part of the contractor, and the other four will most likely be cancelled for the same reason. Obviously, the contractors lacked expertise.
How quickly will the incinerators be built? My impression is that for the BOT and BOO projects, Taiwan is going to go through a painful learning period. A year ago, the EPA [Environmental Protection Administration] laid down plans for these incinerators and said that by June 1996 they would tender the first BOT projects. My impression is that if the policy gets implemented and guidelines for implementation are developed, we still aren’t going to see the first tender until the end of 1997. That’s just being realistic.
There’s going to be some delay, but we feel that the incineration market is imminent and real—it’s just not going to happen as quickly as some government officials would like. It takes time to get financing, and it takes time to find a developer willing to work within the conditions set by the government.
Is this an attractive market for foreign companies?
This concerns the overall procurement method in Taiwan. There are certain regulations and tax practices that explicitly or implicitly exclude foreign companies, even though they have the expertise. But this is part of the learning process. Every country has its pride. People here feel that if they can do it themselves, even if they can only do 60 percent of it themselves, why should they get a foreign company to do it? Thus far, the attitude has been to try to force foreign companies to teach local ones how to do these projects. This is done by placing some mechanism in the tendering process to force the foreign company to transfer their technical know-how to the local company, and then to have the local one do the job by itself. This is a mistake made by the people who devised such mechanisms.
Businesses make their money by building or doing something better then everybody else. They’re not going to reveal to you the core of their know-how. If you force these kinds of conditions on them, what they’re going to do is to send some people over here and say: “You pay for their living expenses. You pay for their children’s education,” and so on. And the people companies send here will be those that they have no use for elsewhere. They’ll send some guy over here who’s supposedly going to transfer the technology to you. But actually, all he’s going to do is live a good expat lifestyle, go to the office, and pretend that he’s transferring knowledge. When local companies meet project tender requirements by retaining these kinds of foreign advisors for certain projects they’re throwing money away.
The best method for technology transfer is to retain a company that has the necessary expertise, then tell it: “You’re in control of this project. If something goes wrong, we’ll hold you responsible, and your worldwide reputation is at stake.” That’s how technology can be transferred. Under those conditions, companies are going to send in one or two of their best people, hire local engineers, local operators, local accountants, and train them to be their people in Taiwan. And when these people have completed the project, they’ll have learned the technology and the know-how. They’ll know how things are done.
One of the problems with projects that are open to foreign firms here, as evidenced by Taipei’s mass rapid transit (MRT) project, is that they are made responsible for any problems, but they’re not given full control. When you don’t have full control, you don't have full responsibility.
What obstacles do foreign firms face in getting into this market?
In the waste management sector, I haven’t seen any real obstacles to foreign involvement at the policy level. But since this is a very early stage, I can’t really say for sure what, if any, obstacles we’ll face. Usually, it’s when you get into implementation that you run into trouble. It goes back to the mentality that says, “We can always tell the other guy to teach us how to do it.”
For example, in independent power projects(IPP), foreign involvement is limited to 30 percent of total investment. That means that local IPP investors would have to convince a utility company in the US or Europe to teach them how to build and operate a large power generation project. So far, they haven’t been successful. With the incinerator projects, the EPA is trying to avoid making the same kind of mistake.
How can the NIMBY problem be overcome?
The whole process involves communication. You have to begin communicating at a very early stage. We have offices in more than twenty countries, and we operate thirty large incinerators and more than five hundred landfills worldwide. So we’re very experienced in this area. We face the NIMBY problem worldwide, it’s human nature. Taiwan does not have any more or less serious problem in this regard than any other place.
As soon as you decide that you are going to build a waste treatment facility, you have to communicate with the community where you plan to build it. You have to seek their input about everything, even the selection of equipment, the route that the trucks will take in and around the community, and so on. Everybody has different concerns, and you must try to listen to and address them. Some people care more about the site, others about the smell, or how close is it to schools. Getting the public involved early on is very important.
The problem in Taiwan is that the government waits until the last minute to begin communicating. By that time, tensions have already built up in the community, residents have heard about the plans through the grapevine, and when the bull-dozers move in, the public explodes.
How well are Taiwan’s waste disposal facilities being operated?
The Taipei city landfill is very well managed. I’m more concerned about the outlying counties. They have a lack of treatment capacity, and what they have is usually farmed out to local “contract” haulers. Many of these operations just dump the garbage into big pits. You can’t call them landfills, they’re pits.
Alternatively, contract haulers sometimes load the garbage into large trucks that haul it down south, and the trash just disappears. These operations practice what we call the hui-tou che [return trucking] method. Trucks come up from the south to deliver livestock or produce to the north, and when they go back they’re supposedly empty. But they’re not. They’re full of garbage. On the way back south, the driver will just spot a place, like a ravine or hidden area, and dump the load. This is a big problem.
What can be done to resolve such problems?
In some respects, this is a political issue between the central and local governments. The central government would really like to help local governments to treat their waste, but the local governments have difficulties in getting the right sites for treatment facilities. It’s a communication problem to some extent, but there is also an interest in maintaining the status quo—a profit incentive among certain people who are running improper, and very profitable, garbage disposal operations.
There’s talk about a coming international environmental certification standard, ISO14000; how serious are the implications of such standards to local companies?
This is potentially a very big problem here. Among other things, ISO14000 looks at final waste disposal. In the process of producing any product, certain wastes are generated. They are classified as hazardous or non-hazardous. Without a hazardous waste disposal facility, products made in Taiwan cannot receive ISO14000 certification.
Every product, every manufacturer, whether upstream or downstream, uses some sort of hazardous material, and residual waste from those materials is not properly disposed of. At best, it is sent to solidification facilities that put the waste into concrete and throw it into a regular landfill. That’s not disposal, that’s interim treatment. So if we really look into it, no product in Taiwan should qualify for ISO14000 certification.
Another issue is non-hazardous waste. Take a certain factory in Taoyuan county or Taipei county. If its waste is not collected by the government or disposed of in a legal landfill, but instead the factory uses an illegal transfer operation, do you know where this waste goes? It goes into a ravine in Miaoli county, or into a river in Changhua county—somewhere along the road, that truck will make a detour when the driver sees an open space to dump his load. Or in some cases they use illegal landfills, where the landowner has opened up a pit to let those trucks dump their garbage—for a fee of course. Do you think those companies should qualify for ISO14000 certification? Of course not.
What advantages can foreign companies bring to waste management services here?
We can offer expertise in the overall integration of hauling, waste treatment, and final disposal. If we were allowed to come in and integrate the market, we could improve the cost picture of waste management tremendously.
What are the incentives for local governments to improve their waste man agement services?
Cost is a big incentive. Operations can also be made more efficient by making waste management services more efficient, by reducing the number of people on the payroll, and giving more responsibility to the private sector. If government provides a better service, citizens will be increasingly satisfied with government efforts in this area. That is another big incentive. There are many examples of efficient waste management systems worldwide that local governments could look to for examples. Wherever waste management services have been contracted out to responsible private sector companies, public satisfaction is much higher.
Although the government has done a lot in the past few years to get the waste issue to the top of the agenda, the process has been complicated by so many things, like cornmunity relations problems. Those problems have to be addressed very quickly. One way to do that is to get a move on with the privatization of the waste management industry. By opening up landfill management and incinerator operation to companies with the right expertise, the government will be upgrading the quality of life for Taiwan’s people, as well as safeguarding the economy.