John Goody, CEO of Wheelabrator Water Technologies (WWT) (interviewed November/December 1996) stated that the global potential for both industrial and municipal waste treatment is so vast that water was a natural for Waste Management Technologies (WMX) the world's largest environmental services company. WMX had decided to focus on four key business lines: clean water, clean energy, solid waste, and engineering. Consequently, WMX's various water businesses were rolled into one global line of business, Wheelabrator Water Technologies.

Wheelabrator Water Technologies has parlayed the benefits of its relation to parent WMX into a leadership position in the water industry, posting a reported $618 million in revenues in 1995, up from $489 million in 1994. Acquisitions have continued to contribute to significant earnings growth. Four of WWT's recent acquisitions have been process engineering and water system

firms, starting with HPD (Chicago, Illinois) for $50 million at the end of 1993. A year later WWT announced the acquisitions of Rossmark (the Netherlands) and Darchet Engineering (Singapore). This year, 1996, has seen the acquisition of Sun Chi Environmental Industries (Taiwan), which has more than 200 installations in Southeast Asia and China. In the Asia-Pacific, WWT has operations in Australia, Japan, Malaysia, and Singapore and will open in Indonesia, Taiwan, and Thailand in 1996.

What drives this international expansion, specifically in Asia, where competitors such as U.S. Filter and Ionics have yet to be successful? Part of the answer is Ram Gupta. Ram Gupta was hired two years ago to manage and direct WWT's Asian business. Gupta has more than fifteen years experience and clear insight about how to succeed in Asia. Since his arrival, Wheelabrator Pacific has quadrupled revenues. In fact, Gupta's operations are contributing only 10 percent of the total sales but more than 20 percent of the profits. That is particularly amazing being a new region of operation in which one expects to lose money, not make money. The following is an interview with Gupta by EBI about market entry strategies, Asian market intricacies, and picking acquisition candidates.

(November/December 1996)

Q: It's been said again and again that the Asian market for environmental goods and services has huge potential. Our own analysis of the market shows the Asian market, excluding Japan, is currently in the vicinity of $15 billion and projected to more than double to $36 billion by the year 2000. Yet, U.S. firms have yet to avail or, some would even say, position themselves for this market. What is your view on current business strategies and sales tactics of U.S. firms in Asia?

A: Most U.S. firms never really paid much attention to Asia as a market in its own right. They used to think, "My domestic market is big enough. I don't need to worry about it. If I get some marginal business working through agents I am happy." What they totally forgot was people in Asia who buy your products and systems have a totally different way of thinking. If they don't believe in you that you are there to stay and have a commitment to the region it doesn't make any difference how good a technology or good a price you have. You still will not get the business. Many times U.S. companies get perplexed. They say, "Hey, I got a better solution, a better price, and still didn't get the order."

Q: What's wrong with the perspective U.S. companies have?

A: They don't know (or, more correctly, they know but they don't adapt their business strategy) that the keys to sales in Asia are the relationships developed and the commitment to stay. Your customers must trust that you are there to help them. If it's just a sale then they are not interested. For example, many U.S. companies have received black marks in the past. U.S.companies obtained large projects through the use of agents, then they shipped the equipment with limited follow-up. The equipment or whatever didn't exactly fit the client, or some unexpected problem came up. Asian customers were left holding U.S. equipment that was useless to them, and they had no recourse. Never again, they vowed.

Q: Do you see other fundamental problems U.S. companies face in Asia?

A: A similar but more subtle aspect between U.S. and Asian customers is that Asian customers buy first based on the faith and trust they build in you before they look at the technology, price, and the solutions you are offering. It's difficult to get the customer the first time in Asia; however, it is much easier to maintain a customer in Asia because, once the relationship is established, so is customer loyalty. In the United States, it is relatively easy to get the first-time customer. If you have the best solution, best technology, best price, the customer will give you a chance. But it's difficult to maintain customers in the United States for the same reason. Somebody else comes with a better solution and U.S. customers will give that one a try. It's a unique and fundamental difference that most companies in America have yet to learn.

Q: So how is Wheelabrator's Asia approach different?

A: I think the biggest difference is that we were able to create a commitment to the region in the minds of our own management. Before I even joined the company I told them point blank if you guys are really serious about Asia then you have to be there. You cannot do it from the United States. That means we have to set up our operations wherever the customers are. We have to be close to the customers. We are not just selling specialized products. That's one big difference.

Q: How do you see different market entry strategies in Asia for specialized, "niche versus total solution" U.S. firms?

A: If you're selling some specialized wastewater treatment components, you can do it long distance because nobody else has that. There's a company in California that sells specialized equipment, that is, vessels for our own membranes, and they control 60-70 percent of the worldwide market. Because of this high degree of specialization, they can afford the luxury of selling "at arms length." Companies like Dow Chemical, however, who are also selling specialized membranes, are having difficulties because as they sell more products in Asia they need to provide more technical support in the region. Even the niche companies selling into Asia, at some point, will probably need a local presence if the business is to grow.

Q: What about total solution companies, such as Wheelabrator?

A: Companies like ours, which have to put environmental solution systems together, have to have a continuing interface with customers. You must be extremely close to the customer, providing a level of responsiveness similar to the local competition. Starting an office and establishing a local presence is not a question, it is mandatory.

Q: Given that establishing an office and building relationships requires a long- term commitment, did you have a difficult time selling this relationship concept and the commensurate costs to WTI executives?

A: At first it was difficult to convince them of the necessity of a long-term commitment; however, once that concept got stuck into our management, we had no problem. What sold them was the strategic plan I developed, and it's been successful. In fact, we now have almost four to five times the business we had two years ago.

Q: What were the key components of the "pitch" to convince your management?

A: Fortunately, I had a couple of things going for me. First, I was lured from outside and not from within the company. I was already managing a $200 million business in the United States and had a proven international track record. So they knew I had no incentive to come to them unless I was given the opportunity to do what I know.

Second, I had a couple of people already in Asia who had some international exposure in the past. Having personnel with international experience on the team was extremely helpful to developing and managing the business.

Third, although the company had been in Asia for some time, the company admitted to themselves that they didn't really know how to do business in Asia. They knew that they had the money, they had the technology, and they had the desire. But they also knew they had no idea how to put it all together. They were not fooling themselves and in that way were quite a bit ahead of others who think they know but really don't. Don't be your own worst enemy is the message here.

Q: But how did you sell them on the time cost involved?

A: They were willing to listen and they did listen. We followed through with the plan, and the results speak for themselves. I knew I could not wait for two, three, or four years to produce results, so we prioritized in such a way that would produce some business in the short term, while other business required additional forward investment. In the short term, you just try not to lose any money. That's not as easy as it sounds but it's doable. You get management to buy in by knowing what it takes up front, asking for appropriate investment and then sticking to that level of investment. You can see how that up-front planning is so critical, because changing the required investment midstream does not make you popular with management.

Q: Being realistic is great in theory, but, in fact, forecasts are never 100 percent correct. What about contingency planning and changing directions, especially within a five-year plan that you advocate?

A: Realism in forecasts is key to managing expectations. So you keep to your plan and you're making forward investments to better position your firm for the following five years. And that's a tough thing to swallow particularly for small- to medium-sized companies in the United States. This five-year planning horizon is difficult for small companies. From my experience, the companies that have, let's say, more than $300-$400 million in sales, coming to Asia with a five-year plan that includes a local presence is a reasonable thing to do. For smaller companies, it becomes difficult to even open an office in Asia, because it can be too expensive.

Q: What do you think are the options for those small companies of less than $300 million in sales?

A: As the firm size gets smaller, less business development resources are available for market entry. These companies have to go for a license, technology transfer, or joint venture. Joint ventures are starting to be a reasonable option in this part of the world, but the problem then becomes: how do you select a joint venture partner?

Q: What about acquisitions as a growth strategy in Asia?

A: You have to be careful what you buy because any time you acquire a company you end up getting a lot of baggage with it. Managing internal relations takes up resources that should be used to serve clients better. So what I did was to acquire a couple of companies. The rest of them we are building from scratch. This strategy is working out.

Q: How did you choose companies for acquisition?

A: It's a lot of work. That was the major part of my strategic plan and drew on my experience of the past ten to fifteen years. One thing that people don't realize is that people normally prioritize markets based on which has the maximum potential.

Q: Could you explain how you prioritize market base?

A: A good marketing manager will say "Taiwan is spending $700 million a year. Korea is spending another $500 million a year in wastewater treatment." Besides Japan, these two are the next largest markets, which have a huge potential and are spending large sums of money on environmental problems. What most marketing directors say is that these are the largest markets and, therefore, we should go in those directions. They don't realize that many of the surrounding markets are big as well, and your revenue targets are a small fraction in the range of half a percent to 1 percent of market share ,even in the "small" Asian markets. What difference does it make whether the market is a $100 million market or a $500 million market if your projected revenues are in the low millions? Remember, this is a market-entry strategy, and all you're trying to do is get a foothold in the region. The result of good market-entry strategies is a regional presence. You can go after the larger markets once you're established.

Q: I understand your views on how not to prioritize your markets, but what about the step-by-step tactics?

A: In my fifteen years of international experience I've learned to prioritize markets based on ease of doing business, the business climate, and government commitment which is going to help you do business in certain areas. You end up picking the areas where you think your business climate will allow you to conduct business in a much easier way and show some short- to mid-range results. So I ended up picking the Singapore market way before I picked Taiwan, Korea, China, or India, even though those markets are ten to fifty times larger. It didn't make any difference.

Q: What made Singapore "easy?"

A: People say Singapore is a small city. They don't realize that Singapore is the third largest refining center in the world. It is one of the top three electronic manufacturing centers in the world. But, most important, Singapore has the structure to work for Malaysia, Thailand, Philippines, Indonesia the whole Asian region. Ease of doing business means easy dealings with government agencies. Singapore was first, Malaysia was number two, Philippines was number three, Thailand was number four. These markets are not big, but I can't even handle these countries right now, there is so much business out there.

Q: Can you tell us more about the "ease" of doing business?

A: In Thailand, for example, they love American companies because America is the only country that has a special treaty with Thailand to establish 100 percent, foreign-owned companies.

Q: What about repatriation of corporate profits?

A: You can repatriate from most countries in the region right now. This is another thing people don't understand. The days are gone when you were forced to give a local partnership and local people some share of profit. Before, you could not have a 100 percent, foreign-owned company; there were limits on repatriation. There is no such thing now, except in China and India, where there are some restrictions, but even those are going away.

In the Asian region, you can set up a 100 percent, foreign-owned company, if you want. You can hire people openly, you can do business openly, you can access your money whenever you want. There's a free flow of money and the currencies are fairly stable. Political environments are quite stable outside of India and China. You know, a lot of people go after China because it's a huge market. I say that's the biggest mistake you can make for our type of business.

Q: You would classify India and China as "hard"?

A: China much more so than India. In China, it's rough going, especially if your management is not thinking about the long term. It's true, however, that a good Asian strategy cannot afford to ignore these countries. You have to do something. We set up an office there. Business is starting to come in, but I'm not going to commit a major amount of resources to those countries until I can build infrastructure in the others and a strong regional foundation.

Q: Is this the "spoke and hub" structure for environmental companies?

A: Right, you need to establish a "hub" of successful projects, satisfied clients, and a core staff with regional experience. Once the "hub" is constructed, you can take some of these guys and go after the more difficult markets to establish the spokes. If a person is sitting in America saying, "China is the biggest market, and look what's going on in the newspapers. That's where I want to go." Making this type of move without the regional support will lead to big disappointment. Most likely, the effort won't produce anything in the first year, management will pull him back, and he's gone forever.

Q: What about the use of agents for starting business in Asia?

A: I don't recommend the use of agents if your company can avoid it. Again, I believe that you've got to really pick and choose the place you want to do business. Focus on that area, do the proper prioritization, build some infrastructure, get some foundation in place, and make your move from there. If you think you're going to do business sitting over in America, it just won't work. Those days are gone. There's a lot of technology and services available locally. If your competitors from Europe or Japan are doing things locally and you're sitting in America doing business through agents, you're going to suffer. Clients in Asia like to see your face. They want to look you in the eye to see if you're going to help them work out problems, should they arise.

Q: Because you recommend a local presence and long-term perspective, how do you view your portfolio of projects? What percentage of short-, medium-, and long-term projects do you spend your business development time on?

A: We didn't have to be that sophisticated, because there is so much business in Asia. Instead of projects, we keep a portfolio of industries that have different payoff horizons. To begin with, we are going to capitalize on our strengths, even if these strengths aren't necessarily in the highest volume or highest margin opportunities. For example, our strength right now is providing ultrapure water, high purity water, and wastewater treatment to the electronics industry. The sales cycles on these types of projects are around four to six months. Even though these are small projects, you know that if you start marketing at the beginning of the year, you're going to book some revenues before the middle of the year, and you'll be able to ship products in the second half of the year. This relatively low-level commercial activity allows you a high level of certainty of showing some short- to medium-term results. This is critical for the folks back home and for continued support for your operations. If you go for the big prizes right off the bat, just like in any high-ticket sales situation, you can work and work and come back with nothing. If you come back with nothing except chances and "maybes," the probability of continued support from headquarters is low.

Q: Could you be more specific about your market-entry process? What are the steps?

A: The first step is selecting the geographical area, that is, picking the country you want to go after. The second priority is to pick the industries you want based on your home market experience in that area. The third priority is picking customers within those industries with whom you want to deal.

Q: Can you provide an example?

A: Suppose that you want to deal with multinational customers who may already have some experience with you in your home market. You determine in which geographical markets they have plants and begin to prepare your plan. Are there similar industries in the region, preferably within a service range of one local office? Then you determine which are going to be the key customers you want to go after. The last priority is deciding on which products and systems you want to focus. You may not be able to sell everything you have. You don't want to bring your entire product and service portfolio, because it can dilute your focus. So you just pick the products and solutions that have the highest probability of customer and project success. The result is a four-step prioritization:

Step One: Geographical market
Step Two: Industry selection
Step Three: Key clients
Step Four: Specific service and products

Q: After identifying and prioritizing markets, what are the next questions to answer?

A: Once you make your market selection and forecasts, the questions becomes, "How do I make this happen? What kind of a distribution channel do I need to establish? What kind of a management structure do I need to establish? What kind of infrastructure do I need to establish? Do I need to do any local manufacturing or assembly, or can I just bring products from outside and provide the local project management engineering and applications type of expertise?" All of these questions will depend on the individual company. They should know their own strengths.

Q: What was start-up like in the first six months? Start with the basics.

A: I landed here on December 23, 1993. The first thing we did was register our company, which, in Singapore, is pretty easy. It costs only $2. Actually, the first thing I did was to hire a secretary. It was only me and her basically. We started doing things and getting things together. During that time I started networking to begin an acquisition search. It took me about nine months to close the first acquisition. But that's pretty fast: four or five months to select the acquisition candidate and another four or five months to complete the deal.

Q: How many companies did you evaluate before selecting your target?

A: I evaluated five or six different companies here, narrowed it down to two, then negotiated the deal with one. Headquarters provided the range on the amount I could offer, and we completed the negotiations.

Q: What was your target percent of control for joint ventures?

A: For us, we want 100 percent control. We can afford it, and it makes things easier. But a smaller company can create a joint venture with some local companies. This, of course, is a little risky, depending on who you end up partnering with. If you don't have control over a joint venture in Asia, you'd better be sure what the hell you're getting into, at least in some countries. The trust factor is huge and cannot be overemphasized.

Q: What is the biggest problem U.S. environmental companies face with Asian joint venture companies?

A: We wanted to make sure that we do not have any restrictions on the evaluation of technologies. That's the way you get into trouble with the joint venture. If you have a technology company like Wheelabrator (new technology is typically what U.S. firms bring), the rub is in the valuation of the technology. For example, we have fifty or sixty different technologies. You can create a joint venture in which you're the majority holder, say, 60/40. Then you decide to bring a particular technology into the market. What happens is that you negotiate a technology transfer from the parent company to the joint venture company. When you negotiate a technology transfer, the joint venture company has to pay a technology fee and a royalty to the parent company. The problem comes in determining the value of that technology transfer.

The parent company may say the market for the technology is huge, perhaps a million dollars. But the joint venture partner will claim it's only a hundred thousand dollars. You end up spending six months, nine months, twelve months just arguing, and the relationship and trust are completely gone.

Q: Is this why you go for 100 percent control?

A: Yes. When you have 100 percent control of the company, that issue is a moot point, because there is no technology transfer fee, it's all internal. Even 100 percent companies pay royalties to the parent, but that's more for the repatriation purpose than for anything else. Just one pocket to the other.

I have a couple of other joint venture types I'm using in some countries. For example, I negotiated a particular joint venture with a lump sum value for all the technologies at one time. So once a joint venture is formed, there is no discussion or arguments after that. Everything will be available, present and future.

Q: The difficult valuation still has to be negotiated, what advantages does the lump sum, joint venture structure have?

A: It's a matter of what can you get, what your out-of-pocket costs are going to be in that country, and what your future revenues will look like. But you can use the lump sum valuation number as a part of your equity contribution, and you wind up getting either a larger equity or a larger ownership, or you can reduce your out-of-pocket expenses. So, it's a matter of making your Asian partner understand right in the beginning that his revenue stream in the future is going to grow significantly more by accepting this lump sum valuation. But at least you totally eliminate the possibility of creating confusion and disagreements down the road. The most important thing is not to spoil the relationship once it has begun. If the joint venture partner feels cheated down the road, their local presence might do you more damage than good.

Q: Now what kind of functions do you look for in a joint venture partner? Is it engineering or sales or both?

A: It all depends again on the country and what your objectives are. Many times we look for a partner who at least has some level of infrastructure in the country and who knows how to do business in that particular country. Someone who knows how to go around those nooks and corners that you don't see as a foreign company. We also look for joint venture partners who can guarantee the availability of the materials, utilities, and staff that you may not get on your own. That's true in China, for example. In China, if you don't have a politically connected partner you may not even get electrical power.

Q: Do you see the decisions to go in alone, then to find joint venture partners, and then to make acquisitions as progressive steps toward executing Wheelabrator's Asian strategy?

A: No. The decision not to acquire is normally because the acquisition is not possible. My first priority is to go 100 percent if at all possible to retain total 100 percent control. Because we are a global technology company, we want to bring companies into the fold and want that particular operation to be the part of the global network without any hitches a seamless organization on a worldwide basis.

Q: Even Wheelabrator can't always negotiate the optimal terms for every acquisition. The next logical step would have to be joint ventures.

A: True. If we can't acquire, the second option is a joint venture with majority control. Again we are interested in a seamless global organization, so we want to have the management and equity control to do that. It's less of a burden for a joint venture partner in the beginning if you can handle 60-70 percent of the start-up capital. The third option is obviously a joint venture with a minority control. After that is just a technology transfer dealing with just two agents. We've made an internal policy decision not to do any technology transfers or license agreements with any third party without equity participation. So we're not doing that at all.

Q: Why are you so negative on technology transfers such as licensing agreements? These are the least costly ways of getting to the market.

A: Least cost, yes, but in what time frame? We see technology transfers as a short-term solution, especially in Asia. In this part of the world, you do a technology transfer, and you might get royalties for the first year or two but nobody will pay attention to you afterward because they've developed their own capabilities.

Q: What will they do?

A: Just completely reverse-engineer your whole product; you lose totally. That's a short- term solution and is a lesson that many Europeans have already learned.

Q: So how was this process for Wheela- brator?

A: The first thing we did in Singapore was the acquisition of a company, Darchet. We had decided on Singapore because of many of the reasons we've discussed; that was the strategic decision. The tactical decision was the acquisition of Darchet. To execute the strategy for Asia, I needed a foundation on which to build. Darchet provided that foundation.

Q: Foundation in terms of sales, expertise, customers?

A: Everything, including service, assembly, and sales. Darchet was a small company doing a little bit of everything, but in a focused area. That's the reason I didn't go for a competing company that was doing a little bit of everything in all the markets, but not strong in any particular one. I wanted a good strong foundation of engineering talent and service capability, even though it was in a narrow area. We could expand later. Now our company is almost double the size of our primary competitor, which had been twice the size of Darchet when we started.

Q: So now Singapore has become your hub?

A: Correct, Singapore has become our engineering center. That's where the systems are being put together and shipped from. So I don't have to start assembling systems in the Philippines tomorrow to do business there anymore. I can use Singapore as a manufacturing base, and the Filipinos are much more amenable to that. Don't get me wrong, you still need a local presence. For the Philippines, I do have to have local salespeople, local project management, and local technical people to support them. But I don't have to do the manufacturing or assembling, which is the expensive fixed-cost type of investment in the Philippines. I'm already doing that in Singapore. As far as doing the manufacturing from the United States, they won't listen to that. They like you to be somewhere in the region. It shows regional commitment.

Q: At what point do you pull the trigger on setting up a manufacturing facility before or after you have sales?

A: Well, that depends a little bit on the operating philosophy and cash-flow position of the company. Basically you have to do your economics. Normally, it's difficult to invest in a manufacturing process before the sales are there. But you're right, it's great marketing. What we do is a lot of incremental steps. For example, now in each country of interest, we are putting up maybe about a million dollars' worth of investment to manufacture some basic equipment.

Q: What types of basic equipment and/or services are you doing from these million-dollar investments?

A: One strategy we've used is focusing on the service part first so our initial investment is in a type of industrial filter-cleaning system. Installation and servicing the cleaning system gives us an opportunity to serve the customer almost every day, 24 hours a day. We then use that kind of continuous service philosophy not only to service what the customer already has but to go after his new projects. This kind of service center is costing us about a million dollars. After tapping into the industrial services we then go into the larger project business, which requires a greater investment for manufacturing.

Q: What are the next investments?

A: We are using our service center to start selling and assembling the smaller systems and prepackaged equipment first. Then, as the client relationships are established and you have a better idea of the client's needs, you can move into the larger equipment. Right now, the larger equipment is manufactured in Singapore. This is the kind of strategy we've been following, and it's been working well for us. It takes a certain level of investment, certain level of manpower and organization, but you don't have to make a big commitment right from the beginning that way.

Q: Are you seeing other U.S. companies follow the same strategies?

A: No, not really. U.S. Filter and Ionics have not put this step-by-step strategic plan together. Instead they seem to be investing in fits and starts. The only reason they are doing it that way is because they are pretty busy and happy in America. But I don't know how long that will last. It's a matter of time.

That's why I think the best thing that Wheelabrator did was to take the bull by the horns a couple years ago and make a commitment to Asia. Their commitment, which I knew to be a prerequisite for success, was the primary reason I came on board.

Q: What are your plans for the future?

A: I still have probably two more years to go. I told them that it would take three to five years to set up the organization to a level that somebody else could feel reasonably comfortable with and make it grow from there. For that matter, I think in two more years we will be totally entrenched in all of Asia. We'll have close to twelve or thirteen operating companies in Asia by that time.

Q: What about following World Bank money into a region?

A: It's true that one entry strategy is to chase World Bank projects. But I don't think lobbying for projects in Washington, D.C., is a good way to learn how to do business in Asia. Concentrating on the private sector like we're doing is working under the radar screen. I'm in before my competitors. My profits are good. We are contributing only 10 percent of the total sales but more than 20 percent of the profits. That's amazing for a start-up region, where you typically expect to lose money, not make money.

Q: So you don't believe that concentrating on large projects is the appropriate strategy, even though many firms have proceeded that way?

A: We are doing just the opposite. It usually comes down to your eyes always being bigger than your stomach. The result is a stomach ache. That's what happens, particularly in Asia, and in dealing with large infrastructure projects in general.

The time cycle for completion of those types of projects is two to three years. I definitely don't recommend taking on that long of a project as a market entry tactic. A lot can and does go wrong, things you would have a hard time anticipating without spending quality time in the region. Uncertainty is compounded as the project gets longer.

Second, the relationships necessary for going after those projects take a long time to develop. I have the connections here and could have easily utilized them. The problem is that the additional resources required to implement those projects are huge. If you've got one $15 million project, you've got to set up close to a couple hundred people over here to implement that project, and if you bring them from overseas you're going to lose your shirt. So if you don't have the infrastructure in place, it is absolutely stupid to go after those kinds of projects.

Q: What do you think the appropriate "ramp-up" in project size is for smooth growth?

A: What's happened in the last three years is that the average size of projects has been creeping up quite a bit; we feel more comfortable because our infrastructure is getting stronger. When I started, Darchet's largest projects were maybe a quarter of a million dollars. Now, we can easily do a $5 million job because our infrastructure is getting stronger, our project management capability is getting stronger, and we know how to implement these things. We are even looking at some projects in the $10-$15 million range. Again, I'm focusing more on the industrial sector because you are dealing one-on-one with decision makers, you don't have too many government agencies involved, and you don't have too many other considerations such as the Foreign Corruption Practices Act (FCPA).

Q: What is your view on the FCPA and its impacts on environmental business?

A: At Wheelabrator, we take the FCPA seriously. In fact, that is another reason why we stay away from municipal contracts. It's not that we're worried about fraudulent dealings, rather, it's just too easy to get into deep trouble without even trying. Small things can be misconstrued: a dinner, a golf game, even drinks. I do not want to take that kind of a chance, at least at this stage of the game. In the initial setup of your business infrastructure, you want to make sure to do things properly; engaging in discussions with municipalities is a risky endeavor. Why take the risk if there is plenty of business elsewhere? Again, in the industrial private sector, you're looking at a $3-4 billion environmental market. If I get $200-300 million of that business, you're talking less than 6-7 percent of the market. That's where to focus your business. For now, leave the government projects to companies like Northwest Water and let them use their political connections. These companies are experienced in playing that game. I have some advice for U.S. companies that are not experienced in Asian politics if you're not a camel, don't go to the desert.

Q: If public sector projects are not part of your mid-term plan, what are your plans for growth?

A: Right now, I'm at such a small position within the industrial market that I will continue to grow within the industrial sector. I have a three-pronged strategy in place to accomplish our mid-term growth. First, expand product and system sales to our existing clients. Second, expand the different industries within a particular geographical market. Third, expand into different geographical markets.

Q: It sounds simple. Is it?

A: It is, but don't be fooled to stay the course takes discipline. Discipline is the key to doing business in Asia. Of course, we're interested in the large World Bank-type of projects. But we're going to have the discipline not to go after them until we're ready. We'll first focus and slowly build our name and our relationships. Then, in five years we'll be ready. If and when we're awarded a World Bank-type project we're not going to be flying over an army of expats, and it definitely won't be "make or break."

In America, there's one wrong perception that I thought was changing, but maybe it hasn't. I would be willing to bet that many companies in America today don't know the types of currencies being used in most of Asia. Second, I don't think a lot of people realize that Singapore dollars or Malaysian dollars or even Philippine pesos are pretty strong currencies. Some of them are internationally traded, some are not, but there are no restrictions for foreign exchange. India doesn't have any restriction on foreign exchange. China used to and still has a few restrictions. Many companies state that they only want to go after World Bank projects because at least they know they are funded in dollars and they'll get paid in dollars. That's being short-sighted. They don't think about the next step, implementing those projects and what it's going to take. Without discipline, it's easy to get sucked in, I know because I have to tell my salespeople this on a weekly basis.

Q: In a recent survey of companies conducted by Environmental Business International, the highest ranking obstacle to Asian environmental trade for U.S. firms was subsidized foreign competition. In particular, French, English, German, and Japanese companies are subsidized by their own governments to be more competitive. Do you find that true?

A: Most of the subsidies I see here are political subsidies. For example, say Holland has a special relationship with a country, and they help their local companies with some development expenses to enter the market. They'll use someone equivalent to a Ron Brown to come over here and make the connections. These connections get the company the critical exposure they need with the relevant local government entities. Then they are considered "players" on the fairly large projects. Other than that, on the private sector side, there is not much subsidization.

Q: Have you had any difficult labor disputes?

A: No. The only issue with labor these days is increasing costs. For example, an engineer with fifteen years of experience as a project manager would would have a salary of at least $100,000 in both the United States and Singapore.

Q: In Eastern Europe and other newly industrialized states, wages are much lower. What's the salary range for China and India for the engineering project manager with fifteen years experience?

A: In India, you can probably get the same guy for $1,000 a month. In China, you can still hire one for about $2,000-$3,000 a month. But in Singapore and Hong Kong, cheap labor has disappeared. They're no different from the United States or Europe. Costs have gone up quite a bit.

Q: Another common perception among U.S. firms considering Asia is that prices for equipment and services will be significantly lower in Asia. Have you found this to be true?

A: Totally false. Often the companies we sell to are multinationals who pay the same price for equipment and services in Europe, Asia, or the United States. Even the local companies will pay the going rate. It's not any different; it's a matter of how much value you are adding and how much they can sell their product for. The Asian value chain is similar to other mature industrialized markets. The proof is in our margins.

Q: Which countries are having the best success in Asia?

A: Japan is the one country that knows exactly how to do business in Asia. Neither Europeans nor Americans are as competent. The Japanese know how to build relationships. They invest for the first five years without expecting even a single penny. I have learned more from the Japanese way of doing business in Asia than from our own. We've tried to customize the Japanese business styles to fit as much as we can into our own structure. The challenge is keeping our own management happy, because we still have to produce positive quarterly results as opposed to revenue results in five years as the Japanese would require.

Q: Any last comments for U.S. environmental companies looking to expand to Asia?

A: Again having a good strategy and the discipline to stay with the strategy is the key. The question you have to ask yourself and your Asian management team is, "How do you create and maintain discipline in your own organization?" For example, let's say you've got an aggressive marketing guy and he wants to go for every project. You have to say, "No, you're not going to do that. You need to listen, identify, and qualify these projects and ask yourself, 'Does this project fit our larger strategy?' If not, don't pursue it." Opportunistic strategies are OK if the cost of going after a specific project is not significant. But in Asia, where projects have longer lead times and relationships need to be built, you just cannot allow yourself to be everywhere at once. You simply will not last.

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