By
Brenda Ortigoza Bateman, Senior Policy Associate, US-AEP, and Jenny
Tan Suat Eam, Project Manager, Centre for Environmental Technologies,
Malaysia
INTRODUCTION
As economies stall across the Asian-Pacific, observers find it
difficult to believe the promises of tremendous growth forecast more
than one year ago.
1
Real growth in GDP, which hovered around 8 percent in Indonesia and
5.5 percent in Thailand in 1996, has plummeted to -15 and -18 percent,
respectively, in 1998.
2
The crisis is far from over, but surely, after the Asia-Pacific
economies trim off poorly-run institutions, reform the banking sector,
and emerge from this economic maelstrom, economic growth will return
to the region as quickly as ever and with it, the attendant issues of
development.
One development issue that will continue to plague Asia is
pollution intensity that is generated in large part by industrial
facilities. Such pollution damages everything from air and water to
the health of the human and animal population surrounding industrial
sites. One important way to curb pollution intensity is through
end-of-pipe technologies and command-and-control policies such as
regulations that require compliance, monitoring, and enforcement.
However, much of the pollution intensity can be mitigated much earlier
in the manufacturing process, through responsible policies that manage
the process itself, instead of merely attempting to manage the
pollution that results. As unpopular as it would seem given the
current financial turmoil, now is the time for policy-makers to
evaluate current processes and consider retooling some aspects for
greater efficiency. Indeed, it is in times of crisis such as plunging
stock markets or oil shortages when the best innovation and forward
thinking occurs.
Industry experts on both sides of the Pacific know that the
re-tooling of both equipment and development policies results
in operations that are not only more efficient, but are
environmentally responsible and cost-saving as well. Mr. Ungush Park,
President of Samsung Petrochemical Co. Ltd., believes it has become
industry common sense that pollution prevention and eco-efficiency
introduced from the product design and plant design stage will save
total manufacturing cost by as much as 50 percent, compared to the
elimination of environmental pollution by adding new facilities and
new devices.
3
Despite the common sense of this approach, however, he knows of no
East Asian companies that fall into this category. But, many Southeast
Asian countries already have many of the tools needed to embark on the
road to sustainable development, and some have begun creative programs
that have built-in potential for success.
INDUSTRIAL ESTATES PROVIDE OPPORTUNITIES FOR CLEANER
INDUSTRIAL PERFORMANCE
Rapid growth provides traditional opportunities, in terms of jobs
and economic prosperity. It also creates an opportunity for
responsible and efficient growth. There are many existing industrial
growth programs in Asia that have potential for improving
environmental performance, one being the concept of the industrial
estate.
4
Estates mirror the kinds of choices facing investors and governments
as they develop their economies, including 1) technologies and
manufacturing processes, 2) industrial mix, and 3) site selection.
Each choice has a direct impact on industrial environmental
performance. Policy-makers can promote efficient management of the
manufacturing process by adopting policies that provide incentives for
the use of clean technologies, production innovation, environmentally
responsible lending policies, and community participation. They also
have a significant impact on the national composition of industrial
sectors, product mix, and rate of industrial growth, as countries move
through agricultural-based production, labor intensive and heavy
industries, and service oriented economies. Each of these sectors
leaves a different kind of environmental footprint, with oils and
fats, pulp and paper, industrial chemicals, fertilizers, pesticides
and pharmaceuticals as the most pollution intensive. Finally, site
selection and land-use including resource use, energy use, and heavy
concentration of industry can have a significant impact on surrounding
watersheds and neighborhoods.
So, how can industrial estates be well situated to provide
leadership in the area of industrial environmental performance? The
answer is three-fold.
First, many industrial estates already are more efficient than
other production facilities. Typically, they demonstrate high product
quality, the use of high-tech production techniques, and a synergistic
mix of large national and multinational corporations, and small and
medium enterprises. By definition, industrial estates include
provision of common infrastructure to help businesses with product
transport, water resources, security, and waste disposal. Estates that
group similar industries together are finding it easier to handle
materials in bulk this way. The oversight required in terms of quality
control, tax structure, environmental impact assessments, permitting,
and other regulatory agreements also means that the government
administrators of these estates have fairly strict control over the
conduct of companies located in these estates, and that corporations
operating within the confines of industrial estates already are
accustomed to working closely with government officials.
Secondly, industrial estates have a place in the global supply
chain that ensures their ability to exhibit leadership on the
environment and other issues. Often, companies in industrial estates
have a direct link to local suppliers, whose materials move through
the estates and on to other facilities for assembly, sale, or export.
With such a position in the supply chain, industrial estates have the
leverage to improve the environmental impact of both their own
operations, as well as those of their suppliers. Many of the
multinational corporations currently operating in industrial estates
already have experience in this area, since they are required to
measure, perform, and disclose use of clean technology in OECD
countries.
Finally, industrial estates represent a microcosm of the real
community of stakeholders who have an interest in this issue,
including manufacturing companies, government administrators, and a
local community of NGOs, academics, and citizens concerned about their
surrounding environment.
INDUSTRIAL ESTATES IN ASIA
Industrial estates and zones are a growing phenomenon in Southeast
Asia. Malaysia, with 311 existing industrial estates, has another 55
in the planning stages, according to the Malaysian Industrial
Development Authority. Facilities co-located in Malaysia�s industrial
estates already share common infrastructure, and now, newer estates in
Malaysia have begun to group themselves by industry, ensuring that
common waste and by-products can be handled more efficiently in bulk.
The most common groupings are by wood and timber, electronics and
high-tech operations, heavy industry, or oil. Malaysia�s Ministry of
International Trade and Industry is spearheading these efforts.
|
Malaysian Industrial
Estates & Parks |
| Within the last two years
industry-specific industrial parks have been developed in Malaysia
(e.g., Bukit Kemuning Electroplating Park in the state of Selangor).
The factories within these parks are expected to try to reduce
waste discharge to the common treatment facilities to reduce their
costs. This creates an opportunity to promote cleaner production
options, such as waste minimization, resource conservation, reuse,
and recycling. However, the awareness of P2 practices is still
minimal, and more efforts are needed to reach out to park
management and the individual factories. In additional, hi-tech
industrial parks are being established, such as the Kulim-Hi-Tech
Park in the north of Peninsula Malaysia, that encourage the use of
automation and the latest technology to manufacture products that
will support the industries (both local and multinational) of the
future. The high standing of such parks means that they have a
clean image to project, and efforts are generally taken by park
management to ensure a clean environment. They are therefore
particular about the industries they accept as tenants and ensure
that all environmental regulations are followed. Many of these
industries have to meet international standards because they serve
both the local and global market. Thus, many are applying for ISO
14001. Since one of the principles is continuous improvement,
there is a potential for cleaner production to be used as a tool
for this. This is evident in the multinationals, especially in the
electronics sector. As of March 1998, 32 companies (mainly
multinationals) had achieved ISO 14001 in Malaysia. The Department
of Environment has served as adviser to the Malaysia Industrial
Development Authority since the mid-1980s to provide advice to
potential and new investors on environmental regulations and
guidelines including encouragement of the use of cleaner
production methods. |
|
Source: Centre for
Environmental Technologies, Malaysia, 1998 |
Free Zones in Malaysia have been established for corporations
manufacturing or assembling products that are 80-100 percent for
export. These industries enjoy minimum customs control and formalities
in the import of raw material, parts, and equipment, as well as in the
export of their finished products. Exported goods from the Free Zones
are not subject to customs duties. Where the establishment of a Free
Zone is neither practical nor desirable, Licensed Manufacturing
Warehouses can be set up to encourage the dispersal of industries and
enable companies to establish factories for export. The facilities are
similar to those available in the Free Zones.
The prime industrial developer in Malaysia is Malaysian Industrial
Estates Sdn. Bhd. (MIEL), which sells or leases ready-built factories
for small- and medium-scale industries (SMIs) for sale or lease. Large
export-oriented companies have access to specially designed buildings
on long-term leases. Other developers also offer ready-built factories
for SMIs.
In the Philippines, the number of economic zones, or eco-zones, has
jumped from 16 in 1995 to 77, under the direction of the Philippines
Economic Zone Authority (PEZA), which was created in 1995. Four of the
zones -- Bataan, Baguio City, Mactan, and Cavite -- are owned by the
government and actually comprise 26 industrial estates. The remaining
73 eco-zones are privately owned; the bulk of these�55 of them�are on
the island of Luzon. From January to November 1997 alone, the
Philippine government approved the creation of 26 new eco-zones. Now,
the Philippines is experimenting with the idea of grouping
complementary industries in a system of industrial ecology where one
facility uses the by-products (i.e., steam, wastewater) from a
neighboring factory. The Philippines Department of Trade and Industry
and the Board of Investment are leading the first of these
experimental projects.
|
Industrial Estates in the
Asia-Pacific Region |
| Country |
Number of Industrial Estates
5 |
| Indonesia |
55:
|
in development
or already operating |
| Malaysia |
311:
|
207
state-owned, 59 private, 45 special and free zones |
| Philippines |
77: |
4 state-owned
eco-zones, 73 private eco-zones |
| Singapore |
30:
|
state-owned,
Jurong Town is the primary estate |
| Thailand |
23: |
9 state-owned,
14 joint ventures |
One economy with unique industrial and environmental successes,
Singapore, stands prominently as an Asian country that has implemented
clean technology and strict environmental controls since the late
1960s, when it sought to establish a financial urban centre, protect
Singapore�s water catchment, and create an industrial area outside the
catchment, zoned and managed for industrial development. These
land-use policies have been supported by strong regulations and
enforcement under both the Ministry of Environment and Ministry of
Trade (MTI), which includes the Economic Development Board and Jurong
Town Corporation (JTC) manager of Singapore�s primary industrial
estate.
6
While Singapore may provide one model of
environmental success, its experience may not soon if ever be
replicated in the region because of tight governmental controls
that other countries might regard as an unnecessary burden. It is the
industrial estates across the region, with their built-in relationship
to government agencies, which may come closest to duplicating the
conditions that made Singapore a success in the environmental arena.
In fact, Singapore is working closely with Malaysia, Indonesia, and
other countries rich in natural resources to develop industry in zones
throughout the region. The Indonesia-Malaysia-Singapore Growth
Triangle (IMSGT), or Southern Triangle, is one zone of cooperation
that uses the resources and lower transaction costs of geographically
contiguous countries to encourage private investors to locate their
manufacturing facilities there.
Through these kinds of arrangements, Singapore provides technical
advice and infrastructure investment that allows for liberalized
movement of goods, services, labor, and capital within designated
zones. These zones include industrial parks, tourist sites, hospitals
and other commercial activities. According to the Malaysian-Australian
Foundation, the IMSGT enjoys considerable investment from Singapore
that goes toward the development of infrastructure, power generation,
telecommunications, water, ports, and roads. Other active
multi-country zones in the region are rich in natural resources and
still in developmental stages. They include the
Indonesia-Malaysia-Thailand Growth Triangle (IMTGT) or Northern
Triangle, and the Brunei-Indonesia-Malaysia-Philippine-East ASEAN
Growth Area (BIMPEAGA).
THE ROLE OF STAKEHOLDERS IN INDUSTRIAL ESTATES
Under these types of industrial structures, the goals and functions
of the stakeholder participants both overlap and stand in
direct opposition. Governments, for their part, are committed to
attracting foreign investment and business, but must simultaneously
monitor and enforce new environmental regulations. Corporations must
run profitable and efficient operations; some schools of thought say
this is best done by achieving minimal compliance with regulations
environmental or otherwise. Community leaders and NGOs want to see a
strong local economy that benefits residents and workers but only if
this scenario includes responsible practices that respect the
environment and its inhabitants. In this new paradigm that emphasizes
ever-improving industrial environmental performance, and de-emphasizes
sole reliance on regulatory compliance, each stakeholder group has a
broader role to play.
Governmental ministries�whether they focus on industry or the
environment, industrial estates, or other development scenarios�must
establish an appropriate investment and industrial environment that
complements existing regulations and encourages performance-based
improvements. With dozens or even hundreds of facilities on-site,
however, industrial estates are especially well positioned to provide
the government an opportunity to transform operations as a bundle,
instead of on a facility-by-facility basis. They also give
environmental guidance to small and medium-sized enterprises that many
times have neither the individual resources, nor the public pressure
to improve their performance. Since these improvements must be largely
driven by private sector initiative, the government�s role as a
moderator and provider of information to the public and corporations
is important. Among government, corporations and the community,
industrial estates create a geographic relationship, which then can be
extended to one of information, innovation and partnering.
But the government also has the ability to foster creative
approaches through innovative policies and regulations. As one
example, the U.S. Environmental Protection Agency�s Project XL is
experimenting with relaxed regulations, in exchange for exceptional
performance. In Indonesia, the Ministry of Environment is encouraging
public pressure to move companies beyond compliance in the PROPER
program. These programs already have enjoyed limited success with
facilities that are far-flung, and therefore difficult to monitor. In
an industrial estate scenario, such programs if structured properly
could have an opportunity to flourish.
Companies that intend to remain competitive in the wake of
Asia�s financial crisis and move into the era of renewed growth, must
acknowledge the benefit of retooling both manufacturing and management
processes. Much of this involves a fundamental transformation that has
the potential to move companies far in front of existing regulations.
Even in economies that consider their manufacturing processes to be
relatively efficient there is room for improvement. U.S. companies
have begun a modern crusade to transform their own manufacturing
facilities as well as those of their suppliers with impressive
financial results. As one example, Case Corp., a farm equipment and
light construction equipment manufacturer with headquarters in Racine,
Wisconsin, sends corporate officials to supplier factories in North
America and Europe on one-week programs, called Rapid Improvement
Events, looking for methods to increase efficiency while cutting
manufacturing costs. Two or three Case officials team up with the
factory managers and production line workers to inspect the physical
machinery, as well as production processes. During a typical program,
they make changes to the layout of machinery on the factory floor,
saving space (anywhere from 25 to 60 percent), removing inefficient
pieces of the production line and raising productivity; one supplier
increased productivity by 75 percent. They have drastically reduced
the set-up time required to change and re-calibrate machine parts in
some cases reducing the time by more than 80 percent. Finally, they
have reduced the work-in-progress, improving the turn-around time
(sometimes by 90 percent) required to get each piece shipped back out
of the factory and sold in the market. The results both financial and
environmental are significant.
7
Again, these programs, implemented in this example on a
facility-by-facility basis, can be applied across entire estates.
Finally, NGOs and communities are demanding increased access
to information from government and corporate officials when it comes
to industry�s effect on the environment, and are finding increasing
support for their efforts, particularly in Thailand, where the 1997
Constitution includes new language encouraging public participation in
resource development issues. Such programs involve an exchange of
information among governments, corporations, and NGOs. Increased
interaction and transparency are crucial in light of the fact that
industrial estates have earned a reputation for behaving like
closed-wall fortresses. Many critics believe that government and
corporate officials often overlook many of the issues that
traditionally increase the cost of doing business, such as labor
agreements, health and safety provisions, and responsible
environmental practices.
8
Although these criticisms must be further examined, the fact remains
that industrial estates in the Asia-Pacific are a growing phenomenon
that hold enormous potential for leadership in the areas of both
economic growth and the environment.
NOTES:
- As the stock market and currency crisis
snared one Southeast Asian economy after another in 1997, government
and corporate officials alike scrambled to maintain a place in the
international markets; many corporations failed, declaring
bankruptcy before year�s end. The Bangkok and Kuala Lumpur stock
markets experienced some of the region�s largest drops during 1997,
with slumps of 56 and 55 percent. Similarly in 1997, the Indonesian
rupiah and Thai baht slipped 71 and 63 percent against the U.S.
dollar.
- "Prices & Trends," Far Eastern Economic
Review, August 27, 1998.
- Ungush K. Park, "Environmental Protection
and Asian Economic Development," UNEP Industry and Environment,
September 1996.
- The United Nations Environmental Programme
defines an industrial estate as any defined geographical area that
contains businesses of an industrial nature. These businesses may be
similar or diverse, light or heavy, up-to-date or relatively
sophisticated, etc., but the essential element is that the estates
are administered/managed by a single authority that has defined
jurisdiction with respects to tenant companies. The authority makes
provision for continuing management, enforcing restrictions on
tenants and detailed planning with respect to lot sizes, access and
utilities, etc. (This term often is used interchangeably with
industrial district, park or zone, business park, or eco-park.)
Environmental Management of Industrial Estates, a 1997 UNEP
Industry and Environment Technical Report.
- Indonesia Ministry of Industry and Trade,
December 1997. "Malaysia: Maps of Industrial Estates," Malaysian
Industrial Development Authority, 1996. "Location of Philippine
Economic Zones," Philippine Economic Zone Authority, November 1997.
Kasemsri Homchean, "The Monitoring System for Industrial Estates in
Thailand," UNEP Industry and Environment, October-December 1996.
- JTC has a tight regulatory grip on the
companies operating under its auspices, allocating land to companies
that may themselves build or that may occupy buildings established
by JTC under a thirty-year lease. JTC has built all the required
infrastructure sewers, roads, substations, electrical and
communication lines in the industrial estate. Presently, half of the
500 companies in the zone are small- and medium-sized enterprise. On
the offshore islands, which are sites for Singapore�s petrochemical
and refinery plants, JTC contracts for major reclamation work for
landfill to expand the site. All telecommunications, electrical, and
other infrastructure are given to the appropriate government agency
for a fee, whereupon it is managed by that agency. All JTC�s
infrastructure development costs are recovered in its leases. JTC
has an international arm, JTC International, which helps build and
operate industrial parks in China, Vietnam and Indonesia. US-AEP
Country Assessments, 1996.
- Case Corp., 1998 Rapid Improvement Events
data. Amory B. Lovins of Colorado�s Rocky Mountain Institute cites
additional examples of corporations that have saved considerably by
instituting energy-saving ideas suggested by workers, including Dow
Chemical, Mitsubishi, Interface, Xerox, Southwire, and Carrier.
"Save Energy, Make Piles of Money," Washington Post, January,
1998.
- Jeffrey Sachs of Harvard Institute for
International Development believes that these estates are attractive
to investors because they are designed to avoid the problems of
infrastructure, security, rule of law, and trade policies that
plague the rest of the economy. This situation has been reported as
a concern by estate workers, community leaders who live and work in
the surrounding vicinity, and the media, which reports corporate
behavior to consumers and shareholder investors. Such groups are
demanding more transparency and public information about these
concerns, as well as the closure of regulatory loopholes that allows
companies free reign on these subjects. Steven Radelet and Jeffrey
Sachs, "Asia�s Reemergence," Foreign Affairs,
November/December 1997.
|
