U.S. Water News Online
WASHINGTON -- Access to safe drinking water and contamination of surface water bodies is a major problem in many areas of the globe. In the year 2000, approximately 1.1 billion people (18 percent of the world's population) lacked access to safe drinking water, and 2.4 billion (40 percent of the total population) lacked adequate sanitation.
Most of these people live in developing countries, predominantly in rural areas. Over one-third of the urban water supplies in developing countries operate only intermittently, while roughly 40 percent of the drinking water supply is lost due to leakage in the distribution systems.
At the same time, countries have come to recognize that an adequate supply of clean water and effective wastewater treatment is essential for sustainable development. Governments and organizations around the world are investing substantial sums in water and wastewater improvements. These expenditures create real opportunities for U.S. companies to export water and wastewater equipment technology.
Today, it is estimated that only 66 percent of wastewater is treated in Europe, 35 percent in Asia, 14 percent in Latin America, and almost none in Africa. Many important water bodies throughout the world are in violation of local water quality standards. More than 35 percent of drinking water supplies in Africa are contaminated in violation of national health standards, 21 percent in Asia, and 18 percent in Latin America and the Caribbean.
The principal constraints to the development of the water supply and sanitation sector are funding limitations, inadequate cost recovery, and inadequate operation and maintenance. As water sources become contaminated, increasingly effective and costly treatment methods are required.
'The lack of access to water for drinking and industrial uses, as well as to wastewater treatment, is thus a major limitation to sustainable development.
The incentives for improving water and wastewater infrastructure in developed countries are primarily regulatory, whereas in developing countries, the driver is public health: 2.2 million people, most of them children, die there every year from diseases associated with the lack of safe drinking water, inadequate sanitation, or poor hygiene.
As a result, the global water market has been growing rapidly over the last decade and constitutes well over a third of the global environmental market. This article aims to engage more water and wastewater technology firms in exporting their products overseas by providing background on overseas markets, and U.S. Department of Commerce programs available to help companies take advantage of opportunities overseas.
Global market size and characteristics
The global market for water and wastewater equipment and chemicals was estimated at $47 billion in 2001. Water-related services also represent a significant share of the $77.1 billion (2001) consulting and engineering market.
The United States, Western Europe, and Japan represent over 80 percent of the total market size, but those are mature markets with an average growth of 3 to 4 percent. At the same time, the economic recovery of emerging markets in Southeast Asia and Latin America from the 1997 crisis, rapid expansion of the Chinese economy, and broadening demand in the Middle East promise a return to the 10 to 20 percent pre-1997 market growth in the developing world.
With assistance from international donors, public sector agencies in developing countries, particularly in Asia, have launched multi-million-dollar spending programs in water supply and sanitation, and are encouraging private sector investments. The proportion of industrialized countries' development assistance devoted to water supply and sanitation increased steadily from 1986 to 1996, rising from 3.4 percent to 6.6 percent of total assistance.
In terms of cash, bilateral commitments from industrialized countries for assistance to developing countries in this sector rose from $1 billion in 1986 to $2.9 billion in 1996 (these numbers do not include France). In absolute terms, Germany's and Japan's donor funding was particularly large: Germany spent nearly $3.4 billion, while Japan invested $9.5 billion.
Best prospect countries
The countries that represent best prospects for U.S. exporters of water and wastewater equipment and services are determined by a number of factors, including:
Brazil, China, India, Japan, South Korea, Mexico, Spain, Taiwan, and the United Kingdom all have water and wastewater markets that exceed $1 billion in size. Such emerging markets as China, India, South Korea, Taiwan, Mexico, and Brazil have enormous potential due to the extent of unmet water supply and sewerage needs. Their growth rate usually exceeds 10 percent per year.
Japan, the United Kingdom, Spain, and Australia are mature markets with slower growth, but their sheer size and favorable business climate make them worth exporters' consideration.
The two Middle Eastern countries described in this report (Egypt and Saudi Arabia) are niche markets for U.S. exporters. Egypt is a large, exclusively aid-driven market, where massive U.S. foreign aid gives a significant advantage to American companies. Saudi Arabia is a highly specialized market with a focus on desalination technology, where the United States also has a good strategic position.
Keys to successful exporting
In order to succeed in the international market for water and wastewater technologies and services, U.S. firms should be aware of the realities of doing business overseas, know and be able to take advantage of particular market characteristics, and use available information support services. The Department of Commerce offers a number of programs to help U.S. exporters achieve the necessary level of expertise to do business overseas.
According to environmental exporters, key success factors in overseas markets include:
1) Understanding local markets. The first step in a successful export market strategy is, knowing where the markets are and how to access them. Knowing the stage and pace of market development, host government regulations, and the local business culture is critical in prioritizing business development efforts. The U.S. Department of Commerce offers a number of services to help companies learn about overseas markets. By visiting the International Trade Administration (ITA) website (www.environment.ita.doc.gov or generally, www.ita.doc.gov) companies may find a plethora of research materials and market reports on countries around the world.
ITA reports range from Country Commercial Guides that provide details on particulars on doing business in a foreign country, to specific International Market Insight Reports or Environmental Export Market Plan reports that provide specific information on the environmental market of a country. All reports are available free of charge to U.S. companies on the ITA website. Additionally, for a fee, companies may choose to contract individual research through the U.S. Department of Commerce for their company's use only. (Further details available on the ITA website) The Department's Office of Environmental Technologies also provides detailed country analysis reports on the top markets for environmental technologies. These reports are available by visiting www.environment.ita.doc under "Market Research."
The Office of Environmental Technologies staff, each with regional and sub-sector expertise on the top markets for environmental technologies can provide expert advice, trade statistics and information on the top environmental markets as well. For a staff listing and areas of expertise, please visit the above listed website.
2) Building alliances and working effectively with partners in export countries. Local partnerships and representation are desirable for U.S. companies so they can learn about attractive market opportunities before the competitors. Methods for developing a local presence range from hiring a local consultant or agent to represent the firm, to establishing a local office or a joint venture. Engaging in joint exporting activities (through joint ventures and consortia) with other U.S. firms is another way to enter a new market.
The U.S. Department of Commerce may also help U.S. companies find local partners in overseas markets through programs such as the International Partner Search and Gold Key Programs. For a fee, the Department of Commerce will find and screen potential business partners for U.S. companies relying on the expertise of the local U.S. Embassy in the country. There are a number of other programs of this nature. Details again can be found by visiting www.ita.doc.gov. The U.S. Department of Commerce has over 140 offices worldwide available to assist U.S. companies with export endeavors.
The Department of Commerce also hosts a number of trade promotion activities and events in the U.S. and abroad to help U.S. companies meet potential buyers, representatives, and to learn about overseas opportunities. For example, the Department hosts technical seminars at major U.S. and foreign trade shows, organizes matchmaking appointments for U.S. companies both in the U.S. and abroad, hosts trade missions overseas, and other activities to help U.S. industry meet potential business partners. A list of upcoming trade events may be found on the ITA website by visiting www.ita.doc.gov, and for a list of environmental industry-specific events, please visit www.environment.ita.doc.gov.
3) Finding financing for export activities. Development assistance is a primary driver in the water and wastewater sectors of emerging market countries. Multilateral development agencies strongly support, through technical and financial assistance, water supply infrastructure, wastewater treatment systems, and watershed clean-up projects, representing significant market opportunities. U.S. technology and services companies also can take advantage of the many U.S. investment and export credit programs. Commercial financing sources include private investment funds, U.S. and local commercial banks, and vendor financing.
The Department of Commerce maintains close, working relationships with a number of U.S. government agencies involved in financing and can help connect your company to the appropriate contact within the agencies. (e.g. U.S. Export- Import Bank, Inter-American Development Bank, World Bank, etc.) The Department also has full time staff in all of the multilateral development banks available to assist. The Office of Environmental Technologies recently published a report on Financing Environmental Exports. This report may be found by visiting www.environment.ita.doc listed under "Market Research."
The Department of Commerce has helped numerous companies achieve their export objectives. For more information on U.S. government export programs, please visit the ITA website at www.ita.doc.gov or contact the Office of Environmental Technologies Industries for information and/or referrals. (202) 482-5225. The Hach Company is an example of a U.S. company that has successfully built an export business that relies on close relationships with distributors aboard using Department of Commerce services. Their case is presented below. Case study: Building a network of top-notch local distributors: the Hach Company
"The advantages of entering into distributor and dealer relationships far outweigh the costs," says Paul Goltz, director of international sales and marketing, The Hach Company.
The Hach Company of Loveland, Colorado, is an internationally recognized manufacturer and distributor of analytical instruments and reagents used to test the quality of water and other aqueous solutions. The company employs almost 1,000 people in the United States and has been selling its products overseas since the 1950s. Hach has built a professional distributor network in over 100 countries; most dealers and sales representatives have well over 10 years of service working with the Hach Company and building markets for its products.
The Hach Company believes that strong local relationships are key to export success. Local affiliates fulfill such critical functions as negotiating new and sometimes frustrating business climates, arranging payment, and addressing tariffs and other barriers.
The Hach Company has established a formal process for selecting and training local distributors, but it also believes that the enthusiasm and capability of the selected local affiliate is critical. Hach representatives look for key characteristics such as honesty, motivation, and a strong commitment to growth.
Hach identifies dealer prospects through the Agency/Distributor Service and the "Gold Key Service" of the Rocky Mountain U.S. Export Assistance Center and by making solid contacts at the U.S. Department of Commerce's trade and catalogue shows. Other prospective dealers have been located through responses generated from their ongoing, multilingual promotional efforts and through overseas Technical Sales Seminars.
Overseas dealers are required to become experts on all facets of the Hach product line. As a result, the company has established an exhaustive process for training its distributors. Distributors are encouraged to visit the headquarters and the Hach Technical Training Center for hands-on training. In addition, they are required to attend factory-sponsored instrument repair courses presented in the United States and abroad. Since 1996, Hach has held technical sessions for its distributors in Australia, South Asia, Southern Africa, the Pacific Rim countries, the Caribbean, and Latin America.
Recently, the Hach Company expanded its Central Asian presence into Kazakhstan. The business climate and language in this former Soviet economy pose a challenge to American companies. Finding a good local distributor is critical to its success in this market. Hach's approach was to send staff to the country to identify and build a relationship with a new distributor or sales representative. After a number of years of work, Hach identified a promising distributor candidate. Hach staff sent used equipment to Kazakhstan so that the distributor and its customers could see and feel the products. Now, Hach has applied for U.S. Commerce Department funds to bring its Central Asian distributors to the United States for training. Growth has been slow in the new market, but the company is already beating internal projections. This is in large part due to the fact that its distributor demonstrates the real enthusiasm and excitement that Hach requires of its affiliates.
For more information, contact Paul Goltz, director of international sales and marketing at (800) 227-4224 or the Web site at www.hach.com.
Source: Primary interview with Paul Goltz.
Sources Environmental Business International. Environmental Technologies Reference Guide. San Diego, Calif. (June 2003)
International Trade Commission. ITC Dataweb. www.itcdataweb.gov (2004)
U.S. Department of Commerce. Water & Wastewater Technologies Export Market Plan. Washington, DC (August 2002)
(Article adapted from the U.S. Department of Commerce's Global Water & Wastewater Export Market Plan)
By: Ellen Bohon Senior International Trade Specialist Office of Environmental Technologies Industries U.S. Department of Commerce Washington, DC 20230.
Return to the U.S. Water News Archives page Or Return to the U.S. Water News Homepage
Editor@uswaternews.com
*Your Name:
*Your Email:
*Friend's Email:
Use a comma to separate e-mail addresses:
*Your Comments:
Hi, I thought you might like to read this article.
*Required Fields