TED Case Studies
Hong Kong Waste Fee
CASE NUMBER: 239
CASE MNEMONIC: HONGKONG
CASE NAME: Hong Kong Waste Fee
A. IDENTIFICATION
1. The Issue
Until last year, all of Hong Kongūs factories producing
chemical waste dumped their detergents, toxic chemicals and waste
water down the drains and into the territoryūs harbor. There
simply was not any alternative. Small Hong Kong enterprises
similarly have been flushing their used-up chemicals down drains.
The corrosive fluids have now eaten up the pipes, and the toxic
metals have dribbled into the Hong Kong harbor. Now, armed with
1988 environmental regulations, Enviropace, Ltd., is trying to
get those factories to turn over their chemical waste for
processing in a new treatment plant. The plant, an affiliate of
Illinois-based Waste Management Incorporated in Hong Kong,
symbolizes the governmentūs ambitious plans to clean up Hong
Kong. But the plant also raises the question of who should pay
for it.
2. Description
In 1992, the government proposed charging a uniform tariff
of 0.75% on all domestic waste and chemical imports to pay for
waste disposal. The Association of International Chemical
Manufacturers, an industry coalition dominated by multi-national
companies, succeeded in defeating the program on the grounds that
it penalized companies which take care of their waste as well as
polluters. It remains now, the taxpayers who foot the bill for
the Tsing Yi plant.
Enviropace is the consortium that built and has a 15 year
contract to operate the facility. Its $125 million plant will
handle 100,000 tons a year of chemical waste, and the company has
a 15-year contract to operate the plant. Because Enviropace
makes money based on the volume of waste it handles, it has a
strong financial incentive to collect everything possible. A
different joint venture involving Waste Management will build one
landfill, and another landfill is being built by a joint venture
involving Browning Ferris Inc., an American engineering and
construction firm. Browning Ferris is also involved in designing
and building three refuse transfer stations, where garbage will
be sorted and packed into containers to be placed in landfills.
Several more transfer stations are planned.
By 1997, when this British territory is supposed to be
returned to Chinese sovereignty, Hong Kongūs government intends
to spend more than $ 1.5 billion on its sewage system. Private
industry might have to spend as much money to comply with new
environmental regulations. This presents business opportunities
to overseas contractors, equipment suppliers and investors.
The implications of a possible taxation are serious. Many
companies will probably go out of business in the coming years,
or move across the peninsula to China, where environmental
regulations are rarely enforced, and where land and labor are
cheaper. Exporting industry to China would not only hurt Hong
Kongūs economy, but it wouldnūt do its environment much good
either. Many of the factories moving to China are among the
lowest technology, highest waste-producing companies in Hong
Kong. In China, they are bunched in nearby Guangdong Province
along the Pearl River, which empties into the bay next to Hong
Kong.
Solid waste has become a multimillion-dollar industry in
Hong Kong. It is growing at a rate well above inflation. The
ūFour Dragons,ū as Asiaūs fastest-growing economies -- Taiwan,
Singapore, South Korea and Hong Kong -- are called, have been
concerned with development at the expense of the environment.
Only as they have become richer have they started to pay more
attention to these important pollution issues.
For years, tiny enterprises have been flushing their used-up
chemicals down the drain, where the corrosive fluids have eaten
up the pipes, and the toxic metals have dribbled into the Hong
Kong harbor. In the process, at least 8,000 other chemical
waste-producing businesses in Hong Kong have helped turn the
territoryūs harbor into one of the worldūs most polluted
waterways.
Until last year, all of Hong Kongūs factories producing
chemical waste dumped their detergents, toxic chemicals and waste
water down the drains and into the territoryūs harbor. There
simply was not any alternative. Now, armed with 1988
environmental regulations, an affiliate of Illinois-based Waste
Management Incorporated in Hong Kong, Enviropace, Ltd., is trying
to get those factories to turn over their chemical waste for
processing in a new treatment plant designed, built and operated
by the company.
Their task is massive. According to a 1992 report by the
U.S. Consulate, toxic metals weighing as much as a London double-
decker bus were dumped into Hong Kongūs waters every day. The
report said that enough copper was being dumped weekly into the
harbor to completely plate the outside of the Hong Kongūs
landmark 84-story Bank of China building three times. That is
only in addition to the 1.6 million tons of paper, plastic and
metal Hong Kong exports for dumping in China. Not to mention the
26 million cubic meters of toxic mud and sludge that will be
generated by the new airport construction project.
Moreover, as a result of Hong Kongūs laissez-faire and rapid
development style, most of the waste-producing factories are
located in high-rise buildings scattered all over the territory.
Because they are often housed in 30-story buildings with five or
10 companies on one floor, it is quite difficult to control. To
make matters worse, the United States exports 200,000 tons of
plastic waste to Hong Kong every year, some of which is recycled
and some of which is simply shipped on to China.
Hong Kong has paid a high price for its stunning economic
growth. Because Hong Kong has not had enough treatment
facilities, factories have had little alternative to dumping
their waste into the nearest sewer or river. The colonyūs soil
and water are so fouled with toxic metal that even its few sewage
treatment facilities have difficulty operating properly. The
waste dumping has had serious repercussions on the marine
population, a large food supply for the Hong Kongese. An effort
to remedy this problem was begun in January of 1993 when the HK$
1.3 billion (US$ 167 million) chemical waste treatment plant
began taking trial shipments.
The new waste-treatment facility was to treat everything
from mercury, cyanide and lead discarded by thousands of small
factories - to the sludge pumped out of ships. This plant was
considered to be the most technologically advanced in the world.
Located on Tsing Yi island, the plant initially handled about
100,000 tons of waste on an annual basis, but the capacity is to
be expanded 30% by 1997. Using a variety of techniques, the
plant either incinerates, or renders waste inert.
The plant symbolizes the governmentūs ambitious plans to
clean up Hong Kong. But the plant also raises the question of
who should pay for it. The risk in asking polluters to pay to
treat their waste is that they will be tempted not to do so, and
continue dumping it. So far, the government has registered 9,300
companies as waste producers, more than 98% of the total. These
waste generators range from tiny film laboratories to large
dyeing and electronics factories.
The plethora of small producers is why the government
ordered an expensive all-purpose facility. The idea of such a
large plant was to not have to charge the smaller polluters, but
to still clean up the mess. Unfortunately this sort of approach
penalizes the companies that comply with waste-treatment
regulations. If polluters do not pay, there is no incentive to
clean up.
3. Related Cases:
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Keyword Clusters
(1): Trade Product = TEXTile
(2): Bio-geography = Temperate [TEMP]
(3): Environmental Problem = Pollution Sea [POLS]
4. Draft Author: Susan Lynne Tillou
B. LEGAL Filters
5. Discourse and Status: AGReement and INPROGress
There is a degree of consensus around the issue of cleaning
up the Hong Kong Harbor. The fact of the matter is that Hong
Kongūs industrial growth began and developed too quickly for the
Hong Kongese to consider the environmental impacts from their
rapid development. As a result of Hong Kongūs laissez-faire,
helter-skelter development style, the territory houses some of
the worldūs worst waste-producing factories. And that is in
addition to the 1.6 million tons of paper, plastic and metal Hong
Kong exports for dumping in China each year. Moreover, the new
airport project is expected to generate 26 million cubic meters
of toxic mud and sludge.
6. Forum and Scope: HONGkong and BILATeral
While the issue of chemical waste run-off is, for the most
part contained within a domestic forum, it does have other
considerations. Hong Kong Bay pollution is not only caused by
the local manufacturers and residential sewage, but also from
pollutants which travel down from the voluminous number of small
factories in South China. With strict regulations, companies
would find it cheaper to export their waste to China. However,
exporting waste and industry to China would not only hurt Hong
Kongūs economy, but it wouldnūt do its environment much good
either. Many of the factories moving to China are among the
lowest technology, highest waste-producing companies in Hong
Kong. In China, they are bunched in nearby Guangdong Province
along the Pearl River, which empties into the bay next to Hong
Kong.
7. Decision Breadth: 2
Both China and Hong Kong are affected as the run-off is
coming from both countries, and with tidal changes, can flow back
into the two countries harbors. Japan is affected by polluted
ocean water and fish flowing from the East China Sea.
8. Legal Standing: TREATY
Even as city officials acknowledge and worry about their
steadily deteriorating environment, they feel they have no
alternative to continued dumping in the rivers. The city is
modernizing, but at nothing close to the rate of cities nearer
the coast, and civic leaders say they dare not risk falling
irretrievably behind their competitors in the drive for
development.
The result of diverging industrial and environmental
priorities is pervasive. Nearly 60,000 acres of fishing grounds
in Zhejiang province, China have been abandoned due to pollution.
Spawning and wintering grounds of fish in all the largest river
systems have suffered serious damage. Spawning and fishing
grounds in the East China Sea also are in severe decline.
Japan also lies in the path of major pollution streams from
Hong Kong and China, and its leaders are increasingly worried
about the these countriesū contribution to acid rain in their
country. Japanese environmental studies from 1994 indicated that
over 50% of the sulfuric acid found in the Japanese environment
originate from China. While Hong Kong and Chinese officials do
not try to minimize the seriousness of their environmental
problems, China bristles at suggestions from other countries that
it should take drastic conservation steps at its own expense, and
they point out that China and Hong Kongūs generation of air
pollutants per person are far behind that of all of the major
highly developed countries.
C. Geographic Filters
9. Geography
a. Geographic Domain: Asia
b. Geographic Site: East Asia
c. Geographic Impact: Hong Kong
10. Sub-National Factors: YES
The Hong Kong government and citizens are concerned over the
pollution problem in the harbor and desirous of cleaning it up.
What comes into play is the investment factor. Both the Hong
Kong government and international businesses shy away from
business investments (like treatment plants) for fear of what
will happen in 1997 when the Peopleūs Republic of China re-
assumes control over the colony. Nobody wants to invest the
capital, construction and labor in hopes to profit -- only to
find that the PRC has seized all rights to their property and
business operation. This uncertainty caused by the upcoming
return has also been a factor in other issues such as the
construction project for Hong Kongūs new airport facility.
11. Type of Habitat: TROPical
C. Trade Filters
12. Type of Measure: Regulatory Standard [REGSTD]
In 1988, the Hong Kong government set out to regulate the
amount of waste disposed of into the harbor by instituting strict
environmental regulations agreed upon by the Congress that year.
In 1992, the government proposed a tariff for chemical imports of
waste disposal, however this attempt was blocked by a coalition
of chemical manufacturers.
13. Direct vs. Indirect Impact: DIRect
Both the proposal to mandate deposits into treatment plants
and the proposal to tax chemical waste imports inflict a direct
repercussion to trade. the importation of waste would now be too
expensive, and would most likely be funneled off to a cheaper
depository site, for example in South China. Requiring Hong
Kong-based manufacturers to treat a set percentage of waste at a
cost to them would drive up the attractively low manufacturing
costs, and simply encourage deviancy.
14. Relation of Measure to Resource Impact
a. Directly Related to Product: No
b. Indirectly Related to Product: Yes MANT
c. Not Related to Product: No
d. Related to Process: Yes. Pollution Sea [POLS]
The measures to clean up the Hong Kong Bay pollution are
directly related to the product because it calls for a taxation
of chemical and waste disposal. Since chemical waste is an
imported product in Hong Kong, the product is directly related.
There is also an indirect relation because domestic chemical
waste runoff is generated through the manufacturing of other
trade products in the region. The production of the other
products producing the waste in question.
15. Trade Product Identification: Waste
The United States exports 200,000 tons of plastic waste to
Hong Kong every year.
16. Economic Data
Hong Kong's imports were $149.6 billion and its total land area
990 square kilometers. The total land area in Hong Kong is less
than 6 times the size of Washington, DC. With the cramped nature
of the manufacturing operations already existing in the colony,
and an already prevalent need to dispose of waste in a space-
conserving fashion, this was already an important consideration.
With a plant to remedy Hong Kongūs own waste needs, it is both
entrepreneurial and profitable to allow the importation of
otherūs waste for disposal also.
17. Degree of Competitive Impact: MEDium
Since the price of goods now manufactured in (or chemicals
imported into) Hong Kong could be taxed in order to pay for waste
disposal, this could generate a heavy repercussions on the price
of manufactured goods. The cost of waste disposal unquestionably
will be passed on to the consumers. This is the reason chemical
manufa=cturers have fought so hard to avoid tariffs of this kind.
18. Industry Sector: TEXTile
19. Exporters and Importers: HONG Kong and USA
E. ENVIRONMENTAL Cluster
20. Environmental Problem Type: HABITat Loss
21. Species Information
Name: MANY
Type: MANY
Diveristy: NA
Five shellfish [MOLLUSK] species are already extinct. The
future of the Chinese White Dolphin [INDO-PACIFIC HUMPBACKED
DOLPHIN] is already threatened. However, this is not a species-
specific problem. All marine life is affected by the polluted
surface water run-off and direct chemical waste deposits into the
bay.
22. Impact and Effect: MEDium and PRODucts
Products affected will be great in number and negative in
impact. Regulatory and Structural measures will be eminent
controlling chemical waste run-offs and sewage domestically; as
well as waste imports. Scale effects would decrease the amount
and level of trade due to its costliness.
23. Urgency and Lifetime: LOW and 5-10 years
If the dumping goes unrestricted and untreated, great
numbers of endangered species will be irretrievably affected
within 5-10 years.
24. Substitutes: RECYCling
Efforts to both recycle and conserve are the only viable
substitutes to Hong Kongūs pollution problem. Use of
biodegradable and environmentally safe chemicals are another
option.
F. OTHER Factors
25. Culture: NO
26. Human Rights: NO
27. Trans-Boundary Issues: YES
This is a trans-border issue in the sense that Hong Kong is
a colony which has relied upon the United Kingdom for legislative
and financial support. Also, China has a keen interest and both
political and financial investments in Hong Kong, due to its
turnover in 1997.
28. Relevant Literature:
CIA Factbook (1994 statistics on countries)
Internet site, URL: http://www.ic.gov/94fact/country/(China -
51.html, Hong Kong/108.html)
"Hong Kong Cleaning Up Its Act -- and Its Harbor; Foreign Joint
Ventures to Help Handle Waste Disposal," The Washington Post,
article by Steven Mufson, Section: first section, Pg. A27.
"South China to Focus on Water Cleanup," UPI Release, article by
Ian Stewart, April 12, 1994 (BC Cycle), Section: International.
"With Chinaūs Miracle Pollution Surges," The Boston Globe,
article by Charles A. Radin, Section: Science and Technology, Pg.
47.
"Bordering on a Crisis," South China Morning Post, Section:
FEATURE; Beyond 2000, Pg. 16.
"Hong Kongūs Dolphins Face Murky Future," Chicago Tribune,
article by Deirdre Chetham, Section: TEMPO, Pg. 3.
"Green Dragon Rising in Asia," Wall Street Journal, article by
Tim W. Fergusen, July 12, 1994, Section A, Pg. 15:3.
State of the Environment in Asia and the Pacific, Bangkok:
United Nations Economic and Social Commission for Asia and the
Pacific, 1992.
"State of the Environment," Far Eastern Economic Review, v. 156
January 14, 1993, p.43.
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