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Growing Demand for Environmental Services in PRD
Business Promise for Hong Kong Companies: HKTDC Report


“The surge in demand for environmental services in the Pearl River Delta region will generate huge business opportunities for Hong Kong companies,” said HKTDC Deputy Chief Economist Pansy Yau (right). With her is HKTDC Economist Wing Chu

9 December 2010 – The surge in demand for environmental services in the Pearl River Delta region (PRD) will generate huge business opportunities for Hong Kong companies, according to a research report released by the Hong Kong Development Council (HKTDC) today. One of the major initiatives in the Chinese mainland’s 12th Five-Year Programme, which will be formalised in 2011, is to step up efforts in environmental protection. Following the Central Government’s policy lead, Guangdong Province plans to create a cleaner, more environmentally friendly PRD over the next decade.

For years, the PRD has been the powerhouse of the mainland economy, in the process consuming high amounts of energy, creating water and air pollution and posing serious threats to public health. In hope of recovering the environment and keeping the province’s development sustainable, Guangdong will impose stricter requirements on business and industry to meet emission standards.

Guangdong has already required businesses to set up their own energy-saving plans. “Businesses can save money when energy costs are reduced,” said HKTDC Deputy Chief Economist Pansy Yau. “Low-carbon production works in tandem with the increasingly popular green sourcing requirements of United States and European buyers. Moreover, under the green-credit policy, energy-saving enterprises can obtain credit facilities from banks more easily, enjoying preferential treatment in taxation as well as government fiscal incentives. These initiatives have helped the PRD’s energy-saving market expand quickly in recent years.” 

Energy-Saving Demand
The new initiatives, however, will create much more opportunity for Hong Kong service providers. Given that the manufacturing industry accounts for more than half the province’s energy consumption, its companies would be the major clients in the PRD’s energy-saving market. They will have strong demand for energy-saving services, in areas such as energy-efficient air-conditioning, residual heat and pressure recovery, green lighting, power-system enhancement, and the use of new energy sources. In addition, enterprises in the hotel and commercial sectors will also offer opportunity for Hong Kong service providers.

Guangdong is the mainland province with the most pollution sources. To strengthen environmental protection, the provincial government will impose more stringent pollution-emission standards on heavy polluting processes such as industrial boilers, building materials, petrochemicals, dyeing and electroplating. Such measures are expected to fuel demand for environmental system engineering services such as sewage and waste gas-treatment system construction.

An investment of Rmb197 billion, earmarked for new environmental infrastructural projects between 2009 and 2020, will create more demand for environmental engineering services.

Demands from PRD enterprises range from the installation of a single facility to projects incorporating a full range of engineering, technical and financing services. “Hong Kong service providers can take advantage of this. With project management experience over many years, they are able to offer one-stop integrated services to mainland companies,” said Miss Yau. “In addition, as they have frequent exchanges with enterprises on the mainland, as well as companies from Europe, the US and Japan, they are adept at bringing together mainland and overseas equipment and technology. They are able to provide the most cost-effective solutions to clients.”

Energy Management Contract
Hong Kong service providers can also benefit from a new mode of cooperation, according to Ms Yau. In the provision of energy-saving services, the Energy Management Contract (EMC) model is becoming increasingly popular in the PRD. The EMC company offers the client a one-stop energy-saving solution and bears all costs in engineering and facility installation. On project completion, the EMC company is paid a portion of the energy savings as specified in the contract. With the advantage of allowing an enterprise to enjoy energy-saving services without paying in advance, EMC is an effective model for energy-saving service providers wanting to expand their market.

In a variation of this, a third-party company is commissioned to undertake an energy audit and test for the energy-consuming enterprise, compiling an independent report on the energy efficiency achieved. In either case, as Hong Kong’s accredited certification bodies are well-respected by mainland enterprises, Hong Kong service providers can break into the PRD and mainland market under the EMC model.

“In all models, Hong Kong service providers are required to make the initial investment in the project. They can only collect investment returns and profits during the construction period or upon completion of the project in accordance with the contract,” said Miss Yau. She added that the Pollution Prevention & Energy Efficiency Programme, jointly implemented by China and the US, is an additional financing channel for Hong Kong service providers.

“In order to achieve its green goals, the mainland will have to import key environmental technologies for quite some time,” Miss Yau said. “With an ideal business environment, good protection of intellectual property rights and a full range of financial services, Hong Kong is well-suited for technology transfer.”

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About the HKTDC
A statutory body established in 1966, the Hong Kong Trade Development Council (HKTDC) is the international marketing arm for Hong Kong-based traders, manufacturers and service providers. With more than 40 global offices, including 11 on the Chinese mainland, the HKTDC promotes Hong Kong as a platform for doing business with China and throughout Asia. The HKTDC also organises trade fairs and business missions to connect companies with opportunities in Hong Kong and on the mainland, while providing information via trade publications, research reports and online. For more information, please visit: www.hktdc.com 

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