Pollution solution a win-win for business (hktdc.com)


	US Consul General James B. Cunningham calls for action on several fronts to tackle pollution challenges in China

A US initiative launched in Hong Kong could unlock greater business opportunities to participate in China's efforts to tackle pollution.

Entitled "Pollution Prevention and Energy Efficiency (P2E2)", the scheme can achieve results without requiring upfront capital or hurting the bottom line of factory owners. Details of the initiative were announced in a speech by US Consul General in Hong Kong James B. Cunningham on June 6.

"Just as the economy is globalising, so are quality of life issues like pollution affecting an ever greater portion of the globe," he said, adding that the issues are complex and "solutions will not come quickly or easily".

Mr Cunningham pointed out that well over 70,000 factories in the Pearl River Delta (PRD) are owned or financed by Hong Kong-based businesses employing more than 11 million workers. These factories produce their own pollutants and demand ever more power.

Multi-pronged attack


	Stewart Ballard, one of the chief architects of the P2E2 model for Hong Kong, is convinced the initiative can work

"Many of these factories support the global business strategies of US firms, and the goods they produce are largely destined for major global markets. So action is called for on several fronts," he said.

The P2E2 scheme draws together international and Hong Kong banks, Hong Kong-based service companies, and mainland factories.

Stewart Ballard, Chief Commercial Consul, US & Foreign Commercial Service, and one of the chief architects of the P2E2 model for Hong Kong, is convinced that, with Hong Kong as its launch pad, this innovative model can work.

The model uses loan guarantees from the Asian Development Bank as well as credits from the US Export-Import Bank. "With both ADB and Exim on board, this helps to reduce risks so Hong Kong banks are more interested in financing the projects."

No cost start-up

Here is how it works:

• The Hong Kong-based service company advises the mainland company – on a no-cost basis - on processes to reduce environmental impact and energy needs

• The Hong Kong-based company secures a loan with a Hong Kong bank to lease or purchase equipment necessary for the upgrade

• The Hong Kong bank grants the loan against a performance contract partially offset by loan guarantees from the ADB and Exim bank. ADB is preparing a wide range of supports for energy efficiency projects and looks forward to realising successful pilot projects in co-operation with the US Consulate General

• The loan is repaid within one to three years using cost savings achieved at the mainland plant through reduced energy usage and raw material intake

• An independent technical auditor measures and verifies these cost savings.

"Our P2E2 initiative needs a place like Hong Kong with its developed legal and financial systems to provide the infrastructure to support private sector initiatives to help solve China's environment problems," Mr Ballard said. "This is a win-win model where businesses can adopt environmentally-friendly technologies without affecting their bottom line."

Both ADB and Exim came on board as a result of a May 2005 conference held in Hong Kong.

"It was an important breakthrough as it was the first time we had officials from ADB and the US Export-Import Bank at this conference. They were willing to provide loans to Hong Kong commercial banks to support Hong Kong-based entities doing work in China. This underlines Hong Kong's role as a risk management centre or risk mitigator. At the same time, it became clear to them that Hong Kong is a forum opened to views and expertise around the world."

Financial edge

According to Mr Ballard, Hong Kong has very strong advantages. "Hong Kong is the financial centre in the region so banks can make sure that people are paid in Hong Kong for work done in China. There are no currency controls so there are no barriers."

Twenty Hong Kong-based environment and energy service companies are on the P2E2 list, including US and other international companies with an office in Hong Kong. So are nine Hong Kong commercial banks.

"With Hong Kong financing, P2E2 has already created interest in Bali, Thailand, Vietnam and other parts of China. Hong Kong is emerging as a powerful tool in improving the environment in China and parts of Asia. By fall this year, we should already see some results," added Mr Ballard.

He said the P2E2 model has tremendous potential in sectors such as power generation, aluminium, brick-making, cement, chemicals, electronics, iron and steel, food processing, paper and pulp, plastics and metalworking.

The success of the P2E2 model will depend on the private sector. "We are giving the private sector a tool to move forward. The more they use it, the faster we will see results. We want to see more Hong Kong small and medium-sized enterprises (SMEs) involved in this fight against pollution," added Mr Ballard.

For more information on the P2E2 programme, and to learn how your company can take advantage of this new financing tool, please contact:

Olevia Yim, Senior Commercial Specialist for the Environment, US Foreign Commercial Service, US Consulate Hong Kong. Tel: (852) 2521 1467, E-mail: hong.kong.office.box@ mail.doc.gov