IFC INTERNATIONAL FINANCE CORPORATION Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

INVESTING IN THE ENVIRONMENT BUSINESSOPPORTUNITIES IN DEVELOPINGCOUNTRIES Environment Unit, Tecchnical and Environment Department, International Finance Corporation Public Disclosure Authorized THE INTIRNATIONAL FINANCE CORPORATION

The International Finance,Corporation (IFC), a multilateral institution, is the Cover and book design by The Barton-Gillet world'slargest source of directproject financingfor privateinvestment in Cover map provadedcourtesy of National developingcountries. IFCexists to further economicgrowth in its developing GeographicSociety membercountries by promotingprivate sector investment. IFC is a member Cover:Cblorophyll-beartmg plants, such as

cIf* ankA3Group***1trldst tne WorlawhichTroup"c,, Bant a (> i , aonoa MIGAlvllen. ~~~~~~~-tato~n-1ndiharshe-skns-enrgymicroscopicphytoplankton in the sea ando-p°--- vege- AlthoughIFC's activities are closelycoordinated with, and complement,the duceorganic matter through photosynthesis. overall development objectives of the other Word Bank Grp-up institutfionis, The amountof cblorophyllindicates the pro- ductive potential of earth's regi6ns.The IFC is legallyand financiallyindependent, with its own Articlesof Agreement, Biospheremap, a compositeof colorreadings made by the NOAA 7 and NASA Nimbus 7 shareholders,management, staff, and financial structure. satellites,illustrates average chlorophyll content IFC combinesthe characteristicsof a multi- countries.IFC has collaboratedwith more than in differentregions. At sea, dark red and orange tndicateareas of highest productivity, yellow lateraldevelopmnent bank and a privatefinancial 2,000 companiesand financ'ialinstitutions in sup- and green revealmoderately productive regions, mistitution.Its sharecapital is providedby 145 portingover 1,000 businessventures m morethan light blue indicateslow productiili, and purple membercountries, whlch collectively determine its 95 countriesat a total capitalcost of over US$60 shows the leastfertile areas.Blackaqreas near policiesand activities.However, IFC raises most billion. lE;Calso helpscompanies in developing the poles indicatesea ice. On lqn4d,areasof 9f;he ftindsfor itsienlhngactivities thiough its cowte'b fi ian1iqi tq i ter/atq. p ic ve potent , rI,ll i'nrain triple-Arated bond issuesin the international marketsthloigh such 'ec sfanrsmsas loan syndi- forests, are dark green;lIghtrgtes indcate finaincaImarkets. Likea privatemistituton, IFC of*bt-& dfes-uei siasoWe troptet iizdstmopral~ chargesmarket rates for its loansand seeksprof- and securitiesissues. forests, temperate forestsand farmlands, and itab!ekretums.Uxhke most multilateralmstitu- In additionto projectfinance and resource some drier regions such as savannasand pam- tliW; lEG do~esnot acceptgovernment guarantees mobilization,IFC offers a fi4l atray ofadvisory pas Bareet conditions of deserts, high moun- ohlts loans It is also ableto make equityinvest- servicesand technicalassistance, helping private tains,and the A*icticregions show up as lighter mentsin privateenterprises. All EFCprojects are businessesm the developingworld increasetheir areas,and red indicatesinland waters. reviewedfor consistencywith appropriateWorld chancesof successand encouraginggovernments Bankand hosgtcountryenv,ron,mlguidnels to-createa cl1irmtehoskable to environmentally Sinceits inceptionin 195,6,IFC has financed sourid,private,investment. oVer1,000 businessventures in more than 90 TABLE OF CONTENTS

FOREWORD LIST OF TABLES

PART ONE 7TableI . P'otcntial and Opportunities for lrivate Sector Opportunities in iEnvironmental Industries in M/lexico 8 Pri vat e Sector In vestmencat 1 2. Nlarkets for EinvirornmenTtal Table 2 Services 13 Buyers of EknivironuilcuitalGoods aind Water and Wastewater Services in Mexico 10 Solid and Haz:ardous Waste LESTOF BOXES Air Renewable Resources 13ox BOT Model 14 F.IinanciTng Environimtlental Projects 25 Box 2 PART TWO Va1lejo Wastewater Treatm11ent Project 16 Environtmenital Issues and Box .3 Regulations 28 Vehicles Powel-ed by Compressed (Chile 29 Natural Gas 23 lIungary 32 lTidonicsia 36 Box 4 Malaysia 39 Global lEnvironimenit Facility (G:EF) 26 Mexico 42 Box S Pakistani 45 Selected FinanciTng for E nvironmen`tal Polancd 48 Projects 27 Thailand 51 TLurkCy 55

BIBLIOGRAPHY 58 Copyright ©j 1992 are Clltie cly thosc of the author(s) anid slhould tI c Completc backlbst of publications from The World IBank and not hc attributed in any mannleICto the IFC, the the World Bank, includinig those of the liFC, is Ihc Intcrnational Finanice Corporation World 1ank, or to member-s of their B3oard of showni in the annual In7dex of Publications, 18 18 11 Street, N. W. xecutivC Directors or thc countries they repre- which contains an alphabetical title list (with Washiligton, 1).( . )0433, U.S.A. scnt. Ibc World B3ankdoes not guarantee the full ordcerinig intforrriationi) aiidl indcxcs of sub- accuracy of thc data includcd in this publication jects, authors, and couLntrics and regions. Thc All rights rescrved and accepts no responsibility whatsoever for latest edition is available free of charge fro ManufactU tred in the Unitcd States of America any consequcnce of their tuse. First printinig May 1992 'Ihe mate-ial in this publication is copy- Distribution Utiit righltec. Rcquests for permission to reproduce OfficC of the Publisher tIhc Interntatio(nal lFinance (Corporation part or all of it should cbe se nt to) Chief, Department F (lFC), an affiliate of the World Bank, promotes Frivirorienilt Unit, IFC, at thc address showit in The World( l3ank thc ecotioinic developmcnt of its mcmbcr coutn- the copyrighit notice above. IAhc lFC, ecotLrages 1818 II Street, N.W. tries through invcstmncit in the private sector. It disseminiation of its work and will normally give Washinigton, ).C. 20433 is the world's largest multilateral orgariiationi peritlissioli promptly and, when thic rcproduc- U. S.A. providiing financial assistance directly in thc tion is for noncommercial puL-poss, without formtoof loan and equity to private crtci-priscs in asking a fcc. Pcrinission to photocopy portions Ptublications devcloping countries. for classroom0 usc is grantedl through the The World Bank 'Io prcseint the rcsults of research with thc Copyright Clearance Center, 27 Congress 66, avenue dIckna lcast possible delay, the typescript of this paper Strect, Salemil, MassacilusCtts 0 1970, U.S.A. 75 1 16 Paris has not been prcpared in accordlance with the France procedures appropriate to formiial printed texts, and thc IC and the World B?ank accept no responsibility for crrors. Ic findings, interprc- tatiolns, and conlclosiolis expr-essed in this paper

ii FOREWORD countries to provide enrvironimental goods ancd services. [FC recently coimpleted nine country studies to assess the role of the private sector in providing environmental goods and services and to identify spccific market opportunities. The inarkct studies focused primarily on pollution control technology and wastc mianagemicnt. The worldwide market for environmental goods and services is expected to [hey targeted countries, from various regions, in I vhich the private sec-tor aippeared to be suffi- US$300 billionl-inwhich cienly. dvoe; ac or thened appa grow rapidlygrowrapi during I the next decade, doubling from roughly 1 1011) cicirtiv decvcloped,or in whicha thc nicecisappcarced to US$600 billion by the year 2000. particularly- great, to prescilt opportLullitiCs In thc environmental sector: (hile, Nlexico, Poland, '['his market is still relativcly small in dcvelop iniodcrnizatioi. T'his is particularly true in Hungary, 'Turkey, Pakistan, Thailand, Malaysia, ing coulitries, yet invcstmcint opportunities are Central iut-ope anid in othcr counitr-ics undergo- anld Indonesia. The reports arc hased on data emerginig at a fast pace and will contribute signif- ing majorl economic transitionis and privatization collected in late 199(0 and carly 199 1. IFC' is par icantlv to growth of thei market. Anin