The market for environmental businesses has been developing rapidly, spurred on by favorable political, institutional and economic conditions. Environmental expenditure from both government and private sectors totaled more than USD 3.1 billion in 1995, with about 80 percent spent in the Polish and Czech markets.
With total environmental expenditures of USD 1.3 billion, Poland had the largest environmental market in 1995, followed closely by the Czech Republic, which had expenditures of USD 1.1 billion. Hungary came in third with environmental expenditures of more than USD 380 million, while Slovakia, with expenditures of about USD 220 million, had the smallest market of the Visegrad countries. These figures are estimated to grow between 10 and 20 percent annually as the economies grow and as the governments offer financial incentives and toughen environmental regulations to comply with EU standards.
In all four countries the environmental market is relatively young - most of the companies were established after 1990. However, the size of the environmental market and the status of the environmental business sector varies. Research indicated a correlation between the pace of industrial privatization and the total amount of environmental expenditures. The highest percentage of privatized companies was found in the Czech Republic (86 percent), followed by Poland (85 percent) and Hungary (78 percent). Again, Slovakia lagged behind the others.
The survey of nearly 600 environmental businesses across the four countries showed that water-related projects generated 41 percent of their income, followed by solid waste and soil contamination projects (19 percent) and air pollution projects (19 percent). The remaining projects included nature conservation, industrial health and safety, noise control and energy conservation.
The sale of environmental products generated the most revenues (44 percent), followed closely by technical services (40 percent). Polish firms earned the highest portion of their income (53 percent) from environmental technologies, while Hungarian firms earned more from technical services than from any other area.
Government regulations were seen as the major reason for the growth in the environmental business sector. Therefore, the top information and training concern among surveyed companies related to how EU harmonization would affect environmental regulations. The topic was followed closely by requests for information and training on new environmental technologies. Another important information topic was how to finance environmental projects.
With regard to information about potential projects, transparent bidding processes were still in the early stages. Therefore, companies relied mostly on interpersonal relationships to learn more about new project opportunities. The survey repeatedly found that the government was not considered a reliable source for business opportunities.
Local firms are gaining more exposure to Western firms, and more than half of the local companies have worked on a joint project and considered it a successful experience. Suggestions to improving East-West ventures included better communication, more equitable terms for local firms, a better understanding of local business practices by Western firms and more clarity in contractual relationships and government regulation.
Since 1995, the environmental business sector has expanded and has significantly improved its capacity to successfully implement environmental projects. As a result, foreign donors have begun to consider channeling more and more money through local environmental companies.