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Pioneering the way to green investment
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China's emphasis on building an energy-saving and environmentally friendly society is presenting huge market potential for the environmental protection industry. Veolia Environnement (VE), a global leader in environment and energy solutions, is one of the organizations grasping this green opportunity. Since entering China in 1994, the company has invested about US$2 billion in water and waste treatment, as well as energy management and public transportation.

Jorge Mora, chief executive officer of VE Asia, spoke with China Daily about the company's strategies in China and shared his views about the ongoing global financial crisis.

Q:Since it entered China's environment market in the early 1990s, VE has secured a leading position in the environmental protection sector, such as water and waste disposal treatment. What strategies of your company have led to such success?

A: Well, the best strategy is never to have a strategy. The best strategy is to be able to adapt ourselves to whatever happens. So when VE came to China, we didn't have a clear strategy in mind. We came to China because we understood the future of the world was with China and within China. And we started to look around on what was happening and how we could adapt.

I would like to compare what VE is doing in China to the Long March of Chairman Mao. When he left, he had a kind of strategy according to the circumstances, but he was ready to change his plan at any time.

Like an army, what we need is to have strong bases. So when we started somewhere, for example, Shanghai, we made sure we had a strong base there with the best people and the best of everything. And starting from Shanghai, we got into the surrounding areas. We did the same thing in Guangzhou, Hong Kong, Tianjin and so on.

Q: In China, there was no so-called market for environmental protection about 15 years ago, so what motivated you to come to China at that time? What changes have you observed since then?

A: There was absolutely no market for the environmental protection business when I came to China in 1994. What was China then? A huge, developing country with an already very strong industry. Obviously, the industry was going to damage environment, and the Chinese government would have to do something sooner or later. We knew that we had to wait for a while.

It was not until 1997 that VE got its first project in China, after three years of looking around. Our second big project was in 1999. It took us five years to get only two projects, but after that it started to roll.

Chinese leaders are doing a very good job to cure environmental problems in recent years. I saw great improvements in China everywhere. The air quality during the Olympic Games was incredible in Beijing.

Of course there are still pollution problems in big cities as a result of the increasing number of cars and construction sites. But I would say it is a step of industrialization. China has to go through that step.

Q: VE now has 62 projects in 41 cities in China, most of which are located in the middle and eastern part of China, or economically well-off areas. Is there any plan to increase investment in the western region of China, where environmental protection infrastructure is needed most?

A: Again, I have to say it is like a Long March. Chairman Mao and his armies walked a long way before they arrived at their destination.

At the beginning, everybody running a business would go to the east and coastal part of China, so did VE.

Now we have already set up bases in Hohhot, Urumqi, Xi'an, Chengdu, Kunming, and other cities in the west of China, and we will go further into that area. For example, we are looking for more projects in the Xinjiang Uygur Autonomous Region.

As a business, making money comes first, and then we can think about charity. After we make good profits in economically well-off areas, we can go into areas earning less. That is what VE is considering.

Q: In China's 11th Five-Year Plan, it has been regulated that at least 70 percent of sewage and 60 percent of household garbage should be effectively treated in the cities by 2010. This has created a huge market for the environmental protection industry. What are your perspectives for this market?

A: Yes, the aim will bring a huge market for the industry. China's President Hu Jintao made a very strong statement about environmental protection in the 17th National Congress of the Chinese Communist Party. So I think there will be a huge market even after 2010.

But as development is happening so fast, I have doubts about quality. Sometimes, the quality of the infrastructure, or the quality of the technology, is quite poor. It might be better than before, but it is still not the best possible. Because lots of people are only starting their businesses, they have limited knowledge about that industry.

I think this will last about three to five years, at least to 2010. After that, the market will go back to quality, which means, without quality, it cannot last.

All those companies without a good quality standard will disappear by then, and only dedicated companies will stay.

Q: What kind of impact do you think the ongoing global financial crisis will bring to the environment business? What will VE do in response to it and what about the sector in China?

A: As in every other industry, the global economic crisis does have a negative influence on the environment business. If the economy slows down, there will be less waste left to be recycled.

And obviously this global crisis will not stop at the border of Asia or China But China is still far less open to that risk than in other parts of the world, because its financial system is much more under control than elsewhere.

For VE, the economy in China looks much stronger than in many other countries, so we are feeling comfortable here. In other parts of the world, we will be much more cautious about the capabilities of our customers in terms of payments.

Fortunately, the central banks either in the United States or in the European countries have set plans to help their own banks. Although the economy is not recovering yet, at least we have got some fresh air.

We don't believe that the crisis will influence VE's business in the longer term, as the environment industry is mainly about infrastructure construction.

Most of the time, when the economy faces a crisis, investment to infrastructure will increase so as to boost development.

After the first shock is over, I believe VE will have more opportunities, as investment will go to a safe place, such as the environment industry, rather than the financial sector.

(China Daily November 5, 2008)

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