Greenbacks for greener industry

By Sherine Nasr
Recent commitments to provide funding should make it easier for Egyptian industry to seek financial and technical support from international donors to adopt more environmentally-friendly practices.
Under the Egyptian Pollution Abatement Project (EPAP), which is a collaborative endeavour between the Egyptian and Finnish governments, $50 million will be provided through the World Bank, the European Investment Bank and KFW bank of Germany to various industrial sectors in four governorates, namely, Cairo, Alexandria, Qalyubiya and Suez. Nadia Makram Ebeid, minister of state for environmental affairs, said, "The bulk of the responsibility for industrial compliance [with environmental protection law] lies within the industry itself. Yet, we are playing a critical role as facilitators of a number of win-win situations through soft loan mechanisms and co-financing of pollution abatement interventions and cleaner production technologies."
This month, a loan of $5 million was extended to the public sector Misr Company for Aluminum in Nag' Hammadi to finance the construction of a plant that will help reduce gas emissions and health risks faced by those working in the factory. Two more companies, the Transport and Engineering Company and the Egyptian Plastic and Electric Company, have submitted applications for funding so as to introduce environmentally-friendly mechanisms at a cost of $375,000 and $500,000 respectively.
Since 1998, when EPAP was initiated, a total of $2,765,000 has been provided in soft loans to a number of public as well as private enterprises. The funds are deposited in five banks through which the loans are channelled to companies. Among these are the National Bank of Egypt, the Commercial International Bank (CIB), Banque Misr, and Misr International Bank (MIBank).
"Although the procedures for applying for loans are the same, the conditions of each loan vary according to the donor," said Yehia El-Mahgari, senior adviser at the Finnish Environment Institute.
For example, according to the terms under which the World Bank provides loans, 90 per cent of the total cost of a project is provided by the bank. Of this, 20 per cent is given as a grant while the remainder is provided as a soft loan that must be repaid within five to eight years at the interest rate at which it was first given. Beyond this period, a grace period of one to two years is allowed. Projects receive funds ranging from $100,000 to $5 million apiece.
Stricter terms are offered by other institutions offering funding. The European Bank for Investment does not provide grants. The KFW bank of Germany provides loans equivalent to 33 per cent of the project with a repayment period of three to five years and a one-year grace period.
"This mechanism of financing environmental compliance has proved a very effective tool. It was not enough to impose penalties on environment offenders. Incentives had to be offered as well," commented El-Mahgari.
Throughout the funding process, the Egyptian Environmental Affairs Agency (EEAA) is given the authority to review, accept or reject the steps taken by the company to select the best technology for the project and the best price for its application.
"It is our obligation to ensure that the funds will be utilised in the best possible manner," said Hanan El-Hadari of the EPAP.
Once the proper technology is applied, the company is obliged, according to the technical terms of contracts through the EPAP, to provide the EEAA with a year's worth of assessment on the pollution resulting from the completed project.
According to El-Mahgari, EPAP emphasises that cleaner production is more than just a component of its programme, but an important component of a prosperous industry. "We are encouraging more industries to adopt such mechanisms, which have also proved to be cost effective," said El-Mahgari.
Mechanisms for cleaner production require a rational use of energy and raw materials and the treatment of pollutants throughout the production process. "Through the rational use of production inputs, products are more competitive as far as price and quality are concerned," El-Mahgari explained.
El-Mahgari cautioned that unless Egyptian industry "seriously" adopts this approach, it will find European markets unwelcoming. "This is why we are working so closely with companies to acquire the ISO 9000 and ISO 14001, [internationally recognised designations] which are primarily concerned with the environment management system for any productive institution," he said.
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