It's a burning issue in Taiwan, pitting the United States and Europe against Japan in a global competition that speaks volumes about business in the high-stakes political minefields of Asia.
The question: Who will have the privilege of burning garbage in this cash-rich island state?
The Japanese got off to a head start three years ago, claiming they were uniquely qualified for the job because they share with Taiwan a basic garbage culture.
Asian garbage is "wet" compared to Western trash, the argument went, and that supposedly made Japan's incinerator technology the kind best suited to the task.
Nonsense, said Americans trying to wrest away a few good public-works contracts from the Japanese, who so far have dominated Taiwan's growing market for municipal incinerators. Garbage viscosity is a lame excuse, they said, for keeping a chokehold on the lucrative contracts.
At stake is far more than the $1 billion worth of waste incinerator contracts Taiwan will award this year alone. Foreign contractors are also competing here for power plants, telecommunications gear and mass-transit projects--all parts of Taiwan's $300-billion, six-year plan to develop a modern infrastructure.
The total budget has been scaled back somewhat since this ambitious building bonanza was announced, with considerable hoopla, in 1991. And, since a series of snafus involving land speculation and corruption, it appears that very little work will have been completed by year six of the plan.
But Taipei is still Fat City in an Asian infrastructure gold rush that extends from Hong Kong to Hanoi.
After about a third of the infrastructure budget goes to land acquisition and another third is paid to local contractors, Taiwan's market will yield some $60 billion to $80 billion in contracts to international bidders, according to U.S. officials.
U.S. Treasury Secretary Lloyd Bentsen estimates that Asian countries will spend $1 trillion on infrastructure in the next decade. That figure doesn't count Japan's market, until recently closed to foreigners.
"That's 18 Santa Monica Freeway projects every day," Bentsen said in Los Angeles last month. "If I were 30 years younger, I know what market I'd want to be in."
But it's not all easy money. Taiwan's trash scene, for one, illustrates the convoluted reality of doing business in the trenches of Asia's public-works sector.
"This incinerator thing has been one big frustration," said Gregory Stevens, an American environmental business consultant based in Taipei. "It's a mess."
On the face of things, Taiwan's central government couldn't be more accommodating to European and U.S. firms.
Taipei's dusty streets are torn up now for a sprawling light-rail project that has been parceled off in so many segments to so many foreign joint ventures that local wags call it "the United Nations subway system."
Cynical observers say the government, bucking its diplomatic pariah status as pretender to China's throne, is trying to buy some respect on the international stage with its public-works program. Others allege that civilian contracts in some cases have been used as bait for foreign arms deals.
Clearly, one of Taipei's most audacious strategies is its official policy of discrimination against Japan in awarding the contracts.
Taipei, distressed by a $15-billion bilateral trade deficit with Japan, has retaliated by raising import barriers and nominally banning Japanese companies from bidding for public-works projects.
Still, the official ban hasn't stopped Japanese-controlled firms from grabbing a piece of the pie. They've bidden through overseas subsidiaries or local joint ventures.
On a section of the Taipei subway where Boise, Ida.-based Morrison Knudsen has a contract, price-competitive Komatsu backhoes are ripping up the asphalt. The roads are clogged with supposedly verboten Japanese autos--assembled in local screwdriver plants or imported from the United States to circumvent high tariffs.
Even the Fords popular in this former Japanese colony are made by Mazda, lamented Ying Price, chief of the commercial section for the American Institute in Taiwan, the unofficial embassy. "Taiwan was occupied by Japan for 50 years," she said. "Maybe the troops left, but Japan's business practices are still deeply rooted."
In the world of incinerators, as in other sectors, the Japanese competitive grip begins with the "specs," or engineering specifications. Typically, whoever drafts the specs for an international tender has a decisive advantage in the competitive bidding. It's smart business. And in Taiwan, Japanese consultants initially set the specs for Taiwan's incinerators--thereby perpetrating that myth that their technology was "designed to treat Asian garbage," Price said.
Some observers say the Japanese construction industry's time-honored practice of dango , or bid rigging, has traveled to Taiwan.
"The Japanese contractors behave as collusive bidders," said Chi Schive, vice chairman of the government's Economic Planning and Development Council. "They join as a group to bid, and they try to monopolize the market here."
When a European or U.S. company bids on a project, Schive said, the Japanese firms typically "lower their bids so no one can make a profit. In the second round, there are no Europeans or Americans left, and they raise their bids."
Schive didn't say which bidding he was talking about, but other observers say that's exactly what happened in the first round of eight incinerators put to bid in 1991. Six of those projects went to Japanese-affiliated companies. Japanese industry sources deny wrongdoing.
The other two went to Volund, a Danish firm, and its local partner, Chung Hsin. The Kuomintang (KMT), Taiwan's ruling party, is a major shareholder in Chung Hsin, industry sources say. (The KMT controls an extensive network of companies in Taiwan, but it flatly dismissed criticism that its involvement in business poses any conflict of interest.)
Meanwhile, Taiwanese authorities, in their zeal to stack the deck against the Japanese, decided to retain U.S. consultants to guide local officials in setting incinerator specifications in the second and future rounds of bidding.
And Taiwan's Environmental Protection Agency, which funds the municipal projects, now requires that foreign companies involved in the bidding own their original technology.
That rule burned all but one Japanese player, Takuma Co. of Osaka, which won two incinerator contracts in 1991. The others were licensing European technology, notwithstanding their claims of special expertise in Asian trash.
The rule change strengthened the hand of the Europeans, who excel at burning trash. It also eliminated all but three American companies: WMX Technologies, the former Waste Management Inc., of Oakbrook, Ill.; Pittsburgh-based Westinghouse Electric, and Foster Wheeler of Clinton, N.J.
"It's a very tough market, but we think we can compete," said Katsihiko Senga, general manager of Takuma's overseas department.
"We were accused of collusion by the newspapers because of a misunderstanding about budget overruns," Senga said. "But it's not true. The whole atmosphere of discrimination is unfair to Japanese vendors. It's all because of the trade balance."
Yet bidding on the second round, for six incinerators, was delayed until early this year. Taiwanese companies lobbied to join the fray as prime contractors, reversing roles in their alliances with the international firms by using foreign technology partners.
"Because of the political situation here, your technical qualifications aren't as important as your political clout," said a representative of a foreign environmental company in Taipei. "In the first round, you had Japanese collusion, but now there's political collusion."
In March, the Chung Hsin-Vorlund partnership was awarded two more incinerators, leaving four up for grabs this fiscal year, which ends in June.
As if things weren't confusing enough, overlapping layers of bureaucracy in Taiwan add another challenge to the sport of infrastructure bidding here.
Since the central government claims to rule all of China, a redundant provincial government supposedly runs this small, congested island. Add to that county and municipal councils, all with a say in infrastructure policy.
"No one wants to be singled out for a decision of any sort in this politically charged environment," complained a Taiwan-based American executive in the power generation industry. "And we have nothing that the politicians are interested in. We don't vote, and we don't do political campaign contributions."
The situation is ripe for corruption, critics say.
Legislators of the opposition Democratic Progressive Party, many of whom were jailed as dissidents in the old days, have appointed themselves guardians against boondoggles and graft.
Maysing H. Yang, a DPP official, railed in an interview about the problems of the disjointed "United Nations subway," on which equipment has failed and trash cans cost $1,000 each. The cost of building the line, she said, is 40 times higher than subway construction in Tokyo or Singapore, because insider speculation has driven up land prices.
"We know that Japan has a lot of corruption," Yang said, "but at least their projects work."
In October, a Taipei court convicted 13 city transit officials on corruption charges and ordered them to repay $9.7 million in misappropriated funds. The $17-billion commuter rail program has been plagued by litigation, including a bizarre contract dispute with the French firm Matra.
Arthur Y. Chen, executive secretary of the Public Construction Supervisory Board, the government's official watchdog agency, blames democracy for the infrastructure morass.
Now that regional officials and local councils have been empowered by democratic reform, Chen said, they all want a piece of the action. That has slowed approvals for permits and helped inflate land costs, he said.
"All this problem with land is the kind of trouble you get from democracy," he said. "We accomplished so much in the past, but now, with too much democracy, everybody can say something, and it's impossible to move."