Doing business on garbage

As Mykola Zolochevsky, Minister of Ecology and Natural Resources of Ukraine, told a press briefing last week, Ukrainian garbage will soon be watched from outer space. In his words, his ministry has drawn up a program which makes it possible to monitor unsanctioned dumps by means of a satellite. The ministry is going to unveil its concrete plans and goals as soon as September this year. The Day asked Yevhen ROMANENKO, director of the state-run company Ukrainian Resources, how Ukraine can make money from garbage, who and how is cashing in on wastes today.

What regions of Ukraine are facing today the most acute problem of garbage collection and disposal?

“The densely populated ones. In particular, it is Kyiv and Lviv that are raising most questions. The main cause of this si-tuation is an imperfect system of garbage collection, when solid household waste is collected together with construction debris, organic matter, etc.

“Today, separate collection of garbage has been introduced in just 53 cities and towns of Ukraine, while waste-sorting lines are working in 8 only. These facilities allow processing and recycling a mere 7 percent of wastes, while some countries have already achieved an almost 100-percent level. For example, there are practically no landfills in Germany, the US, and Japan. They recycle 97 percent of garbage. Only 3-5 percent of extremely hazardous wastes are disposed of by special me-thods, with all the rest being reprocessed. As for Ukraine, if we manage to achieve 30 percent in the nearest future, this will be a furor.

“To do so, we should attract importers and producers of boxed and packed goods more actively, as EU countries are doing today.”

As far as I can see, it is the stare-run company Ukrekoresursy [Ukrainian Eco Resources. – Ed.] with you at the head that is supposed to do this?

“Yes. We are working in many directions. One of them is work with foreign producers. Today, almost every importer must conclude a contract with us, under which our company undertakes to find, sort, and dispose of the packing of his goods, and he is to pay for this process. About 98 percent of the goods that cross Ukraine’s border are packed. Therefore, our company earns about 10 million hryvnias a months.

“We should also apply the same pattern to domestic commodity producers. A relevant law obliges every business that produces commodities in Ukraine to sign a contract with us. But, as usual, we have an obstacle here: the law, of course, obliges, but it does not envisage sanctions for failure to meet the demands. This means that the entrepreneur in fact voluntarily concludes a contract with us. If he does not want to do so, we are unable to compel him.”

And how many national commodity producers have concluded contracts with you by now?

“About three percent. Most of them are export-oriented and, therefore, must observe environmental regulations. Of course, some of them conclude these contacts out of patriotic considerations.”

What industries are these?

“All, to some extent. It is difficult to say concretely because it is amateurish so far. We have tried to do it in a more systemic and civilized way, held several meetings with governors, and told them that we could help them acquire the necessary equipment and teach them to make use of wastes to fill the city budget. Everybody nods and promises to deal with this as soon as tomorrow and gather managers of the region’s businesses, but this is the end of it – they just soft-pedal the issue. We have visited about 10 oblasts during the two months that I am in this office, but still there has been no headway in this matter.”

Maybe, the state should impose sanctions on the domestic producer who refuses to conclude the abovementioned contracts?

“This is a double-edged sword. On the one hand, this can be done, but the question is to what extent it will be right. For, essentially, this will be an additional tax, which will immediately touch off a wave of indignation and protests. Of course, this requires a compulsory political decision.

“Besides, the state should give transparent reports on how it spends the money it took from entrepreneurs. I often have to mingle with company owners, and they keep asking me: ‘But do you really sort out garbage?’

“You must show the entrepreneur that garbage is really being collected, sorted and disposed of. Only then you can come and say: ‘Look, it works.’

“Another problem is the producers who use Tetra Pak packing. This is quite an interesting raw material – it is not scrap paper. All who deal with recyclable materials have their warehouses filled up with this packing because it is not recycled in this country. There are five or six producers in Ukraine, who use this brand of packing, and they refuse point-blank to pay us. So we are mulling over a proposal that these producers chip in and buy the equipment that recycles this packing – in this case the state will have no complaints about them.

“For example, I recently spoke to the management of a Ukrainian mineral water plant: they have purchased on their own an installation to recycle PET bottles. And this raises a logical question: why should you ‘stifle’ them with payments and contracts if they are duly meeting their commitments?

“In other words, the state should make a clear-cut decision: the industrialist who produces a commodity and then recycles his garbage with his own facilities is a hero, so we don’t take money from him, while the rest, who do not do so, must either buy this installation on their own or pay to the state. This is a normal civilized approach.”

Are you subsidized by the state budget?

“No. We are 95 percent dependent on the funds we raise from importers.”

Your annual budget may be said to come to about 120 million hryvnias. Is this amount sufficient to deal with garbage on the national scale?

“Of course not. Besides, we pay taxes out of these 120 million hryvnias. If you further divide this 120 million by 24, we will get three million per oblast. Do not forget that it is an annual budget. It is in fact a negligible amount.”

And what are you planning to do with this “negligible amount” this year?

“The government has set us a goal to make the garbage collection, sorting and disposal equipment available to all Ukrainian cities. One of our top-priority tasks is separate collection of garbage. While throwing glass into one container, scrap paper to another, and food leftovers to a third one has long been at the level of an unconditioned reflex for Europeans, it is still know-how for Ukrainians. Since, while the residents of big cities and regional centers have at least heard about this thing and seen the bins, separate garbage collection is still a terra incognita in the provinces. So our task for this year is to purchase the equipment that will enable as many regions of Ukraine as possible to set into motion the mechanism of separate garbage collection.

“Our potential is limited here, and it is hardly possible to launch this system by means of governmental funds only. For this reason, we are trying to attract business to this. One more thing we must do is show that it is a very profitable field.”

Do you mean Ukraine has its own “garbage mafia”?

“Well, ‘garbage mafia’ sounds so great that it conjures up Italy. I would not say it is a mafia. Everybody is playing a small game of sorts to quietly snitch a thousand dollars… I mean there is no big monopolist company which seriously deals with garbage, purchase, processes or sells things.”

And have you calculated how much one can legally benefit from “garbage business” in Ukraine?

“If you take, for example, a city with a population of 300,000 (such as Chernihiv or Kirovohrad), it is enough to buy two sets of equipment: 1,200 containers, two garbage trucks, and a sorting station. This will cost about 15 million hryvnias. On the average, if you wisely manage this, it may bring in an annual profit of 15 million hryvnias. We have assessed that, after deducting wages and other administrative expenses, the net profit will be about one million dollars a year. In other words, one can simultaneously make handsome money and do a thing of great use for the country.”

Suppose I want to deal with garbage. What should I begin with, who should I turn to, and what kind of support can I expect?

“You should turn to the local Authorities and us. If the local government meets you halfway, you will need the waste collection, sorting and disposal equipment. Our company may help you in this case. Turn to us, and we will lease the equipment to you. In return, you pay us monthly a certain interest and work. This will suit everybody – the residents, the city, and the environmentalists.”

What amount of money is necessary to launch “garbage business”?

“It is very difficult to say exactly. It is like in retail trade: you may put up a kiosk, stand at a marketplace, or open a boutique.”

And what if you, a state-run company, try to reap a benefit from garbage?

“We are exploring the possibility of receiving not only payment for the leased equipment but also the interest on profits. It is one of the realistic ways for the state to earn money. Another way is for us to buy recyclable materials from businessmen and export them. In this case we will show the importers that we are meeting the commitments for which we take money from them and, at the same time, will reap profits. For example, a ton of plastic bottles costs 5,000-6,500 hryvnias today. A kilogram takes about 24 bottles. If you crush these plastic bottles, this material will cost 8,000-9,000 hryvnias per ton. And if this is being exported, the cost will again jump twofold. Besides, there are very many of those who wish to buy Ukrainian recyclable materials. We are now selling them to China, Turkey, Russia, Western Europe, and the US.

“A US delegation visited us the week before the last. They want to buy from us monthly 50 tons of recyclable products. But while the price of a ton of PET bottles is 6,500 hryvnias here, it is 2,500 dollars in the US. For a PET bottle is, in fact, oil whose price is growing. And you can make whatever you want from a recycled plastic, including things for the public utilities sector, such as plastic benches, pipes, etc. In terms of prime cost, this will be much cheaper than in the case of a ‘classic’ production process.”

You have emphasized more than once that nobody cares about garbage in Ukraine. Why?

“There are some who care, but they do so at an amateurish level. Every oblast has 5-10 organizations that buy recyclable materials. There are some ‘guys’ who have ‘chipped in,’ bought some scrap paper, quickly found the one who will buy it from them for three hryvnias more, and thus finished their business.

“We have invented nothing new over the 20 years of independence. On the contrary, we have reduced this system to a shameful condition.

“Over the past 20 years, the state has totally abandoned this market. We are not regulating these processes, nor are we collecting recyclable materials or making money from this. Why? It is difficult to answer. I have toured a half of Ukraine in the two months that I work here. The impression is that, as far as waste management is concerned, we are living in the past, for example, in the 19th century.”

And how long will it take Ukraine to be able to change its attitude to garbage – a year, two, or ten?

“I cannot calculate this, given the specifics of out state. This may take a long time, but things may change tomorrow if the premier issues a certain instruction.”

What kind of a strategic plan should there be for us not to remain on the amateurish level? Does it exist?

“We want and are drawing up a plan together with researchers. So far, we have the State Ecological Academy of Continuing Education and Management, which has been working in this field for a long time, but there is in fact no strategy or concept of garbage management in Ukraine today. We and the Ecological Academy are going to map out a concept of household solid wastes management. For this is not only scrap paper but also old cars, etc. When I headed Kyiv’s Podil district, I could see that every courtyard had a huge problem in winter: those old Moskvich cars stand rotting, but people could care less. So what? Let them stand… Meanwhile, trash trucks cannot drive in to clean up the yard, ambulances cannot go in… Normal countries have a very clear scheme: you consign an old car and get a discount on the new one. And, as the discount is rather attractive, people begin to take interest in this. Household solid wastes also include automobile tires. In other words, it is quite a broad range of wastes. Why are things being done amateurishly today? Because everybody acts chaotically: they deal with tires today, cars tomorrow, and lubricants (which also have to be disposed of) The Day after tomorrow. Therefore, the goal is to map out a concept of household solid wastes management. This concept must clearly say what a company should do. Roughly speaking, if the state makes a decision tomorrow, somebody will have to dispose of these cars. We will be able to do this because we have expertise and skilled personnel. This should be part of the concept. It must be clearly stated when we are supposed to work, what the calendar dates are, and who are the executors and co-executors. This is the task. We will be able to draw up this document by the end of the year and have it approved by a Cabinet resolution. This will be quite a serious strategic document – at least for five years. It should be clear that the Ministry of Ecology is to draft rules and assess the rates, while we are to collect these rates and work at such and such markets in such and such sectors. We don’t have this so far: you can work the way you want.”