NCB Capital, the investment banking arm of National Commercial Bank, Saudi Arabia’s largest bank, believes that the widening gap between the demand for and the supply of water in the GCC region is becoming a policy concern of paramount importance as rapid economic growth is set to continue.
In spite of extreme water scarcity, GCC water consumption levels are internationally high, led by rapidly growing agricultural and municipal demand. The per capital average in Saudi Arabia and the UAE is more than 50% of the US level and 50% more than the Middle East average.
Dr Jarmo Kotilaine, Chief Economist of NCB Capital, said, “A more holistic approach towards policy planning in the water sector is needed and the traditional focus on supply augmentation needs to be complemented with demand-management. Regulators need to rationalize tariffs to ensure that end-users bear more of the economic cost of water.”
The bank believes that additional investments are urgently needed in desalination, distribution networks, sewage collection and waste water treatment. Saudi Arabia alone is estimated to require SAR124.9bn worth investments in this sector. Private capital will have to play an increasingly important role.
A more centralized, structured approach to water resource management is needed. Key steps that would address that include the following:
• Centralize administration of water resource management.
• Establish a long-term integrated plan for water resource management.
• All water users should be brought under formal regulation.
• The adoption of more market-based pricing.
• Virtual water accounting should be used to evaluate agricultural policies and industrialization ventures.
• Private participation in the water distribution, and wastewater collection and treatment segments also needs to be encouraged.
Dr Kotilaine concluded, “No GCC country, with the exception of Saudi Arabia, has fully independent regulators for oversight of the water sector. That needs to change.”
