NCB Capital, the investment banking arm of National Commercial Bank, Saudi Arabia’s largest bank, thinks that the widening gap between the demand for water and its supply in the GCC region is quickly becoming a policy concern of paramount importance, at a time when rapid economic growth is set to return and become the norm in the years to come.
Having previously addressed these constraints by augmenting supplies through methods such as desalination, the Gulf countries increasingly urgently require an overall institutional management framework that regulates water separately as an economic commodity in line with long-term plans for sustainable use. Such an approach would likely establish a growing need for private participation and investments in the sector.
Dr Jarmo Kotilaine, Chief Economist of NCB Capital, said, “In spite of being one of the most water-scarce areas of the world, the GCC region’s consumption levels are internationally high. Agriculture and municipal demand will continue to grow in coming years and GCC regulators need to adopt a holistic view toward policy planning in the water sector.” He believes that regulators also need to rationalize tariffs to ensure that end-users bear more of the economic cost of water.
Additional investment to augment supply further is urgently needed across the water value chain – desalination, distribution networks, sewage collection and waste water treatment. In Saudi Arabia alone, it is estimated that SAR69 billion of investment is required in this sector and it would be possible to build on recent privatization initiatives to improve the efficiency and long-term viability of the region’s water sector.
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