Nov. 5, 2018
Water sector privatization is not always the economic savior many claim it to be, but something is going right in Saudi Arabia.
Saudi Arabia followed a decades-long trend of privatizing water utilities throughout both developed and developing countries. Following the creation of the National Water Company (NWC) in 2008, researchers in the Kingdom evaluated the first six years of privatization effort.
Ultimately, they concluded that Saudi Arabia had, until 2014, been one of the few examples of a largely positive water sector privatization process. Though often touted as more efficient and better financially, actual results of utilities privatization had been quite mixed; but, Saudi Arabia had privatized its water utilities to make them more efficient and boost revenues.
Since this evaluation of water privatization in Saudi, the country has continued to advance its efforts. TBY's interviewees across the GCC even highlighted three benefits of privatizing utilities: improved efficiency, competitive tendering processes, and higher levels of expertise. The CEO of NESMA Water & Energy, Mahmoud Y. Fallatah, concurs that the sector is heading in the right direction. In February 2018, NWC brought in expertise from Japan's Mizuho Bank to help attract private companies into the water distribution sector and entice companies to bid for six regional management contracts. And, with a new PPP framework, the Kingdom is counting on water utilities to drive its broader privatization ambitions. The Saudi Saline Water Conversion Corporation (SWCC) and Ras Al Khair power and desalination are some of the first in the pipeline for privatization.
Nonetheless, NWC remained heavily dependent on the government for capital projects, and in 2014 researchers forewarned about the high costs and other challenges of desalinated water. Still in 2018, the sector lacks the capital for necessary desalination plants; thus, the public sector is stepping in to build an intended nine desalination plants along the Red Sea coast. By the numbers, that is approximately USD530 million in investment, adding 240,000cbm/day of processing capacity to the world's largest desalination network by 2019. No announcement has been made regarding if or when these could be PPP projects.