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Sat 2 Jun 2007 03:44 PM

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A pressing case for treatment: the Middle East water business

Demand for fresh water across one of the world’s most arid regions needs to be given the highest priority on government agendas to avoid an economic crisis.

The countries of the Middle East and North Africa (the MENA region) are facing a major water crisis, with important implications for their future economic development. The problem has been described as three overlapping crises.

First, demand for fresh drinking water across MENA is surging ahead of the naturally renewable supply from sources such as rainfall and underground aquifers. Second, as average populations grow around 2.5% per annum across the region, more of the available fresh water is being polluted by human, industrial, and agricultural waste. Thirdly, there is potential conflict over access to limited water supply, with most of the region's key water resources, such the Nile or the Tigris-Euphrates river systems, stretching across international borders. This three-level crisis has been described as a problem of quantity, quality, and equity.

There is a fourth dimension too; the prospect of climate change. At the beginning of April the UN's Intergovernmental Panel on Climate Change warned that areas that now suffer a shortage of rain, such as the Middle East, would become even drier if nothing is done to reduce global carbon dioxide and other greenhouse gas emissions.

The starting point is that nature has not been generous when it comes to distributing water resources across the region. Writing in Egypt's Al-Ahram recently, journalist Ahmed Geweily noted that "while representing 10% of the planet's land mass and five per cent of its population, the Arab world is home to only 0.5% of global water resources."

The Middle East is indeed the world's most arid region. Between the Nile and the Tigris-Euphrates, for example, rainfall ranges from over 1000 mm a year at the high end to zero in the dry areas. The average is around 250 mm, considered the lowest level at which unirrigated agriculture is possible. But the main issue is variation and unpredictability. Hydrologists talk about ‘reliable flow' - what you can expect nine years out of ten. Across the Middle East reliable flow is under 10%, creating a difficult mix of aridity and unpredictability. Renewable water supply is also extremely scarce to the west of the region, in the Mahgreb countries.

With so little water the people of the Middle East have become expert at making the best of scarce supplies. When rain does fall it is much more likely to be efficiently used in the Middle East than in almost any other region of the world. But scarcity is the bottom line. Per capita renewable water resources in the MENA region are currently around 1 100 m³ per annum, compared to a global average of 8 900 m³.

Under the most water pressure are Oman, the West Bank and Gaza, Yemen, Jordan, Bahrain, Libya, Saudi Arabia, Qatar, the UAE, and Kuwait. These countries make up a group with under 500 m³/annum per capita of renewable water, and are defined as ‘hyper-arid'. With such low levels of renewable water, these countries depend on non-renewable ground water and the desalination of sea or brackish water. Key issues include the management of ground water as a scarce resource to prevent the exhaustion of agriculture.

"Almost all the states of the Arabian Peninsula are consuming much more water than their annual renewable water supply," wrote David Brooks, director of environmental policy at Canada's International Development Research Centre (IDRC), in a paper a few years ago, adding: "Egypt, Syria, and Sudan are fast approaching this situation.

Indeed, some projections suggest that by 2025 domestic uses (about 100 litres per person per day), plus municipal and industrial uses will require all the fresh water available, leaving none for agriculture in the countries of the Lower Jordan.

"Even if no more water is devoted to agriculture over the next few years, these countries are in trouble: their water use is unsustainable, which implies that their whole economy is unsustainable."

From a different and more recent perspective Ranald Spiers, an executive at electricity utility International Power, came up with a similarly stark warning in March: "In the Middle East there isn't any choice. If desalination plants in the Gulf stopped operating, the countries would die in days," he said.

New and powerful evidence has come in the form of a World Bank report on water use in the MENA region that has just been published, the first major work of its kind by the Bank in ten years.

"Per capita water availability will fall by half by 2050, with serious consequences for the region's already stressed aquifers and natural hydrological systems," the report warns. It calls on governments in the MENA region to change their water management practices, warning that if they do not, "the social, economic and budgetary consequences could be enormous." The Bank says that on current trends there will be greater reliance on expensive desalination plants and on emergency water imports during droughts.

Policy and reform

So what should be done? The World Bank recommends wide-ranging reform of water management policies, better integration with decision-making across other parts of the economy, and increased accountability.

"We want the pace of reform to accelerate" says Julia Bucknall, the World Bank's natural resources specialist for the MENA region, adding, "we want water to be a consideration in non-water reforms and we want to see a more sustainable set of policies." The report argues that long-established government subsidies may distort the allocation of resources in a counter-productive manner, encouraging unsustainable use of groundwater.

Desalination solution

Some analysts argue that there is a simple solution: desalination. Most countries have coastlines, which gives them access to potentially unlimited supplies of seawater. There are two different processes that can be used. Thermal distillation and reverse osmosis are both expensive and require the construction of large coastal processing facilities. They also produce a waste product, the environmentally harmful saline liquid or brine that must be dealt with; it is usually pumped back into the sea.

There is a trend to build combined electricity generation and desalination plants, which are more efficient to operate than two separate plants. About three-quarters of the world's total desalination capacity is located in ten countries, including Saudi Arabia, the UAE, Qatar, and Kuwait. In Abu Dhabi, 95% of fresh water supply comes from desalination plants.

Clearly, for hyper-arid countries desalination is one potential solution. But, reporting on a series of case studies in a 2004 paper Manuel Schiffler, a World Bank expert, noted that "in some countries weak water utilities, politically determined low tariffs, high water losses and poor sector policies mean that desalinated water, just like any other new source of bulk water, may not be used wisely, or that plants are at risk of falling into disrepair."

A private sector boom?

Some investors see the water crisis in the Middle East and other parts of the world as an important and profitable opportunity for the private sector. This year Lyxor Asset Management, owned by France's Societe Generale Group, launched its Dynamic Water Fund, to invest in water utilities, infrastructure, and treatment companies.

Lyxor CEO Laurent Seyer has pointed out that something like US $600 billion worth of investment will be needed over the next ten years to ease the world's water supply problems (a World Bank estimate).

"Water is the blue gold now, and the need for investment in this area is huge, looking into the future," Seyer says.

Country examples

Within the region, the UAE is an example of acute dependence on desalination plants as a source of fresh water. Dr Mohammed Al Kindi, the minister for environment and water, recently noted that the UAE has 114 dams with a joint capacity of 118 million m³ of rainwater per year, and desalination plants capable of producing 950 million m³. A water-recycling programme is delivering 338 million m³ per annum for use in landscaping and green belt irrigation.

According to Mustafa Taherali Saasa, a member of the World Water Council, "the UAE has the highest consumption of water in the world and high dependency on desalinated water." He points out that the plants release saline fluids back into the Gulf, and that this increases the salinity of the water. "You can only really desalinate water two to five times," Taherali Saasa says, noting that it takes up to 200 years for the whole Persian Gulf to be flushed and renewed from the Indian Ocean by natural currents.

This leads him to champion more active recycling of rainwater, with recharge wells being built around Dubai to catch and store rainwater and in effect, re-inject it into aquifers.

"From Ras Al Khaimah to Kuwait on the Arabian side of the Gulf, there is a dependency on desalinated water, but wells could be used to reduce this," he says, adding that "every drop of water needs to be conserved in the UAE."

Along the Gulf coast big investments are being channelled into the construction of independent water and power plants (IWPPs). Qatar, for example, has invited international companies to bid in June for the contract to build the Ras Laffan C IWPP, designed to produce 2 600 MW of power and 55 million gallons per day of desalinated water from 2011 onwards.

Abu Dhabi is calling for bids to build the Fujairah 2 facility, the emirate's sixth IWPP, which will produce 2000 MW of electricity and 130 million gallons per day of water from 2010. The cost of each of these giant facilities is being estimated at somewhere between US $2.5 billion and US $3.5 billion. Abu Dhabi is also reported to be planning a seventh IWPP, Shuweihat S2.

Saudi Arabia has begun privatising its water services, partly as a result of water shortages in Jeddah that led to riots in November 2006. Speaking at a water management conference in Barcelona, deputy water minister Loay Bin Ahmed al Musallam said he expected the first contract for a private company to manage water services in Riyadh would be awarded this year. Saudi Arabia is planning to invest US $37 billion over the next five years to upgrade its water pipelines network and expects that over the same period up to half of the population will get their water from private contractors.

Some tough choices lie ahead, however, as currently water supply tariffs are heavily subsidised, and are among the lowest in the world. Not surprisingly perhaps, Saudi Arabian per capita water use is extremely high.

Egypt, meanwhile, argues that it must do its utmost to preserve water supplies from that great river system. Speaking at the end of March, Egyptian irrigation minister Dr Mahmud Abu-Zayd said his government would continue to reject requests from Israel to share Nile water. "Their insistence on asking and our insistence on refusing will also persist, for we simply do not have any water to give them and we are coming close to the water poverty line," said the minister, noting that up to 13 billion m³ of water were squandered in Egypt because of haphazard policies.


The challenges facing the region's water supply industry are significant. Policy reforms and new investment are required. What has perhaps not been fully understood in the public debate so far is how high the stakes are - the bottom line remains that if the Middle East cannot solve its water supply and demand equation, the viability of its entire economic system is at risk.

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