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Sun 15 Jun 2008 04:00 AM

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The private treatment

As Saudi Arabia awards its first two delegated management contracts, other countries look sure to follow suit.

It is hard for many of us to imagine living without sanitation and access to electricity and reliable water supplies. We consider the availability of power, fresh water and wastewater collection as basic requirements in life.

But their absence is a daily reality for many living in the Middle East and North Africa region and a huge challenge that utility providers need to overcome.

Engaging the private sector with its ready finances and expertise is increasingly being regarded as the fastest and most effective way to bring utility services up to scratch.

Private firms can move faster than public companies, which are weighed down by bureaucratic procedure and have to go through lengthy tendering processes.

Understandably though, governments have been cautious in opening up these critical infrastructure services to outside investors, and most have so far limited private sector involvement to independent power and water projects or to wastewater collection services.

But as fears of a region-wide shortfall of electricity and water mount, legislation is being put in place to facilitate a broader privatisation of these sectors.

And it is Saudi Arabia that is leading the charge: the privatisation of the kingdom's water sector took a decisive step forward with the recent awarding of its first two delegated management contracts.

The Ministry of Electricity and Water has now handed over control of the water and wastewater network in Riyadh to Veolia Water, while SUEZ has been entrusted with managing Jeddah's services. A third deal for the kingdom's other major settlement, Medina, is expected to be awarded imminently.

At present, some areas of the country only receive water once every four days.

The water authority has become overwhelmed by rapid population growth and is unable to keep pace with demand for water and unable to extend distribution networks fast enough.

Saudi Arabia had to act first and take a bold step into the unknown as it simply could not afford to continue having more than half of the water sent for distribution seeping out of leaky, ageing pipes.

Enlisting the help of private companies on performance-based contracts will have dramatic results: Veolia and SUEZ have to deliver in order to get paid. The results will be tangible and swift.

Other countries in the Middle East and North Africa region with under-developed or antiquated networks will be watching the outcome closely and these ground-breaking contracts are certain to become the template for the flurry of deals likely to follow.

Afterall, failure to provide for basic needs such as power and water can lead to social unrest and scare off potential foreign investors. And for a region looking to diversify away from a reliance on hydrocarbons, that would spell nothing short of disaster.

Elizabeth Bains is the editor of Utilities Middle East.

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