JEDDAH, 13 November 2006 — Experts optimistically delineated achievements, plans and possible solutions to handle the rapidly increasing demand for water, energy and service industries at the Jeddah Water and Power Forum yesterday.
Abdul Wahab Al-Sadoun, director general of energy sector, SAGIA (Saudi Arabian General Investment Authority), outlined prospects for investors in the Kingdom. The government, he said, intended to “divest itself of $800 billion worth of state-run companies in the next 10 years.” The companies will be in the areas of water, power, transport, telecommunications, higher education and aviation, he said.
The rise in fuel prices had a “close correlation” to the 20 percent increase in Saudi Arabia’s GDP over the last three years, said Al-Sadoun. He told the audience that between 1997 and 2005 the contribution of the oil sector had grown by 80 percent to $33 billion. Rise in population, urbanization and the growth of industry and the economy had put pressure on the country’s services, particularly water and power production. The demand for water, he said, is expected to quadruple by 2030 — from two to eight billion cubic meters a year.
Low corporate tax — 20 percent — compared favorably with the United States and Europe and helped stimulate inward investment, he said. This coupled with soft loans — $4 billion in 2004 alone — land rents as low as SR1 per meter per year and low labor costs made the Kingdom a very attractive prospect for investors.
“For every problem there is a solution,” said Fareed Zedan, governor of the Electricity and Coregeneration Regulatory Authority, setting the tone for the day. He added that a $36.5 billion investment was still needed in the Kingdom’s waste water treatment industry. Currently 37 percent of the water supply is collected from waste water and only 16 percent is reused.
In his presentation, Zedan spoke of the complexity of privatization. He said great progress had been made in structuring a regulatory and legal framework. He also detailed the moves that would implement licensing, tariff reviews, dispute resolution and quality of service to end users. Equally, he said, there was a need for “very reasonable and strong regulations to provide a clearly visible structure for serious investors.”
Zedan hinted strongly that water subsidy would, in the event of privatization, continue to some extent, though he did not give figures. “You cannot increase tariffs to a level to provide a reasonable return for investors,” he told delegates. There would, he said, be some government involvement. “The industry has to be healthy. There are many possibilities under discussion.” Responding to an inquiry, Zedan said “90 percent” of the road map of the regulatory structure governing privatization had been completed.
“We have the quotes, transmission reports, generation board and transmission board, but the very difficult 10 percent remains,” he said.
In order to attract investment of imported technology in the current climate of high fuel prices, Zedan said the Kingdom needs to look at the total return from investment within the context of the whole economy. “We need to price fuel in a way that encourages the investor and also couple this with high efficiency,” he said.
With the imminent privatization of SWCC (Sea Water Conversion Corporation) and the development of water and power plants at Shuaiba and Rabigh, there has been a radical restructuring of SWCC. said Fehaid Al-Shareef, governor of SWCC.
With its sophisticated research facilities and position as one of the biggest desalination operations in the world, the Kingdom could help the world solve the water shortage, Al-Shareef said.
