Booz Allen Hamilton: Public-private partnerships keep Middle East water flowing (page 1 of 3)

As a result, Middle Eastern governments are increasingly turning to public-private partnerships (PPPs) to manage their water resources and everything related to water distribution.

The amount of available renewable water per person in Middle East and North African (MENA) countries is one-fifth of what it is in the rest of the world, and 80% of the countries fall below the international water scarcity threshold of 1,000 cubic meters (m3) per person per year. In addition, water coverage is limited. Potable water network coverage reaches an average of 75% of the population in MENA countries.

However, many MENA countries have some of the highest consumption rates per capita in the world. Consumption per person in the United Arab Emirates (UAE), for example, is among the highest in the world, standing at around 570 liters per person a day, more than three times the world average.

"High consumption rates are mainly driven by aggressive agricultural policies, which sometimes account for more than 90% of a country's water usage," says Ibrahim El-Husseini, Vice President of Booz Allen Hamilton, a global strategy and technology consulting firm. "This is further accentuated by high technical and commercial losses in the water systems, also referred to as UFW for unaccounted for water, reaching in some places as high as 40-50%."

These high consumption rates have led to the rapid depletion of groundwater resources. "Nonrenewable reserves that took hundreds or thousands of years to accumulate would be depleted in a couple of decades at current exploitation rates," explains Dr. Walid Fayad, Principal in Booz Allen's Global Energy and Utilities Practice.

"Because natural aquifers are being significantly stretched," adds Fayad, "there is an increasing reliance on desalinated water, which costs up to three times as much as groundwater. In most of the Gulf Cooperation Council (GCC) states, it accounts for more than 50% of domestic water use." Between 2005 and 2015, MENA countries are expected to spend US$24 billion in desalination costs, with Saudi Arabia and UAE together spending nearly US$13 billion.

MENA countries face a final supply-side challenge: the fact that in MENA countries, at best, only 30% of water consumed is collected and treated. In MENA countries, wastewater coverage averages only 48%. "Aside from the environmental challenges raised, this also means that precious liters of water that could be reintroduced into the system, e.g., for agricultural use, are instead discarded after one use," says Dr. Fayad.

These supply-side challenges have not yet generated significant demand-side measures, such as increased water tariffs. Water costs in some MENA countries are up to three times higher than average costs in Europe, but the average MENA tariff-to-real cost ratio is 15%, compared with nearly 100% in Europe.

"Tariffs for an average consumption (as a percentage of GDP per capita) can reach as low as 0.03% — a tenth of what is charged in developed countries," says Booz Allen's Ahmed Youssef. "And to make matters worse, actual cost recovery is even lower because of low revenue collection rates — less than 50% in many MENA countries."

Because of all this governments in the Middle East and around the world are increasingly turning to the private sector for support in developing and delivering water and wastewater services.