Doing Business in Saudi Arabia - International Franchise Association

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Water Resources Equipment – WRE Overview Return to top 2008 2009 2010 (estimated) Total Market Size 496 521.0 547 Total Local Production 88 92.0 97 Total Exports 22 23.5 25 Total Imports 408 429.0 450 Imports from the U.S. 163 171.0 180 Saudi Arabia lies in an arid area of the world with severe climate conditions, and an absence of permanent natural surface water resources such as rivers and lakes. In addition, Saudi Arabia’s high population growth, rapid urbanization, industrialization and agricultural development make water one of the most precious resources in the Kingdom. In order to meet expected demand growth for water, the Kingdom will have to invest $5 billion a year in infrastructure development over the next 20 years. Saudi Arabia has established 30 desalination plants on the Red Sea and Arabian Gulf coasts at a total cost of $20.2 billion. The country is rapidly depleting its 2.2 billion cubic meters of proven groundwater. 23% of water comes from aquifers, 70% from desalination and 7% from wastewater reclamation. 80% of water has been used in questionable agriculture projects, such as the world’s most heavily subsidized wheat production. 30% of household water comes from desalinating. Saudi Arabia is the biggest user of desalinated water in the world (36% of world’s total), and demand is growing by at least 3.4% year. While the cost of desalination is falling, it still costs $1.33 to process, deliver and remove the waste from one cubic meter of such water, while a Saudi consumer pays only 4 cents. The Ministry of Water and Electricity (MOWE) announces study after study to rationalize water tariffs and privatize the state owned Saline Water Conversation Corporation (SWCC). With its budget surplus, the Saudi Government is working on a number of large projects, primarily in the water and sewage system, in an attempt to meet the needs posed by population growth and industrial growth. Major infrastructure projects include the construction of a 28 new water distribution network, 21 new the desalination plants, the refurbishment of the Jeddah desalination Plant-5, the expansion of Asir II desalination plant, Yanbu/Medina III desalination plants, and the expansion of wastewater treatment plants in Jeddah, Riyadh, and Dammam. In 2003, the Saudi Government brought the Kingdom’s water and power sectors under a single authority, the Ministry of Water and Electricity (MOWE). The governing body sets forth general policies and strategies that aim to expand and improve Saudi Arabia’s basic utilities. More specifically, the Ministry has issued guidelines for the operation of Saudi Arabia’s Independent Water and Power Projects (IWPPs). Further, MOWE has established a regulatory authority to help implement its policies, as well as corporations to develop new power and water projects. Also in 2001, the Royal Commission for Jubail and Yanbu founded the Power & Water Utility Company for Jubail and Yanbu, known
as Marafiq. This company is responsible for planning and developing power and water utilities in Jubail and Yanbu industrial cities. Another major development took place in May 2003 with the establishment of a new company, Water & Electricity Company (WEC), between the Saline Water Conversion Corp. (SWCC) and Saudi Electricity Co. (SEC) to carry out the independent Water and Power Project (IWPP) in partnership with the developer. There are three IWPP projects under bidding: at Shuqaiq (Phase 2), Ras Al-Zour, and Jubail (Phase 3). The three projects will have desalination water capacity of 1870 million cubic meters of desalinated water per day. In 2006, the new National Water Company (NWC) was founded. It will facilitate privatization process and oversee the regional operations under PPP contracts. In the long term, NWC will oversee most water and wastewater operations in the Kingdom. The National Water Company will include regional business units and a core to manage and provide strategic guidance. National Water Company (NWC) National Water Company (NWC), a Saudi joint stock company fully owned by the government (namely the Public Investment Fund (PIF)), was established in 2006 to provide water and wastewater services in accordance with the latest international standards by the concerted efforts of national cadres working together with certain international operators through foreign PPP. NWC focuses on providing drinking water of high quality for all customers, providing all households with water and wastewater connections, the preservation of natural water resources, the protection of the environment, making maximum use of the Treated Sewage Effluent (TSE), and the development and training of qualified Saudi employees in accordance with the latest international standards. Saline Water Conversion Corporation (SWCC) Established in 1965, the Saline Water Conversion Corporation (SWCC) is the entity responsible for operating the country’s 30 desalination plants and providing fresh water for the entire country. It is also the country’s second largest supplier of power with 12 plants generating 3,426 MW. In 2007, the SWCC spent $1.04 billion (SR3.9 billion) to develop its activities, a 24% increase from 2006. In recent years, the SWCC has embarked upon a privatization plan, which established the National Water Company (NWC). The state-owned desalination plant operator will be a holding company with separate production and transmission subsidiaries. As of November 2008, the SWCC had completed five of seven stages that will result in the company’s privatization. The SWCC is currently awaiting approval of the final two stages by the Supreme Economic Council. Based on the IWPP model, the private sector will be able to participate and contracts may begin in August 2009. With the privatization of the SWCC and the creation of the National Water Company, the water sector is expected to be under full private control by the end of the decade. Independent Water Projects (IPPs) Private sector investment is emerging as a key component in the upgrading and expansion of Saudi Arabia’s water infrastructure. The IPP concept is also gaining ground among Saudi Arabia’s leading organizations, including the Ministry of Commerce & Industry, Ministry of Water & Electricity, PCA, and Saudi Aramco, which are contracting local and international private companies to build desalination plants for their mega projects.
Page 1 and 2: Doing Business in Saudi Arabia: 201
Page 3 and 4: • Intellectual Property Protectio
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Page 7 and 8: Since this is a common practice in
Page 9 and 10: Franchising Return to top Franchisi
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Page 13 and 14: Other entities created by the CML i
Page 15 and 16: Pricing Return to top The governmen
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Page 19 and 20: Engineering & Architectural Service
Page 21 and 22: units and 150,000 square metres of
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Page 29: Ministry of Health www.moh.gov.sa M
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Page 39 and 40: Saudi Arabia’s education system i
Page 41 and 42: Education Trade Fairs in Saudi Arab
Page 43 and 44: $90 billion expected to be spent on
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Page 47 and 48: total of $109 billion on railway ex
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Page 57 and 58: seems that Saudi Aramco has started
Page 59 and 60: In 2000, Saudi Arabia passed the Fo
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Page 65 and 66: growth will be sustained for years
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Page 71 and 72: educe its soybean import subsidy fr
Page 73 and 74: Tel.: (+971-4) 332-1000 Fax: (+971-
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standards. The Communications and I
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Publication of Technical Regulation
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efficient customs procedures, and g
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contracts, a restrictive visa polic
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equirements defined in the Ministry
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Of interest to investors who have d
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capacity through training, has stre
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local investment houses. These allo
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any public official must be made a
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• The World Bank Institute publis
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Web Resources Return to top Saudi A
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licenses were also granted to Deuts
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allocated $36.5 billion for the edu
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Recently, the Saudi Fund for Develo
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visas will likely become the norm o
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Transportation Return to top The bu
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Web Resources Return to top Travel
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Saudi Basic Industries Corporation
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E-mail: abondthorley@fmi.org, sgeor
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