Arab countries need to pump more than USD 125 billion into power development projects in the next 5 years and could find difficulty in funding such projects given the current economic and political situation.
The study by the Dammam based Arab Petroleum Investment Corporation said that nearly half the investments will have to be channeled by the 6 nation Gulf Cooperation Council given their rapid population, steady expansion of the industrial sector and growing water desalination needs.
Apicorp an affiliate of the Organization of Arab Petroleum Exporting Countries said that raising such large amounts of capital will be most challenging. With domestic and foreign private investment somewhat retreating, governments in the region must pursue two tracks simultaneously and with determination.
On the one hand and as long as the allocation of public resources reflects their policy priorities, they should step in to fill some of the financing gap. On the other hand they have to step up their efforts to provide the assurances critical to regaining the lost momentum of private investment.
The report estimated the total capital in power generation in the Middle East and North Africa, including Arab countries and Iran, at around $125.8 billion during 2012-2016 to add about 106.4 GW of electricity.
It put investments in such projects at around USD 58.2 billion in the GCC, USD 27 billion in Mashreq Arab nations, USD 25.8 billion in Iran, USD 13 billion in Maghreb Arab countries and nearly USD 1.8 billion in other Arab states. In the current socio-political context, power and water has emerged as a critical sector featuring prominently on top of MENA policy agendas.
It said that as a result of high population growth, record levels of urbanization, sustained economic growth and pressing needs for air conditioning and sea water desalination, many countries in the region have been struggling to meet demand. They now face an even steeper uphill struggle as phasing out price subsidies to rein in excess demand growth has become extremely tricky.
(Sourced from Emirates Business 24/7)
