Arabs face funding obstacles
Arab countries need to pump more than $125 billion into power development projects in the next five years and could find difficulty in funding such projects given the current economic and political situation, an official study has said.
Nearly half the investments will have to be channeled by the six-nation Gulf Cooperation Council (GCC) given their rapid population, steady expansion of the industrial sector and growing water desalination needs, said the study by the Dammam-based Arab Petroleum Investment Corporation (Apicorp0.
“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,” said Apicorp, an affiliate of the Organization of Arab Petroleum Exporting Countries (OAPEC).
“On the one hand, and as long as the allocation of public resources reflect 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 $58.2 billion in the GCC, $27 billion in Mashreq (east) Arab nations, $25.8 billion in Iran, $13 billion in Maghreb (west) Arab countries and nearly $1.8 billion in other Arab states.
“In the current socio-political context, power/water has emerged as a critical sector featuring prominently on top of MENA policy agendas,” it said.
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….
accordingly, power generation capacity is projected to continue growing at an unrelenting rate of 7.7 per cent per year during the period 2012-2016.”
The report showed the GCC is projected to record the highest demand growth of around 8.5 per cent in the medium term. Growth was put at 7.6 per cent in Mashreq (Egypt, Iraq, Jordan, Lebanon and Syria), 7.2 per cent in other Arab states, seven per cent in Iran and 6.5 per cent in Maghreb (Algeria, Libya, Mauritania, Morocco and Tunisia).
Additional capacity was estimated at 52.7 GW in the GCC, 21.7 GW in Mashreq, 19.8 GW in Iran, 10.8 GW in Maghreb and 1.4 GW in other Arab nations.
Follow Emirates 24|7 on Google News.