Private assets

Privatisation of water assets have long been mooted as a solution to the Middle East’s water issues.

Privatisation of water utilities would not be disastrous but it is important not to pursue the policy simply because it’s fashionable, and history suggests that creating a win-win for all parties over the long term is far from assured.

The private operator has few economic incentives to promote water conservation because a corporation’s chief goal is to maximise profits, which often means encouraging increased consumption.

"Private water companies also have little reason to leave sufficient water for ecological needs, endangered species and other downstream uses.

Privatisation agreements may also result in reduced water quality because private water companies make decisions based on profitability rather than public health. Especially in the case of asset sales, there is concern about land that may be subject to development.

When a private operator purchases a municipality’s water-related assets, they may include the municipality’s watershed areas as well as industrial equipment.

Since preservation of watershed lands does not generate revenue, the operator may either want to develop the watershed area or sell it off to others for development.

In many US communities where water has been privatised, there has been an increased risk of rate hikes, inadequate customer service and reduced local control.

Therefore, governments in the Middle East embracing the path of privatisation should ensure that the terms include employing clear and consistent standards, strong public oversight and strict scrutiny of any deals by independent organisations."

a good overview of the expected demand on water in the gulf.

a spot of milk?

"There is a very sad story behind the introduction of powdered milk to our nation.

At one time we were self sufficient in milk. The multi national companies gradually and surreptitiously changed our consumption habits of the “Nation” by offering milk food at a very competitive price so that the farmers were compelled to close the dairy and sell the cows.

The change of food habits also led to the production of our cattle where some time back it was with utmost reluctance that the villager sold his cow for slaughter. The cow, treated as second mother was used for milking and the bull to pull the cart and in the paddy field. Killing cattle for meat is unacceptable. Now the values have changed, we are now meat and beef eating nation.

Recently there are protests and agitations regarding the increase of milk to unbearable levels. It is true that the prices of liquid milk and powdered milk have gone up drastically. Two decades ago Sri Lanka was a country where fresh milk was freely available at an affordable price.

In 1981 under the policy of liberalisation and privatisation the government took decision to close the national milk board and signed an agreement with a multinational company, to develop the dairy industry.

After 20 years there is no fresh milk available in the market, the entire milk food sector is in the hands of just two or three large companies which market only milk powders imported from the West."

Will they privatize Zamzam?

Water privatization through the process of public private partnerships (PPPs) is a step closer to becoming the reality of water production and distribution in Saudi Arabia.

The process of reform in the water industry recently took a major step with the formation of the National Water Company (NWC) and approval of its bylaws by the Supreme Economic Council (SEC).

The plan intends to achieve a separation (unbundling) of water and wastewater operations on a city-by-city basis and offer wastewater treatment plants to the private sector on contract terms yet to be finalized.

Iranian gambit

"Agriculture, internal trade and distribution are mostly in private hands. Even so, estimates of how much of the economy the government controls range between 65% and 80%.

Now there is talk of large-scale privatisation to attract investment and improve productivity. Some privatisation has even taken place, though it often entails little more than shuffling assets from one state sector to another. In theory, the pace of privatisation should pick up, thanks to a new constitutional amendment that envisages moving all but 25 state-owned companies into private ownership within eight to ten years (though the government will keep a 20% stake). Ayatollah Khamenei, the supreme leader, was a critic of nationalisation in the 1980s and is said to be enthusiastic about the change. The impediment will not be an absence of political will at the top but the hesitation of investors.

In the longer run, Iran faces a different sort of vulnerability. It is finding it hard to acquire the foreign technology and capital it needs in order to boost production of its fast-depleting oilfields and realise its vast potential as an exporter of natural gas. Without this investment, all of Iran's big plans for a prosperous energy-fired future would be put in jeopardy. But Iran still has a few years to sort this out, whereas its mastery of uranium enrichment may be only a matter of months away."

Excellent Economist article on Iranian economics. Read about how Khomeini's legacy (Economics is for donkeys) and Ahmedinejad's populist, spur-of-the moment policies are sinking the Iranian economy. Read (but not enough) about the mullah's corruption. Read how the US and world financial systems are used to squeeze countries into domestic and foreign policies pleasant (ie subservient) to the US. But read also how Iran may still achieve nuclear capabilities and then pick itself up. Not a bad plan: get a single-track populist visionary like Ahmedinejad to move Iran into the elite nuclear club, then replace him with economic reformers to bring the country back within world economic standards and develop its full economic potential. The result: a military superpower and an economic powerhouse, sovereign and united.

Brace yourself for more structural adjustment

"The Middle East and North Africa region has become the fastest-growing area for investments from the World Bank's private sector arm, the International Finance Corporation (IFC), which surpassed one billion dollars for the first time last year, according to the Bank Information Centre, a Washington-based research group on international public lenders.

Egypt, the most populous Arab country, received most of the loans (283 million dollars) over the past five years, followed by Oman, Algeria and Iraq.

The report's authors say that the IFC is also taking advantage of new investment opportunities created by accelerated trade liberalisation and privatisation reforms in the region, which are often tied to the World Bank and International Monetary Fund (IMF) programmes.

Of all loans from multilateral financial institutions, including the African Development Bank, nearly a quarter again went to Egypt, which has implemented a rigorous World Bank-sponsored liberalisation programme.

Lending to Iraq is also forecast to grow in coming years. The World Bank has approved emergency loans worth around 400 million dollars to the country through its Iraq Trust Fund, while the IFC has committed over 100 million dollars in private sector operations.

The study notes that in 2001, the World Bank provided 507 million dollars to MENA -- only 2.9 percent of the total Bank lending that year. But in 2006, it gave out 1.7 billion dollars, more than half which went for finance and energy projects after several years of relatively minimal allocations to these sectors.

Lending projects in the water and sanitation, health and agricultural sectors dropped off almost entirely, it says.

In the last five years, Egypt has borrowed more from the World Bank than any other country, receiving over 1.2 billion dollars, followed closely by Iran, which has received 1.1 billion dollars from the Bank over the same period.

The study found that the Bank went into the region with the same ideology it imposes elsewhere in developing nations. It says its focus has been on instituting "comprehensive structural reform" to facilitate greater liberalisation measures such as the elimination of trade barriers to open up the region to increased private investment and economic integration. The authors of the report cite many of the Bank's own studies, which have revealed that income inequality in MENA is on the rise, despite increased economic growth and investment. "

The jury is still out about the significance of increased IFI investment in MENA for the region's people. The impacts of the influx of public financing on poverty, inequality, unemployment and the environment in MENA remain to be seen," the authors of the report said.

"Investment is not an unambiguous good, as it is often portrayed to be, nor is investment itself tantamount to development"."

In a nutshell: There out to get Iraq in financial chains, if it has a slight chance of ever becoming a country again, privatization will boom in the region, neo-lib policies will be fostered, trade will be unbridled, the rich will become richer, and they've already got Iran by the balls.