Arab environmentalism creates new market

Middle East, The, June, 1999 by Josh Martin

The Middle East is emerging as a high growth market for a wide range of environmental control equipment, systems and consulting services. These include water purification and treatment systems, hazardous materials and solid waste disposal operations, and sewage systems and treatment plants. So far, the process has been nurtured almost exclusively by governments and a few large oil companies. Public awareness of and demand for environmental protection is expected to create even higher growth in the future.

Environmentalism is something new to the Middle East. Until the 1990s, oil wealth was so great that governments, planners and ordinary citizens hardly gave a thought to the mountains of trash, toxic chemicals and air pollutants that wealth engendered.

But in the 1990s, two events have caused a dramatic shift in attention. The first was the Iraqi sabotage of Kuwaiti oil wells during their retreat in the 1991 war. Drifting clouds of acrid smoke, coupled with the oil slicks from war-damaged tankers, moved down the Gulf, forcing all governments in the region to pay more attention to environmental protection.

New environmental protection legislation is now in place or being developed in virtually every Gulf Cooperation Council member country, as well as in North Africa.

There are several different motives for this, beyond the simple desire to maintain clean beaches and safe drinking water. As post-boom governments grapple with potentially explosive growth in their working age populations (in some countries, at rates exceeding five per cent per year), many are looking at the development of tourism and other environment-sensitive industries as the way to generate the needed number of jobs.

Traditional industries, including fisheries and agriculture, as well as the energy sector itself, are also pressing for better environmental standards to maximise productivity. The petrochemical sector in particular has come under pressure, to handle toxic waste in a more environmentally sound manner.

The region's rapid population growth and industrialisation has necessitated development of more sophisticated environmental laws, which in turn are mandating the creation of modern waste management systems.

All of this is creating a vast market for environmental systems and services vendors. According to industry experts and US Commerce Department trade analysts, the Middle East market for environmental technologies equipment and services is expected to grow at rates exceeding 10 per cent per year for the next five years.

Total annual spending on environmental technologies in the Middle East and North Africa, apart from traditional water treatment plants, is now estimated at just over $1 billion. By the year 2005, it could reach as much as $5 billion, fuelled by demand for water treatment and solid waste management systems.

US-based companies have emerged as the leading suppliers of products and services in this field, in part because of their long experience with the well-developed American market for environmental technologies and systems.

In Saudi Arabia, for example, US companies hold a 60 per cent market share (against 13 per cent Danish, 10 per cent Japanese, and nine per cent British shares).

In Egypt, which is the largest single Middle East market for environmental technologies, US companies hold a 45 per cent market share. Moreover, US companies entering the Egyptian market are helped by a number of special programmes fostering bilateral trade, such as those funded by USAID.

American advisors have also played a prominent role in key government ministries governing environmental issues in the Arab countries. American technical experts are active in Saudi Arabia, the UAE, and other countries in the region, helping to develop environmental standards and legal codes.

The money for the required environmental systems comes from three main sources: local government funding, the private sector, and - especially in the case of Egypt - foreign aid.

In the Gulf, much of the new environmentalism is currently focused on the energy sector. Major oil companies like Aramco in Saudi Arabia, ADCO in Abu Dhabi, and PDO in Oman, are being pressured to adopt stricter environmental standards. They, in turn, are imposing tougher clean-up requirements on sub-contractors.

"Enforcement efforts are concentrated on the larger projects and larger companies," notes Marc Lemmond, an international trade specialist in the US Commerce Department's Office of Environmental Technologies Exports. "There is pressure on them to 'green' their supplier chains."

Tougher environmental controls have created opportunities for local and foreign companies to develop specialised waste management systems at leading industrial centres, like Egypt's 6 October city, Yanbu in Saudi Arabia, and Jebel Ali in Dubai. For example, US-based International Technology Corporation is teaming up with the Saudi firm, Al-Murgan Environmental Management & Technology Company, to build a fully-integrated industrial and hazardous waste management facility at Yanbu.