Specific privatization issues applicable to water and electricity utilities in the Gulf Cooperation Council States

Abstract

Most of the GCC States have attempted the path of privatization in recent years in order to relieve the financial burdens of capital expenditure from the government. A sudden rush towards privatization has resulted in unfortunate obstacles to most of the proposed privatization of utilities projects in the GCC States. The paper deals with specific economic, political and social issues that impact on the administrative and financial style of management in the GCC States which in turn has reflected on the performance and cost to the government and the public, as compared to utilities management elsewhere in the developed countries. A review of the forces which drive the GCC governments to the privatization process that took place and the obstacles which have hindered the progress towards successful privatization, with alternatives, in order to achieve the privatization goals and a high standard of service to the community at the least cost in order to support the economic and social development of the GCC States. Suggestions of steps towards a privatization process to ensure its success are also presented. The review also identifies some examples of successful and efficient independent authorities, with a comparison of the various types of utilities management, i.e. government, independent authority and private company showing the strength and weakness of each type. The social and the political implications of the privatization process have also been identified, with particular emphasis on tariffs and employees. The issue of ownership and funding of water and electricity utilities has been reviewed as most important commodity affecting the economic and social development of the country. Suggested recommendation is given towards balancing the risks if a decision is made to proceed with privatization projects. The paper concludes that successful privatization will depend on the ability of achieving better customer services and creating a base of highly trained productive employees and delivering the products at a lower cost than existing government or independent authorities.