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Private sector involvement in desalination projects in the Mediterranean Middle East (Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Syria and Tunisia) has in the main been limited to the provision of facilities under turnkey type contracts — with the exception of Israel which has recently embarked on a series of BOO/BOT type projects. The first part of this paper outlines the principal types of private sector involvement employed on infrastructure projects globally today — from management contracts to concessions to full-scale privatisations. Each of the MME countries is then reviewed in turn to identify the forms of private sector involvement experienced to date on infrastructure projects, with particular emphasis on desalination projects. The second part of the paper sets out the general drivers and constraints behind private sector involvement on desalination projects from both public and private sector perspectives. Drivers include: need (either to replace or supplement existing supplies); lack of alternative supplies; desire for private sector expertise, lack of public sector funding; and availability of IPP’s. Constraints include: political opposition; lack of appropriate regulatory/legal frameworks; inability to pay for services; high country risk; and lack of track record of completed PSP projects. The application of these drivers and constraints to each country in the MME is then undertaken, and the results help inform the likely future prospects for private sector involvement on desalination projects in the foreseeable future.

In general the demand for desalination capacity is driven by the lack of economically viable alternatives. The MME countries identified as requiring additional desalination capacity in the foreseeable future are: Algeria, Egypt, Israel, Jordan, Libya and Tunisia. The most attractive of these countries from the private sector perspective are Egypt and Israel because of their investment grade sovereign ratings, their developed legal structures and their previous track record. Egypt offers most potential in the form of IWPP type projects (although there may be a politically driven turnaround on the current strategy of BOT procurement), while Israel is progressing with stand-alone desalination plants under BOT type structures. Both countries have identified future projects to be procured under the BOT structure. Algeria offers significant potential for both O&M and BOT models but will continue to require MLA funding contributions and guarantees because of its high country risk. Similarly Jordan will require MLA support if it is to attract private sector investment. While Tunisia is attractive from the private sector prospective there does not appear to be any immediate plans on the government side to procure additional desalination capacity through the PSP route. With regard to Libya, although it has the highest existing desalination capacity of all the MME countries and an extensive investment programme for increasing future capacity, it is unlikely that the private sector would risk investing under the current economic and political environment.