Frost & Sullivan say the GCC water and waste treatment sector will take home US $1.87 billion in revenues this year.
The GCC water and wastewater treatment equipment market grew rapidly in 2008 on the back of substantial investment in infrastructure, real estate, petrochemicals, oil and gas and other sectors, according to the latest research from Frost & Sullivan.
The report, entitled ‘Analysis of the Middle East (GCC) Water and Wastewater Treatment Equipment Market’, reveals that the market reaped revenues of over US $1.26 billion during 2008. This is expected to rise to $1.87 billion in 2013.
“It is estimated that some of the downstream and upstream investments, which were planned considering a crude oil price of more than US$85 per barrel, are likely to be shelved,” said Frost & Sullivan senior research analyst Vivek Gautam.
“This sudden change in the business landscape has stalled market progression, but with strong economic fundamentals and increased governmental expenditure, the GCC market is expected to be back on the rails by 2010,” he noted.
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The report highlights that GCC governments have exhibited strong political will to continue investing in important infrastructure projects. Environmental and health hazards related to the disposal of untreated effluent, marine pollution and deteriorating ground water quality are some of the issues that are keeping market prospects alive.
Though these forces have been overshadowed by short-term concerns, they are expected to positively impact market dynamics from 2009 to 2013.
The extent to which markets across GCC member nations will be affected by the current economic slump depends largely on factors such as government dependence on oil revenues, dependence of economic growth on external debt, and the ability to absorb the shock based on the inherent economic resilience.
The core municipal sector is expected to cushion the impact of this slowdown. GCC governments have identified municipal wastewater treatment as the priority area for a plethora of reasons, including the achievement of the Millennium Development Goals.
Some large private real estate developers of lifestyle townships, luxury villas and shoreline apartments are utilising advanced wastewater treatment technologies to assist in maintaining a hygienic and odour-free environment.
Wastewater treatment and reuse is likely to see widespread adoption across GCC countries, representing an expanding market for advanced wastewater treatment technologies. On the other hand, desalination has been the prime driver for the water segment, argues the report.
“The market is fraught with challenges in spite of its immense opportunities,” added Gautam.
“The complex business environment, slow decision-making process, and customer preference for low-cost solutions, regardless of the performance, makes it difficult to penetrate the market,” is the report's main conclusion.
Furthermore, the mass market is highly price sensitive, triggering intense competition in lower technology products. Profit margins for such products are also under pressure. Owing to the lack of technical competence, at the end of the day cost considerations dictate buying decisions.
Component suppliers, in particular, are facing hyper competition due to the availability of low-cost products from supplier nations such as India and China. The report states that the onus is on technology providers to roll out cost-effective products so as to navigate tough market conditions successfully.
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