In its quest for a sustainable future, Saudi Arabia has embarked on a transformative journey to restructure its waste management sector – echoing the successful restructuring of its water market over a decade ago. In this article, Amane’s Ismail Alaoui explores the recent developments that have prompted the transformation, particularly in hazardous waste management, and highlights three pivotal shifts that are shaping future strategic opportunities within the industry.
For decades, Saudi Arabia invested heavily in water, without much to show for it. The Kingdom’s water businesses were heavily subsidized by the government, environmental regulations were few and far between, and performance remained low.
Starting in the early 2000s, however, leaders were eager for new solutions. They committed to building a more profitable and sustainable water sector by attracting international expertise and investment to initiate improvements, develop new infrastructure, and encourage local knowledge transfer.
The improved competitiveness, signaled by the presence of international industry giants, the emergence of successful Saudi players such as TAWZEA and Alkhorayef Water & Power to name a few, along with the success story of ACWA Power, are all a remarkable testament to the resurgence of the water market – a vital and dynamic sector that is crucial to the Kingdom’s development.
Today, the Kingdom’s waste sector is in a similar position to that of the water sector two decades ago. Waste management responsibilities are fragmented and lack clear enforcement – with little regulatory oversight. Landfills are often treated as dumping sites without proper waste treatment processes in place, while waste sorting activities are nearly non-existent – and there are even instances of wild dumping of waste, including hazardous materials, in the desert.
This climate has created an uneven playing field for waste management companies; some adhere to quality standards and are ready to invest in state-of-the-art facilities, while others dump waste irresponsibly to cut costs.
However, Saudi Arabian authorities have begun implementing new regulations to promote sustainable waste management and follow the example set in the water sector. These activities signal that changes are coming to the Kingdom that could dramatically increase the strategic opportunities in waste treatment and management.
The transformation of Saudi Arabia’s water sector hinged significantly on the Kingdom’s ability to attract more private sector participation and international expertise. Leaders enacted several initiatives to do so, starting with the Water Privatization and Investment Directorate, which brought water utilities under private sector control while the state assumed a regulatory role.
In 2001, the Electricity and Cogeneration Regulatory Authority (ECRA) was established to oversee the provision of power and desalinated water, and the development of independent water and power projects (IWPPs) also brought in more private investments, expertise, and technology.
In 2008, the National Water Company (NWC) was established as a fully state-owned joint-stock company to provide drinking water and wastewater services. Since then, the NWC has actively engaged in public-private partnerships (PPPs) with foreign and local operators to deliver water services, enhance water infrastructure, improve service quality, and ensure sustainable water management in major cities such as Riyadh, Jeddah, Makkah, and Taif.
The Water Privatization Law, which emphasized the importance of improved efficiency and accountability, also promoted competition, and drove advancements in service delivery.
These comprehensive decisions and initiatives have successfully fostered a dynamic, profitable, and sustainable water market in Saudi Arabia, and helped drive innovation and efficiency. By leveraging public-private collaborations, the country has achieved significant progress in meeting the water demands of its growing population and economy while promoting long-term sustainability and ensuring the availability of high-quality water resources for its citizens.
Without a level playing field and standardized practices, waste businesses have faced challenges in establishing themselves and attracting investments. The collection market has been dominated by manpower providers and bill-of-quantities (BoQ)-based contracts, keeping technical capabilities low. The absence of regulations has not only posed environmental issues but also stifled the growth and confidence in the market and limited its commercial potential.
Now, leaders seem to be following a similar pathway to restructure the waste sector; taking steps to encourage greater investment and private sector involvement.
In 2017, the Saudi Investment Recycling Company (SIRC) was established by the Saudi Arabian Public Investment Fund (PIF) to develop waste treatment facilities for municipal solid waste (MSW) and non-residential non-hazardous waste, thus diverting valuable resources from landfills.
Just two years later, the National Centre for Waste Management (MWAN) was also set up to take responsibility for planning, regulating, and encouraging the development of the waste management sector in the country. Even more recently, the Kingdom passed new waste management legislation which provides some additional guidance. For instance, the law requires those who generate large volumes of waste to have contracts with licensed waste management service providers and emphasizes the importance on recycling, resource recovery, and safe disposal to achieve better environmental and economic outcomes.
Although there is still a long way to go before we will see a fully revived waste market (characterized by comprehensive clear regulatory enforcement, a level playing field for all participants, and the emergence of Saudi players able to compete with international players), these steps have kickstarted the transformation and signal that more change is coming to the market.
1. A shift from manpower to performance-based contracts
Traditionally, waste management contracts focused on specifying the number of resources involved, such as manpower, vehicles, and equipment. More recently, however, there’s been a shift toward performance-based contracts that incentivize waste management companies to optimize their operations and prioritize the quality of service and the achievement of specific goals.
Locally, this approach is exemplified by organizations such as the Royal Commission for AlUla (RCU). For example, for the first time, a contract for the collection of municipal solid waste in part of the territory of AlUla will adopt a performance-based structure, prioritizing tangible outcomes and leveraging penalties to address any shortcomings.
This shift is driven by the recognition that simply allocating a specific number of resources is inadequate to ensure efficient and effective waste management. Instead, waste management companies are leveraging their expertise, knowledge, and creativity to develop strategies that not only meet waste management requirements but also benefit the wider community and environment.
Performance-based contracts drive operational, cost and resource efficiency. They motivate waste management companies to streamline processes, reduce waste generation, and enhance recycling and disposal methods by using advanced technologies, data-driven approaches, and global best practices.
Furthermore, by establishing clear performance indicators and implementing monitoring mechanisms, public authorities can evaluate the effectiveness of waste management services and make data-driven decisions to drive continuous improvement.
Similarly, the shift towards outcome-based evaluation encourages companies to differentiate themselves through their expertise and innovative solutions. This healthy competition drives the development of new technologies, methodologies, and practices in waste management – ultimately resulting in improved services and sustainable practices that benefit the community.
2. A shift in how waste management projects are financed and operated
In the realm of waste management, companies in Saudi Arabia have historically embraced two primary approaches: internal waste management or complete outsourcing to specialized firms. The former granted companies the advantage of maintaining full control over their waste, while the latter allowed them to focus on their core business activities by entrusting waste management to external experts. For example, ADNOC opted for the latter approach with the sale of its treatment facilities to waste management expert Veolia in 2022.
A new hybrid model is now emerging, however, in which waste producers partner with waste solution providers to establish strategic alliances solely dedicated to comprehensive waste treatment.
Under this approach, waste producers access personalized, cutting-edge waste management solutions delivered by industry-leading waste solution providers. With this approach, they retain oversight and control over their waste management operations – enabling them to closely monitor and manage the environmental impact of their activities. This level of control is pivotal for companies committed to maintaining sustainable practices and adhering to stringent environmental regulations.
Moreover, through collaboration with solution providers, waste producers can leverage their partners’ expertise and experience to develop and implement innovative and sustainable waste management practices. By doing so, waste producers can significantly reduce their environmental footprint and align their operations with global environmental goals and initiatives. This hybrid approach is emerging most clearly within the oil and gas (O&G) sector; a sector known for generating hazardous waste requiring sophisticated treatment.
The most notable example is the recent partnership between Saudi Aramco, the national oil company of Saudi Arabia, and Veolia. The companies have announced plans to combine their extensive resources and expertise to establish a benchmark for sustainable waste management practices in the O&G sector.
3. A shift in focus toward attracting international players and collaboration
The SIRC has taken on the task of attracting international waste management players to the Saudi Arabian market – marking a significant shift in waste management practices within the Kingdom. SIRC’s strategic approach involves collaborating with renowned international waste management companies to bridge the gap between local expertise and global best practices to accelerate the implementation of advanced waste treatment solutions.
By leveraging the knowledge and capabilities of international partners, SIRC aims to propel the development of local energy-from-waste plants to treat municipal, industrial, and hazardous waste and raise overall standards and promote sustainable practices.
Opening the waste market to international players presents exciting opportunities to invest alongside SIRC in the development of waste-to-energy infrastructure – with the potential to foster economic growth, drive innovation, and establish the Kingdom as a regional leader in sustainable waste management.
The recent reforms and strategic shifts in waste management are creating exciting, new opportunities in Saudi Arabia. By embracing performance-based contracts, adopting collaborative approaches, and investing in infrastructure and partnerships, the Kingdom is paving the way for its sustainable future. As the waste management industry continues to evolve, stakeholders in Saudi Arabia can leverage these shifts to drive innovation, create new business opportunities, and contribute to the circular economy.