INDUSTRY INSIGHT

GCC solid waste management: A problem of plenty

By Abhay Bhargava, Business Head – MEA, Industrial Practice, Frost & Sullivan and Sasidhar Chidanamarri, Industry Principal – MEA, Industrial Practice, Frost & Sullivan

Significant opportunities exist to grow the region’s waste management market, but stakeholders would need to collaborate towards a more structured approach and conducive environment for recycling

Solid waste and specifically plastics waste is becoming an increasingly complex problem for the GCC. The driving factors that are resulting in this increase cannot be mitigated in the short to medium term, implying that the quantum of waste generated can only increase from this point of time onwards. However, this quandary can present a significant opportunity for recycling in the region, including plastics. Translating this problem into an opportunity is only doable if a structured approach is taken. This requires all stakeholders to work together, with an aim to create a conducive ecosystem for recycling that addresses various gaps existing currently in the value chain.

The total solid waste generated annually in the GCC is estimated to be between 95-100 million metric tonnes (MT), according to a study from 2017 by Frost & Sullivan. This is a staggeringly high figure, considering that Saudi Arabia, Bahrain, the UAE, Qatar and Kuwait each exceed the global waste generated average of 1.2 kilogram/person/day. UAE has the highest waste generation per person per day at 2.1kg, followed by Saudi Arabia, Qatar and Bahrain, all at 1.7 kg/person/day and lastly Kuwait (1.7) and Oman (1.2).

This also puts these countries among the top 10 per capita waste generators in the world. The contributing factors to this issue are population growth, urbanization and economic growth. This presents the complexity of this issue, since none of these can be addressed through short term measures. Considering feasibility and timeline of impact and external imperatives (like China’s recent decision to restrict imports of waste) we see a significant opportunity arising for waste management initiatives in the GCC, especially for recycling solutions.

Exhibit 1:  Per capita waste generation in the GCC countries, 2017

“Stakeholders would need to work together, with an aim to create a conducive ecosystem for recycling that addresses various gaps existing currently in the value chain.”

Based on analysis of global trends, it is seen that municipal solid waste (MSW) presents the highest opportunity for recycling revenue – this is waste generated from residential, commercial, retail, hotels, etc. In the GCC, out of the 95 – 100 million MT of total waste generated, MSW accounts for anywhere between 35% – 38%, presenting a sizeable opportunity for recycling.

The current recycling rate in the region is less than 10%, which reflects the potential upside for this opportunity, considering recycling rates elsewhere in the world, like that in the US (approximately 34%) and in the UK (approximately 44.5%).

The recycling rate in the region has stayed low in the past, owing to greater attractiveness of landfilling (low tipping fees, land availability), ease of exporting, and deficiency in existing recycling capacity owing to non-availability of minimum critical mass. However, each of these factors are already changing, clearly reflecting conduciveness for moving towards recycling. Tipping fees are already being increased across the region, importing countries

are clamping down on waste imports, and with waste volumes expected to surge in the region, the minimum critical mass to justify recycling facilities can be attained to varying degrees across the region. This is especially the case for MSW, which is expected to register a CAGR of 5%-6% from 2018 to 2023, spurred by high disposable incomes, growing consumerism, influx of tourists, and seasonal factors such as festivals and events.

Current waste management practices are confined to collection and transportation of waste with limited implementation of waste to value methods leading to a vast untapped opportunity in waste recycling. The intent in the region to move towards recycling is clearly visible, through the advent of master plans being announced, focusing on waste, and promoting scientific and waste-to-value techniques such as secured landfills with landfill gas capture, waste to energy plants, composting, and recycling.

Existing situation is far from ideal

While GCC countries have made headway in tackling water crises through adoption of wastewater recycling technologies creating a near-circular economy, the waste management sector has lagged in the adoption of “cradle-to-cradle” waste treatment solutions.  Closer examination of the waste management value chain presents significant room for improvement across sorting, recycling, treatment and waste-to-energy.

Source segregation is severely lacking, especially in MSW. A few examples of municipalities that have established their own material sorting and recovery facilities to segregate waste streams are Bee’ah in Sharjah, UAE and Beatona in the Kingdom of Saudi Arabia (KSA). However, segregation at source is still necessary for effective recycling, and presents opportunities for the region, especially when integrated with other value added activities.

Actual recycling of MSW is limited, with success stories only visible for the paper industry. Plastics and glass waste is largely handled by the unorganized sector, and bailed and shipped out for recycling. This presents a significant latent opportunity, especially in the context of China’s recent announcement to ban the import of plastic waste. Instead of scouting for the cheapest possible destinations for shipping plastic flakes and granules, we see that the GCC countries have a viable opportunity to use more recycled content in extensive packaging and manufacturing activities, and even developing plastics-to-fuel technologies

Exhibit 2:  Recycling rates in the US, UK and GCC

“The recycling rate in the region has stayed low in the past, owing to greater attractiveness of landfilling, ease of exporting, and deficiency in existing recycling capacity.”

Exhibit 3: Top MSW recyclers in the world

Exhibit 4:  Germany’s success in achieving comprehensive waste management

Business sense in value recovery from waste

Countries in Western Europe and other fast growing economies in Asia Pacific have demonstrated tremendous success by strengthening downstream activities from sorting to treatment as shown in Exhibit 3.

Government policies in these countries resulted in achieving high success in source segregation for waste from households. An analysis of these success stories can allow us to derive some broad ranging implications for the region, on how to plan for success in recycling:

  1. Governments need to take the lead in terms of setting up an ecosystem that will facilitate investment – we see something similar being developed by Saudi Arabia’s Public Investment Fund
  2. Extensive focus in the short term on enhancing source segregation, and ensuring separate collection of key dry recyclables. This is something that is being seen as an area of focus in the UAE in recent years
  3. Rigid regulations: Landfill ban on specific materials
  4. Mandates: Statutory recycling targets
  5. Business sense: Variable rates instead of a flat fee charged to waste generators
  6. Extended reach: Schemes such as extended producer responsibility
  7. Implementation: Use of recycled materials in manufacturing and supply chains (e.g., Use of recycled PET by Coca-Cola to make bottles)
  8. Economic sense: Creation of domestic market for the off-take of recycled products

 

An argument can be posed on whether these efforts can be justified through returns. This can be best analyzed by the success Germany has achieved in dealing with waste and moving towards a circular economy, as illustrated in Exhibit 4

To conclude, the waste management industry is set to radically evolve in the GCC. Joint participation by the private sector and governments (municipalities, environment protection agencies) is the key to growth of this industry. Opportunities for this region are evident, considering the high waste generation rates coupled with lower than ideal recycling levels. Augmenting the recycling capacity is the need of the hour for taking care of the “potential” arising from growth in waste. Legislations have to be aimed at resource recovery through recycling and defining criteria for using minimum recycled material content.

For private sector players such as integrated waste management service providers, the business model must reflect the innovations available on the global platform. From a customer relationship perspective, companies need to maintain continuous outreach and awareness campaigns with stakeholders such as consumer households, commercial establishments, and municipal agencies, which would go a long way in enhancing source segregation, a critical step to efficient recycling. Service providers would also have to orient themselves to facilitate clients (businesses, residential zones/ compounds) to improve their waste management strategy. This may require streamlining of client’s logistics and supply chains.

More importantly, the value proposition must address the changing dynamics of the industry. This should be focused towards achieving a zero waste economy through resource recovery and up-cycling. This will have an impact on key resources as companies would have to obtain and use technology to treat hard-to-recycle materials within waste types to achieve zero waste goals.

To sum up, the GCC waste management services market offers sustainable and viable opportunities in the long run for end-to-end waste management as the focus is shifting from independent services to integrated waste management. Opportunities will surely arise, providing potential for waste-to-energy, recycling, and even compost production in the future.

“Joint participation by the private sector and governments – municipalities and environment protection agencies – is the key to growth of the waste management industry in the GCC.”