The questions point to a vise which has become readily apparent only in the past couple years, I think, as it's started to tighten. While Egypt isn't the only country that's caught it's an important case, so I'll summarize the two sides of the vise:
FDI and Water Stress
The new administration in Egypt is trying to woo direct foreign investment. The problem is that the investors aren't interested in backing bingo parlor startups or any other business that isn't a water hog.
Traditional World Bank-IMF thinking, which is accepted by mainstream economists, is that to develop, the poorer countries need to diversify their sources of foreign exchange. In Egypt this means less dependence on tourism and fees for international ship traffic through the Suez Canal.
Yet alternatives invariably translate to a greater strain on the country's water resources, which are already so strained that in 2012 the Global Post seriously asked whether the country would run out of water by 2025.
The World Bank is now very much aware of the problem in water stressed developing countries, and that's probably true for all the major development banks. If they didn't get it before, the data coming from GRACE during the past couple years has been the reality check.
For at least two decades a great deal of focus was on creating sustainable energy sources in the developing countries: how could they put development on a strong industrial base without sustainable energy? But as it happened everywhere else in the world, including the United States, not enough attention was put on creating sustainable water sources. That's because everyone was wildly overestimating the world's groundwater resources -- estimates built on nothing but blind guesses. The GRACE satellite system has removed the guesswork, but this kicks the struts out from under all traditional economic prescriptions for developing countries -- for development, period.
In theory a way around the problem is for governments in the developing countries to demand that foreign companies setting up shop contribute to helping build up or repair the country's water infrastructures. And insure that their water use in the country is sustainable.
But right now the theory is running into the fact that economists, development specialists, etc., are having to go back to square one and refigure in the face of water realities. Eventually, water shortage crises will force an entirely new concept of development and FDI on governments, investors, and global corporations, but fast diminishing water resources won't wait for these people to get their heads together.
Energy Subsidies and Water Stress
During his 2014 presidential campaign Abdel Fattah el-Sisi exhorted Egyptians to start working harder and get up at 5 AM.
5 AM? In the morning? I think Cairenes are just getting to bed at 4 AM. Cairo is the city that never sleeps; it's been like that for a long time but not like this era, in which sleeplessness is served by a huge variety of businesses that use a lot of (heavily subsidized electricity, fuel, and water). It's routine for the many
government employees in Cairo, who can afford to arrive fashionably late for work, to eat the evening meal around midnight or later. And many Cairenes actually do work hard running restaurants and coffee houses, and making pizza deliveries across the city at all hours that were ordered via cell phones.
But when el-Sisi became President last year one of his first acts was to cut back on the government's massive fuel subsidies. This was met with cheers in many quarters including the IAEA. It's dawned on people involved with energy conservation issues that it makes no sense to call for cutting back on greenhouse gas emissions while governments subsidize increasingly profligate use of fossil fuels.
The original rationale for the subsidies was to provide the poorest with basic fuel needs. The catch turned out to be that the measure of "poorest" and "basic" kept expanding over the decades. And it turned out that the well-off in Egypt were the biggest beneficiaries of the subsidies. (The situation has been the same in virtually all developing countries with heavily subsidized fuel.)
Yet there's a hidden downside to cutting back on fuel subsidies. There is no question that the subsidies exacerbated the fast rate of water depletion in countries across the MENA, as Shanta Devarajan, writing at a World Bank blog, emphasized in November 2014 (Corrosive Subsidies in MENA). So, on paper, this is the perfect time to cut back of fuel subsidies because the price of oil and its byproducts have more-or-less permanently retreated from their highs.
But cutting back means that even with lower oil prices, it can become more expensive to look for water. Why? Because as water sources become scarcer, drilling has to be done at increasingly deep depths. With every foot down, the price for drilling gets increasingly expensive. This is what killed many farms in Mexico during the catastrophic drought in the country in 2012. Farmers couldn't afford to drill down to the water.
That's not the trickiest part of the fuel subsidy vise. As more people obtained disposable income in the latter part of the 20th Century thanks greatly to increased global trade, they took up lifestyles that fuel subsidies were never meant to address. The same with electricity and water subsidies.
Again, this situation isn't limited to Egypt; it's across the board. People have been upgrading their lifestyles and the disposable income in increasing numbers. So it's not just bad water management or the big population numbers that worst against stretching water resources to serve the larger numbers. It's the growing percentage of people who can buy things that even half a century ago very few could afford -- or things which didn't even exist in that era -- and buy them in larger and larger amounts. All those things are also 'virtual' water.
In Cairo the ways in which the subsidies came to be used -- say, to open a restaurant or start a fast food delivery service -- led to a galloping increase in the use of fuel, water, and electricity. This in turn led to more and more people basing their way of life on runaway use of water and virtual water for nonessentials, many of which need to be rapidly replaced, further skyrocketing the use of water.
The climate and water resources of say, the American northeast mean that the huge population in New York City can still get away with an all-night lifestyle and with buying more and more highly disposable stuff, whereas Egypt's climate and water resources don't allow Cairenes to do the same.
So while the basic reasoning behind cutting back on fuel subsidies is sound, this isn't addressing the central issue for the world's most water-stressed countries, including Egypt. The 2012 Global Post report mentioned that Egyptians still have plenty of drinking water, and quoted an observer who noted that Egyptians "see the Nile flowing and think everything's fine" with the country's water supply. (The same for the many Californians who said that the state actually had plenty of water so why the hysteria about a drought?)
So what else is new about human nature? Generally there's only one shot at explaining really complicated issues to the public before a disaster has to do the explaining. That's because if we don't understand an explanation the first time around or conclude it's an exaggeration, we tend to discount the attempted clarifications that follow.
The Bill Collector Arriveth
So is President Sisi's approach the best? Cut out the long-winded explanations; just tell people to get to bed early so they can get up at a smart hour for doing things in a desert climate. The stumbling block to common sense is that Cairo's nightlife is now integrated with a large number of jobs. The same can be said for the daytime life in desert cities across the Middle East, which imitates lifestyles in big cities, such as London and New York, which aren't located in a desert climate.
To wrap it up, megapopulations across the Middle East want a way of life they thought they could afford through oil and gas wealth (and in Egypt's case, control of a key trade route). Now they're going to learn that they can't afford the water bills for that way of life.
The problem is that the water bill collector is already at the door. From Shanta Devarajan's post:
At 500 cubic meters per capita per annum of renewable water, MENA is the most water scarce region in the world. Renewable water resource availability is below 30 cubic meters per capita per annum in Kuwait, UAE and Qatar, followed by Yemen. Only a few countries in MENA, such as Iraq, Iran and Lebanon, have more than 1,000 cubic meters per capita. Renewable water availability has also been declining over time, with a rate of decrease of 35 percent over the last decade. For some countries, such as UAE and Qatar, the rate of decrease has been as high as 75 percent.Yet even that grim prognosis doesn't convey the extent of the crisis. The countries with more than 1,000 cubic meters of water per capita that Devarajan named -- Iran, Iraq, and Lebanon -- have big water stress issues. Yet these would be small chips next to the specter of millions of refugees from water disaster regions in MENA piling into those countries.
Even more troubling, the ratio of water withdrawn to availability is highest in MENA, amounting on average to just below 400 percent. In other regions they range from 6 to 54 percent. Countries such as Egypt and Jordan are reaching the 100 percent threshold. Lebanon, Morocco and Algeria are the only countries where water withdrawal is less than 50 per cent of availability.