It sometimes takes a shock to send policy in the right direction. On 25 November last year, more than 100 people died and thousands were made homeless when a flash flood caused by heavy rain swept through Jeddah, Saudi Arabia’s second-largest city and the gateway to the Muslim holy cities of Mecca and Medina. Last month, King Abdullah called for the prosecution of officials and business people deemed culpable of the corruption and bad management that many believe left Jeddah unable to deal with the deluge.

The loss of life and property was widely blamed on the inadequacies of Jeddah’s wastewater network. It also highlighted the extent to which the kingdom is lagging behind other Gulf states in providing comprehensive wastewater collection and treatment services.

It is estimated that only 40 per cent of the population of the kingdom is served by an integrated sewage and wastewater system. In Jeddah, the figure falls to 22 per cent and to 21 per cent in Medina. The rest depend upon septic tanks that are occasionally drained by wastewater tankers.

Comparisons with other GCC states are telling. In Bahrain, more than 90 per cent of the population lives in areas with a sewage network. The figure in Kuwait is more than 60 per cent. Only Oman depends more heavily on a septic tank-based system than Saudi Arabia.

The kingdom is now acting decisively to catch up with its neighbours. The National Water Company (NWC), a government joint stock corporation, was created in 2008 to accelerate work on the sewage system and promote foreign investment in it. Just two years later, the NWC can point to substantial achievements. It has taken over control of 186 wastewater projects and accelerated repairs. The running of the sewage system in Jeddah and Riyadh has been transferred to private management and the NWC says this has already led to radical service improvements. A management contract for the cities of Mecca and Taif was recently awarded and bids for a similar contract for Medina will be invited in September. The NWC says that management contracts for nine other cities, starting with the Greater Dammam region, will be put out to tender in the next three to five years.

In parallel, the NWC is stepping up investment. It has announced it will spend SR64bn ($17bn) in the 14 cities that are to have private-sector sewage managers in the next five years. It forecasts that capital spending on the kingdom’s sewage collection and treatment system in the next 20 years will amount to $37bn.

Projects to be tendered soon include two sewage treatment plants (STPs) in the Riyadh area, each with the capacity to process 100,000 cubic metres a day and a 10-kilometre-long deep tunnel sewer to handle 800,000 cubic metres a day in the Saudi capital. In Jeddah, bids are to be invited soon for the second phase of the STP in King Abdulaziz International Airport, which will increase capacity by 250,000 cubic metres a day, and a 700,000 cubic metre a day sewage lift station.

The NWC is also promising that it will relaunch a comprehensive private-public partnership (PPP) initiative. The original plan called for the NWC to act swiftly to privatise operational assets, but this was derailed by the credit crunch. There was also a recognition that going private was a huge step into the unknown for an industry that has always been owned and run by government agencies.

The new starting point is to seek to capitalise on the value of treated sewage effluent (TSE), previously seen as a largely worthless by-product of the treatment process. The NWC has identified several potential markets, including private district cooling units. It has so far sold TSE in contracts worth a total of SR2bn. These will be studied to see if selling TSE can be used to finance future sewage projects across the kingdom.

The aim is to price TSE at market levels rather than at the very low rates potable water is now sold for in the kingdom. If this is found to be sufficient to generate the cash flows that businesses require to invest in sewage treatment assets, then the door will be opened to a water reuse privatisation revolution.

No date has yet been fixed for the start of the new strategy. But the pace of change is quickening in the kingdom’s wastewater sector. The opportunities for business will be enormous. But the principal beneficiaries will be the Saudi Arabian people and the towns and cities they live in.