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State subsidy major obstacle for energy future in Middle East

Staff writer |
Governments in the Middle East and North Africa (MENA) should stop their energy subsidies, as the money "serve the rich rather than the poor," officials said at a major regional power conference in the United Arab Emirates on Sunday.

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"Electricity subsidies amount to around 65 billion dollars and are more than one quarter of total energy subsidies. But subsidies serve the rich rather than the poor," Dr. Hisham Khatib, honorary vice chairman of the world energy council, said at a keynote speech at the opening of the 12th annual energy congress Power-Gen Middle East.

The region was suffering from the same alignments that besieged it in the last decades, which are "increasing demand for scarce investment funds, shortages of natural gas, wastages and modest conservation efforts and limited regional cooperation," Khatib said, pointing at subsidies as the biggest obstacle in facing those problems.

The International Monetary Fund (IMF) in recent years has frequently warned the Gulf Arab states to cut subsidies, as the Arab oil exporters in particular were in danger of running budget deficits in case oil prices fall over a longer period of time.

Despite the ongoing turmoil in some Arab countries, oil prices have lost over 16 percent in the last 12 months, hitting a four- year low at around 85 U.S. dollars per barrel. Rising woes over the global economic recovery also weigh on energy prices. Last week, the IMF cut global growth forecast for 2014 by 0.1 percent to 3.3 percent, and for 2015 by 0.2 percent to 3.8 percent amid rising risks in U.S. economic recovery and sustained obstacles in Europe.

Kicking off on Sunday, the three-day Power-Gen Middle East conference is expected to draw the participation of 150 companies and more than 4,000 visitors and delegates from over 60 countries. The attendees will have the unique opportunity to meet and engage with leading professionals, in addition to gaining an exclusive look at the latest developments in innovation in the power industry and water conservation.

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