November 17, 2006

THE CUSTODIAN OF THE TWO HOLY MOSQUES AND THE CROWN PRINCE RECEIVE SAMA's ANNUAL REPORT. SAUDI ARABIA'S GROSS DOMESTIC PRODUCT (GDP) GREW BY 6.5 PERCENT IN 2005 COMPARED TO 5.3 PERCENT IN THE PREVIOUS YEAR WHILE ITS BUDGET SURPLUS AMOUNTED TO SR 218 BILLION. The Custodian of the Two Holy Mosques King Abdullah Bin Abdul Aziz received at the royal court at Al-Yamamah palace the 42nd annual report of Saudi Arabian Monetary Agency which reviewed the most prominent, economic and local developments for fiscal year 2005 and the latest developments for the current fiscal year 2006. The report was delivered to the monarch by the governor of Saudi Arabian Monetary Agency Hamad Al-Sayari in the presence of the Minister of Finance Dr. Ibrahim Al-Assaf. The Monarch commended the report and its contents and praised the important role being played by the agency in planning and implementing the monetary policy within the framework of the state's general economic policy, wishing them all success. In his speech before the King, Al-Sayari shed light on the report, addressing the king saying,' nowadays we sense the outcomes and yield the fruits of your efforts at the supreme economic council in the field of organizing and restructuring of all sectors of the local economy. The handover ceremony was attended by Prince Miqren Bin Abdul Aziz, Chief of General Intelligence; Prince Abdul Aziz Bin Abdullah Bin Abdul Aziz, Advisor to the King and Prince Abdul Aziz Bin Fahd Bin Abdul Aziz, Minister of State, Cabinet's Member and Chief of Court of Cabinet's Presidency. Crown Prince Sultan Bin Abdul Aziz, Deputy Premier, Minister of Defense and Aviation and Inspector General received a copy of the 42nd annual report of Saudi Arabian Monetary Agency for the current fiscal year. The copy was delivered to the crown prince by the governor of Saudi Arabian Monetary Agency Hamad Al-Sayari during an audience with the Crown Prince and the agency's senior officials at the royal court at Al-Yamamah palace. The Crown Prince expressed his appreciation of the distinguished efforts being exerted by the governor and the agency's employees, wishing them steady progress and development. The handover ceremony was attended by Minister of Finance Dr. Ibrahim Bin Abdul Aziz Al-Assaf. Saudi Arabia's gross domestic product (GDP) grew by 6.5 percent in 2005 compared to 5.3 percent in the previous year while its budget surplus amounted to SR 218 billion, the Saudi Arabian Monetary Agency (SAMA) announced. Presenting SAMA's 42nd annual state of the economy report for 2005 to Custodian of the Two Holy Mosques King Abdullah in Riyadh, its governor, Hamad Al-Sayari, emphasized the growing strength of Saudi economy and noted increasing investment in all vital sectors. King Abdullah Ibn Abdul Aziz expressed his delight over the positive economic report and commended SAMA's role in carrying out the Kingdom's monetary policies. Intelligence chief Prince Muqrin, Finance Minister Ibrahim Al-Assaf and other senior officials attended the Al-Yamamah Palace ceremony. Al-Sayari described the Kingdom's admission to the World Trade Organization (WTO) as one of the major economic achievements of 2005. "It was an important step toward integrating into the global economy, attracting foreign investment, opening and expanding markets and strengthening the competitiveness of the national economy," the SAMA chief said. Saudi Arabia formally became the WTO's 149th member on Dec. 11 after 12 years of intense negotiations. The Kingdom had adopted 42 new regulations and measures as part of its efforts to join the international trade body. Of these, 19 were related to the main WTO agreements. "The national economy is moving in the right direction, taking quick but firm steps, in order to achieve greater strength, competitiveness and diversification and creating more job opportunities for citizens. And all these factors will ensure continuous growth," Al-Sayari told the king. Referring to growing foreign investment, Al-Sayari said it reflected the strength of the Saudi economy and the Kingdom's investment-friendly climate. "Part of these investments came through the capital market, which offers additional channels to finance projects and new investment tools for those who have savings," he added. While commending the government's efforts to strengthen the capital market by acquiring advanced equipment and facilities and increasing the number of financial firms operating in the market, Al-Sayari hoped that these measures would inject confidence among investors. He stressed the need for more efforts to enhance awareness of people dealing in the stock market. He commended Abdullah for taking the initiative to modernize the Kingdom's rules and regulations, restructuring the national economy and approving a number of giant development projects. Al-Sayari was apparently referring to the economic city projects in Rabigh, Hail, Madinah and Jizan, which are likely to mobilize foreign and domestic investment worth more than SR250 billion and create more than a million new jobs. The SAMA governor also praised the king for issuing a new law to streamline succession. "This law will reinforce stability and strengthen the basic principles of governance and will have a positive impact on the citizens' security and prosperity," he pointed out. In his keynote speech, Al-Sayari noted the role being played by the Supreme Economic Council, a mini Cabinet chaired by the king, in taking the national economy to new heights. "Since its formation in 1999, the national economy gained an average annual growth rate of 4.2 percent, overtaking the population growth rate of 2.5 percent," he pointed out. The private sector made an annual average growth rate of 4.6 percent during the past six years. Spelling out the major economic achievements in 2005, the SAMA chief said: "The actual GDP grew by 6.5 percent compared to 5.3 percent in the previous year. The actual private sector GDP increased by 6.6 percent while the public sector GDP soared by 7.2 percent." The Kingdom's balance of payment surplus in current accounts rose to SR338 billion in 2005 on the back of growing oil prices and nonoil exports. The figure was almost the double of SR195 billion surplus gained the previous year. As a result, the currency basket rose by 11.6 percent. Al-Sayari said prices of most local products remained stable throughout 2005 when the general cost of living index rose by less than one percent. "The economy is continuing to maintain these positive results at similar levels this year," he added. He said the Kingdom achieved this positive economic growth despite internal and external challenges. "The number of young Saudi men and women under 30 accounts for 60 percent of the population. This demands greater efforts to provide them with educational, health and other facilities and services," he explained. He noted the king's instructions to ensure transparency by publishing economic data and information and making them available to those who seek them. "This will strengthen the Kingdom's credibility and assist in diagnosing the economic condition. We are confident that your efforts to restructure economy and expand private sector activities will boost the national economy further," Al-Sayari told the king. Economist Ihsan Bu-Hulaiga, who is a member of the Shoura Council, said the SAMA report would have a significant impact in terms of winning confidence of foreign investors. "This is a major annual publication that covers Saudi economy from all aspects which makes it very important internally and externally for analysts, economists, academics, companies, embassies, etc. since it is published in Arabic and English," Bu-Hulaiga told Arab News. He expects the positive economic trend registered in the SAMA report to continue. "I think the Saudi economy will continue to grow and the budget to enjoy record surplus, thus reinforcing the flow of new development projects as well as private investments," he added. Nahed M. Taher, chief executive officer of GulfOne Investment Bank, told Arab News: "This is still relatively healthy growth. However, I believe the multiplier of liquidity driven by high oil revenues was generating less income this year. This multiplier went down from 1.4 to 0.74 in the last three years. So the investment channels are not really in the productive sector of the economy as we hoped for and definitely it translates into the burning of money and portfolios in the stock market." Hamad Al-Sayari, governor of Saudi Arabian Monetary Agency (SAMA), held a press conference to highlight SAMA's 42nd annual report he has presented to the Custodian of the Two Holy Mosques King Abdullah Bin Abdul Aziz with original copy to Crown Prince Sultan Bin Abdul Aziz, Deputy Premier, Minister of Defense and Aviation and Inspector General. Highlighting the economic data stated in the report, Al-Sayari said the economic growth continued its high rates of last year. The domestic product growth of prices for last year reached 6.5. % among which the non-oil sector scored a 6.8 % growth rate, the private sector 6.6 % and the government sector 7.2 %, he said. Al-Sayari said the positive developments at the world oil markets led to the increase of government revenues by 44 percent in 2005 to SR 564 billion while government actual expenditure tolled to SR 345, an increase of 21.5 %. He said the government's public budget scored a surplus of SR 217 billion compared with SR 107 billion in 2004. Inflation rate remained stable as the index of cost of living for all population slightly increased in 2005 by less than 1.7 percent compared with 0.5 or less in 2004, the governor of SAMA said, adding that the index registered an increase of 2.1 % for the first eighth month of 2006. Money supply increased by 12.6% to SR 623 billion, Al-Sayari said citing the banking credit favor granted to the private sector as the main reason behind such increase. He criticized the banking sector for resorting to use foreign-based deposits, saying that this led to bank credits granted to the public and private sectors inside the kingdom outnumbering the size of bank deposits forcing the banking sector to deplete its capital and reserves and resort to borrow from outside to finance domestic economic activities. He said the number of commercial banks and branches increased to reach 16 commercial banks by the eighth month of 2006. branches reached 1283 , he said, adding that the number of licensed banks now is 22, out of which 12 are saudi banks and ten foreign while one local bank, Al Nama'a (development) has not yet operated. both exports and imports which reflect the economic activity hiked, Al-Al-Sayari said, adding that imports tolled to SR 113 billion by end of the first half of 2006 from SR 28 billion by the end of the first half of 2001. He said Saudi Arabia's non-oil exports fetched sr36 billion by the first half of 2006. he said saudi goods exports registered an increase of 43 % in 2005 amounting to sr677 billion. saudi oil exports including vessels fuel earned SR 605.9 billion in 2005, an increase of 45% compared with the previous year, he said, adding that the kingdom's balance of payments made a considerable improvement in 2005 as the current account has scored a surplus of SR 337 billion compared with a surplus worth SR 194 billion in the previous year, an increase of 73 percent. In response to a question, Al-Sayari said Al-Inma'a Bank is expected to operate next year.