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HIS EXCELLENCY THE GOVERNOR’S
SPEECH TO THE CUSTODIAN OF THE TWO HOLY MOSQUES ON THE OCCASION OF
PRESENTING SAMA’S THIRTY-EIGHTH ANNUAL REPORT |
Custodian of the Two Holy Mosques,
It is my
pleasure to present to your Majesty SAMA’s thirty-eighth annual report which
reviews domestic economic developments of fiscal year 1421/1422
corresponding to 2001 and latest period of 2002.
The monetary
and banking sector continued its notable growth during 2001 and 2002. Money
supply increased by 15.2 percent during 2002, bank deposits by 16.8 percent
and the private sector’s demand for bank credit by 12.4 percent. Commercial
banks’ foreign assets were up by 32.1 percent. Banks enhanced their capital
base and focused on assets of high returns and low risks. They also improved
their banking services and intensified their use of modern technology. As a
result, they recorded an increase of 5.0 percent in their profits and a high
ratio of capital adequacy of 21.3 percent as compared with the minimum of
8.0 percent prescribed by Basel committee. The domestic share market has
continued its good performance for the third consecutive year, reflecting a
promising bright domestic investment environment. The domestic share price
index rose by 3.6 percent during 2002. This good performance of the
monetary, banking and financial sectors as well as other sectors was
achieved in an economic climate marked by stability in domestic prices and
exchange rate of the Saudi Riyal, which are the main objectives of the
monetary policy in the Kingdom.
Custodian of the Two Holy Mosques,
It is my pleasure to congratulate you on issuing the state budget
for fiscal year 1423/1424, corresponding to 2003, whose revenues were
estimated at RIs 170 billion and expenditures at RIs 209 billion. You have
stressed, may Allah bless you, in your comprehensive speech, on the occasion
of issuing the budget, that it was designed to meet two objectives, namely
the continuation of the development program for enhancing the growth of the
national economy and improving the standard of living conditions of citizens
and at the same time the continuation of rationalization of expenditure. To
this end, the government has continued to give priority in the allocations
of the new budget to such vital sectors as education, health care, social
affairs and infrastructure projects. The costs of new projects and
additional stages of existing approved projects exceeded RIs 22 billion.
In this
respect I would like to mention that the state budget of 2003 was realistic
in the light of expected domestic and international changing economic
conditions, especially in the international oil market. It also came in line
with national economic trends of continuing financial discipline by
rationalizing current expenditures and increasing investment expenditures.
The state budget also support efforts exerted to confront challenges
encountering our domestic economy.
Custodian of the Two Holy Mosques,
The decline
in actual deficit from the projections of the budget of 2002 and the good
performance achieved by the Saudi economy during the same year are a result
of the measures undertaken by the government during the preceding years,
which included consolidating the rules of a stable economic activity and
adopting resolutions of structural and regulatory reforms, such as
establishing specialized councils and approving a number of regulations and
bodies as well as privatizing a number of public economic activities which
have become the source of investors’ confidence and trust. These measures
aim at diversifying sources of income and production base. They also aim at
enhancing the role of the private sector in development and supporting the
mobilization of domestic and foreign savings for investment in production
and services sectors. However, there are still a number of challenges which
require concerted efforts to overcome them, in spite of many achievements
made to improve effectiveness of the domestic economy and its investment
environment.
Custodian of the Two Holy Mosques,
Let me review
in brief the salient challenges confronting our domestic economy and how to
deal with them. The sources of these challenges are represented in low real
economic growth rates and the continuous dependence of macroeconomic
activity on oil revenue. Another source is the high growth rate of
population which imposes more pressure on public services such as health and
education and low job opportunities for young national work force. To
address this situation, we should keep working at all levels for continued
improvement of the domestic economic environment and public institutions and
development of Saudi human resources, the target and focus of development.
One of the
strategies adopted by your prudent government to deal with such challenges
is the diversification of production base as a strategic option to support
economic stability factors and maintain the development achieved. Over the
years of development plans, the government has made great strides in
achieving this goal. However, accelerating changes witnessed by domestic and
international economies require intensive work to raise the growth rate of
non-oil sectors and mitigate impacts of fluctuations in oil prices on
economic growth. Also, there is a more urgent need to accelerate the
activity of the private sector, enhance its contribution to various
development fields and remove the remaining obstacles that reduce the work
of market mechanisms and optimum use of available production resources. The
efforts exerted, to mobilize public and private domestic savings, should
also be doubled to meet the requirements of the growing size of volume of
actual aggregate investments. Moreover, measures should be taken to deal
with the accumulation of public debt which might negatively affect the
growth opportunities and attraction of investments and reduce the amount of
financial resources available for the private sector.
Custodian of the Two Holy Mosques,
Touching upon
the public debt requires stressing that it is necessary to attach more
importance to the efforts aiming at restoring balance to the state budget
and maintaining it by rationalizing and programming public expenditures and
giving priority to capital expenditures, which enhance economic growth
rates. It is also necessary to adhere to appropriated expenditures within
the limits prescribed in the budget and not to be affected by new
developments in revenues. Any surplus realized should be allocated for the
repayment of the public debt. On the other hand, efforts should be doubled
to increase the volume and channels of non-oil revenues, benefit from the
facilities offered by the government and develop an appropriate mechanism to
amortize public debt.
Custodian of the Two Holy Mosques,
Supporting the
privatization program is one of the challenges that confront our domestic
economy. The government has decided to be committed to this program as a
strategic option to enhance the participation of the private sector in the
production of commercial services provided by public institutions. This
trend will eventually contribute to reducing the burden borne by the state
budget, enhancing the optimum utilization of available resources and
improving the quality of services. On this occasion, I would like to commend
the resolution of the Supreme Economic Council approving the privatization
strategy, which envisages the objectives, policies, methods and
administrative arrangements required to enforce its programs.
Custodian of the Two Holy Mosques,
Senior
officials in the government are preoccupied with the issue of the
endogenization the work force in the domestic labor market. This is clearly
evidenced by a series of measures undertaken by the government with the aim
of employing this work force in the private sector. Among salient measures
are the following: increasing some of the fees imposed on non-Saudi workers
and transferring receipts of these fees to Human Resources Development Fund,
supporting vocational and technical colleges as well as community education
colleges, approving the programs of financial and technical support given to
small and medium businesses which have more job opportunities, urging the
private sector to fully Saudize some carefully selected jobs and adhere to
a minimum percentage of Saudi workers in others. In spite of all
achievements in this field, the present situation and future challenges
still require all authorities concerned to exert more efforts to avoid
possible economic and social effects of the delay in employing the national
work force. Therefore, education curricula and training programs should be
improved continually to be in line with labor market needs. It is also
necessary to enhance the role played by the private sector in these efforts,
restrict the influx of competitive non-Saudi workers as well as continue
supporting Human Resources Development Fund and update the regulation of
employers and employees in such way as to achieve flexibility in the labor
market and at the same time not to transgress the rights of employers and
employees.
May
Allah Bless and Guide you
Peace
Be to You |
