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
