both as borrowers and lenders to saudi counterparties. in the 70's and 80's, their main role was to act as a conduit for transferring the surplus funds and liquidity in saudi arabia to international financial markets. however, with the expansion of economic activity and increasing demand for credit, many regional and international banks have participated in direct and syndicated loans to saudi private and government sector and invested in government securities. looking ahead, the government has identified the expansion of saudi economy as a major objective to meet the expectations of a rapidly growing labor force. other priorities include the diversification of economic activity and maintenance and expansion of existing infrastructures. the government has recognized that private sector should be the engine for rapid growth. in this regard, the government has already privatized companies like the saudi telecommunications company and the national cooperative insurance company, and has announced schemes to privatize the saudi electricity corporation, saudi arabian airlines, ma'aden company, etc. in the past few years, the government has also taken important initiatives including the investment law, the reduction of corporate taxes on foreign investments and liberalization of tourism and real estate. the government also sees significant growth opportunities for job creation in the retail trade, small enterprise, tourism and financial services. in the past year, the government has announced the creation of size economic cities in various parts of the kingdom. these will provide significant opportunities to the private and public sector as well as to the foreign companies to invest in many industrial and infrastructure mega projects. besides, the investment opportunities in the petrochemical sector, these economic cities would accommodate industries in steal, plastics, glass and ceramics. another area of potential investment is the transportation sector where the government has announced several projects affecting the railways network, air transport and land routes. there are also projects in the pipeline in electric power generation, water desalination, natural gas as well as in knowledge based industries such as health, education and tourism. the financing needs of these initiatives are immense and are becoming increasingly apparent. privatization initiatives noted earlier will also require investment of tens of billion of riyals. in addition, the maintenance and expansion of infrastructure in the various sectors will require significant pools of capital. a rough estimate of the financing needs of the projects announced so far by the government over the next 10 years exceeds usd 500 billion. however, the way that these financing needs are met by the banks and capital markets in future is likely to be different. first, these projects and initiatives will require

nation states, there are fewer than 1. 4 degrees of separation. were the network extended beyond the 18 countries in the sample, the evolution of this “ small world ” property would be clearer still. so based on evidence from a sampled international financial network, the past twenty years have resulted in a financial system with high and rising degrees of interconnection, a longtailed degree distribution and small world properties. that is an unholy trinity. from a stability perspective, it translates into a robust - yet - fragile system, susceptible to a loss of confidence in the key financial hubs and with rapid international transmission of disturbances. that is not the worst description of financial events over the past decade – and in particular over the past 18 months. ( b ) feedback and stability in epidemiology, the impact of a disease depends crucially on such structural parameters as the mortality rate once infected and the transmission rate across agents. 14 the first is largely fixed and biological. but the second is likely to be variable and sociological. in other words, agents ’ responses to infection, or indeed the fear of infection, are often crucial in determining its rate of transmission. in practice, these behavioural responses typically take one of two forms : “ hide ” or “ flight ”. for example, the response to the sars epidemic in the 21st century was a “ hide ” response, with people self - quarantining by staying at home and with flight, in this case literally, prohibited. but the response to yellow fever in north america in the 19th century was “ flight ”, with half the population of memphis fleeing in 1878. 15 either response is rational from an individual perspective. both responses have the aim of removing that individual from circulation with other, potentially infectious, agents. but the implications of these responses for infection rates across the system are potentially very different. hide responses tend to contain infection locally, thus protecting the system globally. this was the sars experience. flight, by contrast, tends to propagate infection globally. this was the yellow fever experience, as incidence of the disease followed the railroad line out of memphis. 16 during this financial crisis, faced with fears about infection, similar sets of behavioural responses by financial institutions have occurred. only the names are different. the “ hiding ” has taken the form of hoarding, typically of liquidity. and the “ flight ” from infected cities has taken the form of flight from infected assets, as institutions have sold toxic assets.