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

. however, these investments as a percentage of total assets have declined from 21. 8 percent in 1997 to 14. 3 percent in 2006 due to the government's recent policy of retiring some of its debt. with the establishment of the cma, there has been a considerable increase in the depth and breadth of the saudi capital market. the trading activities of all participants relating to the saudi stock exchange over the past few year have increased manifolds and, the licensing by cma of about 40 non - bank investment, asset management, brokerage and advisory institutions, has considerably broadened the financial sector. while many of these companies are still at an early stage of evolution, they are already having an impact on the financial market due to heightened competition. these institutions are contributing significantly in terms of product innovation, introduction of new technologies and utilization of expert resources. the contribution of the capital market to the growth of the saudi economy has been no less significant. over the last ten years, mobilization of funds for investment through the stock market has grown at a phenomenal pace. the number of shares traded has increased by over 175 times, value traded by more than 85 times and market capitalization by 5. 5 times from rls. 160 billion in 1997 to rls. 1, 226 billion in 2006. at the same time, the mutual funds industry has grown significantly with assets under its management increasing by over 4 times from rls. 21. 4 billion to rls. 84. 2 billion during 1997 to 2006. while encouraging domestic and regional savings and investment, saudi arabia also recognizes that foreign capital has an important role to play in accelerating economic growth. measures to gradually open up the equity market to foreigners are also underway. in 1997, foreigners were allowed to participate in saudi equity market through a country fund, the saudi arabian investment fund ( saif ), instituted in london. since november 1999, foreigners have also been allowed to participate in saudi equity market through open - ended mutual funds offered by saudi banks. gcc citizens are permitted to directly participate in the saudi equity market. in 2006, expatriates residing in the kingdom have been permitted to invest directly in the stock market. there are no restrictions on foreigners'investment in government securities. the role and participation of regional and international banks in the saudi financial market has evolved over time. many international banks had presence in saudi arabia since the 1950s and their contribution in developing the banking system has been significant. many other regional and international banks have also been active