2005, the saudi economy continued achieving distinguished results that exceeded the average annual real growth of that period. gross domestic product ( gdp ) grew by 6. 5 percent as compared to a growth of 5. 3 percent in the preceding year ; the real domestic product of the private sector and government sector grew by 6. 6 percent and 7. 2 percent respectively. the state budget registered a surplus for the third consecutive year amounting to rls 218 billion, with a wise expansion in the public expenditure, apart from what has been allocated to repay a notable amount of the public debt. the positive outcomes led to an increase in the current account surplus to rls 338 billion in 2005 in comparison with a surplus of rls 195 billion in the preceding year. in keeping with these developments, the money stock increased by 11. 6 percent. these economic developments took place in an environment marked by stability in domestic prices. the cost of living index increased by less than 1 percent during 2005. it is expected that the positive results of the economy would continue at the same levels in this year, god willing. custodian of the two holy mosques, these positive economic developments were achieved in spite of surrounding challenges, internal or external. the composition of the kingdom's population represents the most prominent challenge. the saudi youth group ( male and female ), younger than 30 years, exceeds 60 percent of the saudi population which entails continued extensive efforts to build saudi nationals in scientific, health and intellectual terms to carry out their future development role in the best manner. your direct attention to satisfy the current and future needs of the country and citizens has been embodied by your directives providing for using a portion of the additional revenues realized due to improved fiscal balance in vital areas, at the top of which is the development of human resources as being the first pivot and ultimate goal of development. the efforts based on further expanding the number of universities, technical and technological colleges as well as schools of general education ; increasing admissions and offering more scholarships for study abroad and increasing budgetary allocations for promoting health and social services represent a sound strategic option for enhancing the sound march of economic development and will bear fruitful results, god willing. custodian of the two holy mosques, the economic indicators observed by sama indicate a continuous high inflow of direct investments in almost all sectors, and a deeper and more solid national economy. this, in turn, was reflected by the international rating agencies ’ increase of the kingdom ’ s credit rating and the

issue i raised at the outset : that is the importance of a positive investment climate. no matter what type of investment a firm is considering, the environment in which the decision is being made has a major bearing on the decision to invest or not. australia's long record of economic and financial stability is a positive from this perspective. so, too, are our strong legal system and our well - established institutions. to this list i could add the opportunities offered by our links to the fastest - growing part of the global economy and our skilled, diverse and flexible workforce. all these things make australia an attractive place to invest. but we can't rest on these advantages. it is a competitive world out there and the nature of comparative advantage is changing. once upon a time, comparative advantage came largely from a country's endowments or resources. indeed, in our own case, the big waves of investment in australia have been to capitalise on our natural endowments. these resources have made us wealthy and they are central to our continued prosperity. but in today's world, comparative advantage is just as likely to be built, as it is to come from endowments. it is likely to be built through innovation, creativity and ingenuity. and it is likely to be built through investing in information technology and the skills of our labour force. creating a positive environment that encourages this investment is a joint responsibility of government and private business. the government certainly has an important role to play, but so does business. a business culture that highly values innovation and competition and that is not afraid of taking risk will surely help in creating this positive environment. there are no simple answers here. but a recent report by innovation and science australia provides some guideposts. the report's subtitle is ‘ a plan for australia to thrive in the global innovation race ’. it is worth a read. the report rightly focuses on the importance of education and the accumulation of human capital. our ability to innovate rests on the skills of our workforce, so investing in these skills is central to building a positive investment climate. the report also discusses the way we go about research and development and how we can support innovative firms. it also discusses the importance of culture and ambition. over recent times there has also been quite a lot of discussion about the effect of tax on the investment climate and international competitiveness. this is an important discussion to have as australia does need to remain an attractive place for global capital to