investment climate. the kingdom ’ s efforts towards economic reforms in order to attract foreign investment have come to fruition. according to a recent report of the united nations conference on trade and development ( unctad ), saudi arabia emerged as the largest recipient of foreign direct investment ( fdi ) in the arab world in 2006, attracting $ 18 billion in fdi, an increase of 51 percent over 2005. the global rating agencies standards & poors and fitch have also raised the sovereign credit ratings of the kingdom to a +. also, saudi arabia has been upgraded according to the world bank ’ s ease of doing business index from 38th place to 23rd place in 2007. the government has encouraged the establishment and growth of value - added industries in areas where the kingdom has competitive advantages, namely, cheaper energy, strategic locations and availability of raw materials. king abdullah has recently launched four megaeconomic cities in rabigh, hail, al - madinah and jazan, which are expected to draw almost sr 300 billion in investment and create more than a million jobs. it is worthy to note that these economic zones are located in the less developed cities and in areas away from the existing economically developed regions and are specifically selected to ensure that development and employment opportunities are spread around the kingdom. an important indicator of progress made in diversifying the economy is provided by the trend in our non - oil exports. such exports were insignificant in early eighties, but they have been rising sharply in recent years. since 2000, they have risen continuously. the non - oil sector exports were valued at about $ 21 billion in 2006 and constituted almost 6. 0 percent of total gdp and 13. 2 percent of non - oil gdp. during 2006, the national economy continued its remarkable growth for the fourth consecutive year, especially in the non - oil sector which grew by 6. 2 percent following its growth rate of 5. 2 percent in 2005. the non - oil industrial sector was the fastest growing sector of the economy recording a robust growth of 10. 1 percent during the preceding year. the sector has continued its robust growth during the current year. due to higher economic growth and receipt of higher than anticipated revenues, the fiscal position of the government has improved substantially in recent years. the budget surpluses since 2003 have enabled the government to reduce its domestic debt sharply and increase its expenditure on infrastructure and social sectors. the ratio of domestic debt to gdp has declined from 82 percent in 2003 to 27. 9 percent in 2006 which was reflected positively on

close watch on it and adopt all possible policies to confront this challenge. dear audience, the banking system ’ s performance has continued to strengthen over the years with proactive monitoring and guidance from sama. saudi banks achieved good profits, such as the average return on equity and average return on assets. they have not been affected by turmoil in global markets. the banks also have average basel capital adequacy ratios of over 21 percent well above the mandated international standard of 8 percent. to ensure the continuation of this trend, we continue to accord high priority to appropriate prudential regulations and close supervision of banks. during 2005, sama rolled out a risk based approach to bank supervision with on site and off site risk assessments undertaken on an ongoing basis. all saudi banks are on target to implement all 3 pillars of the basle ii capital adequacy by january 2008, using the standardized approach. during the past decade, saudi banks have made tremendous progress in terms of offering innovative products and services, introducing sophisticated technological delivery channels including atms, internet and phone banking. in cooperation with sama, banks have set up advanced payment and settlement systems, including automated clearing houses and real time gross value electronic funds transfer systems such as span and sarie. the introduction of technologically advanced systems has resulted in significantly improving the level and quality of customer service, a reduction in transactional costs and increase in efficiencies and strengthening controls. regarding the capital market, a number of measures have been taken by the capital market authority to deepen and broaden the market which will enhance its role in the development of the economy. the capital market authority has been issuing licenses for setting up specialized companies devoted exclusively to conducting securities business in the kingdom. so far, it has issued 70 licenses for the purpose. our financial system is continuing to develop and grow in strength and sophistication. the insurance sector is being reorganized under the cooperative insurance law of 2003, which has entrusted sama with the responsibility of supervising insurance business in the country. at the time of the enactment of the law, there was only one licensed company namely national cooperative company for insurance ( ncci ) operating in the country. other companies were unlicensed. several companies have applied, and royal decrees were issued approving the establishment of 21 insurance companies. approvals were issued by sama for 50 offices to provide insurance related services such as brokerage, loss assessment and insurance consultations. some offices completed necessary procedures to obtain commercial registrations