hamad al - sayari : challenges posed to investment in saudi banks speech by his excellency hamad al - sayari, governor of the saudi arabian monetary agency, to the symposium on challenges posed to investment and saudi banks, riyadh, 2 december 2006. * * * dear audience, at the beginning, i would like to welcome all honorable attendance. it gives me a great pleasure today to address you at the outset of the deliberations of this symposium on " challenges posed to investment and saudi banks in an environment of global economic openness " which is convened at a time the kingdom is witnessing a period of economic growth accompanied with and enhanced by steps of economic reforms in the fields of streamlining of regulations, restructuring of the national economy, and approval of a number of mega development projects as well as the accession to the world trade organization which is an important step towards enhancing integration into the world economy, coping with economic developments, and attraction of foreign investments apart from accession to global markets which will be reflected on the competitive capacity of the national economy. dear audience, the current symposium is being held in a promising economic environment in this country. the kingdom has recorded outstanding economic results. the real gross domestic product rose by 6. 5 percent in 2005. this growth rate was reflected on almost all sectors of the economy which is characterized by strong investment. international rating agencies recorded their appreciation and certified the efficiency and strength of the national economy. eventually, they raised the credit rating of the kingdom to advanced grades. this environment promoted the interest of foreign investors to participate in and benefit from the various investment opportunities available in the saudi economy. the saudi banking system has played a vital role in the enhancement of the national economy. thanks to its use of the latest technologies and various banking products, the banking system has witnessed good development under a supervisory system which is very keen to meet domestic requirements and legislation and to comply with international standards, including basel capital adequacy standard. the banks operating in the kingdom are very serious in the application of this standard. as a result, the kingdom's banking system has become one of the advanced systems, not only at the regional level but also at the international one. dear audience, basel ii standards are the most important supervisory initiatives of this decade, and they will have a considerable impact on changing the conduct of risk management at all banks regardless of their size and location. the standards aim at achieving a number of objectives, including ensuring the capital adequacy of

the sound economic management of oil wealth provided the necessary financial resources to confront the global financial crisis in addition to reducing the public debt from 104 percent of gdp in 1999 to 7 percent in 2011 and strengthening the position of net foreign assets of sama. the imf executive board also commended the strength of the kingdom ’ s banking system, which is well - capitalized and has high liquidity levels. it has noted that the banking system has showed an ability to encounter a set of regional and global shocks. the board has welcomed the results of stress tests made by the financial sector assessment program mission which showed a rise in the levels of liquidity and capital held by the saudi banking system, representing preventive reserves that impart more confidence to the banking system ability to withstand shocks. the board members praised the monetary policy of the kingdom which aims to enhance the strength of the banking system and price stability. custodian of the two holy mosques, despite the remarkable achievements fulfilled at all levels, there are still some challenges that you spare no effort to follow up and strive to overcome, such as : first : creating more decent work opportunities for the sons and daughters of this country. despite the good achievements in employment of citizens, estimates show that the unemployment rate among saudis is still unsatisfactory. taking into account the composition of the population in the kingdom, which is mainly dominated by young people, it is imperative to face this issue, exert more efforts and overcome the difficulties encountering the process of creation and saudization of jobs, including continued improvement of education and training outputs in line with the requirements of the labor market, determination of saudization rates by activities and increasing them gradually. it is also important to achieve flexibility in the labor market to stimulate production and innovation and preserve the rights of workers and employers. second : diversification of income sources and reducing reliance on oil as a major source of income. despite the increasing role of the non - oil sector in the national economy, particularly the role of the private sector, the oil sector is still the main driver of the national economy, where most of the country ’ s revenues and receipts of the balance of payments are coming bis central bankers ’ speeches from. therefore, it is necessary to continue to work hard in order to diversify sources of income to ensure the sustainability of economic development in the long run and reduce the risks associated with relying on a single source of income. third : reduction of high domestic consumption of oil and gas, as figures indicate an annual