The Kingdom is
looking to the private sector to boost its economy, Minister of
Finance and National Economy Ibrahim Al-Assaf said here yesterday. He
added that the government was considering the introduction of income
economic infrastructure and the large stock of human capital now in
place provide a strong foundation for sustained private sector
growth,” Assaf told a conference on the future of the Saudi economy.
Prince Salman, who opened the two-day forum on “Saudi Arabia:
Financing the Future”, said the economy must sustain healthy growth
to create job opportunities for the rising number of youth entering
the market annually.
changed. We need to achieve growth rates that are compatible with the
population growth,” the governor said. “We must focus on the
private sector by giving it a bigger role in the economy.”
Assaf said the
government expected the economy to maintain a robust performance in
2001, matching the 4.5 percent growth achieved the year before. “We
expect 2001 to be at least as good as 2000,” he told the forum,
being attended by some 400 officials, economists and bankers from
Saudi Arabia and abroad.
trends should continue as we further diversify the economy and add to
our competitive edge in the context of increased globalization.
Private sector activity will be the main vehicle for achieving these
objectives. The role of the government is to be increasingly focused
on provision of public goods and a supportive regulatory framework,”
the finance minister said.
He also raised the
prospect of introducing income tax. “We remain determined to further
strengthen the structure of the budget over the medium term. To this
end, a draft income tax law is under consideration,” he said,
Assaf said the
growth achieved in 2000 was not only due to higher oil prices but also
helped by the “robust expansion of the industrial sector which
increased 7.8 percent”. He referred to a series of steps the Kingdom
has taken over the past few years to encourage the private sector and
to cut government involvement in the economy. “These measures foster
an even friendlier atmosphere for the private sector,” he said.
The Saudi economy
has shown resilience despite shocks in world financial markets and the
fluctuations in oil prices, Assaf said.
participants appeared more conservative on the short-term outlook due
to expected lower oil revenues this year and in 2002 before the
economy starts feeling the positive impact of recent measures,
including opening the gas industry to foreign investment.
They said the
government must adopt faster and bolder reforms to meet the challenges
of financing several giant projects. “Saudi economic growth will
depend on the speed and extent of the liberalization process,” said
Said Al-Shaikh, chief economist at the National Commercial Bank.
“With a rapidly
changing demographic structure and a tall order on many mega projects
in the areas of utilities, communications and power, Saudi Arabia
cannot afford anymore to miss out on globalization... It has no choice
but to open up and be more competitive,” he added.
Alan Thompson of
Riyad Bank estimated that Saudi Arabia would need at least $250
billion in investments to finance projects in the power, water, energy
and telecommunications sector in the next 10 to 20 years.
there was a pressing need to regulate the Saudi stock market to
broaden the participation of the private sector and help repatriate
some of the investments held by Saudis abroad which were put at $500
billion to $650 billion.
Only 75 companies
are listed on the Saudi stock market, some 20 percent of listings in
other comparable markets, and economists see the flotation of more
IPOs as a major tool to generate funds for finance.
Speaking to Reuters
on the sidelines of the conference, Assaf said the Council of
Ministers had approved laws needed for liberalizing the
telecommunications sector. The
Cabinet on Monday approved three laws intended to regulate the sale of
stakes in the telecom sector to private investors.
Assaf said the
first law was to approve a telecom regulatory system, the second was
to set up a telecoms authority responsible for issuing licenses to
private investors and the third was a set of regulations to settle the
status of government employees who had been transferred to the Saudi
attending the conference welcomed the long-awaited step. JP Morgan
Middle East Managing Director Gaby Abdelnour said the telecom sector
was the fastest growing in the Kingdom. “It has expanded by 30
percent annually over the past four years and is expected to grow by
20 percent annually over the next five years,” he said.