Apr 11 - 17, 2005



posits in the Kingdom's banking sector increased by an impressive 18.5 percent to SR422 billion last year, while combined assets of commercial banks surged by 20.2 percent to SR655 billion during the same period, according to a Market Review & Outlook report by the National Commercial Bank (NCB).

The report, however, said that outstanding domestic claims rose by 21 percent to SR490 billion by end-2004, accordingly net domestic liquidity position, measured by the difference between total deposits and total domestic claims, worsened with the gap widening by SR18.7 billion. As a result, the net domestic claims shortage increased by 38.4 percent to SR67 billion by the end of 2004. However, the surge in domestic claims was driven by a 37.4 percent rise in outstanding claims on the private sector, which stood at SR314 billion and those on the public sector edged lower by 0.4 percent to SR176 billion by end-2004.

NCB Chief Economist, Dr. Said Al-Shaikh said: "Growth of monetary aggregates accelerated markedly last year, reflecting a healthy macroeconomic environment in the Kingdom. This was mostly due to higher than expected oil prices and increased production, with Brent crude averaging at $38.5 per barrel for 2004. Consequently, government finances improved dramatically, with the national budget generating an actual fiscal surplus of SR98 billion last year from the originally budgeted deficit of SR30 billion." The NCB report said that strong growth in bank deposits drove monetary expansion as demand for banks' credit increased in order to finance domestic activities, which was supported by the low interest rate environment.

The narrow money supply (M1) surged by 18.1 percent to SR263 billion last year on the back of a 21.3 percent rise in demand deposits, which reached SR203 billion by end-2004. While historically, demand deposits or non-interest bearing accounts (NIB's) have accounted for around 41 percent of total deposits, their share has been increasing over the past four years to reach 48 percent of total deposits in 2004.

At the same time, currency outside banks also contributed to the growth of the narrowest monetary aggregate, rising by 8.5 percent to SR60 billion in 2004. However, their share has continued to decline, reaching 22.8 percent of M1 last year compared to 35 percent in 1999. This downward trend reflects Saudi consumers' increased reliance on electronic means of payments instead of cash. This is exhibited by the 21.3 percent increase in the number of "point of sale" transactions that totaled SR24 billion by end-2004. In addition, the number of ATM transactions rose by an impressive 28.2 percent to 412 million transactions last year compared to its level in 2003.

The broader money supply aggregate (M2), which is made up of M1 in addition to time and saving deposits, expanded by18.9 percent to SR400 billion in the 12-month period ending December 2004, influenced by the 21.3 percent rise in M1. Time and saving deposits, which account for 32.4 percent of total deposits, grew by a whooping 20.5 percent to SR136 billion last year as interest rates bottomed out and started their upward cycle. Both private sector as well as government sector deposits rose by 26 percent and 12 percent to SR84 billion and SR52 billion, respectively.

The report added the broadest money supply aggregate (M3), which includes M2 in addition to quasi-monetary deposits, grew by 17.2 percent to SR482 billion last year. This growth was largely due to the sharp increase of 21.3 percent in NIB's, in addition to the 20.5 percent rise in time and saving deposits. Quasi-monetary deposits, which include residents' foreign currency deposits with local banks, deposits held for LC's and LG's, as well as residents' outstanding remittances, advanced by 9.2 percent to SR82 billion by end-2004.

Foreign currency deposits edged up marginally by 1.6 percent to SR65 billion, while deposits for LC's jumped by a massive 124 percent to SR6.4 billion and those for LG's increased by 28.2 percent to SR3.3 billion, reflecting a surge in trade-related activities. Furthermore, remittances pending for onward transfer also rose by 28.1 percent to SR7.4 billion by the end of last year.

The average three-month deposit rate on the Saudi riyal edged up by 10 basis points last year to 1.73 percent from 1.63 percent in 2003. The three-month US dollar deposit rate averaged at 1.53 percent in 2004 compared to 1.11 percent the year before. As a result, the differential between the Saudi riyal and US dollar interest rates narrowed to 20 basis points last year compared to 52 basis points in 2003.

However, by December 2004, interest rate on the Saudi riyal increased to 2.46 percent, while that on US dollar deposits rose to 2.43 percent, thereby tightening the differential between the two further to three basis points only. Such narrow differential reflects the healthy state of the Saudi economy and the ample liquidity position of Saudi Arabian Monetary Agency (SAMA), the NCB report said.


International oil and gas giants are planning to spend $176.8 billion in exploration and drilling operations this year, according to a report carried by Al-Eqtisadiah business daily, a sister publication of Arab News. The paper said 327 oil and gas companies have allocated $176.8 billion to spend on various projects, adding that the figure was 5.7 percent more than the previous year. American and Canadian companies have made more allocations for exploration and drilling works.

American companies alone have increased their budgets by 7.8 percent to $41 billion, the paper said quoting a survey. As many as 249 companies will spend nearly $100 million each this year for their various projects.


The Kuwait Projects Company (KIPCO) has confirmed that its portfolio company, Showtime Arabia, is considering an initial public offering (IPO) of shares.

Shares in KIPCO were halted late last week for about 30 minutes when the Kuwait Stock Exchange asked for clarification over market rumors that the company will announce the Showtime IPO. Showtime, a satellite pay-TV network in the Middle East and North Africa, has hired Morgan Stanley and Goldman Sachs for an initial public offering which could value it at up to $2 billion, sources familiar with the matter said. Showtime, a joint venture between US media group Viacom and KIPCO, is set to be listed by the end of this year, they said. It may list in Dubai or Bahrain. However, under the securities laws in some markets in which Showtime Arabia may ultimately offer shares, KIPCO is unable to release information about an IPO of Showtime Arabia shares until an official launch of the financial transaction.



KIPCO has been advised by its legal counsel that it is not in a position to name the prospective underwriters of the transaction, the amount of securities that may be sold, the price at which they may be sold, the stock exchanges on which Showtime Arabia may be listed, and other specific information relating to an IPO. There is no assurance that the potential public offering will be completed and, if completed, on what terms or when it would be completed.

KIPCO has also been advised that further comment on the possibility of an IPO of Showtime Arabia shares could have a detrimental impact on Showtime Arabia's ability to carry out such an offering and could expose KIPCO and Showtime Arabia to legal liabilities. KIPCO, the largest private company in Kuwait with $10 billion under management or control, has a portfolio of some 70 companies with major activities in financial services, media & telecommunications, management & advisory services, real estate and industry throughout the Middle East and North Africa. They include Kuwait-based blue chips National Mobile Telecom Co., Burgan Bank and Gulf Insurance Co.


There is no plan to stop recruitment of foreign manpower and get rid of expatriate workers in the Kingdom, Labor Minister Dr. Ghazi Al-Gosaibi said. Gosaibi said his ministry had decided to reduce foreign recruitment in order to tackle the imbalance in the job market and create jobs for Saudis. He also emphasized his ministry's plan to hold a separate employment campaign for women and said it required special facilities.

"We are keen on the employment of women and we will hold a campaign soon once preparations are complete," Al-Madinah Arabic daily quoted the minister as saying.

Gosaibi commended foreign workers for their immense contributions to the Kingdom's development. "Saudi Arabia values foreign work force and their great contributions to its development," said Gosaibi. He said the Kingdom's labor law does not differentiate between Saudi and foreign workers in terms of rights.

"Saudization must be by choice and not by rule," said Abdelmenem Jamil Addas, professor of finance at the College of Business Administration in Jeddah, while commenting on Gosaibi's statement. Saudi Arabia's economy works best when it is based on market economy and any government intervention will tend to destabilize the market, he said.

"Ever since the government imposed the so-called Saudization rules on gold merchants, many businessmen have either transferred their businesses to Dubai or scaled down their operations," Addas pointed out. Given the trend in globalization and the eventual membership of Saudi Arabia in the World Trade Organization (WTO), the government and the private sector must work on the principles of free economy, he added. Foreign investors have also welcomed Gosaibi's statement on recruitment and said it would encourage them to open new businesses in the country.

"Expatriates are essential for technical jobs, because efficient and experienced technical workers are not available locally," said M.V.A. Saleem, a foreign investor who holds an investment license. He said obstacles to recruitment were affecting investment projects. "When we approach the labor office for visas, they say recruitment has been stopped and ask us to hire staff locally. "Even after advertising in local newspapers, we don't get efficient technicians. This has affected businesses. So the minister's statement is quite encouraging," he said. The Cabinet announced a series of measures last month to intensify the country's Saudization drive and reduce dependence on foreign labor.

Gosaibi said measures taken by the ministry to rationalize foreign recruitment had succeeded in cutting down job visas from 832,244 to 684,201 in a year.

Gosaibi said his ministry was in the process of opening women's sections at its branch offices throughout the country in order to register women jobseekers. Saudi Arabia has one of the world's highest women unemployment rates and the government has taken steps to enhance job opportunities for them.


A four-member committee has been set up to look into complaints lodged by individuals as well as officials of the Commission for the Promotion of Virtue and Prevention of Vice against the mass media.

Dr. Abdullah Al-Jasser, undersecretary for media affairs at the Ministry of Information, will chair the committee; Al-Madinah Arabic newspaper reported quoting informed sources. The move came after the government decided to withdraw all cases related to the press from courts and transferred them to the Culture and Information Ministry in accordance with the new Press and Publications Law.

Crown Prince Abdullah last week quashed a Shariah court verdict against Hamza Al-Mizeini, a Saudi writer, in a libel case filed by Dr. Abdullah Al-Barak, who is a teacher at King Saud University in Riyadh.

Barak accused Mizeini of tarnishing his image and branding Islamic textbooks used at the university as radical. Judge Suleiman Al-Fantookh sentenced Mizeini to 275 lashes and four-month jail. Al-Mizeini had also been told that he would be banned from writing in the Saudi media. The timely intervention by Crown Prince Abdullah has been widely applauded by Saudi writers, thinkers and media persons.

The new committee includes representatives from the ministries of justice, interior, commerce and industry as well as legal consultants at the Information Ministry.

In light of the new government decision, the lawsuit filed by Sheikh Salman Al-Auda against Al-Watan Arabic daily for a report published on his son Muad (Lawyer Dr. Muhammad Al-Tuwaijeri filed the case on behalf of Auda) and another lawsuit by the commission against Abdullah Bakheet, a writer in Al-Jazirah daily, will be withdrawn from the courts.



(Courtesy Arab News)