A major banking conference here recommended on Sunday the establishment of an independent body for the development of industrial cities. “The new body should be run by a governing council of representatives from public and private sectors, which is a step away from privatization of the industrial cities of Saudi Arabia,” said Faisal Bin Ibrahim Al-Aqil, director of Business Development Holding Company, one of more than 700 banking and financing experts who took part in the the third Saudi International Banking and Investment Conference (SIBIC 2009). “This new strategy, if adopted by the Ministry of Industry, will maximize the contribution of the industrial sector to the GDP from 12 percent to 20 in 2020,” he said. The strategy will create a more favorable climate for existing industrial cities to excel, contribute to meeting the growing demand for industrial cities, and attract foreign investment in local industries, he said. Also recommended at SIBIC 2009, which was launched Saturday, was the establishment of a bank employees' association and more training courses for financial sector staff to keep abreast of the advances resulting from globalization. The conference focused on the effects of the global financial crisis and ways to stabilize the local banking sector and attract foreign investment to spur industrial growth and real estate development in the Kingdom. $400b catalyst Tal'at Bin Zaki Hafez, an economist, launched Sunday's first session themed “Financial needs and capabilities of the Saudi market.” He said government spending of up to $400 billion on infrastructural and developmental projects in the coming years would be a strong catalyst for economic growth and attract foreign investors. Jarmo Kotiliaine, chief economist of NCB capital spoke about the push for economic stability in these hard times. As nations seek economic stability and provide funding at an affordable cost, price stability will remain the challenge for those making fiscal and monetary policies, Kotiliaine said. He cautioned that “some inflationary pressures” might result from the ongoing implementation of many development projects in the Kingdom. While Saudi banks are able to meet the local market needs, additional precautionary measures are nonetheless required in order to override the global financial crisis, Kotiliaine said. Long-term financing Prof. Hasan Muzfer of Middle East Mckinsey Company presented a session on the current and future financing needs of the Saudi market. “One of the most important obstacles facing the financing sectors, specially the commercial banks, is having no long-term financing sources (more than five years) apart from the paid-up capital,” he said. ”Most of the financing sources are presently of 12-month-deposit duration, which is not enough. “ Muzfer hoped that with the establishment of investment services firms and investment funds, good opportunities would result for medium- and long-term (five to ten years and over) financing. The ongoing economic liberalization in Saudi Arabia will encourage foreign financial institutions to support such financing, said Muzfer. He said the share of non-banking institutions in real-estate financing has increased mainly because of procedural shortcomings in governmental departments, delay in adopting mechanisms for the mortgage business, and complex requirements of banks for sanctioning such loans. Dr. Omar Bin Salim Al-Mershedi, another speaker, suggested that banks team up to offer joint funding, which could attract the participation of foreign banks. “Combined loan is the ideal solution to ease the burden on Saudi banks, especially after the criticism directed at investment funds of late,” he said. The Industrial Development Fund, a wing of the Saudi Ministry of Finance, plays a big role in financing many of the giant industrial enterprises that contribute to creating jobs for young Saudis and speeding up economic diversification so as to reduce reliance on oil, the main revenue source.
