Módulo básico de verificación de la competencia LAR 121

During fiscal year 1428/1429H (2008), the Ministry of Education made efforts in privatizing educational services represented in the following:

First domain: leasing lands

The Ministry, represented by the departments of education (boys and girls) in regions and provinces , made an invitation for bids for leasing its lands, which are not used currently in the academic and educational period. Their proceeds will be used to support the item of school maintenance according to the Council of Ministers’ Resolution No. 105 dated 24/6/1420H in coordination with the Ministry of Finance. Total annual revenues of 23 sites amounted to Rls 10,896,179 at the end of Rabi’ Al-Thani 1430H (April 2008).

Second domain: making use of returned waste paper and school books

A contract was signed with the Saudi Recycling Company for Paper Waste to benefit from buying returned waste paper and school books in the Ministry’s organ, departments of education and schools at the Kingdom’s level at Rls 756 per ton, to be deposited in the school fund account.

Third domain: school transportation

The Council of Ministers’ Resolution No. 305 dated 23/12/1426H came to initiate the implementation of the school transportation project (Al-Ameen) for public education female students. The project was entrusted fully to the private sector under the Ministry's supervision. Work started with forming a permanent committee to follow up the project. The main goal is supervision, follow-up and elimination of obstacles.

Hafel Transport was contracted with for the regions:

(Riyadh, Makkah, Al-Madinah, Eastern Region, and Al-Qassim) at the cost of Rls 1,700 per student annually. Al-Madinah Region was chosen for operation launch since the second semester 1428-1429H.

Fourth domain: investing school cafeterias/canteens A contract for operating school cafeterias/

canteens was signed with the Gulf Catering Co.

covering Riyadh’s schools (boys and girls), Jeddah province’s schools (boys and girls), and the Eastern Region’s schools (girls). The Ministry’s stake of daily sales shall be 30 percent that goes to the school fund.

Fifth domain: private education

The Ministry is working on opening more private and foreign schools, and encouraging the private sector to invest in private education. The number of private boy schools amounted to 1,239, private girl schools 1,173, private kindergartens 640 and that of foreign education

amounted to 266 schools. The Ministry has a project, currently under study, for supporting private education to reduce the cost of public education on the state through the contribution of the private sector.

Sixth domain: establishing and maintaining educational buildings

In pursuance of the Council of Ministers’

Resolution No.178 dated 3/9/1419H providing for approving the Ministry of Education’s making an agreement with the private sector to build schools according to the specifications laid down by either of which under long-term contracts, the Ministry sought after privatizing this domain for the following reasons:

1. Working out the shortage in government school buildings and gradually leaving rented school buildings.

2. Solving the problem of the lands that the Ministry could not own, by adding the value of purchase to the value of building finance and paying them in installments.

3. Dire need for building schools according to the Ministry’s specifications to meet student growth.

4. Making use of the capabilities of the privet sector including funds, technical and engineering expertise.

Up to the beginning of the Rabi’ Al-Thani 1430H (April 2009), the number of girl school projects in the Kingdom under progress amounted to 1,333 with a total cost of Rls 8,425,565,760 and 1,375 projects with a total cost of Rls 9,256,160,631,65 for boy schools.

Future Privatization Programs

Based on the Ministry’s intention to increase the participation of the private sector effective in the education process and encourage it to invest in education, a number of goals were set in the Ministry’s plan (1425-1430H) to realize this task. A number of programs sprung out of those goals which the Ministry is striving to implement during the upcoming period:

1. Supporting and encouraging the private sector to contribute to establishing and running kindergartens.

2. The participation of charity foundations in educating families about the importance of educating children for pre-school, contribution to holding illiteracy elimination programs, opening institutes specialized in adult education (males and

females) in tandem with the need of the job market.

3. The participation of Quran Memorization Charity Associations in teaching children the principles of reading, writing and computer skills pre-school age.

4. Expansion in government school buildings to meet the present shortage and replace rented school buildings to absorb the rise in student growth (by putting into effect the programs of the national plan to establish four thousand government school buildings over ten years at the rate of four hundred schools, two hundred of which to be executed by the Ministry’s funding, and the other two hundred to be funded by the private sector, according to the Council of Ministers’

Resolution No.178 dated 3/9/1419H concerning funding school building by the private sector).

5. Promoting philanthropic investment by urging affluent individuals to donate and build schools.

6. Increasing the contribution of the private sector to girl vocational education and training (which has recently become under the supervision of the TVTC).

7. Supporting existing private centers of the handicapped to expand and develop their activity.

8. Encouraging the private sector in the following fields:

a. Holding special qualification programs for the handicapped in line with the requirements of the labor market.

b. Establishing training centers and institutes, and getting them approved by the Ministry of Civil Affairs.

c. Conducting qualifying courses on the skills required for the labor market in the Kingdom.

d. Manufacturing educational technology appliances.

e. Inviting the banking sector in the Kingdom to contribute to building government schools and offering soft loans to the investors in private education in accordance with Shariah rules.

f. Developing the systems of private education in order to realize a higher participation rate (25 percent) of total number of students within the Ministry's eighth plan.

g. Investing Saudi schools abroad and operating them by the private sector.

9. A committee at the level of leaders in the Ministry was formed to consider the privatization of education pursuant to Supreme Order No. 6478/MB dated 22/7/1428H■

Among the main objectives of the monetary policy in the Kingdom of Saudi Arabia is to stabilize the financial system and prices in general through an advanced, regulated and strong banking sector that can serve all of the economy’s sectors to achieve development objectives and prosperity to all citizens.

This is done by controlling domestic liquidity through available monetary instruments and tools. The year 2008 was an exceptional year, not only at the level of the domestic economy, but also at the level of the global economy. The year 2008 was characterized by two radically different phases.

The first phase spanned over the first nine months of 2008 which experienced continuous rise in oil prices to a relatively high levels, exceeding $147 a barrel in July 2008 as a result of continued steady world economic growth, increased demand for oil and speculation factors in the financial markets. Hence, there occurred a rise in Kingdom’s revenues and government expenditures and the domestic economy continued its growth pace. This was accompanied by a rise in the level of liquidity and inflation rates as well as increased speculations against the Riyal.

The second phase took place in the fourth quarter of 2008 with the global financial crisis which emanating from the buildup of the sub-prime real estate mortgage problem in some advanced economies. The crisis spread quickly to other economies, resulting in a global liquidity crunch and reduction in the credit lines.

The spillover effects of the crisis spread quickly to the real sectors of the world economy, causing lower demand for basic commodities including oil. The prices of oil declined sharply, reaching $38 a barrel in December 2008, and, consequently, the Kingdom’s oil revenues decreased. The crisis resulted in an abstention by international banks from lending thereby, raising the cost of credit at the global level. It also caused a decline in capital flows to emerging economies and developing countries.

As the year 2008 was unusual in terms of the financial and economic fluctuations, monetary policy measures taken by SAMA to cope with such domestic and international economic and financial conditions were exceptional as well. During the first nine months of the year, SAMA adopted deflationary monetary policy aimed at maintaining the stability of domestic prices and the Riyal’s exchange rate, enhancing financial stability, mitigating inflationary pressures, withdrawing excess liquidity resulting from expanded public spending, encouraging investment and improving competitiveness of the national economy.

During the fourth quarter of 2008, SAMA pursued an

expansionary monetary policy aimed at stabilizing the financial sector and providing sufficient liquidity to meet domestic demand for credit to alleviate unfavourable effects of the global financial crisis and its probable results on the national economy, particularly with emerging signs of abatement of inflationary pressures in the Kingdom and speculations against the Riyal.

As for money supply, broad money (M3) during the nine months of 2008 recorded a rise of Rls 98.7 billion or 12.5 percent to reach Rls 888.5 billion at the end of the third quarter of 2008 against an increase of Rls 83.5 billion during the same period of the preceding year. It went up by Rls 40.6 billion or 4.6 percent to Rls 929.1 billion during the fourth quarter of 2008 compared to a rise of 6.1 percent or Rls 45.7 billion during the same period of the preceding year.

Developments in 2008 Monetary Policy

The first nine months of 2008 were characterized by continuous rise in the inflation rate which reached 11.1 percent in July 2008 due to increased government expenditures as result of a rise in oil prices to a relatively high level of more than $147 a barrel in July 2008, as well as the substantial increase in the prices of imported basic commodities such as food stuffs. The period was marked by increased speculations against the Riyal. In response to such developments, SAMA followed a monetary policy geared to the objective of maintaining stability in domestic prices, supporting the domestic economic activity, encouraging investment and coping with domestic and international economic developments.

Therefore, SAMA raised the statutory reserve requirement during the first quarter of 2008 from 9 percent to 10 percent of total demand deposits. Then, during the second quarter of 2008 it decided to raise it from 10 percent to 13 percent of total demand deposits and from 2 percent to 4 percent of time and savings deposits. The purpose of this action was to absorb a portion of excess liquidity in the banking system and to curtail the lending capacity of banks with a view to relieve inflationary pressures. During the third quarter of 2008, SAMA decided to keep the statutory reserve requirement on total demand deposits at 13 percent and that on time and savings deposits at 4 percent.

SAMA also did not make any changes in its repo rate during the first nine months of 2008 and decided to keep it at its previous level of 5.50 percent to signify its anti-inflationary resolve. However, SAMA lowered its reverse repo rate during the first quarter of 2008 by 175 basis points from 4.0 percent to 2.25 percent and further

Commercial banks increased their repurchase agreements with SAMA considerably. The net daily average of repurchase agreements amounted to Rls 1.4 billion in 2008 against Rls 866 million in 2007. In contrast, the net daily average of reverse repo agreements between SAMA and domestic banks went down to Rls 37.3 billion in 2008 compared to Rls 41.9 billion in 2007. These figures signify continued availability of abundant daily liquidity for the banking system.

Money Supply

Domestic liquidity witnessed decelerated growth in 2008, although the government continued to pursue a policy of expanding government expenditures on all sectors of the domestic economy, including social services and development projects. Broad money (M3), consisting of currency outside banks and bank deposits, registered a rise of Rls 139.4 billion or 17.6 percent to Rls 929.1 billion in 2008 as compared with an increase of Rls 129.2 billion or 19.6 percent in 2007. The rise was attributed to many factors, the most important of which was the growth in bank claims on the private sector which rose by Rls 156.7 billion as compared with Rls 101.9 billion in 2008. In contrast, the decreased net domestic government expenditures and the substantial increase in the deficit of the private sector’s balance of payments, which stood at Rls 344.0 billion in 2008, resulted in decelerated growth of broad money (M3) during the same period.

The rise in broad money in 2008 occurred in all its components; mainly in bank deposits. Bank deposits, which represent the main constituent of broad money supply, rose by Rls 128.6 billion or 17.9 percent compared to a growth of Rls 126.3 billion or 21.4 percent in the preceding year. The other component, viz. currency outside banks, increased by Rls 10.8 billion or 15.0 percent as against a rise of Rls 2.9 billion or 4.1 percent in the preceding year. As a result of the deceleration in the growth rate of bank deposits, the share of bank deposits in broad money went up slightly in 2008 to 91.1 percent from 90.9 percent in 2007 while that of currency outside banks fell slightly from 9.1 percent in 2007 to 8.9 percent in 2008.

Among the various constituents of bank deposits, the growth rate of demand deposits decelerated while it accelerated for time and savings deposits and other quasi-monetary deposits, which are made up of residents' foreign currency deposits, marginal deposits for letters of credit, outstanding remittances, and banks' repo transactions with the private sector dealers.

by 25 basis points to 2.0 percent at the end of the second quarter of 2008 with the aim of enhancing the stability of the Riyal’s exchange rate and restraining increased speculations against it. During the third quarter of 2008, SAMA decided to keep the reverse repo rate at its previous level of 2.0 percent.

Another measure taken by SAMA during the first nine months of 2008 was to continue the suspension of the weekly limit on issuance of treasury bills which was suspended in November 2007 to mop up excess liquidity of banks by encouraging them to increase their investment in treasury bills. SAMA also entered into FX swaps with domestic banks, amounting to Rls 13.6 billion in 2008, for several periods up to six months against Rls 8.3 billion in 2007 in order to withdraw excess liquidity in Saudi Riyal and provide the banking system with sufficient liquidity in US Dollar and to restrain speculations against Riyal.

During the fourth quarter of 2008, and, in light of the global financial crisis, SAMA pursued an expansionary monetary policy aimed at achieving stability in the financial sector and enhancing the liquidity position to reduce the cost of credit and meet domestic demand for credit, especially in the context of abatement of inflation and speculations against the Riyal. To this end, SAMA took a package of proactive measures, including the following:

1. Reducing the statutory reserve requirement on total demand deposits in several steps, from 13 percent in September 2008 to 7 percent in November 2008, with a view to enhance liquidity in the banking system. The statutory reserve requirement on time and savings deposits was maintained at 4 percent.

2. Reducing the repo rate gradually from its previous level of 5.50 percent to 2.50 percent by the end of 2008, and reducing the reverse repo rate by 50 basis points, from 2.0 percent to 1.50 percent at the end of 2008.

3. SAMA intervened directly through placement of time deposits with domestic banks in Riyal and Dollar totaling Rls 6.1 billion and $ 2.1 billion, to enhance liquidity in Riyal as well as in Dollar.

4. SAMA placed time deposits totaling Rls 19.2 billion with domestic banks for relatively long periods on behalf of government authorities and institutions to strengthen the liquidity position in the banking system, and, thus, enable banks to expand credit extension.

5. Reducing the pricing of treasury bills by 50 basis points below the Saudi Interbank Bid Rate (SIBID), and reinforcing the weekly ceiling on the issuance of treasury bills at Rls 3.0 billion per week as from November 2008.

There was a particularly marked deceleration in the growth rate of demand deposits in 2008, which went up by 10.0 percent (Rls 31.1 billion) against 27.9 percent (Rls 67.9 billion) in the preceding year, and, thus, their share in board money declined from 39.4 percent to 36.9 percent. Time and savings deposits increased by Rls 84.6 billion or 29.9 percent against 25.2 percent in the preceding year. Their share in broad money went up to 39.6 percent at the end of 2008 as compared to 35.8 percent a year earlier. Other quasi-monetary deposits recorded a remarkable growth in 2008 of Rls 12.9 billion or 10.4 percent against Rls 1.3 billion or 1.1 percent in the preceding year.

Consequently, their share in broad money declined by 1.0 percent to 14.6 percent at the end of 2008. (Tables 3.1, 3.2 and 3.3 and Charts 3.1 and 3.2).

The data for 2008 contained in Table 3.2 show that the growth rates of the three measures of money supply viz. (M1), (M2) and (M3), dropped by different percentage points. The growth rate declined by 11.7 percentage points to 10.9 percent for M1 (currency outside banks + demand deposits), by 4.7 percentage

points to 19.0 percent for M2 (M1 + time and savings deposits), and by 2.0 percentage points to 17.6 percent for M3 (M2 + other quasi monetary deposits).

Reflecting these developments, the ratio of M1 to M3 decreased from 48.6 percent in the preceding year to 45.8 percent in 2008, while that of M2 to M3 registered a slight rise of 1.0 percentage point to 85.4 percent in 2008 (Table 3.4).

Causative Factors for Change in Broad Money Supply (M3)

An analysis of factors affecting broad money supply (M3) indicates a deceleration in its growth rate to 17.6 percent in 2008 from 19.6 percent in 2007 despite the increased growth in bank claims on the private sector. The rise in bank claims on the private sector in 2008 amounted to Rls 156.7 billion as against a rise of 101.9 billion in 2007. The substantial increase in the deficit of the private sector's balance of payments, amounting to Rls 344.0 billion in 2008 against Rls 216.1 billion in the preceding year, and the decline in net domestic government expenditures from Rls 461.2 billion in 2007 to Rls 339.7 billion in 2008

Other

** Comprise residents' foreign currency deposits, marginal deposits for LCs, outstanding remittances, and banks repo transactions with private parties.

End of Year

(Million Riyals)

Other