Ibrahim Al- said yesterday that the Kingdom is setting up an SR20 billion that may be open to partners. The company will draw its capital from the General and would offer in the Kingdom with low risks to foreign investors.

Speaking at the inauguration of the Euromoney Conference 2008 here yesterday, the said would subsidize consumer products to counter price rise in the wake of the current inflation.

Elaborating on the new , Al- emphasized that initially the fund would focus on investments in technology sector, adding: “We are setting up an , not a sovereign fund.”

had earlier said that it intended to set up a $6 billion sovereign wealth fund.

“The proposal () is now being examined by the Council of Ministers and the approval is expected soon,” Al- said. “The focus would be on investments in the , especially in the fields that could attract technology to the Kingdom in alliance with global firms,” he added.

The noted that the new firm would be smaller than other state-owned funds in the Gulf. “We would like to invest in profitable, low-risk ,” he told . “I reiterate the importance of avoiding restrictions on flows of capital … whether they are coming from emerging countries or the opposite,” he said.

More than 1,000 delegates, including senior government officials and members of the diplomatic corps, were present at the inaugural ceremony that was presided over by Padraic Fallon, the chairman of Euromoney Investor.

The two-day conference is the only internationally organized focusing on the Saudi financial sector. Economy and Planning Minister Khaled Al-Gosaibi and Gov. Hamad Al-Sayari addressed the delegates on the current economic issues and the Kingdom’s future plans.

“We are currently subsidizing several items such as rice, infant milk and even sugar to ease the burden on the consumers,” Al- said, pointing out that custom duties on some of the essential goods have either been reduced or withdrawn. “To serve the citizens better, we have been making efforts to curb public spending too.”

Al-Sayari, the SAMA governor, said: “In the Kingdom, economic policies face a critical situation where development seek to enhance the fundamentals of economy. This occurs when expansionary financial policies are adopted even if the surrounding conditions dictate otherwise.”

He pointed out that since 2006, when inflation was 2.2 percent, demand for goods and services began to exceed supply, triggering an imbalance in prices of essential goods.

The governor explained that sources that feed inflation in the Kingdom — housing and foodstuff — are still active and their burden on low-income class is heavier because food and housing constitute a great percentage of their expenditures.

But, Al-Sayari said, and are of great importance to achieve goals of top priority — creating new job opportunities for citizens to reduce unemployment and economic diversification to reduce heavy dependence on oil.

“To achieve these two objectives, a number of initiatives have been taken to encourage private sector activity and investments in several mega projects including the new economic cities, infrastructure projects and large industrial projects, in addition to government spending on equipment, educational, health and municipal services, and others. All these initiatives increase demand for domestic goods and services which increases the pressure on prices.”

Al-Gosaibi said the Kingdom has clearly expressed its desire to build a strong knowledge-based economy. “ has decided to do so not as an end in itself, but as a means to achieve higher rates of growth and further enhance the quality of life for its citizens,” he said.

The recently launched King Abdullah University of Science and Technology (KAUST) in Thuwal, near Jeddah, he said, is another major step in this direction. Indeed, the Kingdom has launched eight new universities specializing in technical areas.

“The Kingdom is also making steady progress in implementing its science and technology strategy under the leadership of King Abdul Aziz City for Science and Technology (KACST),” Al-Gosaibi said.

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