While reading an article in the BT on poverty in Brunei, I was thinking, how sad the reality is. It is almost unbelievable that there is extreme poverty in a country so rich (the lives of those in the article are examples of extreme or absolute poverty, and if it is indeed true that there are families earning only about $12 per day, gosh! that's defined as $1/day poverty! ). It is true that Brunei's GDP per capita has doubled within a decade but that unfortunately does not mean the income is more equally distributed.
So, how bad is the poverty in Brunei? Another article (click here), can give the picture. I cringed when I found out that there are 16,186 poor people = 3,747 families! Based on that statistic (the number of zakat recipients), about 4.3 % of Brunei's population therefore falls under the poverty line. And if my calculation is correct, each person is receiving $46 per month from the zakat fund. So a family of 8 (such as Hj Dullah in Kg. Tamoi) will receive $368 a month.
An easy and straight-forward solution to help Hj Dullah would be to give him a boat so he can operate his own water taxi. However, a few years ago, somebody mentioned that this type of aid (i.e. giving boats to Kampong Ayer's poor) actually backfired. The recipients who were supposed to earn a living with the boats, ended up selling the boats for an easy lump-sum money. I must admit, this puts a pressure on policy-makers. To give or not to give? How can we prevent such incidence from happening again? But I also believe, we can't simply just NOT give based on bad past experience.
Nevertheless I find this really is a challenge. While there are many ways to reduce poverty, I however cannot think of any policy measure that can solve the human attitude problem: the ungratefulness and the lack of responsibility that seem to exist rampantly in Brunei.
I often ask, what did we do wrong? But remember this:
“…Surely Allah does not change the condition of a people until they change their own condition…” (Qur’an 13:11).
Salaam.
Sunday 30 March 2008
Friday 28 March 2008
SME news
I guess I'm not alone in my view:
For the full news, click here. Meanwhile,
And for the above reason, I pray with all my heart that THIS is not another announcement.
Salaam.
"Brunei Darussalam needs to provide special funding to create an
environment where technology-based business ideas can flourish.
Technopreneurs said that it is difficult for them to expand as fast as they
wanted to due to lack of funding. They added that in Brunei if one does not have
the money to do it, then there is little chance of succeeding.
In the words of Tengku Farith Rithauddeen, the Group CEO and Co-Founder
of SKALI, "There should not be any fear of failing if we want to create
innovative products or services."
For the full news, click here. Meanwhile,
"Dato Paduka Timothy Ong also quoted His Royal Highness as saying in the same
interview that diversifying the economy is a lot more than making
announcements". (Click here)
And for the above reason, I pray with all my heart that THIS is not another announcement.
Salaam.
Wednesday 26 March 2008
Money Can't Buy Me...Food
A few months ago I wrote a short post on the increasing world’s food price (see here). In the past few days however, a few readers have emailed and left comments in my tag-board, asking for my view.
Since I am not currently in Brunei, I really don’t know the extent to which the global food inflation is affecting Brunei. But I’m sure, like everywhere else in the world, Brunei consumers must have also feeling the heat. For the benefit of all (in case someone is not sure why food prices have gone up), there are a few contributing factors:
1. The increase in the world demand for food: Giant countries such as China and India, whose economies have grown tremendously now have put pressure on the world’s food demand. As a result of a higher standard of living (due to the increase in income), the people in these countries now can afford to buy a larger variety of food resulting in increasing prices of wheat, rice, milk etc.
2. Rising input price: The main problem is the oil price. The soaring oil price is affecting the food price mainly in 2 ways. One, it increases the cost of transportation (land and/or sea). Two, it increases the price of fertilizers. When oil price increases, gas price also increases. Gas is needed to produce food fertilizer. Hence, fertilizer’s price goes up, so does the food price.
3. Climate Change: Flood and draught in many parts of the world are affecting the supply of food. When the food supply cannot meet the increasing food demand, then of course prices of food will go up.
4. Other market distortion: If you have never heard of biofuel, then by now, you should. And apparently it is also causing the food price hike. Wheat and corn for example, are now being used to produce biofuel. As a result, their prices have gone up and thus affecting the prices of other food. This problem is further aggravated by the trade policy of the developed producing countries who refuse to allow free trade for these commodities.
So anyone reading this should now understand why suddenly they find food prices have gone up (and it is not solely because the retailers have gone super-greedy, although some may have taken an advantage). I would actually expect for the effect to be stronger in Brunei since Brunei highly depends on imported food and we don’t have any (many) local substitutes. It is worrying really, just a few weeks ago, the Philippines for instance failed to buy enough rice for its inventories as a result of sales restrictions of rice in Vietnam, India and Egypt. Indonesia, on the other hand, warns of an impending unrest due to the rise in the prices of meat and tofu. (A Soft WARNING of rice shortage in South East Asia has been issued! And there is also a danger of a shortage of powdered milk! SO Please BE WARNED).
What can the government do? I DO hope the relevant authorities in Brunei will not just sit and watch and see how it goes. Other government around the world have taken actions. UAE recently has announced its intention to build a six-month staple food reserves, subsidising food and price freeze. Russia and China, have also issued food price freeze.
A list of staple food in Brunei should, by now be constructed. While I don’t expect the government to subsidise ALL food but I do expect some food price subsidies/food security packages are being planned for Brunei’s staple food (in addition to rice and sugar) such as cooking oil, flour, milk, eggs, chicken(?) and other food (Anonymousfoe: I hardly think mayonnaise should be included hehe). And this would be THE time to impose some price ceilings. Otherwise, we may be in a BIG, BIG trouble.
My advise to anyone reading this (as my previous post) is DO NOT WASTE FOOD! And however small your backyard garden is, try to plant some vegetables. You just never know…
Anyway, the Financial Times is an excellent place to get further information and latest news on the soaring food price (click here).
Salaam.
Since I am not currently in Brunei, I really don’t know the extent to which the global food inflation is affecting Brunei. But I’m sure, like everywhere else in the world, Brunei consumers must have also feeling the heat. For the benefit of all (in case someone is not sure why food prices have gone up), there are a few contributing factors:
1. The increase in the world demand for food: Giant countries such as China and India, whose economies have grown tremendously now have put pressure on the world’s food demand. As a result of a higher standard of living (due to the increase in income), the people in these countries now can afford to buy a larger variety of food resulting in increasing prices of wheat, rice, milk etc.
2. Rising input price: The main problem is the oil price. The soaring oil price is affecting the food price mainly in 2 ways. One, it increases the cost of transportation (land and/or sea). Two, it increases the price of fertilizers. When oil price increases, gas price also increases. Gas is needed to produce food fertilizer. Hence, fertilizer’s price goes up, so does the food price.
3. Climate Change: Flood and draught in many parts of the world are affecting the supply of food. When the food supply cannot meet the increasing food demand, then of course prices of food will go up.
4. Other market distortion: If you have never heard of biofuel, then by now, you should. And apparently it is also causing the food price hike. Wheat and corn for example, are now being used to produce biofuel. As a result, their prices have gone up and thus affecting the prices of other food. This problem is further aggravated by the trade policy of the developed producing countries who refuse to allow free trade for these commodities.
So anyone reading this should now understand why suddenly they find food prices have gone up (and it is not solely because the retailers have gone super-greedy, although some may have taken an advantage). I would actually expect for the effect to be stronger in Brunei since Brunei highly depends on imported food and we don’t have any (many) local substitutes. It is worrying really, just a few weeks ago, the Philippines for instance failed to buy enough rice for its inventories as a result of sales restrictions of rice in Vietnam, India and Egypt. Indonesia, on the other hand, warns of an impending unrest due to the rise in the prices of meat and tofu. (A Soft WARNING of rice shortage in South East Asia has been issued! And there is also a danger of a shortage of powdered milk! SO Please BE WARNED).
What can the government do? I DO hope the relevant authorities in Brunei will not just sit and watch and see how it goes. Other government around the world have taken actions. UAE recently has announced its intention to build a six-month staple food reserves, subsidising food and price freeze. Russia and China, have also issued food price freeze.
A list of staple food in Brunei should, by now be constructed. While I don’t expect the government to subsidise ALL food but I do expect some food price subsidies/food security packages are being planned for Brunei’s staple food (in addition to rice and sugar) such as cooking oil, flour, milk, eggs, chicken(?) and other food (Anonymousfoe: I hardly think mayonnaise should be included hehe). And this would be THE time to impose some price ceilings. Otherwise, we may be in a BIG, BIG trouble.
My advise to anyone reading this (as my previous post) is DO NOT WASTE FOOD! And however small your backyard garden is, try to plant some vegetables. You just never know…
Anyway, the Financial Times is an excellent place to get further information and latest news on the soaring food price (click here).
Salaam.
Monday 24 March 2008
Getting Organised
I am not an organised person. I tend to misplace A LOT of stuff especially journal papers, printed out articles and other (1001) knick-knacks. And whenever I have some free time and a clear head (which comes probably only once in six months), I would try to sort the paper mountain on my desk into files.
Anyway, I thought I'd do some organising to this blog as well, as I realise that I've been linking papers and websites in my posts, which I believe one day would be useful to me and to anyone who remembered reading it (but too lazy as I am to browse the past posts). So, I've added 2 sections: 'Reading List' which gives the link to all papers, reports and articles I refer to in my posts, and 'Websites' which gives the link to all websites that I refer to and any others which I think would be useful for Brunei. To make (my) life easier, I've put the dates of my blog posts that refer to each paper or website.
I am also recommending a few bed-time readings which are interesting and worth buying (and NOT too expensive). First, it's Krugman's earlier book The Accidental Theorist which is a collection of short articles he had written in various magazines. It is highly informative and entertaining with his witty style of writing and 'easy' english. I feel this is one of those books that can be read by anyone.
For a more thought-provoking book, which I am currently reading, I'd recommend The Black Swan by Nassim Nicholas Taleb. This book is about uncertainties and random events that underlie our lives.
Finally, Slate has also recommended Predictably Irrational : The Hidden Forces That Shape Our Decision by Dan Ariely who "has done a huge amount of firsthand research on decision-making, and he demonstrates that emotions, expectations, contexts, and social norms all play a huge role."
All of the above books are in my MUST READ Recommended Books.
Salaam
Anyway, I thought I'd do some organising to this blog as well, as I realise that I've been linking papers and websites in my posts, which I believe one day would be useful to me and to anyone who remembered reading it (but too lazy as I am to browse the past posts). So, I've added 2 sections: 'Reading List' which gives the link to all papers, reports and articles I refer to in my posts, and 'Websites' which gives the link to all websites that I refer to and any others which I think would be useful for Brunei. To make (my) life easier, I've put the dates of my blog posts that refer to each paper or website.
I am also recommending a few bed-time readings which are interesting and worth buying (and NOT too expensive). First, it's Krugman's earlier book The Accidental Theorist which is a collection of short articles he had written in various magazines. It is highly informative and entertaining with his witty style of writing and 'easy' english. I feel this is one of those books that can be read by anyone.
For a more thought-provoking book, which I am currently reading, I'd recommend The Black Swan by Nassim Nicholas Taleb. This book is about uncertainties and random events that underlie our lives.
Finally, Slate has also recommended Predictably Irrational : The Hidden Forces That Shape Our Decision by Dan Ariely who "has done a huge amount of firsthand research on decision-making, and he demonstrates that emotions, expectations, contexts, and social norms all play a huge role."
All of the above books are in my MUST READ Recommended Books.
Salaam
Sunday 23 March 2008
The Dilemma of SME Part 2
Other issues faced by the SMEs in Brunei are the small market size and the lack of production incentives. With our population of about 380,000 really does not make Brunei an attractive place for any production or businesses. The small market size is further aggravated by cheap competition from import and high local cost.
Of course, somebody would reply that Brunei's SMEs should not limit themselves to the domestic demand and therefore should explore the regional and even the world market. True. But in truth that is easier said than done. Heeks (1998) in his paper (click here) pointed a number of related problems. First, he pointed that Brunei is an island of wealth in the sea of local poverty, at least in Borneo island itself. But it is also true in the context of ASEAN. Brunei is the second wealthiest country after Singapore (measured by the GDP per capita) which is followed by Malaysia and then Thailand. The remaining ASEAN countries are all earning less than US$1000 per capita – they hardly can become our potential markets! Second, where regional markets exist, someone has got there first, producing high quality products at low cost, thus presenting entry barriers to new-comers especially, one that lacks competitiveness.
Now, I’m not trying to be negative but sometimes we have to be realistic. I believe, in order for our local (and weak) SMEs to take their chance in the regional market, let alone the global market, they need assistance. For example, they need to know just what types of products to produce (for e.g. products that have high import growth rates in the global market) given their capabilities. And then of course they will also need (continuous) help in the area of capacity building to increase the products’ competitiveness especially in terms of the quality. Now, my question is, have we got these in place?
OK before we go further into the discussion of providing supports for export-production, let’s first look at the supports for local production. What incentives are we giving to the local producers? You would probably be thinking of the recently reduced corporate tax. Is that enough? The corporate tax, first of all, is not payable by sole proprietorships, which makes up a large chunk of our private sector. And then there is the ‘pioneer status’ scheme, but then again does it apply to a large number of our local SMEs? Correct me if I’m wrong but I think both the corporate tax and the pioneer status scheme are more directed towards the attraction of foreign investors (which I am in support of!). Now, my question again, what then are the incentives we are giving to the local small and medium enterprises? Our SMEs don’t even have complete access to crucial information such as market demand, input costs, availability of sources of production so on and so forth! And so how do we expect our local SMEs to go abroad and compete when they are not even developed domestically.
Now, back to the issue of the small domestic market. How do we then overcome this problem? At the top of my head, we can do this in 2 ways. One, through the natural population increase, which would take AGES! And two, through migration. OK, maybe in our case, not migration per se but we need to find ways to attract foreigners to come and spend in the country. How? One, we need to increase the number of tourists coming to Brunei. The tourism department, from the looks of it, is putting a lot of effort into this. [It’s ashamed really, that the apparent lack of policy co-ordination among other departments somehow weakens the effort (perhaps another post on this one)]. Two, we can attract foreigners who have high purchasing power to come and stay in Brunei. Brunei, being a tax haven has already 'the' appealing factor for anyone to come and live in the country :). However, there is a larger policy implication which is related to another policy taboo – land and property foreign ownership. Now, I’m no expert on this but personally I don’t really see the harm in allowing foreigners, who can make ‘economic contributions’ to purchase properties for the sole purpose of occupation (see for example how Singapore is doing it). Just imagine the spin-off effects of this policy! We can expect a boom in the housing sector and the construction industry, and then of course, the increase in the demand for ALL goods and services which will have the desired direct effect on our local SMEs. Oh I can picture a shift in the aggregate demand for Brunei! (And only then we can seriously talk about providing world-class services be it in education, health etc..)
Oh dear, there’s so much to think of! I do hope I am NOT the only one thinking about this. And while thinking is good, but please for the love of Brunei, DO something about it. I will probably write more on this topic.
Salaam.
Of course, somebody would reply that Brunei's SMEs should not limit themselves to the domestic demand and therefore should explore the regional and even the world market. True. But in truth that is easier said than done. Heeks (1998) in his paper (click here) pointed a number of related problems. First, he pointed that Brunei is an island of wealth in the sea of local poverty, at least in Borneo island itself. But it is also true in the context of ASEAN. Brunei is the second wealthiest country after Singapore (measured by the GDP per capita) which is followed by Malaysia and then Thailand. The remaining ASEAN countries are all earning less than US$1000 per capita – they hardly can become our potential markets! Second, where regional markets exist, someone has got there first, producing high quality products at low cost, thus presenting entry barriers to new-comers especially, one that lacks competitiveness.
Now, I’m not trying to be negative but sometimes we have to be realistic. I believe, in order for our local (and weak) SMEs to take their chance in the regional market, let alone the global market, they need assistance. For example, they need to know just what types of products to produce (for e.g. products that have high import growth rates in the global market) given their capabilities. And then of course they will also need (continuous) help in the area of capacity building to increase the products’ competitiveness especially in terms of the quality. Now, my question is, have we got these in place?
OK before we go further into the discussion of providing supports for export-production, let’s first look at the supports for local production. What incentives are we giving to the local producers? You would probably be thinking of the recently reduced corporate tax. Is that enough? The corporate tax, first of all, is not payable by sole proprietorships, which makes up a large chunk of our private sector. And then there is the ‘pioneer status’ scheme, but then again does it apply to a large number of our local SMEs? Correct me if I’m wrong but I think both the corporate tax and the pioneer status scheme are more directed towards the attraction of foreign investors (which I am in support of!). Now, my question again, what then are the incentives we are giving to the local small and medium enterprises? Our SMEs don’t even have complete access to crucial information such as market demand, input costs, availability of sources of production so on and so forth! And so how do we expect our local SMEs to go abroad and compete when they are not even developed domestically.
Now, back to the issue of the small domestic market. How do we then overcome this problem? At the top of my head, we can do this in 2 ways. One, through the natural population increase, which would take AGES! And two, through migration. OK, maybe in our case, not migration per se but we need to find ways to attract foreigners to come and spend in the country. How? One, we need to increase the number of tourists coming to Brunei. The tourism department, from the looks of it, is putting a lot of effort into this. [It’s ashamed really, that the apparent lack of policy co-ordination among other departments somehow weakens the effort (perhaps another post on this one)]. Two, we can attract foreigners who have high purchasing power to come and stay in Brunei. Brunei, being a tax haven has already 'the' appealing factor for anyone to come and live in the country :). However, there is a larger policy implication which is related to another policy taboo – land and property foreign ownership. Now, I’m no expert on this but personally I don’t really see the harm in allowing foreigners, who can make ‘economic contributions’ to purchase properties for the sole purpose of occupation (see for example how Singapore is doing it). Just imagine the spin-off effects of this policy! We can expect a boom in the housing sector and the construction industry, and then of course, the increase in the demand for ALL goods and services which will have the desired direct effect on our local SMEs. Oh I can picture a shift in the aggregate demand for Brunei! (And only then we can seriously talk about providing world-class services be it in education, health etc..)
Oh dear, there’s so much to think of! I do hope I am NOT the only one thinking about this. And while thinking is good, but please for the love of Brunei, DO something about it. I will probably write more on this topic.
Salaam.
Wednesday 19 March 2008
New SME Financing
When I read today's news (see here and here) I thought, oohh that was fast! (i.e. the response to my previous post) haha.
It was indeed a welcoming development made by the Standard Chartered Bank to offer a collateral-free Business Installment Loan. I don't know what the interest rate is, but I suspect it would probably be as high as the risk involved. SCB is, after all a commercial bank. The detail of the financing scheme can be found here.
However, the scheme is not for start-ups. It is meant for businesses which have been up and running for at least 3 years. Therefore, I hope our local businesses will only participate when it is absolutely necessary.
The issue of start-up financing, thus still remains.
Salaam.
It was indeed a welcoming development made by the Standard Chartered Bank to offer a collateral-free Business Installment Loan. I don't know what the interest rate is, but I suspect it would probably be as high as the risk involved. SCB is, after all a commercial bank. The detail of the financing scheme can be found here.
However, the scheme is not for start-ups. It is meant for businesses which have been up and running for at least 3 years. Therefore, I hope our local businesses will only participate when it is absolutely necessary.
The issue of start-up financing, thus still remains.
Salaam.
Sunday 16 March 2008
The Dilemma of SME Part 1
I’ve wanted to write something about SMEs in Brunei because this is another topic which I feel has not been properly addressed and where (again) policies and solutions offered are not coordinated.
I agree that the government has been very supportive in the development of SMEs but I am not convinced with the effectiveness of the given supports. Let’s go back to 30 years ago when Brunei started a SME Loan scheme for Malay citizens in the mid 1970s, known as the EDB scheme which unfortunately did not result in many success stories.
The failure of the EDB scheme to create many SMEs is mainly because it wasn’t participated by the intended recipients. (More than 65% of the loan went to non-entrepreneurs for buildings of houses which were mainly for rentals – not exactly the type of business we are looking for). Why? This is mainly because the EDB required collateral which could not be provided by any would-be genuine entrepreneur who didn’t have the means to do so. And as a result the only group that was able to apply for the loan was mostly those in the government sector, who were NOT trained to be risk-takers and to become genuine entrepreneurs.
Fast forward to today. The EDB scheme is now being replaced by a few financing schemes offered by the Ministry of Industry and Primary Resources through the Brunei Islamic Bank. While the new schemes may no longer be utilized to build rental houses, yet they pose the same constraint (or perhaps even more strict) to Brunei start-ups – the need to provide some forms of collateral in order to participate in the schemes. Well, of course I don’t expect for the money to be distributed freely to anyone who claims to be an entrepreneur but I am also positive that there are Bruneians out there who really have some viable business ideas but do not have the means to meet the banks’ strict loan scrutiny. So, where can they go for help?
This issue of the lack of availability of credits to genuine entrepreneurs and/or if you think in the reverse order, the availability of credits to non-genuine entrepreneurs to me is very much related to the issue of the wide-emerging of ‘Ali-Baba’ businesses. It works in 2 ways. On the one hand, those who are able to obtain the loans, who are mostly government servants, create businesses under the names of their wives/husbands/children while the business itself is run by some foreigners. On the other hand, those who are not able to obtain any loan seek some foreign external investors, and this coupled with the lack of proper business direction and experience, eventually results in the formation of ‘Ali Baba’ firms. This partly explains why despite the growing number of SMEs over the years, the number of success stories is paltry.
Of course the issue of ‘Ali Baba’ businesses is, to a large extent, attributable to the attitude (laziness) and the mentality of our own people (easy money). I personally feel the government’s effort in developing ‘local rakyat melayu Brunei’ to be the champions in the business sector has backfired. Despite all local privileges and the policy of local contents in almost all government projects, the locals still have not changed their position. It makes me wonder whether the very reason Brunei locals have not developed in the business sector compared to non-locals, is due to the over-protectiveness of our policies (all sorts of policies! e.g. land policy, local content, public sector jobs etc.) towards the Brunei locals. How? Those who are excluded from such ‘privilege’ policies have to work for their survivals. To most of them, forming a business IS an economic necessity. This however is not the case for the local Brunei, who have always been pampered and secured with high-paying jobs. And at the same time, those non-locals who see some business opportunities but are not in the position of setting up their own proper businesses seek the locals who are more than willing to lend their names in exchange for some business equity.
This is the real dilemma and poses a challenge to policy formulation. On the one hand, we want to help the locals. On the other hand, how can we ensure that the locals will not abuse any new given support? Nevertheless, Brunei can no longer wait and see and hope for the best. Brunei is not as it was 30 years ago. Brunei NEEDS to diversify its economy and strengthen its private sector. And the private sector needs help.
Anyway, going back to the issue of obtaining start-up credits, I personally think that Brunei should explore the idea of ‘angel investors’ or the provision of ‘seed money’ to new entrepreneurs who have no means to adhere to the collateral requirements of the existing financing schemes. Of course the risk is high but as the saying goes, No Pain No Gain! And if the government is not ready to take the risk, then how can we expect the people to take similar risk?
And at the same time, the issue of ‘Ali Baba’ businesses need to be tacked ASAP. It is simply an economic disease that needs a remedy. I must admit, it is not an easy task as it involves the changing of attitude and mindset and also requires a strong coordination from different government departments. However, as long as the mentality of ‘easy money’ exists among the locals, no matter how sophisticated the supports to local SMEs are, Brunei’s hope to create local businesses may just remain a non-achievable long-term economic goal.
I will write more on SME-related issues. In the meantime, I welcome views from everyone.
Salaam.
I agree that the government has been very supportive in the development of SMEs but I am not convinced with the effectiveness of the given supports. Let’s go back to 30 years ago when Brunei started a SME Loan scheme for Malay citizens in the mid 1970s, known as the EDB scheme which unfortunately did not result in many success stories.
The failure of the EDB scheme to create many SMEs is mainly because it wasn’t participated by the intended recipients. (More than 65% of the loan went to non-entrepreneurs for buildings of houses which were mainly for rentals – not exactly the type of business we are looking for). Why? This is mainly because the EDB required collateral which could not be provided by any would-be genuine entrepreneur who didn’t have the means to do so. And as a result the only group that was able to apply for the loan was mostly those in the government sector, who were NOT trained to be risk-takers and to become genuine entrepreneurs.
Fast forward to today. The EDB scheme is now being replaced by a few financing schemes offered by the Ministry of Industry and Primary Resources through the Brunei Islamic Bank. While the new schemes may no longer be utilized to build rental houses, yet they pose the same constraint (or perhaps even more strict) to Brunei start-ups – the need to provide some forms of collateral in order to participate in the schemes. Well, of course I don’t expect for the money to be distributed freely to anyone who claims to be an entrepreneur but I am also positive that there are Bruneians out there who really have some viable business ideas but do not have the means to meet the banks’ strict loan scrutiny. So, where can they go for help?
This issue of the lack of availability of credits to genuine entrepreneurs and/or if you think in the reverse order, the availability of credits to non-genuine entrepreneurs to me is very much related to the issue of the wide-emerging of ‘Ali-Baba’ businesses. It works in 2 ways. On the one hand, those who are able to obtain the loans, who are mostly government servants, create businesses under the names of their wives/husbands/children while the business itself is run by some foreigners. On the other hand, those who are not able to obtain any loan seek some foreign external investors, and this coupled with the lack of proper business direction and experience, eventually results in the formation of ‘Ali Baba’ firms. This partly explains why despite the growing number of SMEs over the years, the number of success stories is paltry.
Of course the issue of ‘Ali Baba’ businesses is, to a large extent, attributable to the attitude (laziness) and the mentality of our own people (easy money). I personally feel the government’s effort in developing ‘local rakyat melayu Brunei’ to be the champions in the business sector has backfired. Despite all local privileges and the policy of local contents in almost all government projects, the locals still have not changed their position. It makes me wonder whether the very reason Brunei locals have not developed in the business sector compared to non-locals, is due to the over-protectiveness of our policies (all sorts of policies! e.g. land policy, local content, public sector jobs etc.) towards the Brunei locals. How? Those who are excluded from such ‘privilege’ policies have to work for their survivals. To most of them, forming a business IS an economic necessity. This however is not the case for the local Brunei, who have always been pampered and secured with high-paying jobs. And at the same time, those non-locals who see some business opportunities but are not in the position of setting up their own proper businesses seek the locals who are more than willing to lend their names in exchange for some business equity.
This is the real dilemma and poses a challenge to policy formulation. On the one hand, we want to help the locals. On the other hand, how can we ensure that the locals will not abuse any new given support? Nevertheless, Brunei can no longer wait and see and hope for the best. Brunei is not as it was 30 years ago. Brunei NEEDS to diversify its economy and strengthen its private sector. And the private sector needs help.
Anyway, going back to the issue of obtaining start-up credits, I personally think that Brunei should explore the idea of ‘angel investors’ or the provision of ‘seed money’ to new entrepreneurs who have no means to adhere to the collateral requirements of the existing financing schemes. Of course the risk is high but as the saying goes, No Pain No Gain! And if the government is not ready to take the risk, then how can we expect the people to take similar risk?
And at the same time, the issue of ‘Ali Baba’ businesses need to be tacked ASAP. It is simply an economic disease that needs a remedy. I must admit, it is not an easy task as it involves the changing of attitude and mindset and also requires a strong coordination from different government departments. However, as long as the mentality of ‘easy money’ exists among the locals, no matter how sophisticated the supports to local SMEs are, Brunei’s hope to create local businesses may just remain a non-achievable long-term economic goal.
I will write more on SME-related issues. In the meantime, I welcome views from everyone.
Salaam.
Thursday 13 March 2008
Leg Co: ..On POVERTY
I'm surprised, well actually not surprised that the issue of poverty was not heavily debated, despite HM's titah on the vision of zero poverty. Honestly, I feel really sad to hear that this issue will be tackled by yet ANOTHER poverty research. I mean, seriously... how much research do we need to prove that there ARE poor people in this rich country! And what is wrong with the research made by the UBD? Do we need to waste 3, 4, 5 more years and spend millions just to prove that there is no poverty in Brunei? I've heard about this poverty research like almost 10 years ago (if I remember, it was the year I started my first job) and until today I have not seen any national poverty-related policies besides the MUIB's zakat payment. And if there are recipients of Zakat, then surely there must be poverty..what more proof do we need?
People talk about absolute poverty vs relative poverty. For those who are not familiar with those terms, 'absolute poverty' is basically the number of people or households who cannot afford certain basic goods and services, while 'relative poverty' refers to the number of households (or families if you like) whose income falls below the national average income. So, a family of 6, earning only about $1200 a month definitely falls under the category of 'relative poverty'. They may probably able to buy the basic necessities with that income but that income surely must be below our median income.
If you ask me, I don't know what our median income is, but I suspect for a rich country like us, it should be quite high. So, my question is do we really need another research just to determine our median income? Or should we put our heads together to combat poverty NOW before it gets worse. I feel what Brunei needs actually is to form a serious national committee to address this issue.
Anyway, I don't know about you, but to me poverty issue shouldn't be under the jurisdiction of the Ministry of Culture Youth and Sports alone or poverty is not all about giving welfare benefits. It needs to be addressed in a holistic manner. The fundamental issue is the gap between the rich and the poor. An increasing relative poverty means that there is an unequal distribution of income i.e. there is a large gap between the rich and the poor. Therefore our main challenge is to reduce this gap, because to me income equality = zero poverty.
This should be debated. The ways and means to reduce the gap. It is not about getting salary increments (because to me that in itself will actually result in a higher gap. Why? Because not all of the poors are employed in the government sector) it is more about formulating policies that specifically deal with the poors. For example, the national housing scheme. There should be a separate policy or separate queue (if you are trying to picture it in your head) for those who fall under the category of 'relative poverty' with its own separate terms and conditions, and prices (or no price at all!)
What about subsidies and taxes? These have been the traditional means of income redistribution. Surely, it is high time Brunei reviews its subsidies. Should those who are earning above the median income level pay the same subsidised price of rice as those earning below the median income? Now, there seems to be a serious talk about the irresponsibility of our people (who presumably think that electricity and water are their God's given rights and think that electricity probably comes from air) in paying the utility bills which is costly to the government (see here). If our people continue to be thick-headed and the government decides to reduce the various utility subsidies, then what about the poors? Now, taxes....well this is THE number one taboo in Brunei. But let's start with some form of property taxes. Number 1: tax on rental properties (to help finance the national housing scheme for the poors).
And then there is the related issue of unemployment. I wrote about this in the last post. I don't know how to further express myself but this issue NEEDS to be addressed properly. If the government can no longer afford to provide full employments in the public sector, then whether we like it or not, the government needs to do something about the wage gap because unemployment can cause poverty.
What about education? Yes, we do have the 12 year education policy, but my question is does this cover EVERYone? I'm thinking about those teenagers who got pregnant/married before they finish their 12 year education. How can we help them? How do we expect them to provide for their children if they don't have enough education. Won't it contribute to the poverty spiral?
There are more to think of! Such as how do we help the poors get out of their poverty condition? You know more in the lines of Give-a-man-a-fish-and-you-feed-him-for-a-day, Teach-a-man-to-fish-you-feed-him-a-lifetime.
Oh dear, it's almost midnight. I was supposed to have a break from 'thinking' today after submitting a chapter to my supervisor :) Anyway, the whole point of this post is to actually implore the relevant government agencies to STOP wasting time and resources 'wondering' whether or not we have poverty. Whatever poverty we have now, I think should still be manageable. So please don't wait until it gets too late.
Salaam.
People talk about absolute poverty vs relative poverty. For those who are not familiar with those terms, 'absolute poverty' is basically the number of people or households who cannot afford certain basic goods and services, while 'relative poverty' refers to the number of households (or families if you like) whose income falls below the national average income. So, a family of 6, earning only about $1200 a month definitely falls under the category of 'relative poverty'. They may probably able to buy the basic necessities with that income but that income surely must be below our median income.
If you ask me, I don't know what our median income is, but I suspect for a rich country like us, it should be quite high. So, my question is do we really need another research just to determine our median income? Or should we put our heads together to combat poverty NOW before it gets worse. I feel what Brunei needs actually is to form a serious national committee to address this issue.
Anyway, I don't know about you, but to me poverty issue shouldn't be under the jurisdiction of the Ministry of Culture Youth and Sports alone or poverty is not all about giving welfare benefits. It needs to be addressed in a holistic manner. The fundamental issue is the gap between the rich and the poor. An increasing relative poverty means that there is an unequal distribution of income i.e. there is a large gap between the rich and the poor. Therefore our main challenge is to reduce this gap, because to me income equality = zero poverty.
This should be debated. The ways and means to reduce the gap. It is not about getting salary increments (because to me that in itself will actually result in a higher gap. Why? Because not all of the poors are employed in the government sector) it is more about formulating policies that specifically deal with the poors. For example, the national housing scheme. There should be a separate policy or separate queue (if you are trying to picture it in your head) for those who fall under the category of 'relative poverty' with its own separate terms and conditions, and prices (or no price at all!)
What about subsidies and taxes? These have been the traditional means of income redistribution. Surely, it is high time Brunei reviews its subsidies. Should those who are earning above the median income level pay the same subsidised price of rice as those earning below the median income? Now, there seems to be a serious talk about the irresponsibility of our people (who presumably think that electricity and water are their God's given rights and think that electricity probably comes from air) in paying the utility bills which is costly to the government (see here). If our people continue to be thick-headed and the government decides to reduce the various utility subsidies, then what about the poors? Now, taxes....well this is THE number one taboo in Brunei. But let's start with some form of property taxes. Number 1: tax on rental properties (to help finance the national housing scheme for the poors).
And then there is the related issue of unemployment. I wrote about this in the last post. I don't know how to further express myself but this issue NEEDS to be addressed properly. If the government can no longer afford to provide full employments in the public sector, then whether we like it or not, the government needs to do something about the wage gap because unemployment can cause poverty.
What about education? Yes, we do have the 12 year education policy, but my question is does this cover EVERYone? I'm thinking about those teenagers who got pregnant/married before they finish their 12 year education. How can we help them? How do we expect them to provide for their children if they don't have enough education. Won't it contribute to the poverty spiral?
There are more to think of! Such as how do we help the poors get out of their poverty condition? You know more in the lines of Give-a-man-a-fish-and-you-feed-him-for-a-day, Teach-a-man-to-fish-you-feed-him-a-lifetime.
Oh dear, it's almost midnight. I was supposed to have a break from 'thinking' today after submitting a chapter to my supervisor :) Anyway, the whole point of this post is to actually implore the relevant government agencies to STOP wasting time and resources 'wondering' whether or not we have poverty. Whatever poverty we have now, I think should still be manageable. So please don't wait until it gets too late.
Salaam.
Friday 7 March 2008
Leg Co: ..On Unemployment
I don't know whether to laugh or to cry when I read the reports (in the newspapers here and here and here) of the Leg Co Session today. It was quite disappointing really because there was nothing new. One minister asked the private sector to hire the locals, while the other asked the locals to work in the private sector. I have no problem with both suggestions. But I fail to understand why no minister was addressing the root of the problem, which to me is the remuneration gap in the public and the private sector.
The gap is huge! To know someone in the public sector, who has the same exact qualification with the same skill, is paid triple the amount one is getting in a private sector is really demotivating to anyone. I don't know about you but seriously somebody has to address this issue. As I said in my previous post it is not enough (and equally unfair) to ask the private sector raising their pay rate to the locals due to several reasons. First, our private sector consists largely of SMEs. Second, our SMEs are weak as highlighted by the Minister of the MIPR. And third, the productivity and the commitment of our locals are not exactly commendable.
Now, in my humble opinion it is inevitable and imperative for the government to intervene. Either reduce the remuneration scale in the public sector and/or prop up the remuneration in the private sector. My preference goes to the latter as I believe it would have a larger multiplier effect to the economy. Perhaps take this idea as some sort of 'employment' benefit as opposed to the 'unemployment' benefit. If you are thinking, more government spending and where can we get the fund to do this? Now, I think there is even a stronger need for the government to review the subsidy (especially the fuel subsidy :) Plus, I also think that the government would actually save by spending only some fraction supporting locals who work in the private sector as opposed to employing these locals in the public sector. And of course the direct effect it has on the private sector itself (as compared to the reduction of the corporate tax! No, I'm not going to make any comment on this one) It's a Win, Win situation, No?
With regards to the mind-set problem and the attitude of our local workers, I think the issue is not exclusive to the private sector. I'm sorry..but look at out public sector's employees! I honestly wonder how can you expect the locals to be in their best behaviour in the private sector which pays considerably less when those in the public sector are having the time of their lives and being paid more. And that is why I also think it is equally imperative for the public sector to practice a more realistic productivity-linked wage system.
Oh Well, I'm just in my own world and who am I to say. I don't even know why I'm racking my brain for this.
Salaam
The gap is huge! To know someone in the public sector, who has the same exact qualification with the same skill, is paid triple the amount one is getting in a private sector is really demotivating to anyone. I don't know about you but seriously somebody has to address this issue. As I said in my previous post it is not enough (and equally unfair) to ask the private sector raising their pay rate to the locals due to several reasons. First, our private sector consists largely of SMEs. Second, our SMEs are weak as highlighted by the Minister of the MIPR. And third, the productivity and the commitment of our locals are not exactly commendable.
Now, in my humble opinion it is inevitable and imperative for the government to intervene. Either reduce the remuneration scale in the public sector and/or prop up the remuneration in the private sector. My preference goes to the latter as I believe it would have a larger multiplier effect to the economy. Perhaps take this idea as some sort of 'employment' benefit as opposed to the 'unemployment' benefit. If you are thinking, more government spending and where can we get the fund to do this? Now, I think there is even a stronger need for the government to review the subsidy (especially the fuel subsidy :) Plus, I also think that the government would actually save by spending only some fraction supporting locals who work in the private sector as opposed to employing these locals in the public sector. And of course the direct effect it has on the private sector itself (as compared to the reduction of the corporate tax! No, I'm not going to make any comment on this one) It's a Win, Win situation, No?
With regards to the mind-set problem and the attitude of our local workers, I think the issue is not exclusive to the private sector. I'm sorry..but look at out public sector's employees! I honestly wonder how can you expect the locals to be in their best behaviour in the private sector which pays considerably less when those in the public sector are having the time of their lives and being paid more. And that is why I also think it is equally imperative for the public sector to practice a more realistic productivity-linked wage system.
Oh Well, I'm just in my own world and who am I to say. I don't even know why I'm racking my brain for this.
Salaam
Wednesday 5 March 2008
Wish List
In light of the current Leg Co Session, below are my 'wish list' of topics that I hope the distinguished Yang Berhormats are debating:
1. Unemployment: This has been a main issue since 10 years ago which I feel has not been properly addressed with only some 'piecemeal' solutions thrown from different departments without any coordination. The demand as well as the supply sides of the issue have to be debated. The issues involving the unemployment include:
i)The conflict between local vs. foreign workers: which to a certain extent related to the attitude of local workers.
ii)The remuneration gap: And NO I don't want to hear the same proposal where the employer (the private sector) is asked to give higher wages. That, to me is NOT a solution. What can the government DO to reduce this gap?
iii)The attitude of local workers: A serious lack of commitment.
iv) The welfare and rights of workers: What more can I say?
v) The rights of employers: While employees can lodge their complaints to the Labour Department, where can employers go?
vi) The availability of jobs. Can the private sector provides 'enough' jobs?
vii) Working age: The merits/demerits of extending the pension age.
viii) Job trainings/ skills etc.
2. Social illnesses: Drugs, school-dropouts, teenage pregnancy etc. These are just at the top of my head.
3. Poverty: I cannot stress any further. His Majesty's vision of 0% poverty needs to be addressed properly. The issues related to poverty include:
i) Establishing a national poverty line - in order to measure the gap between the rich and the poor and just HOW poor are we?
ii)To go beyond the solution of providing just 'monetary assistance'.
iii) To combat social illnesses which are very much related with poverty.
iv) To review some fiscal measures i.e. tax and subsidy as the traditional means of redistributing income.
4. Last but certainly NOT the least, BRUNEI's Future:
i) After Oil....What?
ii) Oil Fund to provide for the future. If BIA is doing this, where DO we stand at the moment? How secure is our future? How long can the fund sustain Brunei in the event oil runs dry (This can happen, No?)
iii) Pension schemes: Is TAP enough? How can we eradicate poverty if there is not enough money to provide for the daily expenses, once out of work. What is the merit/demerit of re-introducing a (NOT SO LAVISH) pension scheme. What is the possibility for the 'employer' to increase its contribution. BUT bearing in mind the capability of the current 'weak' private sector. How can the government assist the local workers in the private sector in the provision of a secure future.
iv) What about some form of a National Insurance for every working Bruneian? What happens if accidents occur, death etc?
Oh the list goes on!
But then these are just a mommy's wish..and we'll see how the session goes.
Salaam.
1. Unemployment: This has been a main issue since 10 years ago which I feel has not been properly addressed with only some 'piecemeal' solutions thrown from different departments without any coordination. The demand as well as the supply sides of the issue have to be debated. The issues involving the unemployment include:
i)The conflict between local vs. foreign workers: which to a certain extent related to the attitude of local workers.
ii)The remuneration gap: And NO I don't want to hear the same proposal where the employer (the private sector) is asked to give higher wages. That, to me is NOT a solution. What can the government DO to reduce this gap?
iii)The attitude of local workers: A serious lack of commitment.
iv) The welfare and rights of workers: What more can I say?
v) The rights of employers: While employees can lodge their complaints to the Labour Department, where can employers go?
vi) The availability of jobs. Can the private sector provides 'enough' jobs?
vii) Working age: The merits/demerits of extending the pension age.
viii) Job trainings/ skills etc.
2. Social illnesses: Drugs, school-dropouts, teenage pregnancy etc. These are just at the top of my head.
3. Poverty: I cannot stress any further. His Majesty's vision of 0% poverty needs to be addressed properly. The issues related to poverty include:
i) Establishing a national poverty line - in order to measure the gap between the rich and the poor and just HOW poor are we?
ii)To go beyond the solution of providing just 'monetary assistance'.
iii) To combat social illnesses which are very much related with poverty.
iv) To review some fiscal measures i.e. tax and subsidy as the traditional means of redistributing income.
4. Last but certainly NOT the least, BRUNEI's Future:
i) After Oil....What?
ii) Oil Fund to provide for the future. If BIA is doing this, where DO we stand at the moment? How secure is our future? How long can the fund sustain Brunei in the event oil runs dry (This can happen, No?)
iii) Pension schemes: Is TAP enough? How can we eradicate poverty if there is not enough money to provide for the daily expenses, once out of work. What is the merit/demerit of re-introducing a (NOT SO LAVISH) pension scheme. What is the possibility for the 'employer' to increase its contribution. BUT bearing in mind the capability of the current 'weak' private sector. How can the government assist the local workers in the private sector in the provision of a secure future.
iv) What about some form of a National Insurance for every working Bruneian? What happens if accidents occur, death etc?
Oh the list goes on!
But then these are just a mommy's wish..and we'll see how the session goes.
Salaam.
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