Banks and Investment

The Minister of Finance II said:

"The banking industry, in this country today, sits on over $13 billion in
public deposits, much of which invariably end up being invested offshore and
as these deposits represent a vital capital resource of the country, ideally
it should be deployed for the country's benefit"

I absolutely agree with him! And I also support his encouragement for the financial institutions to:

"...shift towards corporate lending and investment banking and wealth management
and other fee-based activities would be heeded and responded to not just in
letter but also in spirit by all financial institutions in the country."

(here for full news)

However, I cannot help feeling envious towards Malaysia which has the SME Bank or Thailand which also has its own SME Development Bank (which incidently are the subsidiaries of their respective Finance Ministries) to look (solely) after their SMEs' development needs.


Salaam.

Big Salary, Enough Salary?

Today, thousands of teachers in the UK went on strike and as a result thousands of schools were closed, forcing millions of parents to look for alternative daycare for their children. Thankfully, my children's school didn't participate so school was normal for them.

Today was the teachers. Previously, the university lecturers, the postmen/women and the policemen/women also went on strike due to dispute over pay rise.

I'm thankful that no such incidence has ever happened in Brunei. I cannot imagine the reaction from our government :). But then the pay and perks in the government sector are higher compared to the private sector. Whether or not the current salary scales are appropriate (i.e. taking into account the inflation growth rates over the years) is however another question. I can see the dilemma our government would be facing if the current wage rates are found to be below the appropriate rates. If it raises the scale, it will further widen the public-private wage gap.

Don't take me wrong. I'm not asking for a pay rise. But I think it is unavoidable and equally necessary for some sort of study on the appropriateness of the current salary scale to be carried out especially in the light of poverty reduction. The results will not only be used to aid the poverty alleviation policy but will also be useful in other policies and most of all will be very, very interesting (at least to me!).

Salaam.

Rejuvenate Brunei's GLCs

What interests me the most, while browsing the World Trade Policy Review of Brunei, is this bit of information:

(Per cent of GDP, unless otherwise indicated)
Saving and investment 2002 2003 2004 2005 2006
Gross national savings 47.2 48.6 51.4 59.1 62.4
Gross domestic investment 21.3 15.1 13.5 11.4 10.4
Savings-investment gap 26.0 33.6 37.9 47.8 52.1

(sorry, I'm no good in pasting the Table. For the full set click here and I refer to Table 1.2)

The saving-investment gap is huge! And the gap is because there is too much saving and too little investment (which isn’t usually the case in many countries). Now, if you’re an economics student and using Year 1 Macroeconomics, you will know that this excessive saving means there is a capital account surplus which could lead to a glut in the economy which eventually could lead to a recession.

Now, my question is why oh why are we acting as if we do not have enough capital to move the economy? To be specific, we are acting as if we’re having a gap that is caused by too little saving and therefore needs an external financing i.e. the FDI. And I have the impression that we seem to be helpless without the FDI. Now, I’m not saying that FDI is not important and I’m sure I don’t have to enumerate the reasons why we need an FDI. What I’m trying to say is that, given the availability of excessive domestic capital, it is high time that Brunei should also place the importance of the domestic investment in the effort to diversify the economy.

Despite the excessive capital however, the private sector in Brunei is weak, both in terms of resources and expertise, to undertake any major domestic investment. Therefore it is imperative (and equally inevitable) for the government sector to assist the private sector development, in particular, to do the investing.

To tell you the truth, at the beginning I wanted to propose the establishments of government-linked companies (GLCs) the likes of Singapore, but then I remembered, we DO have GLCs! Unfortunately for some reasons our GLCs are very quiet (if not, I wouldn’t have forgotten hehe) and do not appear to be spearheading the investment efforts.

I’m sure by now, many of you will be saying that Brunei’s GLCs won’t work because their managers and Board of Directors are civil servants who lack business acumen, risk-averse, slow in decision-making and their investments mainly political as opposed to commercially motivated. TRUE! And for this precise reason, I believe we need to rejuvenate our GLCs by removing (or perhaps reducing) the number of civil servants in the companies. Let’s put true entrepreneurs and real managers. If we can’t find locals then for the love of Brunei, hire (the best money can buy) foreign experts! Because the lack of competent local human resource to drive the economy is our main problem in the first place (which is nothing to be ashamed of, given our small population and the current nature of our economy, however this does not mean that Brunei’s HR should forever be at the current state) and I don't see anything wrong in hiring foreign talents. Nevertheless, we should be using Singapore as an example. Singapore’s phenomenal economic growth is, after all, the result of its strategy of ‘state capitalism’.


Let’s face the fact, we are not exactly a foreign investment magnet and on its own, our private sector is too weak and too small to drive the economy. At the same time, our oil is depleting. Therefore, I believe the inevitable solution is for the government, through its GLCs, to assume a proactive role both in the entrepreneurial development and the economic diversification effort. For the GLCs to assume this role efficiently, they need to have adequate resources and most importantly become proper business entities which mean risk-taking and being competitive. It is time for the government to let go its domineering role in the GLCs’s decision-makings and to also take the risk. Because if it doesn’t, then the only alternative for Brunei is for us to pray (very hard) for oil to never runs dry.

Salaam.

Moral Hazard

I'm quite pleased that someone brought the issue of moral hazard in my last post. Because to me it is precisely the reason why currently there is a debt of $15 million.

For those of you who do not know what moral hazard is, it is a 'behaviour' that occurs when someone KNOWS that he will not bear the full consequences of his action. (Notice my emphasis on 'knows'). So in the case of the housing debt we talked about in the last post, people are not paying simply because they know that there is nothing the government will do.

And this is also precisely the reason why we should have different sets of policies for different sets of people (and probably different sets of houses). At the moment, everybody (the poor, the rich and those in between) is paying the same amount of money with the same set of terms and conditions, which to me simply is not fair. And I also believe that this is the reason why any kind of enforcement is difficult because by 'punishing' one debtor entails the 'punishment' of ALL debtors, regardless of the economic status of the debtor. So, while sending a summon or court order or even confiscating the house of those debtors who are actually able to pay can be accepted as a just and a proper action, it is however morally unacceptable to do the same thing to those who are genuinely unable to pay.

Therefore I believe that my suggestion to write off the debts of those who are genuinely unable to pay i.e the poor and ONLY the poor, will not lead to moral hazard. The effectiveness however lies in the efficiency of the relevant agency to detect who is genuinely unable to pay and who is not and to be ready with the 'punishment' to those who are attempting deception.

Anyway, while the objective of providing a roof or a land for every Brunei household perhaps sounds simple, it does not necessarily mean that the policy needs also be simple (i.e. one policy, applies to all) which has proven that it is NOT simple at all. I believe nothing wrong with some creativity in policy-making as long as the objective is met.

There is a need for us to be clear with our national objectives; and every policy or every department or even every ministry must cater to each and every objective. From my humble observation presently this is not the case. Everyone seems to be trying to be a champion and meet its own objectives which most often do not tally with the national objectives. Oh well, what do I know? I'm just a student with loads of 'idealistic but not necessarily realistic' theories, ya?

Salaam.

Housing Debt

According to the Dep Perm Sec of the Ministry of Development, there is a $15 million outstanding loans for the National Housing Scheme and Skim Tanah Kurnia Rakyat Jati, and this if repaid can help build an additional 100 houses of class E plus infrastructure (see here). In other countries, housing loan arrears can result in homelessness (i.e you'll be kicked out of the house!) but NOT in Brunei.

*Tsk*tsk* Shame on You! Ungrateful Bruneians..!

But then I said to myself, $15 million? Only?! The last I checked, Brunei’s GDP was $15.9 billion in 2005. If you think about it, that’s only about 0.09 per cent! As much as I want to condemn this act or irresponsibility, I am sure there are many cases of genuine inability to pay. In the spirit of eradicating poverty in Brunei, what is the possibility of writing-off some of those debts? Especially to the poor, actually ONLY to the poor.

At this stage, I’m sure some of you would say “NO Can Do!” because that’s what my husband just said : ). I do, of course share his fear that the moment you give something ‘free to the poor’ then everyone will claim that he/she is poor. But then I said, I can also claim I am the Queen of Sheba and I am sure no one would believe me unless I can produce some evidence. So, for a person to claim he/she is poor, he/she needs to produce the evidence including declaring his/her lack of wealth and property.

Now, you ask, what about those who have children who can bail out their parents? You see, I think we assume too much. I ask, what makes we think that the children are willing and able to do just that? And for this reason, I believe we must have a system that ensures that the payment of the house is the sole responsibility of the buyer (i.e. NOT his children Nor his guarantors).

OK, what I’m trying to say is that Brunei needs to review its housing schemes. I think we simply cannot have a “one shoe, fits all” policy. Clearly, those who are unfortunate and less-able should have a different set of terms and conditions and prices. On the other hand, we need to tighten the conditions to those who are able, ensuring that they WILL pay (including a mandatory insurance that covers death).

Nevertheless, at the end of the day I cannot help but think that it is actually up to the individual to uphold his/her responsibility. At this stage however, I am really sorry that Brunei is unfortunate to have many irresponsible, dishonest and selfish people.

Salaam.

Tourism oh tourism

This morning my husband and I were discussing about the place for our annual family vacation. Considering this year will be my last year in the UK, we thought of several places. Given our limited budget (otherwise we would love to travel to ALL places), we need to find a place which would give us the most value to the (limited available) money we spend, where the children and us can equally have a blast. In the end however, we settled for Disneyland Paris even though we went there 2 years ago.

For those of you who have been to Disneyland Paris, I'm sure you will agree that the place is super-fantastic and it has the X-factor (ie. the ability to make you feel, no matter how old you are, that you are in a fantabulous land and you wish you can stay there forever, well at least until your money runs out hehe). For those of you who haven't, then I can assure you IT IS :). And then there is Paris...the city of love *sigh*.

Now, if you apply the same rule to Brunei as a tourist destination, my question is what is our X-factor? What can we offer to a person who is spending his/her limited budget visiting our country? Or if I were the potential tourist, I ask WHY should I spend my hard-earned 700pounds (or any other amount for that matter) to come to Brunei?

Our quest to become one of THE tourist destinations in the South East Asia, in my opinion, is no easy feat. After all, look at our competitions in the region. However, I also think it is NOT impossible. Our main challenge is not that we don't have the factors that can make us THE tourist destination; rather it is the lack of will, determination and co-ordination among the relevant government departments.

Every time people bring up the issue of tourism, the first thing people talk about is that Brunei is a 'dry' country. The impression I get is that people seem to think that no alcohol= no tourists. What a lame excuse, really. It makes me wonder, do people really travel to consume alcohol (which they can find back home)? Now, before anyone argues FOR the changing of alcohol policy (I'm actually indifferent if the policy is reviewed), let us first look at what we can change without compromising our Islamic faith.

First, let's look at the beaches we have. We have beautiful beaches. Sadly however, the last time I visited them, they were dirty and not to mention the unspeakable state of the public washrooms. And for most of the time, nothing much was happening! Now, my questions are: 1) how expensive can it be to provide the service of beautifying our beaches? For goodness sake, you could even count the number of rubbish bins provided in each beach. For a rich country, I tell you, we are quite stingy! And 2) How difficult can it be to plan 12 types of happening activities for the 12 months of the year?

Next, we have our beloved old Kampong Ayer (Water Village) which is...simply old and dirty. I'm sorry I cannot help but 'smile' every time people mention Brunei being the 'Venice of the East'...Yes... that was aeons ago. Now, I'm not saying that we should just bulldoze Kampong Ayer. In fact, I am FOR preserving it. The challenge now is how to preserve it, beautify it and make it one of Brunei's X Factors. To me, this can only be done if ALL relevant authorities can put their heads together. This - the restoration of Kampong Ayer to its former glory, I believe, is the one project that actually deserves a foreign consultant. There are MANY issues to look into, among others are the sewerage system, an effective rubbish disposal, safety issues such as the fire-breaker system and the electrical system and last but not least, is the ways and means to make it into a desirable habitat of the 21st century!

And then, how about making Brunei into being THE family vacation destination? We used to have Jerudong Park. I tell you, it was the BEST! (At least in this region). Now, it has become a ghost park, which if the stories I heard were true, it really is a GHOST park (hehe). I wrote about JP some time ago (here) and my view still stands. Why aren’t we doing anything about it? Why are we wasting it? There is nothing you can do to UNDO the park so why don’t we make very good use of it? Honestly, I don’t understand. Really, if JP is restored, I think the tourism department won’t even have to spend another cent promoting Brunei.

Oh, and a PROPER Brunei Zoo, please! It is educational, fun and makes a natural (local and foreign) tourist destination.

Anyway, we have to accept the fact that Brunei can never be made into a 'wet and wild party' destination. But it doesn’t mean that Brunei can never be made into one of THE tourist destinations in the region. By declaring VISIT BRUNEI YEAR alone, doesn’t mean Brunei has become that destination. It needs combined efforts, strong will and obviously some spending. Otherwise, Brunei will forever be receiving this, this and this kinds of foreign tourists’ reviews.

Salaam.