The Curses

I'd hate to think that we are cursed. Double cursed. First, there was the Curse of the Resource (in our case, oil). Now, I wonder if we also suffer from the Curse of the Third Generation as explained by Hsu Dar Ren:

"Looking around us, we can observe that many super rich families often discover that their estate cannot survive the third generation.

The first generation often starts out poor, but through sheer hard work and thriftiness and a little bit of luck become wealthy. From being wealthy, many of them then join the class of the super rich as a result of good entrepreneurial skills and judgment. Many of them, however, remain thrifty even when they become very rich.

The second generation very often grows up during the time their parents were struggling to make their fortune. They are better educated and often will be taught by their parents to "fish" intelligently. So when the family fortune passes to their hands, many of them can still maintain the business and some even expand on it. They are, of course, less thrifty than their parents, and will often marry someone from a rich family.

However, the third generation is usually born with silver spoons in their mouths. They are generally brought up in a life of luxury. They are usually not taught how to fish but are pampered with all sorts of expensive "fish" and hobbies. Many of them are sent overseas for education, but it is not uncommon to find some of them just fooling around and living an extravagant lifestyle. They are given everything and because of that, they do not really know how to cope with difficult situations and the intricacies of the business world.

Adding to that, the family wealth inevitably gets diluted among the more numerous siblings in the 2nd and 3rd generations, especially when these generations are unable to do much to expand the family businesses.

So, the wealth that was passed down just withers away. This is commonly known as the Curse of the Third Generation".

Fate, Cursed or whatever you want to call it, as a Muslim I believe:

“…Surely Allah does not change the condition of a people until they change their own condition…” (Qur’an 13:11).

Salaam.

A Blessing in Disguise, right?

These days almost on daily basis we read about the impending recession that will happen in the UK and the US which will affect many-many countries whose economies depend on the demands from these countries. Those, coupled with the increasing global food prices and the skyrocketing oil price, mean doom and gloom for the world economy.

Then I thought are we lucky or what? This is what I think, for some blessing-in-disguise sort of luckiness, all of the world events may probably have little effects on us. Thanks to oil, we have not been producing anything else which means we will not be affected by the fall in world demand of anything, well..except oil. As long as oil price goes up, then we haven’t got anything to complain. Our economy will continue its growth. Our inflation stays low (thanks also to oil money that have been used to subsidise our cost of living). And if there will be a recession, we will actually stand to gain. A world recession will push the prices of all goods (including food) downward. Since we import almost ALL of our needs, then we can continue not producing anything and buy from abroad, which in fact will become cheaper.

And then we all can continue growing… without development.

And of course, if only oil never runs dry.

Salaam.

Life After Oil

I was reading the post made by Brunei Resources on ‘Life Without Oil’. He suggested that Brunei should either decrease government spending and/or increase our tax base, which in economics term is what we call ‘contractionary fiscal policy’. This policy is usually applicable to an economy that has a budget surplus, which thanks to the soaring oil price, is actually the case for Brunei. But if you take the oil effect, Brunei’s budget will not be as handsome as it is today.

The effect of a contractionary fiscal policy will be a reduction in the aggregate demand which is not exactly the right prescription for a country that has little economic activities. Having said that however does not mean that the government should just spend all its income. It should be mindful of what it is it’s spending on. What we want is productive spending (and I agree with Mr. BR, this does not include subsidy). Spending that can stimulate the non-oil economy. And we want lots of this. Being a small economy (defined as having a small population) is not without its problem. And for that reason I personally think we need a strong government support (while it is still able) to help the economy as much as it can.

But the question of life after oil is still unanswered.

To answer this, we need Ricardian’s Theory of Comparative Advantage which says that we should produce and specialize in the production or services in which we have comparative advantage. What? You may ask. I say, look around us. We are so fortunate to have plenty of sun, land and sea, which I believe are extremely under-utilized. With a bit of hard work, I’m sure Brunei can develop its comparative advantage. If Singapore, an island that has an extremely limited natural resource can become one of the Asian’s dragons or Liechtenstein with a population of about 34,000 people and equally has a limited amount of natural resources can become one of the highly industrialising economies, then so can Brunei!

Life without oil will not be the end of the world as long as we do something about it. And we should start NOW. The current generation must help the future generation in the transition of oil to non-oil economy. Any ‘rentier’ habit has to be removed from the current system and the mindset of all Bruneians. With the right attitude, the right mind and the right policy Brunei could and should thrive. There must also be a strong will both from the government and the people and of course, some hard work too.

Salaam.

Brunei and Oil Love Affair

My friend Roger Lawrey talks about Brunei's diversification.
I couldn't agree more.

Salaam.

Reality Bites....in Miri

Somebody sent me a link to a blog post by one of our Sarawakian friends. For the benefit of those who do not have a Multiply account, here it is:

MONEY WITH A DIMINISHING VALUE by Zaidil

There is a sudden change in atmosphere in Miri city after the fuel price hike. There are less cars on the road. The shopping centres are less crammed and worst of all... there are not that many happy faces around. From what I sensed, it is just the beginning. The experts predicted that the trend is likely to continue that way for quite some time. So what do we do?

Nothing much I am afraid. If you are an optimist, you will say - work harder so that you can earn more to compensate for the diminishing value of the currency. At the rate the price of goods is increasing you have to earn at least 2 times what you earned a month ago in order to maintain the same level of lifestyle.By the end of this year, you have to earn 4 times what you earned in April. This week Abdullah has just announced that if you work in the govt, you are allowed to do a part time business. Wonder how will that affect the already inefficent govt agencies?

On the other hand, if you are a pessimist, you will start looking for scapegoats and punchbags to put the blame on.

The situation is however not all gloom and doom. The bright side of it all is that there is a lot less road accidents ever since the price hike was annunced and people started to use the public transport more. Actually last sunday was the first time that I went to Boulevard supermarket without anyone ramming my butt with the trolley. I had the entire supermarket for myself.

Another positive development is that people started to think of growing their own vegetables and rice which I think is not a bad idea at all. Myself, I am thinking of digging the document bag to search for that land title which my grand father left more than a decade ago. With a bit of luck the cockroaches have not been so hungry to savour the land title and I might be able to harvest my own Bario rice. Oh do I have to fly to Bario to grow Bario rice!!

We should be grateful that Brunei still maintains the fuel subsidy (I don't know when will that last though, and I'm not sure whether it is the most sensible and rational policy). Nevertheless, I'm sure Brunei is also affected by the policy change in Malaysia. Perhaps this effect will probably even bigger than an effect of a reduction in Brunei's fuel subsidy.

Too bad for a country that depends on too much import.
But that's reality. And reality bites.

Salaam

Oil Price

I received an email today asking my view on the current issue of the current global oil price hike and the possible 'answer' to the crisis. It has been in my head the whole day today and I'd like to share you my reply to the email. I also believe that as an oil producing country ourselves (albeit small), this issue concerns us. I would also love to hear other views.

Below is the content of the email:

Dear Freakonomist,
I'm Raiza, an ordinary person who wonders alot on what on earth is gona happen to the world when the oil price hits US$200/ barrel which in turn would give a spiralling effect to the worlds economy wreaking havoc the global financial market. Understanding that you believe there is an economic explanation to everything intrigues me and leads me to email you on the following issues. I humbly request for your opinions and explanations.

What has been bothering me lately is the fact that inflations are occuring in most countries, Brunei is of no exception. I strongly believe that one contributing factor to this is the disturbing rise in oil price.

There are several excuses to the rise in oil price:
1) The global demand for oil is rising.
2) The dollar continues to fall to record lows.
3) And, OPEC refuses to raise production levels, insisting US recession will lower.

Today's newspaper mentions despite the Jeddah Summit where policy makers gathered to have emergency energy talks and that Saudi agreed to increase production by 200,000 barrels to 9.7 million per day, the oil price continues to rise. The rise in oil price this time is blamed on possible terrorist activities in Nigeria. If this is true then yes this would choke oil supplies hence demands on oil can not be answered fully.
Unless... more explorations are done which will mean more huge investments are needed. The story on the energy crisis seems to go on and on and no apparent favorable explanation to resolve the said crisis.

My question now is what are all the possible 'solutions' that can help the world to return to its stable state in the short-term and medium-term? Going green is one but this surely will cost us time! I hope to hear from you soon.

This is my reply:

Thanks so much for reading my blog. If I know the answer to your question then, I wouldn’t be sitting here at home and writing this :).

Nevertheless, this is what I think:

1. I don’t think there is an ‘easy’ solution to the current global crisis because as you clearly point out, there are several reasons to the rise in the oil price. Addressing one or trying to do so without solving the others, does not guarantee that the issue will be resolved, as is the case to the Saudi’s agreement to increase oil production (i.e. oil price remains high).

2. The US needs to strengthen its dollars but that would mean at the expense of the US economy, which as we speak, is ailing. A stronger dollar may worsen their Balance of Payment, which would not help their economic health. But a continuous weak dollar will surely be followed by a continuous increase in the oil price.

3. And then there is a problem of increasing global demand. Now, the ‘economically’ right thing to do is for all governments in the developing countries (where oil demand is high and growing) to remove any oil subsidy. If the domestic oil prices in these countries reflect the international price, then demand for oil will surely go down. But this is (as you can imagine) not without a great cost.

4. Another factor that’s causing the increase in price, if I may add, is the work of the commodity index buyers and speculators. Now, this needs to be stopped.

Without doing all of the above then sadly, it may be true that the only solution to the energy crisis is an actual global recession.

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.

So You Think You Can be like Dubai?

"My Grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel"

Sheikh Rashid, the previous ruler of Dubai.

Well, a couple of years back (actually for all I know, we still think we can be like Dubai) there were talks about following Dubai's model to development. Nothing wrong with that - as long as we talk, the talk and walk, the walk. Anyway, I found this interesting Harvard paper 'Dubai Strategy: Past, Present and Future' which to me gives a good crash course on Dubai's development. Have a read, it's only about 9 pages long (minus the graphs) but really it tells the goods and the bads, which can be very interesting lessons.

Salaam.

P.S. Thank you all for your comments/views on my previous posts. I will get back to them once I've handed my chapter to my supervisor.

How Poor is Poor?

A few weeks ago, my officemate and I had an interesting conversation. He comes from Guyana, a country in South America. We were discussing about our economies. And he asked me whether Brunei has any economic problems. Well of course I told him that we have had the problem of trying to diversify our economy and being a 'richly' oil-dependent country we also have our own unique set of problems which include unemployment and to a certain extent, poverty.

So he asked me how is 'poverty' in Brunei? Poverty in Guyana according to him means you are so poor that you probably can't even buy the basic food for the day. And about 40% of the population is poor.

Well to tell you the truth it is quite a difficult question to answer. Firstly, we don't have or rather we don't publish (if there is one, that is!) our poverty line. Poverty line is the minimum level of income that is required in order to achieve an adequate standard of living. Of course, different countries have different levels of poverty line. Richer countries would have higher rates. So I guess, if Brunei were to have its poverty line, ours would be higher than the Guyana's. It would also be VERY interesting to know what percentage of people falls below the poverty line (perhaps a post on this topic soon, ya?) Anyway, I told him, I have not yet seen or heard of extreme poverty in Brunei probably because we are quite blessed with a caring and a giving society. The moment we hear someone is in need, we quickly rush to give some help.

Anyway, our conversation continued. Guyana, being a poor agricultural country, imposes about 30% income tax and on top of that about 20% value added tax (i.e. tax on goods and services). I then asked him whether he was thinking of migrating to the US or even the UK. And interestingly he told me NO. Despite the fact that the economy and the politics are in sh*tty conditions, he said he would still want to go back and DO something for the country. He said, people accept their lives. High taxes and so on. As long as they are happy, then they are not complaining. They are grateful with what they have and with their beautiful country.

At that time I was thinking to myself, there we were debating whether or not Brunei should stop giving the fuel subsidy, when these people from poor countries are so content with their lives! How pathetic can we be? Who are poorer? They may be poor in monetary terms but their spirits and strengths are definitely richer than us. In that sense also, we are poorer in terms of our inability to become less dependent from the help of the government. I actually wonder how many people or graduates have actually thought that they want to work for the government to help build the nation rather than thinking of getting all those perks?

What I'm trying to say is that we should be grateful with what Allah s.w.t has blessed us with and to a large extent, our caring government. We have no political havoc to deal with and apart from the road tax, we have never had to pay any other taxes. Perhaps, for a great many of us, don't even know what 'tax' is?

Anyway, in light of our coming 24th National Day, let us all together be strong in spirit and strength, independent in minds and together help build our nation.

Salaam.

Fuel Subsidy, Again.

I'm quite disappointed with the comments made by the acting Chairman of BEDB. As an economist and an entrepreneur, it is actually the least I expected from him. A few days ago he did mention that Brunei should stand up and face the economic challenges and be prepared to changes and be more adaptable to changes. Well, this is a challenge! If Bruneians can face this challenge, then let's bring the others...

First of all, he didn't seem to acknowledge that car fuel, at times when global prices are rising, is not a necessity. True, people's lives will be affected as the cost of driving a car will go up due to a reduction in subsidy and it will also affect the prices of goods. But I believe people will react by economising not only the use of their cars but also their day to day purchases down to the level of necessity. It would certainly be a different matter, if the government were to reduce the level of subsidy on electricity (but again Bruneians DO NOT economise their electricity usage).

Now, if the government were to decide to go ahead with the slashing of the fuel subsidy, the relavant government agencies should come forward to alleviate the effects on the lives of Bruneians. Firstly, this is when Price Control should be THE active policy in regulating the prices of necessities. Price ceilings of goods which are deemed staple MUST be worked out NOW so that sellers do not take advantage of the increasing fuel price.

Secondly, the Ministry of Education and/or the Ministry of Communication for instance, should come forward in helping parents transporting their children to school. School buses have to be provided and preferably privatised. This will not only directly help the people but also can help boost the transportation industry.

According to the Minister of Energy, about B$500 million was spent on the fuel subsidy in 2005. Again, that's A LOT! The money could be spent on other productive activities including in providing the resources for the above-mentioned activities. But the one use that can directly help the weak private sector and perhaps nurture new entrepreneurial ideas is to use it as SEED MONEY. Instead of spending millions making Bruneians lazy, why not use a fraction of the money making lots of Brunei entrepreneurs. Now BEDB could play a big role here as the agency responsible in giving seed money to the potential entrepreneurs.

Anyway, what I'm trying to say is that in 'every challenge there lies an opportunity' as there must always be 'a blessing in disguise'. This should be the slogan to any good entrepreneur. And I also wonder why should Bruneians be insulated from the effects of the global forces as I think it is unhealthy to the development of a resilient economy and a nation as a whole. It is high time, Bruneians learn to think rationally and start prioritising their lives. Not only that, I also think that a shock is probably what this sleepy country needs to revitalise its weak economy.

Salaam.

"The basic difference between an ordinary man and a warrior is that a warrior takes everything as a challenge while an ordinary man takes everything either as a blessing or a curse." (Carlos Casteneda)

P.S. If you read the news, the US economy is heading more and more towards a recession. A gloomy sign to the global economy. Now, that's a BIG challenge!

YES To Realistic Fuel Prices

Many people may disagree with me, but I think after so many years, finally someone is thinking with a right mind!

If you read my previous post on car fuel, you would know that the prices of car fuel in Brunei are perhaps the cheapest in the world. It is not without its cost. And the cost is obviously borned by the government in terms of subsidy (for 1 litre of diesel, the government is paying about 80cents and 60cents for a litre of Premium 97). That is A LOT!

Many of you would, by now are probably thinking, 'So What? Oil Price is soaring high now, surely the government's coffer is filling and why not share with the people?' . Well, first of all, oil and fuel are 2 different things. The car fuel's prices depends on the oil prices. When oil price goes up, the fuel price also goes up or the cost of producing fuel goes up. The price that we pay however is way below the cost of production. That means the government has to spend more on subsidy to ensure the fuel prices we pay in Brunei stay the same.

Secondly, yes it is true that the increase in oil price would definitely increase the government's revenue, but the money could be spent on other productive things which would have positive economic long-term impact on the country. Life is, after all, not all about cars! And, I believe it is also the time that the government increases its saving (and investment) for Brunei's future generation. in order to maintain our standard of living.

Thirdly, I honestly think that it is high time that the Bruneians live in a real world. By having realistic fuel prices will definitely awaken many people. The last previous posts, I wrote about 'rentier mentality'. As a result, many Bruneians take things for granted. Ever since Brunei started to export oil, Brunei has become a 'welfare state' up to the point that the people do not seem even know how to stand on their own feet! The government becomes the soul provider and this causes Brunei economy to stand still. Worse, people endlessly complain that the government is not doing enough. People want MORE, but never GIVE back!

Look at Norway, the third largest oil producer in the world. Do you know how much their fuel costs? The last I check, it was about US$7 per gallon. With the current US rate, that's about B$2.40 per litre! The government imposes higher tax, at times when oil price goes up, to reduce consumption. And their population of about 4.5 million use cheap hydro energy power! Well, where they have 'hydro power', I think Brunei should seriously be looking at solar energy as an alternative. And, now is a GOOD time for Brunei to seriously invest in some solar power.

OK. If you are still not convinced that a reduction in fuel subsidy (an increase in the fuel price) will do Brunei a greater good, I also believe that other positive impacts will also result.

First, I think the transportation industry may stand a good chance to benefit from such policy. People may start using buses and taxis. If you are still asking whether or not Bruneians are ready to take such dramatic actions (dramatic only in Brunei as it is perfectly normal for people to use public transportation abroad) well of course the answer would be NO. No one is ready to change their comfortable lifestyle. But an improved transportation industry will create more employments, improve services and most of all, can help reduce pollution.

Second, the price of cars will go down. The rule of demand and supply will apply. As demand for cars go down, price will follow.

Third, people will (hopefully) think twice of buying luxurious cars for the sake of showing-off and instead will spend the money on other important matters in life :)

Finally, I also think that it will help foster a stronger family relationship and communication. People, especially family will economise the use of cars. Gone will be foreign drivers. Parents will collect their own children. Husbands and wives will probably share the same car. As a result, communication improves and LOVE grows.....hehehe.

Anyway, these all are just my thoughts. I will probably change my mind when I'm back in Brunei haha. But I still strongly feel that more positive effects will come out of a policy change in the fuel subsidy. Proper research on the impacts obviously are called for. I do however hope it WILL be implemented.

Salaam.

P.S I am still sure that many of you are saying that 'Other prices have gone up too!'. Well, I say 'Welcome to the Real World.....'.

Paradox of Plenty: Are We Cursed?

A few days ago BB reported the findings of the Asian Development Bank's International Comparison Study (click here for the ADB report) and that Brunei was the richest in the region with a GDP Per Capita income of about US$34,600.

Translation: It is the amount that every person who lives in Brunei (those who make up the population) would receive yearly from the income generated through productive activities. Well, now you know what it means, please don't go march to the Ministry of Finance and demand that money! In reality, as we all know some earn more and some earn less. And of course, if the government were to spend all the money on its people then what future would lie for us? Basically Per Capita income is used as a measure of wealth i.e. the higher, the wealthier.

Now, back to the ADB's report. Should we celebrate being the richest?

Look around us, we have unemployment, people rely on government employment, the private sector is weak and the economy is far from being diversified. These, ladies and gentlemen, are the traits of a country 'cursed' with natural resources. The economic term for it is the resource curse thesis (Richard Auty, 1993) which describes how a country cannot use its wealth to boost its economy. What happens is that because the income from oil and gas (the natural resources) is so high, the economy revolves around it. The government who is the recepient of the oil income, for example, pays higher salaries then other (private) industries. As a result, everyone wants to work with the government. Another example is tax. Because Brunei is so rich, the government doesn't want/need to burden its people and as a result we may be deprived of more efficient public services.

Another negative effect of having an abundant natural resource, particularly the richly oil, is rentierism. A rentier state is a country which derives a large portion of its national revenue from a natural resource. The characteristics of a rentier state which are not favourable to the economic development, among others are limited linkages between the oil sector and the rest of economy, high dependence on import of goods, lack of economic diversification, a large import of foreign labours manning basic services and many others (which are quite sensitive but very interesting!).

Perhaps, the most negative effect of being a rentier state is the creation of a 'rentier mentality' in which rewards of income or wealth do not come from work, but come as a result of chance (Beblawi, 1990).

Anyway, to me these are all very interesting. I sincerely hope that somebody would do some research on how badly 'cursed' are we? Or should we really blame the natural resources? And what should we do to right the wrongs? And many other questions.

Oh, well it's almost midnight and my back hurts. Till then.

Salaam.

The Economics Behind the Fuel Limit

At first I thought I wouldn't write anything until after Raya. However, I'm quite surprised by the bold measure taken by the government regarding the limit to the amount of fuel a foreigner can buy (see Brudirect).

Basically the government is giving a ration to foreigners. The effect of a ration is equivalent to the effect of reducing the price, however with the objective of restricting demand. So, for those of you who are familiar with the Demand and Supply curves, when the price is set below the equilibrium price, there will be an excess demand i.e. the quantity demanded will be greater than the quantity supplied.

The reason why the government is doing this is simply because the government has incurred (I presume) a large amount of losses. In case, many of you do not know, the fuel prices in Brunei are probably among the cheapest in the world. Also, year in year out, the prices you pay stay the same. (For example, here in the UK, the fuel prices are about 95pence p/litre for petrol and 97 pence p/litre for diesel, that's like $3.00 per litre! and the prices we pay vary each day). Why? Well, it is not because we are producing oil (those are crude oil and they aren't the fuel!), it's mainly because the government has subsidized the prices we pay. How much? I don't know, but I believe it's LOTS. Even if the amount of the subsidy is not much (highly unlikely), the government has also made losses in terms of the potential income it can get from selling the fuel, through the various taxes it can impose. (About 70% of the fuel price we pay in the UK are taxes).

Therefore, it is not really fair for the Brunei government to also subsidize the foreigners, many of whom unfortunately have abused our kind system (For e.g. having hidden tanks in their cars for the sole purpose of re-selling the fuel back in their home countries at higher prices - I think the fuel price in Malaysia is fixed at about RM1.90 per litre s so any price below this would be good enough). I don't also buy their excuse that the limited fuel is not enough for them to travel back and forth. Hey! Don't they have have fuel stations across the borders?

The downside of this policy however (as is always the case when there is excess demand) is the emerging of a black market. This time, I'm afraid it will be our own Bruneians who will be abusing the system, taking the advantage of selling fuel at higher price to foreigners. I hope, there is a readily preventive policy and its implementation for such occurrence. If however that happens, I will be more ashamed to call them our Bruneians.

Once again, we all should be grateful with what our government has provided us. Don't abuse this generosity. It may not last forever.

Salaam.

PS. We might also see a reduction in the number of 'tourists' coming to Brunei. This perhaps will give the true number of genuine tourists. And I would also love to hear other views especially those against this policy.

Time for Brunei Oil Fund A.S.A.P

Ok. I read this article from Slate which is about Norway oil fund (for the full article please click here) which I believe that Brunei SHOULD follow suit (if Brunei hasn't, that is).

"Less than 20 years after they started producing oil, the Norwegians realized
their geological good luck would only be temporary. In 1990, the nation's
parliament set up the Petroleum Fund of Norway to function as a fiscal shock
absorber. Run under the auspices of the country's central bank, the
fund, like the Alaska Fund, converts petrodollars into stocks and bonds. But
instead of paying dividends, it uses revenues and appreciation to ensure the
equitable distribution of wealth across generations."

Now, their fund is worth "about $311 billion—or about $67,000 per Norwegian. With a 40 percent allocation in stocks, the fund owns more than $120 billion in shares around the globe".


Let's learn from the mistake made by the Saudis:

"the richest oil nation on earth still resembles a garden-variety poor
country: a 25 percent unemployment rate, tremendous inequality of wealth and
assets, a massive public debt, and an undiversified economy dependent on
commodity exports."

And let's pray that Brunei oil NEVER runs dry....

Salaam.