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.
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12 comments:
orang kitani jangan takut kan berbelanja basar tapi berpatutan la... jgn usin atu d bayar arah consultant mahal2 tpi nada jua kana implement nanti... banyak udah belaku ni.
a small country like ours needs a niche, something unique, look at iceland they r no more bigger but their economy enviable... for brunei, kitani go back to basics but on a large scale supported by our govt, make our country self -sufficient, how? we have skilled fisherman, subsidies can go there, how about rice? beras kabun? fruits which are unique in borneo / brunei...
also i read the paper, i saw a malaysian making hydro engines or something, using h2o as fuel for cars... he copied it from the internet, wow!
i m no economic expert but look at iceland, who knows i might uproot my whole family there, if things and sikap pedangki kitani melayu ani nda brubah, cemana tah kan maju, tpi kalau melihat cina kaya pakai lexus bukan main, tpi nda sadar org cina pandai :p
but we can do without the silly aluiminium smelting idea :p
Luv ur article. Yes RE, u're right bout the contraction of the economy and without oil money, there wil be a lot less activity to stimulate demand. Though I believe, spending (ur case: Govn spending), is not the solution to economic development. The Govn support we need is an ingenius strategy to industrialise this small rock, which we don't have.
Mind you Singapore and many more had started way in the 60's so we wouldn't gain a comparative advantage in sectors that they have already ventured in. Sun, land and sea as u mentioned are not just unique to us. In progress, people are key. We have to find our niche. Do u remember that we are voted top 10 happiest people in the world? That's our comparative advantage. We should be in the business of making people happy! hehe..
PS: we got voted top 10 without drugs, booze, sex, etc.
In the absence of a strongly meritocratic environment, I find it hard to envision how such aspirations will come to fruition. The country's biggest challenge towards economic diversification and prosperity lies in putting the right people in the right positions, at the right time. That may involve a competitive compensation package, providing them room for maneuverability, delegation of authority etc. And without an environment where the best and brightest are provided a genuine opportunity to shine, identifying such pockets of talent can be compared to searching for a needle in 100 haystacks. Outside oil and gas, how many of Brunei's numerous attempts at ambitious undertakings could actually have been said to be a success? It all boils down to having the right people, at all levels of the chain of command, not just at the top.
I am indeed implying that the challenge the country faces is a cultural one. And cultural changes take generations to evolve. So I absolutely agree that changes need to happen now. But before taking another stab at another hugely ambitious project, surely we should consider the HR structure of the undertaking (where talent is sourced etc.), before cutting to the nitty gritty of the project. Because ultimately, top organisations are organisations run by people.
anon, ur talking Lewin's abt management of change strategy. i dun know much abt management but i do know a country is never run like a business organisation and its not merely run for maximising weatlh and corporate responsibility but much beyond... and culture is what makes a country ticks.
i agree w u on this one baz, theory xy mgt doesnt apply here and it is a long way before we cud pay market rate wages but so is msia. country development is a passion, a few good men cud do it. in spore, it was the EDB chairman who dared to dream. w some support of course.. who is our champion?
My comments are lengthy so I am posting them in http://kadaikupi.blogspot.com/2008/07/migas-less-brunei.html
patut tah kadaikupi, i dun understand it, r u saying we shud still look for more oil???
kadai kupi.. eloquent writing and interesting facts. i'd like to know what sort of Government role and public-private cooperation you were taking bout..
kadai kkupi for retired people ranting about past issues when they were in their job. They will keep on talking about the right things where they should have voice out during thier time in the job. so what they do now? is rant and wishful that younger generation will listen to them and take something for the better.
heheh, drpd kadai kupi baik tah ke masjid, berdoa saja tah utk generasi kitani masa dapan...
I will say this over and over again (even if the whole of Brunei disagree and totally object such a motion...) that the missing X-Factor - why Brunei lags far behind in economic development or diversification - really is the will of the people or in short - the political WILL! The POLITICAL Will is what is very much lacking.
In Singapore, the Peoples' Action Party (PAP) under the leadership of its founding elder statesman, Minister-Mentor Lee Kuan Yew, has been the driving force and the cornerstone of the island republic's rapid development and success story. Small country and no natural resources but it has been capitalising on its Human Resources! Quality education is the key to knowledge and wisdom... hence has managed to open the door to the golden opportunity to become and economic powerhouse!
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