Road to Diversification

This is the kind of news that I love to read in the morning. Hopefully this too.

Salaam.

Wawasan Brunei 2035 and National Development Plan 2007-2012

I have not read Wawasan Brunei 2035 (Brunei Vision 2035) nor the new National Development Plan (Rancangan Kemajuan Negara - RKN), which for some reason was not called the ninth. Hence, I cannot really make a lot of comments on the contents of these 2 national books. For everyone’s benefits, there are 3 main objectives to achieve Brunei Vision 2035 and these are:

1) Brunei to be recognized as a highly educated and skilled people;
2) To have a quality of life among 10 top nations in the world; and
3) To be among the top 10 GDP per capita income nations in the world.

I have found some interesting reads regarding Wawasan 2035 including a presentation made by Dr Richard Leete at the Brunei Forum in Singapore and an article featured in the economist.

The most interesting paper I came across however was a paper by Brunei’s National Development Party which can be found here. The 17 page paper, written in malay, highlights a few weaknesses of the new RKN and gives some proposals for improvements. Among the key points are (pardon my poor translation):

1) The new RKN lacks a comprehensive planning structure: For instance it does not show the specific sectors to be developed and their projected contribution to the economic growth. It also does not address the demand and supply aspects of economic development which will give a more realistic picture;

2) The use of GDP per-capita as the measurement of quality of life will not give a true picture. The GDP per-capita is not a measure of income equality. A greater income equality will ensure a higher quality of life. The Plan however does not address the issue of income equality;

3) The lack of detailed data to support some of the strategy such as the reduction of foreign labour dependence;

4) The lack of strategies to achieve some of the human resource development objectives;

5) The Plan does not explain the method of the calculation of the multiplier effect, which will be used as the basis of project selection.

From my point of view, those points are valid, economically sound and definitely not some mere criticism. What they have raised in that paper are very important and should be taken seriously by the relevant policy-makers in ensuring the successful implementation of the current and any future RKN.

Salaam.

Land Dilemma

I found an interesting article by Brunei’s National Development Party on the issue of land ownership (click here) which reminds me of a discussion I had with a colleague from the Land Department.

I am no expert in the whole land issue/policy but I do not think the objective of ensuring the local ownership of land has been successfully met, in fact I think it actually has backfired. True, it is a sensitive issue. And for that precise reason, it needs a special attention. The Land Code 1909 really is too outdated, and I do think it deserves some amendments that can accommodate the needs of a new century and most of all the needs of the current economy and its future development without compromising the ‘rightful’ ownership. However for now, I reserve further comments.

Salaam.

National Development Plans: Summary1

I am going to share with you the finding of a little exercise I did at the beginning of my research. After reading all of Brunei’s National Development Plans, cover to cover, I made a matrix (which I must say is not an easy exercise!) of each RKN/NDP’s objectives, strategies, finance allocations and the targeted economic projects/industries to be developed.

Today, I am going to show you the list of targeted industries/projects beginning from the third National Development Plan (as the first two mere talked about physical infrastructure). The aim of this is to sort of reflect, remind ourselves and see how far we have gone to achieve any of the targeted projects. If we have, how successful was it? If we haven’t then the question we should ask is why? (Unfortunately I do not have the data to measure the achievements).

NOTE: ALL of these can be found in the published National Development Plans!

(Apology for the untidy presentation and BEST VIEWED using FireFox!)

3rd NDP (1975-79)
1. Rice production
2. Agriculture: sweet corn, yellow beans and high protein cattle grass.
3. Livestock: meat and eggs.
4. Castor oil plant
5. Tree crops: pineapple plantations and palm oil estates
6. Fisheries: marine fish
7. Forestry: establishment of a Kraft Pulp Paper Mill and a timber complex.
8. Other mineral resources: development of gravel in Temburong, silica sand in Tutong and coastal terrace clay and ceramic clay in Jerudong.
9. Tourism: Construction of hotels.
10. Oil and gas: Ammonia and Urea plants
Agro based industry: sago processing plant

4th NDP (1980-84)
1) Rice production
2) Livestock production: goat farm, cattle breeding.
3) Uplands crop: maize, soya beans, cowpeas for animal feeds
4) Fisheries: fresh water fish
5) Forestry: timber production
6) Other minerals: Silica land in Tutong (with reserves of 20 million tons), sand mining and pottery/tile industry based on coastal terrace clay and ceramic clay
7) Agro industries: vegetable oil, castor oil, animal feed, leather works, oil-palm, fruit juice and puree factory, orchard growing for export, coconut oil extraction and fibre factory

5th NDP (1986-90)
1) Agriculture and livestock industry:
• Rice, Tropical Fruits, Vegetables, Cattle, buffalo and goat, Chicken and Eggs
2) Fisheries:
• Marine fish, Aquaculture: freshwater and brackish water, Fish meal
3) Forestry:
• Using swamp forest product for plywood, Fibre-board factory using woodchips from the sawmill factories
4) Manufacturing:
• Food processing: canning and packaging,
• Furniture
• Potteries and Tiles
• Textiles: high value added types of garments using modern and traditional technologies
• Cement factory to grind imported clinker
• Precast concrete factory
• Chemicals and dyes
• Plywood and Wood paneling
• Glass from silica sands in Tutong

5) Tertiary Industry: Banking and finance, Insurance, Maintenance services

6) Financial Centre
7) Trade Centre
8) High value-added, non-labour intensive industries
9) Bio industry

6th NDP (1991-1995)
1) Industry
• Industrial sites to be developed in 3 districts
• Identified industries are:
o Mini steel plant
o Light-weight aggregate
o Dairy milk
o Glass
o Pre-cast
2) Agriculture:
o Rice
o Hydrophonic vegetables
o Eggs and poultry
o Local fruits and production of seedlings
o Horticulture
o Buffaloes and goats

3) Forestry: Rattan plantation for furniture industry
4) Fisheries: Marine fish

7th NDP (1996-2000)
1) Oil sector:
• Plan to develop the oil and gas industry into downstream activities including:
i. Ammonia/Urea
ii. Methanol
iii. Export Oriented Refinery
iv. Other Petrochemical such as plastics and paints

2) Primary Sector:
• To produce 7% of rice requirements;
• To maintain the self-sufficiency level of egg production;
• To meet 70% of local chicken needs;
• Increase production of vegetables, plants and ornaments and livestocks;
• Aquaculture projects tp produce high values species for export

8th NDP (2001-2005)
1) Oil and gas sector:
• Oil and gas downstream activities

2) Industry
• Value-added industry such as food processing
• Export specialized services such as engineering, Islamic banking, law, economy, accounting, architecture and estate management.
• Manufacturing: Construction materials and equipment, garment and furniture.

3) Primary Sector
• Agriculture targets:
 3% of rice requirement
 To meet 94% of vegetable needs
 To meet 47% self-sufficiency in fruit production.
 Increase production of ornamentals horticulture industry.
• Livestock industry:
• Broiler industry to meet 100% self-sufficiency
• Poultry production to maintain 100% self sufficiency level.

• Fishery sector:
• Production of rostris prawn
• Production of other fish species such as mud crab, golden snapper and barramundi cod.

4) Tourism and Trade
• Develop more eco-tourism destinations.
• Promotion of cottage industry such as:
• Traditional food, Weaved cloths, Rattan furniture, Plaited products, Malay Cap, Sculptures and carving, Woodwork, Silverware, Brassware, Malay dagger, Boats
5) Banking, Finance and Insurance
• To become an international financial centre through BIFC

6) Other promoted sectors:
• ICT for k-ekonomy; Transhipment activities.

Personally, I believe there is nothing wrong for us to come up with ‘new ideas’ for new projects each year, but we need to supply our ‘ideas’ (especially the fancy ones) with some strategies and plan of execution I suppose. Otherwise, it will just be another list in the non-exhaustive yet-to-be-achieved projects.

I have done the basic dirty work of compiling this list. For anyone out there who is thinking of pursuing a Masters degree and/or a PhD, I hope this is of some use to you. (Panjang amal). This could be used as a basis of developing a research question, I think.

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.

Road to Diversification

There has been another ‘exciting’ development in Brunei’s quest to diversify its economy (or I hope it is what we are doing), and that is Brunei wishes to be the ‘city in the garden’. Is this just a mere statement or is this a real project with plans and strategies already being formulated? If it is a real project, I would love to know and maybe contribute ideas but if it isn’t, then Brunei better do something about it because you can’t just announce to the world that you want to be something and not do it and expect the world to forget.

The thing about us in Brunei is that we love to make fancy headlines: ‘halal branding’, ‘heart of Borneo’, 'Kingdom of Unexpected Treasures', ‘service hub (ShuTT)’, ‘ICT park’, ‘offshore financial centre’, ‘Brunei Inc. (or something like that)’, just to name a few. Please don’t take me wrong, I’m not saying that we shouldn’t do this or we cannot dream big but I have yet to see the end products.

I think the main reason why we have not achieved anything in relation to these ‘fancy’ projects or actually ANY project is that there is a lack of detailed plan and strategies. Even if there is one, it is never shared with the public let alone debated. Even worse it is sometimes not even shared among the relevant agencies. As a result the public, including the private sector, do not understand, never mind contribute, and therefore the project is not appreciated and supported.

Take for example ‘halal branding’. Seriously, I don’t fully understand what is it that we want to do? What is our objective? Can it create massive employment? Can it increase food production? How much resources are we devoting? What is our problem? Why does it take so long? How can we help? Do we mean to say that ‘Brunei Halal’ is better that ‘Malaysia Halal’ or ‘Thailand Halal’? Because believe me, when I go to a shop abroad I only look for ‘Halal’ products. Taste and packaging play a more important role in my decision to buy a particular halal product.

I am no expert but I think it is high time that Brunei goes to the basic of development and economic diversification. Instead of devoting our energy and resources to fancy projects, wouldn’t it be better to concentrate in the actual production? I for one want to hear plans for massive agricultural production or fishery or any kind of manufacturing. It sounds boring but it is what we most need to survive. Do remember that we only have 25 years to turn our economy around. And that is not a very long time.

Salaam.

Meritocracy

I've been busy in the past few weeks finishing the final chapter of my dissertation. Alhamdulillah...it's done. But work is not over for me. I need to revise my earlier work. Time flies fast. It's almost 4 years. I can't wait to get to the end. Insya Allah, I will get to the end.

My husband has also finished his course which means it's just another step for him to become a fully qualified international architect. I'm sure he will.

Anyway, both of us believe that education is a lifetime investment (and equally, a lifetime pursuit). Admittedly, it is tough and not easy. There are also times when we question ourselves whether it's worth it. The time and the money we spent - We could have bought a BMW or a Mercedes (that's what I always said to my husband, haha). But most of all, we wonder whether or not we can use what we have learnt to contribute to the development of Brunei?

I'm sorry but Brunei has yet to prove that it's a nation of meritocracy, where people are rewarded for their contribution (regardless of the age) and not for their length of service or worse, for certain 'birthrights'. If Brunei wants to change, it needs to accept and adapt new ideas and new technologies that Bruneians have acquired abroad or even within the country. It needs to listen and encourage its people to question, to debate and to offer solutions. There should also be a two-way communication. Only then Brunei can breed intellectuals and thinkers among the entrepreneurs, the professionals and the policy-makers, who I believe will help create a much diversified Brunei, a dynamic Brunei.

Salaam

Boost Agricultural Production A.S.A.P

Today Malaysia announced the increase in fuel prices, lifting their price ceiling in the move to reduce government subsidy. It is quite shocking actually. I didn’t expect the price increase would be ‘that’ much. (Note: for a very interesting thought about this by Dr Mahathir, click here).

The effect of this will not only be felt in Malaysia, but Brunei too. Malaysia is one of Brunei’s main trading partners. 20 percent of Brunei’s total import comes from Malaysia. About 40 percent of Brunei’s total food import comes from Malaysia. Malaysia is Brunei’s main source of food supply. When Malaysia’s fuel prices rise, we should expect their prices of all other goods will also go up. Naturally, we will also import their inflation. And that is bad news to our consumers.

All of the events that take place around the world including the current world’s food crisis cannot and should not be taken lightly.

Therefore, I think it is high time Brunei seriously thinks about its food production. Enough talk (actually I don’t hear any talk at all since HM’s titah during the Leg Co), act. Fast. Make it Brunei’s ‘emergency’ priority agenda. Set up an ‘agricultural’ fund if we must. At times like this, what the government should do in fact is to attract people to develop the agricultural industry. Call it a fast-track strategy or whatever. Get as many Bruneians or even non-Bruneians to produce food in our country. The government cannot afford to be choosy. Cut down those red tapes! (I tell you, somebody I know tried applying for some land to be developed 2 years ago. Until today, he has not heard from the Agriculture Department). Somebody please do something!

We shouldn’t think that all the events happening around us will pass on any time soon. It could go on and on. We really should use it as a catalyst to achieve our (long overdue) national food security objective. Increasing agricultural production should be the long-term solution for Brunei. We really cannot afford to just sit and wait and do nothing. Because whether you like it or not, for a country that has a high dependence on food import, these events affect us. High food price will increase the cost of living. Well, I guess I’ll leave you to your imagination to picture the effects of that.

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.