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.

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.

Are We Poor OR Are We Stupid?

It is sad to see and hear about the events happening in Brunei (i.e. the food clamouring and the coupon stampede) that have even result into human tragedy (courtesy to ranoadidas.com for always bringing the important news). It would be normal if it happened in a third world country, but for it to happen in Brunei, an oil-rich country, is quite extraordinary.

The question, as rightly put by Mr. Brunei Resources, is “What Happened to Bruneians?”

Now, there are 2 schools of thoughts. One says that it is simply because we are poorer and the other says we are too materialistic that we don’t even know how to differentiate between what is right and what is wrong i.e we are stupid.

Unfortunately, we can never truly find out until a proper income gap analysis is carried out. It is imperative that we know how many Bruneians are poor, how poor and why they are poor. Without such analysis, then we can never know and we will only end up having the rich blaming the poor (of being immoral and shameless) and the poor blaming the system (of unfairness).

While I do not doubt the existence of those who are genuinely poor, I also believe that the pool of poor people in Brunei is also largely made-up of those self-made poor, who are spending beyond their means. Regardless of how people become poor, we need to address poverty properly. There are 2 critical issues to tackle. One, how do we lift Bruneians off their existing poverty and two, how to keep the zero poverty (if it is ever achieved).

Now, if I were an economic advisor to Brunei, these are what I would suggest:

1. Get our statistics and figure right. We NEED to know our poverty statistics A.S.A.P.
2. If the finding (whether this is made public or otherwise) is that there are indeed a large number of poor people in Brunei, then we really need to review our economy. If people are poor because there is no job, then we need to pump-up the economy. This is THE time to make use of the oil-money.
3. Lifting people off poverty does not simply mean giving them money. We need to be creative in giving them the means to make money. True, this is easier said than done given the unfortunate attitude of some (most?) of Bruneians who more than many times do not see the rationale behind the self-aid help. But with proper monitoring and perhaps some taught management skill, I’m sure there will be some positive results. The key is for the relevant agency to NOT to give-up. Don’t let one bad apple ruins the whole basket.
4. It is time to differentiate the different types of goods available in the market. There are the luxurious and there are the normal ones. The problem in Brunei is that there are too many ‘high standard’ people who will not make do with just the normal goods and then there are also too many of us who always want to keep up with the Joneses. For many of these people, the euphoria of owning the latest mobile set or a branded watch has blinded their rational judgement and has reduced their mathematical ability to calculate their monthly balance to pre-kindy level. Therefore I believe the good old system of tax can somewhat alleviate this problem of euphoria-blindness. We need to tax (highly) the luxurious goods.
5. A credit monitoring system needs to be put in place. I cannot just go to any store and sign any credit agreement without a thorough check of my credit rating.
6. It is time to review the TAP contribution. There is a need to increase the contribution from the employees. We need to make sure Bruneians save for their own future. And of course, since Brunei coffer by now must have filled with a lot of oil money, I would also say that the government needs also to increase its contribution into TAP not only into the account of those in the public sector but also to Bruneians in the private sector. Afterall, the money is saved for the future. This contribution from the government I believe could be the key to reduce the remuneration gap between the public-private sectors. It would help increase the attractiveness of the private sector and would (hopefully) alleviate the problem of lazy Bruneians who would rather be unemployed than do manual job.
7. We need also to look at our system of income re-distribution. How do we re-distribute the income from the rich to the poor. While income tax may not be accepted in the near future, property tax certainly deserves some high level discussion now.
8. I don’t know how good our police force or those in the NCB are in combating drug wars, but I pray with all my heart for them to be really good.
9. Finally, I think too much subsidy make people too lazy.

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.

Happy Birthday

Happy 62nd Birthday to our beloved His Majesty Sultan Haji Hassanal Bolkiah.
Thank You very much for your kindness and generosity to us.
May you be blessed with good health for many years to come.

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.

Battle of the Schools, Revisited.

I received many comments for my post on schools in Brunei a few months ago. While I do not doubt that parents’ involvement in their children’s education is imperative, I still believe that schools and teachers equally play an important role. I also agree that at the end of the day, it is the children’s own efforts that determine their achievement and those who have ‘the brain’ will make it anywhere. Although I do not think this is fair.

It still appears to me that most parents (including myself) do not really have a concrete reason why we send our children to a private school than to a government school. We assume we know the reason. We assume that by paying more, our children will learn more. Often, our choice of school is influenced by words of mouth. When we see or hear children of our friends or relatives are doing well in a particular school (which is almost always a private school), we assume our children will also be doing well in the same school. Now, if this is true (i.e. a private school is better) then those children who have able parents will almost certainly get better education. What about those children whose parents cannot afford to send them to a private school?

But the question remains, do we really know that a private school is better than a government school? Does the money we spend worth the quality of teachings our children are receiving?

Generally, we do not know the real performance of a school, the performance of the students, let alone the performance of the teachers. We do not know whether school A is better than school B. I remember when my husband and I went for school-hunting a few years back. We went to a few schools and all we were given was a few forms to fill along with the fee schedules. There was no information on the performance of the school or any information why we should choose that school. In the end, I had to rely on words of mouth, which is not an informed decision.

Here in the UK for example, we have the Office for Standards in Education (OFSTED). Every school is inspected and assessed. In the comfort of my chair I get to read reports about all of the schools in the area which are published in their website. Every school that I visited also gave me a copy of this report.

Now, this is what I call a transparent system that leads to an informed choice which we are sadly, lacking. Now, I don’t know the content of the Ministry of Education’s SPN21, I hope transparency is also one of the agenda. It will not only help parents make the ‘right’ decision, it will also ensure the quality of our schools, be it private or government. And most of all, it can ensure that every child receives a good quality education.

When all schools are assessed and results made public, naturally every school will want to be the best and want to improve their past performance. This will not only benefit the children and the parents but will surely benefit the entire education system. Who knows, if the government schools prove that they are better than the private schools, parents don’t even have to fork hundreds of dollars each month. And that will be sweet indeed…

Salaam.

Life-long Learning in Brunei

There will be 2 exciting international conferences to be held in Brunei:

1. Brunei International Halal Market Conference on 16-17 August 2008;
2. International Conference on Economics of Higher Energy and Food Prices: Future Scenarios and Implications for Developing Economics on 7-8 January 2009.

So, do take these opportunities. Attend, learn and don't forget to ask questions :)

Salaam.

Brunei and Oil Love Affair

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

Salaam.