A couple of people asked me to comment on John Perry's resignation. In fact I have already heard about it a couple of months back and I started composing something which I thought I may want to post one day should the announcement came. So I prepared a long entry about it and about the economy etc. Last night, I started to think - put us in his position, would we have done any better? Would we have done thing any differently? We might and again we might not. Would we be able to change anything? And given all that, do I really really really want to post something? What good would it do? So I decided Naah.... and I deleted it not without regret. I think it would be best for all of us to look ahead rather than look back. We have to move on. I saw s@s has written a more succint post which I thought is more reflective of what a Bruneian would be thinking about the whole thing. Go and read it here. (Thanks s@s).
Sometime in September, I posted an entry about a book written by a Harvard Professor entitled "As the Future Catches You" which has a few interesting comments about Brunei. I also mentioned in the same entry about an email which I received talking about the differences between rich and poor countries. In the light of talking about the economy etc the book and the email might perhaps give us some pointers as to where we should be going.
"The Future of Brunei" was the title of an entry I wrote in August. The entry unfortunately was not as good as the title and all I did eventually was to point to the fact that our over reliance on the diminishing oil and gas reserves will create problems for us in the future. One Aaron John commented the following - ... we must start to open our eyes. We have to diversify our economy and not be wasteful. We have to start educating our children and youths about the seriousness of the situation. Teach them about our history. Enlighten them about other countries' success stories or failures. In the words of that politician character from The Manchurian Candidate "We must secure tomorrow today!
So, where are we heading? Over the years, the government has given us practically all the basic stuffs that we need to succeed - free education, free medical, free healthcare, subsidised housing, subsidised services, no personal income tax etc. The problem is we have become too reliant on all these. We don't know how to look after ourselves anymore. A lot of us, yours truly included, have always instinctively turned to the government when we started work. All the perks are there, so why worry - even though deep down we all know that we have to do something different - collectively. And we all know that our oil and gas will not last forever. We all know diversification of the economy from oil and gas is the answer. The question has always been - how do we get there?
Some argued that we should take full advantage of what we have the most at the moment and that is oil and gas. Use it to create subsidised industries to create businesses and jobs. This in a nutshell was BEDB's approach. Create an area - Sungai Liang was one such site - and turn it into a free trade zone area where everything can be created and manufactured within that area without being affected by the other laws of the country. In that area, it was envisaged that plants will be built run by the energy resources as well as the local raw materials needed to produce something else - the energy and the local raw materials to be sourced at a lower than world price - hence subsidised. The end results was supposed to be the creation of new jobs, new industries, new services, transfer of technology etc. How does that sound?
It sounds good, does it not? On the other hand, some also argued that our oil and gas is our lifeline. We must sell it to the world's market at market price and maiximise revenues out of it. To start any industry using subsidies from this must take into account the loss of revenue which may jepordise the future of the country. The loss of revenue if it is not equal to the job and business creation that was supposed to be generated would mean that the county might as well tolerate unemployment and probably lower growth in the short term as long as the state's coffers fill up. At the same time, it is also argued that using up the oil and gas resources for any subsidised industries would use up our reserves that much faster. And our economy is still not diversifying away from oil and gas. Once the resources get depleted, we are back to square one. How does that sound?
It sounds scary, does it not? What do we do? Some have argued the 'middle way' - given that no matter what we do, there will be great difficulty in creating subsidised business or creating subsidised jobs, so why not just maximise the sales of oil and gas and then used the proceed to provide unemployment benefits. That way everyone gains. How does that sound?
Sounds heavenly. (By the way, ever heard of what happen to the people of Nauru?) But what happens when the oil and gas runs out? In the older days, I remembered our elderly saying Brunei is a very lucky country. They used to say we have these three natural resources. Once the oil runs out, we rely on our sands, said to be the finest in the world (though I think the authorities have run some test and said that's not exactly true). Once the sands run out, we exploit our forests (in those days, the word environment does not exist, and not to mention in the 1960s, our population was barely 100,000 - any size forest was good enough). The thing was nobody ever mentioned, what happened after we run out of that too. So, back to what happens when the oil and gas runs out. Income from the sands and the forests, assuming we are exploiting them in a big way, will be way too small for it to replace the oil and gas income. Not to mention, we would also have a population base of people who have never worked but reliant on unemployment benefits.
So, what do we really do then? In a way we have already begun our journey to diversify the economy. MIPR has, whether impressive or otherwise, depending on your point of view, managed to increase a number of activities in the agro-fisheries areas. Our fisheries activities has increased in leaps and bounds. Our agriculture has incrased its production. We are self sufficient in chickens, eggs and vegetables. There are some industries, not as much as one like, but still there. Other aspects of the economy such as our financial centre has started to operate. Not many Bruneians have realised it. Brunei now host some of the world's biggest banks operating under the international finance center - Societe Generale, Royal Bank of Canada, OCBC of Singapore and CIMB of Malaysia, to mention some of them and a few more are expected very soon. Asset management companies are also here. The latest to open is the Singapore based UOB Asset Management. So there are already opportunities in the financial sector. Microsoft too will be opening its office soon in Brunei and hopefully this will spearhead the information technology sector.
We have begun the journey. Though the speed admittedly, not as slow as glacial speed, but definitely not rabbit fast either. Some economists say because we are suffering from 'Dutch disease' so trying to move away from oil and gas will be a difficult journey. For the non-economists, 'Dutch disease' is a theoretical concept where it is argued that a nation with natural resources will cause movements away from the non-natural resources sector (such as other industries and agriculture) by making them less competitive as resources move to the natural resources sector due to the natural resource boom. This is caused by a resource movement effect which causes the demand for labour for the natural resource sector to increase; as well as a spending effect as the extra revenues allow for employment in other sectors thus moving labour away from the 'lagging sectors'. In Brunei's case, the spending effect is more visible as the government sector is so much bigger than any other sectors combined. The size of the Brunei government in terms of proportion to the size of the population is bigger even when compared to countries in the middle east with similar economic activities and sizes.
One solution would be to reduce the size of the government. I am pretty sure you can think of all the implications for doing that. At the same time, are the private sector ready to take up the role of the government? So, would such a policy create more employment in the private sector or would it create more unemployment? What would more unemployment mean? We have in effect an interesting conundrum. You are on a log in a river. There is a tiger waiting for you on the river bank but there is also a crocodile waiting to pounce on you should you turn back. There are solutions to our problems but they are not easy ones.