Overview

Brunei Darussalam at Crossroads

For most of the twentieth century, Brunei Darussalam has enjoyed growing prosperity. Under the wise and benevolent rule of His Majesty, Sultan and Yang Di-Pertuan of Brunel Darussalam, the people of Brunei Darussalam have attained living standards which are among the highest in the developing world.

Brunei Darussalam's Gross Domestic Product (GDP) per capita in 1997 was estimated at US$14,800, the second highest in ASEAN and the fourth highest in Asia.

This prosperity has been the result of bountiful oil and gas resources relative to a small population and high levels of government expenditure on a large civil service and on social programs and infrastructure development.

As the twentieth century draws to a close, the continued prosperity of Brunei Darussalam can no longer be taken for granted. Although Brunei Darussalam still has the appearance of great affluence, there are warning signals of fundamental economic problems which threaten to undermine the prosperity and with it the social stability enjoyed by the people of Brunei Darussalam.

The following are symptoms of an unsustainable economy.

·         Income growth unable to keep up with population growth. Since 1984, real GDP has growth at less than half of the rate of population growth.  

·         A chronic budget deficit which has greatly reduced the government's ability to provide direct employment and finance infrastructure development. Since 1994, the government has been incurring a budget deficit averaging B$ I billion a year- which is equivalent to an average of 15% of Gross Domestic Products (GDP). This shortfall has been funded by drawing on Brunei Darussalam's foreign reserves.  

·         Rapidly rising unemployment. Official statistics show current unemployment to be 5.1%. Forecasts of job prospects for school leavers between 1992 and 2001 suggest that up to 25% may not be able to secure employment.*

·         A weak private sector facing the worst crisis since 1984. Nearly every sector is recording sharp declines ranging from 20% to over 60%.    

·         This does not take into account 60,000 foreign workers.

This situation is increasingly unsustainable. On the one hand, the burden on His Majesty's Government remains very large. Over 75% of Brunei nationals in the workforce are employed by the government. Government and government related contracts account for most of domestic economic activity. The high expectations of our increasingly well educated population remain largely focused on government.

On the other hand, the government's financial ability to undertake these burdens is sharply reduced as a result of sharply reduced oil and gas revenues and losses in the investment of Brunei Darussalam's foreign reserves.

The private sector should play a greater role in providing employment and driving the economy but it is presently too small and too dependent on government spending to play a greater role effectively.

What is to be done?

The Brunei Darussalam Economic Council (BDEC) believes that there are three central economic imperatives which must be addressed.

Strengthening government finances - Unless government finance is strengthened, His Majesty's Government will be increasingly diminished in its ability to provide security, social services and infrastructure development.

Strengthening the private sector - A diversified

and healthy private sector is necessary to create the  employment  opportunities  which  the government is increasingly unable to provide and to reduce the economy's present dependence on government expenditure.

Laying the foundations for long term sustainable growth - This is necessary if Brunei Darussalam is to move beyond its current dependence on finite natural resources and its vulnerability to the volatility of world oil prices.

BDEC believes that these three imperatives must be addressed in a national economic strategy which is decisive, concerted and integrated.

DECISIVE - A decisive response is necessary to avoid the broadening and deepening of our current economic problems. One of the central lessons of the regional financial crisis is that economic problems have social and political consequences and if left unchecked can be potentially destabilizing. Economic crisis can lead to social and political crisis.

CONCERTED - A concerted response is necessary because the challenges we face will require that all the branches of government and all sections of society pull together in the same direction. No strategy however well conceived can succeed if the different ministries of His Majesty's Government pursue different and conflicting agendas and if it does not obtain the support of the private sector and the community at large.

INTEGRATED - Finally, an integrated response is necessary because the challenges we face require a strategy which addresses the needs of government, the needs of the private sector and the needs of future growth in a balanced way. To address the budget deficit by slashing government expenditures without due regard for the health of the private sector and the infrastructure required for future growth is at best a short term quick fix response which does not address the basic challenge of economic sustainability.

The Brunei Darussalam Economic Council recommends a two-phase strategy.

RECOVERY

Firstly, an Action Plan for Recovery which can be implemented within a 6 month time frame aimed at:

(1)   injecting liquidity into the economy.

(2)   restoring  private  sector  and  public confidence.

(3)  establishing the machinery for effective economic policy implementation.

SUSTAINABLE GROWTH

Secondly, a Strategy for Sustainable Growth for which implementation can commence within a 12 month time frame and for which further expert advice may be required aimed at:­

(1)  strengthening government finances

(2)  Strengthening the private sector

(3)  establishing the foundations for sustainable growth