|Home > South-East Asia >> Brunei|
Pampered sultanate told to change its old ways
Inter Press Service - February 27, 1999
Ruled by one of the world's richest people, Sultan Haji Hassanal Bolkiah, oil-rich Brunei is facing its real economic crisis since independence from Britain in 1984.
While its pampered subjects are by no means hard hit like other Asians, the economy has not escaped the effects of weaker regional markets and falling oil prices.
And though life continues in much the same way as before, the collapse in August of Brunei's biggest conglomerate, Amedeo Development Corp., run by the sultan's brother, Prince Jefri Bolkiah, has sent shock waves across the country.
Amedeo, with interests in transport and building consulting, went under with losses of US$16 billion after the Brunei government stopped pouring in funds for infrastructure projects it failed to complete.
In the wake of the slowdown, Brunei has been advised by foreign consultants it hired to make its financial dealings more transparent in order to ride out the regional crisis.
The sultan, who is also prime minister, finance and defence minister, also dismissed Jefri from the helm of the country's most powerful investment body, the Brunei Investment Agency (BIA).
The BIA controls the vast portfolio of foreign businesses, banks, properties and other assets brought by the sultanate's oil wealth, its value estimated at more than $60 billion.
BIA's problems are believed to have depleted a large chunk of Brunei's estimated $80 billion in foreign reserves.
But not much is known about these by the public. Since 1962, it has been a crime, punishable by up to three years in jail, to reveal the exact nature of the country's currency reserves. Economic statistics are hard to come by.
There is no representative parliament, and the government budget is a secret, leaving citizens of a country enjoying one of Asia's highest standards of living in the dark on what the finance ministry is doing with Brunei's wealth.
"We are not allowed to give any information to the foreign media. If you need any data about the country's economy you better contact the information ministry," a local journalist said in response to an inquiry recently.
"If we do give you a quote we could be thrown in jail," she said. Added her expatriate colleague: "I will be deported immediately."
The foreign experts hired by the Brunei government in August 1998 say it is time for a change in governance in this sultanate. For starters, the consultants, flown in to give advice on modernizing the economy to get through the financial crisis, have advised it to be more transparent about economic statistics.
In an unusually revealing article on its front page recently, the English-language daily Borneo Bulletin said the experts also advised the government to boost its oil production to shore up its dwindling foreign reserves.
"The first priority should be building up once again what remains of its funds with the BIA. This can only be done by the optimum use of Brunei's only asset – oil," one leading London banker, closely associated with BIA, told the newspaper.
While he would not say how much of Brunei's reserves he thought had been depleted, the banker said "it is believed to be substantial" and added that "investigations are still proceeding."
Another expert said that if Brunei had been more transparent with its financial accounting – and published its balance sheets – the BIA scandal might not have occurred.
"It is regrettable that it is a crime punishable by three years in jail if the exact nature of the country's assets is disclosed," one of the advisers was quoted in the report. "This is a law that should be removed as soon as possible," he added.
"This country reminds me of the Middle East, especially Saudi Arabia," said Sadiq, a Jordanian visitor. "It's full of modern, expensively built mosques; people stop everything when the prayer chants go over the loudspeakers, and all the work seem to be done by foreigners."
"Of course it has the oil and the ruler will not tell the people how the money is invested," he remarked.
Many other observers have described Brunei as a "benevolent autocracy" with much in common with the ruling style of Saudi Arabia or of the Arab sheikhdoms.
Very few outside the royal family hold important positions in government. At least 100,000 foreign workers, mainly from other Asian countries, work as doctors, accountants, construction laborers and domestic workers.
Brunei was declared a developed country by the Organization of Economic Cooperation and Development in 1996, with one of the world's highest per capita incomes, $19,000.
It provides free schooling and medical aid, and assesses no personal income tax. The literacy rate is 90 percent and education standards are high. Almost every household has a modern car, most more than one.
To many outsiders, the government's aim seems to be to keep subjects so contented they will not bother about politics. So far, the authorities' solutions to economic pressures have been responses traditional for the sultanate.
In July 1998, just weeks after the BIA scandal erupted, the sultan gave his people a pay raise to cushion against the crisis's impact. In Brunei, the government employs 80 percent of the workforce. As his birthday gift to them, the sultan raised the salaries of all state employees by 14 percent.
At one point the sultan was expected to give some details about the Amedeo scandal, but all he said was the government had "taken the steps deemed necessary" to balance the effects of the economic downturn, such as setting up an economic council of government and business leaders.
"The people here are not interested in politics," observed Jose, a Filipino accountant working here for four years. "Why should they be, when the government provides them everything?"
"As long as they enjoy the fruits of the oil revenue, the people here won't be that interested in politics" said Jose. "But they are worried about what's going on within the palace. It could have an economic impact on the population sooner or later."
"As long as we all don't have to pay any income tax here, we will all be happy," he said with a smile. Indeed, Brunei's oil reserves are expected to last another 30 years, and its gas reserves well into the next century. It pumps 165,000 barrels of oil a day, and 90 percent of oil and gas production is exported to Asian countries.
But oil prices have been falling in recent years, and Brunei is believed to have spent more than what it earned last year. This deficit is said to have reached some $353 million last year and is projected to reach $592 million this year.
The government says it is trying to reduce dependence on oil and is looking at other options, like making Brunei into a financial center and a shipping hub.