[b]Oil-rich Sultanate suffers severe brain drain as national economy declines
Failed to diversify economy even after 29 years of independence, 98% of exports still rely on oil & gas
Large portion of talented overseas graduates refuse to return despite extensive welfare
Set to become Asia’s worst-performing economy this year with a mere GDP growth rate of 1.6% (IMF estimation)
Official government report revealed first quarter 2013 growth at a paltry 0.9%
Country continues to work towards a religion-based economy by 2035
Formerly ASEAN richest, now surpassed by Singapore in all aspects except social benefits
Economy stagnated for 15 years since the 1998 Asian crisis, skilled citizens fled country[/b]
The tiny Sultanate of Brunei, located on the north coast of the island of Borneo, is a wealthy nation. Its residents enjoy high standard of living and are relatively better-off than many other neighboring countries. It is safe and clean, infrastructure is in good shape, not to mention the enormous subsidies and welfare programs funded by petroleum revenues. So why are its brightest citizens running away? Why does Brunei suffer from a severe brain drain in the academic sector and also among its highly-skilled workforce?
Brunei’s private as well as public sectors are increasingly being jilted by trained professionals who, despite being born, bred and groomed in the nation, choose to live and practice their skills abroad. This include doctors, lawyers, engineers, architects, graphic designers, ICT professionals, media and communications graduates who claimed they are seeking “to gain relevant experience abroad” before returning to Brunei to contribute and give back to the homeland. But the reality is: once they go out, many of them would never come back again.
The government of Brunei has repeatedly reminded citizens “to serve the nation as true patriots” and not to migrate with accomplished academic certificates to reside in other countries, especially when these certificates and the entire education have been funded by the government through scholarships. In Brunei, education is free for all citizens up to tertiary level. Many graduates however, ignored the pleas, and experts argue that there are just too many incentives to leave Brunei.
Salaries are the primary reason according to job migrants. For instance, someone with a master degree can earn possibly B$2,000 a month in Brunei. But the same degree would draw 3,500 pounds in the U.K., which is about B$7,000 and considerably more even after tax deductions and higher living expenses. On the career path, the same job in the U.K. would pay 5,000 pounds in a few years but just B$3,500 in Brunei.
To stifle the brain drain, Brunei government is now preparing to take legal action at least against government-funded students who refuse to come home after completing their studies abroad. For example, in 2012, 20 doctors and other medical specialists did not return to Brunei after finishing their training. This has caused intense discussions about Brunei’s education system and flaws in the scholarship process. Labor experts though, said that the graduates shouldn’t be blamed as Brunei’s economy itself is not growing and diversifying fast enough to create jobs for them. There are basically too many scholarships for too few jobs, they argue.
In an economy largely dominated by the petroleum industries, choices for graduates are limited. Brunei, experts said, needs to create around 6,500 new jobs annually and raise salaries significantly in the non-oil sector to eventually resolve this problem, a rather impossible scenario considering that the economy has been stagnated for 15 years since the Asian financial crisis 1997-98.
Unlike its Singaporean counterpart, foreigners have shown little interest to invest in Brunei. This is because one of the government’s most important priorities is to encourage the development of Brunei Malays as leaders of industry and commerce, therefore a joint partnership with the country’s ethnic Malays is essential in strategic industries. Certain business licenses are likewise, reserved only for the Malays. Partial Malay ownership of the company is also required especially in tendering for contracts with the government or Brunei Shell Petroleum.
For a nation the level of its wealth, Brunei is grossly underdeveloped. Capital Bandar Seri Begawan looks exactly the same as it was 15 years ago, aside from several renovated buildings and a new waterfront. Technologically, the oil-rich Sultanate also lagged behind Thailand, Malaysia and Philippines. Local high-tech industries are almost non-existence and a 1Mbps broadband internet costs B$65 or US$52 a month. The government regulates the immigration of foreign labor and oppose globalization out of concern it might disrupt Brunei’s traditional society and Malay culture.
Since independence, Brunei is governed under a philosophical system known as Melayu Islam Beraja or MIB, which states that the Malays, who made up 70 percent of Brunei’s population, is to be the dominant race and culture of Brunei, Islam the official religion, while the monarch has full executive power. Together they formed the three ideological pillars of the country. In 1980, Brunei was the richest state in Asia in terms of per capita GDP, at US$25,531 compared with Japan US$9,308 and Singapore US$4,913. The latter two have since eclipsed Brunei.
In the aftermath of the Asian financial crisis, Brunei slides into economic regression, but was saved by skyrocketing oil prices, which rose from US$27 a barrel in 2000 to nearly US$100 now. By that sense, most GDP increase in the past decade came from oil & gas, with little actual progression in the rest of the economy. For most of the years since 2000, Brunei would descend to become the slowest-growing economy in ASEAN, and this year, it is likely to register the slowest growth in Asia as stagnated Japan is projected to record a 2% growth thanks to the economic stimulus program known as Abenomics.
Brunei’s inabilities to promote industrial growth remains a critical threat to its economy. The differences between the Sultanate and Singapore are striking; in 1950, entrepot trade accounted for 70% of the Singaporean economy, but today the shipping and maritime made up only 7% of the GDP, while the financial industry 12%. One irony is that for a nation with no natural resources, the oil industry occupied 5% of the Singaporean economy, in field of oil refining. This translated into US$13.5 billion, compared to the entire Bruneian GDP of US$17 billion, who is Southeast Asia’s 4th biggest oil producer. In 1950 Brunei was over 90% dependent on oil revenues, today it is still over 90% dependent on oil revenues.
Adding to the uncertainty is Brunei’s economic direction, especially the national vision known as “Wawasan 2035 Negara Zikir” that called for Brunei to become a pure Islamic economy by 2035. After a series of failed economic plannings and mismanagement, crimes and poverty are rising in the normally peaceful Brunei. To deter further crimes, the Sultan of Brunei recently announced the official implementation of Sharia laws across the country by April 2014, which include punishments such as amputation and stoning to death. This added more anxiety especially among Western and other non-Muslim investors. 85% of Brunei’s trade are conducted with non-Muslim states.
One commonly-used reason for Brunei’s economic difficulty is the low population, and hence some argued it should not be compared to Singapore. To this, enter Luxembourg, a tiny grand duchy in Europe. Luxembourg has around the same population as Brunei, only slightly more. The grand duchy however, is a diversified industrialized nation, with an export-intensive economy and enjoy a degree of economic prosperity almost unique among industrialized democracies.
A population less than 600,000, the Luxembourg fund industry manages more than 2.5 trillion euro of (UCITS and Non-UCITS) client assets, making them the second largest fund centre in the world only behind the United States. Thanks to modernization of facilities and industrial efficiency, Luxembourg is also home to ArcelorMittal, the world’s largest steelmaker. The country reputedly have the highest steel productivity in the world. In telecommunications, the Luxembourg-based SES Astra is the world’s largest satellite services company. Bruneian companies, on the other hand, are mostly absent even in ASEAN ranks.