Thread by @koreanforeigner

This is the second part of my third part Twitter thread about the problems facing Brunei’s economy. This thread will focus on how the government and the oil and gas industry smother the rest of the economy.

As I said before in my last Twitter thread, unemployment remains a chronic problem in Brunei, but there is a lack of manpower that can fill badly needed positions in the hospitality (or any other) industry. I will attempt to explain why that is the case.

Brunei has one of the most educated populations in the world. According to UNESCO, Bruneians have a literacy rate of 99.37%. Part of the reason for this impressive figure is that Brunei offers free education to all of its citizens. uis.unesco.org/en/country/BN

But something weird happens when it’s time for high school graduates to go to college. Suddenly enrollment figures drop. A lot. According to that same study, only 32.92% of high school graduates went to college in 2017. And that's higher than in the past. So the question is why?

Why the sudden loss of interest in pursuing FREE college education? It’s not because Bruneians are lazy or intellectually incurious. There is a rational reason for this, and it comes down to incentives and disincentives that are built into Brunei’s economic system.

The two largest employers in Brunei are the oil and gas industry and the government. The private sector can’t hope to compete with the two because the rest of the private sector is so small and underfunded that it can’t match the wages that the government offers.

Especially in the mid-2000s, when oil was going at $100 a barrel, it was basically party time. Money was rolling in, and Brunei is a largely comsumer-driven society due its near absence of any domestic production.

The irony is that before oil was discovered in the 1920s, Brunei was primarily an agriculture-based industry. Now, it's cheaper to import everything - from cars to even fish. This is just one part of what is known as the Resource Curse.

en.wikipedia.org/wiki/Resource_…

So, from the get-go, many young Bruneians dream of becoming government employees. Besides high wages, the government offers lifetime employment, generous subsidies, and a guaranteed pension. And most of those jobs don’t require an undergraduate degree. So why bother with college?

This is why there is a lack of manpower to fill the other industries. Due to a shortage of college graduates, there aren't enough experts to fill those positions from the native Bruneian labor force. Immigrants and/or stateless Chinese permanent residents fill those jobs.

This immediately throws a wet towel on any chances for economic diversification. But this isn’t a new development. It’s been going on for decades. Why is it starting to matter now? That is because another factor is playing out simultaneously. The drop in the price of oil and gas.

Due to the low price of oil and decreasing production (Brunei’s oil reserves are dwindling) due to OPEC and US shale producers, Brunei’s GDP actually shrunk from 2016 to 2018. This is in contrast to everyone else in East Asia whose economies have grown.

bizbrunei.com/2019/01/brunei…

Even North Korea's economy grew in that time. So that's saying something.

But this is North Korea we're talking about here, so we should take that with a fistful, not a pinch, of salt.

thediplomat.com/2018/10/did-no…

Suddenly what was once manageable is becoming untenable. Brunei needs people to work in the private sector. But after decades of failing to diversify the economy, thus leaving the oil industry and the government as the only desirable employers, things aren’t looking good.

With unemployment becoming a bigger problem with each passing day (9.3% in 2017), Brunei needed a miracle, and that miracle appeared in the form of China’s Hengyi Industries International, which is expected to complete a brand new refinery for Brunei some time later this year.

This is expected to give Brunei’s economy a much needed boost. And it probably will. But the problem is that this refinery is like giving an alcoholic a shot of whiskey to sober up. There’s going to be consequences. What consequences, you ask?

1) It will further cement the economic status quo, thus smothering the private sector yet again. 2) Brunei’s economic development will continue to be dictated by OPEC policies (Brunei is not a member) and American shale producers – all of whom are driving down the price of oil.

In exchange for a short-term fix, the government is once again disincentivizing its citizens – its greatest assets – from seeking higher education and private sector jobs. Unfortunately, after decades of paying lip service, there seems to be no real path toward diversification.