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SCMP Reporter

An unemployment nightmare is staring the oil-rich sultanate of Brunei in the face.

 After decades of excess and extravagance, school-leavers in the 'land of plenty' are now facing a tough time finding jobs.

 A government-sponsored economic study commissioned by Brunei's ruler Hassanal Bolkiah has shown unemployment will rise unless the economy grows at twice its present rate.

 The report by the National Economic Council, headed by the sultan's younger brother Prince Mohamed Bolkiah, concluded Brunei's economy needed to grow at least as fast as its population to sustain its current high standard of living.

 To reverse the trend, Prince Mohamed this month unveiled a National Economic Recovery Plan (Nerp) in a bid to inject liquidity and confidence back into the flagging economy and progressively reduce traditional high dependence on oil and natural gas.

 Brunei's economy has grown an average 1.25 per cent a year since 1985, while its population (excluding foreigners) has increased 2.5 per cent towards an estimated 300,000.

 'Assuming the current population growth continues at this rate for the foreseeable future, the economy needs to grow twice as fast,' the report said. 'Our projections indicate the economy has to create an average 2,500 new job opportunities each year for the Bruneians entering the workforce.'  This is in addition to an estimated 6,700 Bruneians already unemployed.'  Most of these new jobs will have to be created in the private sector, given a recent freeze in public-sector employment. The government's development spending will be halved this year in an apparent move to conserve the country's reserves.

 Brunei has sustained a budget deficit since 1994, which stands at US$1 billion or 15 per cent of gross domestic product. On this basis, employment in the private sector - excluding foreign construction workers - would have to double by the year 2011, the report said.

 About two thirds of the economic activity is derived from state-controlled sectors, particularly oil and natural gas.

 Prince Mohamed said recently the country's present economic path was unsustainable over the longer-run.

 'I realise that these are urgent matters,' the prince said.

 The Nerp will last for two years. In its first six months, a $200 million government fund will be established for small and medium-scale projects, boosted by an additional $200 million working capital from banks.

 The bank loans will be backed by a 75 per cent government guarantee.

 Infrastructure development, information technology and small-scale tourism will be among sectors promoted.

 Fast-track payment and credit systems will be set up for entrepreneurs.

 The auctioning of government tenders will also be quickened.

 Unlike its Southeast Asian neighbours, Brunei did not fall into recession after the region's financial crisis erupted in mid-1997.

 It was also spared from having to borrow from overseas, despite the 1998 collapse of Amedeo Development Corp, a huge private development consortium controlled by the Sultan's now-estranged other brother Prince Jefri.

 Deputy Finance Minister Selamat Munap predicts Brunei's economy will grow 3 per cent this year, after 2.5 per cent growth last year and 1 per cent in 1998.

 However, he has conceded that the sultanate will not return to its long-term target of 5 per cent to 6 per cent annual growth until it diversifies its economy, reducing its reliance on oil and gas and promoting private business.

 Its high dependence on oil has made it vulnerable to international price swings over the years. Oil prices have recently begun to recover after a long slump.

 The sultan, Brunei's prime minister and long-regarded as Asia's richest man, slipped to third with $24 billion in the latest annual rankings by The Australian newspaper released last month. This was partly due to weaker oil prices.

 The paper's business editor Geoff Hiscock also commented: 'One reason for his decline: the $3.1 billion exposure of the sultanate's key cash generator, the Brunei Investment Agency, to the collapsed construction group, Amedeo Development, controlled by the Sultan's brother, Prince Jefri.'  Amedeo reportedly suffered huge losses, causing the first family much loss of face.

 Prince Mohamed's appointment as National Economic Council chairman further underlines his elevation to become the favoured heir, ahead of the disgraced Prince Jefri. Prince Mohamed is also foreign minister.

 Prince Jefri, known for his playboy ways, had been finance minister and head of the giant Brunei Investment Agency (BIA) before the Amedeo scandal broke two years ago.

 In addition to approving the Nerp this month, the sultan has ordered another shake-up of BIA, which foreign analysts estimate manages between $70 billion and $110 billion of state funds.

 Education Minister Abdul Aziz bin Begawan Pehin, who replaced Prince Jefri as head of the secretive agency two years ago, has been replaced, without explanation, by one of the sultan's most trusted aides.

 The new BIA head is Yahya Bakar, permanent secretary in the prime minister's department and head of the anti-corruption department.



Jobs scarce in 'land of plenty' as Brunei feels uncharacteristic pinch