Government subsidies refer to the state-paying institutes or organizations to reduce the price of their products and services. This may include commercial items, pensions, medical care, education, and so forth. For example, the Brunei government spends 470 million per year on subsidies in education but the numbers are increasing as, in 2017, the Ministry of Education announced they will receive a budget of $666.57 million during the legislative council (LegCo) session. With the government paying most necessities, it makes the citizens more reliant on the government. The Bruneian people are unaware of the risks in these allowances, so it is important to educate the locals regarding the matter and how it may affect the economy. Hence, supporting the notion to abolish the subsidies may be the only way to make the citizens realize allowances is not something to be too dependent on. Although government subsidies help to reduce the wealth gap between the rich and the poor, these subsidies should still be abolished as it can create issues such as decreasing the country’s overall budget, illegal activities performed by citizens, and may not support the country is the long run. Having the nation looking towards the government subsidy as a discount may not be the best mindset to have since poses an economic burden to the state.
Subsidizing by Brunei Government
First of all, if the government continues subsidies it may be an economic strain to the country’s founding. This can be reasoned as the government contributes only a few institutes that are deemed important to the development and standard of living in Brunei, such as healthcare, education, and the oil and gas industry. As reported in the Scoop in March this year, the ministry of health was given a budget of $345 billion dollars earlier this year. Moreover, the oil and gas industry has been granted $1.65 billion to boost its production and create more job opportunities. Those alone consume an immense amount of money and the government has to keep paying more each year in order to keep up with development which raises the question of whether the state could maintain these funds for a long period. Another obstacle is developing other sectors by giving more budget such as the agricultural industry that received an increase of 40% more than their previous funds. The main issue is how long can the government support all these sectors with the rise of development so subsidies should be abolished as it puts pressure on Brunei’s finance.
Secondly, when Brunei introduced the subsidy program in the 90s, it has positive effects on the citizens. The subsidy program has expanded to basic goods and utilities which were given at a lower price. The most common example of subsidized goods is rice, which is a staple food. Citizens might be considering reselling the commodities to the non-locals or to other neighboring countries at a slightly higher price for their own benefit to earn themselves extra money. For example, in 2017, a Malaysian man was caught by customs officials for trying to smuggle 30 packs of fragrant rice to Limbang. He was then fined $10,000 by the Magistrate’s Court. In addition, if Bruneians continue with their illegal activity, the number of supplies will not be in the same pace as industries have to increase the supply of more goods and services in order to meet the demand of the population. This is a problem as the subsidized goods are exclusively for locals. According to a recent report, Brunei is working to double rice production which has led to us to question whether it is really for the citizens considering many immigrants has flocked to Brunei. To solve this issue, the authorities should apply pressure to those to avoid these unfair trade practices and stress that much of the production is owned majorly by the government.
The Consequences of Subsidizing by Brunei Government
Thirdly, Brunei may face severe consequences if the government continues to subsidize goods. A country like Brunei could become weakly sustainable if it secures the paths of oil and gas. As it might not be maintainable in the near future. Instead, Brunei should shift its focus to other sectors so they can grow to become pillars of the economy. It can be expected that Brunei’s oil reserves are forecast to run out by 2035. If this prolongs, the current economic situation would be deemed critical and inevitable. Therefore, in 2017, Brunei launched “Wawasan 2035” with the vision of assuming a sustainable society for the future and advocates a departure from oil dependency and the creation of new industry. With this in mind, Brunei’s Ministry of Primary Resources and Tourism targets increasing tourist arrivals from 218,000 in 2015 to 450,000 in 2020 under its 2016-2020 Strategic Plan. Consequently, the economy may potentially generate $300 million as a result of ecotourism. The Tourism Development Department has recognized Bukit Toraja as a potential site for sustainable tourism in Brunei. The area has been appointed as part of Brunei’s Heart of Borneo initiative, its lavish and unique biodiversity has attracted 4,000 visitors in 2017. Tourism is needed not just for economic development but also to maintain the environment. In this regard, the environment will also prevent a crisis in the country’s economy if any external factors should threaten the oil market. The Bruneian government funding on its tourism is 54$ million so if Brunei could properly adjust its budget and further acknowledges the potential of ecotourism, it may not be long before it achieves its goal of becoming the new backbone of Brunei’s sustainable economy in the near future.
To conclude this, the citizens of Brunei have become dependent on the government’s subsidies over the years. As Oil and Gas is the country’s main source of economic structure, it will not be sustainable for the years to come. When this happens, the government may have to slowly lower the subsidies on each of their institutions and this could be a shock on the citizens. To avoid more risk for the country’s future economy, the government should start abolishing subsidies and start a budget for improving the country’s economic structure.